LTC Financing Strategies
What Can I Do About Long Term Care?
Long term care is very expensive. Few people are prepared for the cost when they determine they need care.
Long term care is very expensive. Few people are prepared for the cost when they determine they need care. Fortunately, there are ways to deal with the bills even if you do not have much money.
Medicaid requires beneficiaries to spend all savings and other assets down to impoverishment before they will pay for care. This includes a requirement that any life insurance with a value over $1,500 be cashed in—some people have life insurance so that there is money to pay for their funeral. If someone needs Medicaid to pay for their care, this insurance will need to be cashed in, leaving no money for final expenses as planned. Medicaid does, however, let you set aside up to $15,000 to pay for final funeral expenses if this is done in an irrevocable burial trust. I set these up for people at no cost.
Medicaid also allows you to set these irrevocable trusts up for the final funeral expenses for each of your children and their spouses in addition to the one set up for you. This allows you to leave funds to family instead of spending it all on the costs of long-term care.
Few people know of these Medicaid rules and then leave nothing but the funeral bill for their children.
You have some savings in the bank, earning very little interest. The irrevocable trusts also earn interest, cost nothing to open, and protect money from the Medicaid “spend down”. No need to spend money to open these, other than the amount you want to place in the trust.
At TheLongTermCareGuy.com, we help people deal with the costs of long-term care. We also offer alternatives to help those planning ahead to pay for long term so they don’t have to spend their assets down to impoverishment. There is no charge to meet and explore options. Call us at (920) 884-3030 to schedule a free consultation.
How to Use Untaxed Dollars to Cover Long Term Care
LTCi premiums are fully deductible on your Wisconsin income taxes, regardless of whether you itemize taxes!
You may have heard that Long Term Care insurance (LTCi) premiums can be tax deductible. But (and there is always a but), there are restrictions.
LTCi premiums are fully deductible on your Wisconsin income taxes, regardless of whether you itemize taxes, how much or how little your taxes are, or whether you have enough other medical deductions.
Federal income tax rules are a bit more complicated. First, you must itemize your income taxes. Second, there is an age-based cap on the amount of premium dollars that can be used toward the deduction. Third, that amount, along with any other medical deductions you have, must exceed 7.5% of your adjusted gross income before you can start deducting it. This takes all the fun out of it for many people.
But now there is another way to use untaxed dollars to pay for LTCi. Even though Congress authorized this three years ago, most annuity companies have not yet changed their accounting to allow this.
Let’s say that you put some money into a deferred annuity some years back. Let’s say you deposited $50,000 and over the years it has grown to $100,000. Any money you withdraw from this annuity will be considered to be interest, and thus entirely taxable.
Instead, you can initiate a direct transfer from this annuity to pay the premium on your LTCi. The IRS will consider the amount withdrawn to be proportional between principal and deferred interest. In the example above, the existing annuity is 50% principal and 50% untaxed interest, so that half of the premium would be paid with dollars that are not taxable.
Right now, this strategy works when the annuity and the LTCi are with the same company. However, the company I use most for LTCi (because it offers the best benefits for the price) has a fixed interest annuity paying 3%– a decent fixed interest rate today. If your LTCi policy is with this company, you would be able to make a direct transfer from whatever annuity you may currently own into this one, and then have your LTCi premium paid automatically with a combination of principal and untaxed interest.
All this can happen automatically. You would receive a letter each year stating your premium has been paid; meanwhile, you smile at the use of untaxed dollars to accomplish this. If you deposit enough into the annuity to generate interest equal to or greater than the LTCi premium, you will always retain the amount of the initial deposit in the annuity.
When your health changes and care is needed, how easy will it be to suddenly turn on an additional cash flow of $50,000 to over $100,000 a year? If the idea of using untaxed dollars earned in interest, to pay a bill and give you freedom to choose who will care for you and how is important to you, call www.TheLongTermCareGuy.com at (920) 884-3030 to investigate.
What’s it Really Like Paying for Long-Term Care
Annual cost range is $18,720 for adult day-care services to $100,375 for a private room in a nursing home!
As written by Michelle Singletary and published in the Washington Post on November 26, 2018
One of my favorite Spock quotes from the Star Trek television series is, “Live long and prosper.” Who doesn’t want a long life, right?
But what if the longevity means spending down your money for long-term care? And that’s if you’ve been prosperous and have the funds to pay a facility or home health aide to care for you.
Genworth Financial recently released its 2018 Annual Cost of Care survey and found that the annual median cost of care now ranges from $18,720 for adult day-care services to $100,375 for a private room in a nursing home.
