October 14, 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 October 14, 2024

CLICK HERE TO WATCH THE UPDATE

Long-Term Care in Retirement – Annuity and Life – Side by Side

In this episode of the Secure Your Retirement Podcast, Radon and Murs discuss the final installment of their series on hybrid long-term care solutions, focusing on annuity versus life insurance. They provide an in-depth comparison of these two options, highlighting the…

CLICK HERE TO LISTEN TO THE PODCAST

 

CLICK HERE TO WATCH ON YOUTUBE

Long-Term Care in Retirement – Annuity and Life – Side by Side

In our recent blogs, we’ve talked about Long-term care planning; it’s importance in retirement planning, the challenges folks can face when choosing an option that best fits their needs, and some solutions that have developed in recent years. Traditional long-term care insurance policies have become less attractive due to frequent premium increases and availability issues. As a result, hybrid solution…

CLICK HERE TO READ THE BLOG

Long-Term Care in Retirement – Annuity and Life Comparison

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In our recent blogs, we’ve talked about Long-term care planning; it’s importance in retirement planning, the challenges folks can face when choosing an option that best fits their needs, and some solutions that have developed in recent years. Traditional long-term care insurance policies have become less attractive due to frequent premium increases and availability issues. As a result, hybrid solutions, such as hybrid annuities and hybrid life insurance, have gained popularity.

Now that you may have a better understanding of the various options for long-term care planning, in this blog, we’ll break down the key differences between hybrid long-term care annuity and hybrid life insurance policies. By offering insights into their pros and cons, we’ll guide you through a side-by-side comparison to help you understand which approach might fit your long-term care needs. By the end of this blog, you’ll have an even better understanding of the types of long-term care insurance and how they can help you secure your retirement.

First, a quick refresher on hybrid annuities and hybrid life insurance solutions.

Understanding Hybrid Long-Term Care Annuity

Hybrid long-term care annuity is a solution that combines the benefits of an annuity with long-term care coverage. This approach allows individuals to leverage their investment for long-term care needs while maintaining certain financial guarantees.

One notable product in this space is the Equitrust Bridge. This policy guarantees issuance, which means that even if you have health conditions that would normally disqualify you from traditional life insurance or long-term care policies, you could still qualify for coverage. It simplifies the process through streamlined underwriting involving just a Zoom interview, without the need for medical exams or blood tests.

The Equitrust Bridge policy features a coverage ratio based on age and health, which determines the amount of long-term care benefits. For instance, a 55-year-old individual with a preferred health status who invests $100,000 would have a coverage ratio of 325%, translating to $325,000 in long-term care benefits. The coverage ratios vary by age, with older applicants receiving slightly lower multipliers.

Another essential feature of the Equitrust Bridge is the vesting schedule, where full access to the long-term care benefit base is achieved over five years. This policy also includes a 2% inflation rider, ensuring the benefit continues to grow over time to accommodate potential increases in care costs.

Exploring Hybrid Life Insurance for Long-Term Care

Hybrid life insurance, such as the Lincoln MoneyGuard Long-Term Care Insurance, offers a different approach to addressing long-term care needs. With this solution, you can secure long-term care coverage while simultaneously ensuring that a death benefit is available for your beneficiaries if you do not end up needing the long-term care benefits.

The Lincoln MoneyGuard product allows for flexible payment options. For example, a 60-year-old individual could pay annual premiums of $9,422 for ten years, after which no further premiums would be due. In return, this policy provides guaranteed long-term care coverage, which increases with a 3% compounding factor, making it more robust compared to the 2% inflation growth in some annuity-based products.

One of the key advantages of the Lincoln MoneyGuard policy is its guaranteed death benefit. Even if you don’t need long-term care, your beneficiaries will receive at least $120,000, which is the amount of the death benefit in the example provided. Over time, the policy’s long-term care benefits grow significantly, reaching $10,469 per month by age 85, with a total benefit base of $525,000.

However, Lincoln MoneyGuard’s underwriting process is more involved than Equitrust Bridge’s, with standard medical exams and a health questionnaire. This means that individuals with significant health issues may not qualify for this coverage.

