1. Cost of Care in 2003 for the Los Angeles Area
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Nursing Home (Private Room):
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Assisted Living:
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Home Care (per hour):
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2. Future Cost of Care (Calculated at a 5% compound factor)
Do you plan on spending your hard-earned investments for long-term care expenses during your retirement years?
| Year | Annual Cost |
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| 2004 | $59,000 |
| 10 Years | $96,104 |
| 20 Years | $156,544 |
| 30 Years | $254,994 |
| 40 Years | $415,359 |
3. Risk of Care
40% of people who need long-term care are working-aged adults between the ages of 18 to 64
One-third of people having strokes are under age 65
The odds that you will need some type of long-term care are greater than 50%
4. Who Pays for Long-Term Care?
Money accumulated in pension, 401(k), and profit sharing plans - as well as stocks - is in jeopardy of being lost to long-term care expenses. 72% of people requiring long-term care are impoverished within one year.
5. Comparison of Risk
The risk is more common than you think. Compare the odds with other types of personal insurance. Why would you handle the risk of long-term care any differently?
– House Fire: 1 in 1,200
– Auto Accident: 1 in 240
– Disabled: 1 in 8
– Long-Term Care: 1 in 2
1. To protect your assets. (Insurance for your 401K plan)
Part of your financial planning should include long-term care insurance to protect your spouse and family from financial hardships, and to transfer the risk to a third party.
Investing in a long-term care insurance policy is undoubtedly a prudent business decision because of unforeseen serious chronic illness, disability or just simple old age. While self-insuring appears to be a possible solution, once a long-term care arises, it will take a limited time for the investment to be depleted. Assets will then be tapped to pay for additional long-term care costs. Let's look at the two scenarios below.
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Scenario 1 - Self Insuring
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Scenario 2 - Investing in a policy
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Invest $1,000 per year at 8% interest rate 20 years X $1,000 + interest = 49,400
The projected average cost of LTC in 20 years is $120,000 per year A 50 year-old partner decides to invest $1,000* a year toward a long-term policy over a 20-year period |
A 50 year-old partner decides to invest $1,000* a year toward a long-term policy over a 20-year period $1,000 X 20 years + interest = $49,400 *Based on an unlimited policy at 5% compound
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| By self-insuring, the partner would need to tap into his assets because $49,400 would pay for only 5 months of care. The purchase of an unlimited long-term care |
The purchase of an unlimited long-term care policy for $49,400 will recoup his premium investments in just 5 months of receiving benefits. |
2. To supplement your disability insurance
Long-term care insurance, which protects assets, can be offered as a supplemental benefit to disability insurance, which has been designed to protect income.
Over the last few years, disability benefits have been reduced, while premiums have increased. Also, most companies have set a maximum on disability benefits that do not measure up to the employee's increased income.
The number of individuals between 18 and 64 experiencing severe disabilities has risen 400% over the last 25 years (see chart below).
The Bottom Line
Purchasing a long-term care indemnity plan allows an employee up to an additional $6,000 per month that would supplement disability income significantly when the need arises.