LTC
Reality check :
Long-term care ’ s impact on retirement
One of the services many financial advisors provide is the development of a retirement analysis . While this analysis provides no guarantees , it projects cash flow and assets spend-down into the future given a number of assumptions and will model how long your assets can sustain retirement .
Of course these models must utilize reasonable assumptions or they risk substantially misleading our clients . For example , if we assume during a 30 year retirement there will be no inflation , no taxes , and a 20 % annual return , one can imagine what a lovely picture the analysis would paint with virtually no basis in reality .
A couple that reaches age 65 has a 90 % chance that one or both of them will require some form of long-term care . How can a financial advisor prepare a retirement analysis for a couple that does not address a financial challenge that will affect 90 % of his clients ?
The need for long-term care
68 %: The probability that an individual over age 65 will become cognitively impaired or unable to complete at least two “ activities of daily living ” — including dressing , bathing , or eating — over his or her lifetime . That is a 68 % chance of needing Long-Term Care for a male over age 65 and a 68 % chance for a female over age 65 .
When each individual in the couple has a 68 % chance of needing long-term care , basic statistics will tell us there is a 46 % (. 68 X . 68 = . 4624 ) chance both the husband AND wife will need long-term care .
Since statistics show 68 % of individuals age 65 and over will need LTC and we have calculated 46 % of the time both members of the couple will need LTC , we can then determine there is a 22 % (. 68 - . 46 = . 22 ) risk only the husband and a 22 % chance that only the wife will need long-term care .
We know only 32 % of males and 32 % of females ( 100 % - 68 % = 32 %) over age 65 will not need long-term care at some point . Applying basic statistics this means only 10 % ( 32 % X 32 % = 10.24 %) of couples will not need Long-Term Care . 90 % of couples age 65 and older will require some form of long-term care .
Marie King Colbert , CFP ®, CLTC ®, Brokerage Manager at MRW Financial Brokerage , has over 13 years of experience in life insurance , annuity and long term care . Serving independent advisors with case design , sales support , and underwriting to meet their clients ’ goals .
Tom Vassallo has specialized in Long-Term Care Planning for over 30-years recruiting , training , and supporting over 10,000 independent insurance agents through various exclusive long-term care relationships . Tom speaks on longterm care at various local , regional , and national industry forms .
36 Perspectives Q3 2022