September 30, 2024 Weekly Update

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We do love it when someone refers a family member or friend to us.  Sometimes the question is, “How can we introduce them to you?”   Well, there are multiple ways but a very easy way is to simply forward them a link to this webpage.

Here are this week’s items:

Portfolio Update:  Murs and I have recorded our portfolio update for September 30, 2024

CLICK HERE TO WATCH THE UPDATE

Long-Term Care Solutions and Retirement – Hybrid Life Insurance

Radon and Murs discuss the life insurance-based hybrid long-term care solutions, building on their previous conversation about hybrid annuities. They explore the advantages of a hybrid approach, particularly focusing on the MoneyGuard Fixed Advantage policy as an example. They explain how this product offers both…

CLICK HERE TO LISTEN TO THE PODCAST

 

CLICK HERE TO WATCH ON YOUTUBE

Long-Term Care Solutions and Retirement – Hybrid Life Insurance

Radon and Murs discuss the life insurance-based hybrid long-term care solutions, building on their previous conversation about hybrid annuities. They explore the advantages of a hybrid approach, particularly focusing on the MoneyGuard Fixed Advantage policy as an example. Radon and Murs explain how this product offers both…

CLICK HERE TO READ THE BLOG

Long-Term Care Solutions: Hybrid Life Insurance

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When it comes to retirement planning, one major concern that often surfaces is long-term care. How will you fund it? What options do you have to ensure your future well-being while protecting your hard-earned assets? The world of long-term care insurance has changed drastically over the past few decades, moving away from traditional models that required ongoing premiums to newer solutions designed to provide more flexibility and security. One of these innovative solutions is hybrid long-term care insurance, particularly policies that combine life insurance with long-term care benefits.

What makes hybrid long-term care insurance so intriguing is its ability to offer dual benefits: life insurance coverage alongside long-term care protection. This means that your funds are available for care when you need them, but if you don’t end up needing long-term care, your beneficiaries will still receive the life insurance payout. In this blog, we will explore this hybrid approach, focusing specifically on products like Lincoln Financial’s MoneyGuard Fixed Advantage and how they provide solutions for securing your retirement and planning for the uncertainties of the future.

Understanding Hybrid Long-Term Care Insurance

Long-term care (LTC) is a significant expense in retirement, and traditional LTC insurance has faced criticism due to rising premiums and the risk of never using the benefits despite paying into it for years. Hybrid long-term care insurance offers an alternative by blending LTC coverage with life insurance, ensuring that the money you put into the policy isn’t lost if you never require care. Instead, the death benefit will pass on to your beneficiaries.

MoneyGuard Fixed Advantage, for instance, is a life insurance policy with a long-term care rider. The policy allows you to access the death benefit while you’re alive to cover long-term care expenses, ensuring that your retirement planning is more flexible and comprehensive. If long-term care is never needed, your heirs receive the full death benefit tax-free.

How Does Hybrid Long-Term Care Work?

Let’s break down how hybrid long-term care insurance policies, like the MoneyGuard Fixed Advantage, function. Essentially, these policies allow you to fund long-term care costs while maintaining a life insurance benefit. Unlike traditional long-term care policies, where you might pay premiums indefinitely without ever utilizing the coverage, hybrid policies ensure that your money serves more than one purpose.

We’ll walk through some of the features of the MoneyGuard Fixed Advantage as an example. To start, after a 10-year premium payment period, you no longer need to make contributions. The policy is designed so that you will have access to long-term care benefits, and if you never need to use them, your heirs still receive the death benefit.

In our scenario of a 60-year-old woman in North Carolina, the premium for her MoneyGuard Fixed Advantage policy would be $9,422 per year for 10 years. By the time she reaches age 85, she would have access to $10,469 per month for long-term care, and her heirs would still receive a death benefit of $120,000 if she passed away without using the long-term care portion.

Flexibility of Hybrid Long-Term Care Insurance

A key feature of hybrid policies is the flexibility they offer. MoneyGuard Fixed Advantage, for example, allows policyholders to receive benefits for in-home care, assisted living, or nursing home care without any elimination period. This is a stark difference from traditional LTC policies, which often require a 90- or 120-day waiting period before benefits kick in. With a hybrid policy, once you qualify by proving that you require assistance with two out of six ADLs (activities of daily living), such as bathing or dressing, you can start receiving benefits immediately.

Additionally, the policy covers a wide array of services, including caregiver training and respite care, which provides relief for family members who are caring for a loved one. The flexibility to use the long-term care benefit as needed, whether for professional services or family caregiving, makes hybrid policies especially attractive.

Guaranteed Benefits and Inflation Protection

One of the common concerns with retirement planning is how inflation will erode the value of your savings over time. Hybrid long-term care policies address this by providing benefits that grow over time. The MoneyGuard Fixed Advantage policy we have been discussing grows at a compounded rate of 3%, meaning that by age 85, the long-term care benefit increases to over $10,000 per month.

