Bob Stowe faces two central issues in his practice. One is helping clients ensure that they will have an income stream throughout what may be an extended retirement; the other is ensuring that their long-term care needs are met.

“Long-term care is an issue that keeps coming up for clients over and over,” says Stowe, a fee-only planner based in Plano, Texas. “Even when you nail it down, the market changes on you and you have to re-evaluate: Did I pick a good carrier? Is the product still affordable and useful to my client? How does my client’s wealth aggregation strategy fit with continuing to outsource the long-term care risk? Is it something we can bring in-house now instead of outsource?”
If you divided Stowe’s mass-affluent client base into three unequal parts, they would consist of:

  1. Those that are able to afford anything; they can take care of themselves and long-term insurance is just not for them.
  1. A group that typically has around $1 million in assets, where there’s the an open question of whether they can fund their long-term care themselves and still meet their other financial goals. For this group some long-term care insurance might be desirable.
  1. A group that comes up short and will either have to purchase an LTC policy or rely on Medicaid.

The first group, which comprises around 50% of Stowe’s clients, self insures and gets a better return on their capital than they would by investing it in an LTC coverage plan.
The second group—or around 40% of his clients—“can probably pay for their own long-term care costs, but it’s a question—especially for couples.” Having one spouse linger for more than two years in a nursing home can impact the other, especially if the second spouse lives into her 90’s, he notes. So the question they have to confront is can they survive two separate long-term care experiences?

Stowe frequently refers these clients to a LTC insurance specialist and recommends that both spouses get insured at a minimal level. Ideally, the two policies will allow for benefit sharing, which permits one spouse to receive some of the benefits from the second policy, so some benefits can be transferred between the couple depending on circumstances.

Since this group is partially self-insured, he emphasizes that the coverage they procure should be viewed as a prelude to hospice care and not for insuring against 10 years of dementia or similar conditions. Another reason this approach makes sense, the planner says, is all the uncertainty that exists around the cost of LTC. If they were to purchase a Cadillac policy instead, it could easily double in price before the couple taps into it.

For the third group, or 10% of Stowe’s clients, if they can afford a minimal policy they should buy it, he says, otherwise they will have to get on Medicaid. Stowe acknowledges this is “not a fun conversation to have with clients.”