Long-Term Care Reality Check

What happens if one event quietly wipes out everything you’ve built?

In this episode of MasterPlan, we get into one of the least talked about — and most financially destructive — parts of life planning: long-term care.

Most people assume it’s something that happens “later” or that family will figure it out. But the reality is a lot more complicated — and a lot more expensive.

We talk through:

0:00 — The Question Nobody Asks
0:15 — Welcome + What This Episode Covers
0:45 — The “Nuclear Button” of Retirement
1:30 — Why Home Care Isn’t That Simple
2:10 — What Long-Term Care Actually Includes
3:00 — The Real Costs (2025 Numbers)
4:15 — Nursing Home Costs Explained
5:00 — Medicaid: The Backup Plan
6:00 — The Bigger Problem (System Capacity)
7:00 — Why Long-Term Care Insurance Is Failing
8:00 — What People Get Wrong

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Call 770-980-9262 to speak directly with someone about your retirement planning needs.

https://masterplanretire.com/

Catch all episodes of our podcast at https://www.masterplanyourretirement.com/resources/episodes

Listen to Mark Fricks on Saturdays at 12:00 p.m. on XTRA 106.3 FM WFOM.
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Purchase Mark’s book, The Road Less Traveled: Turning Your Retirement Worries Into an Excursion of a Lifetime, on Amazon: https://a.co/d/4fx94Al

Advisory services offered through MasterPlan Retirement Consultants, Inc., a Registered Investment Advisor in the state of Georgia. Insurance, tax and commodities services offered through Fricks and Associates, Inc. dba MasterPlan Retirement Consultants. The aforementioned are affiliated companies.

Transcript

Long-Term Care And Retirement Risk

SPEAKER_01 0:12

Will you need long-term care insurance? Hey folks, welcome back, and thank you for joining us. Welcome to Retirement Roadmap with Master Plan Retirement Consultants. My name is Evan, and with me as always, retirement planner Mark Fricks. During the show, we're going to break down a few long-term care myths and discuss ideas of how to add long-term care protection to your holistic retirement plan. Mark, more and more long-term care strategies are crucial for a complete retirement plan.

Long-Term Care Is A Spectrum

SPEAKER_00 0:44

Yeah, when we do our uh complementary consultations, you know, we run six or eight different reports. One of the ones we uh run is the long-term care report. What happens if that hits, and we just pick an age, maybe in the 70s or early 80s or whatever, and literally the money disappears like three, five, seven years in most cases. It's the most devastating of the reports for anyone. Yep, it's it's it's it is the the nuclear button of retirement. And so, you know, people can either just ignore it, which a lot of people do. They're just like, hey, my family I take care of me. We know the reality of that is is very small, very difficult to take care of folks at home, especially if they're bigger people like you know, the male of the family, or or even just me picking picking up somebody that weighs 125 pounds, it's gonna damage me too. So uh this home care without any help um is is uh uh I wouldn't say a myth, but very difficult. So how do you deal with it?

SPEAKER_01 1:39

Well, first of all, long-term care is often misunderstood. It's not just nursing homes, but it's a full spectrum of services. So here's the problem. About 1.2 million Americans reside in nursing homes, but many people first use homemaker services, home health aids, adult daycare or assisted living.

SPEAKER_00 2:00

Yeah, kind of working their way up to the nursing home. The last place you want to be is a nursing home. It's it's the last stage of care. Um, you know, I can remember as a kid going there and visiting my grandmother and things like that, and it being just, you know, j uh I don't know how to put this, but just a a sad place to be. Nobody wants to be there. But that is the last step of the road, and you know, if if I were to make it that far even. Like you said before, you kind of take those stages stages, which some of those stages can actually be more expensive than some of the other stages, like home health. If it's full time or or three-quarter time, it's very expensive.

SPEAKER_01 2:34

And just as you said, it it's almost a tiered system. You start with income uh in-home care, excuse me, and progressively work your way up and to the nursing home, and each of those is its own unique cost. And um and who knows, you know, and we weren't gonna get into this aspect so much today, but there's even um renovations to homes and remodeling so you can age in place when when maybe you've lost the almost like a group home or something like that.

SPEAKER_00 2:59

Or even that, yeah, of course.

2025 Costs That Shock Most People

SPEAKER_01 3:00

Um and we've seen that as well, and that's just more that you have to make sure that you can handle in your strategy. So here are some numbers of annual costs, and this is from 2025. And this is a nationwide average as well. So keep in mind some areas are gonna be more than this.

SPEAKER_00 3:17

I know up north, northeast is much more expensive, the southeast is less, west coast is more expensive, Midwest is less. So, yeah, definitely a nice.

