Protecting Your Family & Your Retirement From a Long Term Care Event

  • 1/7 people in the United States are Caregivers to either they’re immediate family, friends, or relatives.
  • About 10% of the population has Long Term Care Insurance
  • Yet 70% of those over the age of 65 will need long term care at some point in the future.
Cliff Marshall

By: Cliff Marshall

We all have a different idea of what retirement looks like. You may have already planned and achieved your financial goals, but have you discussed the impacts an unexpected health event might have on your retirement assets? And are they protected?

There are several different options on the market:

Hybrid Asset Based Long Term Care Policies allow you to leverage your existing assets 2 to 5 times their value for long term care expenses. Here is an example.

Female Age 60 $100,000 Single Premium

Asset Based Long Term Care

Asset Based Long Term Care

As you can see an initial deposit of $100,000 on day one leads to $501,070 in Long Term Care benefits. Your initial $100,000 is safe to be withdrawn at any time

Conventional Long Term Care policies have gotten a bad reputation over the past few decades for constantly increasing their premiums. This created a void of demand and the availability of carriers that still provided that product. That Paved the way for guaranteed premium Asset Based Long Term Care Insurance. National Guardian Life and Mutual Of Omaha still offer a conventional long term care policy with several different payment options. This can be thought of as a “Pay-as- you Go” policy.

Long Term Care Annuities:  Global Atlantic ForeCare Annuity can leverage an initial deposit of $100,000 into $300,000 in available withdrawals for long term care expenses.

Asset Based Long Term Care

Asset Based Long Term Care

Hybrid Asset Based Long Term Care Insurance Policies (Most Popular Option)

Hybrid Long Term Care Insurance Policies offer a strategic structure that provide long term care benefits, liquidity, and death benefits.

These offer tax-free withdrawals for long term care expenses. Surrender values, if at some point you don’t need the coverage any longer you can liquidate the policy for cash values. As well as death benefits, if you happen to pass away, the remaining balance of the policy will be passed along to the heirs.

Asset Based Long Term Care Insurance

Asset Based Long Term Care Insurance

Cash Indemnity Plans This means the policy will pay you directly in cash and you have full control over how you spend it. You can spend it on care, building a ramp into your home, paying a friend/family to help take care of you and if you don’t use the full amount you can save it for the future.

Introduction into some Asset Based Long Term Care Policies.

NationWide CareMatters II is best suited for individuals looking for the maximum amount of long term care benefits they can get for their money and a nice death benefit amount if they pass away and never use the policy. NationWide CareMatters II is a Cash Indemnity Plan

Securian SecureCare, another great product, that has the best and quickest return of premium (ROP) in cash value if you decide you no longer need or want the coverage and provide the best death benefit to your beneficiaries should you pass away and never use the policy. Securian Secure Care is a Cash Indemnity Plan.

OneAmerica Asset Care is ideal for individuals looking for a joint (Spouse) policy and especially if one of the insured has had some health history. OneAmerica also has the option for a lifetime benefit and they are the only carrier that allows the insured to use qualified money (IRA, Pension, 401K) to pay the premiums.

Which product is best for you? You can read more about them by clicking on the links and also feel free to reach out to Cliff Marshall by phone or email anytime and he can work on some personal proposals to find one which one offers the most coverage and suits your needs the best.

Conventional Long Term Care

Conventional Long Term Care Policies have had a bad reputation over the last few decades and sometimes with good reason. Individuals who owned these policies consistently saw their premiums increase to the point of no longer being able to keep them or forcing them to reduce the benefits to keep the premiums affordable which compounded the problem by having less coverage and if they never used the coverage the money was not there for them to get back. The market recognized these shortcomings and created Asset Based Long Term Care Policies.

For those who are still interested in more of a conventional long term care policy, National Guardian Life offers a very reasonable conventional plan that does have some unique options like a 10 year pay, single pay and a “shared care benefit”. Mutual of Omaha also has some of the same features.