Side-by-Side Comparison: Hybrid Long-Term Care Annuity vs. Hybrid Life Insurance

Now that we’ve provided an overview of each option, let’s compare them side-by-side to help you consider which may be a solution for you:

  1. Underwriting Requirements
    • Equitrust Bridge (Hybrid Annuity): Guaranteed issue, with a streamlined process that requires only a Zoom interview for cognitive and physical assessments. Suitable for individuals with health concerns who may not qualify for traditional long-term care or life insurance.
    • Lincoln MoneyGuard (Hybrid Life Insurance): Involves full underwriting, including medical exams. Best suited for individuals in good health, typically between the ages of 60 and 65.
  2. Funding Options
    • Equitrust Bridge (Hybrid Annuity): Usually funded with a single lump sum payment. This makes it suitable for individuals who have accumulated savings or are looking to reposition funds from a non-qualified annuity.
    • Lincoln MoneyGuard (Hybrid Life Insurance): Offers flexible payment options, such as spreading payments over ten years or opting for a lump sum payment. This makes it more accessible to those who prefer a payment plan.
  3. Growth of Benefits
    • Equitrust Bridge (Hybrid Annuity): Provides a 2% annual growth on the long-term care benefits.
    • Lincoln MoneyGuard (Hybrid Life Insurance): Includes a 3% annual compounding increase, making the long-term care benefit larger over time.
  4. Death Benefit
    • Equitrust Bridge (Hybrid Annuity): Does not include a death benefit as a primary feature, although some residual value may be available if the long-term care benefits are not fully utilized.
    • Lincoln MoneyGuard (Hybrid Life Insurance): Guarantees a death benefit for beneficiaries, ensuring that the premiums paid are not lost even if long-term care is not needed.
  5. Tax-Free Long-Term Care Benefits
    • Both policies offer tax-free long-term care benefits once the insured qualifies by being unable to perform two out of the six activities of daily living (ADLs).
  6. Flexibility and Accessibility
    • Equitrust Bridge (Hybrid Annuity): Ideal for those looking to reposition existing assets, particularly from non-qualified accounts. The streamlined underwriting process makes it a good option for those with health conditions.
    • Lincoln MoneyGuard (Hybrid Life Insurance): Suitable for individuals who prefer the security of a death benefit and the flexibility of payment options. Best for those with adequate cash flow to handle annual payments.

Pros and Cons of Long-Term Care Insurance: Annuity vs. Life Insurance

Hybrid Long-Term Care Annuity (Equitrust Bridge)

Pros:

  • Guaranteed issuance with no medical exams.
  • Suitable for those with pre-existing health conditions.
  • Allows repositioning of assets, such as a non-qualified annuity, into a tax-efficient long-term care vehicle.
  • Offers tax-free withdrawals for long-term care needs.

Cons:

  • Requires a lump sum investment, which may not be feasible for everyone.
  • Five-year vesting schedule for full benefit access.
  • Lower growth factor (2%) on long-term care benefits compared to some life insurance options.

Hybrid Life Insurance (Lincoln MoneyGuard)

Pros:

  • Offers a guaranteed death benefit, ensuring premiums are not lost if long-term care is not needed.
  • Provides a higher growth rate (3%) on long-term care benefits.
  • Flexible payment options, including spreading payments over ten years.

Cons:

  • More stringent underwriting requirements, making it difficult for those with health issues to qualify.
  • May not be as suitable for those who prefer a single payment or have less cash flow flexibility.

Choosing the Right Long-Term Care Option

Deciding between hybrid long-term care annuity and hybrid life insurance largely depends on your personal circumstances, health status, and financial goals. For those with existing health conditions or older age, the Equitrust Bridge hybrid long-term care annuity may provide the best opportunity for securing coverage. On the other hand, individuals in good health who want the flexibility of payment options and a guaranteed death benefit might find Lincoln MoneyGuard a more suitable choice.

When considering these options, it’s important to think about how your long-term care retirement needs fit into your overall retirement planning strategy. Long-term care is a major concern for many as they approach retirement, and having a plan in place can help secure your retirement.

