The Long-Term Care Talk
The Importance of Planning for Long-Term Care
Medical advancements have made living a long, fulfilling life a near certainty – and planning for that is a necessity. Health-related expenses can increase considerably with age, especially in the face of health problems requiring long-term care. When families don’t sufficiently plan for long-term care, they may find themselves liquidating IRAs and paying heavy taxes – and the markets aren’t always going to work in their favor. Each year in a nursing facility can cost upwards of $100,000 depending on location and needs. Few clients could safely afford that much of a risk to their retirement portfolio without sacrificing their lifestyle or legacy.
Having “The Talk”
It may be difficult to initiate the long-term care conversation, but it may also be one of the most important discussions a client will ever have with their financial professional. Approaching this conversation inappropriately is one of the greatest mistakes that financial advisors make; when you say the words “longterm care” to clients, they often hear “nursing home.” This term is traditionally cloaked in such negativity that these words alone are enough to shut down a discussion before it ever truly begins. Most people prefer to receive care in their own home for as long as possible. Instead, consider using an approach such as: “Mr. and Mrs. Smith, as part of what we want to accomplish today with your financial strategy, let’s discuss how to keep you in your home longer should you no longer be able to care for yourself.” An opener such as this can help shape how the client views the conversation into something positive – remaining in their own home. Women make up more than 70% of nursing home residents, and more than 70% of those residents are widowed or divorced. When working with married couples, long-term care planning should be discussed with both spouses present and positioned as a way of protecting the surviving spouse from financial impoverishment. The discussion should focus on women, because women are the ones most affected as both the caregivers and the cared-for.
Family members often assume the burden of care. This can have a significant impact on their lifestyle, personal and work commitments, and their physical and emotional well-being over time – not to mention a potentially devastating financial impact. While anticipating the expense is crucial, the financial component is only one of many to address during planning. The impact can extend far beyond dollars, affecting careers and personal lives. Acting as caregiver can take away from work and leisure time, impacting both income and well-being. Caregivers’ health and relationships can be affected by the demands they face. Small and large expenses have a way of popping up, from groceries for a loved one to home modifications like ramps and grab handles. It all adds up over time.
Closing the Long-Term Care Funding Gap:
The Challenge of Private Long-Term Care Insurance
One must look at current trends in the long-term care marketplace to make informed decisions about their long-term care plans. Over the past ten years, we have seen a sharp decrease in companies selling traditional long-term care insurance. A decade ago, there were roughly 100 different companies selling long-term care insurance; today that figure is less than 20. What caused the standalone LTC industry to see such a change in sales and find so many carriers leaving the business? A decline in interest rates, underestimated lapse rates, and claims that are expected to more than double over the next two decades have all contributed to the decline of the long-term care industry, to name a few. The cumulative effect has left many carriers defeated. Many carriers that remain have implemented price increases – often substantial – to create the revenue needed to pay claims and survive in the industry. All of these challenges in the standalone long-term care marketplace has created an environment that is ripe for alternative solutions to long-term care coverage.
Contact your dedicated Case Design Analyst today for the information, tools, and tips you need to make the long-term care discussion a positive and productive experience for you and your clients.