How do you achieve retirement dreams and get an income that you can’t outlive in retirement? Micah is flying solo in today’s podcast to answer...Read More
As people get ready to retire, questions about long-term care often start coming up. Although it may not be the most fun subject, it’s a great one to have a solid understanding of and plan for. So, in this episode, Tammy and Micah let you in on the things you most need to know about LTC, as well as things you should avoid.
Listen in to learn what you can do while still employed and what should be looked into as you move into retirement. Tammy and Micah will unpack some common misconceptions that come up in the area of insurance and LTC, as well as some check-list items you can start getting familiar with right now.
Full Episode Transcript
With Your Hosts
Micah Shilanski and Tammy Flanagan
You can spend. You can save. What is the right thing to do? Federal benefits, great savings plans too. You can save your own way, with help from Micah and Tammy. You can save your own way. Save your own way.
Micah Shilanski: Welcome back to the Plan Your Federal Retirement podcast. I’m your co-host, Micah Shilanski. And with me as usual is the amazing Tammy Flanagan. Hey Tammy, how you doing, ma’am?
Tammy Flanagan: I’m good, Micah. How about you today?
Micah Shilanski: It’s another day in paradise. How can I possibly complain. We get to talk about… Last time we were talking about couples and survivor benefits, and now we get to continue that into long-term care. Oh my gosh, how could you be more excited?
Tammy Flanagan: Oh my gosh. Death and nursing homes. What better uplifting topic to come up with? How can we put a positive spin?
Micah Shilanski: That’s right. But these are things that, especially when you and I are meeting individually with our own respective clients, these are questions that are coming up quite frequently, especially if someone’s going to ready… getting ready to retire, because you have some opportunities while you’re still employed and some things you need to evaluate before you move into that retirement world. Now, Tammy and I are going to say, and Tammy, correct me if I’m wrong, you really need to evaluate these. That doesn’t necessarily mean you need to do everything that we’re going to talk about today, but you need to be making an educated and informed decision about your retirement as a whole, especially about health insurance and long-term care, because we see a lot of misconceptions out there about these topics.
Tammy Flanagan: I totally agree with you Micah. And I think this is one of those things that can derail your financial planning, if you don’t plan for the eventual possible need for long-term care. We’re all in denial. None of us think we’re ever going to need that type of personal assistance or, Heaven forbid, supervision, but we know it happens and we know it happens more than what we really want to admit. So it is something. It’s definitely makes sense to plan for it. It makes sense to have a plan.
And then the other thing I want to talk about a little bit throughout our podcast today is the reality of it, because I was telling you before we went on the air about my brother and he’s done all the planning. He’s got everything in place, but there’s that emotional element to it as well that I think there’s got to come a time when you overcome that. So, maybe we’ll mention that if we have time today too.
Micah Shilanski: Yeah, the emotional side, just like so much of any of our planning, emotions are going to play a huge role in this and how we make our decisions. But, Tammy, let’s start off first and talk about what is long-term care because a lot of times I say long-term care and people immediately think insurance, but that’s not what we said. Right? There’s long-term care, then there’s long-term care insurance, which we can chat about, which deals with long-term care costs. But first, what is long-term care?
Tammy Flanagan: Yeah. Maybe it’s also important of what it isn’t.
Micah Shilanski: Good one.
Tammy Flanagan: Because I’ve known people and you’ve known people. They go into the hospital. Maybe they’ve had a stroke or they’ve had a fall and they get sent to rehab, which is basically a skilled care facility.
Micah Shilanski: Sure.
Tammy Flanagan: “A nursing home”, but they get better. Every day, they improve, they get physical therapy, they get all the help that they need and they come home. And within maybe six weeks, maybe even sooner, they come back to their homes. That’s not long-term care. That’s Medicare. That’s your health insurance. That might be a little bit of money out of pocket if you don’t have adequate insurance, but that can usually be covered with your own savings and insurance. So, what we’re talking about with long-term care is when you don’t get better. When maybe instead of falling when you’re 65, you’re falling when you’re 85 and you don’t heal as quickly.