SPEAKER_01 3:35

Um don't seem to be getting any more competitive. They're not gonna couple of uh of averages here. So homemaker services annual cost average is$75,500. Home health aid is$80,000, adult daycare is$26,000, um, and assisted living is$74,400. Okay, so those other than the adult daycare, which is a l it was which is considerably lower, um, those other three are ranging between the$75 and$80K annually. Um so what happens when we need to graduate to a nursing home? Well, um a semi-private room is about$110,000 to$115,000 per year, and then a private room is$127,000 ish to$130,000 a year.

SPEAKER_00 4:27

That that's just uh so much money, and and it it's again, we're so unprepared, and we'll talk about the history of long-term care today, uh, what was uh the old way of dealing with it, what's the new ways, things like that. There are tools that have come out. You know, financial service companies are always looking for uh a competitive advantage. So they're gonna come out with products that people will be drawn to. Um but because there are several different things out there now, which one fits you? Uh it could be one works better for you than another. Uh so we'll definitely talk about all those uh choices today.

SPEAKER_01 5:00

Yeah, and you know, some people r consider part of their plan relying on Medicaid in the future. And, you know, that can be part of your plan for sure to help cover the costs. But as we know, eligibility requires income and asset limits, often forcing a spend down of your assets before. And we know depleting assets can reduce our legacy opportunities and impact the surviving spouses.

SPEAKER_00 5:26

Yeah, that's a big one. And just so people are clear, Medicaid is the state-run program, which is funded by the state with some help from the federal government, so it's for folks that have run out of money. That's just let's put put it clearly. And that's fine. And you do have a few choice of places to go. Right. So that will affect that as well. So that that's a plan, and and I'll tell some clients that have, you know, much fewer in assets that really can't afford any of the long-term care tools. I'll say that that just may have to be your plan. At least you'll get care. And it and it's I'm not saying it's not quality care. It just may not be the, you know, the nicest place out there, so to speak. Trevor Burrus, Jr.

SPEAKER_01 6:00

That's a good point as well. Part of the strategy to covering it is making sure that you have the option to choose because our infrastructure cannot handle the baby the full spectrum of the baby boomers who are all moving into this transition in trans excuse me, transitioning into this period of their life, who need long-term care. We simply don't currently have the facilities yet, and even more so, we don't have the manpower to help. We don't have, I mean, it takes a very special person um to offer that sort of care. Um and they don't pay a lot. And they do not pay a lot, exactly. So it's uh it's a big problem. And yes, you can rely on Medicaid. Sometimes you don't have a choice, and that is okay. That you can you can make that work. However, um the better strategy you have, the more options you have to choose from.

SPEAKER_00 6:47

Right. And and again, it's it's um uh as we get into this, it's it's interesting. I look back and I can remember in the 70s and 80s when my grandmom and and grandmother and grand and grandfather uh were aging and things like that. And so people wonder what happened, why did long-term care insurance miss the mark? In other words, they're going, they're going broke. They're having to raise rates every few years. And so what happened was they did not anticipate uh us lengthening lives so far. And with longer lives, more and more Alzheimer's, dementia, Parkinson's has appeared, whether it be because of a longer life, whether it be because of uh environmental issues over the years that have fed that. I don't know. This is not a scientific show, but uh that's it that they're just being it flooded and they are building new facilities, but like you said, you gotta find people that want to work in these facilities as well. And I don't know of a facility that's not shorthanded. Right. You know, and then can they afford the people they need to hire as well? So then that drives the prices up. It's just this vicious, vicious cycle, so to speak.

SPEAKER_01 7:49

Well, so here's the myth: you must buy traditional long-term care insurance. You already spoke to a little bit of of why that's becoming difficult. One, we know it's gotten incredibly expensive. Um, we know that it gets more expensive, the premiums will write will go will go higher every few years. Like health insurance. Uh right. And it's getting harder to get. Fewer companies, fewer and fewer companies are offering it because of how expensive it's become. Um so let me make something clear. If you have long-term care insurance and can um self-insure yourself that way, it can be such a blessing in a time of need. There are people who will swear by it because it helped them in a time where they really needed it. However, we're seeing more and more companies um reach out to some of our clients who may have already had it when they came to us offering to buy them out.

SPEAKER_00 8:39

Yeah, here's fifty thousand dollars, walk away from the policy.

SPEAKER_01 8:42

That's a true story. Fifty thousand dollars, you heard the numbers that I mentioned earlier. Um that wouldn't cover an annual cost of three out of four.

