The Need for Long-Term Care Insurance

When I was a youngster many years ago, my mother taught me to look both ways before crossing the street. I was precocious and told my mother that on a one-way street, I only had to look one way.

By Robert A. Kieckhefer, managing partner, The Kieckhefer Group, Brookfield, Wisconsin | April 21, 2014
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My mother told me that I could not always be sure the street was one way and that traffic might just come from another direction. She simply said: “You have too much to lose if you are wrong.”

In my role as a financial adviser to almost 10,000 participants across the country, I have begun to think that too many advisers and participants are only looking one way. Focused on retirement, savings and returns,   both advisers and participants are worried about having enough money so they won’t outlive their savings.

I want all my participants to reach a comfortable retirement, and most are on the right track. Unfortunately, very few are prepared for a serious health issue in retirement.  My mother had a long-term health problem called Parkinson’s and it impacted the entire family. It impacted my father’s business career, his retirement and his retirement savings. It impacted the children as we became care givers in order to offset the cost of long-term care. It was a game changer for my father and his retirement savings.

Today the statistics are pretty simple:  1 in 2 people will be affected by long-term care costs 1. Most men who need long-term care are taken care of by their wives; so the long-term care costs are offset until she needs care.

The costs of long-term care can be between $50,000 to $100,000 per year2. If the average retiree has to incur that cost over a long period of time, it will take a huge bite out of their retirement savings.

Medicare won’t cover long-term care services3. Medicaid won’t pay unless you have spent most of your life’s savings.  The amount of countable assets you can have and still qualify for Medicaid varies state to state. In most states you can retain $2,0004. So the answer is simple: if you think that you are set for retirement look both ways and purchase some long-term care insurance instead of relying solely on your 401(k)/retirement assets to cover your long-term care needs.