I asked readers to share their long-term care experiences, and here’s what they had to say:
“My mother had Alzheimer’s and was in a memory unit for two years,” wrote Chris Gonzales from California. “My dad has been in assisted living for two and half years and for the last two years has needed round-the-clock care. The cost, when my mother was alive, totaled $230,000 a year. The cost to care for dad is now $170,000 a year. This is in Fort Smith, Ark. My brother and I are very lucky that our parents lived below their means, saved, and did extremely well investing their money in the market, so money has not been an issue. We are also grateful for the ladies that watch over our father and consider ourselves extremely lucky to have people we can depend on as we both live out of state.”
“I managed the care of my mother (who had Alzheimer’s disease) from 1998 through 2006,” wrote Debbie Trice of Sarasota, Fla. “Even that long ago, the cost of her care approached $100,000 annually once she had to move from an assisted-living facility to a skilled nursing facility. The actual cost of long-term care goes way beyond the monthly or daily facility charges. Personal expenses (e.g., adult diapers, toiletries, laundry, haircuts) can be significant. I saved some money by purchasing diapers from a wholesaler and toiletries from a discount store and doing mother’s laundry myself. Medications cost more for residents in long-term care, too. Some states require that all medication, including over-the-counter items like aspirin and vitamins, be specially packaged by a pharmacist in blister packs — at extra cost, of course. Staffing is a critical issue. To keep their rates competitive, many facilities limit their staffing levels to the minimum required by law. But then some patients’ needs can’t be adequately addressed. I found it necessary to hire private duty aides to supplement facility staff for a few hours each day.”
Lane Beckham of New Jersey wrote, “Four years ago my wife (then 71) suffered a fall which led to numerous complications over the next year. She has since been bedridden going from a home hospital bed to a wheelchair. She can feed herself, converse, watch television and read catalogues, but that’s about it. We’ve had a 24/7 home health care aide since April 2015 at a current cost of $215 a day or $78,475 a year. A long-term care policy kicks in $100 a day but only for 5 years of benefit days.”
“My mother died two years ago and for the last two years of her life, she had progressively worsening dementia,”
One reader wrote. “We (mainly my sister) arranged for her to be cared for at her home. The cost was running at about $85,000 a year and that was two years ago! Why? At times, she was simply too much for one person to handle, so we often needed two people to stay with her. And while we went with the better-rated agencies, we still had problems with sitters stealing, using drugs, having friends over and even taking my mother out when they needed to run errands. What a nightmare.”
David Treece, an investment adviser and financial planner based in Miami Shores, Fla., has a client with Alzheimer’s who has a Genworth long-term care insurance policy, which so far has paid out about $323,000.
“I have learned nothing will ruin a retirement plan faster than long-term care expenses,” Treece wrote. “Try having to come up with nearly a third of a million dollars like my client if you don’t have coverage. It’s just unimaginable for most people. My biggest concerns for my clients are a group I call ‘the alones.’ These are people who have no spouse, no children, no close siblings and really nobody else. They can’t even name a beneficiary let alone someone to serve as a power of attorney or health-care surrogate. This group seems to be increasing as so many people never had children, are divorced or never married, or are estranged from family. Who is even going to help them? Our society isn’t really set up for this, and I don’t see any easy solutions.”
*****
How comfortable do you feel paying for care out of pocket when your health changes?
- Have you thought that Long-Term Care insurance would not be needed?
- Do you plan on spending down to Medicaid, a welfare program and then search for a place that will accept it – and you?
If you are concerned, contact www.TheLongTermCareGuy.com at (920) 884-3030 and schedule a time to investigate with someone who understands and can help you find a way to handle this!
Observations from a Recent Hospital Stay
Nearly every one of the CNAs at a recent hospital stay started their careers in a long-term care (LTC) facility.
Recently, I was an inpatient in a hospital after having surgery. While there, I visited with a number of nurses and CNAs (certified nursing assistants) while they were caring for me. Nearly every one of the CNAs had started their careers in a long-term care (LTC) facility. The reasons these workers moved on to a hospital setting for work is the main problem with LTC today.
Caregivers (CNAs) are in very high demand and very short supply.
LTC workers especially are underpaid and overworked. They rarely receive merit or cost of living raises. The facilities that desperately need them are having a very difficult time making ends meet. This is because Medicaid, which pays for nearly half of all LTC in the United States, pays nursing homes significantly less than the cost of care.
Nursing homes which accept Medicare for rehabilitation care (their main source of revenue) must also accept Medicaid—the welfare program which pays for care when the patient cannot afford it. Thus, the nursing home has become the main place that will accept a person if he/she cannot pay for care in an assisted living facility. Assisted living facilities cost between $4000 and $8000 a month depending on care needs. Since they do not receive Medicare for rehabilitation care, they are not required to accept Medicaid, and many do not.
