Help Me Retire

We have four houses worth $6 million plus stocks and collectibles worth millions more. Do we get a long-term care policy or pay it out of pocket?

‘My wife does not work, and I am considering early retirement’

“We also have three 401(k) plans and an IRA worth a total of $2.5 million. We have stocks worth $350,000, precious metals and collectibles valued at $500,000 and $500,000 in high-yield savings.”

MarketWatch photo illustration/iStockphoto

Dear MarketWatch, 

I am a 62-year-old man married to my 60-year-old spouse. We have two children, 25 and 23 years old. We own four houses — two in California and two in Virginia — worth about $6 million but owe only $500,000 total in mortgages.

Three houses are rented out while we live in one house in Virginia. We also have three 401(k) plans and an IRA, worth a total of $2.5 million. We have stocks worth $350,000, precious metals and collectibles valued at $500,000 and $500,000 in high-yield savings accounts. 

My wife does not work, and I am considering early retirement. We are thinking about buying a long-term-care policy, which costs about $300,000 in a lump-sum payment. Our assets and accounts are in the name of our living trust, with me and my wife as trustees.

Given our current situation, and our desire to leave 50% of our assets to our children and 50% to a charity upon our passing, would it be sensible or cost-effective to buy the long-term-care policy, or should we invest the $300,000 elsewhere? Thank you in advance for your guidance.

See: Reverse mortgage, sell the house or Medicaid? How can my parents pay for long-term care?

Dear Reader, 

You’re in a financial position many near-retirees are not, and that’s the ability to live comfortably and pay for long-term-care costs out of pocket, if need be. 

Long-term care is front and center these days, as more Americans are living longer but may be faced with chronic conditions as they age. Healthcare is a major cost for many retirees. The average couple retiring at age 65 can expect to spend more than $300,000 in retirement on healthcare alone, and that doesn’t include long-term care, which can be hundreds of thousands more when accounting for the price of rooms in nursing homes or home health aides, as well as medications and procedures. 

This year will see a peak in the number of people who turn 65 in this country, and we can expect to see at least 12,000 people celebrate their 65th birthday every day until 2027. Seven out of 10 of those people will require long-term care, according to Genworth, which tracks the costs of this type of care across the country. 

There are two ways you can go about this: One is to insure, and the other is to pay for care yourself. Given your portfolio of real estate and investments, you could technically self-insure, or pay for care yourselves, as many wealthy individuals do. Some experts say this is the way to go. “The cost of buying a policy in their 60s, coupled with the likely increasing premiums over time, doesn’t make sense when they can afford to pay for their own care,” said Cynthia Sforza, a certified financial planner and founder of Lucidity Wealth Advisors. “There’s an adage that goes, ‘If you can afford a long-term-care policy, you probably don’t need it, and if you need it, you probably can’t afford it.’”

Instead of paying for a policy, you can save the money you would have spent on premiums and use it to pay for care if the time comes and you do need it — which may or may not happen, Sforza said.

The case for long-term-care insurance

But just because you could pay for care yourselves doesn’t mean you should, others argue. 

Having much of your wealth in real estate and investments would require you to sell something should you need to pay for long-term-care, and that could result in possibly selling at a loss or in high taxes, said Nicholas Bunio, a certified financial planner at Retirement Wealth Advisors. A long-term-care policy, on the other hand, could cover hundreds of thousands of dollars in care for you and your spouse. 

A long-term-care insurance policy can be an “extra stopgap” that allows your income and inheritance goals to be seen through, said Jeremy Keil, a certified financial planner at Keil Financial Partners.  

Before you jump into any plan, though, shop around and don’t be afraid to ask multiple providers for a breakdown of what exactly is covered, what requirements there may be prior to coverage and any costs associated with the policy, including those you’d be on the hook for outside of a premium. 

Alternatives to long-term-care insurance

There are also so many options to weigh. A traditional long-term-care policy can become increasingly expensive over time, but there are other products on the market, such as a hybrid policy, which is life insurance coupled with long-term-care insurance, Bunio said. Those plans might start out more expensive but level out, and they could include spousal coverage as well as a death benefit. “After all, if someone is worth $10 million in real estate, affording $600,000 of care probably isn’t too hard to do,” Bunio said. “And someone of that worth probably has [federal and state] estate taxes to worry about. That’s where a life-insurance policy can come into play.”

Since you’re so close to retirement, you should get very specific about what you want in your old age, being as reasonable and realistic as you can. Think not just of lifestyle and finances, but care. Discuss this with your spouse and your children as well, so that everyone is on the same page. You may not have all of the answers for what you want to do during your retirement years, but if you have any feelings about how you’d want to be taken care of — whether that’s in your home, or in a particular assisted living facility — be sure to fold those visions into your questions as you shop around. Also look into exclusions, waiting periods and renewability provisions, all of which could play a major role in how well protected you are in the future, said Will Kellar, a certified financial planner and partner of Human Investing. 

“Long-term-care insurance isn’t just a shield. It’s a proactive fortress,” Kellar said. “It safeguards a lifetime’s worth of assets, providing financial security during retirement and shielding heirs from the economic and emotional strains of long-term-care responsibilities. It’s a conscientious choice, empowering couples to dictate the terms of their care and, consequently, their quality of life in later years.”

From the archives (August 2023): If you think you can’t afford long-term-care insurance, here are some options   

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