As financial advisors, we have been asked many times about whether someone should purchase long-term care (LTC) insurance. This is not surprising, as people are living much longer and the incidence of chronic diseases increases with an aging population.
In addition, the cost of care has seen significant increases – much faster than the rate of inflation. However, LTC insurance coverage is optional and expensive; so how do you know if you should buy it?
The best way to evaluate whether you should have long-term care insurance is to relate some facts to your own situation. According to the American Association of Homes and Services for Aging, 54% of Americans believe Medicare provides payment for extended nursing home stays or for chronic conditions such as Alzheimer’s disease. The fact is, Medicare only provides for up to 100 days of care for qualifying conditions, and after 20 days, patients must contribute a significant co-pay. As soon as a condition is diagnosed as chronic, meaning patients either have severe cognitive impairment or can’t perform two or more activities of daily living, Medicare payments stop, even if the 100-day period has not run out. Medicare was never intended to pay for long-term care. The welfare program, Medicaid, does pay for chronic care, but only after patients have exhausted nearly all of their assets (liquid assets typically must be less than $2,000, but this varies by state and excludes your personal residence).
The Cost of Care
It is estimated that just 17% of baby boomers have prepared for long-term care needs, and only 10% of adults over the age of 65 own a long-term care policy. Given that the average nursing home patient requires a stay of 2.5 years at a cost of $215,000, the risk of a long-term care expense is something we review with investors. Many of Premier’s clients are self-insured, meaning that they would cover such a possible expense with personal savings and assets rather than purchase long-term care insurance. This way they do not have to pay the premium payments without any benefits if they never use the insurance, and they can pass those assets along to their heirs. Accumulated assets that can be easily liquidated if needed are an important part of an individual’s planning in this area.
If you are concerned that a long-term care expense would create too much stress on your estate, that you may outlive your funds, or that you would like to ensure an inheritance to your heirs, you may want to consider purchasing a long-term care policy. Each person’s situation is unique and we would be happy to speak with you about your concerns and run through potential scenarios for you. Premier does not sell LTC policies, but we would be happy to refer you to someone who can assist you, should you determine you would like to consider a policy. The key to evaluating this is to keep the potential for long-term care costs in perspective. Although you may have had someone close to you who has been in a long-term care facility for many years, it certainly is not the norm.
Where Are All The Women CFP® Professionals?
Premier has been long-time advocates of the CERTIFIED FINANCIAL PLANNER™ credential, with two of our founders holding this certification, Wayne Caldwell and Ron Ross, as well as our president, Ginger Weber, and operations manager, Teresa Conley. Advisor, Jeremy Sorci, is also currently enrolled in a CFP® education program to prepare for certification.
Although 50% of Premier’s CFPs® are women, you may find it interesting to learn that just 23% of all CFP® professionals in the US are women, and that figure has not changed in more than a decade. As part of its Women’s Initiative, the CFP Board of Standards Inc. has been on a mission to discover why there aren’t more female financial planners. Part of it is linked to the fact that just 1 in 3 financial advisors are female. As a firm with both men and women CFPs®, we understand the importance of providing diversity in our advisors. In fact, we see a tremendous amount of opportunity for women to be successful as CERTIFIED FINANCIAL PLANNERS™, and we support our team in pursuing this credential.
Why is This Important?
You might ask, “Why does it matter how many financial planners are women?” Consider the following (Source: Women of Wealth, Family Wealth Advisors Council, Heather P. Ettinger and Eileen M. O’Connor):
- By 2030, at least two-thirds of the nation’s wealth will be in women’s hands.
- Women constitute 48% of the country’s millionaires.
- It is estimated that 70% of widowed women change their financial advisor within a year of their spouse’s death.
- One in three women wants to strengthen her financial planning skills but “just doesn’t know where to begin.”
We aren’t suggesting that women investors should only work with women advisors, as that would be difficult to do given that there are many more women investors. Premier’s male advisors also have great long-lasting and trusting relationships with our female clients.
Both men and women investors should first and foremost find an advisor that they are comfortable with, who they feel is partnering with them around their goals, who provides them with a clear and understandable investment strategy, has a proven track record, and who really listens to them. That is how each investor will achieve financial peace of mind.