Tag Archives: Long Term Care Insurance

5 Financial Decisions That Sound Smart but Are Really Dumb

By U.S. News

Vector illustration ? Empty head and money brain.

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Alashi, Getty Images

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Norma Yaeger, 83, of Encino, Calif., thought she was making a smart financial decision last fall, when, after pulling into a Ralph’s supermarket, she impulsively hired two men to fix her car.

“Two nice gentlemen came over to me and look at my fender, which was badly scratched. They said that they had a compound that will remove the scratches and restore the paint,” Yaeger says.
They would fix it, for just $50.

Yaeger isn’t a rube — she was, in fact, the first female stockbroker to work at the New York Stock Exchange (and recently wrote an autobiography, “Breaking Down the Walls”). She also served as president of two stock brokerage firms. The men who approached her seemed honest, and Yaeger was self-conscious about her fender. She paid the $50, a snap decision that seemed perfectly reasonable.

Instead — and you knew this was coming — when she returned from grocery shopping, her car fender hadn’t improved. In fact, it looked far worse. Yaeger drove to a mechanic and was told that it would take several days and $1,000 to fix her car.”The worst part was that I had to tell my husband about this embarrassing story,” Yaeger says.

[See: 12 Money Mistakes Almost Everyone Makes.]

Most people have made a financial mistake that seemed sensible at the time, but in hindsight turned out to be pretty stupid. With that in mind, here are some thoughts from a slew of personal finance experts on five financial decisions that sound smart but are likely a waste of money.

The Mistake: Buying something because it is interest-free for awhile.

Why It Can Seem Smart. It’s tempting to buy something with a zero-interest window, such as a “90-day, same-as-cash” offer, in which you’re charged no interest if you pay for the product within 90 days.

Why It May Be Stupid. Many people don’t end up saving the money or putting it aside when they get it, “and they end up paying accumulated interest at a high rate plus compounding interest on the balance going forward,” says Kelley Long, a Chicago-based certified public accountant.

She says consumers make such mistakes when they open a store credit card to get a 15 percent discount, for example, but then carry a 22 percent balance. Paying for things with a rewards credit card to earn frequent flier miles can also be a mistake if you’re not paying off the card in full each month. “The interest expenses end up far outweighing the price of an airline ticket,” Long says.

The Mistake: Buying long-term care insurance when you’re broke.

Why It Can Seem Smart. Who wouldn’t want long-term care insurance? It helps pay for basic activities that people need to do on a daily basis, …read more

Source: FULL ARTICLE at DailyFinance

Why Long-Term-Care Insurance Premiums Are Soaring

By Dan Caplinger

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Alamy

With nearly 70 percent of Americans aged 65 or older expected to need long-term medical care at some point, millions of Americans have turned to long-term-care insurance to help them cover its high costs.

But rate hikes on long-term-care premiums are coming, meaning many of those who prudently planned for their long-term-care needs may not be able to afford to keep their coverage.

The largest public pension fund in the country, the California Public Employees’ Pension Fund, runs one of the biggest long-term-care benefit programs in the country. But CalPERS now expects it will need to raise premiums by 85 percent within the next two years. Private insurance companies are seeing many of the same issues, with CNA Financial (CNA) and Manulife Financial (MFC) both having sought or gotten approval from the California Insurance Department to raise their long-term-care premiums by 40 percent to 45 percent.

What’s Behind the Increases?

Insurance companies have faced a triple-whammy that has hit them especially hard in recent years.

Low interest rates and weak investment returns have hampered their ability to build up the loss reserves they need in order to pay out claims. And with long-term-care insurance often extending for decades, the assumptions that insurance companies make about what returns they’ll be able to earn are even more important than on other types of policies, such as homeowners’ insurance.

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At the same time, health-care costs have continued to rise. The same factors that are making it problematic for the federal government to ensure Medicare’s continued stability are hitting long-term-care insurance providers. Private insurers face the added handicap of having a smaller pool of available revenue and financial reserves to draw from.

Finally, insurance companies made poor assumptions about policyholder behavior, overestimating the number of people who would let their insurance policies lapse over the years. Ironically, that suggests that insurance companies did their jobs too well, convincing their customers of just how important long-term-care coverage is for their financial prospects in retirement.

Combine those three factors together, and it’s no wonder why insurance companies are feeling burned.

Several companies, including MetLife (MET) and Prudential (PRU), have decided simply to stop selling long-term-care policies. They have likely found the challenges of getting regulators to approve the big premium increases that would be necessary to make them economically viable outweigh the potential profits from offering the coverage.

Looking at Your Limited Options

The worst thing about the rate increases is that long-term-care policyholders are essentially stuck without good alternatives.

