But the drop in the Dow Jones Industrial Average has shown many investors that they, and their retirement plans, are no longer invincible. If they weren't worried about outliving their money before, they may be worried now. Burden their financial picture with the cost of possible long-term care, and the worry escalates.

The S&P 500 is down 41% in the last year; that's a handy number for estimating the losses that stock market investors have sustained. Using this index, a stock portfolio worth $1 million a year ago is now worth less than $600,000. What was $2 million is now less $1.2 million; $10 million is now less than $6 million. Those are some scary numbers!

What's an investor to do?

One smart strategy is to leverage the dollars that are left by purchasing insurance. Instead of burdening a portfolio with having to be both big enough and liquid enough to self-insure, a policy can be purchased. Once a new policy is in place, the newly-insured investor has now dramatically shored up his or her financial situation if they need care. Though he or she may no longer be in a position to write large personal checks for long-term care, he has bought, for pennies on the dollar, an LTC insurance policy that will write the checks on his behalf. Investors can find some consolation when they realize that, once the financial risk of needing long-term care is shifted to an insurance company, the need to recoup recent stock market losses is mitigated.

The LTC insurance solution is superior to self-insuring in several ways. The policy can be written to include a guaranteed inflation benefit (such as 5% compound) that is independent of market forces. The insurance policy premium can sometimes be tax-deductible and the proceeds are almost always tax-free. Compare this to the cost of tapping into a qualified retirement plan to pay for long-term care, or the market risk inherent if the self-insurer had to sell either real property or stocks.
 
The losses that investors have sustained in the stock market should serve as a wake-up call. Even wealthy individuals can be vulnerable if they are dependent on stock market values to pay for their long-term care. Now more than ever, it makes sense for even wealthy people to purchase long-term care insurance.

STRAIGHT TALK ABOUT LONG-TERM CARE INSURANCE – Dorothy McMahon is a Long-Term Care Insurance Specialist. She is the President of McMahon and Associates located in Bloomfield Hills, Michigan. Contact her at (248) 844-9787, LTCINSUSA@aol.com or visit her web site at www.BuyLTCInsuranceNow.com.