SPEAKER_00 8:51

Yeah, right. So are they getting letters, you know, I get a call probably at least once every few weeks saying, you know, again, they bought their policy, the traditional long-term care policy. They bought it before uh they started going up, they bought it years ago before they came to see us, and they're like, I got another letter this year, and they're saying they're going up 15%, 20%. This is the fourth time that they've done this, twice I've paid the premium, twice I've dropped my coverage lower. It's just going to become nothing eventually if they live long enough. And then do they use it? Yeah. When you reach you know, 80, 85, and you just pass away, all those premiums have been paid and and just almost a waste. Now, the good ones, especially from like the 70s and 80s, if you bought that long ago, there were some really good ones out there, but they're still going up. Yeah. So you know, the only one that that I would have loved to have had would be one that was like what they call a 10 pay. You pay it for 10 years and it's done, can't go up. It's done, and it's like lifelong coverage as long as you're in a nursing home. Do they offer those anymore? No. No. Those are long gone. So along with the 57 Shabby, those are gone.

SPEAKER_01 9:55

Well, you touched a little bit on perhaps one of the uh most devastating aspects is if you are paying in for 20 years and it's going up and going up and going up, and then you're in your mid-70s and you can't afford to pay the premium anymore, so you're forced to drop it. And there's all those years of wasted money that is just basically just for nothing. Yep. Um, there's the myth. Traditional long-term, or excuse me, there's the problem. Traditional long-term care insurance does provide coverage, but it can be expensive, requires ongoing premiums, and offers no return if it's unused. Now for some alternatives.

SPEAKER_00 10:29

Yeah, that's all the bad news. That's the bad news. You get a good news for me?

Life Insurance Riders As A Backstop

SPEAKER_01 10:32

I do, I do. Here's some alternatives. Um life insurance, believe it or not, with a long-term care writer, allows access to part of the death benefit for care while preserving a potential legacy if unused.

SPEAKER_00 10:45

Yeah, we call these a three-legged stool. Uh so basically um very flexible. They're based on a universal life chassis of a life insurance policy. So aspect one is we actually uh convert IRA money into these policies. We typically do like a five-year period. We don't want to do it forever. Um, and so we're throwing more money than is even necessary into these policies because they go into the cash value. Some of it pays for the death benefit, but a lot of it goes into the cash value. Cash value looks and smells like a Roth. It grows tax-free, it can come out tax-free. So leg one is I could have some tax-free income in the future. Leg two is if I pass away early, I may have a spouse, I may have kids, they get a death benefit that's tax-free, three or four thousand dollars or more, or whatever it may be. And so there's a legacy or there's to help my spouse continue with her or his retirement. Right. Leg three, though, is the cool one. Well, they're all cool, by the way. But leg three is that long that uh death benefit can be used for long-term care. There's a writer called a critical illness writer. It is with our companies, no cost to add it. And so basically it says you can use up to 95% of your death benefit for critical need. What is a critical need? A long-term care need, okay? And so you don't pay for it unless you use it. And even then, it's five cents on the dollar. It's tax-free, and the restrictions are much lighter. You don't have to turn on receipts every month. The money just comes to you every month automatically to use however you want to use it. So if I've got a niece that's in college that wants to make a little bit of money, uh, she can come over, uh, get cook my breakfast, help me get going in the day, get me, you know, situated till lunch, maybe clean the house a little bit, pay her$20 an hour, and we're done, as opposed to an agency coming in that's double or triple that. So much more.

SPEAKER_01 12:31

You know, if there's some people who can't don't have that situation, and this is an opportunity to help pay for those agencies because there is the level of professionalism that's the same. It's the care. Of course. Um so before we move on to the second alternative, I do want to point you to our website, masterplanretire.com. There you can schedule your complimentary consultations. That's an opportunity to discuss your own retirement, your hopes, your dreams, your fears, your goals. And we will run a series of reports, as Mark mentioned earlier. We do have that long-term care report. But basically we see how your retirement outcome looks right now with no planning, and then we discuss what it would look like to develop your retirement plan. So check that out, masterplanretire.com or call us at the office 770-980-9262.

SPEAKER_00 13:16

Lots of resources in that website, by the way. Rated the number one retirement website in the world by my father.

Annuities That Boost Income For Care

SPEAKER_01 13:23

By everyone in this office. That's true. Well, maybe not everyone in this office. Uh another alternative is uh annuities with long-term care writers, similar to the writer we mentioned on the long-term care or on the life insurance policy. But uh these long-term care writers can integrate income planning with care benefits, and they may pass the remaining values to your beneficiaries.

