Father knows best on investing - sometimes

Q: I have been reading your installments on long-term care with relish. I am in my early 40s, and I think my husband and I should be looking into this. Those that I work with are split as to the better option: long-term care insurance or personal investments. I think long-term care has been stigmatized. My father insists if I buy a policy that I should have a lawyer look at it. He seems to feel that it is better to take that premium money and invest it in long-term mutual funds.

 

Well, my co-workers are eagerly awaiting your answer to the big question: Which is better - long-term care insurance or personal investments? (We think you're the bomb!)

 

 

A: OK -- let me see if I can please both you and your father!

 

There is no substitute for having a lot of investments in your 40lk plan, or IRA so you can live reasonably well in retirement. Time is on your side when you start young. (You might enjoy reading the column I just wrote for Thursday.)

 

But a long term care insurance policy is completely separate from your "investments." It's insurance -- and surely he doesn't advise dropping your homeowners or auto insurance! Well, after age 65 you are 10 times more likely to need long term care than to have a fire in your home. At the current $70,000 a year, your retirement assets would be quickly wiped out by the need for long term custodial care.

 

If you're in your early 40s, this is the time to buy the policy -- when you're healthy, and when it's least expensive. You don't need a lawyer to look at the policy. They're all vetted by state insurance boards. Just use an expert agent in this field. I gave names and numbers in my column for that very reason.

 

By the way, you also didn't mention how old your dad is. I suggest he buy a policy as well. They're affordable into your mid-seventies. And if your mom is also alive, she should have one too. This is a big women's issue. Women live longer -- and they spend their last years taking care of their men, who then leave them with no assets for their own long term care! And that means being forced into a state-funded nursing home.

 

I bought a policy for each of my parents -- as a hedge against my own retirement plans! So turn the tables on your dad and tell him I said to buy his own policy!

 

Hope this stirs things up!

 

 

Q: I have a question regarding my recently widowed mother, who is 85 years young. She has approximately $100,000, which my father kept all in CDs. She doesn't need the money to live on, so I was wondering what you would recommend for a safe but maybe higher-yield vehicle for her to invest in. She also owns a 100-acre farm worth $275,000, which we are putting in a trust for her. Please recommend what to do with her situation.

 

 

A: Leave the money in the bank. You never know when she might need it -- probably for a helper/assistant to live with her if necessary. A recent study of nursing home costs shows that one year in a nursing home in a city now costs $70,000. Part time home health care would be less expensive, but full time home care would be even more expensive. This is no time to try to find something higher yielding -- and thus more risky. Your father did the right thing, keeping it in CDs. If she doesn't use it in her lifetime, and it becomes yours, then you can speculate with it.

 

 

 

 

 

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