Lifetime Planner: Resources for Long Term Care and Setting the Special Expense Assumption

Scooterlam

Lifetime Planner:  Resources for Long Term Care Expenses and Setting the Special Expense Assumption

I put together a few resources for researching and estimating Long Term Care (LTC) expenses using the Special Expense assumption in Lifetime Planner (LTP).  Perhaps others will find these resources useful for their own plan.

A few things to think about....

Have you considered strategies to fund long term care?  

• LTC insurance premiums? 
• Self funding
• Medicaid after spend down? 
• Medicaid using an asset protection trust? 
• Funding from a home or other asset sale?
• Reverse mortgage?

Given your current thinking....are you reserving cash in your LTP for these types of care?

• home care?   
• assisted living?   
• nursing home care or,
• some continuum of the three?

And, for how long?   

• 6 months?
• 1 year?
• 2 years or more?   

The possibilities are mind numbing.   Like many planning assumptions, these are things you simply don't know if you'll need them or not and to what extent.  What we can do is look to studies, statistics and life lessons for some guidance and perhaps err on the side of being conservative.

Personally, I kicked that LTC "can" (in my plan) down the road until I saw first-hand the impact on family members and their family member caregivers and reflected those observations on our own situation.  So this year, LTC gets modelled in LTP, periodically reviewed and adjusted if necessary.  If I don't use it, it gets passed along.

Below are some resources to help come to some LTC starting point in your lifetime planner.  Of course, there are other factors to consider, more personal and less of a broad stroke than these resources provide.  Its a start....

WHAT IS LONG TERM CARE?

Very good introduction to long term care from HHS : 
https://acl.gov/ltc

WHAT TYPE OF CARE and HOW LONG MIGHT YOU NEED IT?

National statistics on type of care, length of care and percent of people who have needed that care.   
https://acl.gov/ltc/basic-needs/how-much-care-will-you-need   

HOW MUCH WILL THIS CARE COST?

National statistics on cost of care for different levels of care.     
https://acl.gov/ltc/costs-and-who-pays/costs-of-care 





Refining the national statistics a bit.....Here are some state and local statistics on cost of care for different levels of care.   A very good, interactive cost of care survey tool.
https://www.genworth.com/aging-and-you/finances/cost-of-care.html

ADDING LTC COSTS AS A "SPECIAL EXPENSE" IN LIFETIME PLANNER

Now the easier part....How much future cash to reserve, like any LTP assumption, is purely left to the user and their own situation.  The Special Expense assumption is designed for these kinds of one-time or multi-year expenses in mind.  Simply add a new Special Expense, enter your anticipated expense in today's dollars,  set when and for how many years to apply the expense and finally set the anticipated inflation rate. That's essentially it.  Of course you should inspect the plan summary tables for those years to ensure that your assumptions are represented as you expected in the cash flow model.

In my example, I'm starting simple: 

I reserved $100K @ 3% inflation rate, for both spouses, 2 years each spouse, for nursing home care, starting 2 years before the "end of plan".  

<Edit>
Note:  If you reduce / increase your life expectancy assumption you will also have to adjust this particular special expense, resetting it to the appropriate age.

What say you?  Helpful?

Scott0011

very nice review! So well supported.

Wonder how best to document existing LTC policy? I would like for quicken to serve as resource for any who must follow me. I’m leaning toward Asset with listing max coverage BUT excluding from all reports as not really cashout value.

Scooterlam

@Scott0011 Thanks, glad it is useful. I'll try to keep it updated.

Your proposed handling of the LTP insurance policy is how I configure my own insurance policies. Has been working find for many years.

Kathryn See

Really great information in this post! Thank you to all who conributed!