Given the low priority that most insurance companies have given to offering long-term-care insurance, it’s tough to shop around for better deals. If your health has gotten worse since you opened your policy, you may not even be able to get long-term-care coverage from …read more

Source: FULL ARTICLE at DailyFinance

Financial Advice for the Sandwich Generation

By Molly McCluskey

UPPER MARLBORO, MD- AUGUST 16: Daniel Sherrett, 28, who returned home to live with his mother, Marie, and older brother Mark, 31, after completing his bachelor's degree at the Culinary Institute of America, prepares dinner as part of his deal to live at home, on Tuesday, August 16, 2011.  (Photo by Michael Temchine/For The Washington Post via Getty Images)

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Michael Temchine/For The Washington Post via Getty Images Daniel Sherrett, 28, who returned home to live with his mother, Marie, and older brother Mark, 31, after completing his bachelor’s degree at the Culinary Institute of America, prepares dinner as part of his deal to live at home.

Between the growing number of adult children moving back in with their parents, and a growing population of senior citizens becoming financially dependent on their children, the Sandwich Generation can’t seem to catch a break.

Nearly half of all adults between the ages of 40-59 are giving financial support either to a parent over the age of 65 or to their offspring. Nearly one in seven adults are supporting both. So says a new study by Pew on the rising financial burdens of those adults — the generation that overlaps both the Baby Boomers and Generation X.

Multigenerational Impacts of Unemployment

The middle-aged Sandwich Generation has been hit especially hard by the recession and its aftermath. With unemployment still at 7.7 percent in February, and mass layoffs of nearly 135,000 in January alone, the long-term financial pressure is hitting those supporting multiple generations particularly hard.

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Older parents may face forced retirement, and its sudden impacts. Parents of teens may face impending college expenses. Grown children with children of their own may suddenly face their own unemployment and be forced to move back home.

Although older workers were more likely to have held onto their jobs during the recession than their less experienced counterparts, workers over 50 who were laid off during the recession are finding it difficult to find new work. Too young to retire, this age group was recently called “the new unemployable” by the Sloan Center on Aging and Work at Boston College.

Meanwhile, younger workers are less likely to be employed than they were just a few years ago, and those with jobs are earning lower wages, due in part to the competition from older, underemployed workers willing to work for less.

How to Navigate the New Terrain

Even though being financially sandwiched seems like being stuck in a vise that can only get tighter, with tax breaks and deductions for long-term care, retirement planning doesn’t have to be a pipe dream. If you find yourself in this situation, here’s some advice:

Don’t dip into savings: Sandwichers should avoid dipping into personal and retirement savings if possible. Instead, evaluate all options for both the care of parents and the well-being of children. Investigating long-term care insurance before it’s needed for aging parents, and knowing what expenses will have to be paid out-of-pocket might help make difficult decisions easier.

Explore all cost-savings options: Families with students heading off to college should explore less expensive options. …read more
Source: FULL ARTICLE at DailyFinance

Long-Term Care Insurance Should Be Part of Your Financial Plan

By Michele Lerner

Life Insurance - home care and nursing home coverage

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In the world of insurance products, long-term care insurance is a relative newcomer. It was introduced in the late 1970s, but in recent years, it has become a much more important element of retirement planning thanks to twin rises in health care costs and longevity. (Life expectancy in 1930 was just 59.7; in 2010 life expectancy for Americans was 78.7.)

Many people associate long-term care insurance with nursing homes, but it also pays for in-home care and assisted living facilities. According to the American Association for Long-Term Care Insurance, 50 percent of long-term care insurance benefits in 2011 went to pay for in-home care, 31 percent for nursing home care, and 19 percent for an assisted living facility.

How Long-Term Care Insurance Works

Each long-term care insurance policy is slightly different, but most benefits kick in based on a similar definition of “disability”: either you have severe cognitive impairment or you need help with at least two daily living activities. These activities include bathing, dressing, eating or using the bathroom.

In other words, you don’t just automatically receive the benefits when you think you could use some help or when you move into a retirement community. Policies are typically purchased with fixed daily benefits for a fixed period of time such as three years or five years.

Can You Cover These Costs Without It?

On an hourly, daily and monthly basis, the cost of the kinds of services covered by long-term care insurance really add up.

A 2012 MetLife Survey of Long-term Care Costs found:

  • The national average monthly base rate in an assisted living community cost $3,550 in 2012.
  • The national average daily rate for a private room in a nursing home cost $248; a semi-private room ran $222 per day.
  • The national average daily rate for adult day services was $70.
  • The national average for hourly rates for home health aides was $21.

While many people recognize the value of having insurance coverage to help pay for their care when they age, not everyone purchases it.

A 2012 Generational Research project by Financial Finesse showed that just 10 percent of people age 45 to 54 have purchased long-term care insurance, and only 16 percent of people age 55 to 64 have it.

Why are people forgoing coverage? It comes down to cost, according to the AARP.

How Much Does Coverage Cost?

Long-term care insurance can vary widely depending on your age at the time of purchase, the length and amount of coverage, and policy characteristics including whether your benefits are adjusted for inflation and the length of any waiting period before benefits are paid, among other things.

According to the American Association for Long-Term Care Insurance, the average annual premium for long-term care insurance in 2012 for a policy for a …read more
Source: FULL ARTICLE at DailyFinance