Reverse Mortgages
Are You Concerned About How You Will Pay For Long Term Nursing Care?
You’ve read that nursing homes can cost up to $8500 a month, assisted living half of that, and home care anywhere from very little to more than the nursing home. Your first thought might be there is no way I can afford such care. That is often an accurate first impression. However, there are strategies that can help.
First, consider how much of the cost you may be able to bear on your own. When someone needs care, lifestyle changes, often considerably. If one of a couple needs care there may be no need for a second car or pickup truck. That can equate to less mouths to feed. Then there are the toys; boat, motorcycle, snowmobile, camper, etc.
The travel and fun budget will also shrink with no trip to Branson, a cruise, a bed and breakfast weekend, etc. Note: you should be having fun while you are healthy as you only go around once in this life. Thus with basic necessities budgeted for, less gasoline, insurance, tires, trips, toys, etc., you may find that a significant amount of income may be freed up.
Long Term Care insurance is a great way to pay for care, if you purchase it while still healthy enough to get it. The trick is to investigate it when it becomes affordable, and take into account the budget changes mentioned above and not buy too much. Most long term care is NOT done in nursing homes, so an amount that, along with available income, can cover home care or an assisted living facility may be sufficient for many. And don’t forget the IRA or other nest eggs. Even if you want to preserve them for a spouse or heirs, you can still use the income (yield) they produce. I realize interest rates are not the highest right now, but every little bit helps.
Medicare does not pay for long term care. It will pay for a short recovery stay in a skilled nursing facility following 3 days in the hospital (and you know how quickly they get you out), but that is only for your active recovery for a very short time. Medicaid can pay for care, but only after you are impoverished, meaning you have spent all available assets, cash, savings, real estate, etc. It is a last resort to be avoided if possible. If this becomes necessary, do plan to set aside some money in an irrevocable trust to pay for funeral, which most states allow (life insurance must be cashed in to get Medicaid).
There is a strategy that uses as its base an annuity, an insurance product that converts a sum of money into a monthly income for life. Obviously the older you are, the smaller a check you write to receive the needed monthly check for life in return. One company has fine tuned this for long term nursing care, however, and takes health into consideration. If you need care, your health is probably not as good as the average person of your chronological age. Thus your shorter life expectancy, when taken into account, means a smaller sum may buy you the income you require for the rest of your life. The worse your health, the better the deal.
If funds are not available in your regular bank, do not discount the “bank of house” (reverse mortgage). Since you can’t take it with you, why not use its equity to help you stay at home in it? Some people have even used home equity through a reverse mortgage to pay for long term care insurance. This gives them a much better chance to remain in the home and have money left over at the end to pass on.
For more information on what is best for your situation, contact TheLongTermCareGuy.com Romeo Raabe at (920) 884-3030 or (800) 219-9203
Financial Advisors Struggle with Health Care Planning
This is a common concern I hear from financial planners. Many financial planners do a wonderful job of advising their clients on how to invest their money, when to collect Social Security, how to pay less in income taxes, etc. They manage money and most do a very fine job of it.
The problems start when someone without any money asks for advice. The planner cannot manufacture money and is often at a loss of how to assist someone in this situation. Let me give you an example:
A financial planner called me recently and asked if there was anything he could have done. A woman approached him asking for help as she did not have enough money to live on. Her husband had Alzheimer’s and after struggling with his care for years she could no longer do it. She did not have money for a nursing home, she did not even have enough money to meet her monthly bills. She had spent their nest egg down to $75,000 and did not know where to turn.
This is not the typical client of a financial planner and he had no idea what to do for her, as there was no money to invest. I suggested he call the client back and I would sit in and see how I could help her. We met two days later. I explained that Medicaid, a federal/state program would pay for her husbands long term care once she was down to $50,000 in assets (in Wisconsin). To get to that level I suggested we establish two $12,500 irrevocable burial trusts so that at death their children would not have to foot the bill for their funeral expenses (Medicaid requires all life insurance over $1500 face value to be cashed in to qualify). We immediately did this making her husband elligible for Medicaid nursing care.
I suggested that once she places him in a nursing facility and gets the Medicaid payments started we need to meet again. We met a month later and I brought in a reverse mortgage specialist who was able to help her secure a reverse mortgage on the (paid off) home. There are no payments to be made on a reverse mortgage, and the money received is not income taxable. It is only repaid at death or when the surviving spouse leaves the home.
The financial planner then searched for the best immediate annuity he could find to produce the most income for life for Mrs. client, thus giving her enough income so that she could have food on the table, lights, heat, etc. An income that is guaranteed for life can be better in this situation than spending the proceeds of the reverse mortgage until gone and then find yourself in an even worse cash flow situation.
I understand that financial advisors would struggle with retirees health care costs as for many of them, this is not their area of expertise. That is why so many of them in Wisconsin team up with Romeo Raabe, TheLongTermCareGuy.com to help their clients.
Of course, planning in advance with long term care insurance is much less expensive than trying to solve the problem after funds are gone, but I can help in almost any situation. I simply suggest that the financial advisors ask this question “Would an extra bill of $50,000 to $90,000 a year be a problem in Your retirement”? If the answer is yes then bring me in to help protect their nest egg, as well as their choices for care with long term care insurance or other strategies.
Wall Street Article on Assisted Living Costs Increasing
This weekend’s WSJ features an article titled The Cost of Living Longer. It describes the difficulty families have finding affordable assisted living facilities for their loved ones. Facilities are bundling their add on costs into the monthly fee and you may be paying for services you do not need. The average assisted living facility cost in Wisconsin is now $3329 per month according to the article. This is up 17% over the past 5 years, while nursing homes are up 4% in the past year alone.
This is the main reason why I will not offer LTC insurance without the automatic 5% compound inflation factor included. It is vitally necessary! There are also other ways I can help.
If care is going to be needed soon, and you are waiting for your loved one to move to a facility before filing a claim on your LTC insurance policy, I urge you to start sooner versus later. Most policies have a 90 day “elimination period”, or deductible. It does not matter if you meet that by paying for expensive days, or inexpensive days. Why not hire home care to come in for the shortest period available daily (as long as you qualify by needing assistance with 2 activities of daily living, or have a cognitive impairment).
This might cost only $25 per day for minimal home care, and be less expensive than waiting to satisfy your deductible in the facility charging over $100 per day.
Bargaining is another way to reduce costs. Check the price of the bundled services included and see if all of them are necessary. Then try to negotiate a lower cost by eliminating those not needed.
If your loved one did not purchase LTC insurance while still healthy enough to get it, perhaps there is a way to make your available assets last longer in paying the bill. Sometimes a reverse mortgage can provide funds to keep you in the home, versus selling it and moving to a facility. By taking poorer health than the “average” person of your age into account, a medically underwritten annuity can provide much more monthly income than a regular annuity and make the care you need affordable. If none of these can help, then an irrevocable burial trust can at least protect your burial money from the Medicaid spend down. Remember that life insurance over $1500 (face value) must be cashed in to qualify for Medicaid.
So, no matter what the situation involving LTC; rich, poor, healthy or not, there are ways I can help. Check out my website or call me at 920 884-3030 to explore your options.