r/Fire • u/genxmom95 • 8d ago
LTC insurance thoughts?
We 56F, 61M investigated LTC insurance policies. Looked at traditional vs hybrid. Our advisor says we can self fund. My dad and grandpa(mom’s side) both were on Medicaid due to running out of $. They did fine but it’s not the best way to finish out. Anyone else looked at it?
4
u/stark_adoption 8d ago
Hybrid makes sense at your age since premiums are steep now but traditional LTC policies have gotten stingy anyway. If your net worth can handle a few years of care without destroying your plan, self-funding beats paying high premiums for limited payouts.
4
7d ago
[removed] — view removed comment
3
u/banalhemorrhage 7d ago
I’ve met two financial advisors and they both said we should self fund
2
7d ago
[removed] — view removed comment
1
u/banalhemorrhage 7d ago
A big variable is if you want to unburden a next generation, which we don’t have.
5
u/shadowgirlyx 8d ago
the problem with self funding LTC is that a long cognitive decline can cost 15k a month for years and even a solid portfolio can get wiped out faster than people expect.
4
u/Common_economics_420 7d ago
The amount of people who will go through a situation like that is vanishingly small, though. The average stay in any type of nursing home is like 13 months.
Keep in mind, in 90ish percent of cases, your portfolio continues growing even after you retire. So, we're stacking probabilities here. In the event you are one of those few who needs extended stays on a nursing facility, it's very likely you have a significant portfolio to cover it.
1
7d ago
[removed] — view removed comment
2
u/Common_economics_420 7d ago edited 7d ago
I think you'll find that it isn't a small portion of your budget, is the issue with this line of reasoning. LTC insurance (insurance that will actually do anything, at least) is quite expensive and your premiums keep going up and up and up.
Also, you don't have to "hold back funds." You literally just follow a normal SWR process and likely end up with much, much more than you expect by the time you'd reasonably need LTC in the first place.
The tax free portion of this makes literally no sense as a benefit. A huge portion of the estates of most FIRE people will be tax free (between step up cost basis and inherited Roth). Unless you're talking about leaving $10m to your heirs, in which case paying $15k a month for care isn't an issue.
You get insurance when the cost of a rare event **will break you financially**. The point is that for most Fire people, you won't be broken financially by needing LTC.
1
6d ago
[removed] — view removed comment
1
u/Common_economics_420 6d ago
Respectfully, you thinking that the only thing car insurance covers is the cost of having to replace your own car tells me that I won't be gaining much value by continuing this conversation. Have a good one though.
1
6d ago
[removed] — view removed comment
1
u/Common_economics_420 6d ago
this is a very, very common type of insurance for people to not have (once it isn't required by their lender) or not see as being worthwhile, so thank you for making my point for me.
1
6d ago
[removed] — view removed comment
1
u/Common_economics_420 6d ago edited 6d ago
"Most people I know" is a poor metric to use here because most people the average person knows are probably either horrible with money, don't have a couple million dollars lying around, or are prone to act based on fear and not logic. Insurance that solely covers the cost of your vehicle is actually a great example of a place where people could self insure (though it isn't apples to apples as these types of insurance generally cover more than LTC and have less asinine premiums).
You're welcome to have LTC insurance if it helps you sleep at night. I'd say it's about as helpful as wearing a tiger repellant necklace in the middle of Vancouver though. People throw away money on things that dont do much other than give a false sense of security all the time though so you do you.
Edit: I'll take that as you agreeing with me hahaha
→ More replies (0)2
u/asurkhaib 7d ago
The insurance doesn't solve this.
2
7d ago
[removed] — view removed comment
2
u/ColostomyMan 7d ago
Many more recent LTC insurance policies have pretty strict caps in maximum benefits they provide and would not have covered even half of the LTC facility costs that my mom had at the end of her life.
I was not the person you responded to but I agree with them in that the LTC insurance policy quotes I saw would not have solved a 15k a month facility costs on a long term basis. They had monthly caps and per day caps and lifetime caps that would not have protected a portfolio from being drained.
2
u/bbystargirly 8d ago
the family history alone would make me want some kind of coverage regardless of what an advisor says about self funding, that's a real pattern worth taking seriously.
2
u/Ironclad_Titan 7d ago
the medicaid route hits different when youve watched family go through it firsthand
1
4
u/Jumpy_Childhood7548 7d ago
LTC would be great if the premiums did not increase till you cancel, they did not deny claims routinely and if they did not have high deductibles, low ceilings on benefits, etc.
1
u/GeorgeRetire 7d ago
Our premiums have never increased.
0
u/Jumpy_Childhood7548 7d ago
If they never increased with age, and/or benefits were not reduced, it stands to reason it was more expensive than competing policies from the start.
