Gyroscopic Investing

We've had some interesting threads on this topic, and maybe time to revisit. See article in WSJ:

https://www.wsj.com/articles/philip-fal ... lista_pos1

"Long-term care has been a troubled insurance product for well over a decade, causing financial pain to many insurers and their customers. Now, one executive’s plan to make money where others have failed has backfired.

Serious pricing mistakes loomed from the start. For policyholders, this has meant double- and even triple-digit premium-rate increases over the years. Insurers have collectively taken tens of billions of dollars of charges against earnings as they bolstered their reserves."

(sorry I can't use the quote feature....no idea why none of the buttons are working for me. It's Firefox that's the problem I think, but I haven't gotten around to troubleshooting it.)

Anyway back to LTC...two very good reasons not to buy, if you haven't already. First, I had already done the math and realized that I am way better off saving & investing the premiums, because of the structure of what exactly is being insured. Second, what you can buy insurance for is not the nightmare scenario (10 years in a nursing home) that would prompt you to consider insurance. At least this is my understanding - someone correct me? Finally, if LTC is a troubled industry, you might find yourself with no company to pay your benefits after all those years of premiums.

LTC is in fact a prepayment plan with high overhead. Insurance will pay for LTC for precisely the situation where you need it the least: the first 2-3 years of nursing home residency, excepting only the first 3 months or so. Thus, you are paying a company in order not to have to save up the approximately $400-500K that 3 years of nursing home care costs, and of course the return on your investment will be low since you have to pay the insurance company's overhead. SInce nearly everyone will need nursing home care at some point, it is strictly not correct to call this insurance. It might make sense for a couple with minimal savings, assuming one person needs NH care while the other is still living at home.

The rationale is that the average nursing home stay is 2.5 years (a number you may remember from the COVID threads.) There is no LTC product that will confine coverage to the "long tail" situation in which a small number of people remain alive for many years, requiring 10 or more years in a nursing home. I sincerely wish there were such a policy because it would remove a major financial worry.

Barring assisted suicide and euthanasia options, all I could come up with was to state in my living will that my code status while in a nursing home or any full care facility should be "comfort care only". That would be not only no intubation or CPR, but also: no blood draws, no diagnostic tests, no preventive medications or tests, and no hospitalizations. Only meds to relieve pain and distress, wound care & prevention, and maybe short-term antibiotics. i.e. long term nursing home = hospice. Also of course make sure your nest egg + home value will cover 10 years in a nursing home (and pray it won't go longer than that).

Hopefully this approach would prevent the long-tail scenario, but it would also maximize the one and only thing I would want at that point: comfort. I saw what happened with my father during his last 3 years. He wasn't in a nursing home but would have been without the round the clock care provided by aides and (most especially) my mother. He was deeply distressed at every intervention, even something as simple as bathing/transferring, because he didn't know what was happening. I feel that it's incredibly unethical to subject someone like that to medically intrusive tests & procedures, and seriously what is the point of heroic measures to extend life when it's that low quality? In my dad's case, though, hospice didn't shorten his life by more than a few weeks, compared to what would have happened if he were full code/full care like most people in his situation (inexplicably) are.

So tl;dr: 1) LTC is largely pointless and may also be risky, and 2) the threat of a long nursing home stay is a major financial issue for retirement that I don't really know how to guard against. Thoughts/suggestions welcomed!

If it wasn’t for the full asset protection of our partnership plan I would have not bought just an insurance plan.

Nursing homes in our area are at least 120k a year or more..


the only question you need to answer if you are married is will my spouse be impoverished if i have to go in a home if i am the lucky one with the extended stay ? it has to be someone so it could always be you .

can she pay for both me and make it financially without a major upset .

if the answer is yes , she would find it very hard to manage then you need to come up with a better plan no matter what you decide .

rolling the dice and hoping it isn't you or your spouse that needs the care is a poor idea . hope is never a strategy . especially because now you have 2 bets and only 1 horse .

if it is only one person that has to escape extended care , well that is one bet , but when you are married you have to both escape it . either one of you can tip the apple cart over . those are 2x greater odds of things not playing out in your favor . .

talk to any busy estate attorney and they will all tell you that the bulk of their clients are those that had no real plan and called it self insuring .

now that reality struck and someone needs care all of a sudden they are scrambling to preserve assets as the community spouse ( stay at home ) goes in to survival mode .

so whatever you decide to do , do it and don't wait until after it is to late .

it isn't about preserving assets as much as the survival of your spouse .

have a meeting with a good elder law attorney and familiarize yourself with the options , laws and tools in your state . then you can make a decision with their guidance . as you see in these discussions most folks hve no plan and no clue as to what is a good move and what isn't .

they think because they have a living trust that is a comprehensive plan and they are covered and medicaid can't get to anything . but they fail to realize everything in a revocable trust counts as dollars and that they can't qualify for medicaid with the items in the trust . the old catch 22 gets ya .


some of your options can be :

making medicaid approved family loans

irrevocable trusts

long tern care insurance

hybrid life insurance policy's with long term care links

right of refusal

real- self insuring , not just your general portfolio invested in things that are volatile .

attorney negotiated medicaid rates

and likely a lot more that i am not aware of .

but none except a state partnership plan and LTC cover everything . you can save assets but lose the income for the stay at home spouse so everything else has pitfalls .

