Wade Pfau Archives - Long Term Care Insurance Expert | Honey Leveen

One More Example of Media getting LTCi Very, Very Wrong

September 3, 2016 by Honey 4 Comments

Here’s an example of pundits getting long-term care insurance (LTCi) very, very wrong. Wrong to the point that it is harmful to the public because it dissuades people from considering LTCi by using false information.

The author turned to “one sharp advisor” who is unfortunately not well educated in LTCi and as a result, advised self-insuring. This is bad advice. Too many advisors fail to understand that the primary benefit of LTCi is rapid, worry- and stress-free access to long-term care without hesitation and without fear of threatening the health, financial, or emotional status of their loved ones. “One sharp advisor” and the author do not mention these benefits. All they are concerned about is wealth preservation, which is a secondary consideration.

The author, Richard Eisenberg, also picked an LTCi agent named Irv, to make LTCi recommendations. Here’s what Irv did wrong. He said, “…my wife and I would need to spend an hour with him on the phone so he could ask us some questions.” Health questions should never take more than a few minutes…period. They should never be the conversational focus point. Irv went on to say that “…if I chose to wait five more years to buy the policy he recommended from Mutual of Omaha, I’d be rejected. That company won’t sell long-term care coverage to someone who has had diabetes for 20 years.” This is a false, manipulative, scare tactic. Irv is an embarrassment to my profession.

Mr. Eisenberg wrote eloquently about why it is very important for him to own LTCi. I feel sorry for Mr. Eisenberg because of the poor advice that he received from both parties. He is a very smart guy, evidently very in touch with his feelings and the realities of what long-term care entails. I fear that doubt about his decision to abort his search for reasonably priced long-term care insurance will grow through the years and will haunt him during retirement.

The last way to find a good LTCi agent is through direct mail, as Mr. Eisenberg did. Try your friends, colleagues, and the internet first. Visit agent websites before you call. This is how ALL my clients find me.

Wade Pfau, a noted financial advisor with more credentials than “one sharp advisor”, gets LTCi right. Smart financial advisors do.

What a pity. Many people are harmed by published falsehoods about LTCi.

Does Your Long-Term Care Plan Account for Your Own Normal, Natural Cognitive Decline?

May 19, 2016 by Honey Leave a Comment

Wade Pfau, PhD, CFA, whom I’ve previously praised effusively, writes about research confirming that we all will, very gradually, lose our cognitive speed, financial literacy and verve. I believe our natural good judgment will fade along with these things because I see my clients demonstrate this so very often.

Here’s a paper Dr. Pfau cites that illustrates this normal, natural cognitive decline.

Here’s another paper Dr. Pfau cites proving normal decline in financial literacy at advanced ages.

At a healthy age 63, I notice these changes in myself to a very minor extent. I am pretty sure it’s age related and not dangerous yet. It is just annoying.

I had breakfast with a long-time financial planner this week. He believes affluent people should self-insure for long-term care. I believe that he, like so many, is divorced from and not willing to imagine the psychological reality of what often happens at advanced ages.

I gave him many reasons why affluent people need long-term care insurance (LTCi). They buy it in disproportionately high numbers. I have blogged about this extensively.

Dr. Pfau’s article gives compelling scientific proof of why the elderly are often the victims of their own bad business decisions.

I see in-person proof of these same things. Even if they have no diagnosis of cognitive impairment, I see elderly clients making very bad personal and business decisions, time and time again. I am very disturbed by this.

Children of affluent clients with multi-million dollar wealth tell me their parents would not avail themselves of home or assisted living care without their LTCi.

From what I’ve seen with my clients during the past 25-plus years, the most important reason to own LTCi may be the lack of good judgment plus the common familial dysfunction that too often accompanies aging and decline.

Long-term care insurance provides a plan that plugs in and works. When need arises, no thoughts about which assets to liquidate to pay for LTC are necessary. Irrational thoughts of outliving savings are quashed. Thoughts of imposing on family members are minimized. LTCi can drastically reduce stress and increase quality outcomes.

What are the Best LTCi Options?

February 19, 2016 by Honey Leave a Comment

In part one of his two part series about understanding long-term care insurance (LTCi), Forbes columnist Wade Pfau describes how LTCi prices are determined. He explains what an elimination period is, what a benefit period is, what a monthly benefit is, and what a LTCi “pool of money” or “benefit bank” is. He also describes different types of inflation protection.

In part two of the series What Are The Best Coverage Options for LTCi? Dr. Pfau describes the types of care LTCi covers and what entitles you to collect from your LTCi.

One thing is clear from reading these articles: LTCi is complex. No matter how bright someone is, ethical advice, preferably from an experienced LTCi specialist like me, is necessary for one to make a confident, wise decision on affordable LTCi they’ll be satisfied with for the rest of their life.

Mr. Pfau actually recommends having an elder law attorney study review LTCi contracts. This is unnecessary. Elder law attorneys generally specialize in wills, trusts, probate, etc, not insurance contracts. In addition, today’s LTCi policies generally have straightforward language a college educated consumer can read and understand. An experienced agent can and will confirm what the contract language means. The elder law attorneys I know are not particularly astute on LTCi contracts. A few of them are clients who relied on me for advice.

I’ve loved Dr. Pfau’s Forbes LTC series because he is so credible and astute. He expresses complexities in easy-to-understand language. He has truly done readers a service with this LTCi series.

As much as I respect and admire him, I think he’s wrong about some minor details, but as a whole, he really gets things right. This series is powerful and useful.

Potential Concerns and Risks for Traditional LTCi

January 29, 2016 by Honey 2 Comments

Forbes 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.

Two Options for Funding LTC Expenses

January 27, 2016 by Honey Leave a Comment

In 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.”

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One More Example of Media getting LTCi Very, Very Wrong

Does Your Long-Term Care Plan Account for Your Own Normal, Natural Cognitive Decline?

What are the Best LTCi Options?

Potential Concerns and Risks for Traditional LTCi

Two Options for Funding LTC Expenses

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