There are a lot of things that can literally eat your lunch when it comes to retirement. Inflation, taxes, market risk, outliving your money, making poor decisions – all of these can be retirement killers. Further, they are all exacerbated by longevity. The longer you live, the more each can hurt you. This is the key challenge to retirement planning.

Most of these items are routinely discussed in my meetings with people. The one thing that is often most difficult to broach is the issue of long-term care. This is particularly problematic as it is one of the most common threats most of us will deal with. The statistics are dire. Fifty-two percent of people turning 65 will need some kind of care in their lifetime. I’m not a statistician, but that sounds an awful lot like 100% of married couples; it’s not that, really. Many of the 52% will be in the same marriage, but still. It should cause you to sit up and take notice. These stats are skewed on gender: 47% of men will need care with an average stay of 1.5 years; 58% of women will need care for 2.5 years. Fourteen percent of people will need care for longer than five years. Long-term care, like so many things, hits women the hardest (check out our upcoming Inspiring Women workshops on the 9th and 14th at Free Money Guys.com), yet all too often, it’s the man who drives these decisions.

The costs of care are rising as well. In 2000, when long-term care insurance was really becoming a “thing,” the total U.S. spend on care was $30 billion. By 2015, that had risen to $225 billion. If you’re wondering, that’s an average increase of 14.38% per year. At this rate, it will reach just under $1 trillion in just over 10 years. Once insurance companies started waking up to this, many left the business altogether. Is it any wonder that the federal and state governments are cracking down? And how does that bode for the ability to rely on government aid when the time comes? Things are truly going to have to change.

Most retirees will get substantial health care relief from Medicare. It’s a wonderful program that puts reasonable health care costs within the reach of most. However, the one thing it won’t do is provide any long-term care coverage. While Medicaid does provide coverage, it’s a welfare benefit that requires you to spend down nearly all your assets and provides the least desirable care. The statistics are overwhelming, and often cause people to shy away from even thinking about the issue, let alone addressing it.

The answer for most is “my kids will take care of me,” “my spouse will take care of me,” or “the state will take care of me.” (In fact, 65% of people needing care rely exclusively on families and friends.) Really? Setting aside for a moment the enormous intrusion on people’s lives, the cost is huge. It’s estimated 37 billion hours of unpaid care was delivered in 2013. The value of that was $470 billion, with an estimated $3 trillion in lost lifetime wages. Yet again this is primarily a women’s issue; over 65% of caregivers are women, whether it’s their parents or their husbands’ who need care.

So, what to do? Long-term care insurance is expensive, often unreliable, difficult to use, and insurance companies seem to be throwing in the towel left and right. For many, that conversation is a nonstarter. However, avoiding the subject can completely devastate a family’s financial security if something isn’t done to curb the costs.

My own preference is what’s called “asset-based” care. It’s a combination of self-insurance while limiting the risk, very similar to the “reinsurance” property and casualty companies use. It involves purchasing either a life insurance or annuity product. Should you need care, your money (asset) is used first, and then the house money kicks in once that’s depleted. Should you not, the cash value or death benefit may pay back all the costs, and then some. This type of care has numerous advantages, other than the possibility of getting un- used money back. For example, payouts are often based on activities of daily living (ADLs) rather than expenses, meaning no submission of receipts and you can use the money any way you need. If you have been looking for a way to handle this serious and critical issue but have shied away from traditional long-term care strategies, Safety First Financial Planners may be able to help. Give us a call at or check us out online.

Stephen Kelley is a recognized leader in retirement income planning. Located in Nashua, he services Greater Boston and the New England areas. He is author of five books, including “Tell Me When You’re Going to Die,” which deals with the problem unknown lifespans create for retirement planning. It and his other books are available on Amazon.com. He can be heard every weekend on the “Free to Retire” radio show on WCAP and WFEA, and he conducts planning workshops at his New England Adult Learning Center, located in Nashua. Initial consultations are always free. You can reach Steve at 603-881-8811, or at www.FreeToRetireRadio.com.

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