Women's Money Wisdom

Episode 177: Long Term Care Considerations for Women

• Melissa Fradenburg, AIF®️ • Season 3 • Episode 177

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In today’s episode, we discuss the upsides and downsides of long-term care insurance and delve into key considerations when purchasing it. Join your host, Melissa Fradenburg, AIF® as we navigate the intricate world of personal finance, specifically designed for women.  Melissa shares her recent experience visiting her grandmother in an assisted living facility as well as a basic overview of how long-term care insurance works  as a standalone policy and as a rider on a life insurance policy. In addition to covering considerations when purchasing long-term care insurance, Melissa will share the most cost effective time to purchase coverage.


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Speaker 1:

Welcome to the 52 Pearls Weekly Money Wisdom Podcast. I'm Melissa Joy, a certified financial planner and founder of Pearl Planning, and I'm Melissa Friedenberg, financial advisor with Pearl Planning. Pearl Planning is a financial planning and investment management company located in Dexter and Gross Point, michigan. We work with clients all around the country. The purpose of our podcast is to explore specific financial topics and provide advice you can use in your everyday life.

Speaker 1:

Hello and welcome to the 52 Pearls Weekly Money Wisdom Podcast. This is your host, melissa Friedenberg, and this week I am going to be talking about something that's so critical, especially for women, but is often overlooked Long term care insurance. Before I get into what it is and who should be looking at it, I want to share a story about my adventure over the last week. So I traveled to New York City. I was presenting to a group of women attorneys Great opportunity to speak on women in wealth. I'm also originally from the East Coast, new Jersey, and family in New York, and I got to see my grandmother for the first time since COVID. My grandmother is 93 years old and this was my first time seeing her in a care facility assisted living so it really got me thinking about this topic and it really put some experience to the numbers that I talk about being the ones that are really living longer than men and needing assistance later in life and really needing the funding for that assistance. One of the things I talk about when I do my women in wealth presentation is why are we having presentations on women in wealth? What is different about creating wealth, investing, protecting? That's different for women than men, and really what it comes down to are two things we are going to be the ones that outlive our wealth if we don't have enough, because 8 and 10 women will be solely responsible for the finances at some point. This is due to a couple factors, mainly life expectancy we live longer than men, we tend to marry men that are slightly older than us and the divorce rate. All of these things point to the fact that, even if right now we are not in charge of the finances in our household in a partnership, at some point we will be, and I think this is really critical.

Speaker 1:

So UBS has done probably the most research that I am aware of on women in wealth, and they have a study that started between 2017 and 2019. And in this study, what they found was 85% of women are involved in the day-to-day finances, so budgeting and, you know, like smaller purchases of items, household items but 58% of women surveyed defer long-term financial decisions to their partner. When they broke it down a little further, it actually showed we're going in the wrong direction. So baby boomers are more likely to participate in the long-term financial decisions than millennials. Interestingly enough, they followed up this study with a little bit more detail in their 2020 study and found that women with advanced degrees were still deferring long-term financial decisions to a partner. And, to take that even a step further, primary breadwinner women were still deferring those long-term financial decisions at a rate of 46% of those women surveyed. So this is surprising to me, because I felt like we're making so much progress in other areas, like labor participation, education, and even women as a gender are bringing in more of the household income. So if there's one area that we're sort of falling behind in, it would be in that wealth building, investing, protection of wealth and that doesn't necessarily mean we're doing a bad job or our partners are doing a bad job with those things. There's nothing in that study that indicates that it's that we're really not participating, we're not having a seat at the table, and the study is very interesting. It goes on to talk about some of the reasons why. That may be maybe a future episode kind of digging into those reasons why would be really interesting, both all the same fundamentals, on how we build wealth and how we preserve wealth, how we pass wealth on to our family.

Speaker 1:

But we need to participate and it really became very clear to me why I need to be an active participant in my financial situation after visiting my grandmother this last week. So last Friday I arrived and it was just so emotional, like I said, I have not seen her since a family wedding before COVID. A few times since the pandemic I have made plans to go see her as far as looking at flights but never booking anything and something just held me back. And both of those times in the last few years someone in my family has gotten COVID and what it comes down to is I was terrified of killing her, basically, and just so emotional to see her. So after getting over that initial, just like happiness to give my grandmother a hug, who's so important to me the next thing I realized. So we showed up and we were meeting. My father drove me there and then we were meeting my aunt and we were going to go out for lunch so my grandmother was sitting in the lobby of this facility and I want to say I'm so pleased with where she is, the care that she is getting.

Speaker 1:

I do not come from a lot of money. I know my grandfather passed away 20 years ago approximately of cancer. They were married for a really long time, just a beautiful partnership, and she was so lost for so long. She still misses him terribly, but she has been without her partner for 20 years and I didn't realize how much time had passed since he passed. But this is the reality. If you're living to 93, 100, chances are your partner may die well before you. So she's been spending down. And when I say I don't come from great wealth, they were good savers. He actually worked at a bank. He's the manager of a local bank and I think they were. They were fruble, right, my grandmother was a homemaker. This facility that she's in is not cheap. Talked to my aunt about how much it costs a month, but it is really good care and they were good savers. So there's that Now.

