As your clients move toward retirement, Federal government studies indicate most Americans will require some form of Long-Term Care (LTC) as they age.  Unfortunately, most will also be forced to use their retirement savings since Medicare doesn't cover Long-Term Care.  If this scenario applies to most of your clients, then perhaps it's time to consider proper planning and "Retirement Insurance" in the form of a LTC Plan.   As a case study, let's look at the consequences of an LTC event for a 65-year-old couple retiring today; we'll call them Chuck & Carol Consumer......

Chuck & Carol are in the "Go-Go" retirement period and live a busy, comfortable life until 2044, when Chuck suddenly gets sick.  The couple ends the "Go Go" period of retirement and begins the "Slow Go" period as he needs home care and informal care, projected to cost more than $10,000 per month.   After two years of requiring care, Chuck passed away..... unfortunately, the couple had no LTC Plan because (1) none of their advisors explained that Medicare excludes those expenses, and (2) they failed to implement a component in the couple's financial planning to address potential LTC needs.   

Consequences of NOT Having A Plan.....

Taxes:   As a result of being unprepared, more than $300,000 of their retirement accounts were used to pay for Chuck's care since the couple's retirement accounts were needed to cover the expenses for Carl's care.  While the PRE-TAX cost of care was closer to $10,000 per month, more than $12,000 per month was needed to cover the actual LTC expenses. 

Market Corrections:  What might make a difficult situation even worse would be the need for care that occurs during a market correction, especially when corrections of more than 20% have occurred frequently since 1926.  Carol faces several difficulties since the couple had no "Retirement Insurance" in the form of LTC Planning.   The couple relied on the income generated by their retirement accounts, and there is a genuine concern Carol's retirement security is in jeopardy with the depletion of $300,000 from the couple's nest egg.   Adding insult to injury, the $300,000 was withdrawn during a stock market correction, so those assets will not have the opportunity to recover their value when the market recovers.​   

IRMAA:   Finally, in the "unintended consequences" column, the additional income for each of the two years of care significantly increases the couple's taxable income, causing Carol's Medicare premiums to increase substantially due to "means testing."

Add it all up, and with some prior planning, much of this could have been avoided with "Retirement Insurance," otherwise known as a Long-Term Care Plan.

If your clients lack a formal Long-Term Care component in their comprehensive financial plan, perhaps it's time to consider strategies to mitigate risk and call it Retirement Insurance.

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