You might not have considered how quickly the situation can change should you require the need for long term care services. Right now in the United States 70% of people over the age of 65 will require some type of long term care in the future. The last thing you need is a catastrophic long term care event to deplete the assets you acquired over the

Long Term Care Annuities

These function like conventional annuities, offering guaranteed returns and preservation of principle. However they also offer asset leverage, for example

Global Atlantic ForeCare. Which can offer annual returns of 1.75%, while simultaneously leveraging your initial deposit for 2x- 3x for long term care purposes. Let’s assume you have $100,000 in cash or a Certificate of Deposit (CD) in case of a long term care event. You have the option to move that money from Pocket A (a CD) to Pocket B (Asset Based Long term care Annuity) and get 3x of the deposit as leverage for any future needs for long term care coverage.

So there are plenty of options out there for you. My job is to provide you with educational reviews, videos, and offer unbiased advice as brokers that represent all of the major carriers. When planning into the future for potential long term care events, make sure you do it right the first time.

The Argument Against Self Insuring

A lot of people will tell me that they have “saved for a potential Long Term Care claim” or they are expecting “an inheritance that they will have available” or “I have a lot of money in my retirement plan that we could use”.

For most people it is hard enough to save for retirement and then saving for a LTC event makes it twice as hard. With today’s current choices of Asset Based Long Term Care, this scenario works perfectly. If someone is “saving” that means that they are putting money away weekly or monthly. As I have mentioned before, saving $100 only gets you $100 of potential LTC money to be used for care costs.

Assume you are 55 years old with a goal of retiring at 65 or 70. We can work on a plan that has a 10 year or 15 year payment option that takes that same money you are saving and apply it to one of the new asset based long term care plans. By doing this we are not setting a fixed LTC benefit amount but getting a benefit based on what that amount of money can buy. The leverage this creates will always be more that what is put into the plan, it will provide an increasing benefit pool (with an inflation rider), will provide a death benefit greater than the premiums paid and if you never need or want it, you can surrender it and get some or all of you money back (depending on the plan you choose). I tell clients everyday to always remember “some coverage is better than no coverage”

If you are fortunate to have inherited some money, land or other assets that is great. If some of that is cash, you are in a great position to utilize that and to enhance that money by using it to leverage the amount for a greater long term care benefit. This is where a single pay or 5 year payment plan works best. Move that money into an asset based long term care and at the same time the cash value still shows up on your asset list as cash while assuming a $100,000 deposit might be worth $300,000 initially in long term care benefits and that number would be increasing each year with an inflation feature added. What a great way to preserve the wealth that was given to you by a relative that worked hard to be able to pass that down.

I have mentioned this before and see it everyday working with our clients. We are all conditioned to buy a house, get it paid off and save as much as you can in your retirement plan. Truly sage advice, but during this time there is this little thing called “life” that is going on around us, raising kids, kids events and putting them through college, weddings, new vehicles and just everything we deal with on a daily basis. In the end the house payment and retirement plans have been on cruise control and unfortunately not a lot has been saved outside of those two options. With any of the asset based long term care plans you can use money from your retirement plan (assuming you are over 59.5 years of age) but with most you will have to take a taxable distribution to pay into the plan so that could mean that to make a deposit of $100,000 into a plan it might really cost you $125,000 (assuming a 25% tax) because that $100,000 will be included in your income in the year the distribution happens and could take you into a different tax bracket which compounds the problem.

One of our carriers, OneAmerica, will actually take that deposit and structure it so that the distribution is taxed over a 10 year period so that the 1099 you receive each year is much lower and possibly keeps you in a lower tax bracket and spreads out the gain over time. There is nothing you need to do, OneAmerica takes care of it each year.

One of the advantages of this is that you can do a joint policy with your spouse even though the money used came from the other individual. I would rather see you use other money but if you find yourself in the above mentioned situation with a majority of assets in your home and retirement plan then could be a great option to consider.

With today’s plans and for the person looking ahead, these plans offer a lot of options. Feel Free to Contact Us With any questions.