Welcome to something more with Chris Boyd. Chris Boyd is a certified financial planner, practitioner, and senior vice president, financial advisor at Wealth Enhancement Group. One of the nation's largest registered investment advisors. We call it something more because we'd like to talk not only about those important dollar and cents issues, but also the quality of life issues that make the money matters matter.
Here he is, your fulfillment facilitator, your partner in prosperity, advising clients on Cape Cod across the country. Here's your host, Jay Christopher Boyd. Hello, and welcome to another edition with something more with Chris Boyd. My name is Jeff Perry. I'm here with Russ Ball, my co-host today. Chris Boyd has the day off, so we're sitting in the big seats trying to carry the load. Russ, thanks for joining me and co-hosting. Good to be here.
And for this episode, we have Linda Tallheimer with us. Linda, thank you so much for joining us. You are one of our experts that we turn to when we have questions regarding long -term care insurance. So thanks for making the time to talk to us and our listeners today. Thank you. My pleasure. Practically every financial plan that we do, not everyone, you know, sometimes we're doing a plan for a 25-year-old married couple, right?
But with the exception of the younger clients that we have, and we've, you know, some of those we touch on it, but for most people, most people we deal with are entering retirement, thinking about retirement, or in retirement. And so for every financial plan we have, for every annual review we do, the subject of the potential need for long-term care comes up.
And if, when we go through the plan and we start asking the what-ifs, those questions that we're using to stress test a plan, you know, plans look pretty good when you have just the things that you hope happen, happen. But when we start stress testing, what if one of you needs a long-term care setting? Or what if one of you pre-deceases? Or all these things that nobody likes to talk about. Long-term care often has the largest impact on the likelihood of a successful financial plan.
And so let's start with when is long -term care insurance appropriate? What category of people, if you will, broadly, and then we can go into specifics, is long-term care insurance an appropriate option for people to consider as they're thinking about the potential for long-term care needs? Excellent question. So really long-term care is the financial product that protects your assets and gives you more choices.
So the age at which we're thinking about this is less relevant than the financial picture for any individual. So what we want to do is we look at anyone at any age that they can say, if I continue on this trajectory and I have no bad debt, that I will be self-sufficient in old age. And what I mean by self-sufficient, I mean not on Medicaid, relying on the government for funding. Right.
And nobody wants to be in that category of like not having enough money or not having enough money to actually qualify for Medicaid because you're pretty destitute at that point between assets and income. Exactly, exactly. So and then it becomes a question of, you know, just determining how much you need and how long you want a product to last. Right. So that's where the actual wealth comes into it and goals and perceptions of individuals of what their needs may be.
But I'll be honest, I actually have long -term care insurance from my children and I had it back when they were in college because I know that you're only as healthy as you are today and we don't know what tomorrow holds. Right. That's an interesting topic because we typically, you know, we live in a world of like typical things, but we typically think of long -term care. Somebody retires, you know, and they have a healthy runway. It looks like they have no health issues. Who knows?
But they have a healthy family history and they may live very well, may live to 95 or longer. And so the likelihood of having a long -term care need increases. Right. Absolutely. But we all know from our life experience, friends, if it's not your own family, somebody you know where there's someone younger who has that need for a long-term care setting, either temporary or permanent. Right. So it is broader than what we typically think about.
Linda, you touched on people at the Medicaid level, which they can't afford any product, likely. Right. And so then we have the other end of the spectrum and where people have accumulated so much wealth that a long-term care event could very well be handled with their assets and their income that they've generated. So, you know, if they have a, you know, do the projections, you can shed some light on the average cost of long-term care, perhaps.
But just for sake of discussion, $100,000 a year of long-term care needs for 10 years, which would be a long time. You know, we have many clients who their plan can handle that. It's not what they want. They can handle that. So insurance probably isn't something that they're going to consider. It's the folks who are not at the super low end and not at the super high end that long-term care insurance might be a good option for them. Is that fair to say?
Yes. So actually it's the difference between want and need. So people who have moderate savings and investments, you know, less than two million, those people are really need long-term care because a long-term care event can wipe them out, change the lifestyle for a healthy spouse or impact their ability to leave money to assets or to even have a quality of care throughout a very long, long-term care event. And for the wealthier people, it's a question of choice.