In fact you might not even heal all the way. So when that time and that nursing home or that skilled care facility is running out, because Medicare only pays partially for a hundred days of that type of care, then what? If you can’t go back to your home, they’re going to keep you, but the bill might be $500 a day to stay there. Or if you do go home, who’s going to be your 24/7 caregiver? So that’s when skilled care turns into long-term care or sometimes, I hate this word, but custodial care.
Micah Shilanski: Yeah.
Tammy Flanagan: Personal care. When somebody needs to either assist you with things that you can’t do for yourself like dressing, bathing, feeding, all the things we never want someone to help us with, or to the point where you might have a mental impairment where you need supervision. It’s not just a matter of I forgot to take my pills this morning, it’s a matter of, I forgot my address. I forgot how many children I have. I forgot the name of my spouse. And that’s when it becomes long-term care.
Micah Shilanski: Entertainment with my grandmother, that’s when we were all, as a whole family, quasi denial. We knew she was having dementia and Alzheimer’s issues, et cetera, but it was one of those things that you don’t really want to accept it and it’s not a safety issue yet, but where do you draw the… When is it a safety issue? Right. And we’re having contention among the family years and years ago about trying to answer that. And then one day we get a call from the police, my grandmother stopped her car in the middle of an intersection because she didn’t know where to go and she didn’t know how to drive. And-
Tammy Flanagan: She froze.
Micah Shilanski: Yeah, she froze right in the middle of an intersection. Now, the police officer was phenomenally nice, really made sure she was taken care of, et cetera, but this really escalated. In our minds, it’s like, hey, this could have been a lot worse than blocking up traffic. Right? In this case. And now we have to do something. We have to make a—
Tammy Flanagan: You hit the nail on the head because I always tell my clients. I said, there’s going to be a crisis. That was the crisis in your family. When it finally became relevant. Like we thought this might be happening. We saw it coming, but that day changed everything. And so when that crisis happens, what’s the plan? Do you have a plan? Those are the things that I think people don’t want to think about because they don’t even know how to think about it.
Micah Shilanski: And one of the things that I like to say too, Tammy, is before we have that exterior crisis, which is happening, right? We’re having internal ones, but how do we recognize them? This is like a frog in a boiling pot of water, right? If all of a sudden the pot’s boiling and you throw the frog in there, they’re going to jump right out. But if you just have a slow pot of water that’s heating up, they never leave, and that’s us in these situations, because we keep moving the goal post, we keep moving and saying, this isn’t the issue, et cetera. So one of the things I love to have my clients do is write down triggering mechanisms, right? When X happens, now I know I’m going to need help. When Y happens, this is what I’m going to do.
I have some clients that says, hey, I’m going to leave the country for long-term care. I have relatives overseas. Perfect. When are you going to do that? Well, once I need long-term care. So let me get this straight. Once you don’t know who you are anymore and you can’t safely function, you’re going to get on an international… You’re going to book your international flight, get on an international flight and go set this up in a foreign country. And then it dawns on them saying, huh, maybe that’s a little too late. So, yeah, we need to think about these things in advance and say, all right, what’s going to trigger before I have to have the care, when I need the care, but I don’t really have to have it. When do I start putting those things in place?
Tammy Flanagan: Yep. And maybe having somebody else who can help you with that. Who’s your person? Who’s going to be the person who makes those arrangements, who books that flight, who takes care of what needs to get done, because I think that’s something else that we don’t know, we don’t plan for that. So it’s different when we think about it 20 years from now, versus when it’s happening. We’re in the midst of it. And oftentimes that’s, I think, why it becomes a crisis because we don’t don’t know how to plan. We don’t know how to set those trigger points because we don’t know what they are.
Micah Shilanski: One of the things that most custodians or an insurance company, so places where you have money, or your insurance company are coming out is an authorized third party that they can notify. So, if all of a sudden you quit making your insurance premiums. Well, that’s how insurance works. Right? You don’t pay, you don’t keep the insurance and it gets canceled. And some people are going to be… I’ve seen kids get very irritated because an insurance company cancels their policy; a long-term care policy on an elder parent. Well, the parent quit paying. Right. Now, they didn’t pay because they didn’t know what it was and there wasn’t family communication, all these things, but they still didn’t pay. So the insurance companies have come up with an authorized third party, which I think almost everybody should have that says, great, if I’m not making my premium payments, if it get a return to sender on my mail, who do they have permission to reach out and contact?
