Long Term Care Worst-Case Scenario Planning & Ideas

[bizman]

I have to give credit to steelpony10 for the idea for this thread, as he has mentioned several LTC financial disaster scenarios he has gone through and observed.  I'm wondering how to even get one's arms around the topic.  Does a hypothetical retiree tell themself that if they have a $5 million net worth they are self-insured and okay against disaster scenarios?  

And does anyone know statistics on mean, median, and modal length of stays in nursing homes?  I would assume we are talking about 1-3% of people who have stays longer than 5 years.  Is that roughly accurate, or are we talking about 10-30% of people?  And what about the statistics on outliers?

Assuming the probability of a disaster scenario is not minimal, what possible mitigation strategies exist for a couple with a $1 million net worth and Social Security?  Could planning for the "surviving spouse" not in LTC include converting most assets to annuities and longevity insurance that might not (?) be able to be touched by creditors?  Or could "strategic divorce planning" become an active area of financial planning?  Or maybe the use of irrevocable trusts and such before people enter LTC?

Or are the probabilities low enough that one just has to live with them, sort of like we all have to live with a low probability of dying in a fatal car wreck?

Any thoughts would be appreciated.

[yogibearbull]

What is your age? A good time to get LTCI is in 50s, 60s at most. Beyond that, it may be too expensive, or you may not qualify.

Those who consider buying LTCI, 3-5 years are enough. Coverage is cumulative, i.e. all occurrences/claims claims are counted for the coverage period. No point in buying expensive Cadillac policies. Overinsurance is as bad as underinsurance.

Poor can be covered by Medicaid, rich can self-insure. Middle class can buy LTCI or have $300K-500K of identifiable reserve assets.

There are now LTCI riders for newer life insurance policies. I have also heard of joint/family LTCI coverage although typical policies are individual.

[bizman]

Thanks for the reply yogibearbull ,

I guess I have always been rather cynical and skeptical about LTC insurance, with all of the limitations and elimination periods and such. And I would guess that with GE's legacy problems of being too generous with benefits and underpricing them (from their perspective), the good deals some got in the past are nowhere to be found today. I and my family have always considered ourselves self-insured.

I guess I'm mostly kind of wondering about steelpony's disaster examples of large net worths being ground into dust by LTC. Anyone have an idea on statistics or probabilities of such an outcome?

[mnfish]

A Google search indicated that 60-70% of nursing home residents receive Medicaid assistance. If you go in and live long enough, you will be on Medicaid as well after your assets are depleted and they will deplete your assets unless you have an irrevocable trust. Guaranteed. (including a 5 year look back)

LTC insurance quip (Mutual of Omaha) "A married 60-year-old female can expect to pay between $160 and $319 per month for $2,100 to $4,100 in monthly benefit amounts, while a married 70-year-old female can expect to pay between about $249 and $497 for the same coverage amounts. A married 75-year-old female can expect to pay between about $363 and $726 monthly."

That's about $136 per day.

Recently, I helped deal with my friends' mother transition from assisted living to a nursing home with Medicaid assistance. The pricing is based on the level of care she requires. There were about 30 levels, all with a different price. The range was from $200 to $660 per day. So, $6,000 to $19,800 per month. Some LTC insurance is lifetime capped at certain levels, say $500k.

My takeaway? Gift to your heirs annually now or place a portion of your assets in an irrevocable trust.

[steelpony10]

bizman ,

   I can share a little more detail. Have a policy or self insure. Providing for an outside spouse while the other goes through home care, assisted living or skilled nursing (LTC) is tougher then for a widow or widower. Both are common sense.

       1. Most progress through at least home health care and assisted living before LTC. All ages use these services not just the elderly.

       2. What I did was find a facility that takes medicaid (state program) in case all assets are depleted. In our state the client is left with 2k (still true) for incidentals. A spouse was left with 100k which is indexed for inflation I believe. This is old information so I no longer sure of this.

       3. If you are a resident from independent living you get preference for all available space if needed vs. an outsider coming in. Of course that did cost over 2k a month at the time.

       4. The average stay I believe is 3 years but that’s old info also. The clients are over 90% women and smaller in stature people. Big people and guys don’t make it there as easily it seems. Visit a facility and ask questions.

       5. If you run out of funds for assisted living you’re moved to a medicaid facility. If you run out of funds for LTC and that facility takes medicaid you stay there.

       6. The only strategy I found in our state to “hide” money was a preplanned funeral trust which allowed us 25k for each person in a family including children which is off the books. We tapped that for my mom after my dad passed. It does have some sort of return. We have that trust set up at this time plus deeds for burial plots.