Conclusion

Understanding long-term care options is crucial for effective retirement planning. Hybrid solutions like hybrid long-term care annuity and hybrid life insurance provide innovative ways to ensure you have the coverage you need while offering unique financial benefits. By comparing the pros and cons of each, you can choose the solution that aligns best with your financial situation, health status, and long-term goals.

If you’d like to discuss these solutions and how they apply to you, you can start by scheduling a 15 minute call. A 15 minute call can be very productive in getting you started on answers to your questions and, if you would like, some guidance on what to do next.

Schedule your complimentary call with us to learn more about Long-Term Care – Annuity and Life Comparison.

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.

CLICK HERE TO LISTEN TO THE PODCAST

 

CLICK HERE TO WATCH ON YOUTUBE

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.

CLICK HERE TO READ THE BLOG

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.

November 27, 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 November 27, 2023

CLICK HERE TO WATCH THE UPDATE

Rae Dawson – The Basics About a CCRC in Retirement – Part 2

In this episode of the Secure Your Retirement Podcast, join Rae Dawson as she breaks down the fundamentals of CCRC, covering everything from costs and waitlists to choosing the right time to make the move. Ever wondered about the factors influencing CCRC expenses? Rae delves into that, offering insights on what to consider when evaluating the cost of a CCRC. Now, imagine this: How might being flexible in your requirements help you sidestep a potentially lengthy waitlist, which can stretch anywhere from 4 to 15 years?
CLICK HERE TO LISTEN TO THE PODCAST
 
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The Basics About a CCRC in Retirement – Part 2

How does the choice of location impact the cost of Continuing Care Retirement Communities (CCRC)?  The expenses associated with CCRC are influenced by the contract type and community location. Living in a sought-after real estate location may come with a higher price tag compared to a more rural setting. As you contemplate the costs of CCRC, it’s crucial to factor in…
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The Basics About a CCRC in Retirement – Part 2

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Rae Dawson is back with us this week to continue our series on CCRC (continuing care retirement community) and how it fits into your retirement planning. While much of this information is going to relate to your area, it is focused on Raleigh, NC.

Note: If you missed Part 1 of this series, click here to read it. You can also listen to the podcast version here.

To  listen to this Episode CLICK HERE

Triangle Area CCRC Costs

CCRC costs are driven by the type of contract and community location. If you’re in a popular real estate area, you can expect to pay more than if you’re in a rural area. When thinking about the cost of a CCRC, you need to consider:

  • Buy-in
  • Monthly fee

Rental CCRCs are different than traditional ones because they do not have a buy-in, and monthly fees are much higher. Today we will be doing a deeper dive into Traditional CCRC costs.

For a traditional CCRC, you’ll often have 2 contract options: a single occupant contract, or a double occupant contract. The second occupant is often a spouse, friend, or sibling. Typically, no more than two people can live in a residency. 

In the Triangle area, a buy-in for one of these communities ranges from $60,000 for a studio, and up to $990,000 for an extensive contract cottage. A higher buy-in rate for the extensive contract cottage because you’re paying for your higher level of care upfront. The buy-in is a one-time cost.

For double occupancy, your buy-in could be anywhere from $140,000 for a studio to $1,065,000 for a cottage. Why does the studio buy-in jump up for double occupancy? Most communities will not allow double occupancy in a studio.

Often, if your buy-in is on the lower end of the range, the community’s policy is if you leave the community after 15 months, your buy-in return is $0. However, if your buy-in is on the higher end, some communities offer a 100% return of the buy-in to your estate. If you secure your retirement and want to leave money to your heirs, it’s often best to pay the higher buy-in so that they receive the buy-in amount back.

What is a Cottage?

A cottage, in this sense, is a single-family home. The buy-in price is driven by square footage. A larger cottage may be 3,000 square feet, so a 600 square foot studio will cost significantly less. When moving to a CCRC, you have a lot of activities that you can engage in at the common area of the community. You’ll likely spend less time in a cottage by yourself, so downsizing is often a great option.