This built-in inflation protection ensures that your long-term care benefits keep pace with rising healthcare costs, making these policies a more secure investment for your retirement. Furthermore, all long-term care benefits paid out from the policy are income tax-free, providing an additional financial advantage in retirement planning.

Legacy Protection: Leaving a Meaningful Inheritance

One of the major advantages of hybrid long-term care insurance is the legacy protection it offers. Traditional long-term care insurance can feel like a gamble—if you never use the coverage, your premiums are lost. Hybrid policies eliminate this worry by ensuring that if you don’t use the long-term care benefit, your heirs still receive a death benefit.

In our example, if the 60-year-old woman with a MoneyGuard Fixed Advantage policy doesn’t require long-term care, her heirs will receive $120,000 upon her death, ensuring that the money she invested in her policy benefits her family. This dual-purpose feature makes hybrid long-term care insurance a versatile tool for retirement planning, as it provides coverage for long-term care if you need it, and legacy protection if you don’t.

Comparing Hybrid Long-Term Care Insurance to Traditional LTC Policies

While hybrid policies have numerous benefits, it’s important to understand how they differ from traditional long-term care insurance. Traditional policies may offer unlimited benefits for long-term care, but they typically come with escalating premiums and the risk of paying into a policy for years without ever using it. Hybrid policies offer a fixed premium schedule, meaning you know exactly what you’re paying for, and you’re guaranteed either long-term care benefits or a life insurance payout.

The downside is that hybrid policies generally have a cap on the long-term care benefit, whereas some traditional policies offer unlimited coverage. However, many retirees find that a hybrid policy’s fixed premiums and dual benefits outweigh the potential for unlimited long-term care coverage, especially when paired with other retirement income sources.

Who Should Consider Hybrid Long-Term Care Insurance?

Hybrid long-term care insurance is not a one-size-fits-all solution, but it can be an excellent fit for those who want to protect themselves from the high costs of long-term care without the risks associated with traditional policies. It is particularly well-suited for individuals who want to:

  • Ensure they won’t lose the money they invest in a long-term care policy.
  • Have flexibility in how and where they receive care, whether at home or in a facility.
  • Protect their estate and leave a legacy for their heirs.
  • Benefit from a policy that combines life insurance and long-term care coverage.

If any of these factors are important to you, hybrid long-term care insurance could be a valuable component of your overall retirement plan.

Next Steps: Securing Your Retirement with Hybrid Long-Term Care

As you approach retirement, it’s critical to evaluate all of your options when it comes to long-term care. Hybrid long-term care insurance can offer a flexible, guaranteed solution that helps you secure your retirement while protecting your legacy. These policies ensure that your long-term care needs are covered while allowing you to leave a meaningful inheritance if you don’t use the coverage.

The discussion on this topic may have raised some questions. You can schedule a 15 minute call to start finding some answers. If we can’t answer all your questions in 15 minutes, we can certainly help guide you to some next steps.

Schedule your complimentary call with us to learn more about Long-Term Care Solutions: Hybrid Life Insurance.

September 23, 2024 Weekly Update

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We do love it when someone refers a family member or friend to us.  Sometimes the question is, “How can we introduce them to you?”   Well, there are multiple ways but a very easy way is to simply forward them a link to this webpage. Here are this week’s items:

Portfolio Update:  Murs and I have recorded our portfolio update for September 23, 2024

CLICK HERE TO WATCH THE UPDATE

Retirement Long-Term Care Solutions – Hybrid Annuity

Radon Stancil and Murs Tariq discuss hybrid long-term care insurance, with a focus on the Equitrust Bridge annuity and how it serves as a powerful tool for retirement planning. They explore the benefits of using hybrid annuities, a strategy that combines retirement income with long-term care coverage…
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Retirement Long-Term Care Solutions – Hybrid Annuity

Navigating the complexities of tax withholding in retirement can feel like venturing into uncharted territory. During your working years, taxes are often a distant concern. Employers handle withholding from each paycheck, ensuring that the process remains smooth and largely invisible to the employee. However, retirement changes this dynamic entirely…
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Long -Term Care Solutions: Hybrid Annuity

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As you approach retirement, one critical issue you may face is how to manage the rising costs of long-term care (LTC). It’s no secret that traditional long-term care insurance has become less popular due to its unpredictability and high cost. Many people hesitate to commit to policies where they pay hefty premiums for years, only to pass away without ever needing long-term care, and consequently, seeing none of that money return to them or their loved ones. This issue becomes even more frustrating when insurance companies hike premiums, leaving policyholders trapped in an unsustainable situation. 

Luckily, there are better options. The idea of long-term care is evolving, and one innovative solution growing in popularity is the hybrid annuity with long-term care benefits. This product not only provides LTC coverage, but it also comes with certain guarantees and potential tax advantages. Whether you’re nearing retirement or well into it, hybrid annuities might be the bridge to a more secure future that not only covers potential health care needs but also allows you to preserve assets for your legacy. Let’s explore the concept in more detail and learn how these hybrid solutions, like the Equitrust Bridge annuity, can help you manage both retirement and long-term care effectively. 

