Why You Shouldn’t Wait to Plan for Long-Term Care

Why You Shouldn’t Wait to Plan for Long-Term Care

Aside from running out of money, a long-term care event may be the largest threat your client’s retirement plan. An extended care event can devastate a balance sheet and family’s cash flow. More importantly, it adds unnecessary stress for the retiree, their caregiver and their family. 


I’m not suggesting that everyone go out and buy long-term care insurance. Although insurance is the best risk-transfer agent ever developed for situations like this, the reality is not everyone can afford or have access to the proper risk mitigation. But, that doesn’t mean you can’t have a reasonable plan. What’s important is that everyone is on the same page and the individual gains the best care possible. 


So many times, we get calls for placing assets in other names or entities in an effort to qualify for Medicaid. While that is an effective strategy, I think you need to keep you clients in the front of your mind and provide the best possible care. You need a plan to do that. Planning doesn’t hold value when it’s time to execute. Planning hold value when you maximize options. You can only do that BEFORE the time of need. 


Ask Questions, Find Answers

Talking to your clients about long-term care risk requires a holistic view. Many of our inbound calls possess transactional level detail about a client. In order to serve the client best, advisors need to dig deeper than the balance sheet. 


You have to ask: 

  • What level of care does the client want in the event of a short-term or long-term event?
  • If there is a chronic diagnosis, what type of care can the family caregiver provide and up to what point?
  • Where does the client want to live? (This is one of the most under-discussed aspects of retirement and longevity planning.)
  • Which assets can be used most effectively now and at the time of the care event? 


There are avenues that can alleviate the retention of longevity risks like long-term care. Home equity conversion mortgages provide access to tax-free funds based on the value of the home, annuities and income riders create cash flow as well as increases in cash flow for long-term care, and housing facilities can provide a lifetime estate. 


Obviously, transferring the entire risk to an insurance company provides the best protection, but chances are that all of your clients will need an alternative plan. Planning can make a difference, even just a few years prior to a care event. So, talk to your clients about deploying some of their assets to address a risk that might devastate their plan in the future. 


Winning Strategy

Planning doesn’t hold any value at time of execution. Planning adds value when you maximize options. Look at the options now, before your client needs extended care. Address one of the largest risks that can devastate a retiree’s plan and transfer the risk as much as possible. 


About the Author

Mike McGlothlin is a tireless advocate for the retirement planning industry. As executive vice president of retirement at Ash Brokerage, he heads a team providing income planning solutions focused on longevity and efficiency. He’s also a thought leader who provides guidance and assistance for advisors and broker-dealers navigating marketplace and regulatory changes. You can find a collection of his blog posts in his book, “Above the Clouds … Winning Strategies from 30,000 Feet.”