Long Term Care Insurance

Defending Your Wealth Against the Cost of Aging

The first step in planning your retirement is always the most enjoyable. We sit across the desk and talk about the trips you have delayed, the time you will dedicate to your grandchildren, and the simple joy of stepping away from your career. You earned those years through hard work and strict financial discipline. But a real financial strategy must look at the dark corners too. It must prepare for events that can take all of that away.

For people living right here in Wichita and throughout Kansas, the biggest danger to your money is not a bad day on the stock market. The real danger is a long health event.

At Baxter & Associates, we view planning for long-term care as the core of protecting your money. People hate talking about getting older or needing help. We understand that entirely. No one wants to sit at a desk and plan for a day when they might lose their physical independence or their memory. But avoiding the topic leaves your life savings completely open to a devastating hit. Our job is to walk you through the math, remove the emotion from the numbers, and put a solid wall between your wealth and a nursing home bill.

The Great Misconception About Medicare

People constantly walk into our office assuming the government will pay for their facility care. This is a massive error and one of the most dangerous myths in retirement planning.

You get Medicare at age sixty-five, and it does a great job of fixing acute medical problems. If you break an arm, develop an infection, or need heart surgery, Medicare pays the hospital and the doctors. It is designed to make you well and send you home.

It does not pay for someone to help you get out of bed every morning.

That specific type of help is called custodial care. It means you need help with the basic daily tasks of human life. In the insurance and medical world, these are called the Activities of Daily Living. There are six of them: bathing, dressing, eating, transferring from a bed to a chair, toileting, and maintaining continence.

If you need a professional to help you with two or more of those activities, you require custodial care. Medicare will not pay for this.

Memory loss creates the exact same financial gap. If your spouse gets dementia, they might be physically fine. But they need someone present around the clock to ensure they do not wander away from the house.

Medicare does not view daily supervision as a covered medical expense, so they leave the bill to you. The bill falls entirely on your shoulders.

The True Cost of Care in Kansas

Paying out of pocket for daily assistance is incredibly expensive, and those prices only move in one direction. Healthcare costs inflate faster than almost any other expense you will face in retirement. Depending on the type of facility you choose in Kansas, the drain on your portfolio looks like this.

Home Health Care: Remaining in your own house is the goal for most but hiring a visiting aide for forty hours a week costs well over sixty thousand dollars annually.

Assisted Living: A community that provides your meals and general supervision will cost roughly fifty thousand to seventy thousand dollars a year.

Skilled Nursing Facilities: For around-the-clock care in a dedicated nursing home, a private room here in the Wichita area routinely costs more than one hundred thousand dollars per year.

A typical care event lasts three to four years. If you suffer from a cognitive issue, that timeline can stretch to seven or eight years. You are looking at a potential bill of three hundred thousand to over half a million dollars.

The Disaster for the Healthy Spouse

This causes an absolute financial disaster for married couples. Many call this the spousal impoverishment problem.

If one person gets sick, the healthy person still has to buy groceries, pay property taxes, put gas in the car and keep the lights on at home. The everyday bills do not stop. Without a dedicated pile of money set aside for the sick spouse, the healthy spouse has to start spending down the main retirement accounts to pay the care facility.

This introduces a terrible tax problem. If all your money is saved in a traditional 401(k) or an Individual Retirement Account, that money has never been taxed. When you pull money out to pay the nursing home, the

Internal Revenue Service treats that withdrawal as regular income.
If the nursing home bill is one hundred thousand dollars for the year, you cannot just pull one hundred thousand dollars out of your IRA. You have to pull out perhaps one hundred and thirty thousand dollars to pay the incometaxes and still have enough leftover to pay the facility.

You are draining the accounts at an accelerated rate. You are selling your investments, sometimes in a down market, simply to keep up with the medical bills. This leaves the healthy spouse with almost nothing to live on for the rest of their life.

The Three Options for Protecting Your Wealth

You basically have three ways to handle this threat. We sit down with you, lay out all your assets, and figure out which one works for your specific bank accounts.

