To Self-Insure or Not 
Is self-insuring a wise investment?
Some may believe they can afford to self-insure. But even those with significant assets could erode their savings very quickly should they need long term care.
The first concern should be whether or not you will be insurable in the future if you should decide later to buy insurance. Insurability is determined by: application information, phone interview, and medical records review. Not every applicant qualifies.
If you have decided to self-insure it is recommended that you work with an estate and elder law attorney to make sure your assets are protected. More people are worried that the IRS will take a big chunk out of their estate than what they might pay for long term care.
“I can self-fund the risk."
You have strong assets, but long term care isn’t really an asset issue. It’s an income issue. If a major care event required $1.5 million, it could reduce your retirement income by about 75%. You could pay for it, but the real question is whether you want to spend your hard earned savings that way.
Using Your Investments/Savings To Pay For
Care
How much principal would you need to generate
$6,000-$9,000 a month for care?
For every $1,000 of monthly retirement income you want
to generate from your own savings, you will need about
$230,000 in assets, according to the Schwab
Center for Investment Research. For example, if
you want $3,000 a month, or $36,000 a year, you would
need savings of $690,000. That's a conservative
estimate, assuming that you earn 5.2% on your
investments and live off the earnings without dipping
into the principal.
For a $6,000/month care cost you would need
$1,380,000.00
For a couple you would need $2,760,000.00
Got a pencil and calculator?
The average amount of care needed is 2.5 years for men and 3.5 years for women.
The average nursing home cost Nationwide
in 2024:
- Semi-Private Room $8,700/month x 12 = $104,400/year
- Private Room $9,700/month x 12 = $116,400/year
- Double these numbers for a couple.
The cost of nursing home care varies by location. To find the average cost for your area you can call local care providers by searching here: (https://www.NewLifeStyles.com).
Key reasons to consider long-term care insurance, advice from Schwab Investments
- Long-term care insurance can provide security for years to come by helping to:
- Secure quality, affordable care
- Preserve independence and financial freedom
- Help provide for the rising cost of long-term care
- Relieve family members and friends from having to provide care
- Safeguard your assets for your spouse and other heirs
- Help pay for expenses not covered by Medicare and Medigap
Do You Know If Are You Protecting Your Retirement?
Most long term care funds come from life savings or retirement savings.
Can you think of anything other than the cost of long term care that could deplete your lifetime savings, retirement income, or portfolio?
If you needed long term care tomorrow, what would be the consequences to those around you?
In that situation it is the consequences that matter, not the money. Once someone needs care money no longer becomes an issue. Once someone needs care no amount of money can buy insurance. Their decision to self-insure will prove to be right or wrong.
Long Term Care is a family affair.
The majority of caregivers are family members.