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Retirement Planning > Retirement Investing

LTCI Watch: Rates and roommates

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One of the great, humbling things about writing blog entries for is that, chances are, about 90 percent of the time, many readers will know more about a topic than I do.

I’m just here to try to get you thinking. If you believe that I have a good idea, that’s great. If you believe that one of my ideas is so bad that you have to throw a shoe against the wall, that might be bad for your wall, but maybe it will help you put your own thoughts into words.

So, anyhow, several readers e-mailed to respond to a blog entry in which I suggested that private long-term care insurance (LTCI) companies ought to consider offering pricing plans and programs that encourage insureds — and especially insureds who need, or are close to needing, LTCI benefits — to live together.

If college students can save money by having roommates, why not the frail elderly?

One reader, an Atlanta LTCI specialist, pointed out that some carriers already offer a companion discount.

A major mutual insurer offers a 10 percent discount for one insured who lives with a non-spouse companion in the same generation and a 30 percent discount for two insureds who live as non-spouse companions. 

Another reader, a Connecticut actuary, defended the Federal Reserve Board against my arguments that the Fed has insurers that are investing for the long-term, including LTCI carriers and long-term disability issuers, by keeping interest rates so low.

“To me, that is like blaming the fire department for ruining the furniture with water while it was trying to put out a major fire,” the actuary said.

Thanks to the Fed, “we are doing remarkably well considering the state of the financial markets in 2008,” the reader said.

I think that’s a reasonable point of view.

If you have bubonic plague and also a small tumor, maybe you have to deal with the plague first, even though that might interfere with your body’s ability to fight the tumor.

As much as insurance companies need higher rates on their fixed-income security portfolios, they need stable banks and a lack of street riots in our major cities even more.

Ben Bernanke, the former Federal Reserve Chairman, has done as much as he could to talk about the importance of dealing with post-retirement pension and health benefits costs when he gave speeches.

Maybe we made the right choice, and maybe, in the long run, that choice will maximize total global retirement resources.

But I still think it would be good if people had a clearer understanding that keeping rates low was a choice to shift assets from the retirement and long-term investment category into the short-term grocery bill fund.

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