Page 25 - BusinessWest 2021 Senior Planning Guide
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Forward Thinking
Buy Long-term-care Insurance at the Right Age for Best Value By ADAM SHELL for AARP
Being slammed with exorbitant bills for a nursing- home stay is among the biggest potential budget busters in retirement.
That’s why getting insurance to cover a chunk of the costs for in-home care, an assisted-living facility, or a private room in a nursing home is a personal-finance move to consider. The key, though, is getting the most bang for your insurance-premium bucks.
The catch? The price of long-term care coverage can be cost-prohibitive. The national median daily cost for a private bed in a nursing home in 2019 was $280 a day, or $102,200 a year. A year-long stay in your own room at an assisted-living facility runs $48,612. Those are big numbers that can eat through a retirement nest egg quickly.
So, what’s the right age to buy a long-term-care policy that keeps premiums affordable while saving you money on total premiums paid over the life of the policy? Sure, you could get a policy with a lower premium in your 40s or when you turn 50. But you’ll likely be paying premiums for more than two decades before you file a claim.
People older than 70 file more than 95% of long- term-care insurance claims, and nearly 70% of claims are filed after age 81, the American Assoc. for Long- Term Care Insurance reports.
But if you wait until age 70 to purchase a policy that pays $250 a day for a private room in a nursing home for up to two years, your monthly premium will be
about 130% of the bill for someone buying at age 50, according to Genworth’s long-term-care cost calculator.
Sweet Spot
The optimal age to shop for a long-term-care policy, assuming you’re still in good health and eligible for coverage, is between ages 60 and 65, financial advisers say. Couples might take a look starting at age 55.
“If your health is OK and you don’t have hereditary problems that insurance companies don’t like, the ideal time to get long-term-care insurance would be in your early 60s,” says Diahann Lassus, co-founder of New Providence, N.J.-based wealth-management firm
Lassus Wherley.
Why? You’re not too young, and you’re not too old.
A still-affordable monthly premium coupled with a total premium savings is a winning combination.
But waiting those extra years also comes with a risk, Lassus and other financial planners caution. Anybody could be rejected for coverage because of failing health or medical-test results that point to a high probability of eventual health issues.
“By waiting, you are betting that you will stay healthy,” says Michael Foguth, founder and president of Foguth Financial Group in Brighton, Mich. “It’s a calculated risk.”
Long-term-care insurance premiums can increase over the years. But an insurer must get approval from a state’s regulators to raise the premium, something that doesn’t happen with homeowner’s insurance. Long- term-care insurers have been imposing significant rate hikes for nearly a decade, and the number of insurers offering this type of coverage has shrunk.
Should You Self-insure?
What if you invest the money you would have put toward premiums to pay for long-term care? If you invested $161.72 a month from age 50 through age 79 and had a 7% return, your investment would grow to
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  “The national median daily cost for a private bed in a nursing home in 2019 was $280 a day, or $102,200 a year. A year-long stay in your own room at an assisted-living facility runs $48,612.”
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