Long-Term Care: Why Age 60?Few people argue about the necessity of long-term care insurance (LTC). Many of us have watched friends or family lose their savings to expensive medical costs, and most of us would much rather pay a monthly premium to protect our retirement nest eggs.
The LTC industry suggests that you’ll pay less if you buy your policy at age 50 instead of waiting until age 60 as Dave recommends. But Dave will never tell you to buy something based on how much the monthly payment is. That’s what broke people do, right?
True Cost ComparisonThe premiums may be cheaper if you buy LTC at age 50. But does that really make it a better deal? Here are the numbers we put together:
The average LTC premium for a healthy 50-year-old man is $1,340 per year. If the policy remains in effect until this person is 95, he will spend $60,300 in LTC premiums. For a healthy 60-year-old, the average premium is $2,170; it will cost him $75,950 to keep the policy until he is 95. So, on the surface, it looks like buying LTC at age 50 is $15,650 cheaper than buying it at age 60.
But what would happen if, instead of buying LTC at age 50, he invested that $1,340 each year until he is 60?
If his investment averages a measly 5% growth per year, he will have $17,412 when he turns 60—that’s all it takes to beat the “savings” on premiums for buying LTC at age 50. If he keeps that money invested until age 95 and never added anything to it, he’d have nearly $100,000 at 5% growth, and that is the low end of how he can expect his 35-year investment to perform.
A Personal DecisionMany people worry that if they wait until age 60 to buy LTC, they will develop a medical condition that will either prevent them from qualifying for coverage or significantly raise their premiums.
Dave suggests waiting until age 60 because you are much less likely to file a claim before that age. Statistically, 90% of LTC claims are filed for people over age 70. But if you have a family history of illness at a young age, or you are losing sleep because you’re worried about getting sick and not being able to afford care, then buy LTC when you can afford it. The peace of mind is worth more than any cash you’ll save on premiums.
Just don’t buy LTC at a young age because you think you’ll save money by doing it. As you can see above, that’s just not true.