100 Years

Carolanne Chavanne, CFP®

I was listening to a podcast not too long ago, and one of the hosts cited a study that said that most twenty-year-olds today would live to be 100 or more years old. With advances in technology and medical science, many of these experts believe that it is very likely. Of course, we all recognize that aging brings many physical changes and challenges. The need for a strong healthcare plan to navigate those “golden” years has never been more important. I am reminded of the song 100 Years by Five for Fighting, and specifically the lyrics, “... time goes by, suddenly you're wise. Another blink of an eye, sixty-seven is gone, the sun is gettin' high, we're movin' on.” 

Medical costs for today’s seniors are generally high, and long-term care insurance coverage can sometimes be spotty to non-existent.  When we talk about planning for future expenses, the topic of long-term care is one that is always front of mind. When we picture ourselves nearing 100 years old, we know that it requires a solid plan that will address longevity risks as well as other key areas of concern. 

Carolanne’s Corner

Our theme this time hits close to home. As many of you know, I lost my own mother late last year after her long-term struggle with the effects of several strokes. My family was certainly fortunate in that we were able to provide care for her at our homes during these last few years, but it still came at a cost. My sisters and I made many sacrifices to provide the care my mom needed, and, despite the fact that she was in our homes, the expenses incurred for 24-hour caregiving, support, and other necessities were quite high. I hate to think what it would have been like were we not in a position to help take care of her ourselves. The entire experience has made me a strong advocate for the needs of seniors as well as making sure you have planned appropriately for your own golden years.

Long-Term Care

Long-term care, or LTC, can be defined as a variety of services designed to assist someone’s health or personal needs when they are no longer capable of performing everyday activities on their own. These services come in many varieties, both formal and informal. For example, certain facilities offer formal LTC services that include living accommodations for people who require on-site delivery of around-the-clock supervised care. These locations include professional health services, personal care, and additional items such as meals, laundry, and housekeeping. They are known by various names, including assisted living, independent living, and residential continuing care communities.  Additionally, formal long-term care can be provided inside the home and can incorporate a wide range of clinical services, including nursing, medication management, physical therapy, and more. 

Alternatively, informal long-term care is the description used for this same form of care and support, except that, instead of trained and licensed professionals providing the care, the services are performed by family members, friends, and other unpaid volunteers. In many cultures, this family care is considered a normal part of growing older. Here in the United States, people have increasingly turned to formal long-term care, and that is where a solid financial plan comes in handy.

The US Department of Health & Human Services reports that someone turning 65 years old today has an almost 70% chance of needing some type of long-term care services and support in the future.  

While it is normal to focus on risk when considering investments, the potential for required long-term care is a significant risk to consider too. Failing to consider the costs of long-term care (especially if certain conditions run in your family) can bring some serious retirement planning consequences, including having insufficient funds for the care required.  

Trying to predict your future care needs is understandably a difficult subject to tackle, and many don’t know where to start. This may be a good time for a family discussion about health history and longevity to address the key questions: who will be providing the care, where will the care be provided, what type of care will be needed, and how will the care be paid for?  

Consider the possible long-term care options currently available:  

  • Self-insure or self-fund — individuals or families who choose not to purchase long-term care insurance or any specific financial product will instead rely on their savings, investments, and assets to cover potential long-term care costs. The risk is completely assumed and carried by these individuals and families.
  • Long-term care insurance policy — individuals or families can choose to transfer some or all of the risk to a long-term care insurance policy. Over the past few years, the LTC insurance industry has experienced higher-than-expected costs of claims, which has led to a steady erosion of available products and a simultaneous sharp increase in premiums. Unfortunately, there are now situations where the cost of care cannot be completely absorbed, and covered individuals may find themselves having to self-fund to a degree.  
  • Hybrid life insurance policy — these hybrid policies combine features of both long-term care insurance and life insurance. For people who may look at long-term care insurance as something they may never need to use (and therefore, in their minds, a “questionable” expense) they are able to leverage their death benefit coverage from the life insurance policy to cover potential long-term care expenses, if they arise.  

  • Reverse mortgage — the idea here is to have the equity in your house cover long-term care expenses. A cash loan is made against the home’s equity, with the lending bank making the payments in either a lump sum, monthly installments, or a line of credit. This loan does not have to be paid back until the last borrower passes away or moves residences.  

