Long-Term Care Issues

Odds of Needing Long-Term Care Assistance

Recently I have been discussing the realities of paying for long-term care needs with several clients, and thought it might be a good idea to share with you some of these discussions.  Long-term care expenses are the costs you must personally pay for when you need assistance to independently care for yourself.  These activities of daily living or ADLs consist of: Dressing, Bathing, Transferring, Toileting, Eating or Continence.  If you have long-term care insurance, generally a person must need help with two of these six ADLs in order to make a policy claim.  Care needs may also arise when a person has cognitive problems related to diseases such as Alzheimer’s or Parkinson’s.

So what are the risks of needing this type of assistance?

Well if we put the answer into the context of home or auto ownership the answer is shocking.  The odds of our home being seriously damaged by fire are 1 in 96, with the average insurance claim being $170,600.  Having your car damaged in an auto accident is 1 in 5 with the average insurance claim being $27,600.  BUT the odds of needing help with two of the six activities of daily living are 1 in 2, or a 50% chance!  With the average cost of a private nursing home room in the Bay Area being $259 per day or $94,535 per year.  The average stay in a nursing home is 2.5 years.

So with the high odds of needing this type of care, and with the expense totaling hundreds of thousands of dollars if necessary, how can a person plan for these expenses in their retirement income plan?  As you know, I use a 4-step Retirement Income Planning Process, here is the chart:

Michael Ginsberg’s 4-Step Retirement Income Planning Process

Paying for Long-Term Care Expenses:  There are 3 ways to pay for care.  The first is to self-insure or set aside the funds to pay for the care if necessary.  The second is to shift some of the risk to an insurance company through the purchase of insurance.  Or the third is to shift the cost of care to society through either the government or a charitable organization.

If you don’t have the thousands of dollars to set-aside to personally pay for care, then there are several insurance options now available.  One option is the traditional long-term care insurance policy which will pay if the need arises, but the problem is that if you don’t need the care you don’t get any of your premium payments back.  Another option is a long-term care rider tied to life insurance.  The attractive feature to this type of policy is that if you don’t need LTC benefits then your heirs will receive the death-benefit from the life insurance.  The third type of new policy is an annuity with LTC benefits.  This may be a very viable and the least expensive option if you have additional savings to self-insure since this has significant tax saving benefits available.  I would be happy to discuss your best options with you if interested.

Here are some additional research articles I have put together if you are interested:

 Concept Pieces

Life Insurance Riders that Pay for Long-Term Care
Long-Term Care Annuities


Long-Term Care Needs Calculator

 Video Seminars

Planning for Long-Term Care

 Consumer Materials

Long-Term Care Insurance: How Does It Work?
Using Life Insurance Riders to Pay for Long-Term Care

To Your Successful Retirement!

Michael Ginsberg, JD, CFP® 


New Retirement Math

In a recent article by Offain Gunasekara, of Fox Business News, he highlighted the need to think about new math.  Not the new math which we encountered in elementary school 40 years ago, but the new retirement math.

In the past, most retirement calculators used a growth rate of 7ish percent.  Today, according to Marcus Allan Ingram, chair and associate professor of finance at the University of Tampa, it is necessary to use a more modest growth rate of 5%.  This means that you may need to “do your math all over again.”  Further, since the Fed just announced a concerted effort to keep rates low until 2015, the amount you need for a secure retirement will continue to be a difficult target to not just hit, but to determine in the first place.

In this article, Professor Ingram suggests that investors should “test-drive your retirement assumptions to give you a realistic picture of how much you’ll need to retire — and the steps you need to take to make today’s vision a reality tomorrow.”  In addition he suggests using a “retirement planning coach.”

Professor Ingram explains that a retirement planning coach is not just a financial planner who sells you products, but is an advisor who is an independent and unaffiliated fee-based retirement planner.

What is the ideal amount of savings needed to retire?

That is literally the million dollar question!  The economics of retirement income planning have changed.  This is due to market volatility, inflation, longevity, drop in housing values and ever-increasing health care costs have dramatically altered the planning rules from not only recent generations, but for everyone moving forward as well.  The bottom line is that we are seeing the challenges in retirement planning are not the same from one generation to the next.

By working with an independent fee-based advisor, they should be able to work with you to put together a portfolio which blends both guaranteed/dependable rates of return as well as less volatile investments to help ensure that your portfolio will both generate current income as well as future growth.  This is the only way to ensure that you will not run out of money before you run out of life.

