| Because of social security, private and public
pensions, 401k plans, IRAs, savings accounts, mutual funds, annuities,
cash value life insurance and home equity, many older Californians
expect to begin their retirement years with a high level of income.
This affluence among middle income Californians often leads to a false
sense of security.
Wealthy Enough?
The question is, will you be wealthy enough to self-insure? The
average daily private pay rate in a nursing facility is about $160 a
day, or about $58,400 per year. The overall average stay in a facility
is about 2-½ years. However, more than 20% require institutionalized
care for more than five years. Will you be part of this 20%? Will you
live that long? Will you be able to afford to live that long? If you
require such care 30 years from now, that care could cost you over $1
Million. Will you still have an extra $1 Million set aside, after
having been retired for 20 or more years?
Do Nothing
What many people really mean when they say that they intend to
self-insure is to choose to do nothing regarding their future LTC. You
may choose to leave it to chance. But the odds are against you --
there is an 80% chance that you will incur Long-Term Care expenses if
you live to 65. You may hope that you "go quickly" without
being a burden on anyone. Although you may indeed die with an acute
illness, longevity is improving. Medical science is spending billions
trying to make sure that you live long enough to require Long-Term
Care. Doing nothing isn't the answer.
Allocating Assets
Allocating your assets is one way to self-insure. Those who do not
qualify for Long-Term Care insurance, as well as those who choose to
self-insure, often must set assets aside to be used for their eventual
LTC needs. This can be done through the use of one or more
accumulation vehicles.
Disposable Income
Paying for your future Long-term Care out of your disposable income is
another way to self-insure. For example, if you expect to have
$150,000 a year in net after tax income twenty-five years from now,
and if you are married and your spouse has similar income, you may be
able to self-insure using your disposable income. Unfortunately, most
of us do not have that kind of retirement income, nor can we know
when, or for how long, we may need the care.
Facing the Facts of Self-Insurance
If you can't qualify for Long-Term Care insurance, or if you choose
not to buy it, you may be forced to really sharpen your pencil and
work out a self-insurance plan that you believe will work for you.
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