Most people cannot afford the monthly charges for long without LTC insurance.
The problem is that many people do not plan for care in later life, with investments or insurance that pays for LTC. Many of the residents in LTC facilities are on Medicaid, and most of them are in nursing homes. This is because the very nice assisted living facilities are rapidly deciding not to accept Medicaid because of its inadequate reimbursement for care.
Back to the CNAs I met in the hospital. While there is a desperate need for caregivers, those caregivers need a living wage, and many long-term care facilities are unable to provide that. So, they migrate to the hospitals who can pay them and provide benefits.
If you want to have good long- term care, in a place that appeals to you when your health changes, you need to have a plan to pay for that care or the odds may be good that a nursing home may be your only choice. Years ago, I purchased LTC insurance that will pay for the care I need, in a setting I will be happy in when that time comes. Will you?
For more information, browse all of our resources at www.TheLongTermCareGuy.com.
Will Your Children be Paying Your Bills?
Will Your Children be Paying Your Bills?
A recent survey by TD Ameritrade found that 13% of American adults are financially supporting their parents. It appears to be a growing issue. According to their survey, 19% of millennials are helping pay their parents’ bills, compared to 13% of Generation Xers and 8% of baby boomers. How do you help your parents through their retirement end of their lives, while still preparing for your own?
Their suggestion given was to purchase long-term care insurance for them, and for you. This may not be affordable for many adult children of any generation. The problem, however, is real and needs to be discussed and options sought sooner rather than later when funds may be already gone.
Purchasing LTC insurance for parents may be less expensive than attempting to pay for their care, but it will be a burden for many and often times not available anymore due to their health. Like the airlines say, put on your oxygen mask before helping others. Do you have your LTC insurance in place yet?
There are other strategies that can assist you in helping your parents. Many of them involve nothing more than advice and being aware of rules and restrictions that are often overlooked.
You don’t know what you don’t know.
By discussing the situation and learning how to best help them without causing future difficulties, you might find that it is not necessary for you to simply give them money. Some assets can be protected, if you know how to do this. We help families do this every day. Other times we prevent problems – many people are not aware that if parents pay a caregiver directly, without a simple employment contract signed and notarized first, all payments will be considered gifts by Medicaid thus disqualifying you from that program.
Family meetings are our specialty. Bring a list of questions and we can help you navigate through the rules that you want to learn before problems are created.
Whatever your situation regarding long-term care, there are strategies you can take advantage of that save you and your parents money. So call TheLongTermCareGuy.com at (920) 884-3030 and schedule a time to learn what you need to know.
Please CONTACT US today so we can help you!
Go Broke without Long-Term Care Insurance
Bob and Tom are twin brothers. They have done well in life and saved for retirement in an IRA. They each have $1,000,000, they are both married, and are now age 80. Oh, and Tom bought long-term care insurance at age 60, a benefit of $60/day for 10 years including 5% compound inflation on that benefit. Both Bob and Tom have just had a stroke. They each need an assisted living facility costing $5500/month or $66,000/year – increasing at 5% annually. Will Bob Go Broke without Long-Term Care Insurance?
Bob will pay out of pocket $1,000,000 pocket growing at 3% for Long-Term Care and he will Go Broke without Long-Term Care Insurance!
Bob’s Story
Year one he takes out $66,000 leaving $934,000, but income taxes are due so he withdraws $81,500 to receive $66,000 and leaving $918,500 to grow back at 3% to $946,055 at year end.
Year 2 he starts with $946,055 and after income taxes (15% fed & 4% state) and care he has $860,455 which grows to $886,268
Year 3 he ends up with $820,156 after taxes, care, and growth
Year 4 he ends up with $747,631 after taxes, care, and growth
Year 5 he ends up with $668,089 after taxes, care, and growth
Year 6 he ends up with $581,011 after taxes, care, and growth
Year 6 he ends up with $485,965 after taxes, care, and growth
Year 7 he ends up with $382,505 after taxes, care, and growth
Year 8 he ends up with $269,865 after taxes, care, and growth
Year 9 he ends up with $151,682 after taxes, care, and growth
Actually he can apply for Medicaid (welfare) in year 9
Year 10 he ends up with $18,882 after taxes, care, and growth
Will Bob Go Broke without Long-Term Care Insurance after his Stroke?
Bob is broke and burned through $1,000,000 paying for Long-Term Care! Don’t be like Bob!
