One of the major demographic changes happening in most developed countries is the aging of the population. Thanks to better medical infrastructure, new and more effective medical treatments, and overall better quality of life, U.S. citizens today are able to outlive people from other less developed countries.
This has had a big impact on the way we prepare for retirement since it increases the time we need our savings to last. Additionally, it increases the chances that, in the end, we’ll need more long-term care (LTC) such as helping with bathing, walking, or going to the bathroom.
It’s needless to say that most pension funds are unable to cover the expenses that long-term care implies. In most cases, your pension fund may not even complement the shortage of your parallel sources of passive income. One way around this has been the purchase of LTC insurance that guarantees the coverage of your LTC expenses, at an annual premium paid from an early age. While this has been the go-to solution for those who can afford it, the LTC insurance market has essentially collapsed due to a lack of both supply and demand. According to Harvard economist David Cutler, this results from the fact that most available policies don’t fully cover LTC expenses or charge prohibitively high premiums when they do….