Long Term Care: What You Need To Know


An estimated 52 to 70 percent of people who reach age 85 will eventually need some form of long-term assistance with daily activities such as feeding, washing, dressing, and mobility. The costs of professional long-term care can grow to several hundred thousand dollars a year—potentially draining your retirement assets or family members’ resources.

Long-term care (LTC) insurance is one way to help ease the burden and safeguard your savings. However, there are many factors to consider before you choose a policy. In this podcast episode, host Doug Fabian and guest David Haman, a Certified Financial PlannerTM in the Philadelphia office of Mercer Advisors, discuss:

  • The types of LTC support that people often need as they age, from in-home rehabilitation services to a full-time care facility
  • The cost of LTC services, which can vary dramatically depending on the level of care required and what state you live in
  • The various forms of LTC insurance, different options for customizing your benefits, and monthly premium amounts you can expect to pay
  • The tax implications of purchasing LTC insurance, including potential deductibility of the premium costs and taxability of LTC benefit payouts
  • How soon to start considering LTC insurance, and how your expected net wealth in retirement may influence the decision

David also explains why people should start by sitting down with their wealth management advisor to create a financial plan, which can help reveal whether a “long-term care coverage gap” exists and what other estate planning options may be helpful.

 

Transcript:

DOUG FABIAN: Have you thought about long-term care? Most Americans will need some sort of custodial care in their lifetimes. Just how do you plan to fund it?

We talk about the options, including long-term care insurance today on the Science of Economic Freedom podcast.

DISCLAIMER:    The Science of Economic Freedom is intended as an investor education resource. The views and opinions expressed on this program should not be construed as a recommendation to buy, sell, or hold any specific security. Consult your investment advisor and read any investment prospectus carefully before making any changes to your investment portfolio.

This program is sponsored by Mercer Advisors. Mercer Global Advisors, Inc. is registered with the Securities and Exchange Commission and delivers all investment-related services. Mercer Advisors, Inc. is the parent company of Mercer Global Advisors, Inc., and is not involved with investment services.

DOUG FABIAN: Welcome to The Science of Economic Freedom. I’m your host, Doug Fabian. This podcast is all about helping you achieve your financial dreams. We call that economic freedom. This program is about your journey to achieve economic freedom for yourself and your loved ones. Today we want to help you identify your next step on that journey.

This is Episode 46: What You Need to Know About Long-Term Care, with David Haman. He needs no introduction to the Science of Economic Freedom audience. Dave Haman is our most popular guest export. Dave has educated us about social security in Episode 24. He has explained what you need to know about Medicare in Episode 29. And now he’s back to explain what we need to know about long-term care and long-term care insurance.

David Haman is a senior client advisor out of our Philadelphia office of Mercer Advisors. He is a CFP, CLU, CHFU, and that means Certified Financial Planner, Chartered Life Underwriter, and Chartered Financial Consultant. A lot of letters after his name.

He teachers financial planning at Windner University’s graduate school of business, and he is my go-to contributor when I need an expert on a complicated subject, and long-term care qualifies for that.

Dave, welcome back to the podcast.

DAVID HAMAN:                 Thank you very much, Doug. It’s great to be here, and I wish my wife would introduce me to people like that.

DOUG FABIAN: [Laughs] I will give her my script. So let’s jump into this subject, Dave. Today we’re going to be talking about long-term care and long-term care insurance. These are people that most people would like to put off to another day, but they are so important when it comes to your long-term financial plans, so let’s jump in.

So, Dave, let’s begin with a discussion about long-term care. What is that?

DAVID HAMAN:                 Long-term care, essentially, it’s a range of services and supports that help people when they can’t handle what we call activities of daily living. It provides support for them to make their life as good as possible when they can’t do these basic activities that most people can.

DOUG FABIAN: Now, what are the activities of daily living that comprise this what we call custodial care phase of life?

DAVID HAMAN:                 I’m going to use six activities of daily living that are defined in the Internal Revenue Code. When you go out there, if you Google searched it, you would see anything from six or seven or twelve, so I’m just going to use the six most common, and I’m just going to go down the list here with you.

