Don't Blink!

Time flies.  That’s been a common saying throughout the ages.  And indeed, the older you get, the faster the time seems to pass.  I remember when I used to think of people my age as being old.  Not “over the hill” old, but old, nonetheless.  And although we are living longer and, in many cases, healthier lives, we still will face the inevitable reality of the kind of “old” that requires us to analyze just how we will manage our affairs as the burdens of a long life begin to take a toll on our bodies.

The truth is, once you live past a certain age, call it 55-60, odds are that your life expectancy, barring any catastrophes or abundant bad habits, will be relatively long.  Facts state that our body, like any living thing, has a life expectancy. Current estimates range from ± 90-95 years of age.  The average is currently 80, although that will likely increase as long as we continue to advance in our ability to keep the human body alive.  In the 1940s, antibiotics were widely introduced as a medical treatment for disease control.  During the 1950s, there was much advancement with medical technology.  In fact, the first hospice in the United States was not introduced until 1978.  Now there are hundreds throughout the country and world.  

Not that long ago people did not live as long as they are living today.  They worked, retired and had a few years until they expired.  While it’s a good thing that we are not experiencing that same cycle today, our current reality does come with some complications.  Those complications are related around care.

Indeed, one can live a fulfilled life without having all human faculties available. That said our activities of daily living (ADL) are susceptible to breakdown as we age.  Activities of daily living include; bathing, continence, dressing, eating, toileting, transferring and cognition. And, while assistance might be available from time to time, it’s not cheap to provide constant care.  In fact, most people who require care without a plan to pay for it end up exhausting most of their assets in order to fund required services (1).  Those without alternative resources typically rely on family members and friends, who have to skip work and sacrifice resources to deliver care. That simply drives the loss factor into the next generation’s ability to create wealth.  It’s estimated that 7 out of 10 people 65 years old or older will require an average of at least 1 to 3 years of long-term care (2).  

So, what’s the solution?  It starts with a plan.  If you are independently wealthy and can afford to let $7,000-$10,000 a month go towards care (3), then you might be OK.  Conversely, that $7,000-$10,000 could have gone to your heirs, your favorite charity, or remained in your estate if you didn’t have to use it for care. Notwithstanding your wealth, you could also invest in a long-term care policy. Similar to a life insurance policy, once you have satisfied the requirements for benefits (Needing assistance with at least two ADL or having lost cognitive ability) the long-term care insurance (LTCI) begins to reimburse you for qualified expenses.  You maintain your wealth, you keep your investments and you have a stream of money to assist you with the expenses relating to your care (4).

The problem with LTCI is that many people do not have it.  Similar to life insurance, the older you get, the more expensive the premiums.  In fact, only about 4.8 million people have LTCI coverage today.  The average age to purchase LTCI is 57, although many invest at a younger age (5).  The largest percentage of applicants (55%) falls between the ages of 55 and 64.  The problem is that not only are premiums higher as you age, but health conditions that might interfere with your ability to gain coverage are more likely at an older age.  The following statistics illustrate this point:

Age Range Decline % Due to Health Conditions

60-69 years old 27% of applicants
70-79 years old 45% of applicants
Less Than 50 years old 14% of applicants

Therefore, if you plan to have coverage, it’s best to plan relatively early, as premiums are lower and the likelihood of gaining approval for coverage is greater (6).

The moral of the story is that you are not getting any younger.  The older you get, the faster the time goes.  It’s never too late to plan for your needs as you age. And, LTCI does not only serve for old age related ADL deficiencies.  It also delivers benefits when a younger person suffers a disabling condition requiring care.  Benefits are typically cumulative and some policies have riders allowing for spouses to share benefits.  That’s especially helpful when one spouse is cared for by a healthy partner for a period of time prior to the other spouse requiring care at a later time.  Shared Care riders are becoming much more common in today’s LTCI policies.  Many life insurance products also have accelerated benefit riders to assist with LTCI needs as well.

Now is the time for you to plan for the future.  Having a LTCI policy will set you up for the inevitable expense of caring for you later in life.  That way, you can enjoy your relatives and friends, as opposed to enslaving them for your care.  Although they love you and would likely commit to assisting you, the sacrifices they make to assist will most definitely have a significant impact on their time, finances and quality of life.  Having a long-term care policy will provide the resources you need to allow them to enjoy you during your time of need.  And remember, Don’t Blink!  It goes by in a flash.

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1. Medicaid requires one to exhaust personal assets significantly, prior to providing benefits.
2. 2015 Medicare and You National Medicare handbook, Centers for Medicare & Medicaid Services, Sept. 2014.
3. Estimate.  Amounts differ based on geography, level of care necessary and source of care.

4. LTCI policies require that a licensed physician authorizes that LTCI requirements have been met.  Care must typically be administered by a licensed professional and benefits begin to be paid after a contracted elimination period as defined in the policy. Policy terms differ and careful analysis is recommended prior to executing an agreement for coverage.

5. LIMRA  

6. Similar to Life Insurance, LTCI premiums are rated on factors including age and health conditions after medical underwriting