And most wealthy people, although they could afford to pay for long-term care, didn't get wealthy because they paid after-tax dollar for everything and always paid full price. So long-term care insurance is like getting a discount to pay for long-term care. And wealthy people like discounts just as much as people who need to have that discount. Explain that a little further. I think I know what you're saying, but explain how the discount would play into this. So certainly.
So for example, depending on your age, you can leverage long-term care insurance, you know, five times, six times, sometimes even seven times greater than a rate of return that a financial planner would typically estimate on a, you know, saying that, you know, there's 95% chance that we can depend on, for example, a 5% rate of return over a lifetime. Sure. No, we can all say, yes, the market can be higher, the market can be lower.
But if I said to a financial, if I say to you, you know, what would you say to your clients is a solid rate of return that you could feel comfortable saying with 95% accuracy, you know, many financial planners on average would say around 5%, right? Some might say a tiny bit higher, some might say a tiny bit lower. And if we take that number and we use it to compare to the returns on a long-term care policy coming in tax -free, that can be quite a significant leveraging of that money.
So instead of having, you know, if you doubled your money with investment, you could, you know, five times your money potentially with long -term care. And depending on age and health, it could be more, or it could be a little bit less. And so, you know, the question is, even if you used a tiny bit of your long-term care policy, you would do it, you would be doing as well as if you had invested that money.
And so when we think about long-term care insurance, the reason people don't purchase it is because they don't want to spend the money, right? So, you know, it's almost like a catch -22 or an oxymoron, really, when we think about wealthy people who can afford anything, that they can pay dollar for after-tax, dollar for long-term care, and then say, well, I don't want to spend the money on insurance, right? It's not about the cost. It's about their perception.
And often it's a perception that I don't believe I'm ever going to need long-term care. And that's what drives it. Because if there's any perception that they will actually need long-term care, you know, it's a very logical decision to have more for less. Yeah, you're totally correct. And we hear our clients, and they're being sincere.
I'm not trying to pick on any one of them who might say this, but we're not going to need that because we're married and I'm going to take care of him, and she's going to take care of me. So we're just not going to do that. You know, I love when people say that. I know. And they mean it with all the proper intentions. Do. And I explain that long-term care insurance helps you take care of each other better and longer. My mom has been in claim for nine years.
And when she first went, when she first started to have care needs, you know, she came to the house and I provided her care. My background, I'm an occupational therapist. Very easy for me to care for people. I understand adaptive technique and adaptive equipment. I had everything adapted. And I'm telling you, I was tired, right? So when I woke up in the morning, I got her out of bed. I got her, you know, ready and in the bathroom and showered and dressed, and it was time for breakfast.
And then, you know, it was an hour and a half later, I'd run upstairs, get myself showered and dressed, run down and do breakfast. And I said, you know, this just doesn't make any sense. So she had a long-term care policy, but I figured, you know, I'm the daughter, I can do this. Oh, all the right intentions again. All the right intentions. And it's so much better. And I changed it. I said, you know, let's just use your long-term care insurance for this.
And even when she was at my house, I would have someone come in and get her up in the morning. I'd get dressed, she'd get dressed, I'd get showered, you know. And then we sat down and had a nice breakfast. It's a nice quality time, yeah. All the more time to enjoy the positive aspects of the day. You know, you touched on something, which is another, I think it's a misconception or maybe just how people view things, like all or nothing all the time.
I think when people, you're talking to them about long-term care, they're thinking, well, that's my insurance if I go into a nursing home, right? That's my insurance. If I have this big expense, you know, I need to be there because cognitive issues or physical issues or whatever the case is. And so that's my insurance program for that. And maybe back in the day when this started, that's what it was. I've heard people call it nursing home insurance. I'm sure you have.
But can you just briefly outline the broadness of these policies today? Absolutely. And what it covers? Yeah. So first of all, I call this nursing home avoidance policy. Fair enough, yeah. Right? Because we don't want to go to a nursing home. Nursing homes have become very challenging places. For the most part, they are where the very poor and the very sick go to live, and that's not a great financial mix. And a lot of people end up, if they do need nursing homes, go to private nursing homes.
