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Alternative Long Term Care Coverage


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As we age, long-term care insurance offers us a path to living comfortably and independently in our own homes and communities. Long-term care is not always direct medical care, but rather is a range of services and supports that help individuals care for themselves on a daily basis; a key to aging-in-place.

There are advocates of what we refer to as a ‘Good, Better, Best’ approach to long term care insurance protection.  Long term care insurance is basically a commodity in the eyes of consumers and understanding how to effectively give consumers viable choices that will be a benefit to all.

Long term custodial care is hugely expensive. And the cost is not covered by Medicare or supplement policies. Only if you’re truly impoverished, you can turn to your state Medicaid program for coverage – but it is unlikely to offer home care. Instead, you’ll be stuck in a nursing home that is dependent on state Medicaid payments. That probably won’t be your desired choice for care for yourself – or for your parents in your old age.

It’s a problem no matter what your age because we’re experiencing a “Silver Tsunami” of retiring baby boomers and the costs of long-term care can be extremely high. Medicaid is the only option for many seniors, and that’s straining the funding for that safety net. Many people are not eligible for Medicaid, but also cannot afford the expense of care.

Why do we automatically talk about Medicaid when the subject of long-term care is raised? The answer is that Medicaid pays for a significant majority of all long-term care.  Medicaid, the “payer of last resort,” has become the de facto long-term care financer, a situation not expected to change in the foreseeable future.

As a result, long-term care providers and the federal government are bringing lawsuits and mandating claw-back actions against families, insurance companies and legal advisers. Many are turning to filial support laws, which impose a duty upon adult children for the support of their impoverished parents. Medicaid also has the right to sue families in probate court to “claw-back” funds spent on care.  Most people do not understand filial support laws, which are spreading to more states — 28 and counting.

While self-funding, long-term care insurance, Medicaid, and family provided care will continue to be the primary sources of long-term care funding for the foreseeable future, the market is changing and more people are becoming aware of these new and alternative ways in which to pay for long-term care.

While long-term care insurance is one way to fund long-term care expenses, it is not the only option. Policies can be expensive, unavailable (to those who are not healthy enough to purchase them), and many object to the use-it-or-lose-it nature of long-term care insurance. Long-term care expenses can also be financed through a variety of newly developed “hybrid” or so called linked-benefit products.

Annuities now offer tax qualified long-term care benefits. Companies offer fixed annuities with long-term care riders, which enable you to invest the money you might have saved for long-term care into a product that provides a fixed income but also will provide higher payouts if you need long-term care benefits. In some cases, these types of products will double or triple the annuity payment when long-term care is needed.

Additionally, these products can be purchased with a single lump sum payment which might be preferable to long-term care insurance which generally requires life-time payment of premiums and the possibility that premiums will rise significantly (which has occurred with some policies over the past few years). Lastly, annuity hybrid products solve the use-it-or-lose-it problem with long-term care insurance. If the long-term care benefit is not needed, benefits are available for other purposes.

Another alternative is you can convert your life insurance policy for long-term care. There is $27.2 trillion worth of in-force life insurance policies in the United States, according to the National Association of Insurance Commissioners — that’s triple the amount of home equity today. Rather than cancel or drop a policy to save on premiums when faced with long-term care needs, you can use it to pay for home care, assisted-living or nursing home expenses.  Seniors can sell their policy for 30 to 60 percent of its death benefit value and put the money into an irrevocable, tax-free fund designated specifically for their care.

Medicare specifically does not cover chronic or long-term care, and, due to the high cost of such care, the majority of individuals do not have sufficient funds to pay for an extended period. There is also long-term care insurance, but the relatively high premiums and requirement that people are medically qualified tend to reduce its utilization.

Nearly everyone finds it difficult to see themselves needing hands-on assistance with basic living activities like bathing, getting dressed and eating. So they avoid thinking about it all together. The U.S. government reports that 70 percent of people who reach age 65 will require long-term care services at some point in their lives.

The reality is that the longer we live, the greater the likelihood that we may require long-term care. The costs associated with needing long-term care are significant. It may take decades to accumulate the assets you’ll need to retire comfortably; but just a few years of paying for long-term care may threaten a lifetime of savings.

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Tuesday, April 22nd, 2014 Wealth Management Comments Off on Alternative Long Term Care Coverage

Asset and Income Protection

Hitting that century mark or even living well into our nineties is hard to fathom – so much so, that a lot of us are guilty of just ignoring the “what ifs” of making it that far in life. The facts show that we ARE living longer and longer. This is great news but living longer may create some pretty severe financial challenges.

According to the Government Accountability Office, a husband and wife both aged 65 have approximately a 47% chance that at least one of them will live to his or her 90th birthday and a 20% chance of living to his or her 95th birthday.

As life expectancy continues to climb, the fear of outliving one’s assets has become top-of-mind for most Americans. Today, it is becoming more important than ever to put retirement strategies in place that guarantee lifetime income.

You need to put an income strategy in place that helps you to maintain your standard of living throughout your retirement years with income you can’t outlive. Planning is important, in order to assist you in eliminating a potentially devastating financial disaster. You want to live out the golden years of your retirement as stress free as possible. So make sure you plan for your future long term health care needs as well as your income needs!

