Another Look at Financing Long-Term Care

Another Look at Financing Long-Term Care

When a person retires they have three pots of money to be concerned about. Each of these pots has a dedicated source of funds. They are:

  • The Living Money Pot: This pot contains the income needed for basic living expenses such as food and shelter, utilities, transportation, clothing, and the like. This money typically comes from Social Security, a pension, an annuity, distributions from retirement accounts, and, perhaps, a part-time job.
  • The Lifestyle Money Pot: This pot is for the things we want; things that make us happy, things that are nice but not as essential as the needs funded by the Living Money Pot. Things like golf expenses, hobbies, travel, a golf cart that looks like a Rolls Royce, and so forth. The Lifestyle Money Pot also funds Long-Term Care should it be needed. Let’s face it, if you need long-term care assistance, your golf and travel will probably be limited and the money for it diverted to long-term care expenses. This money comes from savings and investments. It is not a good idea to take money from a source, such as an IRA, that is needed for the Living Money Pot.
  • The Legacy Money Pot: This is the money that we pass on to our heirs. Sometimes it is after we are gone; sometimes we want to do something while we are here like fund a grandchild’s education. This pot is usually funded from investments, an owned business, real property assets, and life insurance.

Long-term Care expenses can be paid by selling an asset from the Lifestyle Money Pot, the Legacy Money Pot, or by buying an insurance policy designed to pay for this care. Some long-term care insurance policies have a feature that returns the premiums paid in if the coverage is never needed.

Another innovation is a life insurance policy, paid for out of the Lifestyle Money Pot, with a death benefit that can be used for long-term care expenses. Any portion of the death benefit that still remains when the insured passes is paid to the heirs (so it becomes part of the Legacy Money Pot).

Long-term care is assistance with the acts of daily living such as eating, dressing, bathing, transferring (i.e., from a bed to a chair), continence, and toileting. Neither Medicare nor Medicare supplemental insurance covers this care. The only government assistance for long-term care is through MediCal, a program for impoverished persons.

For further information regarding the long-term care financing options available, please call. There is never a charge for such consultations.

C. Lawrence “Larry” Thomas

C. Lawrence “Larry” Thomas began working with long-term care and Medicare programs in the mid- 1980s. He is currently associated with Insurance 101 Services to provide long- term care solutions to seniors and those approaching. Larry can be reached at (949) 374-3316 or ltinsurance@me.com.
CA Insurance License # 0C79256.

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