So it's very challenging. Now, the reason why we think of long -term care and nursing homes is it wasn't until the late 80s that assisted livings even came into place. So in fact, some of these older policies that talk about home care and nursing home have terminology in there that says custodial and skilled nursing. So those old long-term care policies cover assisted livings because custodial nursing homes are, in fact, assisted livings.
Yeah, so they're very broad, and they allow people even to spend more money. So let's talk about cost of care. Massachusetts, you're talking an average now of about $40 an hour with a minimum of a four-hour shift. So you're talking, you know, $4,800 a month, you know, for one shift of care. And then, if you need someone to put you back to bed at night, you know, you're over $9,000. You need someone to help you 15 minutes in the middle of the night, you're talking an eight-hour shift.
You know, so if you needed morning, evening, and 15 minutes in the night, you're talking $18,000 a month. That's not even 24-hour caregiving. So people then transition into assisted livings. And assisted livings have gotten so much more expensive. You know, a really nice assisted living in Massachusetts runs about, you know, $8,000 on average. They can be up to $10,000 or $12,000 just for a traditional assisted living. And dementia units are much higher.
I mean, I have clients in $14,000 a month assisted livings for dementia. And that's not the be-all and end -all of long-term care. Now, if you're the kind of person who likes to get up at, you know, 7 .30 in the morning, be showered before you go down to breakfast, you'll be hiring a private aide to subsidize the care and the assisted living.
Because the assisted living's busiest time is getting people ready in the morning to get down to breakfast, getting people ready for lunch, getting people ready for dinner. So the showers are typically, you know, between 9.30 and 11. And, you know, 12.30 and 4 o 'clock, right? So they're in these off-peak times that people are getting their showers. So for people who don't eat breakfast or like to get up late, you know, that's not as much of a problem.
But for those who are, you know, eager beakers in the morning and want to get up, they'll be hiring an additional caregiver to the assisted living. So you can see how the cost of care is much higher than most people will predict. Yeah, definitely. The cost is a big part of it that we're, you know, trying to model when we do the stress testing. You know, we look at some of the Genworth studies of the area.
And for example, Cape Cod, you might have more updated numbers than us, but we use about $180,000 a year for nursing home coverage on Cape Cod. And anyway, obviously a huge expense. I think a lot of people do get a little bit overwhelmed by the amount of options when it comes to long-term care insurance. And we were talking about it just before the show that there are a lot more options now that there might've been in the past.
So can you walk us through some of those that you work with, whether it be the traditional long-term care insurance or hybrid solutions? Sure, sure. And before I do that, I think it's important to talk about the duration of care. So we have the expense. Let's talk a little more about duration. So we can talk about averages of long -term care about 3.7 years, but the reality is that that number means nothing because long-term care is a U-shaped curve as opposed to a bell-shaped curve, right?
So what happens is, and it makes a lot of sense, people who need care are either very sick, they enter into care, 40 % of them have died within the first three years. And then it sort of stays low. And then those people who make past that period of time keep on going, keep on going, keep on going. And 16% of people will use five years or more. I think I mentioned my mom, in her ninth year of care. Ninth year, yeah.
And if you had asked me on day one, I would have guessed two years and if we were really lucky, three. And if you asked me again, I would have said two years and if we're really lucky, three. And after six years, I was like, who knows, right? Who knows, right? And my dad is 98. He went into claim at 96 and he has committed to make it to make it to 100. So that was four years of care minimum because he's a very committed type guy like that.
So you don't know whether you start young or you start old, how long people actually go into need care. And so when we look at policies, we look at the availability of funds. So people who don't have a lot to put into a long-term care policy, smaller policies still have tremendous value. Small policies are done best with traditional policies. They're tightly underwritten. In Massachusetts, we have the MassHealth Lean Law, which protects over a million dollars in a primary home.
And in other states, we have Partnership, which protects dollar that you receive in your benefits. And so small policies really help those people who need a lot of money and we do a short period of time so that they can co-fund every part of that long-term care policy. There's no sense in having a long policy and finding out they run out after the third year in supplementing.
