The Long Term Care Insurance Conundrum

Jan 02 2015


Long Term Care (LTC) insurance. To get it or not to get it. Maybe you are thinking about yourself and a spouse. Maybe for your parents.

You must first understand what it is. LTC insurance pays for services (usually in-home but can also be at a facility) required to care for a person who can’t care for them self. It covers costs associated with feeding, clothing, toileting, mobility problems, bathing, or continence issues.

LTC issues are not covered by any health plans, TRICARE or Medicare. They can be covered under Medicaid (medical welfare) but that becomes its own problem since you have to meet the financial need requirements for Medicaid—in other words you must be poor. For most with a form of pension pay, like military retirees, your retired pay may disqualify you for Medicaid.

Whether to buy LTC insurance is a tough choice for several reasons:

  • One is that the premiums are expensive. If you buy it while you are “young”, it is a lot cheaper but chances are you will paying forever before you’ll ever need to energize it. Most users are well up in years. If you wait until you are closer to the age you’ll need it, it will cost a fortune or you may not qualify for the insurance because of older age health reasons.
  • Two, will you actually need it? There are many statistics about the need for LTC insurance as you age. The older we get, the more likely it is we will need it. Especially since we are all expected to live longer and longer as medical advancements continue to lengthen our ages. Congratulations, you are living longer…but you’ll probably need assistance to live. University studies have indicated almost 70% of people over age 65 will need long term care assistance at some point. By the way, not only seniors need long term care. Younger people may need it as the result of a car wreck, a fall, something hits you in the head, a disease or illness…
  • Three, the LTC insurance industry is in flux. In the earlier years, the insurance companies miscalculated the demand and costs of the benefits. LTC companies have gone out of business, merged with larger companies, or raised their premiums to meet the greater demand from policy holders.
  • Fourth, the scare factor. If you need long term care assistance, it is very expensive. Without LTC insurance, prepare to pay dearly for long term care services. A full-time, assisted living facility can run upwards to $80,000 a year—yikes! Go to this government site to look at the various costs in the country.
  • Finally, which form of insurance do you choose to purchase? Insurance companies are getting creative as they try to best address the long term care needs of people. Choosing the right policy is confusing and there is always the unknown of whether you purchased the right plan until you need to use it.

As is the often the case, it’s those in the middle who get squeezed in this decision. If you have few assets, you may qualify for Medicaid in a LTC situation. If you have plenty of assets, you will pay as you go when a LTC need arises.

For those in the middle, assess your assets and project your ability to cover the costs for LTC services. How long could you pay $25,000 (or up to $80,000) a year without destroying your current life style or your future living standard? What happens if you use up your assets on your spouse’s LTC needs and you are left to fend for yourself? Is paying $2000 to $7000 (a general range) a year in LTC premiums worth the price?

Learn more about LTC insurance on our MOAA web site with our LTC Insurance Primer. MOAA members check into our MOAA benefit, the Long Term Care Buying Service below. Check the Federal Long Term Care site if you are a federal/military employee or retiree. Other LTC information sites are, the American Association for LTC Insurance and this Consumers Report magazine article.

For MOAA members

ltc_coverDon’t forget the MOAA LTC Buying Service. Call 1-800-698-7943 for details, or visit MOAA’s Long Term Care webpage for more information.

You also have access to MOAA’s Understanding Long Term Care publication as a free download with your PREMIUM or LIFE membership!


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Financial Adviser Standards—Fiduciary or Suitability

Nov 18 2014

shutterstock_38823016Financial services are unlike most other consumer products or services. You never really know if you bought the right product or if you are getting the proper service. In addition, you may not even know how much you are paying for the product or service.

This frustrating consumer situation is the basis for arguments about the standards financial people abide by. The two standards are “fiduciary” and “suitability.”

Fiduciary—a person or company charged with the responsibility of managing assets for the benefit of a client. The fiduciary standard requires the adviser to put the client’s interests above their own. States have laws that mandate what fiduciaries can and cannot do with a client’s assets. Most laws declare that it is illegal for a fiduciary to invest or misappropriate assets for the fiduciary’s gain.

“Well, isn’t that the standard of most professionals?” No. This is…

Suitability—offering investments or money management that is considered appropriate for a client by making recommendations that are consistent with the interests of the customer. So the financial person must make suitable recommendations to their clients. This allows a professional’s or firm’s best interest to be the priority as long as the client gets something that is suitable for his/her needs.