So again, this would go into the pre-planning phase, right? You don’t really need facility care right now, but how do you make sure… We got one from a client because they were on a two month trip and their mail got returned to sender. Right? So this wasn’t even a cognitive impairment issue. This was just a reality, and we were able to get these things and make sure they were taken care of. So, getting little things in place make huge differences.
Tammy Flanagan: Yeah, if you have the federal longterm care plan, they do have the option to name somebody just like you just mentioned. So if you don’t have that already set up, I would, just like you said, highly recommend putting someone’s name. I have somebody’s name on mine. My husband has somebody’s on his, and so we have that backup plan just in case.
Micah Shilanski: All right. Now, Tammy, is your backup plan your husband and your husband is you?
Tammy Flanagan: Nope.
Micah Shilanski: Exactly.
Tammy Flanagan: Nope. I got my brother, and I think he has his sister. And I think eventually we’re going to change that to one of our kids. In fact, we may have already done that because they’re adults and responsible now.
Micah Shilanski: That’s the important part, is not putting a spouse on there. Right. Because then by the time it gets to that point, the spouse will have missed it as well. Okay.
Tammy Flanagan: Yeah, normally that, but the spouse may not be as rationally thinking because it’s your spouse. You don’t want to put them away, as my mother used to call it. It’s like, well, when you say it that way, it sounds worse than it really is.
Micah Shilanski: Right?
Tammy Flanagan: Yep.
Micah Shilanski: Right. Okay, so we talked a little bit about what long-term care is not, right? And I’m also going to say, with long-term care, what is it? It’s not just a facility. So it’s not a long-term care nursing home, recovery center, whatever we’re going to call this thing, right, where you go and you’re locked up and you’re there. Long-term care starts really in the beginning, and it could start as early as our sixties, maybe a little bit later when things are difficult to do around the house and we start delegating things out.
Now, there’s traditional long-term care insurance, which we’re going to talk about, which have to do with ADLs and all those things. But in reality, and in my opinion, Tammy, so please correct me if you have a different idea, but this is going to start earlier when all of a sudden it’s hard to mow the grass or it’s unsafe. You should not be up on ladders my 60 year olds listening to this, cleaning out your gutters, right? You don’t bounce off concrete the way you used to.
Tammy Flanagan: Wait, hold on, Micah. I’m going to go get my husband, bring him in here—
Micah Shilanski: Exactly. And I have stories about—
Tammy Flanagan: Please don’t climb the 30 foot Palm trees to cut the branches off.
Micah Shilanski: Yep. Yep. So we still climb up there. And then all of a sudden, when something happens, that really can cascade into bad things. And yes, I’m sure you bring my wife in here, I’m guilty of something in my own stead, but this is, how are we looking at our activities and making sure we can age in place safely? This isn’t about restricting things that you can do. And just because you could have done it when you’re 20 does not mean you should be doing it when you’re 60. These are different activities. So you need to gauge what you’re doing in your life every day to make sure you can have a long and healthy life.
Tammy Flanagan: Yep. And you know what? You may not even realize that there are things in your own community that are in place to help you. There can be contractors who can come out to your house and evaluate any remodeling that might need done to make things easier. There are departments of agencies on aging that can send someone out to your home and say, hey, you’ve got these throw rugs, that’s a slip hazard. You don’t have grab bars in your shower. And sometimes there might even be funds to come out and do that for you at no cost. So, sometimes you want to do a little research around your own town, your own county, within your own state. There’s resources for aging in place that you probably don’t even know exist.
Micah Shilanski: Now, we’re going to link on our website. So that’s going to be planyourfederalretirement.com/45; 45. This the 45th episode. And if you jump on there, Tammy, we’re going to go ahead and put a couple links. One, ARP has a great article talking exactly about that and about what are the resources that you can find in your local area.
Tammy Flanagan: Yep.
