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While some would say its inflation, others would say its a recession, and others still, might think its a stock market crash that is the biggest threat to their retirement. The truth is that its neither taxes, interest rates nor volatility spikes.  It’s instead  living a good long life and then  incurring  unexpected un-reimbursed health care costs amounting to hundreds of  thousands  of dollars. This situation could by far be a much bigger threat to your own retirement that you could have ever imagined.

Many people are of the wrong impression that there must be some governmental program out there that will pay for some or a big part of these unreimbursed healthcare costs. The fact of the matter is that there are no governmental programs available to pay for these costs other than Medicaid. But to qualify one must be destitute and have virtually no assets in their name. It used to be much easier to qualify for Medicaid but several years ago they changed the eligibility requirements and made it more difficult for a person to qualify for benefits if he/she is only artificially impoverishing themselves.

The problem of how to pay for these large unexpected costs can be rectified with some proper risk management techniques. In all likelihood if you have a home and it’s mortgage free you’re not required nor obligated to carry fire insurance on that piece of property, but very few individuals would consider the premium savings involved by discontinuing that coverage, even though there’s only a 1/10 of one percent chance of your home being totally destroyed by a fire. However the cost of the premium is not worth the risk you’d be taking by not having this insurance coverage.

By the same token you should apply this logic to Long Term Care Insurance,  especially when you consider the fact that the odds of an individual aged 65 requiring care, according to the Journal of  Medical Association, is 43% and the care lasts an average of  3 years. What makes the argument even more compelling is that the cost of care can often equal or exceed the value of one’s home.

Depending on your age and  state of  health,  when you  first acquire the long term care coverage, the premium for this valuable coverage amounts to a very small portion of your income.  However that  very contract with a built in 5%  inflation factor can effectively solve the problem of your family ever having to worry about paying for the high costs of a long term care episode.

In addition to the financial burden of the cost of long term care, having a long term care contract often frees up a daughter or wife or daughter in law,  the traditional caregivers, from the emotional burden of  having to act as primary coordinator and  caregiver. Today’s Long Term Care Insurance Contracts provide the family with a personal care coordinator.  This individual relieves the family of having to care for an aging or elderly parent and instead allows them to care about their loved one.

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Tags: financial planning, henry montag, personal insurance, retirement, unexpected costs

About the Author: Henry Montag is an Independent Certified Financial Planner as well as a CLTC. He’s been in practice since 1976 with offices on Long Island, New York. He is a contributing writer for The Moneypaper, a national financial publication, been my sourced by Investors business Daily, Long Island Business News, Newsday, Wall St Journal, The Moneypaper,Investment News, Senior Lifestyles and has held insurance and securities licenses for over thirty years.

This entry was posted on Sunday, October 12th, 2008 at 10:57 am and is filed under Personal Finance. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.