Tom keeps his $1,000,000 intact thanks to Long-Term Care Insurance! And it cost Tom only $2960/year for the tax-deductible premium!
Remember Tom?
Tom bought long-term care insurance for he and his wife back when they were only 60 years old!
It cost Tom only $2960/year for the tax-deductible premium for Long-Term Care Insurance!
It started out at $60/day benefit ($1800/month) but with it’s built in 5% compound inflation the benefit by age 80 had grown to $159/day ($4770/month). It continues to get bigger every year by 5% of last year’s benefit.
Tom is now on claim, collecting from this insurance so he pays no more premium ($2960/year).
Tom collects 3% from his IRA and pays 15% fed & 4% state taxes, giving him $24,300/year or $2025/month.
His $2025/month income + $4770/month insurance benefit pays for his long-term care. The insurance benefit gets larger every year by 5% to keep up with increasing costs of care.
Tom keeps his $1,000,000 intact and does not go broke, does not gamble his $1,000,000 away by not buying Long-Term Care Insurance! Be like Tom!
Financial planners suggest this will probably work out even better than this simple comparison shows.
If you do not have $1,000,000 in savings, you need long-term care insurance even more.
May is Disability Awareness Month – Does Long Term Care Keep You Up at Night?
May is Disability Awareness Month – Does Long Term Care Keep You Up at Night?
Becoming disabled from sickness or accident and unable to work is a significant problem for many. Once retired you might think this is no longer a concern.
But what if you became disabled enough to need assistance with bathing, or dressing, or moving about (arthritis)? 50% of Long Term Care is due to dementia, something that scares most everyone, and is becoming more and more common as we live longer lives. This need for care happens to 70% of people who have reached age 65 according to HHS, and typically it starts by involving spouse or family helping out.
Caring for a family member can be a full time, 24 hour a day job and nobody can do that for long, especially when that caregiver may be over age 65 themselves. You can hire care to come into the home daily to help out, but this is expensive. We also have assisted living facilities popping up like mushrooms in the spring, but they cost from $4000 to $8000 a month. Who can handle a bill like that for very long?
Medicare does not pay for long term care. Medicare is for doctors and hospitals and fixing us when we are broken. It does pay for a few days in a rehab center following a hospital stay of at least 3 days as an inpatient, but not for anything more.
Medicaid is a welfare program that will pay for care once you are completely out of money (broke). They strongly verify this and will not provide care if you have given money away in the past 5 years.
Long term care insurance is the least expensive way to handle these costs, if you purchased it back while you were healthy. Most people are surprised to learn they do not need as much of it as they think. When health changes, the family budget changes as well. No more extra vehicles, toys, travel, when someone cannot drive. The money previously spent for fun can be redirected towards the cost of care. Interest on savings can also help out without spending any of the savings themselves. Only the shortfall needs to come from insurance.
If you did not plan ahead and now find yourself among the 70% of seniors who need care and without a plan, there are some alternative strategies that can make your money last longer. Wouldn’t it be nice if you could pay for this care and have some left over for spouse or family?
In a worst case scenario, there is a way to protect some money for family instead of every cent going to the costs of care. At The Long Term Care Guy we work with every one of these strategies. If this keeps you up at night, give us a call (business hours please), and lets investigate what strategies might help you. You can reach us at (920) 884-3030 to schedule a meeting. There is no cost to investigate.
Think You Are Too Young To Worry About LTC? Think Again!
I just read that the Centers For Disease Control and Prevention (CDC) says “The percentage of adults aged 45 to 64 years who reported needing help with activities of daily living such as eating, bathing, dressing, or getting around inside their residences has increased nearly 50% from 2000 to 2015. This was published in their weekly Morbidity and Mortality Weekly Report on August 26th.
For years it has been known that 40% of the people needing Long Term Care (LTC) services in this country are between the ages of 18 and 64. LTC is not something that people can ignore until age 85. Just like car insurance, LTC insurance must be purchased while you are healthy – so you have it when you need it.
By 60 years of age, 25% of us cannot qualify healthwise to purchase LTC insurance. The great majority of people cannot afford to pay for such care out of pocket or savings for very long. This leaves them no alternative but to apply for a welfare program called Medicaid.
Medicaid will only pay for LTC when you can prove that you are completely impoverished. In most states that means you have less than $2000 left to your name and have cashed in your life insurance as well. A married spouse can retain use of the home and car but this goes back to the state – not your heirs – after last death.
LTC needs can last for many years. Alzheimer’s is only one of 68 different types of dementia. By age 65, one in eight have it. By age 75 it is one in four and by age 85 it is half of us.
