Part II: Why LTC needs to be included in a retirement plan - five strategies for communicating with prospects
How do financial professionals and sales associates talk to clients about the subject of long-term care in a way that doesn’t scare them and can help them think about an uncertain future? One person told me “I’m scared enough already, I don’t need to hear more statistics about how I will need long-term care.” Here are five ideas worth considering in helping clients understand the value of long-term care planning and why they should get started sooner rather than later.
1. They can preserve their retirement assets
As mentioned earlier, planners are more likely to understand the economic value of long-term care protection and purchase the product. Comparing estimated retirement expenditures with and without long-term care can be effective. By calculating the cost of care in a nursing home ($102,200 per year), assisted living ($48,612 per year) and home care ($52,624 per year)1 and estimating two or three-year duration, it’s easy for planners to see that a portfolio can be depleted. Check local rates, which can vary considerably. Factor in family health history as there is some genetic predisposition to such diseases as Alzheimer’s and Parkinson’s.
2. They are purchasing for their family, not just for themselves
From a financial perspective, preparing for a possible long-term care need is as important as planning for death. As noted above, the cost of care can have a negative impact on the money available to a spouse for his or her own care later on. There is also another consideration. Having funds set aside to pay for care alleviates the heavy burden on family members who may spend many hours providing care, often at the expense of their own health and well-being. Adult children often are forced to give up their jobs and the time spent with their own family. Helping clients understand the impact of caregiving resonates with many, especially those who have provided care themselves to aging parents or others.
3. They can stay at home longer, and have more care facility choices
It’s a rare person who says “I want to live in a nursing home in my final years.” The large majority of people want to remain at home as long as possible. By having home care services available to supplement family care, long-term care protection can make staying at home a valid choice. Community resources such as adult day care and respite care to give the family a break can stretch dollars. If more intensive levels of care are needed, having sufficient funds set aside enables people to choose which assisted living facility or other option they prefer. It’s a good idea to know something about the home care agencies, assisted living facilities, including costs and reputation. Also, check local community resources and get to know the what’s available.
4. They can stay in control of their future
Many people have completed a living will and a durable power of attorney as part of the retirement planning process. Equally as important is completing a care plan, but few have given much thought to this concept. By the time people reach age 85, it is estimated by the Alzheimer’s Association that one in two will have dementia. At that point, other people (usually adult children) make decisions for them, and the decisions may not be what they would have wished. Helping clients think through what will happen if they need care, who will be there to care for them, and where they want the care delivered if they become cognitively impaired or unable to function can be a wakeup call to action. By putting a long-term care plan in place, they will have more control of their future and their family will know what to do if they are the ones to make decisions.
5. They can more fully enjoy their retirement
Long-term care is often the “elephant in the room.” People may not want to acknowledge that they may need it someday, but as we’ve seen, it is a real concern as people transition into retirement. As difficult as it may be to get clients in their pre and early retirement years to focus on the subject, a long-term care discussion should be easier when clients are active, healthy and at an age when final illnesses seem remote. One strategy for addressing long-term care is to “plan backwards.” The way this works is to discuss the concerns and expenses of final years of retirement first and then move to the early retirement years when travel and other more pleasant topics are usually addressed. This way, the “elephant in the room will be gone” and clients will more fully be able enjoy their new life stage and have more peace of mind about the future.
1 Genworth Cost of Care Study, https://www.genworth.com/about-us/industry-expertise/cost-of-care.html, 2019.
Long-term care riders generally have an additional cost to them and have restrictions and limitations. Be sure to review the product specifications for details. It is paid as an acceleration of the death benefit.
Life insurance products are issued by Equitable Life Insurance Company (NY, NY) or Equitable Financial Life Insurance Company of America (EFLOA), an Arizona stock corporation and are co-distributed by affiliates Equitable Network, LLC (Equitable Network Insurance Agency of California in CA; Equitable Network Insurance Agency of Utah in UT; Equitable Network of Puerto Rico, Inc. in PR), and Equitable Distributors, LLC. Variable products are co-distributed by Equitable Advisors, LLC (Member FINRA, SIPC) (Equitable Financial Advisors in MI and TN) and Equitable Distributors, LLC. When sold by New York based (i.e. domiciled) Equitable Advisors financial professionals life insurance is issued by Equitable Financial Life Insurance Company (NY, NY).
Long-term care riders are paid out as an acceleration of the death benefit providing only one pool of money available to the insured. A separate long-term care policy and life insurance policy will have two pools of money available to the insured.
Equitable and its affiliates are not affiliated with Dr. Sandra Timmermann.