Are You At Risk?

You wouldn’t think of owning a home without insurance to replace it in case of fire or disaster, would you? Of course not. In fact, its required by law when you take out a mortgage. But the chances of losing your home in a fire or disaster are very slim.

Also, car insurance is required by law in case of an accident. You want to be able to cover the cost of replacing the car if something happened. Seat belt laws are also there for our safety. But the chances of being in a car accident and totalling the car are also very slim.

Did you know that there is a much greater risk which could drastically affect your retirement nest egg? And it doesn’t matter how you may be invested?

In fact, the wealthier you are, the more risk you may have. And the chance of “something happening” is much much greater than replacing your house or your car, yet most people aren’t covered at all, or even given it much thought.

What might this be, you ask?

According to John Hancock, 49% of all people turning 65 will need Long Term Care at some point and 72% will use Home Care Services. 49% – that is HALF!!

There are several myths on Long Term Care which should be cleared up. First, most Long Term Care is NOT provided in nursing homes. In fact, also according to John Hancock, 80% of older adults who receive long term care services do so in their own homes.

Another myth is on Medicaid. Medicaid will only cover LTC in nursing homes – and they choose which one you can use. (i.e. “cheap”) Also, before you can qualify for Medicaid you savings MUST be spent down significantly to poverty level. (The actual amount varies from state to state.) Also the government can (and will) look back over your records for the past 5 years before letting you qualify for benefits.

The real risk if you don’t have insurance coverage is how it can wipe out your savings. (Remember earlier how we said that your investment portfolio didn’t matter?) According to Met Life, the annual cost for nursing home stay averaged $75,190 in 2006. And inflation normally grows in healthcare much faster than in other areas. Assisted living facilties, which are more like apartments, averaged $35,616 in 2006. And without coverage – that is 100% out-of-pocket.

Fortunately, there is hope. Since 1993, Indiana has offered a Partnership Program, which can help you to protect your nestegg. What that means is, if you purchase a Long Term Care Insurance policy which meets the program guidelines, you can protect the same amount of assets as the amount of coverage in your policy. Buy a $100,000 policy – protect $100,000 in assets. And if your policy provides at least $228,045 in coverage (2008), you will be able to protect ALL of your assets.

It doesn’t take long to figure that $228,000 is a good benchmark either. Figure 4 years (48 months) at $5000/month and you get $240,000.

Another huge benefit is that premium payments for Indiana Partnership Long Term Care Policies may be deductable on Indiana state tax returns. In a future article, we will look at ways to control costs. But I certainly hope that this at least makes you think. My job as an advisor is to help you “protect” your nestegg.

You can contact me through my website and follow me on Twitter at I also host a weekly internet radio program “Improving Your Financial Health” at


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