Planning for Long Term Care - Childfree Wealth Podcast Ep. 24

The Childfree Wealth Podcast, hosted by Bri Conn and Dr. Jay Zigmont, PhD, CFP®, is a financial and lifestyle podcast that explores the unique perspectives and concerns of childfree individuals and couples. In this episode, Bri & Dr. Jay delve into the topic of Long Term Care (LTC), discussing when to start thinking about it, what to do about it, the different options available, and the cost of long term care.

As people age, the likelihood of needing long term care increases. Long term care can refer to a range of services and support. However, it can be costly, and without proper planning, it can deplete one's retirement savings and other assets. This episode is ideal for anyone who wants to learn more about planning for their future.


Resources:

Long Term Care Article: https://childfreewealth.com/blog/long-term-care-childfree

Long Term Care Course: https://childfreewealth.com/course/long-term-care   

Get a Long Term Care Insurance Quote: https://llis.com/allis/quote/long-term-care

*Childfree Wealth is not affiliated with LLiS and does not receive any sort of compensation or commission for any insurance purchased through the link above.


Be sure to join the conversation by emailing us at [email protected], following Childfree Wealth on social media!


Instagram: https://www.instagram.com/childfreewealth/

Facebook: https://www.facebook.com/ChildfreeWealth

Twitter: https://twitter.com/childfreewealth

LinkedIn: https://www.linkedin.com/company/childfree-wealth/


Disclaimer: This podcast is for educational & entertainment purposes. Please consult your advisor before implementing any ideas heard on this podcast.

Transcript

Bri

So the question is always, what are you going to do? Who are you going to rely on when you're older to take care of you? You tell us a bit about that.


Dr. Jay

Hi. I hate this question. So, yeah, yeah. You get, like, people like. All right. Well, if you have kids, who's going to take care of you? The reason I hate this question is that implies that they're counting on somebody to take care of them, meaning their kids. You know, it's funny, they call it the sandwich generation.


People take care of their kids and together parents same time where the open faced sandwich is taking care of our parents. So that question implies, hey, I'm counting on my kids to take care of me, which, by the way, the data is not back up and that we have to figure it out. So let me throw the numbers to kind of just put this in place.


The U.S. Censusdid a study looking at adults over 55, and they found that in childless adults, 2.5% got any support from their family financially. So that's like nothing. So that questions that they also found in the same group they that get parents 35 and older 1.5% got any support from their family. They're going to support them without kids.


What do you think of that?


Bri

It's not surprising, honestly. I think because when you have kids, everybody expects your kids to take care of the parents. And, you know, if you were a really childfree person and you've got like nieces and nephews or different things like that, they tend to be sometimes just kind of want to be like, oh, let me help you. And kind of just more willing to help because there's a feeling of they're not going to get help otherwise.


Dr. Jay

I mean, the bottom line is, it doesn't matter who you are, you're not going to get help these. And and I had somebody I was working on a podcast and they said, well, help means more than just finance. Yeah. Okay. But, you know, I worked as a paramedic for years. And if you look at people in nursing homes and see how often their families visit them, it's sad. That’s… it’s just that it's sad.


There's no nothing around it. So, okay, fine. Let's ignore the question and just say my answer to it is my money's going to take care of me. I'm going to pay somebody. They care me. And they go, well, but, but that's, you know, transactional. Yeah. Well, what do you think it is that the kids don't care and they want the inheritance?


No, I shouldn't say that one. But the bottom line is you have to have a plan. So here's two parts it. The first part is you have that paperwork that says, what do you want done? So this is your wills, living wills, power of attorneys. We'll do a whole separate episode on that. But the bottom line is, you need to tell the state in health care who's making decisions for you.


Yeah. So they'll talk about it as a next of kin makes decisions. Which of your childfree? Not so much. So you need to have it in writing what your wishes are. And the question is at what age? And the answer is now. So, Bri, you have your paperwork in place. Will living, will power of attorney.


