Every individual faces the risk of paying for some type of long-term care expense. The older we get, the more likely we will become a statistic in need of long-term care. Thus, it would be wise to establish a plan to pay for such expenses. This does not mean you necessarily need a policy, but you do need a plan because if not properly planned for, it could cost you dearly.
When people face a specific risk, they analyze the cost of internalizing it or transferring that risk to a third party. Take, for instance, riding a bicycle. Before riding a bike, rational individuals consider purchasing a helmet because they know they risk falling off the bike and causing serious injury. As purchasing a helmet costs less than paying for a head injury, a prudent individual makes the purchase and wears the helmet on every ride. Although no one expects to fall off a bike, they still have the helmet in place just in case the unthinkable happens. If they hit their head while not wearing a helmet, the cost can be significant, putting a real strain on their family. Thus, wearing a helmet ensures that you protect not only yourself, but also your family from the aggravation and expense that comes from a serious accident. Long-term care protection works in a similar way: You might not need it, but it is in place just in case the worst happens.
Are You Near Retirement or Retired Without A Helmet?
Developing a plan to minimize potential risk is something that all financial planners stress. Science is enabling us to live longer, but it is also increases the chance that we will need some form of long-term care at some point in our lifetimes. Is it really an option to live with your kids if you need some type of care? Would you want to take care of your parents if they were in a distressed state of health? You need to ask yourself these questions, because far too often we hear of this happening. If your parents do not have a plan, you and your siblings might want to discuss investment options in order to protect your family. If you are currently retired and have children, you might want to discuss what your long-term care plans are with them in the event you need this type of care.
Investing in Protection
The major objection most people voice about long-term care is that they are paying for protection that they might never use. Although playing the odds that you might not need insurance is very risky, we recognize that traditional long-term care can be very expensive for some. If you would rather not pay for long-term care or if you find it too expensive, you may be interested in a new investment that is an asset, not an expense like traditional care. With this new investment, if you do not use the benefit for long-term care, the benefit is given to your beneficiaries in a lump sum, tax-free. Maintaining the investment, even for a relatively short timeframe, grows your money at a guaranteed interest rate. In addition, if at some point you decide that you no longer need the investment, you are able to get your entire investment back through a provision in the contract at any time. This offers a great option for people who have money set aside for emergencies or money set aside for their heirs.
This investment is quite innovative, and I have been told that banks are even using it to provide an alternative for their low-yield CDs. This could be an option for individuals who do not want to add another expense in retirement and this alternative should be discussed with a financial advisor because not everyone needs a policy, but everybody needs a plan. FBN
Bill Babb is president of Babb Financial Group, LLC. Information is available at 928-526-2911 or at www.babbfinancialgroup.com.
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