Americans save diligently throughout their working years so they can maintain their lifestyle throughout retirement.  Unfortunately, most don’t factor in the potential impact of "Healthcare In Retirement" needs into their planning calculations.  According to Fidelity Investments, "an average retired couple age 65 in 2023 may need approximately $315,000 saved (after tax) to cover health care expenses in retirement", and that figure does NOT include potential expenses associated with Long-Term Care (LTC).  

Advisors should be concerned, especially when the majority of their clients in or near retirement are expected to require some form of LTC as they age, and so few of them have adequately planned for this eventuality. 

In the past, LTC Planning meant buying traditional LTC insurance that simply provides benefits at the time of claim.  However, these solutions have little to no cost certainty, and there's been a shift to other planning solutions.  Today, however, advisors can recommend a “Layered” approach to LTC Planning that doesn't include traditional LTC insurance, as there is often value to be found in using annuities and life insurance as an alternative.  With the ongoing evolution of financial planning, a comprehensive plan should include an LTC component, and a “Layered” solution may be a great option.   

Let's meet our hypothetical couple named Steve and Sally Saver, both age 60 and planning for their retirement years.  They are concerned about LTC but have ruled out traditional LTC insurance and want to learn about a "Layered" LTC solution.

Layer #1 – Put Low-Yield, Low-Risk Dollars To Work

The Savers are approaching retirement and keep a portion of their savings in ultra-safe places such as CDs and Money Market accounts.   Today though, interest rates remain at historic lows, and once taxes and inflation are factored in, they could actually be LOSING purchasing power every year on their savings.  Steve and Sally might consider repositioning $100,000 of their “safe money” into an Asset-based LTC solution.  Not only can this solution provide a significant shared LTC benefit, but it can also offer a 100% Return of Principal Guarantee while allowing their savings to continue growing tax-deferred.  If Steve and Sally never experience a Long-Term Care need, the death benefit (often tax-free) will be paid to their heirs.

Layer #2 – Upgrade Existing Life Insurance

While in their 40s, the couple each purchased $250,000 of permanent insurance, which will be “paid up” at age 65.  Their total annual cost for life insurance is significant, and they still have five more years until the end of their expected premium payment stream.  The Savers could "upgrade" their life insurance and the accumulated cash values of their existing policies into a policy that could better fit their needs today.  By exchanging their old policies for new ones, it's possible to:

• Increase their individual death benefits....

• Eliminate all future premiums, saving the couple thousands of dollars every year...

• Allow them access to the death benefit to help cover LTC expenses if the need arises...

• Make the changes with ZERO out-of-pocket costs!!

Layer #3 - Guaranteed Retirement Income With An Eye Towards Healthcare

Sally and Steve have been contributing regularly to their retirement plans over the years. In addition to their current 401(k) plans at work, they have rolled over retirement plan dollars from previous employers into Individual Retirement Accounts (IRA).   The Savers are considering an annuity solution for a portion of these dollars which will allow their retirement assets to continue to participate in the market, but with ZERO market risk and guaranteed future income for retirement. Then, once they begin taking distributions from the annuity, they would be eligible for an enhanced income payout should they become unable to perform some of their "Activities of Daily Living" or they're confined to a Nursing Home.

With proper planning, Steve & Sally can address "Healthcare In Retirement" as a component of their comprehensive financial plan, and by layering various solutions, they will create a plan for a more secure retirement TOMORROW, which may also save them money TODAY.....

Please contact us to discuss “Layered" Long-Term Care Planning solutions for your clients.

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