Dear Carrie: I'm 55 years old and trying to be smart about planning for my retirement years. What I'm struggling with is whether buying long-term care insurance makes sense. What do you think -- is it a smart move or just a waste of money? --A Reader
Dear Reader: You're certainly not alone in struggling with this question. With upwards of 79 million baby boomers currently living in the U.S. -- and people living longer -- there are lots of folks considering long-term-care insurance. And I believe they're wise to do so. That's because just as life-expectancy rates are going up, so are the costs of long-term care.
LTCI is now often an important part of a well-rounded financial plan. However, you bring up a good point. Not everyone will need it. Plus, premiums for LTCI aren't inexpensive. So you'll want to look at LTCI from both a financial and a personal perspective.
THE ODDS YOU'LL NEED LONG-TERM CARE
Of course, there's no way to predict for sure whether you'll need long-term care. A lot depends on your own health and family history. But current statistics provide some food for thought. For instance, the U.S. Department of Health and Human Services says that people who reach age 65 have a 40 percent chance of entering a nursing home. About 10 percent of these people will stay there five years or more. It's estimated that by 2020, 12 million older Americans will need long-term care.
WAYS TO COVER THE COST
The cost of long-term care -- what insurers call the "activities of daily living" such as bathing, dressing, eating, using the bathroom and moving --can be staggering. (The American Council of Life Insurers projects a 2.6-year stay in a nursing home will cost about $496,000 in 30 years!) And many don't realize that Medicare and other types of health insurance don't cover most of this type of care. For instance, Medicare will only pay for medically necessary (set ital) skilled (end ital) nursing and home care, such as giving shots and changing dressings, not assisted-living costs like bathing and eating. Social Security doesn't pay for any type of long-term care.
If you have family to care for you, that might minimize your need for LTCI (realizing, of course, that providing this type of on-going, hands-on care can be a huge task for anyone). Paying for care out-of-pocket may be an option if you have considerable assets. At the other extreme, people with a low net worth might qualify for long-term care provided under Medicaid.
However, if none of the above fits you, LTCI can be an extremely worthwhile choice.
EVALUATING LTCI POLICIES