Micah Shilanski: Also, you sent me one over on NIH website about aging in place. We’re going to link to those. And again, these are things you need to do before you need them. And so one of the things on the planning side team that I like to do with my clients is we look and say, okay, great, maybe they don’t want long-term care insurance, maybe they do. That’s a separate discussion we haven’t even gone into. Almost everyone’s of this… the mindset of saying, hey, I want an age in place safely, and how do I do that and maintain my independence?
Tammy Flanagan: Right.
Micah Shilanski: So somewhere between 65 and 70 years young. This is—we have on our list to do. We like to take one month of long-term care cost, not insurance premium. So I live in Alaska. It’s $400 a day. So, if you went into a facility. It’s at least $400 a day, and that’s the base by the way. That doesn’t cover all the extra stuff. So you’re at least at 500 bucks a day. Great. What’s that cost for a month? We take one month of that cost and go invest that in your home, go put that money in your home and make it safer. Go do the throw rugs, go put the grab bars, and go hire these people to review the home and let’s make sure it’s safe for both you and your spouse.
Tammy Flanagan: That’s a good suggestion, Micah. And even some of the… If you do have long-term care insurance like the federal plan, will give you one month’s worth of benefits that you’ve purchased to use that towards making your home accessible.
Micah Shilanski: That’s huge. Yeah.
Tammy Flanagan: I don’t know if all policies do that. I’m mostly familiar with the federal plan, but that’s a great benefit to have there. And they also provide training for a caregiver. So, besides just paying for your care, they can also make it so that you can stay at home longer, because it’s always best. You live better, you live longer generally, if you can stay in your own home.
Micah Shilanski: And why is the insurance company doing this? Forgive me to be a skeptic. But it’s cheaper for them, right? If you are able to stay in your home getting care, it is less expensive. They are happy to help with those things. So everything aligns in that path, which is beautiful.
Tammy Flanagan: Yeah, and believe it or not, 80% of long-term care in this country takes place at home, and not provided by paid help, but provided by family members.
Micah Shilanski: So that’s another myth or thing that I want to dispel, Tammy, if that’s okay. Maybe we should call this episode, the myth about long-term care.
Tammy Flanagan: Yes.
Micah Shilanski: So the other thing that I want to talk about is sometimes, and I’m going to be sexist here. I’m going to talk about guys, because this is normally where I hear this coming from, is saying, well, if something happens to my wife, I’ll just take care of her. I was like, well look, you’re at the ADLs; activities of daily living; eating, toileting, bathing, transferring… And they’re like, not a problem. I can pick my wife up if she falls. I can do all this stuff. Okay. A couple things with that. One, you can now, but can you really later? Right. And if you think so, awesome, go to a CrossFit gym. A lot of them have big dummies and go grab a 200 pound one.
I know this sounds crazy. Pick up 200 pounds of dead weight and move it around. It’s not that easy, but let’s say you still think you could do it. Awesome. Can your wife pick you up?
Tammy Flanagan: Yeah.
Micah Shilanski: And this was the big thing actually in my family. Right? And my dad is a financial planner. He’s an epic financial planner. Been doing for over 40 years. He knows his stuff and mentally in his own head trash, Tammy, he still had to deal with this and saying, I don’t need this because I’m the man. I will take care of this. I will make sure it’s all good. I’m doing this myself. And then it was my mom that turned around and was like, yeah, well when you fall, how am I picking you up?
Tammy Flanagan: Right.
Micah Shilanski: And it dawned on him then says, you know what? We need to do other things because it can’t just rely on your spouse.
Tammy Flanagan: No. No, it’s unrealistic.
Micah Shilanski: Yes.
Tammy Flanagan: And when the spouse does it, because my mom did that. She was picking up a 200 pound man because she had to. And she didn’t want to put him away, as they said in those days. So, she did it until she was the one that passed away before he did, and that happens more often than you think. So this whole idea of caregiving and long-term care, it’s not as hard on the person receiving care. It is way harder on the caregiver.
Micah Shilanski: Yeah.
Tammy Flanagan: So don’t underestimate the fact that a spouse will do whatever it takes to keep their spouse at home, to keep things seeming normal, even though they’re not. So that’s another reality that’s hard to face sometimes.
