Long-Term Care Planning

Episode Transcript

Speaker 1 (00:00):
In the full lines. They are open to you right now.
If you've got questions for our retirement planning professionals from
Class Financial, we would love to have you join us
this morning. All I gotta do is pick up phone
dial in telephone number six oh eight three two one
thirteen ten. That's six oh eight three two one thirteen ten.
We'll get you on the air with CJ. Closs and
Eric Schwartz. As mentioned, they are from Class Financial. You

(00:21):
can learn more about Coss Financial on their website. It's
Clossfinancial dot com. That's Coss k l Aasfinancial dot com.
Not only can get to know Eric and CJ and
the whole team at Coss Financial, you can learn about
their separate divisions. You can schedule a complimentary chat right online.
Also sign up for the weekly Market Pulse newsletter. That
all available to you at Cossfinancial dot com. Their telephone

(00:44):
number six oh eight four four two five six three seven.
No charge for that initial gets to know you appointment
at Loss Financial. It will be complementary to you again
their number six oh eight four four two five six
three seven. As mentioned, joining us this morning, our CJ.
Closs and Eric Schwartz of coss Financial Cejay, how are
you doing this morning?

Speaker 2 (01:03):
I'm doing great, Sean. How are you?

Speaker 1 (01:04):
I'm doing really well. Great to chat with you and Eric?
How have you been?

Speaker 3 (01:09):
I'm doing great, Sean, glad to be here.

Speaker 1 (01:10):
It's exciting to talk with both of you. And just
a little programming note for folks that probably figure this
one out, is next week being Thanksgiving. As much as
we all love hanging out together, we do like spending
time with our family. We will not have a show
next week, which means it's a good week to listen
back to the podcast and other things so you can
still get your fix of Money in Motion. We just

(01:32):
won't be in studio next week. We've got a lot
of stuff to talk about this week. Something that's really
important and long term planning. May not be the most
glamorous of conversations, but it is a very very important
one and we'll get to the details on that in
just a moment. Before we get rolling on this week's topic,
let's actually look back at last week's show. Of course,

(01:53):
with the class quiz luestion week. We do that each
and every week right here on Money in Motion with
Costs Financial. This week, no exception, our friends from Class
Finance provided a twenty five dollars gift card to Best Buy.
Tell you a little bit later on the program how
you can win that twenty five dollar gift card. A
little tip, don't listen close to the program because just
about every show, the question and answer comes up during
the program, and before we start talking about this week's topic,

(02:14):
let's actually look back at last week's topic and the
class quiz question. We can get the question and answer
there as well.

Speaker 3 (02:20):
Eric, absolutely so thank you to everybody as always for
listening and bake. Congratulations goes out to our winner from
last week, and that was Tracy from Madison and our
question last week was true or false. According to the
US Department of Health and Human Services and its agencies,
approximately seventy percent of people turning age sixty five today

(02:42):
will need some form of long term care during their lifetime.
And Tracy knew that the correct answer to that was true.

Speaker 1 (02:49):
That's fantastic and as mentioned, we'll do another another prize
this week. Great prize from our friends a Class Financial. Also,
if you missed any part of that program, or miss
any part of the day show, you can always and
back at Colssfinancial dot com. That's cost k l a
a sfinancial dot com. We're talking today about a topic
that not the most exciting but super duper important, and

(03:10):
that's long term care planning. And of course, as we
get older, we start thinking about potential care needs and
how to become more and more essential. The folks at
Coss Financial are going to guide us through some of it.
And let's start off CJ with with kind of under
kind of a just a ground understanding, kind of lay
the groundwork for the scope of long term care and

(03:30):
how exactly is it funded.

