November Client Letter: Tackling Long-Term Care Needs
The need for long-term care is a reality that is best planned for.
Approximately half of people turning age 65 will require some type of paid long-term care in their lifetimes, according to Morningstar.
About 60% of us will need assistance with things like getting dressed, driving to appointments, or making meals, according to the Administration for Community Living (ACL), a division of the U.S. Department of Health and Human Services. Not all of these activities will require paid assistance.
Some of us may require home care, which would include those who need minimal assistance with health-related tasks. Others might benefit from adult daycare, which offers daytime supervision, including meals, recreational, and therapeutic activities. It occurs in a community setting.
How much care might you need? On average, women will need 3.7 years of care, and men will need an average of 2.2 years.
The ACL defines long-term care as “a range of services and supports you may need to meet your personal care needs. Most long-term care is not medical care, but rather assistance with the basic personal tasks of everyday life, sometimes called Activities of Daily Living (ADLs).”
The definition seems a bit on the dry side, so let’s take a more practical approach.
- Shopping for groceries or clothes
- Managing money
- Caring for pets
- Using the bathroom
- Taking medication
6 Steps to Long-Term Care Planning
Planning is critical, but many people are not sure what is covered by insurance, and others are often misinformed about what is covered by Medicare. Here are six steps to help you think—and begin planning for—your possible long-term care needs.
- Gauge the likelihood of needing care.
- Review potential costs.
- Assess available resources.
- Create a long-term care fund.
- If insurance is the answer, investigate whether a stand-alone or hybrid policy makes sense.
- If government-funded care is part of the solution, think through the ramifications.
Medicare and most health insurance plans, including Medicare Supplement Insurance (a Medigap policy), do not pay for long-term care.
What does Medicare cover?
- Medicare covers up to 100 days of nursing home care. For many, that may not be enough.
- Medicare can help with costs for skilled-home health or other skilled in-home services. What is skilled-home health? It is a wide range of health care services that can be provided in your home for an illness or injury. These might include monitoring a serious injury or illness, injections, patient and caregiver education, and nutrition therapy. The goal is to help you recover, regain independence, become more self-sufficient, or slow any decline in health.
- Generally speaking, long-term care services by Medicare are provided for a short period of time.
Medicare does not pay for non-skilled assistance with ADLs, which make up most long-term care services.
If needed, you will have to pay for long-term care services that are not covered by a public or private insurance program.
What about Medicaid? Medicaid is available to those who meet strict income and asset guidelines. Unlike Medicare, which is health insurance, Medicaid is public assistance.
Medicaid will count wages, Social Security benefits, pension, Veteran benefits, bank and investment accounts, trusts and annuities, and your property.
In most states, Medicaid looks at your income over the last five years, according to the American Council on Aging. California reviews your data going back 30 months.
Assets that were transferred or gifted during that period may count against you. So, we would advise that you not try to transfer financial assets to qualify for Medicaid.
Medicaid eligibility occurs on a rolling basis. You could make just $1 over the monthly income limit and end up on the hook for the cost.
Developing financial strategies
Which option is best will depend on various factors, including age, health status, the likelihood of needing care, and your financial situation.
Some people use their own assets to pay for care. Be advised you may have tax consequences for drawing on an IRA, 401k, or qualified plan.
Others recognize it is more cost effective to transfer some or all of the risk to an insurance company.
Let’s look at these potential resources.
Long-term care insurance is an alternative. The cost will vary depending on the benefits. We can add inflation riders that raise your benefit level each year to keep up with the ever rising costs of care. There are still options available that provide lifetime benefits for those concerned about long term illnesses like Parkinson disease and Alzheimer’s.
Costs will rise for those who are older or have health problems. You may not qualify if your health is compromised or you are already receiving end-of-life care services. The point being you need to evaluate your options now. If you kick the can down the road you may not be able to get any type of coverage.
Typically, you become eligible for benefits when you can no longer perform two ADLs. Most policies have a waiting period before you receive benefits.
However, many insurance companies no longer offer traditional policies. Those that do may raise premiums annually, and the cost may be high.
There is also a product that I have called “short term, long term care.” It provides one year of care at home and one year of care in a facility. It has a wide range of benefit levels available to meet almost any budget. It costs significantly less than other options and has proven to be the best option for many clients.
Hybrid life insurance offers unique features that may offer financial assistance. What is a hybrid policy? It combines life insurance with long-term care insurance. The policy may pay for long-term care or a death benefit if the policy isn’t used to pay for care.
Another option is a long-term care annuity, which provides a benefit based on your investment. However, it has become challenging for insurers to provide these policies due to today's interest-rate environment.
Other avenues Some states offer PACE (Program of All-Inclusive Care for the Elderly), which is a combined Medicare and Medicaid program. It may pay for some or all the long-term care needs of a person with Alzheimer’s disease. TN does in fact offer this program.
SHIP, the State Health Insurance Assistance Program, is a national program offered in each state that provides one-on-one counseling and assistance with Medicaid and Medicare.
