by: Cory Carlton
If you are like most people, you don’t like the idea of losing a ton of money. With the way the market is right now most people are focused on their investments and the returns, or lack thereof, they are receiving right now.
But there is something else that could result in you losing money quicker than a stock market crash.
A long-term care event could wipe out everything you have.
But what’s the likelihood of that happening? For women, they have a 50% chance of needing care, and men have a 33% chance. It’s higher for women because they live longer than men. So, the chances are high but what does that mean in dollars?
Today, the cost of a semi-private room in middle TN is $95,000 a year. In 20 years that cost will be $172,000. How long could you afford to write a check for that amount during your retirement? To see the cost of care in your area, click here.
Besides death and taxes, this is one of the most likely events to occur and yet the majority of people are not protected from it.
Think about this…
The odds of being in a car accident: 1 in 103
The odds of having a homeowners claim: 1 in 20
There is far less likely that any of us would be in a car accident or have a claim to file on our home but almost everyone has auto and home insurance.
Why not protect yourself from something that has a greater chance of happening?
Our job is to help protect people from the things they don’t see coming. But a long-term care event is something everyone is aware of and concerned about.
The main reason why people don’t have some form of protection falls into a few reasons…
They waited until they were in their 60s to look at it because that is what some “financial expert” told everyone to do and then they could not get it.
They can’t qualify for long-term care insurance because of their health.
They can’t afford long-term care insurance.
The advisor someone used did not share because they likely did not know, all the options.
We call protecting yourself from this kind of risk by having an Extended Healthcare Plan. Having one of these plans is all about leveraging your money to maximize it for the purpose of an extended healthcare event.
So, do you want to use all your money to pay for an event? Or would you rather use a lot less of your money to get a lot more from an insurance company? I think we would all prefer to leverage someone else’s money. That’s why most people get a mortgage instead of paying cash for a home.
Here are some of the various options you can use to protect you and your family from the high cost of a long-term care event.
For those of you that think you want to self-insure, keep an open mind here.
LONG TERM CARE INSURANCE
This is the traditional protection for long-term care needs. It generally provides the most benefit and has the biggest bang for your buck. You do have to health qualify for it and if you are not working with a knowledgeable advisor, the premiums can be high. I say a knowledgeable advisor because long-term care insurance is like buying a car.
You may walk onto the lot and ask to see the nicest car there but when you see the price tag you see it is out of your budget. Just because that one car is out of your budget does not mean that you are just going to walk everywhere.
No. You are going to find a car that is more in your budget that is going to get the job done. Long-term care insurance is the same way. It can be built and adjusted to meet your budgetary needs.
Some people say to wait to buy this coverage and that is terrible advice. The longer you wait, the more expensive it is. We can show you the cost of waiting and it is generally thousands of dollars that waiting will cost you.
SHORT TERM CARE INSURANCE
This is exactly like it sounds. It is protection but for a shorter period. Generally, up to a year depending on where you live.
The benefit of this kind of plan is that it is way easier to qualify for and is much less expensive.
This is a great alternative if you can’t qualify or afford a traditional long-term care plan.
Availability does depend on what state you live in.
Most people would prefer to receive care in their homes if they can. But if they don’t have long-term care or a short-term care plan, how do they pay for that?
A home health care plan can do that. It is even easier and more affordable than a short-term care plan.
Depending on your age and where you live you could pay $60 a month for a plan like this that will pay out up to $108,000 for a year of home health care.
You can see that with a reasonable premium like that this has a huge benefit. In some situations, you may even be able to receive a reimbursement for taking your medications up to $600 a year.
Availability is based on what state you live in.
This has not always been an option to help fund extended healthcare needs but what most people like about this option is the fact that they know they will use this plan.
With the other options, if you never have an extended healthcare event/need, then you don’t get to use the policy. You pay into it and don’t use it. Some people don’t like that idea
With life insurance, you are either going to be able to use it for the extended healthcare need or the death benefit. So, utilization is 100%.
You do have to health qualify for this and the premiums are generally a little higher than a traditional long-term care policy. That’s because the insurance company knows you will use it, no matter what.
This also goes back to leveraging your money. If you have the need for life insurance and you want an extended healthcare plan, one of these policies can provide both benefits for less than if you purchased the policies separately.
We have been helping a lot of people explore this option lately.
Right now, annuities are a great thing to consider for a portion of your retirement assets. Mainly because they provide protection from a market correction so you can never lose a penny.
They also give good consistent returns while protecting your money.
But the main thing I want to share with you is that they can be used to provide some extended healthcare benefits too.
Most people don’t know they can do that. Even a lot of advisors don’t know that.
With this type of plan, you don’t have to health qualify and you don’t have a monthly premium. You simply reposition a portion of your assets into one of these annuities and if you have an extended healthcare event, the benefit is triggered.
For one person we recently helped, he repositioned $100,000 out of his IRA into one of these annuities. When he reaches his early 80s, which is the average age to have an event, his annuity will pay him $120,000 a year for 5 years.
That’s $600,000 of benefit for his contribution of $100,000. That’s the power of leverage.
That’s the entire point of having an extended healthcare plan. Use a little bit of your money to have access to a lot of money from an insurance company.
We’re passionate about protecting people and there are lots of ways to do it.
If you have thought about looking into something like this or have any other concerns about your financial life, reach out to us. We would love to visit with you and help protect you and your family.
ABOUT THE AUTHOR: Cory Carlton is a co-founder and CEO of Both Hands FG. He specializes in asset-based planning for the purposes of tax-free retirement, tax mitigation, strategic income planning, and extended healthcare planning. He, and all the agents at Both Hands FG, aim to provide realistic solutions to our client's problems. We evaluate each scenario and take the time to understand everyone's concerns and objectives and find a solution to fit. When Cory is not working with clients he is often found spending time with his wife, Emily, and their three young daughters. Cory's fourth child is arriving later this month, so they will be busy with the new addition to the family.