Speaker 2 (03:34):
Yeah, that's a great place to start, Sean. So at
Coss Financial, we view long term care as a key
element in your overall retirement planning strategy. Now, as we
discuss this today, I will disclose while some of us
on the team are insurance licensed, we don't actually sell
any insurance products. So as we discussed this, we can

(03:56):
speak to it from an authoritative place in terms of
the licensing that we but we are not the organization
that's going to fulfill any sort of long term care
insurance or any sort of insurance based products for our listeners.
So let's begin with there's a common misconception as it
relates to long term care, that Medicare will fully cover

(04:16):
long term care costs, and this simply is not the case.
In reality, Medicare provides limited assistance. For example, if you're
required skilled nursing or if you sorry, if you require
skilled nursing after a hospital stay, Medicare may cover the
first twenty days. However, from days twenty one to one hundred,

(04:37):
you'll likely be responsible for something called a co payment
of about two hundred and nine dollars per day as
of twenty twenty five. Beyond that, so imagine that again
you kind of need skilled nursing care beyond one hundred days, Well,
that's all on your own, so you get the idea.
Do not be confused that Medicare will cover this. Now Here,

(04:59):
of course, is the second part of this. Somebody goes no, no, no, no,
I know Medicare won't cover it, Medicaid will cover it,
and we go, oh, that may be true, but in
order to qualify for Medicaid, that means you've substantially exhausted
all of your resources. Typically, the individual receiving care must
have reduced their assets to around two thousand dollars before

(05:20):
Medicaid will kick in. Now if you have a spouse,
so think one spouse is unhealthy, there's another spouse who
is still healthy not needing assistance. So there is something
called it like a spousal allowance, depending upon the state
that you live in. So for example, in Illinois, the
community spouse resource allowance is approximately one hundred and thirty
five thousand, whereas in Wisconsin it's about one hundred and

(05:42):
fifty eight thousand, plus one vehicle, a home, and some
prepaid funeral expenses. So think of it this way. If
it's just you, you're gonna have to spend down your
assets to about two grand before medicaid will kick in.
If it's you and a spouse and you go into
a nursing home together, you will need to spend down
your resources to those numbers I mentioned previously before medicaid

(06:06):
will kick in for the one who's in the nursing home. Now,
to be quite frank, everybody, we're overly simplifying this. There
are some elements of like some income that the spouse
can keep that's outside of the nursing home. There's some
rules around qualified retirement accounts. But the point of this
is to say, don't think of Medicaid as a get
to get out of jail free card here, because ultimately

(06:28):
you're going to have to spend down your estate significantly
before that would kick in.

Speaker 1 (06:32):
Are you saying, CJ, that a government program might be complicated.

Speaker 2 (06:36):
Yes, not only complicated, But here's what we would say.
Often people will say to us, well, how terrible is
that that the government requires you to use your own money?
And I go, no, no, no, no, no no no.
Remember taxpayers fund medicaid. The last thing I would want
to come to find out is that some you multimillionaire
gives his money away to his children and then says

(06:58):
taxpayers ban for timber heard to be in a facility.
You get the idea. These rules are actually good to
make sure that people don't take advantage of the government
or the sorry taxpayer funded care.

Speaker 1 (07:09):
Really good perspective there. As we talked this morning with CJ.
Closs and Eric Schwartz. They are our retirement planning professionals
from Clause Financial. We do have a phone line open
for you if you've got a question, love to have
you join us this morning. Six oh eight three two
one thirteen ten. That's six oh eight three two one
thirteen ten. You can learn more about class Financial on
their website class financial dot com. That's coss Klaas Financial

(07:29):
dot com and their telephone number six oh eight four
four two five six three seven. No charge for that
initial get to know your appointment at Colss Financial. It
will be complementary to you again their number six oh
eight four four two five six three seven. I think
those numbers for a lot of folks pretty sobering. Let's
talk then about the actual cost of care and how
long term care insurance plays into this picture.

