WTOP Interview: Weighing the Costs and Need for Long Term Care Insurance

Interview Transcript:

Shawn Anderson: It’s 5:11 on WTOP. With roughly 10,000 baby boomers turning 65 every day from now until 2030, the future costs of long term care and health care, in general, are a top concern of current and soon to be retirees. And one of the top questions is, whether it makes sense to buy long-term care insurance.

Hillary Howard: Here to help us to weigh the costs and needs of long term care, is Nina Mitchell, co-founder of Her Wealth and senior wealth advisor at The Colony Group. Nina, great to see you.

Nina Mitchell: Great to be here.

Hillary: So, your article on wtop.com has some pretty scary statistics about the costs of long term care. So, why don’t you walk us through them and what they mean to retirees?

Nina: Alright Hilary. So, here’s the reality for an American turning 65 today; you have a better than 50 percent chance of needing long term care during retirement for an average of 2 years. And 1 in 7 adults will need long term care for about 5 or more years. The big elephant is Alzheimer’s, which is the most common form of dementia and that currently affects about 10% of Americans, over ages 65 and 38% over age 85. And the type and annual cost of care vary from having maybe a home health aide coming to your house for $52,000 a year, to getting a private room in a nursing home at 118,000 a year. And these are actual [Maryland] costs for 2017.

If you assumed a 4% inflation, those costs are going to double in 18 years, just when many 65-year-olds are now turning 83 and they’re more likely to need the long term care. So, remember these are only annual costs for one spouse, so someday you’re looking at a really big number if you multiply them, times two for several years.

Shawn: What are some of the misconceptions we have about what’s covered by long term care insurance and what’s not?

Nina: Alright, well let’s first make sure you know what long term care is. And it’s care needed if you can no longer perform everyday tasks by yourself; like eating, bathing and dressing, which are called activities of daily living or ADLs. And once you’re not able to perform two or more ADLs, long-term care insurance typically pays for the following types of care, obviously based on policy limits and terms. Home care, like skilled nursing care, assisted living facilities, adult day-care centers, nursing homes, memory care centers, and home modifications; like a wheelchair ramps and grab bars… grab bars rather. People sometimes confuse long-term care with medical care. Long term care just covers custodial care, not medical costs.

Hillary: Are there limitations? How much do these plans actually cover, Nina?

Nina: Well, there are limits and you have to look at each policy, because they do have their limits. Yeah, it’s policy by policy.

Shawn: Are there some reasons to have long term care insurance that we may not know about?

Nina: Well sure, I mean obviously, most people buy long term care for peace of mind and not to be a burden to their family. But you know, one of the biggest reasons is really just to protect the family finances. Self-funding a major long term care event can event can suddenly devastate your entire retirement plan, leaving little if any assets for the surviving spouse or the next generation. And you can also have negative tax consequences if you’re forced to sell your house or assets or even retirement accounts. Sooner you’re going to have to pay higher taxes and you going to have a lot less for your future.

Hillary: Any final observations for folks on this?

Nina: Yeah, you know, as the wealth advisor we run a lot of retired models with and without long term care insurance and it’s really important for clients to understand the long term impact. And the hard part is that you’re making a decision in your early 50s or mid-60s for an event that might happen twenty plus years later. And there’s also a chance you could buy long term care insurance and never need it. There’s a lot more information in my article and on our Her Wealth website and next time I’m going to be talking about some alternatives to long term care.

Shawn: Alright, very good. Nina, thanks so much.

Hillary: Thanks.

Shawn: Nina Mitchell, co-founder of Her Wealth and senior wealth advisor at The Colony Group and you can read more about this on wtop.com.