Mobility, that involves being able to get out of bed or get out of a chair by yourself. Feeding yourself, which is self-explanatory. Washing yourself, or bathing. Using the toilet, using the restroom. Maintaining continence, that is, maintaining control over your bladder and bowel movements. And dressing yourself. Those are the six.

Also, cognitive impairments come into play here if something happens where you get some type of dementia of some sort, that would pretty much trigger the need for support services.

DOUG FABIAN: What type of services in the healthcare field deliver custodial care?

DAVID HAMAN:                 There are a series of, we’ll call them levels of service, beginning from simpler to more complex and more expensive, starting with home care. One of the objectives when we do planning with someone who may need this kind of care, the idea is to keep them in their home as long as possible.

You can either have what we call informal or non-paid caregivers at home, family members, typically, to take care of the person as best and as long as they can in their house where they’re comfortable. There’s also something called adult day care, where that caregiver may need a break, either as a rest for the day, or to go shopping, where the person needs to be watched. That’s adult day care.

There’s something called intermediate or skilled care, and this is typically if you go into a hospital and you need rehabilitation or therapy when you come out, you would go to what we call intermediate or skilled nursing care for a period of time. And then you would leave there, hopefully a little bit better.

Then we have, the next level is the assisted living, and this is typically ongoing care. Someone isn’t living at home, they’re in an assisted living facility, and someone comes in periodically, but not 24 hours a day with the person, to help them maybe with meals or to bathe or these activities of daily living, and that’s assisted living.

The next step up is the big one and the expensive one, and that’s if you need 24-hour nursing home care, where the person just can’t function by themselves. So it runs anywhere from home care up to nursing home.

DOUG FABIAN: So let’s talk about the cost of these services, Dave.

DAVID HAMAN:                 Oh, sure. Again, it varies dramatically. Home care for a paid person to come in to one’s house to deliver services periodically, the average is somewhere around $22 per hour, and you could do the calculations yourself on a daily or a weekly or monthly basis, but home care is the least expensive.

Then you get the adult day care, which is averaging somewhere around $70 per day to put someone in adult day care, have them taken care of until the caregiver can come pick them up again.

Intermediate or skilled nursing care has a dramatic range in it, as does nursing home care, from about $140 a day to $770 a day. That’s sort of on the high end.

And then you have assisted living, at about $45,000 per year. Nursing home is, again, and this is depending on where you live. For example, in the state of Oklahoma, nursing home care runs from about $53,000, on average. If you were in Alaska, which is the most expensive place to actually be in a nursing home, about $280,000 a year. So it’s very much dependent on where you live and what the cost is and your geographical area, but it can vary dramatically.

Here in Pennsylvania where I’m located, it’s probably about $130,000 a year for a nursing home.

DOUG FABIAN: Okay, so we’re talking about long-term care. We’ve not talked about yet how are we going to pay for this? How do people pay for long-term care?

DAVID HAMAN:                 This part isn’t too complicated. You can either pay out-of-pocket, that means that you have the resources to fully pay for your care. You may have a combination of or enough insurance—there is something called long-term care insurance, which I’m sure we’ll get into here in a minute—which can defray or pay for the cost of care.

Lastly, for people who don’t have the means to pay and they don’t have insurance, we have the Medicaid system. The Medicaid system is actually, as people know, or I’ll just remind if you don’t, it’s a federal program that is essentially run by the states, so each state has its own little idiosyncrasies to it, but Medicaid is the largest payer of long-term care services in the country, and that’s actually part of the big financial problem surrounding this.

DOUG FABIAN: Dave, I’m going to back up for a second and ask you another question here. Obviously, everyone listening to this program, no one’s getting out of this alive. And so, how many people are going to need long-term care? I mean, we have statistics on everything, I’m sure there’s some statistics about who’s going to need this, and how long are they going to need long-term care?

DAVID HAMAN:                 You would be correct, there are statistics on that. Again, it’s going to vary depending on what study you want to read, but it’s anywhere from…we’re talking about, by the time you reach age 65, and this is where it gets a little scary, anywhere from 52 to 70% of people, depending on the study, are going to need some type of long-term support service during their lifetime, and so it is the majority of people.

