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Archives for January 2016

Potential Concerns and Risks for Traditional LTCi

January 29, 2016 by Honey 2 Comments

Bait And SwitchForbes contributor Wade Pfau is doing the world great good with his series of articles about the urgent need for long-term care (LTC) planning.

What I like so much about Mr. Pfau is his credibility. He is a highly qualified financial planner and academic at The American College.

Financial advisors are generally fee-based, not commission-based, like I am. Because he does not make commission from his advice, some may consider him to be more credible than agents who sell long-term care insurance (LTCi).

In his January 19, 2016 Forbes column titled, “Potential Concerns and Risks of Traditional LTCi” Mr. Pfau describes the history of long-term care insurance and the mistakes made with this product in the past.

Since he is not an LTCi specialist, I can’t fault him too much for not quite “getting the whole story” on what causes and caused past LTCi rate hikes.

An example is this “bait and switch” accusation, which is wrong: “Buying based on who offers the cheapest price is risky, since the company may be seeking upfront sales with the intention of increasing premiums later.” It’s more complicated than this. Carriers are not interested in making lots of sales now and suffering unhappy clients, bad public relations, and reduced sales later. This has never been their strategy.

With an average LTCi buying age of 57 and an average claim age 25 or more years later, plus ever changing mortality rates and demographics, no prior experience to go on, and required reserves earning unusually low interest rates for longer than anyone could have imagined, how could the earliest LTCi carriers realize that their assumptions would be so far off that significant rate increases could not be avoided?

Mr. Pfau does correctly state that today’s LTCi products are expected to have very stable rates.

He also correctly describes the public’s resistance to buying LTCi. He gives some good reasons but fails to point out the #1 reason people don’t buy LTCi: DENIAL! To be fair, however, he has mentioned denial in his prior columns.

Mr. Pfau does mention people sometimes lapse their LTCi shortly before they need to use it, due to cognitive decline. This doesn’t happen often, but I have seen and dealt with it, and it is highly upsetting. It is also highly avoidable. By and large, LTCi policies have very low lapse rates. The study Mr. Pfau refers to giving high lapse rates has been refuted.

It is up to policyholders to plan for the high odds of mental incapacity by appointing and empowering, not arguing with, trusted individuals to act on their behalf. I have learned that one of the earliest and most subtle indicators of mild cognitive impairment is making bad business decisions. Such bad decisions often go unnoticed, again, due to denial by the policyholder and family members.

Today’s LTCi policies, thankfully, have stronger protection against unintentional lapses.

I still love Wade Pfau and greatly appreciate his very clear writing and ability to make complicated concepts understandable. His articles are very factual, with very few flaws.

 

Filed Under: Helpful Information About LTC, I'll Just Self-Insure, Information About LTC Tagged With: Forbes Magazine, Long Term Care insurance, long-term care, LTCi, Medicaid, Medicare, The American College, Wade Pfau, www.forbes.com

Two Options for Funding LTC Expenses

January 27, 2016 by Honey Leave a Comment

Self FundingIn his January 12, 2016 Forbes column, Wade Pfau describes why Medicare, Medicaid and health insurance do not pay for long-term care (LTC). This column describes what can and often does happen, financially and psychologically, even to highly affluent people, when LTC planning is ignored and people wind up self funding for LTC with personal assets.

Mr. Pfau has heart. He gives us facts, but he also shares accurate human insights. He wisely urges people to prepare now for their last years, and to share their plans with those they most trust.

This piece is accurate, accessible and concise.

He states, “For self funding, ask yourself if you have sufficient financial resources to cover an expensive long-term care shock and still meet the remaining financial goals for retirement. Which specific resources could be used for long-term care expenses? How will they be invested? What impact would these expenditures have on the standard of living for remaining household members and potential beneficiaries? Is this a risk that can be accepted, or could insurance provide a positive impact by helping pool this risk?”

“Self funding could force an individual to rely more greatly on family care, which introduces a number of potential opportunity costs not included in formal cost calculations. Caregivers often experience increased stress and health problems, and they could be forced to make sacrifices in their careers that could result in substantially reduced lifetime earnings. The health problems created by providing long-term care could potentially result in the caregiver needing long-term care for themselves as well.”