Why Traditional Long-Term Care Insurance is Losing Ground 

In the past, the most common way to cover long-term care costs was through traditional LTC insurance. The logic was simple: you pay premiums during your working years, and in case you need help with daily activities (like bathing, eating, or moving around) in retirement, your LTC policy steps in. But things rarely stay simple. Many traditional LTC policies have downsides that make them less attractive today. For one, traditional long-term care insurance policies can be extremely expensive. Policyholders also risk paying premiums for decades, only to pass away without ever using the coverage. 

Another significant problem is the fact that many insurance companies have raised their premiums. This financial burden can escalate over time, causing people to pay far more than they initially planned. Worse yet, the policy doesn’t provide any return on the premiums if care is never needed, which makes it feel like a wasted investment to many. As a result, more people are seeking alternative solutions, such as hybrid long-term care insurance, which offers more flexible options and guarantees. 

Enter the Hybrid Annuity: What It Is and How It Works 

A hybrid annuity is a combination of an annuity and long-term care insurance. With a hybrid annuity, you pay a single premium or series of premiums into the annuity. The annuity grows over time, offering a stream of income or a lump sum when needed. What sets hybrid annuities apart from traditional options is that they come with a long-term care rider that allows you to use the value of the annuity for long-term care expenses if necessary. 

The Equitrust Bridge annuity, for example, is a hybrid annuity product designed to provide both an income stream and long-term care coverage. This annuity is particularly attractive because it has guaranteed underwriting, meaning nearly everyone who applies for the product can qualify, regardless of their health status. Traditional LTC policies often reject applicants due to health concerns. Hybrid long-term care annuities like the Equitrust Bridge provide coverage even to those with pre-existing conditions, albeit with different levels of benefits depending on underwriting results. 

Key Features of the Equitrust Bridge Hybrid Annuity 

The Equitrust Bridge annuity stands out for its flexibility and benefits, which make it an appealing option for retirement planning and long-term care. Here are some of its most important features: 

  • Guaranteed Issue: The annuity offers coverage to virtually everyone. Although there is minimal underwriting involved, the product is designed so that anyone can qualify, even those who might not otherwise be able to secure traditional long-term care insurance. 
  • Tax Advantages: One of the greatest advantages of the Equitrust Bridge annuity is its potential tax benefits, especially if you’re using non-qualified annuities (those funded with after-tax dollars). In many cases, the earnings on annuities are taxed as ordinary income, but with a hybrid LTC annuity, the funds used for long-term care can be accessed tax-free. This is a major plus for anyone with a significant amount of gain in their annuity and looking to offset long-term care costs. 
  • Rider Charges and Coverage: Like many insurance products, the Equitrust Bridge comes with rider charges, which are fees for adding the long-term care benefit to the annuity. However, the product offers enhanced coverage ratios for long-term care benefits, which can increase the value of the original deposit by up to 300% or more, depending on age and underwriting class. 
  • 2% Growth on Long-Term Care Benefit: The long-term care benefit base grows annually by 2%, providing inflation protection. This means that the longer you wait to use the benefits, the more they grow, increasing your available long-term care coverage over time. 
  • Vesting Schedule: The Equitrust Bridge annuity has a vesting schedule, meaning that full access to the LTC benefits takes time. For example, while some benefits are available in the first few years, the full long-term care benefit becomes available after about five years. This encourages long-term planning and ensures the annuity is utilized wisely. 

Why Consider a Hybrid Long-Term Care Annuity? 

So, why would someone choose a hybrid annuity over a traditional LTC policy or another type of retirement product? Here are a few reasons: 

  1. Flexibility: With a hybrid annuity, you’re not just buying insurance. You’re investing in a product that can generate income while simultaneously providing long-term care coverage if needed. If you don’t end up needing long-term care, you can still receive income from the annuity or pass on the remaining value to your heirs. 
  1. Tax Efficiency: One of the standout features of the Equitrust Bridge is the potential for tax-free withdrawals when used for long-term care. This is especially beneficial for those who have large, appreciated non-qualified annuities that would otherwise be subject to hefty taxes upon withdrawal. 
  1. Predictability: Hybrid long-term care products offer more stability than traditional LTC insurance, which can increase premiums or offer little value if unused. With a hybrid annuity, you can be confident that your investment is protected and will offer returns either in the form of long-term care benefits or income. 
  1. Guaranteed Issue: For many, the guaranteed issue aspect of hybrid annuities is crucial. Even if you have health issues, you can still secure long-term care coverage, something that might not be possible with traditional policies. 

Long-Term Care Costs Are Rising — Are You Ready? 