An even scarier statistic is, by age 65, 10% of that population already has Alzheimer’s. By the time we reach 85, it’s up to 33%, or one in three people at 85. So, the statistics are eye-opening.

DOUG FABIAN: Okay, so now we’re going to kind of decipher this issue, who’s going to pay for it, do you pay for it yourself, you’ve got some insurance, there’s a safety net in Medicaid. Talk to us just a little bit about Medicaid and long-term care services, just so we get that out of the way.

DAVID HAMAN:                 Medicaid is for people who really don’t have much of anything left. You can pretty much have no assets. I think you’re allowed, in Pennsylvania, it’s somewhere around $2400 in assets, and a very low income, to qualify for Medicaid. If you do qualify, then Medicaid will pay for custodial care, nursing home care, for you. So, it’s not a place anybody wants to be, but, yeah, it’s the backstop.

DOUG FABIAN: Okay, so let’s now talk about long-term care insurance. Of course, there are some people listening to this broadcast who might have long-term care insurance. There are some people listening that may want to consider it, and certainly there’s some people just kind of wanting to understand, maybe they do have the means to self-fund their long-term care, but they’re still going to be grappling with, you know, how much, and the scope of those services. So, let’s attack long-term care insurance. First of all, what is it?

DAVID HAMAN:                 Long-term care insurance is insurance you purchase from an insurance company designed to cover the cost of those long-term support services at all those levels that we described from home care all the way through nursing care.

It is something that is very individually designed for the people who need it. It can be designed to defray the cost of long-term care. It could be designed to try to cover the entire cost of long-term care, and those big numbers we were talking about, but that’s what the insurance is.

I’d like to give a little bit of a history of it if I may here. Long-term insurance came into play back in the 1970s when it was first created, but not very many people bought it, because it was a very strange product. In fact, you purchased it in parts. You would actually buy home care separately from nursing care.

By the 1990s, the modern long-term care policy had come into play, and this was the pool of money concept that we have now. That is, you decide on a daily benefit that you want to purchase. So, for example, I want to cover $250 per day in case I go into a nursing home. So that’s $250 a day.

Then we decide how many years we want that coverage for. Now, the average stay in a nursing home is 4-6 years. That’s the average stay and, yeah, we don’t walk out of there, I think as you alluded to before. So, let’s say we want 4 years of nursing home, so 4 times 365 are the number of days, times the daily benefit, $250, and that creates a pool of money.

The insurance pays out up to that daily benefit you selected in a reimbursement mode once you go onto long-term care. Now, if you don’t use the full daily amount for your care, for example this $250 a day example I used, and if I’m doing home care, say I’m paying $160 on the home care, then only 160 comes out of my pool, and my pool of money can stretch out a lot longer. So that’s essentially how the insurance works.

DOUG FABIAN: Now, you’re only insuring one person. There’s not a couple’s insurance on there, is there, Dave? How are policies actually purchased? You have second to die in life insurance policies, but how is long-term care issued?

DAVID HAMAN:                 Part of the evolution of long-term care policies…because, back in the day, that’s exactly right. Each person bought their own policy, and you have situations where one spouse would get afflicted and the other would be perfectly healthy for life, and they have really not been able to use all of that benefit.

So there’s something that the insurance companies developed, we’ll call it the share and care. It’s a rider where you pay a little bit extra in the premium, where one spouse or partner can use the other’s benefit if they use up all of theirs and we have a healthy spouse remaining.

So that’s a very interesting type of an arrangement that you can put on long-term care that protects the financial investment in the policy that you’re going to have to buy two policies.

DOUG FABIAN: Now, the idea with long-term care, of course, is that you want to purchase it when you’re longer because the cost is going to be less, as opposed to going out and purchasing it when you’re in your 60s. So, just kind of give us the landscape regarding age and when people should be considering long-term care insurance.

DAVID HAMAN:                 I tell my clients we should be looking at long-term care insurance after age 40. Now, that, to a lot of people, sounds very young. But what plays into it is the way that the premiums are priced. I’m going to use my experience as the example.

