Protecting your golden years

Regardless of your post-employment plans, seek out a policy for long-term care

Don’t think that retirement is all about travel and leisure. As you grow older, you could become frail and dependent upon others for constant care. If you need to go into an institution or hire professional home-care aides, the stratospheric cost could wipe out the retirement fund that you worked so hard to build.

That notion has been a concern for 56-year-old Ronald Henderson, Ph.D., who resides in Upper Marlboro, Maryland. Henderson, the director for the Washington, D.C.-based National Education Association, and his wife, Inez, have built up their nest egg through their respective company-sponsored plans. He has invested in the Vanguard family of funds, including its Capital Opportunity and Primecap offerings. Inez, a 56-year-old educator, has stashed away a portion of her dollars in the equity and fixed-income funds in her 403(b) plan.

So, to protect himself and his wife, Ronald, a self-professed golf enthusiast, instead of dreaming of golf courses in faraway places, has been clipping articles on long-term care. He is actively shopping for a policy so that, if necessary, he and Inez can receive top-notch health care. “If you’re going to rely on the government, you’ll have to spend down all of your money first,” he says. “There’s a big hole in the safety net.”

Indeed, falling through the hole can be downright catastrophic. For example, experts say that nursing home costs can grow to $4,000 to $5,000 per month in the Southeast and even higher in other parts of the country. Where is the money to pay for the home going to come from? Out of your pocket. Or maybe your children will have to foot the bill, putting a crimp in their retirement savings plan.

Your key to fighting the danger of rising health costs in the future may be long-term care (LTC) insurance. Financial planner Edward Fulbright tells his clients that they don’t have to wait until they’re senior citizens to consider purchasing an LTC policy. “If you buy before age 70, these policies can be affordable, perhaps $1,500 or $2,000 per year,” he says. “With a good company, those premiums will remain constant over the years. After age 70, though, premiums become much more expensive.”

In fact, his 37-year-old wife, Genevia, a CPA and business advisor, says she purchased an LTC policy several years ago. “I’ve had one since I was 30,” she says. “I did some volunteer work in a long-term care facility, so I saw the need for this coverage. I also saw how much it costs. One of our elderly clients is paying $6,500 per year for coverage. Since I bought a policy when I was so young, I’m paying under $200 per year.”

Besides timing, what other factors should you consider when shopping for an LTC policy?
Quality of the insurance company

Experts say you should do your homework and buy a policy only from an established company in excellent financial condition. John Haslett, a long-term care insurance specialist in Reston, Virginia, agrees. He advises consumers to choose a nationally recognized insurance company that has

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