October 4, 2005

To Our Clients and Friends,

Long Term Care Insurance (LTCI) - To Buy or Not to Buy

LTCI can be expensive, but can you afford to be without it? If the primary financial risk in retirement is increased life expectancy (i.e. outliving your money), should you not at least consider it? Many people think Medicaid will pay for long term care when they need it. But last month the Department of Health and Human Resources proposed tightening up the eligibility requirements for long term elderly health care. Stephen Moses, President for the Center for Long Term Care Reform, Inc. noted that, "There's a political earthquake going on now with Medicaid and long term care. In the future Medicaid will no longer be a resource for middle and upper class people."

Long term care is a continuum of care, housing, and services needed when the aging process begins to erode a person's physical and cognitive abilities. It is custodial care not skilled care. Unfortunately, the burden of caring for the elderly usually falls on the daughter as a caregiver. The effort of caring for a loved one can exact a toll on the emotional health of the caregiver as well as his/her relationship with other family members.

Have you considered the consequences of living a long life? We all want to live a long life, especially if we are healthy. Long term care insurance is one way to protect your loved ones from the emotional toll of being a caregiver and your retirement plan from long term care expenses. You should meet with an insurance person who specializes in LTCI to determine if LTCI is appropriate for your individual circumstances.

So, have you considered the consequences of living a long life? Longevity risk is the primary risk of retirement. There are alternatives to LTCI. You can self insure using personal assets if you have substantial capital. However, selling assets to raise cash may have income tax consequences. Also, as you use capital to fund long term care, there will be less of an estate to pass on to heirs. Other options to LTCI include the use of:

• Annuity contracts
• Reverse mortgages
• Life care retirement centers
• Viatical settlements - the sale of life insurance policies
• Life insurance policies with long term care riders

Obviously, each option has pros and cons that you need to consider in light of your own personal feelings and circumstances.

I can relate to you my own personal experience in dealing with my Mother. Her care in an assisted living center costs about $5,000 per month. That cost is paid for by a combination of LTCI and personal assets. The LTCI my Dad bought helps but is inadequate. I am sure that he never expected my Mom to live to be 88. Fortunately, he left her with enough assets to fund the difference. If either my sister or I had to be daily caregivers, it would be a very difficult situation. She has a full time job teaching, and I don't live nearby.

So, have you considered the consequences of living a long life? The probability of people age 65-80 requiring long term care is 1 in 4, and that probability raises to 1 in 2 for people over 80. In my own personal experience with my parents, it was 2 for 2.

As usual, please feel free to call us. We are here to answer your questions, respond to your concerns, and help you make smart decisions about your money.
   

Very truly yours,

ZRC Financial Services, LLC
A Registered Investment Advisor

By:
         Richard P. Clarke

P.S. Want more information? Contact Karen or me, and we will send you a small package of information on LTCI.