According to recent studies, the cost of long-term care continues to rise. Depending on where you live, expenses for a semi-private room in a nursing home can range from $3,000 to $8,000 per month or more. Preparing for this possibility is essential for anyone planning for a secure retirement. The hybrid annuity, with its combination of long-term care benefits and tax advantages, is an excellent way to ensure that you have the financial resources to manage these costs without depleting your savings. 

As you think about how to plan for retirement and how to cover long-term care, consider the hybrid annuity as a valuable tool in your retirement portfolio. It can provide peace of mind, financial flexibility, and the potential to preserve your wealth, even in the face of future care needs. 

If you have a question from this blog, we offer a complimentary phone call that you can schedule with us on our website. If we can’t answer all your questions in just 15 minutes, we’ll guide you to the next steps to find the answers you need. 

Schedule your complimentary call to learn more about Long-Term Care Solutions: Hybrid Annuity. 

September 17, 2024 Weekly Update

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We do love it when someone refers a family member or friend to us.  Sometimes the question is, “How can we introduce them to you?”   Well, there are multiple ways but a very easy way is to simply forward them a link to this webpage.

Here are this week’s items:

Long Term Care Insurance Options in Retirement

Radon and Murs discuss long-term care planning and the complexities involved in making decisions regarding long-term care insurance. They outline why it’s crucial to think about your future care options and why understanding the different types of policies available today is more important than ever.

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Long Term Care Insurance Options in Retirement

This blog will guide you through understanding basic long-term care options, outline the importance of long-term care planning, and offer you insights to consider when deciding if long-term care insurance is a good option for you. As the aging population grows, the financial burden of long-term care will only continue to increase, making this type of planning more essential than ever.

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Long-Term Care: Planning and Options

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Long-term care is one of those essential topics that no one really wants to think about, yet it’s crucial for anyone planning for a secure future. If you’re nearing or in retirement, you’ve likely considered what happens if you need care down the road. Unfortunately, most people avoid long-term care planning because of its complexities and the difficulty of accepting the reality that they may one day need assistance with daily living. However, skipping this critical step can lead to unexpected financial strain that can eat away at your retirement savings, leaving you or your loved ones vulnerable.

This blog will guide you through understanding basic long-term care options, outline the importance of long-term care planning, and offer you insights to consider when deciding if long-term care insurance is a good option for you. As the aging population grows, the financial burden of long-term care will only continue to increase, making this type of planning more essential than ever.

The Evolution of Long-Term Care Insurance

Over the last few decades, long-term care insurance has gone through numerous changes. Many people who initially purchased traditional long-term care insurance are now reconsidering its value. Traditional policies required you to pay premiums for years with the promise that, should you need care, the insurance would kick in and cover a portion of your expenses. But here’s the issue: no one foresaw the significant rise in healthcare costs or the fact that people are living longer than ever before.

Insurance companies offering traditional long-term care policies were caught off-guard by the rising costs. As a result, policyholders saw their premiums skyrocket, making it increasingly difficult to maintain coverage. Some policies have seen annual premiums rise from $500 to $2,000 or more for the same benefit, forcing many to drop their coverage. In many cases, if you don’t use the insurance, you lose all the money you’ve paid into it.

The Shift to Hybrid Long-Term Care Options

Due to the challenges faced by traditional long-term care insurance, the market has seen a shift toward hybrid policies. These alternatives provide a blend of insurance and investment products to offer more flexibility and value. Hybrid policies include a long-term care benefit coupled with either a life insurance policy or an annuity. Unlike traditional long-term care insurance, if you don’t end up needing long-term care, the money you’ve invested in the policy isn’t lost. Instead, your beneficiaries can receive a death benefit or you can access some of the cash value.

This shift has made hybrid policies more appealing to individuals seeking a more comprehensive financial planning strategy. It’s important to understand the options available within these hybrid policies to determine which one suits your financial goals and long-term care planning needs.

Hybrid Insurance Policy: Life Insurance with Long-Term Care Benefits

Hybrid life insurance policies are one of the more attractive options for those looking to combine life insurance with long-term care benefits. Here’s how it works: you purchase a life insurance policy that allows you to access the death benefit early if you need long-term care. If you never need long-term care, your beneficiaries will receive the full death benefit, making it a win-win.

For example, let’s say you purchase a policy for $100,000. If you need long-term care, you can use the value of that policy to cover costs, tax-free. If you don’t need the long-term care, your family will receive the full death benefit upon your passing. The hybrid approach ensures you don’t feel like you’re wasting your money on premiums for a service you may never use. In addition, hybrid life insurance policies often build cash value, which means you can access funds if you need liquidity during your lifetime.

This type of insurance tends to work best for individuals between the ages of 50 and 70, in relatively good health. It offers peace of mind because, no matter what happens, your money is being put to good use—either for care in your later years or as an inheritance for your loved ones.

Hybrid Annuity Policy: Annuities with Long-Term Care Benefits

Another hybrid option gaining popularity is the annuity with long-term care benefits. An annuity is a financial product that guarantees a stream of income for life or for a set period. When combined with long-term care benefits, these annuities offer a multiplier effect, where your income can increase if you need to pay for care.