How you should approach long-term care will depend on your circumstances. We have offered a basic outline of various options. If you have additional questions or concerns, we encourage you to reach out to us.
Stocks waver in October
October has been associated with frightening incidents in the financial world.
Perhaps this is because two significant stock market crashes that occurred in 1929 and 1987 happened in the month that sports Halloween.
However, it may surprise you to know that broad market indices such as the S&P 500 have historically performed well in October (data provided by the St. Louis Federal Reserve).
Nonetheless, last month was an exception to the usual trend.
Key Index Returns
Dow Jones Industrial Average
S&P 500 Index
Russell 2000 Index
MSCI World ex-U.S.A*
MSCI Emerging Markets*
Bloomberg Barclays U.S. Aggregate Bond TR USD
Source: Wall Street Journal, MSCI.com, MarketWatch, Bloomberg
MTD returns: September 29, 2023–October 31, 2023 YTD returns: December 30, 2022–October 31, 2023
It can sometimes be challenging to pinpoint the ‘why’ behind market movements. This was true last month.
Are investors getting anxious about the economy?
Gross Domestic Product accelerated to a robust annualized pace of 4.9% in Q3, per the U.S. Bureau of Economic Analysis.
However, weakness in smaller company stocks, as illustrated by the selloff in the Russell 2000 Index (these firms obtain their business primarily in the U.S.), might suggest there were some economic jitters.
In the broadest sense, market sentiment was depressed by rising bond yields, with the 10-year Treasury briefly exceeding 5%, marking its highest yield since 2007 (CNBC).
In part, “higher for longer,” as Fed officials have been fond of saying, is playing a role. By that they mean they expect the fed funds rate will remain elevated for an extended period of time.
The enormous federal deficit and the accompanying need to borrow an ever-increasing amount of cash jolted the bond market. The US government wrapped up its fiscal year 2023 on October 31 with a $1.7 trillion deficit, up 23% from the year before. We have zoomed right past $33 trillion dollars of debt and are less then half way to $34 trillion.
Consider this if ….
$1 equals 1 second
$1M equals 11.5 days.
$1B equals 32 years.
$1T equals 32,000 years.
This means that $33 trillion is equal to 1,056,000 years. Let that sink in for a minute or two. Here is a critically important question. What’s your tax plan? If you don’t have one give us a call today because we have a small window that closes on January 1st, 2026.
War in the Middle East
On October 7, Hamas, a designated terrorist group by the U.S. and European Union, launched an appalling and unwarranted attack on Israeli citizens and the nation of Israel.
It is difficult to be clinical and objective following the tragedy. Real emotions surface. They have their place. But in this forum, our job is to analyze what is happening through a very narrow prism—i.e., how it might affect investors.
When such an event occurs, investors attempt to measure the potential impact on the U.S. economy.
So far, investors believe the violence will be contained. Oil prices, which briefly rose following the attack, ended the month slightly below where prices stood on October 6 (MarketWatch data).
Perhaps that is because past geopolitical shocks have not had a longer-term impact on stocks. Knee-jerk reactions are rarely profitable.
While what happens in the past is no guarantee of future performance, reviewing 23 separate geopolitical events since Pearl Harbor, the average loss for the S&P 500 on the first day was 1.1%, and the average pullback was 4.7%, according to LPL Research.
The 1973 Yom Kippur War led to the OPEC oil embargo, soaring oil prices, and a steep U.S. recession, but it was an outlier. Today’s oil market is different, geopolitical dynamics in the Middle East are different, and the U.S. is a leading oil producer.
That said, any significant disruption in oil supplies would send the price of crude higher. Any expansion in the conflict would have a significant impact on markets. Either event can’t be completely discounted.
We always emphasize that you should control what you can control.
- Long-term performance is about time in the market, not timing the market. If you have money invested in vehicles that provide some down protection your overall risk is lower.
- Your behavior plays an important role in long-term returns. How do you react when stocks soar or falter? Does euphoria lead you to become too aggressive? Does market weakness push you to sell after equities have already faltered?
- What is the best approach to your financial plan? Your mix of stocks, bonds, CDs and cash (and any other diversified asset classes) plays a role. Much will depend on your appetite to take on risk and your time horizon. Your financial plan helps determine what your “required rate of return” is and whether you are on track to achieve your financial objectives or not.
It’s not something that is set in stone. Life events can create the need for adjustments, but the plan is your blueprint for financial success.
I trust you have found this review to be informative. If you have any inquiries or wish to discuss any concerns, please don’t hesitate to contact me or any member of my team.
Please feel free to send this to any family member, coworker, or neighbor that you think may benefit from this.
Thank you for choosing us as your financial advisor. We are honored and humbled by your trust.
Niles P. Geary, II, MBA, CRPC, AIF™
Co-Founder & CEO
Niles P. Geary, II is Registered Representative offering Securities and Advisory Services through UNITED PLANNERS FINANCIAL SERVICES, A Limited Partnership Member: FINRA, SIPC Voyage Partners Financial Strategies, LLC and United Planners are not affiliated.
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