As medical care costs continue to rise, the cost of long-term care (LTC) could jeopardize the assets you and your clients have worked so hard to protect.
With only one in 10 financial advisors discussing long-term care risks with their clients, advisors that are more open to having the long-term care conversation tend to gain more mindshare from clients, provide more options for clients, and stand out against competition.
We’ll walk through some key client misconceptions about long-term care that may be keeping your clients from planning for this risk and preventing you from providing a good solution, such as asset-based long-term care products.
A lot of folks I speak to that are 65 years old or older don’t think they’ll need long-term care coverage. Or they think they’ll have enough money set aside to handle any costs.
The fact is, a recent survey by John Hancock found that about seven out of 10 people turning 65 will need long-term care at some point in their lives. In the year 2000 alone, 10 million people in the United States needed some form of long-term care.
Are your clients comfortable running those odds? Would they run the risk of a 70% chance of needing care, or would they rather prepare and plan for that risk?
The amount of long-term care assistance that Medicare may provide is limited in both benefit and the time it’s available.
In most cases, Medicare may only cover the first 20 days in a long-term care facility. From days 21 to 100, Medicare may cover only a portion of the expenses, leaving your clients with a co-pay that could drain their retirement accounts.
After day 100 in a facility, Medicare stops covering expenses altogether, and the client assumes all responsibility for the full cost of any care.
Imagine having to pay $6,000–$7,000 every month from your retirement assets to cover a semi-private room in a facility, or paying $21 per hour for a home health aide. These were averages in 2010, and medical care costs have only increased since.
How many of your clients could sustain that type of payment for 5–6 years? How many of them would want to?
A study by the AARP Public Policy Institute reported that some 43.5 million Americans served as family caregivers in 2015 alone. That’s nearly as many people who were on Medicare in 2015 (49 million).
A 2013 study by AARP found that these family caregivers provided $470 billion in unpaid care in that same year.
Most of these caregivers are spouses or children. Beyond the stress and emotional strain that caring for a loved one causes, it could also affect the ability of the caregivers to prepare for their own retirements.
On average, unpaid family caregivers lose an average of $324,000 in wages and retirement benefits in their lifetimes due to taking time off work, decreasing wages, and decreasing their future Social Security benefits.
In 2016, there were seven caregivers for every one senior that needs care. However, by 2030, that number is expected to shrink to four caregivers for every one senior. And by 2050, there will be only three caregivers for every person 80 years old or older in the U.S.
As a parent, you never want to go to your children with your hat in hand. That’s why we protect assets to ensure guaranteed income, and it’s the same reason we want to protect against the long-term care risk that could jeopardize your clients’ retirement accounts.
Are your clients comfortable with the idea of their spouses caring for them? Their children? Are they aware that the help their family gives them may not just cost their family time but also their retirement savings?
Many baby boomers only think of outdated long-term care policies when they hear about long-term care insurance. The fact is, there are products that offer full return of premium, a tax-free death benefit, and a tax-free long-term care bucket that’s accessible when needed.
For example, I was speaking with a 65-year-old male client taking $10,000 per year for an FIA and not using it, but he had no long-term care protection. By utilizing an asset-based long-term care product, he can pay $10,000 per year for 10 years. He gets a total guaranteed long-term care benefit of $313,467, which he can access over a 6-year period. That’s $4,354 per month to help with qualified care, including home health care. After he finishes paying for 10 years, he has full return of premium at the beginning of year 11, meaning he can walk away with his money at any time, guaranteed.
Why not present a win-win scenario to your clients when it comes to long-term care? Why not differentiate yourself from competitors by talking about long-term care risk?
Your clients will thank you. Your practice will thank you. And you’ll thank yourself.