Now that youngest has left the nest (temporarily - college freshman) - thinking of next steps…
Is anyone taking out long-term care insurance? H & I are mid-50s and I’ve been reading Suze Orman who is a big advocate of it. I also saw how much care my elderly parents needed at the end and am thinking I don’t want to burden my kids. So many different perspectives out there!
It is a good idea to check out LTC insurance but make sure you use a good agent who can help you interpret. There are a lot of options and you need to look carefully at how much they can raise premiums. But, unless you are very wealthy, that insurance can be essential if you need care and want to stay at home. H and I are just looking into it as well after dealing with his mother’s care.
With LTC, I think it depends a lot on what your assets are, your family medical history and other issues. LTC is very expensive. Personally, we plan to use our annual income in retirement to cover things like having someone help out ( if needed). We are also in our 50’s. We don’t have a family history of long term illness on either side. We looked at LTC in our 40’s and it was far too expensive for the benefits. Now that I think of it, that was a good choice.
I know that many plans offer various benefits so that matters as well.
My grandmother and father (neither of whom was/is wealthy) have used home help to stay in their homes (until 96/84). The costs are really not that high when compared to LTC. We live in a high cost area. They both needed a cleaner/home shopper to take them to the supermarket. And my grandmother needed a nurse’s aid to take her vitals and check in with her a couple of times per week.
I’ve factored in having more help as we age. We laughed about having to have someone come in and do the Xmas lights when we’re old. I think that’s honestly the kind of things we need to think about in retirement that can be overlooked.
Anyone wondering if the tech bubble might finally be starting to deflate? I’ve spent the last 6 months looking at an increasing array of fraud and nonsense in my part of the industry, particularly connected to the SPAC boom.
How much would that affect your plans?
Well my spouse has been in that industry for about 30 years. We’ve seen a lot of changes and used to be very highly invested mainly in just the tech sector ( yikes). I think that while technology is inflated there is still a lot of room to grow, unlike other industries innovation and rapid changes often create more value. The downside in this industry, IMO is the idolization of tech giants. IF you are buying a stock because of one person then I’d stop and reconsider. Reading and understanding the technology is very important. If the technology has long term impact then I’d invest. I personally think robotics, cloud computing, Iot( Internet of things), Agri-tech and a couple of other industries are primed to grow esp. if the technology is hard to understand and hasn’t made headlines in the media. That’s what I’d buy today. Companies like AMZN, MSFT, FB and all the other titans also have lots of room to grow but I think they could soften. But not by a huge amount as people are still using their products. My two cents.
I get the purpose of a roth - and have a 24 yr old who is making a decent salary now. Can you explain some good reason why a roth might be better than just normal investing for him? i think he’s concerned about accessibility of funds - he’s planning on moving to NYC.
Both of my in laws have been paying for LTC for years. The issue I have observed is that it doesn’t necessarily cover what is needed to help the elderly. My FIL had Parkinson’s, and he wanted to do as much as he could himself, and while it was very difficult to dress himself (took him a long time), he could do it. He needed help with bathing, but that wasn’t enough to get the LTC to pay out. MIL needs someone to help with meals and cleaning, so she lives in a facility where she gets that assistance. But LTC doesn’t help with that. I am pretty sure that they would have been much better off saving the money they shelled out for LTC over the years, but the peace of mind it brought was important to them.
Many also require that people be certified. You may just need someone to help you out not someone who is certified and therefore more expensive. If you are hiring and paying you can also look at multiple providers and not be confined by the terms of the list.
LTC insurance is a calculated gamble. Sometimes it pays off. DH had it through work, and now that he is disabled at 55 yo it makes a huge difference to our daily lives. By that I mean he gets about 4 hours a day of in home care, so I can go to work. At this rate it will be gone in 8 years. Still, better than nothing, and worth a lot more than he paid into it.
I work with a lot of elders, and I can’t tell you how often they hold off on activating their ltc insurance, only to die never getting their money’s worth. Partly that is because the companies are loathe to approve care (it is a function of how many “activities of daily living” you need help with). I can’t say ltc is a bad idea, though, since we have benefited. Just buyer beware. If you are young enough, Consider instead saving the money you would spend on premiums and invest it. Do the math and see which way is better.
When the music stops it won’t just stop for the bad companies. Amazon’s share price collapsed during the dotcom bust too. But I agree about the cult of Elon. The problem is that if Tesla just goes back to its valuation of a year ago then confidence may drain away more broadly.
It reminds me of late 1999/early 2000. I remember sitting next to John Chambers at a conference back then when Cisco was briefly the most valuable company in the world. He was pronouncing on some issues that I’d studied pretty deeply and I was just left speechless about how wrong he was. He then went on to claim that as a result the US was going to grow GDP at 7% per year for the foreseeable future. It left me thinking that however big and respected a company is, they may still be clueless about the future.