So Linda, just to clarify for the people who may not have much experience in this, in Massachusetts, as you indicated, if you have a qualifying long-term care policy, your primary residence will not be automatically leaned to secure the funds if you had to go on Medicaid. Yeah. So clarify that. Your house can still have a lien upon it, but upon the death of the person in claim, the funds will not be recovered. The lien is removed and the home is returned to the estate. Okay. Thank you.
And typically, I think when people have maybe heard about long-term care traditional policies, they say three years or $300,000 or whatever the number is, right? And so go ahead. Yes. So I usually start off, so if we're looking at a minimum long-term care policy to meet MassHealth lien is just $125 a day.
So they're in $10 increments, so $130 a day would get someone to that MassHealth lien protection, put a little inflation protection on it so that it can have some real value going out in addition to protecting their home. And then we go up from there based on that premium and affordability.
Once they get to about $5,000 or $6,000 a month in benefit, then I start to enhance to three years, four years, five years, depending on their, again, on their wealth and their ability to co-fund these policies for the full cost of care. But the wealthier population, I usually start at six years and go up from there. Uh, couples, I love shared policies, uh, and there are two different ways to share policies.
For example, a couple of each could have four years of coverage and they could share each other's where one could use eight and there would be nothing left for the healthy spouse, but it's a great way to protect the estate for the healthy spouse. And if the first spouse doesn't use any care, it's all left for the, for the other spouse and protects the estate for, for whatever, whoever else would be their heirs or beneficiaries.
And, um, and then we have, uh, shared policies that actually have an extra pool of money so that each of them would say have four years. And then there's a four year pool where one could use eight and there's still four for the healthy spouse. And these are the strongest leverage policies out in the marketplace. So, um, in terms of policies, there's basically three ways to fund long-term care. There's traditional, which is generally use it or lose it.
They are most cost-effectively paid for via an annual premium. And you know, that you pay until you enter into claim. A hybrid, which is a combination of a life insurance long-term care policy or annuity long-term care policy. And those have inflation throughout the entire policy. And it's really seamless to the client that it is life and long-term care and the return of, um, premium is basically a death benefit that is right around the cost of the premium.
And, and that would be left to the heirs if that person never needed them, needed the, the policy. So basically for every dollar you receiving claims comes off the death benefit. And many of these policies have a residual death benefit from five to 20%. So those are designed to deal with the hesitancy about, I'll never going to use this. I'm going to lose all this money. Why should I, why should I do it? Right. Exactly.
So one of the things that these policies does is it checks off the boxes on the win-win scenario, right? So obviously if you need long-term care and you have a long-term care policy, that's a win, right? Because you've leveraged your money. You have many more choices. It's a feel good in a really feel bad situation.
Now, um, because of that return of premium, if you purchase a policy and you never use it, your estate that would have supplemented that long-term care policy has been protected by your good health. So that's a win. And then the kids or your beneficiaries also get a death benefit. So it's another win. So it's another feel good, whether you use long-term care or not, it's a win for the family, right?
So that's, you know, makes it much, much, much easier to make that decision, especially knowing that if you don't have long-term care insurance and you enter into claim, it is an immediate panic on the side of the family, which is, we don't know how much, and we don't know how long this is going to cost. And how do we start managing and trying to figure out how much we should allocate along the way? Absolutely. So, um, the other question you had was, uh, all the policies that are out there.
So there's the hybrid. And then I also want to mention there's a life with a long-term care rider and you, and a lot of people are going to start seeing this in their worksite. Um, and these policies have great value for people who don't have good health because they're guaranteed underwritten in the worksite. So great products to have. And, um, and they're also especially good for the younger population who needs life insurance.
And, and once they reach 70, the, the, uh, the death benefit decreases to about 30%, but they kept to keep the long-term care benefit. Now there's no inflation on these policies and the older you get, the more competitive a traditional policy would be. And, and hybrid policies would be to these types of policies.
So I always say, whenever you're in a worksite, you got offered a product, make sure you do a comparison, uh, with the general marketplace to make sure that you're making the right decision. Right. Okay. Great. Uh, and, and I'm just thinking at high level, we didn't touch on it yet, but, uh, what does it, you know, what are the requirements to, to qualify for a long -term care, uh, claim? Okay, good. So traditional policies are the most strictly underwritten.