I purchased long-term care insurance when I was 37 years old, and I don’t recommend other people do that. But what I did was to calculate what that policy was going to cost me by the time I was 60 and compare it to what it would probably cost at age 60. What I found was the younger I would have bought it, the less premium I actually would have paid over a lifetime, even though I wouldn’t expect to use this until my 80s if I’m very fortunate.

That’s the reason for doing it younger rather than older. You have a much less chance that you’re going to need the policy at a younger age, but because the premium is so much lower, you may find that it’s actually worth purchasing a little sooner.

DOUG FABIAN: So, talk to us now about the compare and contrast with affordability and assets, when should you use the insurance, when can you self-insure, just kind of go through that a little bit for us.

DAVID HAMAN:                 Absolutely. Long-term care insurance is not something that everyone should buy. It has very unique characteristics to it because the premiums are fairly expensive compared to other types of personal insurance, and you’re always buying this insurance for life because your anticipation, if you need it, is to need it in the twilight of your years, in your mid-80s and up.

So, you have to calculate, number 1…well, when I’m looking at a client, what are they trying to protect with the long-term care insurance? Do they have enough assets that make it even worth paying the premium to protect?

As a general rule of thumb, and other planners might look at this differently, but I look at it about… When I have a couple, it’s about a $3,000,000 cutoff. I’m assuming, especially a younger couple, and when I say young, you folks in your 50s are still young, so you’ve got a long way to go, maybe 30 years, before you need this.

So the cost of care is going to be so much higher in 30 years from now. We’re looking at…what I was saying in my area, about $130,000 a year, that might triple by the time I’m in my 80’s. So, we have to look at the amount of coverage we’re going to need, and am I going to have enough assets worth protecting? That’s number one.

The second thing is, am I going to be able to afford this policy through the rest of my life? Because, while we’re working and we have earned income, a lot of times we have extra income that we can put toward insurance, but we also have to have that extra income once we go into retirement, because we have to continue paying those premiums, so we have to look at it that way.

The other thing about this is someone’s ability to qualify for it. Long-term care insurance, it’s getting tougher and tougher to buy. The underwriting restrictions are getting very, very strict compared to what they were 20 years ago when you could just…the insurance company would check your heartbeat, and if you were alive, you’d get long-term care insurance.

That’s caused a lot of problems, and one of the things for people now who are trying to buy it, the underwriting’s pretty strict.

DOUG FABIAN: Talk to us a little bit more about that. Give me some examples that would exempt someone, or disqualify someone from getting long-term care. I’m curious about that.

DAVID HAMAN:                 Yeah, and I want to be careful about using the word “disqualify,” we’re just having a conversation here. The point of the matter is, if you need long-term care insurance, you think you need long-term care insurance, give it a shot and try, regardless of your health, unless an insurance agent tells you, “Don’t even bother.” So I’m not telling someone whether or not they should apply.

But, for example, if you’ve had a knee replacement or a hip replacement or a serious back injury, you’re going to have a harder time getting this if you can get it at all, because these are some of the things that might disqualify you.

What an insurance company is looking at in terms of risk is, what is the risk to them that you are not going to be able to walk or do those activities of daily living, get out of bed. If you’ve got a serious back injury, as you get older, that may get exacerbated, and you may not be able to get out of bed. There, you’ve got an activity of daily living, at least one, that you can’t perform.

So those are what we’ll call pre-existing conditions. To an insurance company, they’re looking at this pre-existing conditions to determine whether you’re insurable.

DOUG FABIAN: So, a little bit more on this, a little bit more color, Dave, a lot of people listening to us might not have any idea what long-term care policies cost. I know you did a little prep on this. If somebody’s age 60 and they’re going to go out and buy a policy right now, what might that cost today?

Again, ladies and gentlemen, we’re giving you just opinions, and David’s an expert, we’re not pricing out anything, and of course we don’t sell anything, but just giving somebody an idea of what a policy might cost.

DAVID HAMAN:                 Say you’re 60, 62 years old. You’re in the $3500 per year range for $250 per day type of maximum daily benefit. You’re looking at a couple, now you’re at $7,000. So, it’s very, very expensive once you hit your 60s.

