Longevity annuities: A solution for long-term care?
By Nick Paleveda MBA J.D. LL.M
National Pension Partners
Long-term care, long-term problem
When I was researching the issue of long-term care for a continuing legal education seminar, I came across a real problem. One government study shows over $371 billion was spent in 2011 on long-term care in direct payments and an additional $450 billion in care which was not compensated (family members watching and caring for others). This number was scheduled to increase as 10,000 baby boomers turn age 65 each day. In addition, one study indicates 42 percent of these individuals will suffer from some sort of dementia by age 85.
Federal government folds
What to do? The government commission threw in the towel and took any form of long-term care out of the Affordable Care Act. Many pensions note it as a liability — then do not fund for it. Several insurance companies offer products, then withdraw from the market as they, too, do not know where this will all lead us.
Forbes: Why not a longevity annuity?
One commentator at Forbes stated that an individual at age 65 could purchase an annuity that would be annuitized at age 80, which would provide $3,500 a month for life. This would solve the problem (or at least help) if long-term care is needed (42 percent of the time) or if not (58 percent of the time). The annuity would obviously payout in the event there is improvement in the dementia effect, which appears to be on the horizon.
What do we do?
What do you advise? I can tell you, after presenting CLE classes, that attorneys need help in this area. Since many of you on ProducerseWEB are experts in this area, what would you advise? This is not really a legal issue, but inquiring lawyers want to know.