WiseOne wrote: ↑Tue Mar 02, 2021 10:14 am Barring assisted suicide and euthanasia options, all I could come up with was to state in my living will that my code status while in a nursing home or any full care facility should be "comfort care only". That would be not only no intubation or CPR, but also: no blood draws, no diagnostic tests, no preventive medications or tests, and no hospitalizations. Only meds to relieve pain and distress, wound care & prevention, and maybe short-term antibiotics. i.e. long term nursing home = hospice. Also of course make sure your nest egg + home value will cover 10 years in a nursing home (and pray it won't go longer than that).

10 years in a nursing home with a "comfort care only" living will as you have described it sounds overly pessimistic to me. Then again, wouldn't it be ironic in a cruel kind of way if your living will actually prolonged what's left of your miserable life?

My dad was confined to a home for 5 years ..it financially devastated his wife

The problem with self insuring is you cannot keep that money in your income generation pool ...a safe withdrawal rate assumes that pool can be near zero under worse case outcomes .

So you have to treat that money as an insurer would ...that means segregating it in safe , conservative investments with low return on a pretty big sum of money .....so we found it’s a better deal keeping that money invested normally and use but a tiny percentage of gains to pay for our LTC plans ....

Most who say they are self insuring don’t do a thing with the money ...they just cross their fingers and leave the money status quo .

Then once something happens the stay at home spouse freaks out and wants an attorney to help because the realization she or he hits home that they can be impoverished self insuring as they claimed they were

In the high rise condo area of Cartagena Colombia I would see tons of oldsters (expats?) being wheeled through the parks and waterfront by cute 20 year old gals. The gals would meet up and gossip and feed pudding to their charges and carry on.

I got the feeling it would be about as inexpensive and delightful a way to slip off into dementia as anything could be.

As long as these dementia patients don’t get violent .

On the other hand my dad had a paralyzing stroke that left him speechless , paralyzed and with not a lot of brain function . He needed professional care in a home

mathjak107 wrote: ↑Tue Mar 02, 2021 5:32 pm As long as these dementia patients don’t get violent .

On the other hand my dad had a paralyzing stroke that left him speechless , paralyzed and with not a lot of brain function . He needed professional care in a home

Sorry to hear about that, Mathjak. That's more or less what happened with my father - he had repeated brain hemorrhages due to amyloid angiopathy. My mother kept him at home, but it required a heroic effort. My cousin is doing the same with my aunt, who has advanced dementia and is in the same state. She's a nurse and moved her parents into her house to care for them, which she does with the help of 7 aides and a ton of equipment including a Hoyer lift. The expense of all this is less than a nursing home, but not by all that much (I think my mother spent $80K/year on aides & equipment, using them very judiciously, as opposed to $120-150K for a local nursing home.)

Your point about the SWR allowing for the portfolio to drop to zero by the end of a preset time (usually 30 years) is well taken. It's why I set retirement calculators to preserve capital, and instead of plugging in standard portfolios I specify the parameters of the PP (average real return, SD). The PP really shines here, because it is much more likely to preserve the portfolio than any other setup - for which you pay by having fewer chances of a crazy runaway high portfolio value. I think you've just explained why that tradeoff is worthwhile.

WiseOne wrote: ↑Wed Mar 03, 2021 10:42 am

mathjak107 wrote: ↑Tue Mar 02, 2021 5:32 pm As long as these dementia patients don’t get violent .

On the other hand my dad had a paralyzing stroke that left him speechless , paralyzed and with not a lot of brain function . He needed professional care in a home

Sorry to hear about that, Mathjak. That's more or less what happened with my father - he had repeated brain hemorrhages due to amyloid angiopathy. My mother kept him at home, but it required a heroic effort. My cousin is doing the same with my aunt, who has advanced dementia and is in the same state. She's a nurse and moved her parents into her house to care for them, which she does with the help of 7 aides and a ton of equipment including a Hoyer lift. The expense of all this is less than a nursing home, but not by all that much (I think my mother spent $80K/year on aides & equipment, using them very judiciously, as opposed to $120-150K for a local nursing home.)

Your point about the SWR allowing for the portfolio to drop to zero by the end of a preset time (usually 30 years) is well taken. It's why I set retirement calculators to preserve capital, and instead of plugging in standard portfolios I specify the parameters of the PP (average real return, SD). The PP really shines here, because it is much more likely to preserve the portfolio than any other setup - for which you pay by having fewer chances of a crazy runaway high portfolio value. I think you've just explained why that tradeoff is worthwhile.

I wouldn’t count on any portfolio having a big remaining balance , not even the pp. under worst case scenarios..as we have been seeing in more modern times what should make perfect sense at times doesn’t .

Remember insurance is not supposed to be a gamble on any outcome... it took 37 years for rates to get as low as they did .a 37 year climb back in rates would be kryptonite to the pp as remote of a chance as it sounds