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August 03, 2003 at 08:00 PM
Planners agree that with increased life expectancy, many retirees run the risk of outliving their assets. Running out of money may not be the result of living too long but is more likely due to the high expenses associated with long term care services.
“Probably the biggest threat to outliving their assets is the long term care threat,” says Steve Bowlds, president of Retirement Benefit Advisors, Sand Springs, Okla.
He notes that even though an 80-year-old has a greater than 50% chance of needing some type of long term care, most seniors dont recognize it. “Theyre in denial,” he says.
“LTC is a much tougher sale, its almost like trying to sell disability insurance to a 35-year-old who thinks hell never become disabled,” adds Robert A. Kaiser, president of Kaiser Financial Group, Fanwood, N.J.
Furthermore, many retirees go through “sticker shock” when they see how expensive a LTC insurance policy can be. “The benefits are fantastic in relation to the premium, but most of the prime candidates look at it and take a step back,” he says.
“I think the most compelling argument is that if you need it at any given time, one year of benefits would recover almost all of the premium youve paid–no matter how long youve had the plan in place,” adds Joseph T. Molony, a financial representative of the Northwestern Mutual Financial Network, Lancaster, Pa.
But some retirees would rather take the chance and not purchase a LTC policy, he says, and instead would rather spend down assets in their estate to cover the expense.
