We’re 65 and 69 with no long-term-care insurance. We want to self-insure — but how do we do that?

Dear MarketWatch, 

We are truly fortunate to have a lifetime inflation-adjusted federal pension and Social Security of $200,000 annually. We’re a 65-year-old man and a 69-year-old woman. Our income roughly breaks out to $125,000 and $75,000, respectively.  

We did not take advantage of spousal survivor benefits when we retired years ago, which seemed like a good idea at the time. So our plan was always to self-insure our long-term care and spousal survivor needs. We would like some help with how to plan for the future. 

We have also amassed $1.5 million, half in IRA and thrift savings plans and the other half, which came from the sale of our real-estate assets, in a taxable brokerage account. Our financial adviser has us striving for a 5.5% return on the taxable account. We really don’t need or intend to tap these funds, since our pensions cover more than our needs and allow for our three to six months of travel per year. We have no debt or mortgage and pay our credit cards off monthly.  

One main question is, how much should we set aside, if anything, for long-term care? In looking at long-term-care policies in the past, the maximum payout was around $360,000. We thought that was the right amount to target.  

We have a life-insurance policy for the 65-year-old of about $300,000 through 2036. Should we look for additional life insurance, or is it reasonable to depend on the above nest egg to cover the costs of the lower-retirement-income spouse, since she is not eligible for my Social Security benefits?

See: I’m in my 60s with almost $1 million. My home is paid off. I’d like to move but am afraid of the high prices elsewhere: ‘Will I be OK?’

Dear reader, 

It is truly wonderful to have so much income in retirement through your pension and Social Security alone. That will certainly help you in the years to come. 

Calculating how much money you’re going to need for long-term care can be very difficult, just like trying to figure out how much you need to have saved for retirement overall. There’s no one number to offer you, since what you should put aside would depend on your health, the state you live in and many other factors. 

Insurance is also not completely out of the question now. True, long-term-care insurance can very easily be much more expensive than it would have been had you purchased it years ago, but depending on your health and the provider you choose, you do have options. 

There are also other insurance options. For example, your life-insurance policy, or another one, could have long-term-care riders attached to it, such as a death benefit that pays for those expenses. “This can have better tax benefits and guarantees an amount that’s not exposed to market risks,” said Nicholas Bunio, a certified financial planner. Without a rider, the death benefit would only pay out at death. 

To figure out how much you may need, you could check out the Genworth Cost of Care calculator, which helps you forecast the cost based on the year and the period (monthly, daily, hourly and annually). The calculator includes figures for in-home care, assisted living and nursing homes. Genworth, an insurance company that specializes in long-term care, has been tracking these expenses across the country since 2004. 

Those projections can be a helpful start, said Brenna Baucum, a certified financial planner at Collective Wealth Planning. “The typical long-term-care health need is just over three years,” she said. “With these two pieces of information, you can get insights into how much you may need to earmark for long-term care.” 

Also see: We have two houses and 45 acres of farmland, but we don’t know what to do about retirement. Where do we start? 

But remember, this number would just be an estimate. To be extra safe, Baucum recommends increasing projections or looking for additional sources of funding if the family has any history of cognitive decline. 

Your financial adviser could also point you toward a few resources or help you organize your finances so that a portion of your assets are secure should you need to pay for long-term care. You should also double-check — or triple-check— that your spouse really isn’t eligible for Social Security benefits on your record. The Social Security Administration can explain further

I’ll end with this: In addition to running the numbers, review — or create! — your important estate-planning documents, such as a will, a healthcare proxy and anything else you think your spouse should have. You’ve done so great at creating a nest egg, and you’re working hard to preserve it. Make sure you have all the paperwork in place to allow you to take advantage of the hard work you’ve already done. 

Readers: Do you have suggestions for this reader? Add them in the comments below.

Have a question about your own retirement savings? Email us at HelpMeRetire@marketwatch.com

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