What's your worst-case scenario plan?

[Ego]

I tend to see moral hazards everywhere I look, so you might take this with a grain of salt. For me long-term care and disability insurance creates a long-term moral hazard that gives the insured person permission to relax their vigilance toward healthy living since they know, "at least my family will be cared for if the worst case scenario happens". The fact that their affairs are settled allows them to take minor unhealthy shortcuts, day after day, year after year. These tiny bad choices have the cumulative effect of increasing the very risk they are designed to insure against.

For insurance companies the creation of these moral hazards is a spectacular business model in the same way that everything-including-kitchen-sink health insurance is fabulously profitable. Since they skim a percentage off the top of the insured pool, the bigger the pool (more risky) the bigger the take.

No, we don't control everything, but we do control a lot. Fear of the unknown is a strong motivator. Take away even a portion of that fear and you remove some of the motivation to do everything within your power to be healthy.

[Chad]

I think I've come to terms with my own mortality.---That life is finite and that my goal is to optimize quality and not quantity. I put much more value on being in tip-top condition than simply being alive. My first and last tattoo will be a "no code" on my chest.

This is exactly what my mother, who has been extremely rational her whole life, has said for the 40 years I have been alive...until now. I'm not sure if it's because the tumor is messing with her thought processes or she realizes she doesn't have much time, but she is not choosing this path. It appears to be easier said than done.

[Chad]

Sorry to hear, Chad. Been there unfortunately.

I'm not sure which is most common, major debilitating injury (brain/spine) or illness like cancer/stroke, but I believe these striking in your younger years and/or children at home years are the biggest risk.

I haven't really thought about what I'd do if I wasn't working, right now I carry both LTD and LTC insurance through my employer.

The poor and the rich have little to fear, the middle class and ERE, IMO, actually share this one. It seems to me ERE/MMM "retirees" are unlikely to have these types of insurance, and focus on self-reliance for lifestyle, which may be taken from you. There is not enough money to get over the gap. The Middle Age/Class guy will have no to moderate savings, so will simply see standard of living fall to government subsidy levels without external help.

Thanks, man.

You are probably correct about the fate of the different classes.

[Chad]

@ Chad

Sorry to hear what you are going through. Unfortunately, I've also been there too with a sibling. Makes documentaries such as "How to die in Oregon" heart-wrenching. Everybody should have to watch that movie.

Thanks. It's a little surprising how many people go through this.

[7Wannabe5]

The scary thing is that the better shape you are in physically, the longer you might stay alive with disabling neurological condition. My ex-father-in-law biked the entire Lewis and Clark trail solo at age 69 and now he is completely incapacitated with a Parkinson's-like syndrome at 79 and there is no way his 79 year old wife can care for him.

[RealPerson]

I think you just can't protect 100% against all risks in life. This one is tough. Having "DNR" tatooed on your chest may be easier to do now, when you are not sick. But you may change your mind.

My mom died of cancer. When she knew treatment was no longer curative but ony palliative, she essentially stopped all treatment. There were no huge protracted medical bills. She made a very logical choice and died peacefully.

FFJ raised a very good question. I am just don't think all questions have an answer, even good ones. Back in the old days, family helped each other. Maybe that was not such a bad idea after all. Having close ties within your family may be better than a very expensive insurance policy.

[The Old Man]

Actuarial Life Table
http://www.ssa.gov/OACT/STATS/table4c6.html

Disability Statistics
http://www.disabilitystatistics.org/

In the USA a male has a 7% chance of dying before age 50 and a 15% chance of dying before age 60. Additionally, about 8% of the USA population aged between 18-64 has some health problem or disability which prevents them from working or which limits the kind or amount of work they can do. Finally, if my family is any indication there is a near 100% chance to need some form of long term care.

The chance for death or disability is a small number, but it is not zero. Therefore, a prudent person would have a contingency plan. These contingencies would be handled through insurance.

Likewise for major health issues health insurance would cover it. In the past poor quality health insurance (i.e. big gaps in coverage) was sold and many people who thought they were covered actually did not have the coverage they thought they had; thus, bankruptcies loomed large. The Affordable Care Act may change this. With quality health insurance one only needs to cover the deductible.

For chronic health issues (i.e. continuing debilitating condition) health insurance will contain the costs; however, paying the deductible every year will become expensive, but there is no other solution.