Filed Under: Elephant in the Room, Helpful Information About LTC, I'll Just Self-Insure, Information About LTC Tagged With: caregivers, caregiving, Forbes, health insurance, home care, Long Term Care insurance, LTC, LTCi, Medicaid, Medicare, Nursing Homes, Wade Pfau

Costs and Incidence of Long-Term Care

January 25, 2016 by Honey Leave a Comment

In his January 5, 2016 Forbes column titled “Costs and Incidence of Long-Term Care”, columnist Wade Pfau explicitly describes how likely it is any of us will need long-term care (LTC).

He states the most credible research he found determined that 58% of men and 79% of women aged 65 and older would need LTC at some point, and that average lengths for care were 2.2 years for men and 3.7 years for women. 38% of men and 63% of women will require care for one year or longer, while 11% of men and 28% of women will need care for at least 5 years.

He correctly explains people are not statistics. Statistics are irrelevant if you are the one needing LTC and you have not properly planned for it.

Mr. Pfau also correctly notes study results vary but the big picture is the odds are needing LTC are very high.

He accurately explains what LTC is.

He quotes average annual rates nationally for assisted living are $43,000/year and a private nursing home room is $91,250/year. A five year stay in a nursing home would cost $456,250 in today’s dollars.

Mr. Pfau explains that LTC costs vary and are regional. He gives the link to the newest Genworth Cost of Care Study, so people can determine a more precise cost of care in their locale.

What I find so entirely cool about Mr. Pfau is that he’s a fee-based financial planner. Unlike me, he is not a commission-based advisor who needs to sell products to make a living. He is an insightful thinker with a clear, common-sense, accessible writing style. He has an accurate view of the Big Picture and the necessity of responsible LTC planning.

In other words, he is interested in helping people create and achieve wealth – many financial planners can do that – but more importantly, once clients achieve wealth, he clearly understands the things they must do to preserve it.

 

Filed Under: Elephant in the Room, Helpful Information About LTC, I'll Just Self-Insure, Information About LTC Tagged With: Forbes, Genworth, home care, home health care, Medicaid, Medicare, Wade Pfau

Hybrid LTC Policies

January 25, 2016 by Honey Leave a Comment

The Big PictureMy love affair with Forbes contributor Wade Pfau continues. He’s written another clear, concise, accessible article on a complicated subject: explaining the newer, asset-based (also known as “hybrid”) long-term care (LTC) products.

In this piece, Mr. Pfau also explains the differences and the pros and cons between traditional long-term care insurance (LTCi) and the newer, asset based (hybrid) life/LTC plans. This part of the article gets a wee bit more technical, but it is clearly written.

Since I have a life insurance background, I understand asset-based (hybrid) LTC plans well and I like them.

Which choice is better? The jury’s out. Each approach has advantages and disadvantages.

The Big Picture is: take the risk of needing LTC seriously. It is real.

What’s the best insurance policy? Trick question. It’s the one that’s in force when you need it!

One thing is clear: to make the wisest decision you can, and to be very satisfied with it, you’ll need the assistance of an experienced, ethical, qualified professional…like myself!

Filed Under: Helpful Information About LTC, I'll Just Self-Insure, Information About LTC Tagged With: asset based LTC, assisted living, Forbes Magazine, home care, hybrid LTCi, Long Term Care insurance, LTCi, Medicaid, Medicare, Nursing Homes, Wade Pfau

The Continuum of Care

January 20, 2016 by Honey Leave a Comment

The Continuum Of CareForbes has recently done some outstanding, insightful reporting on long-term care (LTC). I am very grateful for this. It’s a welcome and deserved change from typical error-riddled LTC coverage.

Their contributor Wade Pfau, a professor at The American College and principal at McLean Asset Management, really “gets” LTC. More importantly, he has a writing style that makes complicated concepts clear and simply understood by readers.

In is January 7, 2016 column he lists and describes the LTC continuum. I don’t remember ever having seen it laid out so clearly and accurately.

He explains why Medicare only pays for short duration skilled needs under certain conditions. He explains the difference between skilled and custodial care. It’s custodial care that is bankrupting so many Americans financially, emotionally, and health-wise.

He lists excellent questions to ask of facilities.

I am very grateful for Mr. Pfau’s columns. They do the public a true service.

Filed Under: Helpful Information About LTC, I'll Just Self-Insure, Information About LTC Tagged With: Activities of Daily Living, ADLs, adult day care, assisted living, Forbes, LTC Continuum, McLean Asset Management, Nursing Homes, The American College, Wade Pfau

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Phone: 713-988-4671
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Email: honey@honeyleveen.com

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