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How to model Long Term Care needs

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A quick and dirty way to model LTC is as follows....

First, enter all the financials.... RSP, non reg, pension income, loans..... real estate, estate goal, etc, and AMORTIZE. You will see the individual's lifestyle and investment cash flows such that the estate is exactly run out at age 95 (say).

Now for the scary stuff. Estimate what the size of the long term care extra income need would be and when it would be required. Let's say an extra $2000 per month may be needed at age 70.... simple,

Starting at age 70, click on the 'Net Income Target (additive)' column and hilite it (pull it down the page). Answer the 'value to insert' prompt with 24000. Now you have 24K in the NIT (additive) column starting at age 70.

Now, SMOOTH, using the current amount which the plan just amortized at. Voila.... the capital runs out (with a vengeance) under the extra income requirement. Now you spring into action with your LTC insurance pitch..... adding the extra cost of the insurance, amortizing...... and showing the (naturally) somewhat reduced lifestyle, which hopefully won't be too drastically less from the initial "no insurance" scenario.

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