Obsidian Market Update 01/20/2024
Economic Update
Is Long-Term Care Insurance for You?
The Association for Long-Term Care Insurance, an industry advocacy group, has gathered the following data about long-term care (LTC):
- In 2020, 54% of the applicants for LTC insurance were between the ages of 55 and 64.*
- In 2021, 12.4% of applications from 40- to 49-year-olds were denied, while 47.2% of applicants between the ages of 70 and 74 were denied.
- In 2021, 50% of claims began between the ages of 80 and 89.
- In 2022, 73% of the first payments were made for home care.
- For claims lasting more than one year, 49% were made for cognitive issues.
- As of 2022, only six insurance companies were issuing traditional LTC insurance to new applicants.
We’re presenting the data, so you can use it to help make the personal decision about whether to purchase LTC insurance. Some people can, and choose to, self-insure, but many cannot. For those who do apply for LTC insurance, the data above speaks for itself: The optimal time to apply is long before most of us need it.
LTC Coverage
The cost of coverage varies depending on 1) your age when you purchase the policy; 2) the maximum number of dollars the policy will pay per day; 3) the number of days or years that the policy will pay; 4) the maximum dollar amount the policy will pay; and 5) any optional benefits you choose to purchase.
Terms vary as well, but policies typically reimburse insureds when assistance is needed in two or more of the activities of daily living (bathing, continence, dressing, eating, toileting, and transferring) or severe cognitive impairment (as defined in the policy) provided to them in their homes, a community organization or other facility.
LTC Cost
LTC insurance isn’t cheap which isn’t surprising when we consider the number of years we might need assistance and the spiraling costs of care. According to The Bureau of Labor Statistics, the seasonally adjusted cost of nursing homes and adult day services in U.S. cities increased over four years by:
- 3.0% in 2020
- 3.4% in 2021
- 4.5% in 2022
- 5.0% in 2023
When considering the cost of LTC insurance, don’t forget that the costs to family members to deliver unpaid care are high as well. AARP estimated that the value of unpaid care delivered by family members in the U.S. in 2021 to be $600 billion, and three quarters of the surveyed caregivers reported spending an average of $7,200 annually in out-of-pocket costs. Sparing relatives this cost is part of the equation as well.
If you are interested in learning more about LTC insurance, please don’t hesitate to contact us. We’re happy to help you weigh the pros and cons as they apply to your situation.
*2021 data skews younger because many younger people in the State of Washington submitted applications to avoid a state tax.
Economic Alert
Retirement Plan Contribution Limits for 2024
Nearly across the board, the contribution limits for retirement plans have changed for 2024. Please check out the following table and, if you have any questions, give us a call.
2024 MAXIMUM LIMITS FOR RETIREMENT PLANS
Lifestyle
The No-Longer-Hidden Jewels of Baltimore
Ten days ago, The New York Times published its list of 52 Places to Go in 2024. Appearing at number 14 was Baltimore, Maryland. Writers chose only six places in the U.S., and noted Baltimore (or Charm City) for the opening of the Justice Thurgood Marshall Amenity Center in the Upton neighborhood, the Baltimore Peninsula, and the Baltimore Blueway, a favorite of kayakers, canoers, and paddleboarders.
We would add the Baltimore Streetcar Museum (opening for the season on March 3) and Oriole’s Park at Camden Yards (opening day: March 28). The B&O Warehouse in right field makes the Park a must-see for fans of retro ballparks.
How We Help
Building Wealth Using Real Estate
We’ve written several times in this newsletter about real estate:
- The state of the market (January 2024)
- Buying a home
- Commercial Real Estate and Sustainability
- Assessing properties for your portfolio
Today, we want to share some insights into comparing and using investments in the stock market with investments in real estate to build wealth
It’s not unusual for investors to compare the purchase of stock to the purchase of real estate when determining how to invest. That’s like comparing apples and oranges, since there are two factors that apply only to real estate investor: leverage and depreciation.
By leverage, we mean using other people’s money, i.e., a mortgage, to purchase property we can’t pay for in full.
Depreciation, when applied to rental property is the deduction that the IRS allows owners to take (typically 3.636%) for market value loss, and the costs of buying and improving property over its useful life (27.5 years) for every year that the owner owns and rents the property.
We’re happy to talk with you in more detail about purchasing property for your portfolio. Just give us a call.
Advisory Services offered through Obsidian Personal Planning Solutions, LLC. Securities are offered through Triad Advisors, member