Retirement Planning: Questions to Ask about Self-insurance


Retirement planning is an unnerving process for many baby boomers right now. Over the years, we have all witnessed various aspects of retirement change: Social Security feels like it is no longer as reliable as we initially thought, technology has made its way to our everyday lives, and costs of everything in the country have increased to frightening heights. If we take everything into consideration, we soon realize that planning for the golden years is not as easy as we all thought. In fact, many are postponing it for a few years. Many are even working well into their 70s, and this maybe because of the need to stay active and relevant or of financial concerns.


As we have highlighted in A Baby Boomer’s Guide to Keeping Up with the Times, we have a lot on our plates, and we need to be proactive. However, the reality is that retirement is rapidly changing before our eyes, and not everyone is comfortable with these developments.


The Struggle of Finding Coverage for Long-term Care

One of the biggest concerns that weigh down baby boomers is long-term care. As you may know, care services can easily overwhelm a person’s savings. The costs have sky-rocketed to amounts that the majority of Americans will not be able to afford easily. And as much as many baby boomers like to believe, care needs are not as easy to escape. In fact, more than half can expect to require long-term care services after turning 65. Bear in mind that this also means that a portion will require care even before they hit 65.


A number of Americans have opted to purchase long-term care insurance during retirement planning. They have factored in the premiums to their plans successfully, and they are now satisfied with the benefits they are receiving. In fact, 90% of policyholders are happy with the worry-free coverage that they get.


However, some are also considering self-insuring for care. They find that the policy premiums are too much to add to the worries that come with retirement planning. They want the coverage, but they do not want the pressure of having to meet the costs. This puts them in a situation that thousands are facing as well: will self-insurance work for me?


Questions to Ask about Self-insurance

As the decision on long-term care makes up a big part of retirement planning, we thought we should discuss how to determine if self-insurance is for you. Listed below are three questions you need to ask if this option will serve you.


How big is the possibility that I will need extensive care?

One of the biggest questions you need to answer during retirement planning is if you will need extensive long-term care. Naturally, there is no absolute way to determine this, but there are steps you can take to approximate.


One way to do so is to examine your family health history. Have a good look at the various health conditions and illnesses that struck loved ones. Are heart conditions common in your family? Were there instances of cancer? Do you have loved ones who suffered from early-onset familial Alzheimer’s disease? Although there are no guarantees, these could help you narrow down your potential care needs. It can also help you identify the type of services you might need and how much they might cost.


Now research on the costs of these services in your area and see if your finances can take the hit. Bear in mind that care typically lasts for more than a year and that costs have been increasing rapidly in the recent years. You also have to factor that this is not the only expense you need to plan for during retirement.


Can your finances take the cost of care in your area?

As highlighted by this post, 10 retirement and long-term care planning tips to beat senior blues, finding the right location can make or break your plan. As mentioned earlier, the cost of care differs in each state, and some are substantially more expensive than others. An example the article highlighted is this: the average annual rate for a private room in a nursing in Alaska is $297,840 while the rate for the same service in Louisiana is at $61,663.


You need to see if your finances can take the rates of long-term care services in your area, and you also have to factor in inflation. Unlike long-term care insurance policies that have inflation protection riders, you will have to adjust your assets and savings to fit in these considerations. Remember that these costs may seem high now, but they will only rise in the coming years.



What is my backup plan?

One of the dangers of self-insurance is miscalculating how much you need. When that happens, what is your backup plan? Unlike policyholders who can fall back on their savings and assets, individuals who have opted to self-fund end up looking to their family members to provide care that they need. However, this puts both parties in a compromising position with care recipient losing a great deal of his her independence and the care providing pushed into a situation that can affect his or her finances, physical and mental health, and financial stability.



At the end of the day, finding any type of coverage—whether it is self-funding or long-term care insurance—is a risk. You just have to be able to determine the one that can work in your favor. If you choose to secure yourself through a policy, then you have to contact an insurance specialist now. If you wish to take risk and self-insure, then you need to be more proactive with planning. Yes, retirement is an overwhelming task, but many have succeeded before you. This means that you can also do the same.


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