Micah Shilanski: A really hard conversation that I’ve been almost completely… I’ve had a couple cases where I’ve been successful, but very unsuccessful at is trying to convince that caregiver to take a vacation to recharge.
Tammy Flanagan: Yeah.
Micah Shilanski: It is so difficult to have that. Even three days, take a long weekend. Right. And don’t do any caregiving. Recharge, because Tammy, do we say, they’re burning themselves out, and then that doesn’t help anyone. But again, we’re so emotionally attached and I can’t imagine that my wife, something happened, God forbid, that I would, hey, I’m going to go to Hawaii for a little bit. I know you got some issues. Someone else will take care of that. I’m going to go enjoy some time in the sun. Right. All of that issues come up, but we also, we have to balance out this care for yourself as the caregiver, making sure that you’re in there for the long run. This is not a sprint. This is a marathon.
Tammy Flanagan: Yeah. It’s called respite care. And again, some of the long-term care policies will provide a benefit for that.
Micah Shilanski: Yep.
Tammy Flanagan: Some of the nursing homes will hold a place for that person to go out and receive care somewhere else, so the caregiver can get a break. So, that’s a real thing. And you hit that nail on the head as well. These are all things that, again, nobody wants to think about. We don’t really know how to plan for it, but it is something to give some thought for, because this is all part of financial planning and retirement planning.
Micah Shilanski: So, Tammy, back on those triggering mechanisms I was chatting about earlier that I like to have clients write down. I also like to have them write down what are they okay with their spouse doing at this time, right? Now, this is relatively new, so I haven’t seen it go full cycle on this, but here’s my thought process. If we get them both to agree, it’s okay for respite care to come in, so that you have a break. My mental thought is, later, I’m going to be able to use this with a client and pull the document up that Bob said and signed, it was okay for Sue to go get respite care to help encourage her to make sure she’s taken care of. So again, having this communication. Now, this can get you into an estate planning conversation, your advanced healthcare directive, right? Your living will. All of these other documents should be in line in the same process.
Tammy Flanagan: Yeah. That’s really a great idea because we do have those other documents that say, if I’m need resuscitation, those kind of things. So we really don’t put that in writing about who’s going to provide our care, who are we willing to have provide our care. And it’s okay to hire someone to come into the home or it’s okay to put me in an assisted living facility if you can’t do it because I feel that way right now, but maybe my spouse wouldn’t at the time. So it’s worth it to put it down. I like that.
Micah Shilanski: Every now and again. I might even make it to the action items list. I love it.
Tammy Flanagan: That’s right. I like that one. I’m going to add that to my stuff. I’m going to steal it.
Micah Shilanski: Perfect. Please! Yeah, this information, and by the way, it’s a great plug, if I may, to share this information out, right? And if this isn’t just for a federal employee; you have a friend, you have a loved one that’s going through this and you’ve been preaching at him and they need to hear it from somebody else. Awesome. Forward this podcast to them. Share this information. This is the reason Tammy and I do this. We do not get paid for podcasting. Believe it or not. So we’re doing this to really put this information out to you guys. So yeah. Rip it off, share it, go for it. We love it.
Tammy Flanagan: Right.
Micah Shilanski: The other thing I wanted to bring back is we’re talking about spouses, but then also going through this plan with the kids, and this is where you still need to be a parent, because so often you’ll say, oh, well, I talked to my kid, and he’s willing to do all this stuff. Okay, great. My mom comes to me and says, Mike, if I’m disabled, are you going to take care of me? What is the only thing I’m going to say? Right?
Tammy Flanagan: Of course.
Micah Shilanski: Of course I am. Right? She gave me life into this world. Right? I’m not going to tell her no, I’m going to stick you in a home. Right. But is this realistic? And I’m not trying to sound cold-hearted but where are your kids in life? And is it really feasible for them to take care of you and what level of care do as that mean? And how do you outline things where you’re not a burden from them? Now, this doesn’t mean that they can’t take care of you. But again, back in those triggering things, right? What happens where your kids taking care of you and what happens when it escalates and you give permission to your child to say, it’s okay to bring in alternate care. Why do we bring this up? We see this multiple times, right? Kids don’t want to put their parents away in a home. Kids don’t want to bring anyone else. And they’re burning themselves out. I’ll give permission to your kids to do that.
