Mom is 85 years old and has a LTHC policy. It has a lifetime benefit maximum which is currently at $385k which increases 5% per year. The policy has a provision where she can elect to receive a monthly cash payment of $2,775.
Her SS, pension and annuity more than meet her expenses. She has $200k or so in a HYSA.
I’ve always advised her to not take the monthly money out of her LTHC policy because of the uncertainties around length of stay if she ever needs it. However, after researching average cost ($115k per year) and average length of stay (16 months) I’m wondering if she’s being too conservative. If averages say she only needs $154k might it be smarter to start taking the $2,775 per month and investing it? The money isn’t gone, so she could still use it for future needs. If she dies and never uses it (or most of it) that money is gone.
So two questions:
1. Start taking the 2,775 per month now?
2. Invest it in what kind of vehicle, assuming she wants to pass it maximally to her heirs?
\* Note, she can start or stop the monthly distributions at any time.