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    How to protect yourself against long-term care costs


    Self-funding care

    Although family members may attempt to provide long-term care, it is often necessary to employ the services of skilled professionals, and this requires tapping into personal assets to cover the expenses. This is self-funding.

    This concept works if people do not need to liquidate assets to provide care. However, it becomes expensive and will threaten a secure retirement if a family faces a multi-year event, such as Alzheimer’s disease.

    When these family-care decisions are discussed, they can be emotional and they are made with maintaining the dignity and comfort of the one in need. Many times these decisions will override logical financial reasoning. Ideally, it is best not to have financial restraints dictate the quality of care, or increase the chances of an individual becomes dependent on someone else when assets are depleted.

    There are government programs, such as Medicare and Medicaid, to cover the cost of long-term care. Unfortunately, these programs provide limited benefits and may not allow individuals to receive the proper care they seek, in the place they would want to receive it. Therefore, it is not an option.


    Traditional premium coverage

    As a result of the issues outlined, the best alternative for most people is to transfer some of the long-term care risk by purchasing long-term care insurance. Using insurance helps take control of the care and expenses, placing more of the long-term care decisions in the individuals’ hands.

    Instead of liquidating taxable retirement dollars to pay for long-term care, individuals may enjoy tax-free benefits from these policies, which means the payments are not subject to either federal or state income taxes.

    While today’s policies continue to change and improve, there are a limited number of quality insurance providers available. Long-term care planning decisions should be taken seriously. Before making any decision, be sure to evaluate the quality of the insurance provider.

    One tool to help investors create their long-term plans is called the Envision process. Unlike other investment-planning tools, this process helps individuals work toward their financial objectives by looking at life circumstances and planning the money around those circumstances.

    Chart 1 shows one of the process’ most valuable outputs. It’s called simply the “dot.” With an Envision plan, one is able to see what impact long-term care costs may have on the probability of success in retirement.

    The idea of the plan is to make sure that one’s personalized “dot” stays within the “Target Zone.

    Investors do not want to be guessing what might happen to their cash flow if a long-term health care event lasts several years.

    Chart 1

    Case studies (with video)

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