  • Medicaid — for those who may live below the poverty line, with very little in the way of assets, the government-funded Medicaid program can be used to help offset long-term care costs.   

One of the key decisions when contemplating the purchase of a traditional long-term care insurance policy is the consideration of when to purchase one. Typically, the most advantageous timing is somewhere between the ages of 50-60. There are several good reasons why it makes sense to consider purchasing a policy during this time, including affordability, health eligibility, and an adequate planning time frame. Once you have decided to go ahead with the purchase, the next step is to determine how much long-term care insurance coverage you should acquire.  

You’ll want to think about where you’ll be spending those later years and, more specifically, how much healthcare may cost in your chosen community. Consider the national monthly median costs, as gathered by a Genworth survey in 2021:  

  • In-home care with a nurse/health aide was $5,148/month 
  • Private nursing home room, the cost was $9,034/month 

One important caveat: under most policies, you or your loved one becomes eligible for benefits only when they can no longer perform at least two out of six “activities of daily living” or ADLs, on their own, OR if they suffer from dementia or other cognitive impairment. Note that these policies will usually contain an elimination period before the benefits will be paid. Typically, this amount can be set for 0 days up to 180 days (about 6 months).  

Market Update

US Economy: Inflation rose more than expected in January as stubbornly high housing/shelter prices have continued to weigh on consumers. The consumer price index, or CPI, a broad-based measure of inflation, increased 0.3% month-over-month, as reported by the Bureau of Labor Statistics. Year-over-year, this figure continues to hover around 3.5%. Fed officials remain steadfast in their focus on returning to a 2% year-over-year inflation rate.  

Additionally, after months of consumer spending surprising to the upside, is the consumer ready to take a break? January retail sales fell 0.8% month-over-month, while economists expected a decline of 0.1%. This came after December's surprising increase of 0.4% month-over-month. It is also possible that this January decline can be attributed to seasonal issues and a holiday hangover.   

 Capital markets: The S&P 500 stock index reached the milestone price-point of 5,000 for the first time ever in February. This record-setting high was driven by the performance of a small group of companies that continue to push this benchmark upwards. Chipmaker Nvidia and Facebook owner Meta have led the index, with each advancing more than 30% in the new year. Strong gains from some of the largest companies have more than offset the concerns of investors about how quickly the Federal Reserve plans to reduce US interest rates this year. 

 News and Upcoming Events

Texas Client Appreciation Event - Save the Date! 

We are pleased to announce that we will be hosting our annual Texas Client Appreciation Event  on Thursday, June 6th, from 5:30 - 8:00 pm at Mexican Sugar in Plano. The official e-invitations will be arriving in your mailbox soon. We look forward to seeing our Texas-based clients soon!

Spring Prosperity Planning Sessions 

April is the final month to schedule your Spring Prosperity Planning session. There are a few appointment slots available, and they are booking up fast. Click here if you still need to schedule your appointment.   

Tax Planning Sessions 

Tax season is in full swing, which means now is a great time to start looking forward to how you can position yourself to reduce your tax obligations in both the short and long term. Please contact us if you are interested in learning more about our Tax Planning Sessions.  

Supercharge Your Finances Podcast - Episode Three 

Have you heard of the new Supercharge Your Finances Podcast series? You can now listen to your favorite financial planners in conversation on a variety of topics in a convenient podcast format. Every month, we discuss trending financial planning topics, review what’s going on in the markets, and share a relevant “client story of the month”. Check out the link below to catch our latest episode on Long-Term Care Planning. 

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Articles of Interest  

Cost-Saving Strategies for Extended Care
Why women need to plan for Long-term Care
 7 Ways to Help Aging Parents with Money
What issues should I consider When Purchasing Long-term Care Insurance?

For many of us, the idea of growing old and dependent on others is something we don't want to think about, let alone discuss. However, about 70% of us will find ourselves requiring help. It’s certainly something to consider. If you need more information or would like to discuss this important topic further, please contact us and let us know your concerns. Thanks again for allowing us to be a part of this discussion. Until the next time, I hope your start to Spring has been rejuvenating and that you are looking forward to the possibilities that lie ahead.   



By Carolanne Chavanne, CFP®

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