“Patients needing home care out of luck as waiting list grows” (Montreal Gazette Thursday November 18, 2010)

This is why I constantly preach that Long Term Care is the largest financial issue facing Canadians. Look at the date on the article and you may realize that we are about 11 years away from the beginning of the problem. There are waiting lists now – what will they be like when the “boomers” start to need care – which usually begins after age 76? The oldest “boomer” is age 65 today – that means that we are 11 years from the start of the real crisis.

I think it is safe to say that few of us have a strong desire to move into a long term care facility. Most of us would prefer to stay at home for as long possible. If we have children who live nearby they will probably assist us as we age, however, we do not want to be a burden to them. What happens if we do not have children? What happens if they live far away? Even if they live around the corner, do we either want or expect them to give up their careers or their family life in order to help us? I suspect that few of us want that. We want to enjoy our time with them and we want them to be happy and to enjoy their own lives.

What do we want for ourselves? Remember – I am 45 days older than what is officially the oldest baby boomer, who was born on January 1, 1946. We value choice, independence, and control. We want to be customers not patients. Remember that Long Term Care Insurance is not “Nursing Home Insurance”. It is what may allow us to stay out of a Nursing Home.

I want to take this opportunity to address what seems to be a significant issue among advisors and possibly clients: the fact that premiums for Long Term Care Insurance are not guaranteed.

We have 3 choices:

1. Take our chances and hope that we never need help at home or elsewhere;
2. Save our money and hope that we have enough to look after ourselves;
3. Buy Long Term Care Insurance.

I will ignore the first option and look at the other two.

Case study: female age 65, who will need care for 5 years starting at age 76. Just to have a number to work from, let’s assume the care costs are $3,000/month. I will ignore inflation for ease of calculation, but in the real world, it is a significant issue.

“Save the Money”

In order to accumulate sufficient funds to cover the cost of care of $3,000/per month ($36,000 per year) I will need to save $163,654.22 in the next 11 years. In order to reach that objective I will need to put aside $10,685.81 (at a 5% interest rate) each year. 

Long Term Care Insurance

How much would insurance cost for the same case study? The answer here is $4,104 annually - about 60% less than the savings approach. Yes, insurance costs MAY go up, but this remains a far more reasonable approach than “saving for it”. Not to mention the whole issue of: “What happens if/when I find more interesting uses for my money?”

There is one other problem with the “save it yourself” approach. What happens if you need care earlier?

The people who are most likely to need this protection are those who look after themselves. If we exercise, watch what we eat, do not smoke, and generally take care of our health, our bodies build up a great deal of strength. The obese, the smokers, and the “couch potatoes” will not live as long and are less likely to need care.

Back in 3 weeks with more.

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