After the pandemic, it could be time to rethink your long-term well being wants
The best listening experience is in Chrome, Firefox or Safari. Subscribe to Federal Drive’s daily audio interviews on Apple Podcasts or PodcastOne.
When the pandemic proves something, it’s never too early to think about hours of healthcare. That means now is a good time to review your requirements. Federal Drive with Tom Temin spoke to Greg Klingler, director of wealth management for the state employers’ association.
Tom Tem: Greg, it’s good to have you back.
Gregor Klingler: Thanks for having me Tom. So how should people rethink their long-term health options and needs now that we, I think, are largely through this pandemic.
Tom Tem: But as you mentioned, over the past 18 months the pandemic has really brought health insurance, or health in general, to the fore of much conversation and awareness of many people. Long-term care insurance has a lot to do with health. And when we look at long-term care insurance, one of the things that was very apparent at the start of the pandemic was not just the ability to go to a healthcare facility, but the ability to choose the right healthcare facility, unfortunately, all of these long-term care facilities are being affected by the effects of COVID -Virus devastated resulting in dozens, if not hundreds, of deaths depending on facility size. Unfortunately, many of them had more Medicaid beds, which were effectively lower costs and a more affordable environment. So if we dig into long-term care, where you have that care, it turns out to be much, much more important, as the higher-end care facilities didn’t have nearly as many problems as the lower-level care facilities.
Tom Tem: And over the years the benefits of long-term care insurance have become smaller and smaller. Basically, if you are lucky enough to have one of these unlimited policies you are really in the clover, but the new policies are expensive, they cost thousands and thousands of dollars a year in premium, and they have a three year or four year term performance. So how do you calculate to know if it’s worth it because no one can predict how you will end up reaching the age you need it to be.
Gregor Klingler: But as you mentioned, the cost and type of policies have changed pretty dramatically over the years. And as federal officials know, many of these plans became more expensive in 2016. When they started reevaluating prices, these plans were made with different assumptions. The unfortunate reality is that your retirement plan is not complete. without a plan for the high cost of long-term care. Long term care happened out there, it is statistically likely, it has a high duration when you go to a care facility, around 4.1 years for a woman, 2.5 years for a man. And it’s very expensive. And it is very different geographically when it comes to expensive. And the cost of a semi-private nursing home can fluctuate by about $ 50,000 between the low cost of, say, Texas and the high cost of the Washington DC, New York, or Hawaii area. So it is just as important where you retire when it comes to long-term care as it is ultimately when you retire.
Tom Tem: And I think it’s also important, as you’ve mentioned in the past, to consult with the rest of the family on the plan because either way they’ll be a part of it. And I think the more they can come over and bring cookies and the less they have to change, the better off they’ll be.
Gregor Klingler: Yes absolutely. Everyone has a plan when it comes to long-term care in retirement. Some people just don’t know yet. The unfortunate reality is the people who don’t yet know, the concern is your children, when studies tell us that if you don’t have a plan, and it will be your children, no matter how many children you normally have your duty of care a child. And states will also tell us that a child is generally a woman, be it your daughter or daughter-in-law. And studies will also tell us that if it hits a single person at any given time during care, there is a high chance that the person will become chronic as depression due to the financial, physical, and emotional stress they are suffering from is called causes.
Tom Tem: All right so make sure the families are part of the plan so they are not part of the plan.
Gregor Klingler: Absolutely. If that’s your plan, let your child take care of you. You want to make sure they are aware of this. And you want to make sure it’s coordinated with your other kids too.
Tom Tem: We spoke to Greg Klingler, Director of Wealth Management at the State Welfare Association. And what options are federal employees available at this point, and when in their career should they start changing their mix of options that they choose each year to think about this long-term phase-out?
Gregor Klingler: So we find that most people begin to successfully plan long-term care planning in their early to mid-1950s. There are many reasons for this schedule. Number one for people who have children, in general, the demands on raising the child, be it studying at college or just getting the kid out of the house that you normally move on to now about yourself and yours Think about retirement in early to mid 50s. When we see that happening in general. We also find that the prices are still pretty good for people planning long-term care in the early to mid-50s, which makes signing up a lot, much better and the health of people in their 50s in general is pretty good too, which leads to a lesser chance of declination. What options does a federal employee now have? Well, obviously the federal employee and her parents have Federal Long Term Care Plan 3.0. Thats a good plan. It’s a very nice improvement over 2.0 and 1.0. that came before. There are some benefits to not using it to pay off your heirs. And it offers some buffer against rising costs, which many federal employees are very wary of. In addition, we offer everything outside of the federal benefits package, be it traditional long-term care or one of those hybrid plans, life insurance and care combinations that can work very well for people who have both life insurance and long-term care.
Tom Tem: Yes, this point about the benefits that might be paid to heirs is an issue I think a lot of people worry about when you pay those high premiums year after year. And then before you get to the point where you would need the performance, you get hit by a bus and all of the rewards have gone into the airwaves.
Gregor Klingler: When the two major stressors for people who know they need long-term care insurance because they can’t insure themselves and they don’t buy, use or lose. They worry that they will pay all this money because long-term care insurance is expensive, because again, high probability, high duration, high cost. So that’s a big concern. The other major stressor for people is that they all know someone who saw a significant increase in rates for people in the September 2016 federal plan. And it was a very big step up for anyone in the private sector. It was probably minor steps over a year, two, or three, but they all saw it. That is a concern of theirs when moving into a fixed income environment.
Tom Tem: And if you have had life insurance for many years, and it has been around for your entire life, I don’t know if it still exists. But there are these hybrid plans. And then, is there any way I could convert an older plan so that it can then be used for long-term care instead of outright death?
Gregor Klingler: Yes. When you have a plan and present value, you can definitely back it up with something called a 1035 exchange to move you into something that covers something that is a bit more relevant to you now and has a touch of long-term care insurance coverage. Absolutely.
Tom Tem: Does it differ depending on the carrier, or is 1035 a legal act or something that is required for insurance? Or are these just a few plans?
Gregor Klingler: Correct. It’s a legal law. This is how it worked for every wearer. Remember that it is life insurance or general life insurance that has a cash value because converting term life insurance doesn’t really make much sense as there is no cash value.
Tom Tem: Finally, what do you think of how people in the federal government have dealt with teleworking and so on? In my opinion, for the various types of cats in the herd, federal employees probably weathered the pandemic a little better than average because they had a short term and were generally supported with teleworking by agencies.
Gregor Klingler: We see that here too. Obviously, the pandemic likely accelerated much of the virtual work that people wanted to do. Well, we would probably see this accelerate into the last 18 months over the next 20 years. Many of our agency partners and our customers are now at least partially looking at a virtual environment.
Tom Tem: Greg Klingler is Director Wealth Management at the Government Employees Benefit Association. Thank you for joining me.
Gregor Klingler: Thanks, Tom. Thanks for the invitation.