Question

Omar and Suzette are trying to decide whether long-term care insurance is right for them. They both just celebrated their 75th birthdays and have very little left in their retirement savings accounts. Which of the following statements most applies to their situation?

a) Long-term care insurance may not be necessary due to their age.
b) Long-term care insurance is essential given their age and financial situation.
c) They should focus on increasing their retirement savings instead of getting insurance.
d) They should consider canceling other insurance policies to afford long-term care insurance.

Answer 1

Considering their age of 75 and limited retirement savings, long-term care insurance is essential for Omar and Suzette to financially protect against the significant costs associated with long-term care. Social Security and Medicare may not cover all their potential health care expenses, and the potential cost of long-term care could further strain their financial resources.

Step-by-step explanation:

Omar and Suzette are contemplating whether long-term care insurance is a suitable choice for their situation. Given their age of 75 and limited retirement savings, the option that most applies to them is (b) Long-term care insurance is essential given their age and financial situation. Health care is expensive, and a couple aged 65 may need an estimated $283,000 to cover their health care costs in retirement. As a result, although Omar and Suzette are past this age, their potential need for extensive health care and the cost associated with it could be significant. Additionally, their limited savings indicate a heightened vulnerability to health-related financial risks.

It is also crucial to understand that Social Security and Medicare benefits may not fully cover such expenses, especially with the long-term budget outlook for Social Security and Medicare being uncertain due to demographic changes and potential funding shortfalls. Long-term care insurance can provide a layer of financial protection specifically for costs associated with long-term care needs, such as in-home care, assisted living, or nursing home expenses, which are not typically covered by Medicare.

Considering their financial situation, Omar and Suzette should assess the potential benefits and costs of long-term care insurance carefully. They should also take into account the life expectancy and the fact that health care and long-term care costs typically increase as people age, most notably after reaching 85. Relying solely on Social Security benefits and their existing retirement savings might not suffice to cover all their potential future costs, and long-term care insurance could be a strategic move in planning for their future needs.