This brings up another study published in the Journals of Gerontology: Medical Sciences that says “Older adults who do not exercise often – or do not exercise at all – have a 50% greater risk of developing dementia as they age”. Anyone with diabetes also faces a significantly higher risk of developing Alzheimer’s.
Will you wait until it is too late to plan for your LTC when your health changes? Or will you proactively investigate solutions while they are still available? The ability to pay for care not only prevents impoverishment, but gives you choices as to how and where your care will be delivered.
Give TheLongTermCareGuy.com a call to meet and see what you can do for yourself. We are experts who have done nothing but work with LTC financing for 23 years now. There are solutions for almost any budget. (920) 884-3030 or (800) 219-9203
Alzheimer’s Is Expensive
Alzheimer’s Disease is the 6th leading cause of death in America.
By age 65, one in eight has it. By age 75 it’s down to one in four, and by 85 fully half of us already have it. If you live long enough, its almost inevitable. Alzheimer’s is not preventable, and not curable. At first you will know that you have it, and are trapped in its progression.
At some point you will need help. Sometimes the children can retire early and move in to care for us 24-7. Most of us do not have that luxury – we will have to pay for home care or assisted living facility care. Most LTC, even for dementia, is not done in nursing homes anymore. Costs for dementia care are the highest range of assisted living billings, often up to $6500 per month.
How long can your budget last with this kind of an extra bill each month? Many other physical ailments can bring about a need for care too. Its all expensive, like a car accident with car insurance. Surely you insure that risk, so why not insure for LTC costs since 70% of us will need some (per HHS)?
I have seen some very inappropriate proposals given to consumers on Long-Term Care insurance. For most agents or financial planners this topic is a once in a while, also have product. They typically do not research all the options, and tend to suggest more insurance than will be needed, making the premiums far too high.
Before you think it is out of reach for your budget, contact a professional who can help you decide how much is appropriate for your situation, taking into account the lifestyle changes that occur when care is needed. We constantly hear “Oh, that is much better than we anticipated” once we meet with clients.
Consult with the experts. We have 23 years experience in the financing of Long-Term Care. We have solutions for anyone, regardless of finances or health. The best options are for those who are still healthy, but we can help everyone in some way. Give us a call at (920) 884-3030 in Green Bay or from anywhere at (800) 219-9203
Is Motel 6 WhereYou Plan To Retire?
Tom Bodette will leave the light on for you, but do you really want to stay there?
I surely do not! And I do not want to end up in a welfare nursing home either. Many people think that you get the same care on Medicaid as you would by paying for your care. The problem is the Medicaid reimbursement is so far below market rates only the Motel 6’s of nursing homes or assisted living homes will accept you.
You’ve planned to have a comfortable retirement, and unless you can afford 6 figures a year for a nursing home, or over $50,000 for a nice assisted living facility or home care, you should be looking into LTC insurance while still healthy enough to get it. Every year it is tougher to get this coverage, the benefits are shorter, and the costs are higher. Get it while the getting is good.
But you’ve heard that this insurance is very expensive. From proposals my clients have shown me, it is – when it is not appropriately chosen.
How does over $850,000 of benefits for a 65 year old (male of female) for less than $2000 per year premium sound? Say you pay this premium for 20 years until you are 85 years old. You spent less than $40,000 for over $850,000 of coverage, is that expensive? Is it affordable for you?
Today, less than 15% of Long-Term Care is done in nursing homes. Thus, just like flood or earthquake endorsement on your homeowners insurance, many people choose not to cover the nursing home, but purchase just enough LTC insurance to cover home care, assisted living facilities, or adult day care.
Then bear in mind that when someone needs care, their lifestyle changes drastically. No need for the second (or third) vehicle, vacation travel drops, less golf, boats, campers, motorcycles, etc. to support when they can’t be played with. Most people can cover a good part of the cost of LTC by simply repositioning the dollars from things they can’t do anymore. Interest on your life savings can help as well without depleting the balance.
OK – here is the fine print. 65 year old, male or female, buys a $70/day benefit. This plus available income and interest may be sufficient. It will give you 10 years of collecting when you need care and INCLUDES an automatic 5% compound increase on your benefits every year.
You pay $1980.94 per year for 20 years. On the 21st year you need care and file a claim which starts at $185/day (remember the automatic inflation included) and will increase over the 10 years you collect until it reaches $288 per day for a total of $852,603 paid out to you. If your care costs less, you get all the money for every day of care regardless.
If you can’t find a deal this good with an A+ rated company, no matter where in the USA you live, call (800) 219-9203 and talk to us at www.TheLongTermCareGuy.com