Different communities may have different names for types of homes. You may hear “duplex”, “triplex”, “apartment”, etc., in addition to studio and cottage. Keep in mind that the buy-in prices are driven by square footage if the different names for types of homes becomes confusing. 

Monthly CCRC Costs

On top of your buy-in costs, you also have monthly fees. For a Traditional CCRC, there are ranges for the monthly fees:

  • Single person studio is as little as $2,150 per month
  • Cottage can run as high as $8,000 per month
  • Double-occupancy, one-bedroom ranges from $4,580 to $9,840 per month

In most cases, some meals, cable television, most utilities, transportation to and from the doctor’s office, gym or pool access, and some other perks may be included in the monthly fee. It’s important to know what amenities are included in the monthly fee, as they vary between communities and are probably things you pay for on an individual basis before living in a CCRC. 

Qualifying for a CCRC

A general rule of thumb when pursuing a Traditional CCRC is that your monthly income should be at least 2 times the amount of the monthly fee. Your assets should be greater than 3 times the amount of your buy-in fee. If you’re moving into a $2,150 studio, your monthly income should be $5,000 to support this.

Traditional CCRCs will feel comfortable with allowing you to move in if you meet these income and asset requirements.

I’m Ready to Go. What’s the Waitlist on a CCRC?

CCRCs often have a waitlist because they’re in high demand and communities aren’t opening up at an adequate rate to meet the demand. It is not uncommon for a waitlist period to be 4 – 15 years. However, if you’re flexible with your floor plan requirements, you may be able to circumvent these long wait times.

In some communities, you can remain on the waitlist for your ideal floor plan and switch to your ideal unit in the future, but it’s often discouraged. What a lot of communities will do is allow you to downsize. Let’s say that you’re in a 3,000-square-foot cottage and one spouse dies. You would rather move to a smaller footprint, and the community may allow you to do this.

However, do not put all your eggs in one basket. Instead, you’ll want to be on multiple waitlists at a time. If you receive a serious diagnosis, you may be prohibited from entering a CCRC. It’s always best to have multiple options.

Joining a CCRC Waitlist

If you want to join a waitlist, there are steps that you’ll need to take to make all this work. You’ll need to:

  • Pay an application fee. It’s typically about $300, and it’s not refundable
  • Provide general financial and health information 
  • Moving from a waitlist to a ready list will involve providing your financial statements

Communities will run a financial assessment before accepting you onto a waitlist, knowing the waitlist period is 4-15 years. You will also need to pay a $1,000 – $5,000 waitlist fee, which is refundable if you choose not to move to that community. If you do move to that community, the fee will be applied to your buy-in.

What Age Should You Start Looking Into a CCRC?

Today, the average CCRC entry age is 75. People are moving into these communities earlier than in the past due to competition and the attractive convenient amenities. The average age of a community may be 80 – 85. People who live in CCRCs often live longer than the normal person, with some living until 90 – 100.

Most communities require 6 months to 3 years of being healthy to move into a CCRC, so you can live more independently for longer.

If you wait too long and fall into bad health, you may not be able to move into one of these communities. Entering a CCRC early allows you to build friends and relationships early on, which is a nice perk of living in any type of community.

How to Decide What to Do

If you decide that you want to move to a CCRC, now you’ll need to choose the right community for you. You’ll want to think about quite a few different points, such as:

  • Family health history. Have your relatives lived through age 90 with few health issues? If so, you may not want to pre-pay for an extensive stay with higher levels of care. 
  • Do you have long-term care insurance? Your insurance may help pay for a higher level of care.
  • Location. If all your friends and family are in one location, you’ll likely want to stay in their area.
  • Cost. It can be challenging to compare contract types and communities without a lot of organization first. 

However, you will find there is one thing that’s even more important than all these points: culture and community. Visit multiple communities and find one that fits you and makes you feel comfortable. If you’re not visiting multiple communities, you may miss out on finding the community culture that is best for you.

Want to reach out to Rae Dawson to learn more about CCRCs? Email rae01dawson@gmail.com.