DOUG FABIAN: Right, and contrast that, Dave, with…well, if somebody purchased this in their 40s, what might that premium be, just to give people a compare and contrast there?

DAVID HAMAN:                 Right. You go back and get this in your 40s, and now you’re probably, with an inflation rider, just the basic structure of a policy, you’re probably around $1200 to $1500 a year. I get that number from pricing these policies out, but also it is, example my wife.

I had mentioned that I bought it at 37 years old. When I bought it, I have benefits in my policy that you can’t even get anymore. I was paying about $600 per year when I first bought it, and my wife bought it when she turned about 42. At that point, she was paying, for her policy, I think it was around $1200.

It was almost double what I paid just a few years earlier, so the price of this policy goes up so dramatically as you age. That’s why you want to look at it when you’re in your 40s and 50s.

Now, as a financial planner, Doug, one of the things we do in terms of this affordability issue, we want to figure out how much somebody actually needs. I had said before, we purchase this policy very rarely to cover the entire risk, because people, pretty much, they do have other resources they can use to self-insure part of it, and then buy some insurance for the other.

It is extremely important that someone considering this get a financial plan done. I run for my clients what’s called a long-term care gap analysis, and what I do is I actually run a scenario, I age them in the process, I age them to age 84, I assume they’re going to need 4 years of coverage, and I assume the price in my area, because it’s where my clients are, is going to be $130,000 a year.

Then I look at what resources they have, what pensions do they have, the level of social security, the level of retirement savings that can be put toward this. We look at their spouse, of course, because we ultimately want to structure insurance that not only pays for the care for the afflicted person, but helps protect the standard of living for the healthy spouse through the rest of his or her life. So, I can’t overstate the importance of it when you’re talking about whether you need long-term care insurance.

DOUG FABIAN: Dave, let’s talk a little bit about the financial and non-financial considerations of long-term care.

DAVID HAMAN:                 What we talked about so far, we’re talking about numbers and what it costs, how much you should buy. That’s very, very important, but there really are some non-financial issues involved in purchasing long-term care insurance.

When someone goes to a nursing home or assisted living, it can be a very, very disruptive time for family members. If you have a situation where maybe the first spouse has already passed away, and now the surviving spouse is going to need long-term care, it can be really disruptive to the family.

We see it all the time where we’ll have the children of the afflicted person living on one side of the country, another one on the other, and the child who lives nearest the parent and the nursing home is going to be the one who’s expected to visit constantly, provide help.

So this insurance, it’s helping ease the burden from a financial standpoint, but also from a lifestyle standpoint on the children who are expected to be there.

Another financial consideration, we actually have a saying that goes, “Who wants to give Mom a bath?” If Mom doesn’t have the money or the insurance, and not on Medicaid, to have someone help out in doing these things, look at those activities of daily living and ask yourself, “Which of those would I like to perform for my parent?”

When I look at them, well, I might cook for my mom, but I don’t want to do any of those other things. So those are non-financial aspects that can be just as important as the money to preserve an estate, for example.

DOUG FABIAN: So, Dave, let’s talk now about different types of insurance. Now, I know there are standalone long-term care policies, but there are also some hybrid policies out there. Talk to us about those, and compare and contrast.

DAVID HAMAN:                 Yes. We’ve so far talked about long-term care insurance as we will call a standalone policy. It is a long-term care insurance policy and that’s what it covers.

The insurance companies got creative and started to put long-term care, bolt long-term care benefits onto annuities, onto life insurance. And so you might buy a life insurance policy that you’re paying a life insurance premium that allows you, while you’re alive, if you qualify for long-term care insurance, to use, accelerate, death benefits for custodial care to help offset that.

For a lot of people, that’s a lot more palatable, let’s say, to use a life insurance policy with this add-on, because, if you don’t use the long-term care insurance, you’re going to die and the death benefit’s going to go to an heir. The money isn’t wasted, let’s say, and that’s what people think, they’re wasting their money on long-term care insurance.

Because, actually, the thing is, Doug, nobody thinks they’re ever going to need long-term care, especially when you’re in your 50s. There’s something called mental discounting, the phrase we use to describe a risk that is so far off in the future that you really can’t appreciate it today at a much younger age.

