Case Study #1

Single Female, Age 60

 

Long-Term Care Planning for women is very important, and for those who are single, widowed or divorced it's even more of a concern.   When we look at scenarios for women in this situation, we often find that children and extended family are no longer living near by and these women lack a support system in the event Long-Term Care is needed. 

 

In this case study, we make the following planning assumptions:

  • The single, female, age 60 has $1,000,000 in assets

 

  • In addition to social security and pensions, she needs to generate a $30,000 income stream to maintain her lifestyle.

 

  • Her income stream includes an annual 3.5% Cost of Living Adjustment (COLA).

 

  • Her assets will have a net rate of return of approximately 4%.

 

  • At age 80, she experiences a need for Long-Term Care lasting 5 years.

 

 

Below you will see the different scenarios which might play out for this woman, based on 4 different planning models.....

Scenario #1 (Purple Line):

In this situation, the individual plans on a lifetime income stream which will last to at least age 100, where LTC is neither needed or planned for.   The outcome is predictably successful.....if all goes well.

 

Scenario #2 (Red Line):

In this situation, a five year Long-Term Care need - not uncommon for woman - will pretty much wipe out her assets by year four.  At this point, she and her family may lose the opportunity to determine her choices for care and she will likely require financial assistance to maintain the current course of care.  

 

Scenario #3 (Blue Line):

In this situation, the individual plans on a lifetime income stream which will last to at least age 100, while reallocating a portion of her assets to plan for Long-Term Care needs.   Not only does the projected income stream last to age 100, there would be sufficient additional funds available in the event Long-Term Care is needed.

 

Scenario #4 (Green Line):

Unlike scenario #2, a retirement income plan which addresses future Long-Term Care needs is a more palatable outcome.  By planning ahead, there is little difference to her income plan versus scenario #1, however she and her family are better positioned to deal with Long-Term Care expenses and she can maintain control of the care she is receiving.

 

 

CONCLUSION:

By planning ahead, retirement income goals can be reached even with a Long-Term Care plan and most people will see little effect on their long-term income projections.  

Sponsor Code = "LTC"

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