Bri

It's all ready I just need to go sign it.


Dr. Jay

Then we'll check back with you to make sure it gets done. I will say you're setting a good example, Bri. You’re 25, getting the paperwork done. That matters. So you want to make sure you get the paperwork done. You got to find somebody you trust to do it. If you don't have somebody you trust, you can actually pay a professional trustee or someone to do the medical decision for you.


Gives a little bit a little bit harder to find depending on the state and some of the other day and she's a what's called a solo ager. Solo agers are people who don't have kids and are aging and they're on their single. I also heard it called a soloist. I like that term. You know, I'm a soloist, but so she's a soloist.


And she goes, “Well, but I've seen too many movies. I can't trust somebody financially to make decisions for me.” She's right. The statistics, though, say your friends are more likely to take your money than someone that's a fiduciary and required by law to do it. So who's making the decision for you?


Bri

It is my wife as the first one on my mom's the second one.


Dr. Jay

We can have a separate discussion. Your mom's older than you are, so that may not work for as long as possible. But you're young enough. That'll work.


Bri

For now. And for now. I does. And I know, like, when the time comes, I'll have to change things.


Dr. Jay

But for now, the bottom line is you need somebody and you need to keep a copy of that paperwork on you electronically, at least. You also want to make sure the medical paperwork is valid on your medical record. So you have that. Keep in mind, it can be a little hard for people to find that paperwork if you don't have it there.


So the people that are making decisions, you do have a copy. The one that's a nightmare. Just think about this for your parents is, oh, I have a will, but it's in a safe deposit box. Well, after you die, I can't get access to the safe deposit box to get the will so it says I can have access. Like states have an easier way to do that, but like literally have to drill out the safe and go to court and do all that tonight.


So make sure they all have the paperwork. Did did you give a copy of the paperwork to everybody, Bri, or you haven’t signed it yet, but you're going to?


Bri

Yeah, everybody's getting a copy. I told my mom and she goes, Oh, okay.


Dr. Jay

You know, and then it's a good opportunity to have a discussion with your mom and say, Oh, yeah, great, let me have a copy of yours. So when it comes to actually paying for long term care, when I went out and did research for my book on this, quite a few people, I asked questions, you know, what are you going to do? How do you do it?


And in a surprising number said they were looking at the opt out. The opt out for of a better way to say is euthanasia. You know this is the way I'm going to Oregon or Switzerland to the suicide pods when it's my time. If that's the way you believe, that's okay. That works by us.


Laws are an issue, but let's get past the legal fees if that's your long term care plan. The hard part is if you have any type of mental issue, you know, cognitive decline, dementia, Alzheimer's, getting you out of the country to Switzerland is nearly impossible. I worked with this with one of my colleagues because he had a client who had Alzheimer's history in her family very heavily.


And her rule was, if I ever can't, you know, do my daily functions, I would like to go to Switzerland. And the problem is, once you get into the healthcare system, for somebody to sign you out against medical advice and take you to another country, yeah, there's no legal way to do that. So you have to be aware that also if you are going to go on the opt out path, it's really hard to change your mind.


Like it's just kind of like the reality check is you get to 80 and you're like, Oh, you know what? I don't like this option. I wish I saved for long term care. No. Also, once it's done, it's not. So you need to have a… you need to know 100%. That's the path you're on. Well, what do you think about the opt out option?


Bri

I've heard about this before and it always makes me really sad. And I know it's obviously not my place to say for other people what they choose to do, but it is… In my like inner core, it makes me very sad and just kind of makes the rest of my day sad too, honestly.


Dr. Jay

Great. I've already made Bri sad, by the way, if anyone listening, this is not a cheery topic we're talking about today, okay? Like what you're doing when you're old and who's taking care of you is something you have to do, not something here like, I want to talk about that today. You know, I've had this conversation with people that like, yeah, you just depress me.