There are two main types of long-term care annuities. The first is an annuity with a long-term care multiplier, which allows your annuity income to grow to cover additional care expenses. For example, if your annuity income is $10,000 annually, a multiplier may increase that amount by 1.5 or 2 times for a period of time if you need long-term care.

The second type is a true long-term care annuity, which requires underwriting—an evaluation of your health and risk factors before approval. This type of annuity offers significant tax benefits when you use the funds for care, making it a compelling choice for those concerned about the tax implications of their retirement plans. If you use the annuity funds to cover costs associated with activities of daily living, the withdrawals are typically tax-free, which can provide a tremendous planning advantage.

Pros and Cons of Long-Term Care Insurance

When evaluating your long-term care insurance options, there are pros and cons to each type of policy. Let’s break it down:

Traditional Long-Term Care Insurance

Pros:

  • Provides a dedicated pool of money for care
  • Offers specific coverage for long-term care needs

Cons:

  • Rising premiums make it hard to maintain
  • If you don’t need care, you lose the money you’ve invested

Hybrid Life Insurance Policies

Pros:

  • Provides a death benefit if care isn’t needed
  • Can build cash value over time
  • Allows you to access the policy’s value, tax-free, for long-term care

Cons:

  • Higher upfront cost compared to traditional insurance
  • Requires relatively good health for underwriting

Hybrid Annuities with Long-Term Care Benefits

Pros:

  • Offers lifetime income and the potential for long-term care coverage
  • May provide tax-free withdrawals when used for care
  • No underwriting required for some policies

Cons:

  • Typically has fewer benefits than a life insurance policy
  • Can be more complex to understand

Creating a Long-Term Care Planning Checklist

It’s essential to create a long-term care planning checklist to evaluate your needs and make informed decisions. Here are some key points to consider when planning for long-term care:

  • Evaluate Your Financial Situation: Can you self-insure, or will you need a long-term care insurance policy?
  • Understand Your Care Preferences: Do you want to receive care at home, in an assisted living facility, or a nursing home?
  • Explore Insurance Options: Research both traditional and hybrid long-term care insurance options to determine which is best for you.
  • Consider the Costs: Long-term care costs vary significantly depending on the level and location of care. Ensure you have a realistic estimate of potential expenses.
  • Review Tax Implications: Certain policies and annuities offer tax benefits when used for care. Make sure to consider the tax impact on your overall retirement plan.
  • Discuss Your Plans with Family: It’s important to involve your family in your long-term care planning to ensure your wishes are understood and that they are prepared for any financial or caregiving responsibilities.

Is Long-Term Care Insurance Worth It?

The answer to this question depends entirely on your financial situation, health, and goals. If you can self-insure and feel comfortable shouldering the risk, you may choose to forgo insurance. For many people, long-term care insurance provides peace of mind by transferring some of the financial burden to an insurance company.

Hybrid options have made long-term care insurance more appealing because they offer flexibility and ensure your money isn’t lost if you don’t need care. By evaluating your needs and understanding the various products available, you can make an informed decision about the best way to protect your financial future.

Conclusion

You may have a few questions from this blog. Our complimentary 15-minute call is a good option for you to get started on some answers. Schedule your complimentary call with us and learn more about Long-Term Care: Planning and Options.

August 21, 2023 Weekly Update

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We do love it when someone refers a family member or friend to us.  Sometimes the question is, “How can we introduce them to you?”   Well, there are multiple ways but a very easy way is to simply forward them a link to this webpage.

Here are this week’s items:

Portfolio Update:  Murs and I have recorded our portfolio update for August 21, 2023

CLICK HERE TO WATCH THE UPDATE

This Week’s Podcast – Long-Term Care Planning Options

Listen in to learn how long-term insurance has evolved from standalone to asset-based long-term care insurance policies and the benefits of these changes. You will also learn about the right age to start planning for long-term care and the average cost of different long-term options.

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This Week’s Blog – Long-Term Care Planning Options

No one likes to talk about long term care planning. Your plan will be expensive, and who really wants to think about needing long term care? Unfortunately, as we age, our health will likely decline, and there’s a possibility that we won’t be able to remain as independent as we are right now.

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Long Term Care Planning Options

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No one likes to talk about long term care planning. Your plan will be expensive, and who really wants to think about needing long term care? Unfortunately, as we age, our health will likely decline, and there’s a possibility that we won’t be able to remain as independent as we are right now.

In our most recent podcast, we brought on Jessica Iverson, a partner with us specializing in long term care planning and the options available to us.

Current World View of Long Term Care Planning and Insurance

Long term care evolves and changes over time. In the past, a lot of people didn’t consider this type of care during their retirement planning. However, people are living longer, and things are changing.

