Portfolio CHECKUP

Physician's Money Digest, July31 2003, Volume 10, Issue 14

Name:Mary Campo, MD


Age: 60

Family: Divorced, 2 grown children

Years in practice:29

Type of practice: University hospital

Annual income:$175,000

Savings: $650,000 in retirement savings plans and $125,000 inmiscellaneous equities and equity mutual funds.

Financial concern:Dr. Campo wishes to work until age 70. Based on hercurrent standard of living, modest lifestyle, and the fact that she is savingalmost $40,000 annually on a pretax basis, she will have absolutely no problemmeeting her long-range retirement goals, even assuming a moderate 6% to7% net tax-deferred annualized rate of return.

However, what does concern her is that she lives alone, and should sherequire long-term care at some point, she does not want to have to depend onher children to take care of her. She also realizes that her savings could bewhittled away should she require extended care either at home or in sometype of assisted-living facility.

What can she do to protect the assets she has worked so hard to accumulateover the years so that she can pass these assets on to her children and notto a nursing home?

The Finance Professor's Solution

Dr. Campo should consider purchasing a long-term care policy while still relativelyyoung and healthy, before the costs become prohibitive or her healthstatus changes and she is not able to qualify for such coverage. This policyshould include home health care options, an inflation rider to keep pace withthe cost of living, a minimum daily benefit of no less than $100 to $150, andno less than a 5-year benefit period. There are many long-term care policiesavailable with all sorts of options from a variety of insurance companies.

In researching companies, she was able to find a policy that met her needsat a cost of $180 monthly—not the cheapest policy on the street, but it waswith a good company that she can easily afford. The annual cost of the policyis approximately $2200.

Granted, if she lives 30 more years and never uses the benefits from the policy,she will have spent $66,000 in premiums. However, with today's escalatingcosts for rendering such care, depending on geographic location, if she utilizesthe benefits of this policy for little more than a year, it will have paid for itself.

For more information, call Mr. Kosky at 800-953-5508or visit www.assetplanning.net.

Thomas R. Kosky and his partner, Harris L. Kerker, are principals of the

Asset Planning Group in Miami, Fla, specializing in investment, retirement,

and estate planning. Mr. Kosky teaches corporate finance in the

Saturday Executive and Health Care Executive MBA Programs at the

University of Miami.