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I've been helping individuals and corporations plan for long-term care for more than 30 years.
While I respect and agree with many things that David Ramsey teaches on his radio show, his guidance on LTC planning is widely viewed as misguided, especially when it comes to planning timing.
Mr. Ramsey states that there is less than a 1% chance of needing LTC services before age 60. He therefore suggests that his listeners wait until then — "when the risk begins to rise" — to buy coverage.
Recommending that people wait until age 60 to 65 to explore LTC insurance is incredibly harmful to most individuals.
The Cost of Delays
After speaking with thousands of people across the country from all walks of life, I can tell you that most people will find LTC insurance unaffordable by age 60.
Worse yet, many people who can afford the higher premiums will no longer qualify due to medical underwriting requirements.
For couples, the odds of one of the two having medical issues are even higher than an individual's risk.
Mr. Ramsey acknowledges the importance of having LTC insurance to protect against the significant financial risk posed by long-term care needs.
Yet recommending that people delay purchase until coverage becomes less affordable and harder to obtain undermines his own message.
Probability
Let's look at the numbers.
According to 2021 data from the Association for Long-Term Care Insurance and Milliman, the coverage decline rate for individuals ages 60 through 65 is 30.4%, which means that there's a 52% chance that one or both members of a couple will be declined for coverage.
That's worse than flipping a coin.
Between ages 40 through 49, the individual decline rate is only 12.4%, or 23% for a couple, which means that 77% of couples will be approved for coverage.
That's a dramatically better outcome than waiting and having a 52% decline rate.
Mr. Ramsey's rationale appears to be: "Why spend the money at age 45 for something that won't happen until decades later?"
The answer is simple: Math.
More Calculations
Mr. Ramsey's advice to wait actually costs consumers more while reducing their odds of getting coverage at all.
Here's an example: Let's say annual premiums at age 45 are $1,401.
Assuming a claim age of 85, that means a client will pay $56,025 over 40 years.
Buying at age 65, annual premiums jump to $3,441. Over 20 years, the client would pay $68,834.
The client would spend about $12,000 more, while also facing a much higher risk of being declined and having no access to LTCI.
The client would also go without any LTCI coverage from ages 45 through 64. While the likelihood of needing LTC services at a younger age is low, it's not nonexistent. Early onset Alzheimer's, Parkinson's and accidents can strike anyone at any time.
For clients who get covered in their 40s, the costs are comparable to the cost of a cable or internet bill: not insignificant, but manageable.
For clients who wait until their 60s? That's more like adding a luxury car payment to their budgets.
The math and the logic are clear: It's safer, smarter and ultimately cheaper to buy LTCI early.
Kevin Sypniewski is the CEO of AGIS Network, a caregiver information service affiliated with Brown & Brown.
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