Option 1: Self-Funding

This means you decide to take the full risk on your own shoulders. You accept that if you get sick, you will sell off your investments to cover the monthly bill yourself.

For very wealthy families, this might work. If you have several millions of dollars in liquid assets, you can likely afford to write a check every month without changing the lifestyle of the healthy spouse. But for most people, that math simply does not support it. We run the numbers on your portfolio to see if it could survive a four-year care event. Usually, the risk is far too high. The tax hit and the drain on the principal balance will ruin the financial plan.

Option 2: Traditional Long-Term Care Insurance

This works exactly like your homeowner insurance or your car insurance. You pay a premium every year. In return, the insurance company agrees to pay a set amount of money each month if you need care. You are shifting the risk off your own shoulders and handing it to the insurance company.

This remains a viable option for people who want pure protection at the lowest possible entry price. However, the main problem people have with this route is the exact same problem they have with car insurance. It has a "use it or lose it" rule. If you pay premiums for twenty years and then pass away in your sleep without ever needing care, the insurance company simply keeps all your premium money. You get nothing back. Furthermore, the insurance companies hold the right to raise your premiums in the future, which makes budgeting difficult.

Option 3: Asset-Based or Hybrid Policies

Because folks hate the idea of losing their premium money, the financial industry created hybrid policies.

These products mix life insurance with a long-term care benefit. You usually move a chunk of cash into the policy once, or you pay a fixed premium for a set number of years, like ten years. The premiums are locked in and can never increase.

If you need care later in life, the policy gives you a large pool of tax-free money to pay the nurses or the facility. It protects your retirement accounts from being drained.

If you live a long, healthy life and never need professional care, the policy pays a tax-free death benefit to your family when you pass away.

The money goes to someone no matter what happens. It pays for the care facility while you are alive, or it goes to your children when you are gone. You completely remove the "use it or lose it" risk.

The Heavy Burden on Your Family

Beyond the raw dollar amounts and the tax problems, skipping this planning puts a heavy weight on your family. We see this happen all the time, and it is heartbreaking.

Someone must do the work. If you do not have the money to hire an aide, that job falls entirely on your spouse or your kids. Being a full-time caregiver will drain a person physically and mentally. It requires your adult children to step away from their jobs and put their own lives on pause. They lose precious time with your grandchildren because they are stuck at your house providing care.

Putting a funded plan in place is a massive gift to your family. It means your spouse stays your spouse, rather than becoming your nurse. It means your children remain your children. They get to visit you, hold your hand, and manage the professional care workers, instead of doing the heavy lifting and the bathing themselves. It preserves your dignity and their physical health.

How We Solve the Problem for You

Navigating the insurance market on your own is frustrating. The contracts are incredibly dense and filled with fine print. There are waiting periods, elimination periods, and strict rules about how you qualify for the money.

At Baxter & Associates, we do the heavy analytical work for you. We look at what you own, what you earn, and your family health history. We check the current prices for care right here in the Wichita area, so we know exactly what target we need to hit.

Then, we go to the market to find a product that does exactly what you need it to do. We compare the top carriers. We look at the strength of the insurance companies to make sure they will still be in business thirty years from now when you need the money. We make sure you know exactly what you are buying, exactly how the money comes out, and exactly how it fits into your overall retirement plan.

There is one critical rule to remember: you buy this insurance with your health, not just your money. You have to pass medical underwriting to get a policy. If you wait until your doctor hands you a bad diagnosis, or until you start showing signs of memory loss, it is entirely too late. The insurance companies will deny your application, and all your options will disappear. The time to build the wall around your money is when you are healthy and active.

Start the Conversation Today

Please reach out to our Wichita office to set up a risk review. We will sit down together, look at your current accounts, do the math in plain English, and build a concrete defense around your money. Let us help you put a plan in place so you can enjoy your retirement without the fear of a medical event destroying everything you have built. Contact us for a free consultation.