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November 13, 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 November 13, 2023

CLICK HERE TO WATCH THE UPDATE

Rae Dawson – The Basics About a CCRC in Retirement

In this Episode of the Secure Your Retirement Podcast, Radon and Murs have Rae Dawson to discuss the basics of Continuous Care Retirement Communities (CCRC). Rae is a CCRC expert and spent her original career primarily managing people and projects in high-tech in Silicon Valley for many years before gaining an interest in CCRC. She explains what it means for a facility/community to be a CCRC and why most assisted care facilities are not CCRCs.
CLICK HERE TO LISTEN TO THE PODCAST
 
CLICK HERE TO WATCH ON YOUTUBE

The Basics About a CCRC

Rae Dawson was a special guest on our podcast this past week, and she was happy to talk to us about a very important topic: CCRC. If you don’t know what a CCRC is, don’t worry. We’re going to cover that in just a few seconds. But before we do, let’s learn more about Rae and why we’re so excited to have her on our show.
CLICK HERE TO READ THE BLOG

The Basics of a CCRC

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Rae Dawson was a special guest on our podcast this past week, and she was happy to talk to us about a very important topic: CCRC. If you don’t know what a CCRC is, don’t worry. We’re going to cover that in just a few seconds.

But before we do, let’s learn more about Rae and why we’re so excited to have her on our show.

A Little Bit About Rae Dawson

Rae was mentioned to us by one of our clients, and after a great conversation with her on the phone, we knew that we had to invite her onto the show. She had a career in high-tech and worked in Silicon Valley.

She moved to North Carolina when she retired, and she worked with her friend, who taught a class on CCRC until 2021. Her friend eventually moved into a CCRC herself and Rae has been teaching the class on her own ever since.

What is a CCRC?

A continuous care retirement community (CCRC) is not well-defined and there are a lot of opinions on what a CCRC should include. A CCRC, by Rae’s definition, should offer:

Memory care may or may not be offered, but it’s a nice perk of these communities. 

CCRCs offer a continuum of care while staying within the same community. Most residents live in these communities until they pass on. CCRCs are a topic that we cover when discussing retirement planning with clients, but many people are educating themselves on their community options.

What is the Mindset of People Attending Rae’s CCRC Class?

Educating yourself on CCRCs is important. Most people want to age in place and remain in their family home. However, planners take Rae’s class because they want to know:

  • If aging in place is for them and what that looks like
  • If CCRC is something they might prefer, and what criteria must be met before going into a CCRC

CCRCs are regulated and there are nuances that everyone considering these communities must know about beforehand.

Regulations on CCRCs

Note: We’re going to cover a lot here, and Rae has been kind enough to share some slides with us. We’ll be adding these slides to our YouTube channel for you.

A lot of money and resources go into CCRCs. You plan on living in one and ensuring that you receive the care you need in retirement. Regulations are a safeguard that offers you peace of mind and ensures that the community is “following the rules.”

In North Carolina, where Rae and our team are located, CCRCs are regulated by the NC Department of Insurance. Assisted living and skilled nursing facilities are also regulated by the Department of Health and Human Resources.

The NC Department of Insurance is your best resource for understanding the financial stability of a CCRC.

Luckily, in North Carolina, no CCRC has ever gone bankrupt. One almost went under, and the Department of Insurance stepped in to protect residents and help the community get back on the right financial footing.

Why?

Residents buy into these communities and make a significant investment to remain in one.

Familiarize Yourself with the Department of Insurance Website

Rae recommends that all her students familiarize themselves with the NC Department of Insurance website because it’s their go-to source for information. You can:

  • Search the site for CCRCs
  • Read through contract types
  • Read through community disclosure documents
  • Learn about the licensing requirements to be a CCRC
  • Access community search tools

Community search tools allow you to use an interactive search engine or download a PDF on all CCRCs.

If you cannot find a community on the Department of Insurance website, it is not a CCRC. Often, nursing facilities may promote themselves as a continuous care retirement community, but they are not if they’re not on the site.

Browsing through the PDFs on the NC Department of Insurance website, you’ll find great information on each CCRC, such as:

  • Buy-in options
  • Refund options
  • Low and high costs
  • Meals on wheels info
  • Waitlist time

A new interactive portal is also available that makes it simple to browse through all of the CCRCs in the state.

