Hint: it's not the stock market.
What do you think is the greatest risk to your retirement plan? Most people probably answer a stock market crash. And some might say inflation. And yes, these are significant threats and risks that your financial plan should address. But at a conference I attended this week I heard the statement made by the presenter that LONG TERM CARE COSTS are the single greatest threat to your retirement assets. And the more I think about that statement, the more I think it may be true.
The cost of long term care is extremely high. Nursing home costs in New Jersey are over $10,000 per month and rising faster than the cost of living. There is NO government help, and insurance is both very expensive, and often insufficient to fully cover the need. While we frequently test our financial plans to ensure that they can withstand a long term care expense of 2 or 3 years (about average) - the need in some cases is much mucn longer than that - particularly if you include need for home care and / or assisted living facilities. That can rapidly deplete even a sizable estate.
Long term care insurance is one tool that can limit your risk and protect your assets for your spouse and/or kids - but not everyone qualifies, or can afford the steep premiums. And in some cases with extended care situations, coverage limits mean that the insurance is simply insufficient to cover the need.
The good news is that (as I am learning in great detail this week) there are for more tools available to long term care planners than simply buying insurance. In much the same way you can limit your market risk and inflation risk through smart investment strategies, there are also steps you can take to limit your risk and exposure to long term care costs. Sadly, most people never learn about these strategies, or choose not to take advantage of them (for a variety of reasons). This is a hugely complicated area of finance and law, and very little of it is intuitive or makes any sense at all. What is clear to me from my discussions this week with professionals active in this area is that if mom or dad (or you or your spouse) needs to go into a nursing home, it is highly unlikely that the hospital or nursing home social worker is going to be giving them the information they need to take the wise financial steps necessary to protect their hard earned assets. What is also true is that most financial advisors, CPA's, and attorneys are not very well versed in this very unique and complex field either. .
If you would like me to review or help you build a strategy for handling potential long term care costs, give me a call or send me a note. It doesn't matter if the plan is for an imminent need or (hopefully) just planning for the distant future. Either way, we can consider various strategies and come up with a plan of action, and call in other professionals if/when needed to implement those strategies.