As Financial planners, so much of what we do for our clients involves more than just investment planning and cash flow analysis. First and foremost, our job is to be fiduciaries to you and your family – Meaning that we have a duty to always put your needs at the forefront of our planning objectives. Your long-term success is critical to us. Therefore we must also manage risk, and not simply within the portfolio.
This year Hallmark Stores sold a record number of “Happy 100th Birthday” cards (82,000). Every day more and more Americans are celebrating their 80th, 90th and even 100th birthday. When people live this long, there is a high probability that they will require advanced care in their later years – This is simply referred to as Long-Term Care (LTC).
It is estimated that 70% of people who reach age 65 will require long-term care service at some point in their lives (US Dept. of Health & Human Services – Sept. 2008). It can be very difficult for people to imagine that a time will come when they will need assistance with the regular activities of daily living (like bathing, getting dressed and eating). As a result, people are inclined to delay discussing this possibility or determining how to manage this risk.
When you really think about your own personal risk of one day requiring long-term care, it is not really 70%. Your real risk is either 0% or 100%. Being married obviously increases the risk that at some point in time your portfolio will be required to help support the costs of care for either your own care or the care of your spouse. Many people have a fixed annual cost of living planned for in retirement. Imagine how things would change if suddenly $9,000 per month were required in order to cover Long-Term Care costs. This could significantly derail the ability of a portfolio to last for the entire lifetime of both spouses. This is why it is a risk that must be addressed in your planning.
Medicare covers very little, if any, of the cost for long-term care and is typically limited to a listed set of injuries or illnesses. Further, Medicare will only help offset these costs for a short period of time. Some states Medicaid programs or Veteran Affairs programs will help to cover expenses, however these are clearly not available to everybody. Having a Long-Term Care Insurance policy in place is
the surest and most effective way to offset the costs associated with this potential risk.
As with all types of insurance, it is something you have and you hope you’ll never have to use it. There is no one “right amount” of coverage, and every case requires a cost-benefit analysis to see if it is right for you. As part of our due diligence as your Risk Managers, Dominion Wealth is taking time this summer to update our records to be sure we have documentation of any and all existing Long-Term Care coverage. To that end, please expect contact in the coming weeks to verify sufficiency or to inquire about obtaining copies of your policy. Should Long-Term Care insurance be something you do not have presently, we will add this to the agenda for your next Progress Meeting. Together, we will make certain we are working to provide you with as unassailable a financial plan as possible so that you can be sure to live your best life in retirement.
Until Next Month,
Your Advisors at Dominion Wealth