Note: If you’re not in North Carolina, you can often find similar information on your state’s website.

Wait List Notes

CCRCs have limited space, which means there’s a waitlist. We’ve had some clients wait six months, two years, or even longer to get into one of these communities. Some communities have a 12-year waitlist!

CCRC Rating Agencies

Rating agencies for CCRCs do exist, and three of the main ones are: Fitch, CARF, and CMS.

Fitch

Fitch provides primarily financial liability ratings. The main factor in the Fitch rating is the Debt Service viability. When a CCRC is expanding, the community takes on a lot of debt. However, once complete, the community will sell residency and its rating will rise because it’ll pay off the debt.

CARF

Rather than focusing on the financial aspects of a CCRC, these agencies will look at the services provided and the quality evaluations. Communities apply for a CARF (Commission on Accreditation of Rehabilitation Facilities) rating and pay for the assessment that is done. 

CMS (Medicare)

Medicare will provide quality of care and staffing service ratings for skilled nursing facilities. Note that not all facilities are Medicare-certified, which may sway your decision to join one facility over another.

Note: Remember, the NC Department of Insurance also has a rating system for each community.

Understanding the 5 CCRC Contract Types

1.  Extensive or Type A

An “extensive” contract is the most popular and requires a buy-in plus a monthly fee. No matter what level of care you’re living in, your monthly fee does not increase. You’re pre-paying with your buy-in with a higher upfront cost but a stable monthly cost.

Moving into a Type A CCRC does mean that your doctor will need to state that you’re likely to remain independent for a longer period of time than with other contract types.

2.  Modified or Type B

A modified contract means that you’re buying in for a higher level of care at a subsidized rate or for a fee for a certain number of days. You’ll have a lower buy-in and monthly fee than an Extensive contract, but you’ll be paying more than our next contract type.

3.  Fee for Service or Type C

Fee for Service contracts are exactly what they sound like. You pay for what you receive. While you live in an independent living facility, you’re paying for this level of care. When going into an assisted living area, you’ll pay the going rate for this type of care.

4.  Rental

Rental communities are growing in popularity in North Carolina and do not have an entrance fee. You may need to provide a deposit of two months of rent. These communities do provide access to higher levels of care at the going rate.

What we do want to point out is that Rental communities are for-profit while the other communities that we’ve mentioned are non-profit.

Traditional CCRCs are beneficial because they will often offer a benevolent fund, which means that if you move into one of their communities and you run into money issues, they will not make you move communities. However, they may require you to move to a smaller footprint within the community that is less expensive.

Rental communities will make you move out of the community if you cannot continue paying.

5.  Equity

An equity contract comes with a real estate transaction because you’re buying the residence that you move into. The real estate transaction allows you to buy the home and contract with the community for a higher level of care services.

The cost of the contract with the community is roughly 10% of the cost of the unit you purchase.

While there is not a structured classification, equity contracts are, more or less, a fee-for-service type of structure for higher levels of care.

Which CCRC Contract is Best?

Rae finds that no single community is best for everyone. If you have long-term care insurance, your choice for a community may be different than someone else’s. Why? Your insurance can help you cover the financial requirements of the facility.

Extensive contracts with long-term care are often a good choice because you may pay less once long-term care kicks in.

A few things to consider when choosing a CCRC contract are:

  • Current level of health
  • Family health history
  • Do you think you’ll need a higher level of care for a long period of time?

Rae’s former co-teacher chose a fee-for-service community because she didn’t want to pay for any services that she may not use.

In terms of quality of care, you’ll find that the quality of care across all contracts is about the same. You will receive the same great care in a Rental community as you will in an Extensive one.

Many residents who are tired of caring for their homes will often go to a Rental community. The community allows them to avoid the buy-in and gives them the freedom to move to another community or move into their kid’s home if they wish.

Rental communities do have a lease that is 12 months, but you will need to pay some costs upfront.

