First Time Millionaires Should Have Long-Term Care Insurance

One out of every 10 American households will be worth at least $1 million within the next four years and these individuals should be planning to protect their savings with Long-Term Care Insurance.

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First Time Millionaires Should Have Long-Term Care Insurance
6 Min Read October 13th, 2017 Updated:January 18th, 2021

A million dollars is not what it used to be, but more people are getting to their first million. As more people invest in their employer's 401(k) and other retirement programs, their savings are growing. You add the money in your retirement plans plus current savings and investments and the value of a home more people just like you will soon (or may already be) a millionaire!

One out of every 10 American households will be worth at least $1 million within the next four years, and these individuals should be planning to protect their savings with Long-Term Care Insurance, according to the head of the American Association for Long-Term Care Insurance (AALTCI).

"Achieving this milestone is historic for millions of Americans, and their number one priority will be protecting that achievement," said Jesse Slome, director of the AALTCI. Slome was speaking recently to key Association members regarding the market outlook and future opportunities.

In a report released in 2020, there are 8.6 million millionaires in the United States, representing approximately 14% of U.S. households. Bloomberg says there are 1700 new millionaires made every day in the U.S.

Families with savings need a plan to address the financial costs and burdens that come with aging. Longevity is a significant risk on a family's assets. By the time you get into your 40s, if not before, you start seeing changes in your health and body. Once you get into your 60s many people will begin having a cognitive decline. As the decline increases, you start to require supervision. 

The cost of long-term care services will significantly impact your income and assets, even if you are a millionaire. 

"Individuals who have worked hard and saved throughout their life understand the risks that could impact their net worth, long-term care being the greatest risk as they age. What they don't know is how easy and affordable it can be to mitigate that risk," said Slome.

Longevity a Major Retirement Concern

Many consumers and financial planners discuss the costs and burdens of aging and how it impacts a retirement plan. With the advances in medical science, longevity has become a retirement issue. 

The concern is the risk of running out of money when you are retired. The cost of long-term care is a significant factor many people don't consider.

Most people want to manage a long-term care situation without becoming dependent on their adult children or spouse. Generally, spouses are not the best caregivers because of their own age and health. Adult children have their own careers and family responsibilities. The role of being a family caregiver is physically and emotionally draining. Siblings often have conflict as usually one of them gets the job and takes on the pressure.

Family Caregivers Face Enormous Challenges

Caregiving is hard on family members and is emotional and challenging work. Writing in their blog, "Losing a Puzzle Piece," Jessica Conway Church and Shane Eleanor Conway McCoin write, "We can't always paint a rosy picture of caregiving. There are harsh realities, stress, and much hardship involved."

Long-Term Care Insurance will pay for care in any setting, whether it is your own home or adult day care center, assisted living facility, memory care, or nursing home. Quality care is not cheap.

Long-Term Care Costs are Significant

The cost of care can vary depending on location. The national averages are:

Median Annual Cost of Long-Term Care 2021

      Adult Day Care (5 days/wk.) $20,456  

      Assisted Living - base cost (one-bedroom) $52,451 

      In-Home Health Aide (44 hrs./wk.) $55,004 

      Nursing Home (semi-private room) $97,578

      Nursing Home (private room) $109,683  

  (LTC NEWS cost of care calculator)

To find the cost of care where you live, click here.

Do You Really Have A Lot of Money?

Just having a million bucks isn't like it used to be. Although being a millionaire sounds nice, the Financial Samurai says it's not that impressive any more thanks to inflation. If you retired today at 65 with $1 million and no Social Security, you'd only be able to spend $40,000 – $45,000 a year for 25 years until you'd run out of money. 

Charles Schwab says that without Long-Term Care Insurance, the expenses of extended long-term care could quickly deplete your nest egg.

The expenses of care services are considerable and why the asset protection LTC Insurance offers becomes vital to both your lifestyle and legacy, but to mention the quality of care.