Speaker 3 (07:51):
Eric, absolutely, and this is certainly a key part of
the conversation. And the best summary is it's it's pretty
but we're going to get into some of the details
of that here in a moment. Largely the best source
of data related to cost of long term care insurance
without going directly to these facilities and figuring it, out

(08:16):
comes from jen Worth, which is a big insurance company,
and they do something called the Cost of Care Study,
and it gives you a really good summary of kind
of what to expected terms of cost. So that's what
we're going to be referencing today. Starting with home care,
which this is definitely one of the most popular choices
for older adults, they'd rather stay in their home and

(08:38):
just sort of receive the care they need. There the
media and annual cost for a home health aid, so
someone who comes in and helps with personal tasks like
bathing and dressing. That rose by about three percent this
year to about seventy seven seven and ninety two dollars
per year. Meanwhile, if you just need like homemaker services,

(08:59):
which includes like think of this, like help with non
medical tasks like cooking and errands, this jumped about ten
percent over year over year, and that's up to about
seventy five four dollars per year. And that increases largely
because many agencies now charge the same rate for both
types of services, which is kind of interesting if you

(09:19):
think about, like, hey, I need help with with more
medical base things versus just kind of help around the house.
But that's that's essentially the way the system is set up.

Speaker 1 (09:29):
I'm not great with math, Eric, but seem like things
are adding up pretty quick here. What about what about
them like outside the home care, like you know, adult
adult programs and assisted living. As we're kind of tallying
some of this up, goodness, this is this is really
adding up.

Speaker 3 (09:47):
Yeah, don't don't sell yourself short. You've been doing the
show for a while. I think you picked up some
good math skills along the way.

Speaker 1 (09:54):
But trust my calculator, that's for sure. There you go,
There you go.

Speaker 2 (10:00):
Yeah.

Speaker 3 (10:01):
So, as we kind of look closer at this, another
service that folks will use as what we would call
adult day care services, and that saw about a five
percent increase, and that brought the national median cost up
to about twenty six thousand dollars a year. These are
programs that provide supervision and support during the day, something
we would call more like respite care for family members

(10:23):
who are providing care or maybe folks just need part
time care. And then assisted living communities these saw a
more significant increase. So we saw about a ten percent
year over year increase with the national media and now
reaching about seventy dollars. Higher occupancy rates rising from about

(10:43):
seventy seven percent to eighty four percent. That's likely contributing
to these rising costs because demand is just starting to
outpace the supply in some parts of the country.

Speaker 1 (10:54):
That is fascinating stuff. And we'll talk a little bit
too about nursing home care as well, which we talk
about some big numbers we'll get into that in just
a moment. In the meantime, if you haven't had a
chance to check out the website Coss Financial dot com,
I implore you to do that now. COSS that's k
l aas Financial dot com. Great website and resource against
class financial dot com. Telephon number six oh eight four

(11:16):
four two five six three seven. No charge for that
initial get to know you appointment dech claws Financial. It
will be complementary to you. We'll continue our conversation with
CJ and Eric. We will do that next as Money
in Motion with Coss Financial continues right here on thirteen ten.
WIWA talking with our retirement planning professionals Eric Schwartz and CJ. Closs.
Of course they come to us from Clause Financial the
website class financial dot com. That's class k l aas

(11:41):
Financial dot com. You can learn more about Coss Financial
right on the website. You can also schedule a complementary
chat right from the website. Speaking of complementary conversations, telephone
number six oh eight four four two five six three
seven to make an appointment declass Financial. Don't forget that
initial get to know you conversation at COSS financial it
will be COMPLI metry to you again their number six

(12:01):
oh eight four four two five, six three seven. Talking
this week about a really important topic, long term care planning,
and before the break we talked a little bit about
some of the numbers and got some information when it
comes to when it comes to adult programs and assisted living,
and then of course brings us then to nursing home care,

(12:23):
which I do know this is one that I'm quite
aware of. Quite expensive, actually, I thought I saw one
of the notes say it can be one of the
largest expenses of them all, can't it CJ.

