The Importance of Long Term Care Planning
According to a recent survey from UBS Wealth Management Americas, long-term care is investors’ greatest personal financial concern. Donald Jay Korn in On Wall Street (a SourceMedia publication for the financial services industry) reports that more respondents were “highly worried” about “being able to afford healthcare and the support I need in my old age” (over 25%) as compared to any other issue. Surprisingly, that was more than the number of respondents that were highly worried about having enough money set aside for retirement (only 14%).
Korn also points out from the report that younger investors (age 25–49) appeared to be more worried about these issues than respondents in their 60s, perhaps because the former are beginning to see the financial impact as their parents and other loved ones grow older.
This study reinforces to me the importance of doing Long Term Care (LTC) planning as part of retirement planning. When people hear the term LTC, they immediately think of insurance. But LTC planning is not the same as LTC insurance. There are actually four primary sources of LTC funding and support, of which insurance is only one:
- Your family
- Your savings/investment portfolio
- LTC insurance
- Welfare (Medicaid or, in California, Medi-Cal)
Which and how much of each source should be included in your plan is specific to your own unique family and financial situation.
It’s difficult if not impossible to determine whether or not you need LTC insurance without first doing LTC planning. And it’s hard to do LTC planning if you have not first completed a thorough retirement plan identifying all your future goals and the funding required for each. Only after you’ve gone through the planning process will you have a reasonable sense about your insurance needs. As a Certified Financial Planner I always cover LTC planning as part of retirement planning for my clients, and I would guess that about half the time insurance is actually not warranted. In those cases the other sources turn out to be more than adequate.
For those of you living in the Bay Area, I will be presenting a seminar on the topic of Long Term Care Planning at the Los Altos Library (13 S. San Antonio Road, Los Altos, CA) at 7:00 PM on Tuesday February 12th.