SPEAKER_00 13:46

Right. So basically, as you know, to get down to the elementary aspects of this, an annuity is something that you put some money in so that one day you get a guaranteed income stream like Social Security. Social Security is the world's biggest annuity. So if you need additional guaranteed income, it's a great way to get that, but by adding this writer, and it's not expensive, it's maybe 1% or whatever per year of the of the value of the annuity. And so you're paying this small price to get a guaranteed income. But if that if you have a long-term care need, that income can up to double. And I even have one company that will triple your benefit or your income if you have a long-term care need. And so now you're you know you're not losing anything, you're gaining more if you have a long-term care need. Will it cover everything? Depends on how large the annuity is. But certainly between that and Social Security and your assets, it can make a big dent in the cost of long-term care for you.

SPEAKER_01 14:39

Well, that's a great point, too. These are not one tool answers either. For some people they may be, um, and which would be fantastic. But a lot of times they have to coincide with multiple tools, and even something as simple as a um long-term portfolio in the market that we can beat inflation, beat some taxes, beat all that kind of good stuff, and that'll be an extra buffer. Well, this bucket is for 15 years, 20 years down the road. We're not touching that till then. Um so everything has to work together, and these are just some options. These are not recommendations for you because we don't know you. Um however, these are some options that we definitely employ.

SPEAKER_00 15:15

Well, what I love about these options is that they have more than one function. So it's not like if you don't use it, you lose it. So if you've got this guaranteed income, if you never use the long-term care rider, you still have guaranteed income for life. And like you said, anything left over can go to your heirs. And so it's you don't waste any penny of it, plus the growth. So it's a great tool. Make sure again you have a fiduciary pointing you in the right direction. Uh make sure it's the proper company, make sure it's A-rated or better. I mean, there's lots of things concerning this. It's not just, hey, I'm going to snatch an annuity out of the air. So make it part of your overall plan.

Household Planning And The Real Odds

SPEAKER_01 15:48

We say this a lot. There's no one size fits all solution. All right, long-term care planning should align with your income needs, uh, risk tolerance, your legacy goals. Roughly 70% of Americans turning 65 will require some form of long-term care services. Even if one spouse never needs care, the other might. Long-term care planning is household planning because we've also seen the first spouse need long-term care uh and drain the resources. And then the remaining spouse is not only not left with long-term care services, but maybe nothing left, you know, and and all of a sudden they're maybe just have one social security left and that's it. That's not an uncommon situation.

SPEAKER_00 16:30

Yeah, because of course uh a spouse passes away, the remaining person is left with one social security payment, right? And whatever other assets have not been drained down. So that's the devastating double whammy. You have, you know, you have a husband or wife that that spends six or eight years going through the process of the various levels that we talked about earlier of care. Uh, drain this down by four, five, six, seven, eight hundred thousand dollars. And then you have a spouse remaining uh that may have another twenty years of life. They're already 75. Do they want to go back to work? They don't want to, may have to. And so again, we want to look at these what-if scenarios. If this happens, we've got this tool and this tool. If that happens, the uh these other two, whatever it may be, right? And so that's why when we run the reports, those seven or eight reports, it illuminates those holes in people's plans so we can pick the proper tool to plug that gap. That's right.

SPEAKER_01 17:26

And a few more s uh statistics as well. So an average healthy 65-year-old couple has a 75% chance that at least one partner will require significant long-term care during their lifetime. This is according to Health View Services research. There's also a 25% probability that both partners will need care. Um, while 70%, as I mentioned, 70% of people over 65 will need care. Um one thing that we do find is having a spouse often delays the need for paid services. Oftentimes you see one spouse taking care of the other for a while before they need to call in um, you know, more professional help, uh, higher medical resources.

SPEAKER_00 18:03

But once that's other spouse passes uh the first spouse passes away, now you've got probably a greater need of long-term care for that remaining one because who's at home to take care of them. I certainly don't, you know, want my kids having to drop their lives to come take care of me. I'm sure they would, but don't want that, of course. So again, having a plan and not just uh uh you know just ignoring it, it's not gonna go away. Hopefully uh you're blessed and you don't need that kind of care.

SPEAKER_01 18:29

Well, you know, we talked about the financial strain, of course. The expenses can significantly impact your retirement savings, create financial strain. But we don't often talk about the emotional strain of families. And um yes, maybe you will have someone in your family who has the time to take care of you and and is willing and wants to do that, but that is a huge burden physically, emotionally, uh mentally. Uh we have a client who has been taking care of her father and she loves him and she she that she insists on doing it, but we also she speaks of the toll and how she has no time for herself and it's a difficult it's a difficult season, although she's got the kind of heart that she just wants to be there with him. Um but we don't we have to keep that in mind too. The strategies in place give you an opportunity to not only save your financial strain, your side your financial side of your plan, but also uh your emotional and family uh you know tight knitness and making sure that everyone is able to um enjoy those years with someone who might be in need.

