Imagine you own a crystal ball. That crystal ball tells you there is a 0% chance you’ll die in the next 10 years. You’re not going to buy a 10-year term life insurance policy. Most people in their 30s, 40s and 50s would assess their odds of ending up in a nursing home in the next 10 years at the same odds. While that would not be totally accurate, it is unlikely. That’s just the rub with insurance. No one wants to pay a premium for something they won’t use.
At the same time, no one wants to be in the situation where they need to use it. When it comes to long-term care insurance, that often leads to folks waiting too long. But what is the optimal age to buy so that you’re not paying for too long but also not paying too much?
This is a complicated question, as it depends on so many personal factors. However, here are some rules of thumb for when to buy long-term care insurance: According to AARP, the best age range is between 60 and 65, with a significant assumption that you will still qualify for care. According to the American Association for Long-Term Care Insurance, 30.4% of people between the ages of 60 and 64 will be declined for the insurance. Partly for this reason, they recommend applying for coverage in your mid-50s.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
There are many personal factors to consider when figuring out the best age for you. Below we cover some, but not all, of them.
1. Health
When I was affiliated with ING early in my career, I was trained to say, “You’re insuring your insurability.” I don’t disagree with this sentiment. If you have a family history of something that may preclude you from getting coverage later in life, that may be a reason to start earlier.
2. Gender
For about a decade, women have had to pay more for insurance because they tend to live longer and therefore need long-term care for a lengthier period than men. For this reason, paying policy premiums over a longer period is more impactful. Therefore, assuming coverage can be obtained, starting as late as 65 for women tends to be more affordable.
3. Income
Because of high claim rates, LTC insurance is expensive. Traditional policies also don’t guarantee, and probably won’t have, level premiums. This is one of the reasons many opt for the hybrid life insurance or annuity options.
It is much less painful to pay a premium while you’re working than it is to pull it from your savings in retirement. While this one is less quantitative, it can help to align your premium with your retirement date. So if you are 55 and plan to retire at 65, buy a policy that is paid up in 10 years.
All insurance is a risk-management tool. If you have a lower risk tolerance, you are more likely to get the coverage and to get it early. Your financial plan can point out how much of a risk this is. For example, someone with a large balance sheet may be able to self-insure. If you want to build your plan or reaffirm your numbers, you can use a free version of our software.
In my experience, the biggest factor influencing when and if you get LTC insurance is really quite simple: Do (or did) your parents need it?
Related Content
- Nursing Home Care: What to Do When Medicare Won't Pay
- A Roth Conversion Alternative That Addresses Long-Term Care
- New Payroll Tax Targets Long-Term Care Expenses
- Four Tax-Friendly Ways to Pay for Long-Term Care Insurance
- Six Key Factors to Consider When Shopping for Long-Term Care Insurance
-
Ask the Editor — Tax Questions on Inherited IRAsAsk the Editor In this week's Ask the Editor Q&A, we answer tax questions from readers on the rules on inheriting IRAs.
-
I Asked Experts When It's Worth Splurging on Beauty and Skincare — and When You Can SaveSmart Shopping Experts agree that while you don't have to spend three figures on your products, some higher-priced items have value.
-
Retiring Early? This Strategy Cuts Your Income Tax to ZeroWhen retiring early, married couples can use this little-known (and legitimate) strategy to take a six-figure income every year — tax-free.
-
Ditch the Golf Shoes: Your Retirement Needs a Side GigA side gig in retirement can help combat boredom, loneliness and the threat of inflation eroding your savings. And the earlier you start planning, the better.
-
Roth IRA Conversions in the Summer? Why Now May Be the Sweet SpotConverting now would enable you to spread a possible tax hit over more than one payment while reducing future taxes.
-
A Financial Expert's Three Steps to Becoming Debt-Free (Even in This Economy)If debt has you spiraling, now is the time to take a few common-sense steps to help knock it down and get it under control.
-
I'm an Insurance Expert: This Is How Your Insurance Protects You While You're on VacationHere are three key things to consider about your insurance (auto, property and health) when traveling within the U.S., including coverage for rental cars, personal belongings and medical emergencies.
-
Investing Professionals Agree: Discipline Beats Drama Right NowBig portfolio adjustments can do more harm than good. Financial experts suggest making thoughtful, strategic moves that fit your long-term goals.
-
'Doing Something' Because of Volatility Can Hurt You: Portfolio Manager Recommends Doing This InsteadYes, it's hard, but if you tune out the siren song of high-flying sectors, resist acting on impulse and focus on your goals, you and your portfolio could be much better off.
-
Social Security's First Beneficiary Lived to Be 100: Will You?Ida May Fuller, Social Security's first beneficiary, retired in 1939 and died in 1975. Today, we should all be planning for a retirement that's as long as Ida's.
