From the September 2009 issue of Boomer Market Advisor • Subscribe!

Where LTCI should start

My research convinces me that boomers will have far higher expectations and greater demands for quality long term care.

Having had the good fortune to escape many of the hardships prior generations faced, there is little evidence of stoicism in the baby boom generation. As a more demanding group, boomers will have a greater need for service and comfort, even at the end of their lives.

For example, it's especially important to boomers to remain in their home as long as they can. Despite the fact that doing so can be more expensive than living in a facility (if, for example, live-in aides are required), boomers will want to stay. This is where long term care insurance can help.

Boomers have repeatedly told me that financial independence later in life is important. They never want to ask their kids for money. If they wind up needing expensive long term care - and odds are many boomers will - asking their children for the money or asking them to provide the care itself is not something boomers want to do.

The number of aging boomers will increase demand for long term care services faster than the supply of facilities and staff are likely to grow. But, fact is, most boomers have not saved enough. And long term care insurance is the most effective method for dealing with this risk.

Since they haven't saved enough beforehand, it's very important for boomers to keep expenses in retirement down as much as possible. There's an easy way of doing this: buy LTCI at a younger age. This gets the premium down and thus makes it more affordable after people retire.

This brings us to an interesting John Hancock survey. In that survey of 502 employee benefit decision makers in companies with 10 to 1,000 employees, they found (of course) that most don't offer long term care insurance to employees, even as a voluntary benefit.

Still, many of these company decision makers are sensitive to the long term care issue. Two-thirds believes that their employees worry about their ability to afford long term care for themselves or other family members. A quarter of the respondents believes that the productivity in their companies has been hurt because their employees are dealing with long term care issues, most often and no doubt, for elderly parents.

The main reason companies offer LTCI as an employee benefit is that it helps attract and retain employees. Other important motivators are the tax advantages to the business owner, employee interest in the product and firsthand experience in dealing with someone who needs long term care.

Reasons why companies don't offer the benefit are that they have other priorities or that the cost is too high. However, LTCI can be offered as a voluntary benefit and very few companies that offer these plans are disappointed in the cost of implementing the plan.

Surprisingly, most of the companies (57 percent) not offering LTCI to their employees have never been approached by a broker or financial advisor about it. Here's an opportunity for the advisor.

At the least, LTCI should be a voluntary benefit. And introduction at the workplace makes sense - it's cost effective to educate a group of workers, rather than educating clients one at a time. This coverage can also help establish a relationship with employees that extends into their retirement.

It's likely that interest in LTCI will grow; The risk will never go away, and boomers are increasingly reminded by their parents' need for care now.

Mathew Greenwald is president of Washington, D.C.-based Mathew Greenwald and Associates.

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