Using the planner to evaluate long term care policies

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frp user
Posts: 65
Joined: Fri Feb 29, 2008 12:55 pm

Using the planner to evaluate long term care policies

Post by frp user »

Jim, I just stumbled upon your website while surfing and googling for information on Monte Carlo simulations for retirement planning. In particular, I am now struggling with the issue of whether long-term care insurance is a good "investment" instead of self-insuring via additional savings. The insurance company hype gives you a worse case scenario, but finding the true probabilities of needing LTC, the duration of such care, etc., is a challenge.

Would be a nice enhancement to the retirement withdrawal calculations to see how adding LTC probabilities (along with mortality rates) would affect the outcomes, as well as how insuring that risk would change the expected outcomes.

Thanks for making your extensive work available to the public!

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admin
Site Admin
Posts: 79
Joined: Thu Feb 28, 2008 5:27 pm

Re: Using the planner to evaluate long term care policies

Post by admin »

Thanks for the note. I've actually thought about adding an option to simulate possible expenses of long term care, but haven't gotten to it.

For now, you can directly model the expenses of long term care to see how it would affects the plan. Unfortunately, you can't do it probabilistically (ie. the expenses will definitely happen).

To add the expenses for a hypothetical long term care stay, go to the additional inputs tab and create an "other expense" for the long term care expenses for 10 years or so starting at age 80 or 85 (or any age range) using an estimate of the expected annual cost (in today's dollars).

Again, I understand this is only a workaround and what you'd really like is incorporate the probability of having to pay for long term care in the plan.

Best Regards,

Jim

frp user
Posts: 65
Joined: Fri Feb 29, 2008 12:55 pm

Re: Using the planner to evaluate long term care policies

Post by frp user »

I'll try that and run different scenarios for when and how long LTC occurs. Thank again...great program indeed!

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