Thinking Long Term

Toni and her husband might want to think about getting long-term care insurance, quickly.

QUESTION: Toni in New York City and her husband are in their 60s. They do not have long term care insurance, and she wants to know if they should get it because it will cost them about $8,000 a year at their age. They earn about $200,000 a year. Dave explains why he is a big proponent of long-term care.

Dave's ANSWER: You can certainly afford it. Here is the trade-off: $8,000 a year, but a nursing home costs $50,000 a year. There is an 80% chance that one of you will spend time in a nursing home. That's the trade-off. I am a strong proponent of long-term care insurance once someone is 60 years old. I would not buy it before 60 years old, but I really believe in it after that, even if you have the money to pay for a nursing home yourself.

It allows you to not have to worry. Your normal statistical scenario is that 75% of you ladies outlive your husbands. The normal scenario is the man goes into the nursing home and drains down the nest egg to pay for it. That leaves the wife poor or somewhat poor after he dies. It's really to protect you. It's to make sure that you've still got a nest egg after he passes. Also, that can obviously happen the other way around. I am a huge believer in long-term care insurance once you're 60 years old.

Prior to 60, you have a less than a 1% chance of spending time in a nursing home. I would not spend a dime on it. A lot of people sell that stuff to people who are 40 or 50 years old, and I don't believe in that. But once you're 60, the percentage goes up almost daily that you're going to use it. You can afford it, and I would buy it. I think you're going to get a good return on it.

It's just going to help you guys make better quality decisions for care and so forth. Also, look for a policy that has in-home care, meaning it has some private care in the early stages before someone has to be put into full care. That's a good type of thing to have in your policy.