Finance Filter: Protecting the nest egg
March 11, 2021 6:52 AM   Subscribe

My spouse and I have built up some money. We'd like to protect it. How does that work?

Our dollars are roughly evenly split between Her 403b & Roth, His 401k & Roth, and a joint taxable (brokerage) account. We're low-cost index fund people. No debt besides mortgage, which we refi'd last fall to a very low rate.

We're getting umbrella insurance soon (would have it already but our car/house insurer doesn't offer it, and that means I have to call someone). We are aged/priced out of long-term care insurance policies.

The scenario that comes to mind for us is if one of us is badly injured by our medium-risk activities, to the point of needing care (in-home or facility) for the rest of life; Spouse is concerned that scenario would blow through the savings, and devastate the non-injured spouse's financial security.

I'm not even sure what happens there. The retirement funds (40x/Roth) would stay with each person. We both have long-term disability insurance through jobs; Spouse's job will not last forever (tech), but mine is more likely (tenured academia). Presuming the injured person has to leave the job, health care would come from the non-injured person. But does this cover a care facility? Is this a scenario where Medicare comes in only after we've spent down all other money?

So I'm looking for experience in this area, or an idea of what professional we'd want to get advice from (-not- a financial advisor) to help us insure against this scenario. We have no kids, thus no term insurance.
posted by Dashy to Work & Money (5 answers total) 11 users marked this as a favorite
 
Clarification: Medicare doesn't cover LTC, Medicaid does.

Is there a reason your planning scenario is "medium risk activities" instead of "getting old"? The latter is the more common reason for needing long term care.

In either case, long term care is very expensive. Medicaid is needs-tested, meaning you can't be able to pay for it and elect to have Medicaid cover it instead. It has a "look back" period to see if you suddenly gave all your money to your heirs, but I'm not sure how it works with spouses.

When we needed to figure out changes in my mom's long term care needs, a really excellent geriatric care manager helped a lot, but I don't know if they are appropriate in the early planning stages.

Other people to talk to: a financial planner (different from a financial advisor) or an attorney specializing in elder planning.

Good luck!
posted by justkevin at 8:37 AM on March 11, 2021


Response by poster: Clarification -- this is specifically about medium risk activities causing need for long term care well before we get old, which is the more common but different scenario. So, what happens if one of us becomes disable at age 50, rather than at end of life.
posted by Dashy at 8:41 AM on March 11, 2021


I don't think you necessarily can plan for unknowable medical expenses. I know middle class people who are disabled or have become disabled early in their older age (specifically ALS - had for 15 years, from 45 to 60, died in 2019) - I don't know their expenses but it's not something that drove them into poverty. Old age in-home and dimentia care is also extremely variable in price. My grandmother lived in a place for 20 years, but it didn't really effect the inheritance given (to my mom's brother). There are more plans and programs than one might think, but you can't get estimates or knowledge of the expenses because they are so personal and based on state, insurance, age, etc.
posted by The_Vegetables at 9:59 AM on March 11, 2021


I'm not sure if this is the right answer for you (it appeared in the back of my head as I was reading the question), but have you checked out disability insurance? It's less about long term care and more about replacing lost work income, but it might do the job.
posted by How much is that froggie in the window at 6:34 PM on March 11, 2021


If you are paying into Social Security, then you will be eligible for social security disability if you suffer a long-term disability. It not only provides you with income (you can look up how much) but also makes you eligible for Medicare so your basic health care will needs will be covered (still need to pay something for Medicare supplemental plan). If you aren't paying into social security then your employer probably has some other option for long term disability as part of your employment.

Second issue would be to think about what kind of disability you would be realistically facing. Actually nursing home care - that requires real nurses is very expensive. Home health aides or CNA that assist with daily living like feeding, dressing, bathing or diapers is much less. If you only expect one partner to have this kind of catastrophic accident, then the other partner can be available to provide nighttime care even if you need aides during the day time.

Finally, if your savings are being wiped out by the long-term medical care, then you turn to Medicaid (Meds-Cal in California). They have some rules in place that allow the healthy partner to stay in their home and keep some share of the assets while the resources belonging to the ill partner have to be spent down to quality. There won't be anything left over to give as an inheritance but it is a safety net program that will allow the healthy partner to keep going.
posted by metahawk at 3:37 PM on March 12, 2021 [1 favorite]


« Older A COVID-19 quandary - U.S. tax prep edition   |   Reducing Bandwidth on Zoom Newer »
This thread is closed to new comments.