We’ve asked Rae to come back onto our show, because we’ve really just covered the basics of CCRC here. We plan on covering this topic more in-depth in the future, so be on the lookout for more episodes with Rae if you want to learn more about CCRC.

If you want to learn more about CCRCs with Rae, you can contact her directly at rae01dawson@gmail.com. 

September 5, 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 September 5, 2023

CLICK HERE TO WATCH THE UPDATE

This Week’s Podcast – Integrated Wealth Management Experience in Retirement

Learn more about the elements of an integrated wealth management experience: a retirement financial plan, specific-to-the-client investment process, and tax planning. You will also learn how we’re involved in every step of the wealth management process, in-house or with a partner.

CLICK HERE TO LISTEN TO THE PODCAST

 

CLICK HERE TO WATCH ON YOUTUBE

This Week’s Blog – Integrated Wealth Management

Integrated wealth management experiences are our way to help clients have the type of retirement planning assistance that is provided in a “family office.” If you don’t know what this term means or who it applies to, we’re going to cover that in great detail before explaining the concept of integrated wealth management to you.

CLICK HERE TO READ THE BLOG

Integrated Wealth Management Experience

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Integrated wealth management experiences are our way to help clients have the type of retirement planning assistance that is provided in a “family office.” If you don’t know what this term means or who it applies to, we’re going to cover that in great detail before explaining the concept of integrated wealth management to you.

Note: Click here to listen to the podcast that this article was based on using Spotify, Apple Podcasts, Google Podcasts and Amazon Music. 

What is a “Family Office?”

A “family office” caters to what can be considered ultra-high net worth. You have enough assets that you require an entire team to help manage your assets. These offices will help you with:

  • Family businesses
  • Taking care of budgets
  • Paying bills
  • Managing cash flow, credit cards, real estate

Individuals in a family office have assets of $50+ million. Anyone who falls into this category can be their “own client,” meaning that the entire team works for you to manage your wealth. Extensive assistance is offered, including tax and estate planning, to the degree that 99% of people will never require. You’ll also work with attorneys and CPAs.

All these employees work for you, they’re registered with the SEC, and they assist with managing your “family.” If a person has this high of a net worth, they may need to have a chief financial officer (CFO) who will handle hiring or working with certain experts to meet their family’s needs.

Often, with a family office, they have a CPA working with them full-time.

The family office works solely for the family and will handle all their financial and wealth management needs. If a lawyer needs to be hired to work on estate plans, that’s all handled for you behind the scenes.

Integrated Wealth Management Experience

In our office, our average client doesn’t have $100 – $200 million or a billion dollars. We can’t create a family office for these individuals, but we wanted to create a system that offered the same experience as a family office for all our clients.

What we devised is known as our integrated wealth management experience.

What Does an Integrated Wealth Management Experience Look Like?

Instead of working with one individual, we work with many and take on the role similar to a “CFO.” We look at the person’s entire financial picture and beyond to help you secure your retirement. We partner with multiple professionals on a range of services, in addition to in-house wealth management.

For simplicity, we’ll break this down into a few of our in-house and partnered services.

In-House Wealth Management

In-house, we specialize in wealth management. We are financial advisors, and fiduciaries- which means we’re required to put your best interests first. The majority of our clients are people close to or retirement, and we’re big on the retirement-focused financial plan.

In a few words, the retirement-focused financial plan:

  • Analyzes where you are today
  • Outlines retirement goals
  • Identifies changes that need to be made to reach your goals

Reaching your financial goals will often mean investing in some sort of return. We may invest in the market, bonds, annuities, or a wide range of other financial vehicles. We invest for a return that is comfortable for the client and is based on individual risk tolerance.

Next, we offer tax planning. Some of the tax planning is in-house and some of it is done by working with outside experts. We have checks and balances in place to understand:

  • What your taxes look like today
  • What strategies we can implement before the end of the year to lower the tax burden
  • What to do to save you money next year

We can also handle the tax return for you, and we have partnered with CPAs to lead this process. CPAs will also provide a stamp of approval for all the tax planning strategies that we prepare to ensure that everything moves along smoothly.

