Who Will Take Care of You When You Age?

09/13/2008 12:00 am EST

Focus: MARKETS

Terry Savage

Author, The Savage Truth on Money

Have you thought about the very real possibility that in your old age you'll need help dressing or bathing or getting out of bed? Can you count on your children to be there for you?  Would you even want your children to do that? Or will you run out of money trying to pay for care on your own? 

And then are you willing to be placed into a government-run, Medicaid-funded nursing home, which will be crowded with aging baby boomers who have also run out of money?

Most people avoid thinking about, much less planning for, the fact that one day they'll be dependent on others to help carry out the functions of daily living.  We see few examples, because boomers-and their aging parents-are benefiting from new hips and knees, new heart valves, and pharmaceuticals. But one day those body parts-or our brains-will break down and demand help.

While we insure just about every risk in our lives, from a fire at home to an accident on the road to our very mortality, relatively few have considered purchasing long-term care insurance. Yet it's a statistical fact that once you reach age 65, your chances of needing some form of "custodial care" are ten times greater than the chance that your house will burn down!

With the cost of care now approaching $100,000 per year in major cities, this is a cost risk that should be considered. Many people figure they will "self-insure," but that could be the most selfish thought you have! 

If you have a spouse, the male is likely to need care first (just based on mortality tables that show women tend to live longer). That means family assets-and a wife's energy-are likely to be drained before it's her turn to need care. That's why long- term care is particularly a woman's issue. Alone, or as a surviving spouse, the costs and the need for a care plan are alleviated by a good long-term-care insurance policy.

Don't count on the government Medicaid program to be there for you, even if you spend down all your assets. They currently give care almost entirely in nursing homes that are already chronically understaffed and underfunded. 

That's not where you want to put your mom, and it won't be the place you'd like to receive care in 15 or 20 years when boomers swamp the system. So, isn't it wise to plan ahead by considering a long-term-care insurance policy?

Yes, the premiums have been rising. That's all the more reason to get in now, and minimize future costs. Spouses typically get a discount of as much as 50%. The best time to buy is in your early 50s, when you're young and healthy enough to qualify. If you own a C corporation, the premiums may be entirely tax deductible. If you're worried about increases down the road, consider a "10-pay" policy that eliminates your exposure to premium increases after it is fully paid in a decade. That's expensive, but buys peace of mind.

All right, I know you don't want to think about being frail and elderly. Who do you think you are, Superman? Remember, even Superman (Christopher Reeves) needed extensive custodial care! 

What do you think? Please join the conversation.

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