And so the, basically insurance companies all across the board are generally looking for stability. So, um, you know, they don't worry about high blood pressure as long as it's stable and you're managing your meds. They don't like meds going up and down. They don't like new diagnoses. Um, they want to ensure things that they understand. So, uh, COVID for example, is a scary thing to insurance companies.
So when people have, uh, uh, you know, long COVID, uh, it's very difficult to, and actually I'm working with that right now. I have two companies that will insure long COVID, right? That's it because they just don't know enough about it and makes them nervous. Maybe 10 years from now, they'll feel more comfortable. Lyme disease. Another one is another one that that's really tough. You have long Lyme, uh, with all those extra symptoms, very difficult to get underwritten.
The good news is that we do have products now that have simplified and even guaranteed underwriting so that everybody has an opportunity for something. It's just a question of, of what and how much. Yeah, that's great. And, and what about, uh, you know, as, as you age, like what would qualify you for, for getting that coverage? Oh, I see. That was, that was another question I had. So I got it back. Yeah. I was thinking about qualified from underwriting and qualified for claim.
So, um, all the longterm care policies are the same, which is when you need help in two out of six daily living skills. So those two out of six are bathing, dressing, toileting, continence, transferring, which means like moving from a bed to a chair, um, or, uh, uh, feeding oneself. And that's from the table to your mouth. It's not preparing food.
So it's typically when you have tremors like Parkinson's or if you're on a feeding tube, that that would go into play or a cognitive impairment, uh, such that you need substantial supervision. So it's not when you need somebody organizing your schedule, um, it's, or can't drive it's when you don't want to leave someone alone in the house. Cause you don't know what they're going to do, right? They could leave the stove on.
Um, you don't know if they're going to shower and if they shower, if they're just going to put their clothes back on, um, you know, those types of things. Now, while it seems like those are very high bars and they are high bars, 30 % of people will use their longterm care policies, even with a 90 day elimination period. And 50% of people will use their policies with a zero day elimination period. So still very, very high utilization of longterm care.
And here's the catch 22, the longer you live, the greater the risk of dementia. Sure. So it's the catch 22, you know, you're healthy, you're feeling good. You feel like, you know, why would I ever need longterm care? I am so healthy. I do everything right. But unfortunately that brings you into very old age and very old age itself is what often brings people into claim.
Linda, one of the objections that we traditionally hear from people who were talking about the likelihood of a longterm care policy being helpful to their plans and to reach their goals is the premiums. It's not a steady premium, right? So you're not saying your premium is $3 ,000 a year. The premium is not fixed for most, if most, if not all policies, is that correct? And there was a period where there was some premium increases that were maybe higher than people had thought.
So there are policies that do have guaranteed premiums. So all of the hybrid policies are guaranteed premiums. And it's important to understand what caused those rate increases. Those earlier policies were grossly underpriced. I have one of those older policies. And if I get a 400% rate increase over my lifetime, it's still a good deal. I mean, that's how significantly underpriced those early policies were.
And it was, and so it's actually important that those increases take place so that the companies will be able to be there to be able to pay out those claims when people go into claim. And what I try to help people understand when they do get rate increases is to not look at the absolute dollar amount, but look at the relative value, right? And they were so smart to have purchased it when they did. And even if they have to lower their values a little bit, the cost benefit of these are incredible.
And we used to cover the total cost of care. I mean, you know, with, you know, $200 a day, 5% compound inflation and unlimited benefits. I mean, crazy, right? You know, so now we're doing, you know, we look at, I try to have at least four hours of home care covered. So if somebody says, you know, I expect to live till, you know, I would go into claim about 85. Some might say 80, some might say 90.
We pick an age, we do the projections, and we say, we'd want to know that you could cover at least four hours of home care. Why? Because this makes it easy for everybody. So when you first need care, you bring in that first four hours, because if you don't have long-term care insurance, what happens is you need one hour, one and a half hours of care. And then you find out that you have to spend $160 for, you know, that one and a half. And then families say, well, we'll just do it ourselves.