Tammy Flanagan: Right. And I think we set examples for our children because I’m hoping that the example I set with the way I assisted, I didn’t take care of my father necessarily in my home. But when my mom passed away, we brought him to a nursing home close to where we lived. We visited, the kids went and visited and we were there at least several times a week. And when I couldn’t be there, I hired someone to come in in my place just to make sure he was being fed, just to make sure he was going to the music program. So I think all of that set the stage so that when my day comes and someone has to do that for me, my kids have seen how it’s done. So I think we watch our parents and pay attention to that parents too, because if you’re not doing the right thing for your parents, what do you think your kids are going to do for you?
Micah Shilanski: Great point.
Tammy Flanagan: So it’s something you want to set that good example, that caring example, because there’s a way to care for someone without doing it for them, but to do it smartly and to do it to protect yourself and your own family as well. It’s a hard road to travel.
Micah Shilanski: It’s hard. Tammy, I had to transition this just a little bit. One of the things that I see pretty consistently is a lot of my single lady clients are big adamants of having long-term care insurance. And the reason is, Micah, I have no one to take care of me. I have to have a policy in order to take care of me. And so transitioning a little bit into insurance, and what does that look like, Tammy? And I spend a lot of time talking about long-term care concepts. But Tammy, if we need that respite care, if we need that facility coverage or someone to come in, et cetera, how do we pay for it?
Tammy Flanagan: You’re right. Yeah, there’s lots of ways to pay for it. We all have TSPA accounts or retirement savings plans and we can just start writing checks, but that’s easier said than done. A lot easier said than done, especially if we’re married and our spouse is saying, wait a second, we’re writing checks. It’s going to affect what I have left later on down the road. Or if I’m single, I don’t want to admit that I’m never going to get better. So if I start writing checks and then I do recover, now I’ve spent all my savings. So I think there has to be something besides just our own personal savings or if we are going to self-insure or self-fund, I guess we could call this as we’re not really self-insuring we’re funding our future long-term care needs, what does that look like?
And should that be a separate account of money that’s just for that purpose and if it never gets spent, then we can leave that pot of money to somebody else. So I think this really needs to be an intentional plan, whether it’s through insurance, where you purchase an insurance product, where you pull your money along with everybody else who’s buying that policy, or whether you fund your own long-term care plan, but that can’t be the money that you’re living on and saving and using for your day to day living.
Micah Shilanski: 100% the case. And one of the things too is, Tammy, a lot of times clients ask, well, I have enough money to take care of my long-term care bill. Let’s say it’s a husband and wife. And the answer is yes, you have enough to cover one person’s long-term care. And now the spouse is destitute. And it’s great, which one of you wants to be destitute and which one of you wants to be in a long-term care home. Right? It’s a horrible decision to make. So really understanding what it actually costs and Tammy, I have done multiple podcasts on the true cost of survivor benefits. Right? Because we have a delusion in how much our spouse actually needs to survive. Hint, it’s the same thing you’re spending now.
So if you’ve committed all of your retirement assets and say, great, we have enough money to provide for my wife and I for the rest of our life in retirement. Perfect. Then you add to that, oh, we’re going to self-fund long-term care. Well, how? You just committed all of your dollars for retirement income for the rest of your life. You die, your spouse still needs an income, right? So how did you just also commit to this long-term care side? And again, we want you to make an educated and informed decision. We’re not telling you to go buy insurance. It’s not the conversation, but you really have to look at the numbers honestly. And Tammy, in your example, we have some people say, look, I want to carve out money for long-term care. Perfect.
