Why Boomer Retirement Strategies Should Include Long Term Care (LTC)

Medicaid costs have soared in the past 3 decades from 0.7% of GDP in 1975 to 2.1% in 2003 according to Howard Gleckman, author of a new report by Boston College’s Center for Retirement Research, “Medicaid and Long Term Care.” This growth has been caused by higher costs as well as rising numbers of beneficiaries, he says.

Both congress and the states are making Medicaid eligibility more restrictive and policy makers are looking for ways to shift the costs to individuals. A handful of states have created Partnership Plans to encourage more individual LTC policy ownership. Eventually, the premiums paid for LTC insurance could become a deductible expense.

Most clients of fee-only financial planners have gathered assets exceeding the Medicaid guidelines. They’re planning to control their own LTC destiny by self-funding or purchasing LTC insurance. This chart shows the LTC funding sources.

If your clients have spendable assets in excess of $3 million, they may be planning to fund their LTC costs themselves. But if they haven’t yet gathered that much in retirement cash, they should probably consider buying LTC insurance. And the younger they buy the better. Good health — with a plan that allows a policy to be paid up before retirement — makes sense. Long term care insurance enables your clients to protect their assets when their retirement income can’t handle the financial demand.