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Reid: Long-term care planning a must

MARTY REID
Guest Columnist

Retirees unanimously confess that their greatest fear is running out of money. In other words, individuals deplete their retirement assets unexpectedly and are unable to sustain their retirement lifestyle. In many cases, unforeseen health care costs are the culprit. For example, research indicates that individuals may typically require up to three years of custodial care during their lifetime. Custodial care is necessary when a person is no longer able to carry out such daily tasks as administering medicine, bathing or eating independently.
Health insurance does not cover these costs, and Medicare, contrary to popular belief, only provides limited coverage for custodial care. However, long-term care insurance does provide coverage to cover such costs as home health care, adult day care and nursing home care.
Some pundits argue that long-term care insurance is too expensive, but consider the following scenario. A 59-year-old male, who is reasonably healthy, conservatively estimates that he could spend $162,000 in long-term care expenses over a three-year period. So, he purchases a policy that provides the same amount of coverage, supplemented by three percent compounded interest. Thirty years later, he enters a nursing home with an annual cost of $125,000 per year. With its compounded interest, his policy paid $387,764 of his expenses for the next four years, compared to his total premium cost of $53,730. Due to his financial planning, the client was not forced to deplete his retirement assets unnecessarily.
The cost of paying long-term care expenses out-of-pocket can quickly become an unbearable burden for many families and seriously jeopardizes their quality of life.  It may not be the most pleasant of topics, but insurance allows the individual to transfer high risk, severe events to the insurance company and away from his or her family and their own financial legacy. Consequently, retirees should devise a careful risk management plan to protect their retirement assets and to bolster their financial security.
Marty Reid is a CERTIFIED FINANANCIAL PLANNER™ practitioner. Registered Representative of and Securities and Investment Advisory Services offered through Cetera Advisor Networks LLC, Registered Broker Dealer, Member FINRA/SIPC. Reid Financial and Cetera Advisor Networks are unaffiliated.

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