Let’s do the math on how much long-term care would cost, carve out 400 to $800,000 of assets because remember, most of your assets are pre-tax, right? And expenses are post-tax. What does that mean? That means you have a Delta. You have a difference in there. You have to pay taxes on it if most of your money’s in an IRA. So it’s much larger than you think it is. So if it costs 500 grand to be in a long-term care home, you can’t put 500 grand in IRA and that’s not the same dollars. Because aunt Iris is part of your IRA. So we need more money set aside. Great. Remove that from your retirement plan. Do you have enough to make sure you and your spouse are taken care of? If the answer is yes, rock on. Good for you. That’s great. Maybe you don’t need long-term care insurance. If the answer is no, you really have to have a long-term care plan. Maybe, maybe not insurance, but you have to have a long-term care plan.
Tammy Flanagan: That’s right. That’s right. And that’ll save a lot of grief and heartache in the future if you do. So it is something worth thinking about. But if we go down the route of someone who is young enough and healthy enough, because those are two key factors in purchasing long-term care insurance. So if you meet the criteria that you can afford it, because you’re young enough and you can qualify for it because you’re healthy enough, my feeling on long-term care, and I don’t know if you agree or if you have a different philosophy on this, but I think you should buy something.
I don’t think you should go overboard and insure for 10 years of nursing home care at the cost of 30,000 a month, per month. But I think you should have enough in my opinion, to get through the crisis. And what I mean by that is like you mentioned about a family member who all of a sudden, one day you realize, oh my goodness, this is not just being forgetful. This is not just going downhill a little bit. This is where we need to do something. She can’t stay alone anymore. She can’t go unsupervised anymore. What do we do? Oh, she’s got long-term care insurance. It’s going to pay out $200 a day. We could hire six hours, eight hours a day of someone to come in and be with her. Or have someone come in for four hours in the morning and four hours at night to get her ready for the day to get her ready for the night.
Those are things we can do if we have a separate policy, and we do that for two or three years, by that time we know what we’re facing now. Now we know this is long-term, really long-term situation. Now we have to make other hard decisions. Do we sell the home? Do we move her in with us? Do we move her to an assisted living facility? So I look at it as a crisis alleviation so to speak, and I know you’re looking at it from another interesting point of view when it comes to Medicaid. So tell us a little bit about Medicaid because that’s something people don’t understand because they confuse it with Medicare.
Micah Shilanski: That’s the first thing I start off with. Medicaid is different than Medicare. Right? Medicare happens at 65, that’s elderly health insurance once you’ve hit 65 plus, we’ve had different podcasts on that. Medicaid is poverty. You cannot pay your own bills. You do not have enough money to cover your own health insurance, your own long-term care expenses, et cetera. Then you are eligible for the government to help pick up some of the expenses. Now the definition really is close to poverty. I’m going to get the numbers wrong and it’s different every single state, but in your bank account, you got less than a couple grand. You can’t and have a car worth more than $10,000, right?
This truly is virtually all of your assets except your home must be spent and gone in order to be on Medicaid. So one of the things that we encourage clients, of course, that’s not our plan A, right, that’s our last resort plan that we’re going for. But if you’re going to buy long-term care insurance, one of the things I like to say is at least look at a five year plan. Why? This gives us time and a lot of nuances inside of here. So just go with me on a concept, and a lot of the details we could cover in a future podcast are individually, if it’s something you need help with, but on a five year plan, that’s the federal limit that Medicaid has for looking back at asset transfers. What does this mean?
This means that if a client goes into long-term care and is expected to be long and permanent, we’re going to start transferring assets out of their name. So after five years and this long-term care policy runs up, Medicaid looks back and it looks like the client is broke. They have no assets, et cetera. And then they’d be eligible for Medicaid. Now, if you did this at the last minute, you waited to four years and you said, great. Now I’m going to transfer all these assets out. There’s this look back period where Medicaid’s going to look back and says, no, you had assets over the last five years. You just transferred them away. Therefore they still count that you still have to use them, even though you don’t have them anymore. So it gets complex. But that’s the minimum that I like to see clients going for because it gives us planning opportunity.
Tammy Flanagan: Right? Another thing to look at, and this is something you can do, even if you don’t have a need for it yet, but you’re just curious or you want to do some better planning is go visit an assisted living facility or a nursing home facility and ask, if I should go here, how would I pay? I know when we were looking for places for my dad, some of the places would say, well, let’s see how much assets he has. Let’s see what his income is from pensions and social security. They were looking to see that he could pay his own way for at least two or three years. Most places said two or three before they would be willing to let him stay there on Medicaid. So in other words, if he walked in the door and didn’t have enough on paper to show he could pay the full freight for two or three years, they didn’t have a bed.