Long term care insurance has evolved. Past policies were standalone and didn’t have life insurance or annuities built into it. Policies today are not standalone products but asset-based and focus on long term care with life insurance or annuities built in.

If you never need long term care, your beneficiaries still receive something from the money that you put into your plan. Previously, if a person didn’t use their standalone plan, their families never received any of the funds back.

The plans of today are certainly more beneficial than in the past.

Appropriate Age and Time to Begin Thinking About Long Term Care Planning

When you work towards trying to secure your retirement, you’re often younger and not thinking about future health issues. However, there isn’t an opportune time to plan for future healthcare needs.

Jessica states:

  • It’s never too early to start planning, whether you purchase an index universal life policy with a long term care rider or chronic illness rider
  • As you get older, you can reposition an asset and look at an asset-based annuity

Jessica prefers an asset-based life insurance policy that has life insurance on the policy with a death benefit to beneficiaries. You can also pay these policies over a longer period of time to make them more affordable and can add an inflation rider on them, too.

An inflation rider guarantees that your long term care benefit will grow annually as inflation rises and costs for care rise along with it.

Understanding the Costs of Care and Why Insurance is Crucial for Most Retirees

Many people underestimate the cost of care as they age. Even looking back 10 years, costs have risen greatly. You have quite a few options and in 2023, these are the general costs that you’ll be faced with:

  • $4,000 – $6,000 per month for an assisted living facility
  • $9,000 – $12,000 per month for private room nursing care
  • $3,000 – $5,000 per month for a home healthcare policy

These figures are ever-increasing.

Home healthcare allows you to stay in your home for as long as possible, and it’s the preferred choice for many if their health allows them.

Do you need insurance?

We help people through this question by asking:

  1. Do you have enough assets to cover these costs, or are you comfortable with self-insuring?
  2. Do you need to transfer some of this risk?

Our retirement-focused financial plan does focus on long term care needs and helps us look through the scenario of today’s care costs to the costs at age 80. We provide a clear picture of what you may be spending for 3 – 5 years of care, how much assets are left and if there will be funds left for your spouse.

How Long Term Care Works and Your Options

Standalone policies are becoming increasingly difficult to secure, but they are available. These policies are hard to be approved for because they’re the most likely to be used by the individual.

Asset-based long term care has quite a few options and is really where the market has turned to in recent years. This works by:

  • Purchasing insurance on top of an asset (let’s say, life insurance)
  • When a claim begins, you would spend down your life insurance first and then receive a pool of long term care benefits, too
  • If you deplete the life insurance, you still have benefits through long term care that will cover your costs

There are also asset-based annuities, which work similarly to the policy built on a life insurance asset. An asset-based annuity option is more flexible and accepts a variety of premiums, such as qualified funds or transferring an asset from one annuity to another.

With this type of policy, the annuity is spent before receiving the additional long term care benefits in your plan.

You also have the option to secure a plan that offers:

  • Life insurance with a long term care or chronic illness rider
  • Income annuity with a doubler

If you have failing health already, it will make it far more challenging to secure a plan.

Difference Between an Asset-based Life Insurance Policy vs Life Insurance Policy with a Rider

The asset-based policy’s main purpose is long term care and allows you to:

  • Adjust the benefit period with up to 6 or 8 years of coverage
  • Add an inflation rider

You will receive a smaller death benefit with the asset-based policy. 

Life insurance policies focus primarily on life insurance and include:

  • Higher death benefit
  • Fewer long term care customizations

If you’re in your 20s and 30s, a life insurance policy will likely make more sense. However, the standalone asset-based policy maximizes your long term care benefits and has a lower life insurance payout.

Qualifying for a Policy

Every policy must go through underwriting, which is a complex process with a lot of moving parts. An insurer can deny your application for a policy, but we do know what these companies are focusing on.

  • Long term care focused products focus on the morbidity of the client. How likely is it that the client will get sick?
  • Life insurance focused policies are looking at your risk of mortality. How likely is it that the client will die from sickness?

Long term care policies look at the client’s Activities of Daily Living and if they can maintain:

  • Mobility
  • Feeding
  • Transferring
  • Dressing
  • Bathing
  • Toileting
  • Continence

With these policies, the carrier will not want to take the risk if you have a cane or walker or if you’re in any type of physical therapy. If you’re still able to maintain the points above and are in relatively good health, you will likely qualify for a long term care plan.

If you do have a few issues, there are some options available to you, such as:

  • Annuity options, which are more favorable and should include an income doubler. These plans only care about you not needing care right now and are easier to be approved for if you’re declined on a long term care plan.
  • Self-funding long term care is also possible.

Some annuities do accept qualified funds and you won’t need to worry about taxes upfront. An asset-based annuity will produce withdrawals over 5 or 10 years, which you will be taxed on for the duration of the annuity.

However, when the long term care benefits kick in, they are tax-free.

Navigating long term care is very complex when you go at it alone. Working with someone like Jessica Iverson or our team can help you understand all your options and find the best plan for you.