With long-term care costing as much as $250 a day, it doesn’t take long to completely deplete a lifetime of savings—even if you’re “lucky” enough to only need it for a relatively short period of time.

With Nursing home Cost’s running $4,000 to $8,000 a month and outpacing inflation, it is a small wonder that most seniors cannot afford the Long term Care insurance premiums.  If you consider the average annual cost of elder care, you may rethink the (much) smaller annual premium involved in owning a LTC policy.

* The average annual cost of Nursing Home care – $83,179
* The average annual cost of Assisted Living – $44,345
* The average annual cost of Home Care – $38,317

These costs are in TODAY’s dollars. With the average stay in a nursing home coming in at around 3 years, the average cost per person is around $241,219. This theoretically could become the greatest financial risk of your life.

The wealthy can be reasonably sure their savings will be enough to pay directly for long-term care, whatever its duration. And despite concerns about quality, Medicaid is there for the poor.

But what about consumers with midlevel savings—in other words, most people? These consumers need long-term-care insurance the most. They tend to have too little savings to pay for even a couple of years of care without impoverishing themselves and their families, and too much to qualify for Medicaid.

It’s unforeseeable what your nursing home and assisted living costs may be…we’d all like to hope that this is something we’ll never face. But, the facts aren’t on our side. Planning for it now, rather than later, is simply a wise thing to do.

The industry touts scary statistics about the probability of ending life in a nursing home. It’s not uncommon to see ads claiming “70% of all seniors will go into a nursing home,” or “the average stay is two and a half years.”

It may be more useful to learn that 67% to 70% of seniors who do go into a nursing home are discharged within 90 days, and that after two years, less than 6% of those admitted will still be there. Actually, out of 40 million American seniors alive today, approximately 1.5 million currently live in nursing homes, about 3.7%.

Another important point: Most long-term-care policies don’t pay anything until the person has been in a nursing home for more than 90 days. If more than two-thirds of those going into nursing homes leave before 90 days are up, it is unlikely that most consumers will receive any benefits at all.

For those with little wealth, a policy will never be suitable. They will be covered by the long-term care provided by Medicaid. For individuals with incomes of at least $250,000 a year and substantial savings, the smarter move might be to either self-insure or use their resources to pay for high-level in-home health care.

For mid-wealth individuals, the answer isn’t so clear. The average annual premiums for policies sold to seniors run around $3,500 per year. But few—if any—policies pay 100% of the daily private pay rate, currently about $250 per day. Policies typically pay $150 a day. So, even a resident with a policy will have to dig into savings to pay the difference.

But instead of buying a policy and paying premiums, the consumer could set aside savings for long-term care. At $3,500 a year, in 20 years he or she could have $70,000 plus interest. In the statistical unlikelihood they end up in a nursing home, they could use these savings to pay the bills.  The best option instead of buying a long term care policy and paying premiums, the consumer could set aside savings in a long term care annuity.  If you don’t use it, you don’t lose it.

The newest addition to the hybrid marketplace is the long term care annuity. This product also functions exactly like a fixed annuity, but has a long term care multiplier built into the policy. There is no premium rider attached to this medically underwritten annuity policy. Instead, a portion of the internal return in the contract is used to pay for the long term care benefit.

Long term care coverage is calculated based on the amount of coverage selected when the policy is purchased. The insurance company offers a payout of 200% or 300% of the aggregate policy value over two or three years after the annuity account value is depleted.

Being financially ready for the possibility that you will require long-term care is an important part of retirement planning. But too many people are still preparing merely by hoping for the best.  Buying insurance is basically gambling. You calculate the costs, risks and benefits—and hope that you come out ahead.

Fixed index annuities have answered the retirement income needs for individuals facing a wide variety of retirement planning scenarios. By providing exposure to market-based gains and eliminating losses, FIAs have proven to be an excellent alternative to the stock market.

The past few years have taken a brutal toll on your investment portfolio and your sanity. You are tired of the stress that comes with the ups and downs of the stock market. You’re tired of seeing your hard-earned retirement savings lose value with big market drops.

You need more stability. However, you’re looking for a bit more earning potential than what today’s bond options or Certificates of Deposit (CDs) can provide you. You are looking for a safer alternative to the stock market, one that provides principal protection with some exposure to market upside.

Annuities come in all shapes and sizes, and “lifetime income” is just part of the story. If you are a Senior concerned about the High Cost of Long term Care but really cannot afford the High cost of Long Term Care Insurance Premiums, then a Hybrid Annuities with a Long Term Care Rider may just be the solution you seek.

These innovative products can meet consumer demands and provide more guarantees by combining retirement benefits along with traditional long term care insurance with the many advantages of annuity policies. Thus, consumers who utilize hybrid policies can avoid self-insuring against catastrophic long term care related expenses and have the peace of mind associated with a comprehensive plan

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Monday, April 15th, 2013 Wealth Management, Wealth Preservation Comments Off on Asset and Income Protection

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