I recently went to a seminar sponsored by Middleton Community Bank. It was a presentation about Long Term Care Insurance, otherwise referred to as Nursing Home Insurance. I learned right away why the professionals don't call it Nursing Home Insurance. It can also cover assisted living and at-home custodial care.

The cost of this insurance, for someone age 55, is about $1,600 per year. Based on the presenter's chart, the annual cost will increase about $250 per year while you're still in your 50's. It increases more rapidly when you reach your 60's; about $450 per year. Just like life insurance, the cost per year increases more rapidly as you get older. I am using rounded-off averages. The actual amounts depend on age and health.

Please note that when I talk about the cost going up, that is if you do not purchase the insurance. Once you buy it, the annual cost stays roughly the same for the life of the policy. For example, the 55 year old will pay the same $1,600 each year for life. But a 60 year old will pay about $3,000 per year for the life of the policy. Once you buy the policy, the annual cost is locked in, so to speak.

Nursing home care costs about $4,500 to $5,500 per month for a semi-private room. Private rooms are an extra $500 per month. Again, these are rounded-off averages. Actual costs depend on the nursing home, and the specific needs of the individual. Assisted living and home health care are at least $3,000 per month, depending on what services are required.

Medicare, and Medicare Supplemental insurance, pay for hospitals and doctors. It also pays for rehab, as long as the doctor signs a weekly form showing improvement. That is apparently where many people run into trouble. Improvement levels off, but they are still not able to take care of their daily needs. Medicare stops paying at that time.

Medicaid is for people with no money. The problem with this is you are limited on choices. Nursing homes lose money on Medicaid. They set aside as few rooms as possible for Medicaid patients. Some people gift away all their assets in order to qualify for Medicaid. This works, but you have a 3 year "look-back" period where all gifts are ignored. The presenter talked about Congress possibly lengthening the 3 year look-back to 5 years or forever, but I have not heard those rumors.

Other topics she discussed include paying for the insurance with a lump sum payment up front. Also, most insurance companies include a cost of living increase in the benefits it will pay. Most benefits are structured to pay a certain amount for each day you are being cared for. A common amount is $100 per day. A cost of living clause protects you from inflation. She also recommended purchasing long term care insurance as part of a group plan at work. It will almost always be less expensive.

Last, but not least, is a newspaper article reprinted from the Wall Street Journal. It listed the top ten mistakes people make concerning retirement.

1. Failing to consider long term care needs.
2. Failing to consider the effects of inflation and taxes.
3. Failing to take advantage of the years immediately before retirement.
4. Making large loans to family and friends.
5. Overestimating how much you can withdraw from your nest egg.
6. Over-managing a retirement portfolio.
7. Taking too much risk with investments.
8. Underestimating life expectancy.
9. Underestimating expenses in retirement.
10. Focusing on your nest egg to the exclusion of all else.

I thought this list was kind of interesting. There are a couple paragraphs that go along with each item. I can fax or mail you a copy of the entire article if you want to read it.

I hope this has been informative. I found the seminar quite interesting. Please note that I am not an expert on this stuff. Please talk to your insurance person or financial advisor for a more detailed discussion about your specific situation.

As always, feel free to call me if you have questions or comments.