And that is the beginning to the end, right? It's just overwhelming to families. So to have that four hours covered, magical. And that four hours isn't just for home care. It's for when you visit your children or visit friends. You can stay at a friend's house and bring your caregiver, so to speak, with you. So you're never a burden to anyone that you're visiting. You can go to weddings, you can go to, you know, graduations, and you bring your caregiver, you know, once again.
So this is, you know, people think about that once you need care, it's all over. It's not true. I travel with my parents all the time. And, you know, when we go to hotels, we have an aid, we call up the individual home care agencies in the different states that we visit, and have a caregiver come into the hotel and provide the care.
And, you know, then you don't mind doing little things like a little helping with the toileting or going back to sleep because that major care in the morning is taken care of. So four hours of care is where I start. It's typically about half the cost of assisted living. So it makes sense as a good starting point. And then if we have to go a little lower, we'd do like three quarters of the cost of care because most people would have paid for that one hour anyways.
So at least the other three hours are there to make it easy to accept that full four hours of benefit. This certainly isn't a financial issue, but I bring it up because it's my mom. She had home care for actually a billion back when she retired, she was a home health agent as a second as a post retirement job. So she did the work. And then later in life, when she was around 90, she needed home care.
But the reason that she would tell us that she needed home care is she needed help and she didn't want her family providing her the type of help that she needed. Absolutely. You know, I don't want you to give me a bath, son. Right. And, you know, I don't want I would just want some helper, some companion to help me do the work. So it's more this this this issue is more than a financial issue.
It's also, from my perspective, a quality of life to have the resources or the insurance that you can live a dignified life and not be that burden to I hate to use the word burden because a lot of people don't think of that, but be that need for the family to have to step in and do things that just, you know, better done by someone who's trained and someone who has the temperament and experience to do it.
Yeah. And I think the other thing is that when you have a long term care policy, you're setting a direction to your children, right? You're telling them I've already prepaid for my caregiving. I do not want you I never intended for you to care for me. Here's the plan. So it's all set up for them.
I have a gentleman who has like over thirty five million and he bought a long term care policy for himself and his wife because he wanted twenty four hour home care and he didn't want the family to have to think about what liquidate what to sell. He wanted to make it easy. And so, you know, people can spend, you know, you know, ninety thousand dollars a year on long term care if they have the money because it is value.
So, you know, they just the more you have, the more you can spend, because when you have the money, it's a want and not a need. Right. So he wanted to make it easy on his children. He knew he could make it easy on his children. And so he's making it easy on his children. And oftentimes when people are in those higher wealth categories, they often can take more tax deductions.
They may own businesses and they can take tax deductions on the premiums and the benefits are still tax free, regardless of whether or not you take the premiums as deductions. So we often talk to our clients when they're talking about legacy planning.
We talk about a variety of subjects, whether it's state planning or long term care planning that, you know, although it's difficult to think about these topics as you get older, it's actually a gift that you're giving to your family to resolve these things and resolve these questions, resolve these care issues so that you're if the time comes, you're not having to have them rush around and have the stress and potential strife avoidance as well. So Linda, you're a great guest.
Lots of information there. Can you give our listeners a website or a way if they want to follow up with you for questions, how they can reach out to you? Yeah. So my website is longlifeplanning.com and you can also email me at linda at longlifeplanning .com. Great. We'll put both of those in the show notes. So if you're listening and you didn't catch that, just open up the show notes and you'll see how to reach out to Linda. Linda, thank you for your time. Thanks for the work that you do.
And Russ, thanks for co-hosting with me. Of course. Please tune in next week when we'll continue on with various financial planning topics. Until then, keep striving for something more. Thank you for listening to Something More with Chris Boyd. Call us for help, whether it's for financial planning or portfolio management, insurance concerns, or those quality of life issues that make the money matters matter. Whatever's on your mind, visit us at somethingmorewithchrisboyd
.com or call us toll free at 866 -771-8901, or send us your questions to amr-info at wealthenhancement.com. You're listening to Something More with Chris Boyd Financial Talk Show. Wealth Enhancement Advisory Services and Jay Christopher Boyd provide investment advice on an individual basis to clients only. Proper advice depends on a complete analysis of all facts and circumstances.
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