If you need more help with this topic, please feel free to call or email me.

To Your Successful Retirement!

Michael Ginsberg, JD, CFP® 


Life Insurance is Not Just for the Young

Congress has declared September – Life Insurance Awareness Month.  So why would I be writing about life insurance in a blog about retirement – isn’t life insurance just for those with young kids?  In the not so distant past, the answer may have generally been yes – but today the answer is no!

Life insurance does play a very important role in planning for the financial risks associated with younger couples.  Meaning young couples have many financial risks which can be address very easily and inexpensively through the use of life insurance.  These risks include loss of one spouses income, lump sum to help fund college expenses for young children or even a lump sum to pay off or down a mortgage.

BUT since we are all living longer, there are new longevity risks which can be mitigated through proper life insurance planning.    

These risks include not only the typical such as loss of a spouse’s income, but also the ability to provide a lump sum to help offset the costs of long-term care for the surviving spouse, lump sum funding for a grandchild with special needs or even a lump sum to assist with education costs of grandchildren.

Here is how the scenario plays out for the risks associated with long-term care expenses…

  • A husband and wife are in their mid 60′s and 70′s and they are starting to draw down on their retirement assets.
  • One spouse, needs some long-term care assistance.  So now the couple is not only drawing down on their retirement assets to fund retirement needs, but they are also drawing down an additional $2500+ per month to pay for part-time or full-time home health care assistance.
  • As that spouse needs more care, the costs increase dramatically which causes further drawing down on retirement savings.  The accelerated draw down rate may even result in the need to obtain a reverse mortgage in order to fund the long-term care expenses of one spouse.
  • Eventually the ill spouse passes.  The surviving spouse may still need to draw down on the retirement savings for another five to ten plus years and may even have their own long-term care expenses which need to be paid.  THIS IS WHERE LIFE INSURANCE COMES INTO PLAY!  IF THE SPOUSE WHO PASSED FIRST HAD LIFE INSURANCE THEN THE LUMP SUM COULD REPLENISH THE SURVIVING SPOUSE’S RETIREMENT ASSETS!

You can take a look at my website  www.michaelginsberg.com for interesting calculators and articles about life insurance.  To save some search time, here are some further links to articles about life insurance which you may find valuable:

If you can see how this risk may apply to you – I would be happy to review your needs.  Let’s “celebrate” Life Insurance Awareness Month together – call me for a life insurance review today.  If you would like to watch the video sponsored by the LIFE Foundation highlighting this year’s life insurance story, click here.

To Your Successful Retirement!

Michael Ginsberg, JD, CFP® 



Welcome to My New Blog

I decided to start this blog to help my clients and friends to better understand the challenges associated with Retirement Income Planning.   As a Certified Financial Planner™ specializing in Retirement Income Planning, I address these challenges with clients on a daily basis.  My practice can be divided into three groups:

  • Pre-Retirement clients who are 5 to 10+ years away from retirement:  For my pre-retirement clients, they are still concerned about the accumulation of assets in order to support themselves during their retirement years.  They are of course challenged in this savings process since they still have obligations such as putting children through college or supporting their own parents.
  • On the cusp of retirement, meaning clients who are within one year of making the leap from full-time employment to either retirement or part-time employment:  As clients face the day that one or both spouses leave their full-time position, they immediately start to experience the fears associated with major life changes.   One common thought/fear I hear is that one spouse is not sure how they will spend their day, or how they now need to find new friends outside of work.  I also hear comments, if one spouse has already retired; they are concerned about the newly retired spouse interfering with their home and personal life processes.
  • Already in retirement:  For my clients already in retirement they see firsthand the choices which they need to make in order to make sure that they don’t outlive their financial resources.  I see these clients wanting to support their grandchildren’s educations at the possible detriment of their own financial well-being.

I firmly believe that almost anyone can plan for and ultimately enter retirement successfully if they follow a specific process.  In the case of my client’s, I use a 4-step process to help them plan for this exciting new phase of life.  Here is what the process looks like:


Each week, I will post a new blog message which discusses one of the 4-steps of my retirement process.  Occasionally, I will post more often if there is some significant change which occurs because of the economy or because of something which happened in Washington, DC.  At other times I may post a video message.  This may be a recorded version of a presentation I give.

I hope this blog can turn into a two-way communication process.  I encourage you to either comment on articles I write, or make suggestions as to topics you would like me to comment on.

To Your Successful Retirement!

Michael Ginsberg, JD, CFP®