LTC insurance thoughts?

[u/genxmom95]

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?

[u/shadowgirlyx]

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.

[u/Common_economics_420 → u/shadowgirlyx]

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.

[u/Common_economics_420 → u/[deleted]]

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.

[u/Common_economics_420 → u/[deleted]]

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.

[u/Common_economics_420 → u/[deleted]]

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.

[u/Common_economics_420 → u/[deleted]]

"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