Who will need it and for how long, how much it will cost, the state of the long-term care insurance marketplace, and the toll on caregivers.
If there's a single unsolved problem in the retirement plans for many middle and upper-middle-income adults, it's what to do about long-term care costs later in life.
Very high-income, high-net-worth people can plan to self-fund long-term care costs, though I'd advise them to do the math on long-term care cost inflation before getting too comfy with the idea that they'll have enough to do so. Meanwhile, people without significant financial assets will need to rely on Medicaid-provided long-term care. That's most people: Medicaid and other government programs cover the majority of the long-term care costs in the U.S.
Sandwiched in the middle are people with some, even significant, financial assets--just not necessarily enough to comfortably fund a $300,000 (or more) long-term care outlay at the end of their lives. For them, the choices are stark and rather unappealing. They could purchase traditional long-term care insurance and risk premium hikes. Alternatively, they could purchase one of the increasingly popular hybrid life/long-term care products and face an opportunity cost, as discussed here. Or they could forego insurance altogether, planning to self-fund care or use nonportfolio assets, such as a home sale, to cover any long-term care costs.
If you're among the people who are still on the fence about what to do, the best way to make smart decisions is to go into the process armed with the facts. How likely are you to need long-term care and for how long? What does long-term care cost, and what does it cost to insure against it?
Originally published August 20, 2018, on Morningstar