So, there are places that will take a Medicaid patient. So if you have spent everything down to poverty level, you can still find a nursing home, but you’re going to have a lot fewer choices. A lot of places will want you to come in as private pay or they have only a few beds available for those Medicaid patients because they don’t get as much money. The states and the federal government combined on Medicaid, don’t pay the full cost of your care and the places have to accept that and make up the difference. That’s why those places cost $500 a day because they have people there that are receiving the Medicaid allowance, which is a fraction of that.
Micah Shilanski: You got it. All right, Tammy, this—it was a quick change of subject.
Tammy Flanagan: That was my soapbox speech on Medicaid.
Micah Shilanski: Yeah, yeah. I know this exactly. Well, this podcast is all about action items that our listeners can take and move forward on. So Tammy let’s make a quick little transition to some action items. Something that they might be thinking about, is that okay?
Tammy Flanagan: Absolutely. I think we’re going to have quite a list.
Micah Shilanski: Yeah. Well I would say let’s start off with one. What is your written plan for triggering mechanisms, to start your long-term care plan, right? What’s going to happen? What things do you want to see between you and your spouse that when those things take place and again, it’s a third party evaluation. So this is not saying, hey, one day I feel like I can’t do X. No, no, no, no. I want empirical evidence. Right? Once those things happen, then we can initiate this plan.
Tammy Flanagan: Right? I would say get informed one way or the other, whether you go to one of these meetings where somebody say, hey, we’re going to have a thing on aging in place, or you do some research on the internet, find out what’s in your community, what’s in your county. So that if that day comes that you need that type of assistance, what’s out there? What contractors specialize in aging in place? There’s things like that, that you don’t even know exist. They happen because you haven’t needed them yet. You haven’t looked at it, but take some time and look at that. Especially if you’re in your 50s or beyond.
Micah Shilanski: I love that. Number three, I’m going to say before you retire, especially if you’re still actively working as a federal employee, look deeply into your long-term care insurance options. Look at the federal system. It’s a good program. Is it perfect? Absolutely not. Nor have I ever seen one that is, it’s a good program. And then go evaluate that with other long-term care insurance as well, and make an educated and informed decision about long-term care insurance before you separate from federal service.
Tammy Flanagan: And for those of you who have long-term care insurance, how much do you have? It never fails that I ask my clients, do you have long-term care insurance? Yeah, I got it. I bought it 20 years ago. Well how much is it? Well, I don’t know.
Micah Shilanski: How much is it? It’s $40 a month. It’s $200 a month. Right? That’s how much it is.
Tammy Flanagan: Right now, how much does it cover? I have no idea. But your policy will tell you, if you have the federal plan, they’ll send you a notice saying here’s how much you’re paying. Here’s what the daily benefit is. Here’s the benefit period. Here’s the elimination period. Look at those things. And if you don’t understand what that means, get educated.
Micah Shilanski: And think about this just like your homeowner’s insurance, right? Has your home appreciated in value in the last 10 years? Yes, probably. Right? Okay. So does that mean you should have the same dollar coverage of insurance for the last 10 years as you do today? Probably not. Right. If your home burned down and it was worth 200 grand and now it’s worth 400,000 and your home burned down and all you get is $200,000, are you going to be upset? Yep. Probably going to be pretty fiery. Right? So you want to make sure it’s current and that’s the same thing with your current insurance. You bought it 10 years ago with the best intentions, et cetera. Is that still a policy that’s going to cover you for what you expected today?
Tammy Flanagan: That’s right. Yeah. So that’s definitely something to look at. There’s just so many things. And depending on your own situation, take a look at your family situation, your parents, your children, are they responsible? Can you entrust them with these things? How are your parents doing? Do you need to start doing these things and helping them because you might be in that sandwich generation.
Micah Shilanski: Yeah. Perfect Tammy. Well, thank you so much for staying tuned, going through this podcast and going through these action items and until next time. Happy planning.
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