Speaker 2 (12:34):
Yeah, absolutely, Sean. So, the annual median costs for a
semi private room is now one hundred and eleven one
hundred and eleven thousand dollars approximately, and this is up
seven percent from last year. And now if you prefer
a fully private room, expect to pay closer to about
one hundred and twenty eight thousand dollars, which is a
nine percent increase from the prior year. So you know,

(12:57):
these are significant numbers and they certainly highlight why it's
so important to include long term care planning in your
retirement strategy, whether that means considering long term care insurance
or self funding options, or relying on a combination of
different resources. It just really drives home that while we
plan for things like homes and colleges and retirement, long

(13:18):
term care insurance or long term care coverage or long
term care planning should be another major component to plan
for in retirement. This is why it may be prudent
to look at how insurance could play a role in
your planning. Now, before we mention insurance, I just again
want to reiterate we do not sell this stuff, so

(13:38):
we have no kind of conflict of interest on whether
or not you obtain a long term care insurance policy.
As a matter of fact, Eric and I love nothing
more than to look at a client's overall financial picture
and say, hey, you're mostly self funded against this cost,
and therefore you know insurance is optional. We love that conversation.

(13:59):
But that's a big number. Everybody to be self funded
against one hundred and thirty thousand dollars a year and
a potential nursing home cost for up to two people
in a household for some unknown period of time. Those
self funded individuals often have significant pension, social security and portfolios.
To be self funded, Okay, So with that being said,

(14:20):
how do you quote unquote like offset this risk of
potential cost spikes at the end of your life due
to due to aging. And the answer would be when
there's traditional long term care insurance. These are often policies
that we call user or lose at policies. So, for example,
a sixty year old male might pay about twelve hundred

(14:43):
dollars per year for a policy offering about one hundred
and sixty five thousand dollars in coverage. For women, it's
typically higher around one nine hundred and sixty dollars per
year for that same one hundred and sixty five thousand
dollars in coverage. Now, couples may have access to joint
policy with shared benefits. You can also choose things called
inflation protections, which can drive up premiums. But you get

(15:06):
the idea that's traditional long term care use it or
lose it. I pay if I pay, and if I
don't use it, what I lose it. There's also things
called hybrid policies. These combine life insurance or annuities with
long term care benefits. So if you don't end up
needing care, your beneficiaries then just receive a death benefit,

(15:26):
so hybrid policies are not use it or lose it. However,
as great as these are, hybrid policies are typically more
expensive because you're just basically buying a life insurance policy
that prepays the death benefit if you need it for
long term care, and then, as any good insurance agent
would tell you, they're keeping that cost up with purchasing
power is one of the challenges. So having these what

(15:49):
are called insurance writers can be a tricky thing. It
keeps your your benefit up with present purchasing power, but
it also can be the thing that drives up the
cost of your PA. So what we would say is,
sit down with a good advisor, sit down with your
whoever you trust to review your overall financial picture and
just assess whether or not you need to try and

(16:13):
ensure against this risk. We're not again, we're not at
necessarily four or against that. We're just saying it is
something you need to consider.

Speaker 1 (16:20):
Really important stuff and a lot of CJ mentions to
consider and really important stuff, says we go through this conversation.
This week, I'm talking with our retirement planning professionals from
Class Financial online Cossfinancial dot com. That's coss k l
a as financial dot Com. There're tell for number six
so eight four four two five six three seven, no
charge for that initial get to know you appointment at

(16:41):
costs financial. It will be complimentary to you. So what
about the folks who got I think this way, I'll
never need this, or you know, maybe you've got some
of these older policies that only cover nursing homes. What
will people need to know there?

Speaker 3 (16:55):
Eric, Yeah, we hear this a lot, Sean, we hear
you know, Oh I'll be fine or well that's for
later me to worry about. But unfortunately, statistically that confidence
can be misplaced. And like CJ said, you know, he
and I love nothing more than to look at a plan,
run the numbers for folks and tell them that you know, yeah,

(17:17):
you're in good shape. You don't you don't need to
be thinking about purchasing a long term care policy. But realistically,
for a lot of people, that's that's just not the case.
The US Department of Health and Human Services reports that
about seventy percent of Americans turning sixty five will need
some form of long term care. About twenty percent of
them will need it for five years or more. Women

(17:39):
tend to require care for a longer period than men,
often because they just tend to live longer. But if
you think about that, that one statistic there that twenty
percent will meet it for five years or more, that's
really I think for CJ and I that that really
is kind of an eye popping number because you know,
the averages is shorter than that, and most folks will