Do you have any questions about long term care planning? Feel free to reach out to us and schedule a free 15-minute call with us to discuss them.

June 12, 2023 Weekly Update

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We do love it when someone refers a family member or friend to us.  Sometimes the question is, “How can we introduce them to you?”   Well, there are multiple ways but a very easy way is to simply forward them a link to this webpage.

Here are this week’s items:

Portfolio Update:  Murs and I have recorded our portfolio update for June 12, 2023

CLICK HERE TO WATCH THE UPDATE

This Week’s Podcast – What If You Need Long-Term Care in Retirement?

If you want to know and understand what long-term care may cost you in the future, you must first understand the actual cost of long-term care.

Listen in to learn about assisted living services for long-term care that involve more than a nursing home. You will also learn about long-term care insurance methods/plans, how they work, plus the pros and cons of each.

CLICK HERE TO LISTEN TO THE PODCAST

 

CLICK HERE TO WATCH ON YOUTUBE

This Week’s Blog – What If You Need Long-Term Care?

One of the biggest topics today is the policies people took out in their 40s and 50s are having their prices increase. When signing up for policies, insurers do mention that the rates for premiums can rise, and it’s something that we’re seeing happen right now. Many of our clients receive a notice in the mail that their premiums are rising 50% or more, but there’s usually a list of ways to offset these costs by cutting benefits.

CLICK HERE TO READ THE BLOG

What If You Need Long Term Care?

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Long term care (LTC) is a part of retirement planning, but it’s surely not as fun and exciting as planning vacations or taking up hobbies. Twenty years or so ago, Radon worked exclusively with long term care policies.

Back then, people often asked:

  • What if I need long term care?
  • How do I pay for it?
  • What are my options?

One of the biggest topics today is the policies people took out in their 40s and 50s are having their prices increase. When signing up for policies, insurers do mention that the rates for premiums can rise, and it’s something that we’re seeing happen right now.

Many of our clients receive a notice in the mail that their premiums are rising 50% or more, but there’s usually a list of ways to offset these costs by cutting benefits.

Unfortunately, people who receive these notices are already in retirement and it’s just too costly to switch plans. The older you get, the more you’ll pay for this type of insurance, and it leads to a person feeling almost forced to pay the higher rates.

We also have people come into our office who mention long term care and do not want to go the typical insurance route because premiums are always rising.

The goal of this article (you can listen to the podcast here) is to:

  • Outline your options
  • Explain how long-term care works
  • Things to think about when considering LTC

If you’re trying to secure your retirement, you need to have something in place for your future long term care needs.

What are the Risks and Numbers Surrounding LTC?

LTC is costly, and it’s something you need to consider in the same way that you do a mortgage or car loan. You need to learn the numbers and care options that you have available so that you can feel more comfortable with the idea of long-term care.

As of June 2023, we know that:

  • 69.6 million baby boomers are alive right now
  • Around 70% of Americans 65+ will need some LTC

Considering these figures, there’s a good chance that you or your spouse will be in an LTC situation during your lifetime.

We know that the cost of insurance is high, and this is because LTC is expensive.

How expensive?

  • In 2021, the private-room nursing home costs were $108,405 annually
  • In 20 years, the costs are expected to be $195,791 annually

If you’re fit and healthy now, it’s difficult to imagine that one day you may need to cover these costs either through insurance or out of pocket.

The average LTC stay is 3.5 years, so just think about having to pay $379,000 – $685,000 to cover your care. Some people are in long term care for memory care, and they don’t have any other medical issues, so they can be in a care situation for even longer.

What is Long Term Care?

Go back 20 years and there was nursing home insurance. Then, home health care started to pop up. Long term care itself is more than staying in a nursing home. My mom right now is in assisted living because she’s able to do much of her everyday routine on her own.

However, she needs assistance in some of her Activities of Daily Living, which is something that falls into one or more of six main categories:

  1. Bathing
  2. Dressing
  3. Continence
  4. Eating
  5. Toileting
  6. Transferring (getting in and out of bed, etc.)

Insurance policies start to kick in when you need assistance with at least two of the activities of daily living. A doctor will determine that these activities are difficult for you, and you can go into long term care.

However, if you have a little issue with bathing and dressing, you may want to go into what’s known as assisted living.

Assisted living allows you to have someone close to you to help you with your activities of daily living and then progress to greater care in the future if you need it. Assisted living also allows you to maintain your independence for as long as you can.

Even assisted living is quite expensive.

Costs for homemaker services (someone who helps with food and bathing), and a home health aide both have different costs. Annual costs for these are:

  • Homemaker Services Home: $59,488/annually at 44 hours a week
  • Home Health Aide: $61,776/annually for 5 days a week
  • Adult Day Health Care: $20,280 per year
  • Assisted Living Facility: $54,000 per year (private room with one bed)
  • Nursing Home Semi-Private Room: $94,900/annually
  • Nursing Home Private Room: $108,405/annually

These are hefty numbers, but the super high expenses come from the nursing home part of long term care.