45 States Offer Partnership LTC Insurance

Most states offer partnership Long-Term Care policies that provide additional dollar-for-dollar asset protection. Partnership LTC Insurance will give you extra peace-of-mind as it safeguards your hard-earned assets from the costly costs of long-term care services. Learn more about Partnership Long-Term Care plans by clicking here.

Total Asset Protection

There are policies available that provide total asset protection. These policies offer unlimited long-term care benefits to eliminate any risk on your savings and investments. When you speak with a qualified Long-Term Care Insurance specialist, they can review your options and find the best option based on your age, health, financial situation, and family history.

If you have a substantial estate, the tax consequences of long-term care could make your cost even more expensive. If your family must sell assets to pay for care, you usually will incur taxes as you trade stocks, bonds, or even sell companies to pay for this care.

For example, many farmers own land, which is often worth millions of dollars. Without Long-Term Care Insurance, families will sell the farm to get the cash needed to pay for care. 

Read more about the problems of America's farm families and long-term care by clicking here.

Long-Term Care Insurance is Affordable

Since premiums are very affordable, many families with significant estates will purchase Long-Term Care Insurance to limit the tax consequences of using their own money. But Long-Term Care Insurance is more than just about money.

Most policies provide other services like case management, which give the family the time to be family instead of the responsibility of being a caregiver or managing your future car situation. 

If you have assets to protect, whether you have $100,000, $1,000,000, or more, an affordable Long-Term Care policy will help you make sure you don't run through your savings due to excessive care costs. It will also reduce the tremendous burdens extended care puts on family members.

For those families with over $10 million in assets, a Long-Term Care policy with unlimited benefits can offer total asset protection. A specialist will review your options, including options that include death benefits in addition to the long-term care benefit.

Experts suggest starting your planning before you retire as premiums are based on your age and health at the time to get a policy. Long-Term Care Insurance is medically underwritten, so you need to have reasonably good health to obtain coverage. Ideally, start planning in your 40s or 50s.

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About the Author

An LTC News author focusing on long-term care and aging.

LTC News Contributor James Kelly

James Kelly

Contributor since August 21st, 2017

Editor's Note

Long-Term Care Insurance is easy, affordable, and rate stable income and asset protection. These policies are custom designed. Be careful, however, since premiums can vary over 100% between companies for the exact same coverage. This is why you should seek the help of a qualified Long-Term Care Insurance specialist. Find a specialist by clicking here.

Items to Discuss with a Long-Term Care Specialist:

  • Partnership – Most states offer special policies that provide dollar-for-dollar asset protection. The Long-Term Care Insurance Partnership Program might be one of the best-kept secrets in retirement planning. Make sure the specialist explains this program and how it might help you.
  • Tax incentives – There are federal tax incentives available for some people. If you own your own business, be sure to ask.
  • Health Savings Accounts – If you have an HSA, you can use the pre-tax money in your account to pay for the premium.
  • Asset-Based or Hybrid policies – These are life insurance or annuities with a rider for long-term care. Careful, only a handful are actually a long-term care benefit. However, one of these policies can provide you with the flexibility of both a long-term care benefit or a death benefit. They are expensive but can be paid with a single premium.
  • Health and Family History - Make sure the specialist asks you detailed questions about your health, family history, and retirement plans. Underwriting criteria vary with each insurance company. If they are not asking you detailed questions, then find another specialist.

Take a moment and find the current and future costs of long-term care in the area you live in. This will help you decide the amount of coverage is appropriate for you in your situation. For example, if you have a defined pension when you retire, the amount of benefits you would need for long-term care would be less than an individual who will fund their future retirement with earnings off investments. In that case, protecting the principal is essential since that will produce your future income.

Research Current and Future Cost of Care Services

Find your state and use the LTC NEWS cost of care calculator by clicking here.

It is always best to start planning before you retire. Once you have your plan in place, you will enjoy peace-of-mind, and your family will thank you decades from now.

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