The bottom line is a person under either standard could work in your best interest or burn you. A consumer should have the expectation that a fiduciary will best protect you but know your financial professional well either way. There are sales people and there are advisers. Know the difference.

As most things in life, it is buyer beware. It comes down to the person you are dealing with in the financial industry. No laws or government can protect consumers from someone looking to make a buck off you or cause you harm.

As a financial professional, there are many options available to me to accomplish a financial objective for you. How would you know whether I’m recommending “the best” solution for your objective? How do you define “the best” versus my version of best? Generally speaking, be wary of quick solutions, guarantees, high costs and commission based products.

Read our two-part article on shopping for an adviser:

  1. Shopping for a Financial Advisor? Some of the larger points.
  2. Shopping for a Financial Advisor? Some finer details.

Ask your financial professional and the firm their standard. Know the right questions to ask and don’t be shy about it. I wanted my clients to know the who, what, where, when and how. Accept ownership over your accounts.

financialplanninguidecoverMaking smart financial decisions is not always as clear as we would like it to be.  Whether you are buying a home, considering investments, starting college planning for your children, or other life decisions, the MOAA Finacial Planning Guide has the answers you need. FREE download or hard copy for LIFE and PREMIUM members of MOAA.

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Save Taxes! Improve Your Retirement Too!

Oct 23 2014

Recent news from the IRS and SSA will affect your ability to save more in tax deferred and tax free accounts starting in 2015.  And as a bonus you’ll be able to reduce your current taxes if you so choose.  Here is a summary:

  1.  401(k), TSP and 403(b) elective contributions will increase to $18,000 from $17,500
  2. Catch-up contributions to these accounts for those age 50 or older will increase from $5,500 to $6,000
  3. So, if you are 50 or older you’ll be able to contribute a total of $24,000 to these accounts next year
  4. Unfortunately, IRA contribution limits are not changed.
  5. Several other employer plan limits have changed.

iStock_000003513487XSmallOn a related note, up to $118,500 of earned income will be subject to Social Security taxation (up from $117,000). If you’re a high income earner you’ll pay about $93 extra in Social Security taxes.

Tax laws and rules are constantly changing make sure you stay on top of them.

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The World’s a Mess. I Have to Do Something!

Oct 22 2014

shutterstock_61377316For those of you who read these pages regularly (even somewhat), this may begin to sound like a broken record. “This is 2014 you know, Shane.” OK, your digital music with a bad track sector on the hard drive.

The issue is “What should I do with my investments? I can’t leave them as they are. I’ll get killed when the world stops turning and Hell freezes over.”

Even my family, friends and acquaintances who know my investment philosophies and strategies have been on my case lately. “Why? About what?” About everything!

Have you noticed the news? Afghanistan, Iraq, ISIS, terrorists, climate change, European economy, China’s economy, Ebola, politics (pick your own side), upcoming elections, expected stock exchange “correction”, inflation predictions, interest rate predictions, bond prices falling, race riots in the streets, police out of control, illegal immigrants, lack of border controls, immigration policies, blah, blah, blah.

Given the state of our national and world affairs, shouldn’t you be adjusting your investments to account for all the turmoil?


The media are always all over doom and gloom. That’s how they get you watch, listen, or read them. The vast majority of people go about their days in a positive situation everyday but that’s not what is presented for our viewing pleasure. So the media are biased and brainwashing in multiple ways. Stop listening to them.

No one knows the future. No one knows the effect any of these issues will have on the investment markets. Financial professionals can’t get it right yet people who spend little time or efforts in the financial world think they can out-guess the markets.

Here’s what we have; history and we know the impacts from past significant events.

The history of mankind is full of crises. The headlines we face today are no different and no worse. The history of the U.S.A. alone has faced worse events and yet here we are. Mankind perseveres.

Just back in 2008, the financial sector of our economy threatened to collapse. The stock market lost over half its value from October 2007 to March 2009! The “dot-com bubble” of March 2000 through September 2002 dropped almost 40%. Do I have to mention the Great Depression?

What about the recession of the early 1970s or the inflation of the late 1970s and early 1980s? Some of you seasoned folks remember the WIN buttons? Gasoline rationing of the early 1970s? The choking smog. The pollution. The Rust Belt. The crying American Indian commercial.

Ebola? The flu pandemic of 1918 is the deadliest in modern history. It infected an estimated 500 million people worldwide–about one-third of the planet’s population at the time. It killed an estimated 20 million to 50 million people. 25 percent of the U.S. population became sick and some 675,000 Americans died during the pandemic. It swiftly spread around the world; even the remote areas. There were no drugs or vaccines to treat the flu strain or prevent its spread.

