Americans have just survived a devastating period of asset depletion and shrinkage. For many retirees and near-retirees, the ability to pay for the costs of long term care and other retirement costs has been severely compromised.
What options are available for them? Are the costs affordable?
For many retirees and near-retirees, annuities have been the investments of choice when the decision to park investment dollars not needed for current expenses has been made. No taxes to pay now–that is a great feature. With variable insurance products, they can reallocate funds among attractive funds without a tax consequence. That is attractive too. 
Those are just two of several factors accounting for the annuity's popularity.
Yet, except for the very wealthy, investment dollars during the retirement years, including dollars inside of annuities, do need to be viewed as a source of funds when expenses are incurred, and especially when expenses increase significantly over what had been normal levels. Market researchers confirm that one of the major concerns people have is how to cover expenses if a family member, such as a spouse, needs to receive LTC services.
The insurance industry has largely focused its attempts to address such LTC needs via the stand-alone LTC policy; this generally attempts to cover all or most of the LTC costs an individual will incur.
Let's be clear on what that means. It means that, in event of chronic illness, the insured will not have to pay any out-of-pocket expenses, except possibly to cover costs for an initial care period of typically 90 days. Said another way, the insured would only modestly need to cover LTC expenses with funds from sources other than the LTC policy.
There is much to like to like about stand-alone LTC policies. Since they in effect prepay one's LTC costs through coverage paid for by premiums, the insured doesn't have to draw on personal assets should care for chronic illness be needed.
This benefit comes at a significant premium cost, however. What does the target market of retirees and near retirees say about this kind of policy? They have clearly spoken over recent years with their wallets, so to speak. That is, sales of individual stand-alone LTC policies have plummeted over the past several years, according to sales figures from research organizations such as LIMRA, Windsor, Conn.
Cary Lakenbach, FSA, MAAA, CLU, is president of Actuarial Strategies, Inc., Bloomfield, Conn. His e-mail address is 