(18:02):
actually plan for, you know, if they need care a
shorter timeframe than that five years or more. So that's
really something to be thinking about and making sure that
you're taking this issue seriously. Really, older policies that you
might find in your parents your parents paperwork, they often
only cover care in a facility, and like I was

(18:23):
saying earlier, a lot of folks prefer, understandably to actually
get care in their home, and today's policies typically include
a range of services, but some of those older policies
won't give you that same type of type of flexibility.
And timing is everything on this stuff. So the best
time to explore coverage options is in your fifties or
your early sixties, before you have health issues arise, especially

(18:47):
cognitive decline, So don't wait too long to look into
this because your options could become more limited as you
age and your health potentially declines.

Speaker 1 (18:57):
Really a lot of stuff to take again this week,
that is for sure, really some great information, important information
as well as we talk with Eric and CJ. Our
retirement planning professionals from Class Financial learn More Online, COSS
Financial dot Com. That's Coss k l a A S
Financial dot Com. Telphon number six soh eight four four
two five six three seven. No charge for that initial
get to know you appointment tech Loss Financial. It will

(19:19):
be complementary to you again their number six oh eight
four four two five six three seven. You heard CJ
mentioned self funded. We'll get to some of the details
on that. We'll also do the listener question corner as
well as the clas quiz question week. It's going to
be an action packed final segment of Money in Motion
with COSS Financial and we'll do that next right here
on thirteen ten wiv I. We're talking with our retirement

(19:40):
planning professionals CJ. Closs and Eric Schwartz of Class Financial Online,
COSS Financial dot Com that's Class k l a A
S Financial dot Com and CJ uh. In the last
segment you mentioned Uh self funded instead of buying insurance.
Let's talk about folks in that position and what folks
need to know when it comes to self funding these

(20:00):
type of things.

Speaker 2 (20:02):
Yeah, good point, Sean. You know, some people will call
it being self insured, and we would say no, insurance
is about is about a group of people de risking themselves.
It's the rule of large numbers. So you can't really
self insure this. You can self fund it. But anyway,
that's me getting into into the weeds on the definitions
of words. But yes, self funding is definitely an option.

(20:25):
And research does show that that while most people over
age sixty five spend less than twenty five thousand dollars
on long term care, about fifteen percent will spend more
than two hundred and fifty thousand dollars. And again, depending
upon where you're at with your portfolio, that could pose
a significant financial risk to kind of your goals. So

(20:47):
let's break down your choices. There's family caregivers, so roughly
sixty five percent of long term care is provided by
family members. However, this can place a heavy burden on
adult children, especially the so called Sandwich generation, who are
balancing careers in their own families. The other option is
self funding. So if you go this route, make sure

(21:08):
you've saved enough to both support your lifestyle and cover
future care expenses if you end up needing like a
private room like we talked about previously. And then finally,
insurance with this is whether it's a traditional or a
hybrid policy, insurance could offer peace of mind and help
preserve your assets. And of course the right choice depends
upon your age, health, income, family situation. But you get

(21:30):
the idea here, everybody. So, yes, self funding is an option,
but it doesn't mean it's optimal. Let me actually put
this a different way. If you end up needing care
for a let's just say three to four year period
of time in and let's just call it like private
room or semi private room in a nursing home, you

(21:51):
will more than likely have been best off to have
bought an insurance policy period. End of story. Right, So
what is the best choe And it's like, well, I
don't know. If I knew the future, I would tell
you what the best choice is. So just because you
can self fund doesn't mean that you should or that
you want to. Because maybe one of your goals is
to leave X number of dollars to your estate or

(22:14):
your children and your charities. Well, if that's your goal,
you're going to have to de risk yourself against spending
it down at the end of life. So I'm kind
of getting into the weeds here, but what we're getting
at is there are multiple options. You just need to
decide what matters to you.