How Doctor’s Die
http://www.saturdayeveningpost.com/2013 ... s-die.html

The above article should be required reading. Preferred end of life care should be documented in a Health Care Directive (different names in different states) and you should have a discussion with the person (usually a spouse) who would be making health care decisions on your behalf. Due to the fear of lawsuits the health care industry is not designed to allow a person to die peacefully at home.

Long Term Care is care for a person that needs help with basic life needs. This care can be a nursing home or home health care. These days current Long Term Care Insurance policies are time limited to a maximum of about three years. Medicare (US government provided health care for the aged) covers nursing home care (i.e. skilled nursing care), but not home health care (i.e. unskilled care). Insurance only partially covers this risk and the cost is high.

My grandmothers (both), great aunt, and father were taken care of by my mother before they died. Duration of care ranged from less than a year to a decade plus before death. When my father was stricken with cancer and became home bound, my grandmother who around the same time had fallen and broken her hip was transferred to a nursing home where she died about six weeks later. My mother was unable to care for two very sick people at the same time. She had needed the help of a neighbor when my grandmother had fallen because my father was unable to help.

Family assistance is best for long term care. If unavailable, then one needs to draw down their financial assets and then finally rely on the government. It is not really possible to develop a contingency plan for this scenario that is 100% effective.

[riparian]

This is something I've thought of a lot and part of the reason I'm choosing passive income over accumulating assets.

Here's how I'm making my bets:

1) I've done a lot of research and practice of health and emergency medical care. I mean, most of the things that come up, I can handle.
2) I invest in people. I participated in two medical emergencies yesterday. Holy crap. But I'm pretty sure there's some people I can call if I need some help.
3) I'm trying to get obamacare...
4) I'm familiar with local programs. My auntie was inpatient for two weeks and I got them to make her bill zero cause she had zero. If I had an emergency like a broken leg that required a short expensive medical intervention I would go this route.
5) I've taken care of some old people who were mostly planning on dying before they ever reached the conditions that they did, but were convinced by friends and doctors to just try one more thing, etc, until they were physically unable to kill themselves. My plan is not to let that happen to me. I'd rather fold my cards a little early than lose my marbles.
6) I invest heavily in things that keep me healthy.

[JohnnyH]

This thread is sad hope she pulls through, Chad... I was hoping this thread was going to be about going over 4% SWR or running low on funds after retirement.

I want to say that I'll take my own life when my consciousness is interrupted (Alzheimer's), my quality of life becomes too low (immobility, pain) or my care will decimate what I leave for inheritance... But I personally know people who have said just that and ended up not. It's a very courageous path that many end up not taking when the time comes... I hope my perspective and resolve doesn't change. But life is good, I think it would take a lot for me too feel otherwise.

Being blindsided is very hard to plan for but all people with some wealth should takes steps as they age BEFORE they MIGHT become dependent on care:
*get liquid assets down to near zero
*put assets in heirs' names early
*if you move in with relatives pay them for care, pay for housing, transportation (everything really)
*establish monthly cash withdraws patterns

I've seen million dollar fortunes lost because they didn't follow the above and the end the result was the same: medicare.

[Chad]

This thread is sad hope she pulls through, Chad... I was hoping this thread was going to be about going over 4% SWR or running low on funds after retirement.

Much appreciated. I didn't mean to add to the sadness. I wanted to put out a real example that demonstrated how hard it is to plan for late life events. Doing everything right doesn't guarantee anything, but it can help.

[Dragline]

This thread is sad hope she pulls through, Chad... I was hoping this thread was going to be about going over 4% SWR or running low on funds after retirement.

Much appreciated. I didn't mean to add to the sadness. I wanted to put out a real example that demonstrated how hard it is to plan for late life events. Doing everything right doesn't guarantee anything, but it can help.

That's what makes this a great thread. This is one of those common realities that people like to avoid talking about and pretend can't or won't happen to them. It's a modern technological conceit that disease and death are somehow completely avoidable or controllable, or at least can be "solved" by a magic formula or approach. Not that certain risks cannot be minimized, but that it is impossible to eliminate all risks.

Yet the prospect of very disease and death permeates life, and provides the greatest perspective as to what we might do with the limited time we have.

