Feature Articles
AAA President's Message
Member Feedback
AAA Mini Tour
Member News and Benefits
AAA Commentary
FYI
Ask AAA
News to Use
Colorado Calendar
Auto Talk
My Colorado
Approved Auto Repair
Offices to Serve You
Travel Specials
Office Events
Join AAA
Search for Savings
Contact an Agent
Maps & Directions
TourBook Lookup
Insurance Feature Article
Cracks in the Nest Eggby Eunice Krieger
When the Wall Street Journal asked financial planners and educators across the United States, "What are the biggest mistakes investors today are making with their retirement savings, both before and after they retire?" the number one response was: "Failure to consider long-term care (LTC) needs."
Obviously, people make all types of mistakes with their money, but the most painful mistakes are those that involve the nest egg. One or two financial missteps with your retirement savings, and you could pay a penalty well into later life. In the past, a healthy stock market covered a multitude of sins. If one needed to borrow $20,000 from a 401(k), it was not a problem—by the end of the year, the markets probably gave them back that much and more. Now the landscape has changed rather dramatically.
When people think about threats to their retirement savings, they primarily think about market losses. That is normal. With the events that have occurred in the past year, people have become more and more aware of market losses. Equally as important is failure to consider nonmarket-related threats such as health care costs of long-term care. Such a catastrophic event can cause just as much harm, or more, than a volatile market.
When one studies the current costs of care in the Denver area and nationwide, if care is needed, a sizeable crack can occur in one's nest egg. The good news is that most of us will never end up in a nursing home—at least not for a long time. The bad news is that more than 50 percent of Americans will need some form of LTC, either home care or facility care, in an assisted living, adult day care or nursing home environment, according to the Health Insurance Association of America.
If, for example, one is 55 years old today and would not need care until age 85, the projected costs would be $965 per day, based on historical increases of 6 percent per year and the current national cost of $168 per day. Thus, projected LTC costs must be an integral part of estate planning. Careful planning is the best insurance.
Could you finance potential costs of LTC out of your nest egg?
Perhaps you could. But the key word is "your" nest egg. No one else will pick up the tab. These potential costs are really an uncapped liability. Your nest egg is perhaps not the size that it was a year or two ago. The crack can be a bit bigger now than it was estimated to be in the past. We have had many of our clients say how thankful they are that they took the step of insuring this liability, as their assets are much different today than in the past. Others who previously felt they would self-insure are now reconsidering purchasing a LTC insurance policy because of market losses affecting their portfolio. With costs historically increasing at 6 percent per year, one of the greatest risks of asset loss in retirement is unanticipated and uncapped LTC expenses.
Yes, premiums for LTC insurance are not inexpensive. But spending a few thousand dollars a year versus hundreds of thousands of dollars in the future is believed by most financial planners to be smart money management.
Eunice Krieger is a long-term care specialist and president and founder of Krieger & Associates, Inc., a consulting firm specializing in educating adults regarding health care issues since 1988.
AAA Connection: AAA Colorado sponsors educational long-term care seminars at various times in our office locations. These educational seminars may feature an expert in the LTC industry, such as Eunice Krieger, who is not employed by AAA. AAA Colorado LTC specialists will also be in attendance for private consultations. To receive additional information or to find out when a seminar may be held in your area, call 303-753-8800, ext. 8240, or toll-free, 977-244-9790, ext. 8240.
Return To Top
© Rocky Mountain Motorists Inc.