Our team helps clients understand where their income is coming from and ensures that their retirement-focused financial plan is operating to reach their goals.

Estate Planning

Estate planning is a crucial part of retirement planning that folks really struggle to talk and think about. However, we incorporate this planning into the experience because it provides you with peace of mind that your estate matters are all handled in a legal manner.

Without an up-to-date estate plan, it can be difficult for you to leave assets in your desired way for heirs and beneficiaries. If you’ve had a major life change since you’ve created or looked at your estate plan, it is a good idea to have your estate plan professionally reviewed and updated. 

For our clients, we have a system in place for the state they live in to create a:

  1. Trust
  2. Will
  3. Power of Attorney
  4. Healthcare Power of Attorney
  5. HIPAA form

We believe this aspect of your retirement-focused financial plan is urgent, and strongly encourage our clients to review and update these documents on a regular basis.

Social Security

We work with a Social Security consultant, so our clients have an expert look at avoiding mistakes when filing for Social Security. Some clients have an easy process for Social Security, and we can help them apply for their benefits. However, other clients do not have as easy of a time.

Our consultant is on retainer and will help consider:

  • Complex decisions
  • Divorce
  • Optimizing for certain forms of income
  • Survivorship

She assists us when running the numbers for Social Security to help you make the best decision on when to take your benefits and how to reach your financial goals.

Insurances

Insurance includes many different options, but one of the major ones is health insurance. When you retire, you’re responsible for your own health insurance, which will be Medicare.

Medicare can be overwhelming when it comes to options, plans, and thresholds. We work with our clients and partners to help them find the best Medicare options for their health scenario and budget. We may be able to structure things to avoid IRMAA surcharges on Medicare, too.

Additionally, we help clients during open enrollment to find plans that may be more affordable or a better overall option for them. 

Long-term Care Planning

Speaking of healthcare planning, we also dive into long-term care planning. Hopefully, you’ll never need this level of care, but you just never know what the future will hold for you. We recently had a podcast on long-term care planning.

We’ll analyze your long-term care options and even help you secure the insurance you need to pay for a nursing home or assisted living facility.

Life Insurance

We’ll work through the question of life insurance and how to structure it for you and your family. 

These are just some of the insurance options that we can use to help build our clients retirement-focused financial plan. As we’ve outlined, we do our best to mimic the “family office” so that it works in your best interests.

What Getting Started with Our Integrated Wealth Management Experience Looks Like

If you call us to discuss your options, we already have:

  • Ongoing, up-to-date research to aid in building plan for your goals
  • Multiple estate planning methods in place
  • Many in-house Insurance and Wealth Management strategy options

We’re involved the entire time, working to have all your questions answered. We will do the research with the estate planner or Social Security expert to have your questions answered.

Since we work with the outside experts, you bypass the extra step to make sure your financial, tax, and estate planning professionals are all on the same page when it comes to your retirement-focused financial plan. We’re very much involved with every aspect of your plan to help you make sound financial decisions.

Want to learn more about our Integrated Wealth Management Experience? Schedule a free call with us today.

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.

CLICK HERE TO LISTEN TO THE PODCAST

 

CLICK HERE TO WATCH ON YOUTUBE

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.

CLICK HERE TO READ THE BLOG

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.

May 8, 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 May 8, 2023

CLICK HERE TO WATCH THE UPDATE

This Week’s Podcast -What Issues Should You Consider Before You Retire?

Listen in to learn the importance of understanding your cash flow needs and budget and building some type of plan for your retirement. You will also learn the importance of budgeting for health insurance if you retire earlier than age 65 and the options to consider for long-term care planning.

CLICK HERE TO LISTEN TO THE PODCAST

 

CLICK HERE TO WATCH ON YOUTUBE

This Week’s Blog – What Issues Should You Consider Before You Retire?

Are you considering retiring? After working your entire life, you’ve come to this beautiful ending where you’ve hit all your milestones to secure your retirement and can pursue the things that you truly love to do. Many companies offer early retirement options to their employees, it’s an important time to consider a few things before retirement.

CLICK HERE TO READ THE BLOG