Speaker 1 (22:30):
Really great conversation this week. Don't forget you can always
listen back subscribe to the podcast at cossfinancial dot com.
That's Cossfinancial dot com. Speaking of getting to the website.
Another great opportunity to submit a question to be answered
in the listener question corner, and today's question comes to
us from Aiden, who wrote in with a very timely
retirement question. Aiden says, I'm turning fifty five this year
and thinking about retiring soon. I've heard there's a way

(22:51):
I can take money out of my four oh one
K without paying the ten percent early withdrawal penalty. Can
you explain how this works? And CJ will let you
answer Aiden's question?

Speaker 2 (23:04):
Yeah, great question, Aiden, And this one comes up quite
often so what you're referring to is commonly called the
separation from service rule, which is actually if you google
it everybody. It's separation from service after the age of
fifty five or at the age of fifty five. And
here's how it works. If you separate from your employer
in the year you turn fifty five or later, or

(23:27):
age fifty if you're in in public safety, the IRS
allows you to withdraw funds from your four oh one
K or four h three B plan tied to that employer.
That's key, without paying the usual ten percent early withdrawal penalty.
This is sometimes called the age fifty five exception. Now

(23:48):
here's the key. This only applies to employer sponsored plans
you're leaving. It doesn't apply to iras or to four
oh one ks from past employer lawyers. Now, when I
say from past employers, if you separate from service at
say fifty six, and that's your past employer, it applies
to that. But what we're saying is it doesn't apply

(24:11):
if you were fifty three and left a past employer
and left money at that past employer, and now you're
fifty six years old. You get the idea that doesn't
apply because you didn't separate from service at fifty five
or later. So another thing to remember, just because you're
avoiding the penalty, you still owe regular income tax on

(24:32):
the distributions. Again, avoiding the penalty is a pretty big deal,
but you'll still have the taxes. And if you're considering
retiring at fifty five, this strategy could help you bridge
the gap until you reach age fifty nine, or say
sixty two when Social Security first becomes available, or sixty
five when Medicare kicks on. You get the idea. So

(24:52):
here's what we'd say, if you see anybody listening out there.
If you separate from an employer with an employer spot
answered retirement plan like a four oh one K or
four h three B at fifty five, fifty six, fifty seven,
fifty eight or fifty nine, okay, so think of it
as those years. So you're not yet fifty nine and
a half, that's the key, but you are at least

(25:15):
fifty five. If you separate from service from an employer
and that window of time, caution, caution, caution, Probably don't
roll that over to an IRA, because as soon as
you roll that money over to in IRA, then you
have to wait till fifty nine and a half to
pull it out without a penalty. But if you leave
it in that old employer in that window of time.

(25:35):
Now you have access to funds without a penalty. So
that's that's kind of the idea here and Aiden, thanks
so much for asking the question.

Speaker 1 (25:42):
Great question. Of course, you can smit those right online
COSS Financial dot com. That's Coss Klaas Financial dot com.
They're telephone number six oh eight four four two five
six three seven. No charge for that initial gets to
know you appointment tech Lost Financial h will be complimentary
to you again. They're number six oh eight four four
two five six three seven. Want to hold on to
that telephone number now because it's time for the Class

(26:04):
Quiz question of the week. It works like this. In
just a moment, I'll ask you the class quiz question
of the week. You will then have thirty minutes from
the end today's program to call the Class Financial office
right here in Madison at six oh eight four four
two five six three seven. If you are the first
call with correct answer, win this week's prize, which is
a twenty five dollars gift card to best buy this
week's Closs Quiz question week. Is this true or false?

(26:26):
Medicare will cover all associated expenses with long term care?
Is that true? Or is that false telephone number six
oh eight four four two five six three seven, first
call with correct answer when this week's prize at twenty
five dollars gift card to Best Buy. Don't forget that's
Class Financial's office, their telephone number right here in Madison
as well. Six oh eight four four two five six

(26:47):
three seven CJ. Eric. It's always great chatting with both
of you guys. Have a happy Thanksgiving and we'll talk
real soon.

Speaker 2 (26:53):
Thanks Sean. Thanks Sean.

Speaker 1 (26:54):
News comes your way next year at thirteen ten w
IBI