Planning for Your Long-Term Care Needs

Helping Make Sense of It All

Gardner Sherrill, CFPSherrill Wealth Management, LLC

Today’s Agenda

What is Long-Term Care (LTC)? What are the chances of needing LTC? What are the costs associated with LTC?

What are the funding sources to pay for LTC? Is LTC insurance right for me?

What is Long-Term Care (LTC)?

Long-Term Care is the type of assistance you would need if you were unable to handle some of the basic activities of daily living or if you require substantial supervision due to a cognitive impairment

What are Activities of Daily Living (ADLs)?

Activities of Daily Living include: Eating Bathing Dressing Toileting Continence Transferring (from bed to chair)

What is a Cognitive Impairment?

A condition that leads you to require substantial supervision to protect yourself or others from dangers to health and safety

Supervision due to Alzheimer’s disease, brain injury or stroke

Where Can I Get Long-Term Care Services?

Your home Adult day care facility Assisted living facility

A facility for people who can live somewhat independently, but need assistance with basic activities of daily living

Nursing Home Hospice care

Care provided for a terminally ill patient; can be provided in the home or at a facility

What are the chances…

…that YOU could need long-term care services?

Long-Term Care is a Reality

1) Source: National Clearinghouse for Long Term Care Information, U.S. Department of Health and Human Services: Planning for LTC. Date accessed, January 18, 2012.

2) Source: American Association for Long-Term Care Insurance, 2010 LTCi Sourcebook3) Source: Genworth Cost of Care 2012 Survey; April, 2012

3.8years 2

Average length of majority of long term-care claims

4-8years 3

Average life expectancy after

Alzheimer's diagnosis after age 6570%

Of people over age 65 will require

long-term care1¹

Not Just For Seniors

40% of Americans who need long-term care are between the age of 18 and 604

Causes include auto accidents, sports and work-related injuries, diseases and strokes

4) Life and Health Insurance Foundation for Education, http://www.lifehappens.org/who-needs-long-term-care-insurance; 2012

Your Long-Term Care Experiences

Who? Where? How was it paid for? Who provided the care? How long did the person need care? Was the care expected or unexpected? How did long-term care affect the family?

The Cost of Long-Term Care

National Average cost of care per year: Nursing Home (Private room): $81,0303

Nursing Home (Semi-private room): $73,0003

Assisted Living Facility: $39,6003

3) Source: Genworth Cost of Care 2012 Survey; April, 2012

The Cost of Long-Term Care

Average/ Median Cost of Care3

Home health care - $18 per hour Annual cost (based on 40 hours of care): $41,184 Average need of 4.5 years could total: $185,328

Specialized HHC - $19 per hour Annual cost (based on 40 hours of care): $43,472 Average need of 4.5 years could total: $195,624

Adult Day Care averages $61 per day 50 weeks, 5 days a week: $15,250

3) Source: Genworth Cost of Care 2012 Survey; April, 2012

Who Pays for LTC Services?

Private/Company Health Insurance Medicare Medicaid Personal Assets Family LTC Insurance

Skilled Care vs. Custodial Care

Skilled Care Patient shows sign of improvement

Has nothing to do with severity of illness or injury Is determined by the services received Is short-term to help recover from something

Health Insurance and Medicare will pay Possible qualified treatment

Short-term IVs or tube feeding Physical therapy – with improvement Speech therapy – with improvement

Skilled Care vs. Custodial Care

Custodial Care Patient does not show progress

Respiratory therapy for emphysema Catheter maintenance Colostomy drain Chronic care can include care for strokes, paralysis and comas Help with bathing, dressing, other activities of daily living

Covering the Cost of LTC

Private/company health insurance Skilled acute care only Not designed to pay for long-term chronic/custodial care

Medicare

Deductible of $1,156 must be met first services are covered.

Medicare pays a maximum of 150 days for Hospital Care6

First 60 days are covered Days 61-90 require a copay of $289 per day Days 91-150 require a copay of $578 per day

Medicare pays a maximum of 100 days for Skilled Care6

Covers skilled care, not custodial care First 20 days are provided at no cost Days 21-100 require a copay of $144.50 per day 6) The Official US Government Website for Medicare: http://medicare.gov; September, 2012

Medicaid

Medicaid is for the impoverished7

Welfare program that pays for skilled or chronic care Assets must be $2,000 or less (amount varies by state) With new five-year look-back period, giving away assets is

complicated Lose control over options for care – must be a Medicaid

approved facility Medicaid uses nursing homes first, not as a last resort

7) National Clearinghouse for Long-term Care Information, U.S. Department of Health and Human Services, http://www.longtermcare.gov (2010).