[jennypenny]

@Johnny
"if you move in with relatives pay them for care, pay for housing, transportation (everything really)"

Why do you emphasize this? Am I missing something other than being ethical?

To legally transfer your wealth to them.

[riparian]

And to maintain your status as an independent "household" for potential public assistance.

[The Old Man]

Long Term Care: Most risks can be covered with insurance, but this one is the exception. LTC insurance can be bought, but it is time limited to a maximum of three years, comparatively expensive, continuation of coverage not guaranteed, and there are dangers on solvency of the carrier. Insurance carriers don’t really know how to price this risk. The three years while sufficient in most cases is not sufficient for the worst case scenario which is Alzheimer’s or other sort of mental incapacity for which one could survive decades.

My plan:
(1) Insurance: Medical insurance through work, disability insurance as a job perk, and life insurance not necessary as I don’t have dependents. Auto insurance is also not necessary as I don’t own a car. Additionally, I also don’t have home owners insurance since I don’t own a home; however, I have been debating whether I should buy renters insurance, but have so far decided against it. Considered Umbrella insurance, but decided against it as the target market (auto/home owners) doesn’t seem to be me.
(2) Estate planning: Will, trust, power of attorney, and health care directive have all been prepared. I went the DIY approach through Nolo Press and Quicken software.
(3) Social Security: Will be deferring until age 70 so as to max out the benefits.
(4) Pension: Will also be deferring so as to max out its benefits.
(5) Investments: While my investments are index fund oriented, I don’t subscribe to a total return philosophy. I plan to limit my max spending to only the dividends and interest. Capital will be available to be drawn down as necessary for emergencies.

Long Term Care in an institution runs about $70 K per year. Social Security and Pension will cover part of it and investment returns should cover the remainder, but if it does not I should be close and will draw down my investments as necessary. I am uncertain of health care costs under this scenario, but Medicare should cover most of it. In a worst case scenario, I am diagnosed with Alzheimer’s in my 70s and spend twenty years in an institution. Financially, I would be OK, but of more importance my personal life would certainly be poor.

[workathome]

Hey, if it's legal to pay $1,000/night for a ridiculous hotel room, why not $1,000/night for an ultra exclusive relatives private lodging (heh). If anyone else wants to pay that to stay too, they're more than welcome

[jacob]

Actually some amazon critic just brought this one up:
http://www.amazon.com/review/R1RIS2C8P9 ... deID=&tag=

[Ego]

Actually some amazon critic just brought this one up:
http://www.amazon.com/review/R1RIS2C8P9 ... deID=&tag=

So you need to start with your worst-case medical needs FIRST, then work back from there. If you do that, your story may end much differently from the story in this book. Unfortunately that is the reality if you plan to keep living in this country. But think your healthy and this won't happen to you? I recommend going to the hospital or long-term care facility because you'll find many people at all ages who thought the exact same thing. Until it happened to them.

Ugh! There are some who would gladly trade 80 miserable work-hours a week for 80 years to ensure (insure) that their last month above ground was as serene an experience as humanly possible. This sounds like the spiel of an offended insurance agent or someone who is so risk-averse he is going to work himself into a slow suicide in order to pay premiums.

For a healthy person with no health issues, the cost to insure against a risk is always higher than the estimated cost of the risk. If not, insurance companies and their ad agencies would be bankrupt. They are experts at calculating risk. They profit on our inability to do the same. And they use scare tactics (like this guy) to close the sale.

[Ego]

How Doctor’s Die
http://www.saturdayeveningpost.com/2013 ... s-die.html

The above article should be required reading.

Radiolab had an incredible program today dealing with death and end-of-life issues.... yipee!

http://www.radiolab.org/story/bitter-end/

It featured Ken Murray who wrote the article General Snoopy linked to above.

Here is a link to Advance Directive forms with instructions for all 50 states in the U.S.

http://www.caringinfo.org/i4a/pages/ind ... ageid=3289

[Chad]

I would like to see stats on the article about how doctors die, as the article is too anecdotal to suggest this common among doctors. It wouldn't change how I hope to handle it, but it wold be interesting.

[Ego]

The last segment in the radiolab story gave some hard numbers from the Precursor study of Johns Hopkins Medical School grads.

http://drvoice.blogspot.com/2013/01/doc ... ently.html