       7. They looked back 5 years when we checked a facility plus tax returns and bank statements in my state. Every state is probably different. They know people try to cheat. You could consult an elder care attorney like we did at the time to find out more current information.

     The reason I went hog wild with CEF’s was directly related to this situation. A high yield reliable continuous cash flow in all markets started ASAP just in case. This really slows spend down. The down side is less then equities and for us the 8-10% area matches VTI, VOO. So call me paranoid. If this never arises we have plenty to spend at all times. Since we think we’re covered for a normal retirement we’re just accumulating cash as another option if ever needed. It’s basically a race against time and an unknown. So plenty of cash or a 3 year set aside for each individual invested fairly conservatively (3-4%+ growth per year) would be my options. Currently for us that means about 300k each + SS which might put us in the vicinity for a couple years.

[uncleharley]

Does anyone have a handle or opinion on what our current rate of inflation is doing to the cost of LTC? The reason I ask is that I am self insured, 80 yrs old, and will probably survive my spouse. I am concerned that I may be underestimating what I will need.

[steelpony10]

uncleharley ,

          When I dealt with LTC inflation was 3-4% a year. Costs where they were are services based, like a menu. I believe their facility was at the higher end of costs. It is currently over 135k a year. I call and check about every 5 years. So I believe this is a high end in our state.

           I’m sure wages have shot way up so inflation is higher. Call a few and check. I estimated 200k a year (including an individuals SS). I tend to overdue my estimates.

[Chahta]

"Most progress through at least home health care and assisted living before LTC. All ages use these services not just the elderly."

steelpony10 , are you saying most of the elderly population or most of those needing services?


"The only strategy I found in our state to “hide” money was a preplanned funeral trust which allowed us 25k for each person in a family including children which is off the books. We tapped that for my mom after my dad passed. It does have some sort of return. We have that trust set up at this time plus deeds for burial plots."

Another not mentioned is deeding your house to your children. Maybe not desirable but effective. Like you said, a 5 year window.

[bizman]

Thanks for the details, everyone. This isn't as well worn territory as the value/growth, active/passive, or trade/buy and hold debates, but it makes sense to think it through rather than ignorantly fearing the boogeyman.

Just as background, my mother was in memory care for a bit over a year and a half with Alzheimer's and passed away in May of this year. My dad cared for her for several years until he just couldn't do it anymore. Horrible disease. We must have gotten "lucky" in some sense in terms of cost as they live in rural Iowa and the cost of my mom's memory care was about $8,000 a month. Sounds like elsewhere, I am guessing especially in metro areas and on the coasts, the costs are much greater.

My main concern was the horror stories of big net worths being ground to dust by LTC. It sounds like while this can happen, it is fairly rare statistically, and affects mostly those of fairly modest means?

[steelpony10]

bizman ,

        I lean towards the ground to dust side and hope statistically I’m wrong leaving a whole pile of money to someone, hopefully my wife. I know a 70 year old, 3 80 year olds and my mom at 95 that went trough the process. Only my mom ground it to dust to date. Too little to late because I was learning on the run. It comes down to luck and chance. Which for me is not a plan. Dealing with markets doesn’t compare for me anyway. Sorta why I think being to conservative as an investor “could” lead to big trouble when faced with certain situations.

[nobhead]

bizman,

We are too old for LTC insurance and wanted to insure certain property was protected for the children. I chose the irrevocable trust path for myself and the family. This way does have a 5 year look back period from the time you fund the irrevocable trust. My attorney has it so that if either of us passes (even during the first 5 years) everything goes to a testamentary trust which would immediately qualify the surviving spouse for Medicaid. It also transfers certain property to the kids when the first of us passes.

I spent a lot of time debating the same things as you and felt like this was my best option. I am blessed to have 2 responsible adult children to serve as trustees.

I remember Retired Limoman saying that he used the "divorce" plan but I chose not to go that way.

 

[FD1000]

YBB said it all already.
I dedicated $500K for LTC for both of us when I started retirement in 2018. It grew nicely since then.
This was based on 8K monthly times 12 months = rounding to $100K. Based on 5 years between the wife and I = $500K.
KISS.

[johntaylor]

Agree,  except we decided on a 2 million cushion instead of 500k

[Deleted]

I have been trying to find statistics of Length of Stay by Age of Entry to long term care. Not successful. It seems to me that my self insuring numbers should be inversely proportional to Age of Entry. An 80 year old won't survive as long as a 65 year old. Premise is that if I was good at 65 I should have excess at 80. Then there's inflation. Does it offset the age factor? Any thoughts?

[uncleharley]

A thought I just had was that assuming that the older you are, the shorter the stay, might be the wrong plan. A history of the most probable disease or most probable cause of death might create a better assumption. I also think that living in a rural or low cost of living area should reduce the cost of LTC, possibly by a large margin.