And I'm like, I'm sorry. The facts are the facts. I think we could have a separate political debate on the opt out and all that. I'm not making any judgment on that. I'm just saying, if it's your financial plan, you need to be 100% on it and you need to make the decision way before you can't make it.


The problem is, you know what happens if you have a stroke in your mid seventies and I can't make decisions. That's where it gets iffy. So the other option is long term care. And by the way, the reason the opt out is so popular is because the US, we do a terrible job of caring for our elderly. Yeah, they talk about Medicaid homes and nursing facilities and I worked as a medic.


You would know these facilities because when you walk through your feet, stick to the ground because they're that disgusting, by the way, that's usually urine that you're, you know, sticking to it like smells disgusting. There are some good Medicaid facilities, but very, very rare because the government is paying them pennies on the dollar versus what the care costs.


So relying on Medicaid is an option if you're not going have any money and just some generic numbers, if you have about a half million dollars in net worth, which remember, net worth is everything you own minus everything you owe. If you have less than a half million dollars net worth, you're probably going to end up in Medicaid because you don't have enough money to care for yourself.


If you have more than $3 million, you'll have enough money just to pay for it out of pocket. So somewhere in the middle is where long term care insurance comes in. And we'll come back to that. But you have to choose, am I going to pay for myself or am I going to rely on Medicaid? Now they'll go, “Well, I'll hide my money from Medicaid.”


Yeah, that doesn't really work. There's a five year look back and built out the boomers passing on money to the next generation. The answer is no. They're going to spend it on their own long term care or health care. I mean, you know, huge numbers. You know, let me give you an idea. So in the U.S. right now, 2023, 2022 numbers is the national average for a skilled nurse is $108,000 a year.


 $108,000 on a year. I can live on a cruise ship year round for less than that. Yeah, and that's not an exaggeration. I actually can.


Bri

And that's a lot of money to be spending each year to take care of yourself when you don't have a job anymore.


Dr. Jay

Yep. And it's an average, so. And it ranges. So give me an idea of range. The lowest for a private room. Missouri is about just shy of $6,000 a month. The highest is actually Alaska at $31,000 a month.


Bri

Wow! That is high.


Dr. Jay

That is crazy right now, by the way, there's different levels, you know, in-home and an assisted living, skilled nursing. There's levels which have a huge amount of money, and that's in today's dollars. Now, on average, nursing home care is running at about 5% inflation. Now, this year, this year, we had a bit more inflation, but I did Bri's number.


So let's say Bri decides to go into a nursing home at 80, which is kind of like this kind of in your 80’s it’s what happens. It will be $1.5 million per year for Bri.


Bri

It's that's a lot. That's a big number.


Dr. Jay

And women on average will do 3.7 years in long term care, men do 2.2. We have no data on trans or any other genders. We only have men & women. I apologize. That's all we have data for. But 3.7 years times $1.5 million. And Bri's like, that's all my money.


Bri

Yeah, yeah, that's right. So what do you recommend for people my age? And then once we start thinking about long term care insurance, because right now I do not have money to cover that.


Dr. Jay

So I in general, there's only one place I'll quote you in your thirties when you have 30, can't get a quote before that. So that's one of those things. That thing about my general rule is I want to have a solution for long term care in your middle forties. The numbers tend to work well because what happens is you pay for long term care in your twenties, you're paying for too many years knowing you're not going to use it.


Bri

Okay.


Dr. Jay

In your forties is where we want to be doing this, but I got people in the childfree [community] in their thirties freaking out about it and I'm like, fine, just get an insurance policy so you stop freaking out about it.


Bri

Yeah.


Dr. Jay

Sounds like w yeah.


Bri

That's me.


Dr. Jay

I will wait till we are 30, but we will get you a policy at that point. And these are all rough numbers and I just want you to have a solution for long term care. Your solution in your thirties or twenties can be I'm going to put something in place in my forties. You know, I have a plan, I have a structure, but that means you hit 45 and you haven't done it.