LTC insurance in your 50’s will be outrageous and most likely not worth it. The best time to buy this is when you’re really young. Of course, the flip side is if you don’t think you can afford a caregiver, then you may be better off buying long term care insurance. It really depends on your circumstances, but usually depending on age, it can be not worth it. Also, if you talk to a financial advisor about it, be very careful that they’re not marketing you heavily on it as they make commission on these types of things. Find out what your insurance and medicare will cover also.
For a Roth you never pay taxes so it compounds tax free, there is no RMD requirement, so there is no set age that you are required to start withdrawing, like there is with a traditional IRA. The other one huge benefit of a Roth is that any contributions you make you can withdraw at any time without penalty. So for instance if your son puts in the max $6k annually, and in 5 years it’s worth $50k but realizes he needs 20k for something, he can take out $20k of his original $30k contributions without any sort of penalty. He also would owe no taxes on it because he already paid it when he put it in. His earnings which would be $20 k and the remaining 10K of contributions would still be there. THat’s huge.
Just note that there is an income phase out though so depending on how much he makes he may not be able to put in the $6k/year which is why many people contribute to a traditional IRA and then the next day convert that to a Roth IRA.
“LTC insurance in your 50’s will be outrageous and most likely not worth it”
My wife with a preexisting condition (MS) will turn 50 this summer and we were researching LTC costs. One policy is about $230 a month which gives her about 200K in insurance over a 4 year period. It didn’t seem too outrageous to me but maybe I’m missing something?
As a separate item, my 83 year old step father who cannot care for himself anymore just entered an assisted living facility in Sacramento (CA) that costs about $7,500/month. It’s expensive getting old…
It’s also really hard to pinpoint when you are in your 20s or 30’s where you’ll be in your 50’s and 60s. A lot can happen. We always did well financially. But even with a Masters in Econ, I couldn’t imagine retirement in my 50’s/60s. The horizon is just too long. That’s what LTC works on. Very long timelines. So will you need it? Maybe, maybe not. But in the meantime a lot can change. So do you buy something you might not need when there are so many other things you want?
It used to be that more people worked with their hands and so not being able to work meant they couldn’t do their normal job. Today, there are so many jobs where one can work from home, that the loss of a hands on job, probably won’t send the family into financial ruin.
When I think of LTC, I think of chronic conditions where someone can’t take care of themselves and where professional help is needed.
Again, just thinking about some reasons why people might buy LTC or might forego it entirely.
Agree that in your 20’s and 30’s it’s hard to think of that timeline but at the same time, that’s also why people need to have established IRA’s, Roth’s and/or 401ks in their 20’s (or teens) and college savings accounts the minute their kids are born. The only time I didn’t contribute to an IRA was when I was a SAHM and spouses couldn’t contribute. They finally changed that. Then I was divorced with 4 kids under age 9 and had to stop contributing anything for awhile, but the saving grace was that I had an IRA as long as I can remember and Roths since Roths were first introduced. My 4 kids have had Roths every since they had jobs in high school. No one wants to think about death or getting old but we have to. Why else do people have life insurance or estate plans? It is all expensive.
For myself I have never had life insurance or LTC, but I haven’t needed it and no one needs to inherit a life insurance policy on me if I die. But these are all issues that people need to be educated on when they are in their 20’s and unfortunately it should be a requirement to have a class like this to graduate college IMO!
Yes, agree to all except LTC. I think saving early is incredible.
We could never get ROTHS. Our income level was too high. Yes, you can put money in after the fact and pay the taxes directly. Someone on this thread ( It might have been you) mentioned that one can put a partial amount into a Roth. Something we never did or considered. But we’ll have to do that soon and spread it out over the years. Just need to consult with our tax guy and financial planner.
We bought a lot of life insurance when our kids were babies and our expenses, home and education were all ahead of us. We still have the policies, but we’ll let them lapse. Peace of mind for a very low cost.
Not me about partial Roth’s. I’ve only suggested converting traditional IRAs to Roth’s and that you don’t need to convert it all at once, but anyone can put the money into a traditional IRA if they can’t put in Roth due to income limitations and then immediately convert. That’s a loop that hasn’t been closed at this time and allows people to also put more than the maximum $6k in.
@socaldad2002 - I have MS and am in my early 50’s, and while it has been a while since I investigated LTC for myself, MS was disqualifying for LTC policies.
If you can get LTC insurance for her, great. But hopefully, your wife’s condition won’t progress to the point of needing LTC for a looooooong time, if ever. So depending upon how she is doing, it still may be a lot to pay over time.
@socaldad2002 and @CateCAParent My brother has MS, was DX 16 years ago and is turning 50 this year. Does not have LTC and did not seek it. Fortunately he is in pretty good shape and was dx early, but the medicine he takes is outrageous. He plays a sport to help stay active and has really not had any issues. I hope both of you and your families are as healthy as can be expected too.
This strategy doesn’t work if you have pre-tax IRAs either directly or from 401k rollovers, because you have to pro-rate the distribution across all your IRAs, so you wind up paying taxes a second time.