SPEAKER_00 19:29

Well there are studies that show that that a caretaker, their lives and health is shortened in most cases if they do have to spend a lot of time taking care of a loved one. Again, they love that person, um, you know, they want to take care of them, but at the same time, it is draining and it can really affect the rest of that person's life as well. And it's it's not it's not and we see it. I mean we we see clients come in and we can see the change in them. They had to get a sitter to sit with their spouse while they could come in and meet with us and catch up on finances, and we can see the strain on them and then how they've uh aged more than you would have thought. Uh not in every case, but but but we have seen that.

SPEAKER_01 20:07

Yeah, so just like retirement planning, uh planning early expands your options for long-term care. It increases flexibility, helps protect financial stability, and again, family peace of mind. But we know um the sooner you start planning, it will tell this to everybody. We've had people come in, uh, hey, I retired last week, can you help me? We've had people come in, I'm not retired for 20 years, retiring for 20 years, can you help me? I mean we've we've we've I've been retired for 10 years, can you help me? And we'll help everybody, but it's always the case. The more time you have, the more preparation, the more those accounts can get ready and prepare for your need. Um and so we see that in long-term care planning as well. It has to coincide with the rest of your retirement plan. It is holistic for a reason, it is comprehensive for a reason because that income, that estate and legacy planning, that long-term care planning, all of those things do work together, and they must, frankly. They must be.

SPEAKER_00 20:59

And I think a great way to put it, I think, is you want to plan for the need of long-term care, but also plan that you may not need long-term care. Right. So, what how do you maximize both both of those areas? And there is a way to do that. Yeah. And that's why I love the tools we're using. We even have another uh tool that is also more of a life insurance base, but uh actually have a client right now that's purchasing it, and they're doing a one-time payment. He uh he got an inheritance,$200,000, and they're gonna put$200,000 one time into this uh tool, never pay again, and it will cover both of them. Now it's it's shared services, so if one uses it all up, there's nothing left for the other one, but at least that um three or four hundred thousand that went toward long term care um stopped the other assets from draining. It's a piece of the product. It saved you know some of their assets as well. But in this case, again, if one needs a little bit of care, there's still plenty left for the O, and vice versa. So it's a really cool tool. We just started using that one more lately, um, depending again on the circumstances. And and uh that one you can pay over ten years, you can pay over five years, you can whatever. So it's not just a one time you've got to put something in, but that way again you know you're done with it and it's not gonna go up.

SPEAKER_01 22:10

Yeah.

SPEAKER_00 22:10

So I I I love this new tool we found uh in the last year or so and beginning to use that uh much more.

SPEAKER_01 22:16

Yeah, and not trying to get down the rabbit hole of product talk and everything else like that. But again, they are tools to use um for in retirement planning. Ninety-nine percent of the time the first thing that we have to take care of is income. Income is is our income plan in place. Um and so oftentimes we'll be employing other tools to help alleviate some of the income need, t fill some of that income gap. Um there are like we mentioned some of those annuities out there. There's one I really love right now that if you have a long-term care need or critical illness, which I think on that one is uh if you are missing three of the five activities. I think it's two of the ADLs. Excuse me, I'm in two. Yep. Two of the five ADs. Or mental capacity. Right, right. Um and typically just a doctor's note. But basically your income, once it's turned on coming from that product, you turn it on, it can double for five years. And then at the end of those five years, it just goes back down to where it was. Um it's it's that's not a one tool solution. But think about when you've got your whole comprehensive plan, you've already got this tool filling out your income need, and then you also have a future supplement to assist with long-term care in the future, and that's just one small piece of the pie there.

SPEAKER_00 23:26

And again, it depends on your needs and it depends on your other assets. Maybe you just need one little gap filler, just as for peace of mind, or maybe you need a couple of these tools. Every case is different, as we talk about almost every episode. So it's it's getting that comprehensive plan together, and as you've said many times, Evan, you make a change here, it's gonna change probably three other areas. So it all has to work together. And even during uh retirement, as we continue working with our clients, ch something changes in their life. It's gonna affect several areas. We have to adjust that plan so it's not set in stone. It is fluid living, like you said, I think a living document or a living plan.

How To Get A Complimentary Consult

SPEAKER_01 24:01

Yeah, absolutely. Well, folks, I do want to remind you to check out our website, masterplanretire.com, to schedule your complimentary consultation or give us a call at the office, 770-980-9262. Glad you joined us.

SPEAKER_00 24:14

And until we see each other again, remember, plan well and prosper. Take care, everybody.