​
When having the discussion on buying a LTC policy there are a few aspects to think about.

Cost of care:
This aspect is usually over looked during the process but is the most important part.
The average daily cost of a home health care is $228 for 12 hours at $19h about $6840 per month and $82,080 per year.

The starting cost of a private room in an assisted living community is $134 a day $4000 per month $48,000 per year, and can get up to about $10,000 per month and $120,000 per year.

Cost of Premium:
Most people tend to look at the premium and say it’s too high.
For example, a healthy 55-year-old man would pay nearly $6,870 per year for a LTC policy that pays $200 per day for five years and increases the benefits by 5 percent compounded each year. Providing up to $365,000 in coverage (in today’s dollars) when you multiply the daily benefit by the benefit period.

On the hand the same 55-year-old man would pay only $1,534 per year for a LTC policy that covers $150 a day for three years with a 3-percent compound inflation adjustment. Providing up to $164,250 in coverage (in today's dollars) when you multiply the daily benefit by the benefit period.

People tend to go with the lesser of the 2 options (listed) since the premium is much lower.
But what is the so-called “high premium” compared too? If you compare it to the yearly cost of care, it is pennies on the dollar. The only real question that needs to be asked is how long will I live, and will it be in place to cover all my expenses?

By reducing the inflation adjustment delivers the biggest savings. You need to have some inflation protection, especially if you buy coverage in your fifties or sixties and may not need care for 20 years or more.

Shortening the benefit period saves money but probably wouldn't provide enough coverage for a degenerative condition, such as Alzheimer's. Couples can hedge their bets by buying a shared-benefit policy. Instead of, say, a three-year benefit period each, they'd have a pool of six years to use between them.

Extending the waiting period can also lower the premium, although you'll have to pay the full cost of care before your insurance covers anything. Policies with a 90-day waiting period tend to offer a good balance, but look for a "calendar day" waiting period. That starts the clock ticking as soon as you qualify for care, either because you need help with two activities of daily living or have cognitive impairment. A "service day" waiting period has the same benefit trigger but counts only the days you receive care. Some insurers, charge about 15 percent extra for a policy with no waiting period for home care.

All policies can be tweaked to save hundreds of dollars in premiums, but is saving a few dollars now worth the reality of spending thousands of dollars out of pocket later? 

​Vasilios "Voss" Speros 602-531-5141
#LifeInsurance #RetirementStrategies #‎sperosfinancial
http://www.sperosfinancial.com/
https://www.linkedin.com/pub/vasilios-%22voss%22-speros/60/722/67b
vsperos@sperosfinancial.com
85254

Ruth Davis Konigsberg @ruthdkonigsberg
Jan. 14, 2015 

Parents often find themselves between a rock and a hard place when it comes to doing what's best for themselves and their children. One financial adviser offers a formula to make it easier.
 
It’s a uniquely Gen X personal finance dilemma: Should those of us with young children be socking away our savings in 401(k)s and IRAs to make up for Social Security’s predicted shortfall, or in 529s to meet our children’s inevitably gigantic college tuition bills? Ideally, of course, we’d contribute to both—but that would require considerable discretionary income. If you have to chose one over the other, which should you pick?

There are two distinct schools of thought on the answer. The first advocates saving for retirement over college because it’s more important to ensure your own financial health. This is sort of an extension of the put-on-your-own-oxygen-mask-first maxim, and it certainly makes some sense: Your kids can always borrow for college, but you can’t really borrow for retirement, with the exception of a reverse home mortgage, which most advisers think is a terrible idea.

The flip side of this, however, is that while you can choose when to retire and delay it if necessary, you can’t really delay when your kid goes to college. Moreover, the cost of tuition has been rising at a much faster rate than inflation, another argument for making college savings a priority. Finally, many parents don’t want to saddle their young with an enormous amount of debt when they graduate.

According to a recent survey by Sallie Mae and Ipsos, out-of-pocket parental contributions for college, whether from current income or savings, increased in 2014, while borrowing by students and parents actually dropped to the lowest level in five years, perhaps the result of an improved economy and a bull market for stocks. But clearly, parents often find themselves between a rock and a hard place when it comes to doing what’s best for themselves and their children: While 21% of families did not rely on any financial aid or borrowing at all, 7% percent withdrew money from retirement accounts.

If you’re struggling with this decision, one approach that may help is to let time guide your choices, since starting early can make such a huge difference thanks to the power of compound interest. Ideally, this would mean participating in a 401(k) starting at age 25 and contributing anywhere from 10% to 15%, as is currently recommended. Do that for a decade, and even if your income is quite low, the early saving will put you way ahead of the game and give you more leeway for the next phase, which commences when you have children (or, for the sake of my model, when you’re 35).

As soon as your first child is born, open a 529 or similar college savings account. Put in as much money as possible, reducing your retirement contributions if you have to in order to again take advantage of the early start. Meanwhile, your retirement account can continue to grow on its own from reinvested dividends and, hopefully, positive returns. Throw anything you can into the 529s—from the smallest birthday check from grandma to your annual bonus—in the first five or so years of a child’s life, because pretty soon you will have to switch back to saving for retirement again.

By the time you’re 45, you will have two decades of saving and investing under your belt and two portfolios as a result, either of which you can continue to fund depending on its size and your cost calculations for both retirement and college. You probably also now have a substantially larger income and hopefully might be able to contribute to both simultaneously moving forward, or make catch-up payments with one or the other if you see major shortfalls. At this point, however, retirement should once again be the central focus for the next decade—until your child heads off to college and you have start writing checks for living expenses, dorm fees, and textbooks. Don’t worry, you still have another 10 to 15 years to earn more money for retirement, although those contributions will have less long-term impact due to the shorter time horizon.

Of course, this strategy doesn’t guarantee that your kids won’t have to apply for scholarships or take out loans, or that you won’t have to put off retiring until 75. But at least you will know that you did everything in your power to try to plan in advance.

Vasilios "Voss" Speros 602-531-5141
#LifeInsurance #RetirementStrategies #‎sperosfinancial
http://www.sperosfinancial.com/
https://www.linkedin.com/pub/vasilios-%22voss%22-speros/60/722/67b
vsperos@sperosfinancial.com
85254