Speaker 1:

Funny side note. Any women listening to this can appreciate this. I don't know when I thought that the female drama ended, but I guess I thought that by the time you're in an assisted living facility and really like starting to lose your memory that maybe the female drama stopped. But as I was sitting in the lobby with my grandmother Waiting for my aunt so we could go out to lunch, there was a gaggle of women, all in wheelchairs or walkers, minus one, and this other woman in a walker comes barreling out of the dining room area, which is off the lobby, and she is yelling and hollering at this one particular woman standing there with a walker and Saying I heard you were talking about me to the new girl and I'm telling you it was like a record, scratch right. She like came across and she walked up to this group of women and started yelling at her who supposedly was talking about Her to the new girl, like women from across the room started like Slowly wheeling their wheelchair over so that they could hear the drama of what was going on. And I got a little nervous and actually looked over at the nurses desk to see if there was anyone over there to potentially Break up like a walker fight or something. So Again, that's just a funny story that it happened. It all worked out. Somebody suggested maybe she needed a nap.

Speaker 1:

My grandmother told me that this particular woman who kind of went off about it, she recently fell and Heard her hip and is new to a walker and so she's just really just like all Girl drama, starting in middle school or even before that, through supposedly now, I guess, through end of life care. She was feeling bad about herself and her own situation and taking it out on others. So funny little story there. But my point being this facility was all women. There was one man that I saw and heard about from my grandmother. Everybody else was women. Side note, all the women were sort of fighting over this one guy. So I guess if you are the One male that ends up in an assisted living facility in your late 80s and early 90s, the women will fight over you. So there's that.

Speaker 1:

But my point being here, it really got me thinking about our own long-term care plan and what we have saved and what it may cost, because chances are I may live another 20 years without Jay, assuming we make it to. You know, 65, 70, and I live till late 80s, early 90s or longer. This is the reality. And while it was a beautiful visit with my grandmother, I could not help but think About what I talked to people when I do my women-in-wealth presentation or in a one-on-one meeting, putting together a financial plan and earmarking that expense of Either in-home care, nursing home facility or assisted living. So with that, I'm going to switch gears and talk a little bit about how it is that we can, as women, prepare for that expense.

Speaker 1:

So long-term care insurance is an option. There are really two ways to go about it. Either you have the money to pay For your care at that point at the end of your financial plan, we put it for the last two years of everybody's life that they will be spending either on in-home care or nursing home care, and we use the national average. And then, of course, our software includes inflation. However, the cost of in-home care and nursing care is actually outpacing inflation by an additional 3%. So it's something to consider when I share with you the costs of these care facilities today. But when you think about how you're gonna pay for this should you need it as you're aging towards the end of life, if you think well, you know Medicare will cover it. It doesn't cover most long-term care costs, so this is separate from Medicare, and Medicaid is something different. So if you are going to have coverage through Medicaid, you're going to spend down your personal assets before that kicks in. We don't really want a plan for that. That's not a good plan when we're thinking about our finances. So really, what we can do is either fund it through accumulated wealth or we can buy insurance, and when it comes to long-term care coverage, as far as insurance goes, you really have the option of a standalone policy or as a rider on a life insurance policy. Very popular right now is what's called a hybrid, so it's kind of in between of a standalone policy and what that means.

Speaker 1:

You know everybody thinks about long-term care. Coverage is insurance and there is the possibility that you're not going to need it, right? You know everybody kind of, I think, when they think about the end of their life, as nice as the facility my grandmother was in, it's not a great quality of life, right? So you know it's great if you want to think. Well, I'll probably die in my sleep one day, you know, just never wake up or I'm gonna have a heart attack and go out that way, or however you think your end of life is gonna go, you have to prepare for the possibility that you may sit in a wheelchair in a nursing home facility where you, you know, the details of your life are hazy and you get visitors from time to time and you're really, you know playing cards and watching movies and going to bed at like 5 pm, because that's really what everyone was doing here at this facility. So the cost of that is quite high.

Speaker 1:

When I talk about these, you know hybrid policies or a ride or on a life insurance policy. Some people like to go about it that way. Or is this a straight long-term care policy? Because your family is still getting a death benefit If you pay into it and never use that long-term care portion there's, you know, something there. But again, when you think about affordability, you're really paying for life insurance as well as long-term care, so it may make sense to just do a standalone long-term care policy. Everybody's situation is different. It's definitely something I encourage you.

Speaker 1:

If you're listening to this podcast and thinking I should maybe look at long-term care, I want you to look into it, but I am certainly not suggesting that everyone run out and buy a policy. One of the major downsides to long-term care insurance is the cost. Premiums can be high, especially if you purchase a policy later in life. Like any insurance, there's a chance you may never use it, which is why some people stay away from long-term care as a policy. Now, if you are one of those people who feels like if I never end up in an assisted facility or using that care, the premiums are wasted money, maybe you want to look into either a hybrid or life insurance policy with a rider. Standalone policy really is a use it or lose it. I will say they've made advancements. There's all sorts of options. There are such things as return of premium options that you want to look at, but again, you're going to pay for that. So if you're looking at the most cost-effective way to get this kind of coverage, it's going to be the simplest policy in most cases.