So that risk in your head is zero, and then when you suggest to someone they pay two or three thousand dollars for insurance to cover that risk, it’s a hard sell.

But, when you can show them that the benefit is going to go to somebody regardless of whether they need long-term care insurance or not, it becomes a bit more palatable, and that’s why these hybrid policies are getting very, very important.

The bottom line is, you can find them on life insurance, you can find them on annuities. So if you’re not in the mindset to buy a standalone policy, you’ve got another option.

DOUG FABIAN: Dave, talk to us about tax implications. We don’t think about that many times when it comes to insurance. Are there tax implications with long-term care?

DAVID HAMAN:                 On January 1st, 1997, the game changed with regard to the taxation of long-term care. For the longest time, up until that point, the IRS, they weren’t very definitive about how the benefits were going to be taxed.

Then came along what was called, and still is called, the qualified long-term care insurance policy. The qualified long-term care insurance policy treats the premiums you pay just like other medical insurance premiums, so it is potentially deductible. If you have enough medical costs on Schedule A to realize a deduction, you could realize a deduction for your long-term care insurance.

So it’s deductible, the premium, and then on the other side of it is the double tax advantage that, when you need the benefits, the benefits are not going to be included in your gross income.

Now, I do want to go back to a little bit of an anecdote. Again, personal experience. My mother-in-law had a long-term care insurance policy that she had purchased back in the early 1990s. She went into a nursing home and we started to draw on that policy. This was a non-qualified policy that the IRS had always said, “Well, we haven’t decided how this is going to be taxed.”

Well, I found out how it’s going to be taxed, because I got a tax deficiency notice on her income tax that we owed the tax on the long-term care benefits that she had drawn in that first year that she drew on them, so that was a lesson learned.

I think for people who are listening to this and have old policies, you want to go back and take a look at how the tax is going to be handled if you do need the care.

DOUG FABIAN: Okay, Dave. We’ve given a great overview today of what’s going on, what are the, of course, costs, what are the different categories, what are the different levels of long-term care service. We’ve talked a little bit about long-term care policies, we’ve talked about the hybrid policies.

I kind of want to now get to some action steps for our audience, and I want to go back to what I talked about at the beginning of the podcast, which is, let’s talk first about what those listeners who have long-term care policies and, as we have been discussing, these policies have been going up. The premiums have been going up. These premiums are not locked in, and there is some wiggle room for an insurance company to go to the state agency and secure a rate increase, so, certainly long-term care costs can go up over time even if you haven’t accessed any benefit.

So, help the audience with kind of evaluating their position, if they own a policy. What would you be advising them to do?

DAVID HAMAN:                 If you own long-term care insurance, it is almost a certainty that you have seen a fairly large rate increase on your policy. You’re correct that the insurance companies may, on a group basis… No one is allowed to be picked out of the pool and have their insurance premiums raised. If the insurance company has a bad experience with the…

We call it the risk pool, that is people using more than is anticipated of benefit. The insurance company needs to pay for those benefits. And what they will do is they will go to the insurance commissioner in the state that they need the rate increase, and they will almost certainly get approval for a rate increase. This is called guaranteed renewability. It doesn’t mean that the insurance company can’t raise your rates.

Now, I think it’s important to understand why this is happening, because I do have clients who come to me, in fact I have one right now where I have the letter on my desk, essentially, where a client got a 40% rate increase just this past July and wants to know, what can I do?

There are some things you can do. There are what are called non-forfeiture options in every policy, and it has to do with this. If the policy becomes unaffordable, there are ways you can go in. For example, you can ask the insurance company to tell you what a paid-up policy would be based upon all the premiums you’ve paid into it thus far, and they will reduce the benefits, but then you will have a paid-up benefit that you don’t have to continue to pay a premium on.

Another thing the insurance company will allow you to do is to change the provisions on the policy that lower the insurance company’s risk. For example, let’s say we bought that $250 per day benefit, and we just got a 40% rate increase. Well, maybe we can have the benefit cut from $250 a day maybe down to $200 a day, whatever it would take to keep that premium the same as it was before.

You can cut inflation riders, there’s all kinds of things you can do with these policies, but you’re going to work with the insurance company to do that.

