Most in the advisory community are quick to explain how their role is essential to consumers and how artificial intelligence (AI) or Google search can't replace their expertise.  Yet, these same professionals allow millions of Americans to believe that having the financial resources to cover future Long-Term Care (LTC) needs is enough to be prepared.  The two truths form the basis of the self-funding myth, the fairy tale belief that money alone solves the complexities of LTC.  

When a trusted "advisor" suggests a client set aside funds to cover potential LTC costs without addressing the broader scope of what care entails, they leave clients to manage everything else on their own and needlessly expose clients to a complicated, chaotic, and highly stressful process when care is needed.  As 75 million Baby Boomers head into retirement, it's time to say the quiet part out loud:  Self-funding is not a plan; it's a forced self-planning by members of the advisory community unwilling or unable to incorporate a complex topic into their advisory role…..

Self-Funding Equals Forced Self-Planning

Self-funding might seem like a simple solution, but in practice, it leaves clients and their families to deal with a host of unanswered questions like:

What are the care preferences, and where will care be provided?

Who will coordinate the care, and who will serve as the caregiver?

What is the tax impact of liquidating assets to pay for care, and how will this affect other financial goals?

Will the family be burdened with difficult care decisions, or are preferences clearly outlined?

How will legal and estate issues be handled during the process of care?

Without a comprehensive, even written, plan to address the various aspects of LTC, consumers must navigate all of these challenges on their own, thus real-time self-planning.  Perhaps looking at other "comprehensive" financial planning disciplines will highlight the absurdity of LTC self-planning scenarios.

Would Clients "Self-Plan" Their Retirement?

Imagine if advisors told clients, "You have enough money for retirement; you can figure out the rest on your own." It sounds absurd, right?  Retirement planning involves careful analysis of income streams, tax strategies, investment growth, and withdrawal plans to ensure clients don't outlive their assets.  No advisor would leave clients to self-plan their retirement income, so why leave them to self-plan for LTC?

Estate Planning Without Professional Guidance?  

Estate planning is another area where self-planning could be disastrous.  Without proper guidance, consumers may neglect essential documents like wills, trusts, or powers of attorney, leading to family disputes, tax issues, or even loss of assets.  Estate planning isn't just about money; it's about control, protection, and legacy……no different than having a plan for LTC!

Isn't Tax Planning Complex?

The tax code is complex, and failing to plan effectively can lead to costly mistakes.  CPAs and tax professionals work to ensure consumers maximize various strategies to reduce their tax burden or avoid penalties.  Expecting clients to handle this alone is a recipe for disaster—just like expecting them to self-plan their LTC without understanding all of the tax-deductible, tax-deferred, tax-advantaged, and tax-free options.

Risk Management Without a Professional?

Risk management is another critical area that demands expert guidance to mitigate risks through proper financial structuring or adequate insurance coverage.  Americans rely on professionals to help them navigate the unknown, and leaving clients to self-plan their risk management would expose them to liabilities they're unprepared to handle….It is no different than self-funding without a plan exposes them to the uncertainties of LTC.

Medicare Specialist And Closing The Healthcare Coverage Gap?

Medicare is essentially health insurance designed to address acute healthcare like doctors' visits, hospital stays, and rehabilitation, so Medicare specialists help clients navigate the intricacies of Medicare coverage and help clients "see" the gaps in coverage like deductibles and what care or services are excluded…..thus, the importance of recognizing Medicare does not cover LTC.  Without proper guidance from Medicare specialists, their clients are left vulnerable to costly surprises when Medicare benefits fall short, and the consumer is left with chaotic, unplanned outcomes from self-planning LTC.

Long-Term Care Should Not Be Any Different

So why do so many advisors allow clients to self-plan for one of the most expensive, emotional, and unpredictable events of their lives?  When did the dangerous myth that setting money aside to self-fund LTC become acceptable?  Just as clients wouldn't be expected to self-plan their retirement, estate, or tax strategies, they shouldn't be expected to handle the complexities of LTC without support throughout the advisory community.  The tide will begin to turn when there is a realization that (1) self-funding is just a way to pay for care, (2) self-funding is not the comprehensive plan it pretends to be, and (3) self-funding is not a license to ignore all the other aspects of LTC Planning that are equally, if not more, vital.  

Proper LTC Planning should include ten critical components such as care preferences, legal and tax implications, family coordination, caregiver support, etc.  Without this complete picture, clients and their loved ones are left to scramble, making decisions in crisis rather than with clarity and purpose.  The self-funding planning myth leaves clients vulnerable to the harsh realities of Long-Term Care because someone they rely on and trust is doing their clients a disservice and forcing them to self-plan without guidance or support.   

If the advisory community isn't advocating for clients to self-plan their retirement, estate, or tax strategies, they shouldn't be left to Long-Term Care self-planning either!  It's time for the advisory community to step up and embrace comprehensive Long-Term Care Planning to ensure clients are protected from the harsh realities of Long-Term Care and that they deliver the comprehensive, holistic approach that clients are being told they can expect.

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