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Insure your Retirement Savings with Long Term Care

During their prime working years, many people take the time and care to prepare for the glorious days of retirement, while other folks work day to day, lack any formal planning, and hope that they will be able to save. Even for those who did careful planning, the market’s downswing in 2009 has caused people to worry that the hit to their hard earned dollars could impact their anticipated date of retirement. Those who were nearing retirement may have begun to move to a more conservatively invested portfolio which means they may not have been as greatly affected by the market. Others, however, were advised to stay the course in their investment strategies and ride out the market volatility. If they did stay the course, many accounts have recently regained much of their value.

People are living longer, which is of course a good thing. Back in the early 1990’s, the life expectancy for men and women was in the early 50’s. According to the Department of Health & Human Services, a man’s life expectancy is now 72 years of age while a woman’s is 78.8 years of age. However, if you want to retire at age 65, which for many years had been the traditional retirement age¹, you will inevitably need to either have more money saved to provide for your retirement years or be prepared to cut back your spending so that you don’t run out of money. There are several products which provide income in retirement such as reverse mortgages or annuities with minimum withdrawal benefits.

In the coming months, we urge you to take the time to not only review your retirement plan, but also to insure that your savings won’t be eroded by an unexpected illness or unforeseen circumstance. Simply stowing away money in your 401k, IRA or various other retirement savings vehicles is not the only way to ensure that you’ll have enough assets to live off of when you decide to retire. You ought to review your portfolio frequently and adjust your financial investments to cover your projected fixed costs and take into consideration the impact of a long term illness on your portfolio.

If you or your spouse has an illness, accident, or are faced with challenges that accompany the normal effects of aging, the costs of care can be astronomical. Genworth did a recent study where they found that a Medicare Certified, Licensed Aide in Massachusetts charges between $18-69/hour, a private one bedroom in a Boston area assisted living facility ranges from $1,800-$5,600/month and a private room in a local nursing home ranges from $249-$435/day, at the high end $158K/year². It is easy to calculate how these expenses can quickly erode savings. Without long term care (LTC) insurance, you can quickly use up your retirement monies leaving your spouse to care for you as well as face the reality of returning to work or even entering the work force for the first time in order to generate income to cover the costs of care.

For the wealthy, who think they may be able to self insure these costs, there are strategies to own a policy in an irrevocable trust outside the estate. Wouldn’t you rather have the insurance company foot the bill and leave more to your heirs or to charity? It is important to conduct a thorough analysis of the trade offs as the costs often outweigh the benefits.

LTC insurance is very important coverage that provides valuable support and financial resources that can help cover the costs of long-term care. By helping to protect your assets, and giving you choice and control over where you receive care, which can include your own home, LTC insurance provides a sense of security that retirement savings will not be depleted by the expenses associated with a long term illness or unforeseen disability.

The bottom line is that protecting yourself against life’s uncertainties is essential to retirement planning, especially given the unpredictable nature of a long term illness that might prevent you from utilizing the money you so diligently saved while working to live happily in your golden years.

Aviva Sapers is the CEO at Sapers & Wallack and has her Certification in LTC and is a licensed Insurance Advisor. If you are interested in learning more about retirement planning and LTC insurance, please email Aviva at asapers@sapers-wallack.com or call her at 617 225-2600.
1. Social Security Online, http://www.ssa.gov/pubs/ageincrease.htm

2. Genworth.com, http://www.genworth.com/content/etc/medialib/genworth_v2/pdf/ltc_cost_of_care.Par.8024.File.dat/cost_of_care.pdf