According to the Center for Retirement Research, high-net-worth boomers have two options for planning long term care. Boomers can buy long term care insurance to offset the costs associated with an extended illness, or they can self-insure by conserving home equity until they need to use it to pay for care. Each strategy has its own advantages and disadvantages.

While insurance policies can make it easier to pay for care, they often specify how long a policyholder can receive it; your clients run the risk of needing more care than they’ve planned for. Even the best plans can fall short as unanticipated costs drive up the amount needed to cover long term care by the time your clients need it. And there’s always a chance the insurer will increase the premium on the policy.

Boomers who choose to hold onto their home equity and use that to pay for long-term care face their own share of problems. “According to the life-cycle model of savings behavior,” the report states, “a household that anticipates using part of its post-retirement income to purchase long-term care insurance or earmarking housing equity for long-term care will plan for lower consumption both before and after retirement than otherwise similar households.”

Married couples who plan to use their house to finance long term care have a special set of problems. If one spouse needs to be institutionalized, the home must either be sold, forcing one spouse to find new housing; or the yield is limited to how much can be obtained from a reverse mortgage. Of late boomers using home equity to pay for long term care, 65 percent are at risk for downsizing their lifestyle in retirement. Fifty-three percent of older boomers are at risk.