Education >> Confused About Insurance?
A Story of Shocking Account Losses
But the stock market is not to blame. Might you be at risk, too?
September 2010
Can you imagine the impact on a recent retiree who sees her account fall from $700,000 to $325,000 in three years?
A woman I recently met shared that sad story, but the decline in the value of her portfolio wasn’t due to the stock market. The cause: Her husband suffered a stroke three years ago, and they’re spending nearly $125,000 per year to provide him with long-term care.
You need to protect yourself and your loved ones from the rising costs of aging. And because financial planning is a family affair, please read this article with your parents and in-laws in mind as well as your own situation.
Yes, this article is about long-term care insurance. As you know, the planners and I at Edelman Financial strongly encourage most of our clients to obtain long-term care insurance. AARP estimates that 70% of Americans who are age 65 today will require long-term care at some point; the average cost is currently $74,000 per year, and in many metropolitan areas the cost exceeds $125,000 annually, according to a 2010 nationwide survey of nursing homes by Genworth Financial.
Don’t have LTC insurance? Absence creates a gap in retirement planning, especially for married couples or those who wish to leave a legacy to children, grandchildren or charity. Quite frankly, few Americans can afford to maintain their current lifestyles while also spending $6,000 or more every month on long-term care. Here at Edelman Financial, we’ve seen some people lose a lifetime of savings in a few short years because they failed to plan for LTC costs. We’ve also seen couples become impoverished because their resources were wiped out paying for a partner’s long-term care needs.
For most people, the best way to protect against these costs is to obtain LTC insurance. And that brings me to the crux of this article: Insurance companies have been dramatically increasing the cost of long-term care insurance. John Hancock, for example, has initiated a 32% price increase for new policies with compound inflation in some states. For a married couple, both age 60, buying a four-year LTC policy that pays benefits of $230 a day with compound inflation, the cost is now $9,400 a year compared to just $6,700 last year! Other insurers have either already acted similarly or are expected to do so.
There have been price increases before, but rarely of this magnitude. Therefore, if you have not yet determined whether you need LTC insurance, or if you’ve been planning to buy it but have procrastinated, now is the time to act. Contact us to determine if you need LTC insurance. If you do, we can shop insurers for you to help you obtain the right policy with the features you need.
Given our concern for your need to protect yourself from the potentially devastating costs of long-term care, as well as the expectation for additional price increases in the future, I encourage you to contact your Edelman advisor about this important retirement planning issue.
For more information about insurance options or to order a copy of the National Association of Insurance Commissioners’ free booklet, “A Shopper's Guide to Long-Term Care Insurance,” visit www.insureUonline.org or call (866) 470-NAIC.
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