Skilled Care vs. Custodial Care

Long-Term Care: Is considered custodial care Neither chronic care nor custodial care are covered by private

insurance or Medicare What about Alzheimer’s or the fragility of the elderly?

Covering the Cost of LTC

Personal Income and Assets One long-term illness may jeopardize your accumulated

retirement savings If the cost of care was $80,000 to $100,000 a year, how many

years of long-term care could you afford before you depleted YOUR liquid assets?

Covering the Cost of LTC

Family 57% of primary caregivers provide care for more than 16 hours

each week; 31% more than 30 hours each week8

83% of caregivers contributed financial (out-of-pocket), an average of $8,800 annually8

48% of caregivers lost their jobs or missed career opportunities Care was needed due to 45% for a specific illness, 42% age

related frailty, 23% for cognitive impairment, and 13% for rehabilitation after an accident or surgery8

Can your family afford to care for you? Would you want them to?

8) Beyond Dollars, The True Impact of Long Term Caring; Genworth Life Insurance; March 2012

The alternative that will protect your assets, while protecting any long-term care needs you may have…

Private Long-Term Care Insurance

Preparing for Long-Term Care

Only 17% of baby boomers have planned for long-term care needs16

Only 10% of adults over age 65 own a long-term care insurance policy16

9) Sources: A Golden Opportunity: Emerging demographics, new legislature and budget shortfalls have converged to create unprecedented long-term care insurance opportunities for both U.S. insurers and consumers , Resource, LOMA; www.medicare.gov/LongTermCare 2/2008;

Have you thought about long-term care?

Advantages of Private LTC Insurance

Avoid physical and financial dependence on family and friends

Protect your hard-earned assets Maintain choice on how and where to receive care Assure high-quality care, at an affordable price Stay at home when you need care Maintain your independence

Limitations may apply. Please reference policy documents for specific limitations

Who Should Plan for Long-Term Care?

Who should be purchasing long-term care coverage? Anyone with assets to protect

What about the wealthy? Self insuring possible but not cost efficient

Middle Class concerns? Preserving a legacy Protecting healthy spouse from impoverishment

Self Insuring vs. LTC Insurance

Premiums Paid

Over 30 Yrs.

5% ReturnOver 30 Yrs.

8% ReturnOver 30 Yrs.

LTC Pool of Money

Daily Benefit$200

Comparison based on:• Personal savings

of $100 month with 5% and 8% projected returns

• $100 John Hancock LTC monthly premium based on Male, Age 50, NH Resident, 90 Day EP, 15% Spousal Discount with GPO Inflation

• For illustrative purposes ONLY

• Investment results and premiums paid will vary

0

50000

100000

150000

200000

250000

300000

350000

400000

$36,000

$82,302

$142,768

$365,000

Planning is Always the Best Option!

Many often put off the decision of how they will afford long-term care Too often, people wait until they critically need care. By then,

they may not qualify for insurance Remember: the healthier you are, the longer you are likely to live.

The longer you live, the more likely it is that you will need long-term care

Evaluate your situation Discuss the emotional and financial issues with your

family Explore all the options

Summary

The likelihood of needing long-term care is significant The cost of such care can be financially devastating

Not covered by heath insurance Not covered by Medicare after 100 days

Long-term care coverage is another piece in financial and retirement considerations

Purchasing LTC insurance coverage may help preserve financial well-being and provide peace of mind

DISCLOSURES:

The opinions voiced in this material are for general information only and not intended to provide specific advice or recommendations for any individual. To determine which investment (s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.

Life insurance policies contain exclusions, limitations, reductions of benefits, and terms from keeping them in-force. Your financial professional can provide you with costs and complete details.

[Add one of the disclosures listed in the notes (Tahoma 16) to meet compliance requirements: IAS – IS – Bank/Credit Union - Hybrid.]

Thank You