Insurance Companies Exiting the LTC business
Genworth, a major writer of long-term care insurance (LTC), recently announced they’d no longer offer LTC insurance through brokers and, instead, would only offer coverage ‘direct-to-consumer’. This is an effort to cut the enormous expenses of commissions paid to brokers and reflects declining demand for LTC products. Demand has fallen because premiums have risen significantly over the last decade or so. This continues a trend of companies exiting this business because of poor claims experience leaving only a handful of companies who still write LTC insurance. Those companies include Mass Mutual, New York Life and Northwestern Mutual.
Retirement Healthcare Costs Continue to Rise
So, it’s harder to find LTC insurance and the premiums continue to rise leaving Baby Boomers with fewer choices and solutions. All of this comes at a time when healthcare expenses for retirees continues to rise. Fidelity research indicates that an average retired couple age 65 may need approximately $280,000 saved, after tax, to cover healthcare expenses in retirement. Compare this to the median retirements total savings of $172,000 (Transamerica Center for Retirement Studies) and you can easily see the mismatch.
What should you do?
Have a plan. You’ll need to have a plan for dealing with these potential significant expenses. I can only think of 3 strategies, but you may think of others:
- Buy LTC insurance. It’s expensive but LTC premiums may be less expensive than coming ‘out-of-pocket’ for healthcare costs.
- Save enough money. Again, your target retirement healthcare savings account should be $280,000 or more. It’s a big number and only a few super-savers will be able to do this noting this is in addition to your savings for normal lifestyle retirement savings. That lifestyle savings target should be 8 to 10 times your ending annual salary.
- Your children become your caregivers. Most people don’t want to rely on children to support them during their old age, but for many, this will be the only option. Ask yourself, “Are my children willing and able to take care of me in my old age?”
Failing all of these options often results in a depletion of all assets and residing in a state-run nursing home…which is not a pretty picture. Don’t procrastinate, develop your plan now.