Got $300,000 under the mattress?

With their federal pensions and Thrift Savings Plan accounts, do federal workers really need long-term care insurance? Senior Correspondent Mike Causey says it'...

If you’ve made your decisions on what to do about long-term care insurance or life insurance, you can relax. Instead of D-for-decision-Day, This is just another Friday. The fact that the open season ends today is no problem.

But if you are still undecided on this last day of the open season, it’s time for some long-range financial planning. Open seasons like this don’t come along very often. The last one for the federal LTC program was seven years ago. The last time people had the option to join the federal group life insurance plan without medical tests was 12 years ago.

Statistically, there is a good chance that most of us will need some kind of long-term care (in-home or a facility) at some time in our lives. The average age when people need LTC is 71, but it can be much, much sooner if you have a stroke, fall off a roof or get hit by a bus, which can happen at any age.

Not everybody needs LTC or life insurance. And there are alternatives, like the one outlined by this reader:

“I don’t understand the need for LTC insurance. A working fed should be able to save enough to self-insure for long-term care, assuming that when it’s needed that fed would be retired, mortgage paid off and debt-free. If one doesn’t have a comfortable nest egg before retiring, then one can’t afford to retire. After working for the IRS for 35 years, I have a comfortable nest egg, and I also live and travel on my pension without touching that nest egg. Paying premiums for LTC insurance would be like throwing money out the window. For that matter, the same is true for life insurance. After retirement, I carry the absolute minimum FEGLI to pay final expenses while my estate is being settled. I know everyone’s situation is different, but the tools like the TSP are there to help feds reach their goals and it doesn’t take a rocket scientist or a financial planner to get there.” —Kevin Sowell, IRS, retired

Asked about the nest egg vs. LTC issue, one expert said: “Seems this gentleman has it figured out … for his situation. Not everyone will be in the same situation, however, and everyone’s retirement “nest egg” is different. Expectations, lifestyle, earnings, savings, etc all play a role. The fact is, long-term care, if you need it, is likely to be expensive. Attached here is a worksheet we have used with enrollees during EDP to illustrate the costs of care today and the rates at which they are inflating. The pie chart shows where claimants are receiving care today in the FLTCIP as well. This should give you an idea as to the overall costs that someone facing a long term care scenario could expect.”

That works if you don’t ever need or use LTC. Or if your need for LTC comes after 35 years of service and you’ve had the good luck, good sense, willpower to build up a nest egg that would pay those expenses. And if your nest egg and annuity would cover all your LTC expenses. That’s a lot of important ifs that need to be considered.

The same is true for life insurance. People need it when they are younger and have or are starting families, buying homes, etc. But as they get older (and insurance is harder to get) the need for life insurance (to provide for a spouse or young children) fades.

Walton Francis, an authority on health care, was our guest on Wednesday’s Your Turn radio show. He covered both the LTC and life insurance open seasons. He said there are two mistakes that people make when getting life insurance. The first is that younger, married workers with children often don’t get enough coverage to take care of their families if they die. The second is that older people without those kinds of responsibilities need little or no life insurance. Listen to the complete show by clicking here.

Last Minute Help: Still undecided over your LTC options? Here’s a very timely note from Walton Francis: “I just counseled an employee who needed help on LTC options. Her form letter didn’t include any good options for her. And the LTC website didn’t personalize them enough for her. But she was able to reach one of the staff on their 800 number and got some good options over the phone. They are going to mail a new change options form to her and give her a one-week extension to choose the better option. So the Sept. 30 deadline is not immutable. And there are personalized options not in the correspondence that everyone gets. So as an extra piece of advice: ‘Look at your LTC correspondence NOW and if you don’t like any of the options, call the 800 number and ask for advice. You will get help and if necessary an extension of your deadline. But do not wait. Do your homework NOW.”

In her case, she was younger and reducing the inflation protection guarantee below 5 percent would have been a mistake. But she was able to get her nursing home length of stay benefit reduced from “unlimited” to five years, at a huge premium saving. Very few live more than five years in a nursing home.”

Nearly Useless Factoid

By Michael O’Connell

One cubic foot of ground mustard seeds weighs 26.6 pounds.

Source: Aqua-Calc

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