By: Mark Milbrod, CLU, CLTC, Vice President, ASG

The last couple of months have been a tumultuous time to say the least when it comes to the stock market.  In this “long-term bear market,” we have all seen dramatic drops in our 401(k) and other investment accounts.   As this is happening, we hear a lot of rumbling from just about everyone we speak to about those drops.  And rightly so. 

Some have seen modest drops such as 10%, while others have seen drops of 20%, 30% or more.   Traditional market wisdom tells us that the markets are cyclical and do come around and you have a chance to recover over a period of time.  Hopefully, that wisdom holds true in this case as well.

All of this activity gets me thinking about another, yet equally devastating, financial event that could wreak havoc on a portfolio and can erode assets just as dramatically and unexpectedly as a market crash. This would be a Long-Term/Extended Health Care Event.

While seemingly disparate, the sudden and significant depletion of assets due to a long-term care event bears a striking resemblance to the impact of a substantial stock market downturn. By understanding these parallels, we can gain a clearer perspective on the potential financial risks associated with aging and the importance of proactive planning.

In the stock market, this shockwave manifests as a sudden sell-off, driven by fear, uncertainty, and the desire to preserve capital. Similarly, a long-term care event triggers an immediate need for resources to cover care costs, potentially forcing the liquidation of assets at an inopportune time, much like selling low during a market downturn.  

With the annual costs of care for full time skilled nursing can easily exceed $100,000 per year, the steady outflow of funds needed to provide care mirrors the impact of prolonged bear market.  

While a stock market downturn can be painful, history has shown that markets tend to recover over time. Investments can rebound, and losses can eventually be recouped. However, the financial impact of a long-term care event can be more permanent. Once assets are depleted to cover care costs, they are often gone, with little chance of recovery. This can severely impact the financial security of the individual needing care and their surviving spouse or family members.

Embracing early planning, exploring various long-term care funding options, and having open conversations with loved ones are crucial steps in mitigating the potential financial devastation of an extended care event.

So, when you hear your clients bring up their current market losses, don’t be hesitant to bring up the conversation of…

Long Term Bear v. Long Term Care?