Now, having said that, here’s what I was looking at with my client. When we talk about 40 or 60% rate increases, it sounds pretty exorbitant. But you actually have to look at it in terms of what are you paying, in dollar figures, for that premium, and what’s that new premium going to go to? Is it really that expensive?

What we found out was it was $79 a month to $111 a month. That was his increase, and that’s pretty big, but when you actually look at the dollars, it was still very affordable.

What we also looked at was, what is the benefit? What is he going to get for that now $111 a month, and we found that it was still worth the cost of the increase to keep those benefits. So we did a little cost-benefit analysis. That’s what you need to do, and it’s good to have someone to sit there and work with you and help you make good decisions if you’re in that situation.

DOUG FABIAN: Now, talk to us about some action steps on those people who don’t have policies but we’ve piqued their interest with this discussion. How do they go about making good financial decisions? Should they buy long-term care or not?

Remember, ladies and gentlemen, when you buy a policy like this, you don’t have to cover all of your long-term care expenses. It’s designed to be a supplement, so, obviously, you can adjust the benefit level to be able to get the premium more affordable, but, Dave, coach those people who, okay, boy, this looks like something I should look into. What are my first steps?

DAVID HAMAN:                 The first step, and I’m a financial planner, but I don’t sell long-term care insurance, I have no interest in what everybody buys. I do insist that we do a financial plan. Let’s take a look at this thing, find out what your risk looks like and how much it would cost to cover that risk.

Do you have the resources, if we do decide to apply for a policy, to be able to pay for it for the rest of your life without putting you on ramen noodles? So that’s the first step. We’re going to figure out how much you need, and does it make sense to purchase it.

The second thing we would want to do is find out if you can qualify. If I am sitting with a client who’s on oxygen, insurance is not the way we’re going to go. So if you’re in pretty good shape, you look healthy enough, what we’re going to do is we want to find out if you’re going to qualify, so we’re going to find an experienced insurance agent who sells long-term care, and the nice thing about having a financial planner by your side with no interest in you buying it is they’ll take care of you and make sure that you get the right structure for the policy, if indeed you apply, and make an application to see if you can get an offer.

Those are the three steps if we’re going to look to insurance as a method of helping us manage the risk. I would add one more thing, that if insurance isn’t an option, you’re just not going to buy it or you can’t buy it, if you have substantial assets to protect, there are attorneys, we call them elder care attorneys, who specialize in legally helping you structure your finances to protect some assets. Those are the things you can do to get yourself started.

DAVID HAMAN:                 Awesome, Dave. Well, this is a complicated subject, ladies and gentlemen, and Dave Haman has helped us kind of get the landscape together. Of course there’s two important components to what we talked about today. There’s long-term care, what is long-term care, different levels of long-term care, assisted living, skilled nursing, day care, in-home benefits, those kinds of things. The insurance component provides some funding for those things, but of course there’s a lot of different types of policies out there.

There’s certainly the need to have qualified experts in your corner, and one of the things that we would be encouraging everyone on this broadcast to do is to make sure that they have a comprehensive financial plan, and they’re working with a financial planner who can do the analysis, what is called the long-term care gap analysis, of your situation, and give you some good advice before you start shopping for insurance.

So, Dave Haman, awesome job today. Thank you very much, and thanks again for joining us on The Science of Economic Freedom.

DOUG FABIAN: Thank you, Doug.

DAVID HAMAN:                 Ladies and gentlemen, I want to remind you, if you have questions, comments, show topics, you can send me an email. My email address is [email protected], [email protected]. Thanks again for listening.

DISCLAIMER:    The Science of Economic Freedom is intended as an investor education resource. The views and opinions expressed on this program should not be construed as a recommendation to buy, sell, or hold any specific security. Consult your investment advisor and read any investment prospectus carefully before making any changes to your investment portfolio.

This program is sponsored by Mercer Advisors. Mercer Global Advisors, Inc. is registered with the Securities and Exchange Commission and delivers all investment-related services. Mercer Advisors, Inc. is the parent company of Mercer Global Advisors, Inc., and is not involved with investment services.

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