Get your butt in gear. And if you're in your 50s to 60s, you’ve got to get something done immediately because you never know when you're gonna need it. The problem is, you know what? Put money aside for long term care. That is an option. But we need to do the math on it because it depends on when you go on a long term care and for how long.


Bri

Yeah.


Dr. Jay

And like my wife and I, we have a seven year split in age. She's younger than me by seven years and statistically women outlast men, so she’s probably… And I hope she’s not listening because she doesn’t like talking about this one. She’s probably got about ten years without me. That's just the math. So if I spend all my money on long term care and we do everything together, but let's just call it my money for this moment.


If I spent all my money on long term care, she's got nothing after I'm gone.


Bri

Yeah, that's a problem.


Dr. Jay

Bri’s over there freaking out. Okay, so everybody's not watching the video and not seeing Bri… Like she's over there. Like, hiding this. Like, this topic sucks. Is that fair, Bri?


Bri

Yeah, and I was the one who picked this to talk about today.


Dr. Jay

Yeah, yeah. So it's Bri’s fault. Alright, so let's talk about some solutions. Some states, Washington being the lead, are starting to offer state long term care insurance. By the way, everybody, all the other states like Pennsylvania, New York, California, and a couple other things, Wisconsin, watch your states. They're trying to model something off of Washington. What Washington did was they said, all right, we're going to tax your income, 0.58% for life.


You have to do ten years minimum. And then we will give you a long term care benefit. A long term care benefit in Washington is $100 a day for one year. The average cost is more like $250 a day for 3.7 years. There's a math problem.


Bri

Yep.


Dr. Jay

And you're paying, you know, half a percent, a little more that of your income for life. So what Washington did was they said, hey, if you have your own policy, you can opt out of this. It actually made the math quite different. And what happened was so many people tried to get long term care insurance that the the the insurance providers are like, yep, now I've run out.


I can't take anybody more. We’ve got to stop taking applications. So if your state is working on this, you may need to get a quote for a policy like immediately. New York was working on it for a while and we're here in mid 2023 and if they've, you know, since then they may have done it. But there was their rule was going to be that you have to have the insurance in place a year before the law starts.


And I'm like, how are we supposed to plan a year ahead of a potential law? Like, I don’t know, but the reason they're doing that is it helps Medicaid. So they're just trying to do it because it helps the state. They're taking that money to pay for Medicaid, not really to pay for your long term care. Do not think that a state long term care program is paying for you.


Just that's it. Now, if you have what's called what I consider like an all the long term care policy about it, same goes for your parents. So you see these old programs. I see them like for CalPERS, for the state I've seen through John Hancock generous you others with their old policies. Chances are you probably have better coverage than you can buy now.


So here's kind of one of those like take them home with things. Ask your parents if they have a long term care policy. If they do, that policy gets paid before they pay the electricity bill. And I'm not exaggerating at all, because if they miss it by 30 days, oops, and that policy, they will cancel. So if you have one of those old policies like hold on to that for dear life and make sure you don't lose new policies, new policies, the ones I use and we're going to include a link in here, it actually has where you can get a quote, I do not sell any insurance advice.


All the financial planner. If I recommend things, it's just because I think it fits. Yeah, the policies I like are standalone long term care policies. Now you'll see some people selling a hybrid, which is life insurance and long term care. We have a separate episode to talk about life insurance, but chances are if you are childfree you don't need life insurance, so you're buying something you don't need.


So there's two major carriers that I use for that long term care policies. You can get quotes or get through, you know, a couple of things. One, average daily benefit. So the way these policies work, as you say, oh, I need $250 of care coverage. $250 by the way is just kind of good place to start. If you're an expensive state, you may need a bit more. If you’re in a cheaper state, a little less.


And they will cover either in-home assisted living or skilled nursing. Because I like you, but I'd rather stay in my house. Is that what you would operate?