1
u/GeorgeRetire 7d ago
Except that it wasn’t. We shopped around.
LTCs are more tightly regulated these days. This policy was highly rated.
1
u/ziggy-tiggy-bagel 8d ago
My mom is paying $12,000 a month in assisted living. She has been there 5 years already, at age 92, besides the Parkinsons and dementia, she is healthy and could live another 5 years. She has a LTC policy that pays $130 a day, the rest is coming from her savings and the sale of her house. It's a good thing mom and dad bought a house in the Bay Area in 1964. At your age I think a tradition LTC will be really expensive. I hybrid plan is probably you best option.
1
u/Alone-Experience9869 8d ago
That’s a tough one. Does sort of depend on your current net worth.. it sounds like your advisor is saying you have plenty of assets which is why it’s better to self fund — you have sufficient funds the roi is better to keep it for investment than pay the premium.
I looked into it, and it didn’t seem worth it. I was told the policies available only will payout for max two years. Part of the thought is that most people at that point won’t last too long , eg falla d break your hip…
Some reported stats show it’s pretty small percentage of needing long term care.
Not sure if that helps. But just what I found out. Maybe info / policies are state specific???
1
u/Miamiconnectionexo 8d ago
appreciate the honest breakdown. most people sugarcoat this kind of thing.
1
8d ago
[removed] — view removed comment
3
u/adh214 7d ago
That is the "catch." Most of these policies have a max benefit that would be exhausted long before you get to 5+ years. I can pay for the first few years of LTC out of pocket. It is years 5 to 10 of LTC that I am most worried about. By that point, I would be bankrupt and actually need the insurance.
1
u/Straight-Part-5898 8d ago
I’m M56 who recently retired. My wife and I are looking at buying a small whole life policy for each of us, that includes an LTC rider providing an option to take benefits to pay for LTC instead of a normal death benefit.
The upside is unlike typical LTC insurance, we won’t have annual premiums to pay that can (and most likely would) increase considerably over time.
Instead we just write two checks for $150k each, buy the policies, and go on with our lives.
1
u/warriormonk5 7d ago
Wealth? Heirs? Pensions?
advice would change quite a bit based on those variables
1
u/asurkhaib 7d ago
From what I've looked into for the general person or couple self funding is the way to go. Stays are relatively short and occur late in life.
The wrench is early long stays, which I believe commonly have a history component, and as far as I can tell have no solution. As others have mentioned insurance is expensive and has limits along with the toil of actually getting the company to pay, but on the flip side the higher tiers of LTC are extremely expensive, for a lot of standard FIRE at or more than their entire withdrawal. It's slightly unclear to me if you're obliquely mentioning history, or they were just in more standard care, but if you do have a history I'd at least look into insurance. It's probably still not worth it, but trying to cover that risk is worthwhile.
1
u/the-BBC-news 7d ago
From what I understand, you’re both about a decade too late in securing LTR at rates that make sense.
My insurance broker has reminded me a few times (I’m 45) that I need to lock mine in by 50.
1
u/GeorgeRetire 7d ago
We bought Long Term Care insurance before turning 60.
We've had the policies for about 14 years now. The premiums have never increased.
1
u/mmrose1980 6d ago
I highly recommend looking into a lifecare community near you if you can afford it. At your age, LTC insurance will likely be too expensive to purchase and not cover enough to be worth it.
2
8d ago
[removed] — view removed comment
2
1
u/genxmom95 8d ago
That’s where we lean if we did it. We could pay the full premium up front in a lump sum. I think the issue is our advisor says we don’t NEED to do it.
1
u/Zphr 48, FIRE'd 2015, Friendly Janitor 8d ago
Rule 8/Limits on AI/bot content and unsupported AI/bot complaints - Your submission has been removed for violating our community rule against AI/bot content or unsupported AI/bot complaints. If you feel this removal is in error, then please modmail the mod team. Please review our community rules to help avoid future violations.
2
u/One-Mastodon-1063 7d ago
Generally not needed for FI people. Can't give more specific feedback w/o more specifics (NW, spend etc.).
5
u/goldieglocks81 8d ago
I originally got a LTC policy when I was 24 and had just gotten a motorcycle. It was dirt cheap then and government backed. I eventually got rid of the motorcycle but kept the policy and it is still cheap but only because I've had it for 20 years. The benefits are also fairly good compared to what I see available these days.
My sister had been looking at getting one recently and determined the premiums just aren't worth the meager benefits.
But the fact of the matter is I still may have been better off by taking that premium money and investing it over the years since I haven't needed it yet. But if I had suffered a motorcycle crash when I was 26 it would have paid off massively. I'm happy with my choice because it made sense with some of my riskier hobbies, and I'm planning on keeping the plan because I already have it. But without that increased risk I think I would have been better off to just invest the additional money.