Prepare for Long-Term Care without Sacrificing Your Long-Term Goals

UBS Financial Services Inc.

The Brewster Wealth Management Group

More clients than ever are telling us that long-term care is their number one personal concern, surpassing even retirement. Add to that concern increasing life expectancies and rising healthcare costs, and it’s clear that no financial plan is complete without a strategy to fund long-term care. We know starting the conversation can be difficult, but not nearly as difficult as being unprepared.

Defining your future

Many of our clients have a clear idea of how they want to age. According to a recent UBS Investor Watch report, 44% of investors said maintaining self- reliance is most important to them, with two-thirds preferring to remain in their own homes. While this may be the ideal option, it can also be the most expensive, when you consider the cost of possible home remodeling to accommodate senior citizen living and, if needed, round-the-clock home health aides.

Often, the goal of aging on their own terms is just as important to clients as protecting family from having to assume the costs associated with their care. If you’re concerned that your long-term care costs may become a financial burden to your spouse and other loved ones, we should discuss how we might prevent that from happening.

Longer lives, bigger bills

The average 65-year old is now expected to have a much longer life-span, which means retirement could last 30 years or more. The average life expectancy of women is about five years longer than for men, and 40% of all women 65 and older live alone. Without proper planning, many women who help spouses through prolonged illness or incapacitation could end up with funding shortfalls of their own. For this reason, having a plan for long-term care is especially important for women, and for men who want to protect their wives.

The average cost of long-term care can easily approach $92,345 per year and is typically not covered by Medicare. The average length of a nursing home stay for someone older than 65 is three years. Fortunately, there are many strategies available to help you fund these expenses ahead of time, but they should align with your goals and be considered in the context of your overall financial plan. For example, do you envision an assisted living arrangement or moving into a professional facility? Or would you prefer to “age in place” with professional or family assistance?

Funding the need

There are different ways to pay for long-term care. Below are the options to help inform your thinking and drive our conversation.

• Paying out of pocket: Investors with sizeable assets sometimes prefer to “self-insure” by paying all their long-term care costs out of pocket, or by combining out-of-pocket payments with other funding strategies. If you’re considering this option, we should assess whether you have enough liquid assets to meet your long-term care needs and those of your spouse. Actual costs could exceed expectations, given the inflationary nature of healthcare. Also, if you liquidate assets to pay for long-term care during a market downturn, we need to consider how selling at a loss could affect your financial plan.
• Long-term care insurance: Long-term care insurance can be a more cost-effective alternative to paying out of pocket. Premiums, however, increase with age and are impacted by pre-diagnosed conditions, so the sooner we start exploring this option, the better. We should talk about what you want your coverage to pay for. Services that are commonly covered include nursing, social and rehabilitative services needed in the home or at a facility. Besides age and health, premiums will depend on what kind of services you want covered, how long you want coverage to last, and whether you want inflation protection. Keep in mind, however, that premiums are typically not refunded if you end up not needing long-term care.
• Life insurance with long-term care benefits: An alternative to long-term care insurance is a universal life insurance policy with an optional long-term care benefit rider. A long-term care benefit rider is an amendment that provides additional coverage for long-term care costs if needed. These policies typically offer a death benefit to beneficiaries and may offer a refund-of-premium feature, which reimburses a percentage of premiums if you end up not needing long-term care or should you decide to forfeit the policy.

Let’s have a conversation

In many ways, it matters less which option you choose, as much as it does choosing one. Long-term care can be a difficult topic to discuss, but it’s vital to find solutions now. We’d like to help.

---Team---

John G. Brewster

Senior Vice President - Wealth Management

Senior Portfolio Manager - Portfolio Management Program

john.g.brewster@ubs.com

Randall V. Brewster

Financial Advisor

Account Vice President

Portfolio Manager - Portfolio Management Program

randall.brewster@ubs.com

Susan McGeachen

Senior Registered Client Service Associate

susan.mcgeachen@ubs.com

61 South Paramus Road

Mack Center IV, 2nd Floor

Paramus, NJ 07652-1236

201-441-3496 800-698-2707

ubs.com/team/brewsterfinancialgr

---Disclaimer---

Sources:

1 UBS Investor Watch, 2Q2013. Investors surveyed had at least $250,000 in investable assets; half had at least $1 million in investable assets. The survey included investors ages 25 – 90, 1,584 men and 1,027 women, of which 434 were UBS clients.

2 The MetLife Study of Caregiving Costs to Working Caregivers, June 2011.

3 Lincoln Financial Group, 2012.

4 Optional riders and benefits are available at an additional cost. Optional riders are only available through the purchase of a universal life or variable universal life product

Long-term care insurance products are issued by unaffiliated third-party insurance companies and made available through insurance agency subsidiaries of UBS Financial Services Inc. Applications for long-term care are subject to the underwriting requirements of the issuing insurance company, including a medical examination. Long-term care insurance may not cover all of the costs associated with long-term care. You should review all long-term care contracts carefully as they have exclusions, limitations, reductions in benefits and terms under which the contract may be continued in force or discontinued. Contract benefits and maximum monthly benefits may vary by state. For costs and complete details of a particular long-term care insurance product you should contact your Financial Advisor.

We offer both investment advisory and brokerage services, each of which is separate and distinct, differs in material ways, and is governed by different laws and separate contracts. In providing a financial plan, we may act as a broker-dealer or investment adviser, depending on whether we charge a fee for the service. Financial plans provided free of charge are a service incidental to our brokerage relationship and the service terminates upon delivery of the plan. We provide financial planning services as an investment adviser for a separate fee pursuant to a written agreement, which details the terms, conditions, fee and scope of the engagement. For information about our fee-based financial planning services, see the firm’s Financial Planning ADV Disclosure Brochure. Note that financial planning does not alter or modify in any way the nature of a client’s UBS accounts, their rights and our obligations relating to these accounts or the terms and conditions of any UBS account agreement in effect during or after the financial planning service. Clients are not required to establish accounts, purchase products or otherwise transact business with us to implement any of the suggestions made in the financial plan. Should a client decide to implement their financial plan with us, we will act as either a broker-dealer or an investment adviser, depending on the service selected. For more information please visit ubs.com/workingwithus.

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