Bri

Yeah, I prefer to stay in my house. I have my… If and when the time comes to build a house, I have it in my mind of how I want it to be so I can continue to age in place.


Dr. Jay

It, by the way, it's also why in the U.S., single level houses are appreciating more than double level houses. Because as people age they don’t want stairs.


Bri

Yeah.


Dr. Jay

So it'll cover in-home, assisted living, or skilled nursing. Those are… that's great. You'll also see on top of that $250 a day I'll say like what compound interest rider you want is you 3%. Now by the way, 3% is less and what it's actually growing at 5%. But the 5% rate is so expensive that I can't afford it. For most people, it's a 3% compound interest.


The if you're in a couple, you get a lower rate than being single because they assume the couple will take care of each other for a while, which is a decent assumption and you maybe actually share years together. So like, you know, me and my wife, we can have a policy where we each have three years, but we can share the years to make it work out.


That works at the highest rate. I apologize, is for single women because 3.7 years and you also when you take care of it it just isn't. And by the way, single women are the ones that really should have insurance policy. So like, that's rough. In the link we have, we actually have some simple policies and rates at 40, 50 different ages.


You can look at. Those are just samples. Those are not real. We pulled policies, but they're not for you personally. So you go out and get this policy, you apply for it. Now, Bri, let me ask you some questions is let's let's do your policy. Do either your parents have dementia or Alzheimer's?


Bri

No


Dr. Jay

Okay. If one of them has dementia or Alzheimer's, your rates going up probably 50% ish. If both of them do, you cannot get quoted. They won't even give you a quote.


Bri

And what happens then when you can't get a quote or even get long term care insurance?


Dr. Jay

You're screwed. You now you might be able to do one of those life insurance slash long term care hybrids, but even those are going to be hard. Your parents health has more of an impact on long term care prices than your own. Unless you like having a cancer diagnosis or like you are in need of care. And if you are in need of care, you just can't either.


Bri

Yeah.


Dr. Jay

The reality check for insurance is if you need the insurance, you cannot get it.


Bri

Yeah, because they don’t want to pay.


Dr. Jay

To. Yeah. You have to pay for it before you need it. Yeah. So that, by the way, that's why I say the mid-forties is, that's when your parents are still healthy enough. What happens is as soon as they get that checkbox for dementia or Alzheimer's, that game over, your rates just went up or you can't get it at all.


You know, I've had some people come to me, so like my family, my father's side, my grandfather, his brothers are all in Alzheimer's. They were brought in my house is if I can't tie my own shoes, take me out back and shoot me. Now, my wife doesn't like that rule, but that's okay. But that's also why I wear slip on shoes rather than with laces?


Because, you know, just in case. You think I'm joking. Okay, I wear some unfashionable shoes.


Bri

No, I've seen your picture on Instagram where your shoes are.


Dr. Jay

Oh, wow. Call me now. Anyway, man, I came and get the right shoes now. So what happens is you have to have an answer well before you need it for insurance policies. There's actually a policy I like that offers something called ten pay or single pay, and you can actually just pay for ten years and then never have to pay again or pay it once and be done.


Those are nice. The problem is they're expensive.


Bri

Yeah.


Dr. Jay

Stupidly expensive. Let me use numbers. So let me see here. So for a single female, for your benefit period, $250 a day. No, that was $240 a day, sorry, 3%. It was it's about five $45,000 a year at age 40. When you get to age 50, it's $5,000 to $6,000 a year. So it goes up each year. So we've come a huge chunk of money and what happens is the older you get, the less likely you're going to be approved.


So you're playing a game. But that's a policy for a 30 year old. It's just about $5,000 a year, too. So you're paying for ten more years and you're not saving money. That's why that mid-forties is about. Now interestingly enough, I'll give an example. So women four year period, 40 years old, $5,000, single male, three year period 40 is $2,500.


Huge differences in price.


Bri

Yeah, that's a big difference.


