Then the question becomes is there a more cost-effective way to generate this amount of money besides funding it dollar-for-dollar out of your retirement savings?
Checklist: Financial Advisor Questions
If you are 50 years old and the current cost is $6,000 a month, the financial planner might project $24,000 a month by the time you are 80. If you don’t have Alzheimer’s in your immediate family, your financial planner could allocate four years at $25,000 a month to allow for inflation during the four years. $25,000/month x 48 months = $1,200,000. This amount could easily be double or more if you were to get Alzheimer’s.
Your financial planner should ask if Alzheimer’s runs in your family with your parents or siblings. That average is eight years but could be much longer. You don’t have to have a family history to get it though. You could just live a long life. The greatest predictor of dementia is age itself. A severe stroke with paralysis is another common reason for needing many years of long-term care.
Paying for LTC out of your savings at $15-$25,000 a month is like a bear market that won’t go away. Your account value may drop every month, and that money may not grow back.
Paying out of your savings means paying after taxes and investment fees. LTC insurance may be more efficient when the LTC benefits are tax-free. There are certain tax deductions as well with some policies. Ask your agent to share those with you.
For more information when weighing self-funding and insuring your long term care, check out our webinar So, You Think You Can Self-Fund LTC?
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