When Can I Afford To Self Insure? (Hour 1)
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What is self-insurance for long-term care and when is it appropriate?
The Ramsey Show, where debt is dumb, cash is king, and the paid-off home mortgage has taken the place of the BMW as the status symbol of choice. This is The Ramsey Show, where we help people build wealth, do work that they love, and create actual, amazing relationships. This is a show about your life. Ken Coleman, Ramsey Personality No. 1, best-selling author, is my co-host today as we answer your questions. The phone number is 888-825-5225. Matt starts off this hour in Huntsville. Hey, Matt, welcome to the Ramsey Show. Yeah, Dave, thanks for having me on.
First-time caller, long-term fan.
Well, thank you, brother. How can we help today?
Well, I went to some of my first financial peace classes about 10 years ago, and the My wife and I worked really hard at becoming debt-free, which we did. Good for you. About a year and a half ago.
Good for you.
And now I'm trying to figure out, you know, next chapter of my life, how do I plan for, you know, potential early retirement and or, you know, just doing something different. And one of my concerns is long-term care insurance. And I'm sort of a, I mean, I hate to say this, but I'm sort of an anti-insurance guy just because of the cost.
That would be all of us.
Okay, good.
We believe in never buying insurance unless it's absolutely necessary.
Exactly, exactly. And so anyway, so it's one of those last pieces that I'm trying to figure out, do I really need it or not?
How old are you? From a financial standpoint. How old are you?
I'm 55.
Okay.
How can I find scholarships for college without being scammed?
And what's your net worth now? $4.2 million. You don't need it. Great.
Simple.
Now let me tell you why I said that and see if you agree with me, okay? Sure. The average nursing home stay is 2.4 years. Yeah. The average. And the average is about $100,000 a year. So let's call it quarter million dollars, okay? So your risk is $0 to $500,000, right? Yep. If I did those numbers right, you can handle that risk. If you burn through 500,000, Mama's left with three and a half, she's going to party when you're gone.
Yeah. Yeah. For multiple reasons.
She's got plenty left to throw a party. A big wake is because we're all going to be sad. But, yeah. I'm talking to you like my wife talks to me, so there you go. No, I get it.
I get it.
Yeah, I mean, and you've got five years. So, by the way, if you do nothing with that net worth except keep it invested at around a 10% rate of return, your four and a half in seven years will be nine. Yeah. And you'll be 62. The chances of someone going into a nursing home and spending a dollar with a nursing home prior to age 60 is very close to zero statistically.
What should I consider if I have a criminal background while looking for a side hustle?
Yeah. So let me ask you this. Would you recommend kind of putting that into some sort of a safe fund for the future? No. Or just keep on investing?
You've got $9.5 million. You can come up with a half million.
Yeah. Okay. Got it. Yep.
You're going to be fine. I mean, you've just got a big old chunk of mutual funds in your 401K. She needs to write some checks to the nursing home because you get early dementia or whatever onset. Then, boom, she writes checks, and she burns through a half million. She's more than good. Because here's the thing. Seventy-five percent of the ladies outlive their husbands. And so the normal scenario with someone with a $300,000 or $500,000 net worth is papa goes in the nursing home, burns through the nest egg, cracks and scrambles the nest egg, and gets taken care of and dies and leaves mama broke. So this is why if you've got $300,000 to $500,000 in net worth, you definitely buy long-term care insurance the day you turn 60.
It's your birthday present to your wife. But in your case, you're self-insured. I'm self-insured. I'm 61. I didn't buy it. Okay? I got plenty of money. Sharon's got plenty of money. She's got too much money if I die. It's not good. So I'm having to sleep with one eye open. But, yeah. So that's... Yeah, you're good, Matt. You're good. So, yeah. And so... Long-term care insurance is a little bit like the old Willie Nelson joke about taxes, right? You either want to be broke and the government provides you with nursing home care through Medicaid welfare and you're 100% broke, or you need to be so wealthy that you can, you know, $10 million and you can afford a half million.
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Chapters
8 chapters
1
What is self-insurance for long-term care and when is it appropriate?
0:30–2:06
2
How can I find scholarships for college without being scammed?
2:06–3:23
3
What should I consider if I have a criminal background while looking for a side hustle?
3:23–6:29
4
How can I balance a side hustle with family time effectively?
6:29–11:39
5
What are the risks and benefits of self-insuring for long-term care?
11:39–14:30
6
How does net worth influence the need for long-term care insurance?
14:30–18:35
7
What strategies can help increase income while managing family responsibilities?
18:35–21:28
8
How can I effectively budget and save for a home purchase?
21:28–42:27