Dr. Jay

And a couple saves about a thousand bucks if they're together per year. Now, by the way, those rates can go up if they get approval from the states, which they've had, that if you have options through work to get long term care, you might have a better price. The Fed has a long term care program for employees there.


It's on a… They’re not taking any applications for the next year and a half or two years, something like that. When it comes back, hopefully the rates are where they’ve been so that save a bit of money, but you're going to have to put up some money now if you're not going to you know, deny overwhelming with that insurance have you freaking out yeah.


Bri

Yeah I'm thinking man 30 can't come soon enough so I can get that insurance in place.


Dr. Jay

I will tell you. And in the article, I actually go through my my numbers and my wife's numbers. We decided not to have insurance. We decide to pay for it out of retirement. We've set aside money and it's scheduled and we say, okay, this is just for that a grows to that that's where it is. It prob would be would be cheaper for me to do long term care insurance.


But the the gamble you're taking there is whether or not you need it. If you don't need it, you pay for insurance, you don't need it. Now, I'd rather have insurance or money set aside then end up in a medicaid home. So you want to figure out an answer. It's not that one answer is perfect. It's each person needs their own answer.


And it's part of if you're going to embrace the die with zero approach where you you know, you don't want to have a whole bunch of money to pass on, which is most childfree folks, the way we protect yourself is by having some plan for long term care. Yeah we’ve already talked about Bri’s numbers which is $1.5 million a year when she needs to go in it and it's one of those yet you have to have an answer for this is also you know there's some of the topics we talk about here that I'm like, you can do it alone.


This is one of those you want a professional. So, you know, I'm a Certified Financial Planner, also Childfree Wealth Specialist. Childhood Wealth, the company as a whole deals with this a lot. A lot of my colleagues that are CFP don't do a lot of work with long term care because people don't want to talk about it with the childfree, childless population.


I mean, 95% of the people I talk to long term care comes up as a question. So it's just one of those we deal with regularly and it's going to depend on your face situation. Yeah, I can take a look and go, okay, cool. You're not going to be able to afford it. You can't afford insurance or you can pay for yourself.


Start doing the math or work it through. The other part of it is it just gets rid of the fear. Yeah. So there's a lot of fear and unknown around who's going to take care of me when I'm old or how many doing this or that. It can be overwhelming. The answer is you ask a professional and you work on a plan and it can disappear.


Bri can freak out now, but I'm like, when you get older, worry about it where you know, I have people in there for me or they reach out to me in their fifties like I'm too late. I'm like, No, we can still do it. As long as your parents are healthy and you're healthy, we can figure out a plan, but it's overwhelming.


What do you think?


Bri

Yeah, I think that definitely is overwhelming. And especially if you see different things through parents and it can be worrisome if you don't have it in place.


Dr. Jay

Yeah. And let me give a little spin on this for your parents. So we'll have a separate episode on elder planning, but you need a plan for your long term care for your parents. It may be cheaper for you to buy a long term care insurance policy on them than to pay for. Yeah, you want to think about how are they going to pay for it?


I've also had people where, you know, my parents have a long term care policy. You just pay the policy yourself that way. They never stop paying for sleep in the hospital, then they stop paying it. Then they think long term care is good.


Bri

Yeah.


Dr. Jay

So you may actually want to with their permission, of course, you know, take something out for your parents.


Bri

That makes sense.


Dr. Jay

So, Bri, you picked this topic. What questions do you have or any I mean, I know we got a little depressing quick like, but yeah.


Bri

Yeah. Dr. Jay’s going to have me upset for rest of the day.


Dr. Jay

Now if I was not trying to make you upset, I'm just trying to. This is a reality check.


Bri

Yeah, it's a good reality check. And I think it's something that a lot of people don't consider until all of a sudden, “Oh, crap, you got to do something.”


Dr. Jay

Yeah. And if anyone ever asks you who's going to take care when you're older, the answer is my money will and I have a plan.


Bri

It's the perfect answer.