Speaker 1:

Think about your personal situation of should I purchase this insurance If you have a family history of chronic diseases, especially some kind of family history of memory care issues, cell dementia, alzheimer's. Those are things where it may make extra sense to have this coverage. If you think this is going to be your future, the other thing to consider is how much can you afford to put towards premiums? The other thing is you want to hit that sweet spot, so you don't want to necessarily buy a policy in your 30s or 40s, but you can't wait until you need the care Really. These are just some things to think about. And again, what other resources do you have to potentially cover those long-term care costs? So if you are in a situation where you've had a large inheritance or you're living below your means or the projected means of what you've already saved for retirement, maybe you don't need to consider a long-term care policy. These are all things that doing a financial plan can help you with figuring out if it makes sense.

Speaker 1:

Statistically speaking, about 70% of people age 65 and older will need long-term care at some point. As I mentioned earlier, and no surprise women are more likely to need it than men 79% of women and 58% of men. The duration of long-term care can vary anywhere from a few months to several years or more, and I realized this with my grandmother. So she has had Parkinson's for some time now is on medication and control that, and other than that she really doesn't have any health issues. She ended up there because she fell and broke her leg Two Christmases ago. She was in a nursing home for a period of time after that, and then this is really where she's gonna be, so she is gonna be here until the end of her life.

Speaker 1:

And when you think about what kind of assistance you'll need, again, even if you don't have a medical condition, as you get older, you need help with things like showering and Meals. You can't rely on the family history necessarily for one thing, and Secondarily, even if you don't have a family history of something, you're going to need some help with certain tasks. What are the costs for these? These numbers that I'm sharing are from a Genworth financial study in 2020 the median annual cost. Now, this is national, so depending on where you live, things could be higher or lower but currently, assisted living 51,600, in-home healthcare 54,912, and a private room and a nursing home 105,850. The inflation on these costs is a little bit higher than inflation by like two to three percent Historically. So also consider that financial planning software does factor in all these things. So if you're feeling like, how am I gonna figure out how much I need and coverage, like financial planner, you should be able to run some numbers for you and really give you an idea of what you personally May need to cover these costs and versus what you already have saved.

Speaker 1:

Another thing to consider is 80% of long-term care is provided at home by unpaid family members and friends. So when you're looking at long-term care policies, there are different policies. You're gonna pay for different things, including how those benefits are paid out. So whether it has to be to a facility or whether it can be, you know, paid in-home care and what exactly qualifies for that, those are things you should look at when you're looking at comparing policies, not just price. Other things are gonna be not just the type of care, but the amount care that will be covered, the length of the coverage, as well as things like your age, your gender yes, women pay more for it because we use it more and again, your overall health, which brings into the question of when do I look at buying a policy? Typically, the sweet spot we say is between age 50 and 65. So those are kind of the ages. If you're in your 40s, probably not yet start thinking about it when you think about your overall plan, but typically between age 50 and 65 is the most cost-effective time to buy long-term care coverage.

Speaker 1:

The last thing I want you to consider is when you're thinking about these long-term care policies. Before you reach out to get some quotes on what that would cost you and look into it, you want to think about how you're gonna be paying for this. So there are options to purchase a policy in a lump sum. Maybe, if you have just come across either inheritance or, as kids are sort of leaving the nest and Wealth is being accumulated, that sometimes people have life insurance policies that they purchased in order to really cover the care of children when they're younger and or covering a non-working spouse to pay the mortgage, and maybe they're thinking I don't know if I really need this. So it is something to consider the possibility of taking your existing life insurance and Converting it to more a policy or adding a writer to it that is geared more at care during your life in the form of long-term care.

Speaker 1:

Something to consider Again, a lump sum option to purchase either straight long-term care or some sort of a hybrid policy. If you're saying you know I don't have a lump sum of money from Anything in particular available or earmarked for this expense, you can obviously pay in annual premiums, in many cases, a monthly payment. These are all factors that are going to go into the cost of your coverage. So just thinking about these things before reaching out to get a quote or going online. I'm going to post some resources, additional information on this in the show notes, but I hope that you found this episode helpful, if nothing else, that you enjoyed a little glimpse into the girl drama that's going on at my grandmother's facility, because I found that kind of interesting. Bottom line here is have a seat at the table and be an active participant in what this looks like in your plan.

Speaker 1:

Regardless of whether your husband takes the lead on these long-term decisions, most likely, ladies, it's going to be us. We're going to have to provide that care for ourselves or hope that our daughters, I guess, or sons, but I'm going to go with my daughter are going to help us at this point in our life. So thank you for listening. As always, if you found this helpful, please do share with others, and I am going to link in the show notes our economic update and investment outlook, which is going to be live on July 19th. If you're listening this after the 19th, I will put the link below to listen to the reply. Thanks for listening. You can access our first two seasons of this podcast on our website at wwwpearlplancom, or on Spotify. If you're interested in learning more about pearl planning, feel free to sign up for our newsletter, also found on our website.

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Melissa Joy, CFP

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