[Mustang]

The cost depends upon where you live. Here is a site that forecasts annual costs into the future. oneamericaltcmap.hvsfinancial.com/

New York My State
                               2022     2032     2022       2032
Assisted Living     $58k      $70k     $62k       $85k
Home Care              66k        88k       58k         78k
Nursing Home      164k       221k      96k       129k

The average stay is 3 years. I had a younger brother stay 5 years in a Nursing Home following a stroke. He was 62, paralyzed and unable to talk . I don't have any idea how to judge the length of the stay by someone's age. I'm not sure how accurate any such estimate would be. He was fairly young.

[chang]

Those numbers seem awfully low. My mom's assisted living costs $13K+ per month = $160,000 per year. Fortunately she bought LTC which covers it all. (Suburb of Boston.)

PS uncleharley congrats on your 1,500th post and promotion to the next rank 

[uncleharley]

"PS uncleharley congrats on your 1,500th post and promotion to the next rank"

Wow!!! I can't wait to tell my wife!!! lol

[bb2]

Yes, geography matters. My mother had an apartment at Freedom Village in Michigan and there were many residents from other states who'd done their homework and were willing to leave their homes for the price/amenities at FV. And near the end she had 24/7 care, excellently staffed by RNs for about $20/hour. This was all 10-15 yrs ago but the shopping around concept still holds. Article in the Times the other day about elderly people with no family or friends. Comments section showed a great interest in suicide. Doc I know has such a plan. Easier said than done, I imagine.

[Chahta]

Dec 8, 2022 17:11:50 GMT uncleharley said:

"PS uncleharley congrats on your 1,500th post and promotion to the next rank"

Wow!!! I can't wait to tell my wife!!! lol

At last.....it was too much pressure posting to stay at the top. Congratulation!


"I also think that living in a rural or low cost of living area should reduce the cost of LTC, possibly by a large margin."

Possibly if they can find the labor to do the work. I am curious if LTC is hurting.

[ECE Prof]

"I also think that living in a rural or low cost of living area should reduce the cost of LTC, possibly by a large margin."

Possibly if they can find the labor to do the work. I am curious if LTC is hurting.

We deferred LTC. It was not worth paying all that monthly premium. How can they pay more than they make? It is better to invest in PIMCO CEFs and generate income to pay for it. A moderate investment should be sufficient to live in assisted living (my 97-year-old neighbor) in a rural area. We know a few more examples from my neighborhood.

[uncleharley]

How much do you consider to be a moderate investment?

[Deleted]

For a single person, it will take all you have and hold your heirs responsible for the deficit at the end.

[fishingrod]

Plan for 3-5 years of care. With each year at the very minimum of 80K.

[ECE Prof]

Dec 8, 2022 20:01:07 GMT uncleharley said:

How much do you consider to be a moderate investment?

500-600 k. I have goofed many times in my life (many professors do, but I showed some interest on the investment side too). This could be one of them. But, based on my area, this, along with SS payments, should be sufficient.

My 97-year-old neighbor (also my former colleague) is bedridden since COVID days, and he is still alive. His wife takes care with assisted living. He has three pensions—GE, Federal, and TIAA. He came by boat to this country, finished his Ph. D., married a local PA girl, and settled here.

[ECE Prof]

Dec 8, 2022 21:08:35 GMT fishingrod said:

Plan for 3-5 years of care. With each year at the very minimum of 80K.

 Any number of years with investment distributions of this amount (80k) is a good idea. You will still have the principal, even if it is diluted, it is ok.

[fishingrod]

If we make it to 80-85 years of age, 1 in 3 of us will develop some form of dementia according to the statistics. The average length of stay for women is 3.7 years, for men 2.2 years. Nobody is average.

[uncleharley]

Dec 8, 2022 21:39:38 GMT fishingrod said:

If we make it to 80-85 years of age, 1 in 3 of us will develop some form of dementia according to the statistics. The average length of stay for women is 3.7 years, for men 2.2 years. Nobody is average.

Thank You!!!   I have made it to 80 and have a family history of Dementia.  Based on my current health and info on this thread, I am probably O K, but another 100k to 200k would be comfortable.  Another short might do it.  LOL

[richardsok]

Just to throw out a possible option. I am sure there are others like it, but Medellin is a beautiful city with a perfect climate. Long term pensioner residency permits are easy to get, I'm told. You need 3x the national average income, which should be absurdly easy for anyone on this forum. Am told Costa Rica, Argentina and Uruguay are perhaps better in terms of gov't support --- but you'd be paying everything yrself anyway.

www.liveandinvestoverseas.com/retirement-living/upscale-assisted-living-in-medellin-colombia/