Wars? WWI. WWII. The American Civil War. Revolutionary wars. The Cold War. Nuclear annihilation, MAD, civil defense exercises, Cuban Missile Crisis. Terrorists attacks the world over.

From the 1960s to 1980s alone, there was the assassination of a president, the attempted assassination of a president, the assassination of high ranking government official and presidential candidate, and the assassination of three civil rights leaders. In total, four U.S. presidents killed.

Life goes on.

There are always new technologies. New levels of productivity. New health breakthroughs. Better methods of food production. More wisdom. More people in countries able to rise above poverty and ignorance. The breakthrough technologies of the near future will change our world and lives like never before. Everything you know today will be different in 50 years. We will do things that are science fiction today.

Bottom line is mankind is always striving to be better than yesterday; with a few exceptions.

Here are some guarantees you can take to the bank.

  • The stock market and all the other investment markets will be up and down in the short-term, however…
  • It is always up in the long term—see the preceding paragraph.
  • Trying to second guess news events and market movements is a losing proposition. There is plenty of investor data to back this up.

Follow the appropriate investment strategies for your objectives and forget about the fog and friction of external events. Have an investment strategy based on taking advantage of the three points listed above.

Want to know more? Start here:

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More Boring Investment Insights for Your Retirement Account

Oct 21 2014

“Ugh! Another boring investment article, right?” If only it wasn’t so important to your future wealth and quality of life. First a little set-up before getting to my real points which are strategies for your use.

shutterstock_67583179A little background.

The media are all over the “the next correction” in the stock market (“correction” equals a significant drop). After all, it’s been up since 2009; surely it has to pop sometime soon. “So what”, you ask. Word of these stock market events spreads eventually causing us investors to act in silly and costly ways.

To recap, the stock market hit a bottom in March 2009 and began the rebound. There was a correction (drop) in 2010 of about 13%. Again in 2011 of about 15%. In 2012 there was an 8% dip. But the big picture is a solid up since March 2009.

Besides the stock market correction is the inevitable inflation and interest rate hikes that will drive down bond prices. Meaning, if you hold bond funds in your 401k/TSP, their value will drop. Between the sluggish economy and the resulting government actions to fix it, we have economic conditions that are ripe for inflation. Inflation leads to higher interest rates. Higher interest rates lead to decreased bond values.

Example: You buy a bond for $1000 that pays 3% interest. Say interest rates rise to 4%. You want 4% so you decide to sell your 3% bond. No one wants your 3% bond when they can buy a 4% bond. You have to drop your price to sell your bond. Voila! Bond values decrease in a rising interest rate environment.

Finally, the real points.

What is a 401k/TSP/IRA investor to do? The financial journals are all over the map on opinions. Simplify the discussion.

We boil down the types of investors into two pots: wealth accumulators and soon-to-be retirees seeking preservation of assets but also requiring some growth to stay ahead of taxes and inflation. While there are other types of investors with rather specific or sophisticated needs, the majority of you fall in the wealth accumulator category.

Wealth accumulators require a down market to accumulate the maximum shares of ownership (mutual fund shares in retirement accounts). Ownership equals wealth. “What?!”

You read me right. Wealth accumulators need the stock market to go down. Only in a down market will your regular payroll contributions have a chance to buy enough ownership to build wealth.

Here’s the rule of the game; s/he who retires with the most shares wins! Stop judging your success on your account value. Account value is a by-product of ownership.

Wealth accumulators shouldn’t worry about market corrections. In fact, they should welcome it. They should be dollar cost averaging and have an allocation that leans heavily to stock funds. Rebalance your portfolio after your allocation is off by more than 5% (these bolded strategies are explained in the articles linked below).

Soon-to-be retirees should have an allocation that won’t follow the market all the way down. Say, a portfolio of no more than 30 or 40% stocks. This is a proportion of stocks recognized as being able to maintain enough growth to offset taxes and inflation without too much risk.


From September 2008 to March 2009, the stock market dropped 48%. A portfolio of 80% stocks dropped 38%. For wealth accumulators, that’s great. You are raking in ownership at bargain basement prices. A portfolio of 40% stocks went down 18%. If closing in on retirement, you can survive that reasonable drop in portfolio values to ultimately catch the rebound in stocks.

Details are missing in this article. For more go to:

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