Recently a reader asked what age I thought was ideal for buying long-term care insurance. In this post I share my thoughts on the pros and cons of buying at a younger age vs. waiting until retirement.

The majority of people hold off shopping for LTC insurance until their late 50s or 60s. But there are some advantages for buying at a younger age (maybe late 40s or early 50s). Here are some points you may want to consider when making the decision of when to buy...

Advantages for waiting until you are older (like 65 for example)

- Money saved by not paying the annual premiums can be earmarked for other uses or investments.

- The LTC industry is still evolving. There is a chance that companies will introduce new features in the future, and you will miss out by locking in a policy at an earlier age.

- Your insurance is only as good as the company backing the policy. The longer the time horizon, the more uncertainty that your provider may experience a decline in their ability to pay.

- To reduce the burden on Medicaid, the government may at some point in the future decide to add additional tax incentives for individuals who buy LTC insurance.

Advantages for buying at a younger age (say late 40s or early 50s)

- Young and healthy people are rewarded with reduced rates.

- Assuming you opt for the inflation rider (IMO a necessity for younger buyers), your daily benefit will rise over time. For example, a $150 / day benefit selected at age 50 will have grown to $312 / day by age 65 (assuming a 5% compounded inflation rider).

- A change in health status prior to buying a policy could render you uninsurable. Check out this post about my MetLife health screen (scroll down page and follow link to Part A). If your health causes you to answer yes to any question in Part A, MetLife would decline coverage.

- Old age is not the only reason people need LTC. A disabling accident can strike at any time (this is also why disability insurance is important if you are still of working age).

- While credible companies do their best to not raise rates on existing policies, they are still able to introduce new policies that in effect are more costly than the policies they replace (IMO, this happened at John Handcock immediately after they were bought by Manulife).

Will you save or lose money by buying earlier (because premiums increase as you get older)?

Answering this question requires you to run the numbers on a couple of scenarios. Go to this post -- or better yet, contact an agent -- to obtain the annual cost for LTC insurance assuming your current age, as well as for alternative scenarios assuming you are older (like 65 for example). Armed with this data, then go to this post and run your scenarios. [Or, have a financially savvy friend or paid financial advisor run the numbers for you.] You will also need to address the following variables in order to run the numbers:

- What is your opportunity cost for money you tie up when buying early (this is the after tax rate of return for money you could have otherwise invested)?

- What is the end date (when you either use the insurance or die)?

- And most tricky, assuming you opt for the all important inflation rider, you will need to factor in the added daily value your policy will build in the years that separate the alternatives you are considering.

So when is the best time to buy?

Like many financial decisions it comes down to running the numbers and weighing the risks, then deciding what is best for you. In my case, I pulled the trigger in my late 40s. Click here to read all of my LTC posts.

Final thought

For a relatively young couple like my wife and I -- who have substantial assets buy only modest earned income -- the financial burden caused by a long-term disability is greater than if one of the spouses were to die. For this reason, my wife and I have LTC insurance, but have chosen not to buy life insurance.

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