If you’re freaking out, let’s discuss your options for LTC.

Long Term Care Options

LTC is expensive and a major concern when you’re trying to secure your retirement. You can opt to:

Self-insure

If you have the assets, you can self-insure, where you pay for these costs out of your own pocket. This may bring about some anxiety for you and there are pros and cons to consider:

  • Pros: You’re not transferring assets to an insurer and can avoid premium rate hikes.
  • Cons: You’re taking on the risk of not knowing what LTC will look like for you or how long you’ll need it. Can you afford to self-insure?

Self-insuring changes drastically, as you’ve seen from the 20-year projection. We help our clients visualize by using questions and scenarios where we determine how much the LTC will cost and how much will be left for your survivors.

Many people do not want to deplete their assets to the point that their survivors will struggle.

Medicare

Medicare does not provide what is known as “long term care insurance.” However, the first 20 days of a stay in a rehab facility are covered. For example, if you fall and need rehab, the first 20 days will fall into this category.

Day 21 – 100, the coverage will require an expensive copay.

After the 100-day mark, there is no coverage available.

Medicaid

Medicaid is a government program for low-income folks or people without assets. If you fall into this category, the pros are that you can get the care you need. Any money that you do make will go to the facility, but anything above what you make in “income” will be paid by Medicaid.

For example, if you receive Social Security, your check will go to the facility to cover as much of the bill as possible.

The total assets that you can have on Medicaid are very low.

Qualifications for Medicaid vary from state to state, and there’s not an easy way to get into the program. You can get assets out of your name to qualify, but you can’t just give everything to your kids or play the system in this way.

Traditional Long Term Care Insurance

Traditional LTC insurance is the one that most people are familiar with. You pay for insurance and if you don’t use it, you lose it. You pay an annual premium that is put towards a policy that will kick in if you need help with two or more activities of daily living.

Insurance will reimburse you daily based on the amount that you built your plan around.

Perhaps you receive $300 or $400 a day to cover costs. The plan may:

  • Increase based on inflation
  • Limit the length of coverage

If you transfer more risk to the insurer, you can be confident that you’ll pay more for your long-term care premiums.

LTC does take the risk out of the hands of the 70% of adults who will end up in this long-term care plan. You’ll pay for this insurance, and you may never need it, which is a concern. We’re also seeing annual increases in LTC, meaning that premiums will jump substantially.

Underwriting and qualifications are required to be approved for your insurance.

Much like your homeowner’s insurance, if you never use your long term care insurance, the money you put into it is never returned. This brings us to the next couple of categories and things to consider.

Asset-based LTC Insurance or a Life Insurance Policy Combined With LTC

One of our favorite options is the combination of life insurance and long term care insurance. 

Why?

It allows you to:

  • Take money from the policy if you need care
  • Leave the remaining balance as life insurance to the beneficiaries

Your premiums go into an account of sorts. You can use the money for your LTC, and your premiums do not disappear. Premiums are fixed and will not go up. You can pay in cash and fund the premium in one lump sum.

Some plans also allow a 10- or 15-year pay period to fund the account.

Underwriting is necessary to qualify for these plans, but with just a few questions, we can help you understand if you qualify for this type of insurance or not.

Riders

There are long term care riders you can attach to your life insurance.

When you add a rider, it adds an option to have LTC insurance and your premiums for the rider are fixed. The drawback of a rider is that premiums are not tax-deductible, and you’ll need to pay more on top of your life insurance premium for the rider.

Chronic Illness Rider

A chronic illness rider is very similar to a normal rider, but it’s for chronic illnesses. You can use your benefit payments for things limited to chronic illness, or a non-recoverable illness that you have.

Asset-based Long-term Care Through an Annuity

With this LTC option, you’ll attach the long term care benefit to an annuity that you have. This is a special annuity that can double or triple. For example, you put $100,000 into an annuity and it will add $200,000 or $300,000 for your care needs.

You have leverage and do not need to pay premiums because you fund it upfront.

If you want, you can even take money out of the annuity, although it will reduce the amount of money that you have for LTC if you ever need it.

We find that it is convenient for our clients who are above 68 years of age because there is baseline underwriting, but it’s not as strict. You also don’t need to worry about premiums rising, which is perfect for anyone who is in retirement and on a fixed income.

Income-based Annuities Asset Doubler

The final option for long term care on our list involves income-based annuities. A doubler kicks in when you can’t perform two of the six activities of daily living and will double your income for a certain number of years.

You don’t need to qualify for a doubler and it will provide you with additional cash flow for a certain period of time.

We do have a great resource available that breaks down everything we’ve just talked about and goes a bit further into the pros and cons of each option that we mentioned.

Please reach out to us if you would like us to send you this document.

Click here to request our document covering all of this information in greater detail or schedule a call with us if you want help going through your own long term care options.