This blog illustrates how a 60 year old male solves his potential extended care needs during retirement by transferring $250,000 from his IRA to a Long-Term Care Annuity.
Perhaps you are a visual learner and prefer the use of illustrations to fully comprehend the concepts of a Long-Term Care insurance policy. Illustrations are some of the most powerful tools available in the insurance industry for clients and financial professionals to be on the same page. Therefore, in this article, we are providing an example of what a Fixed Long-Term Care Annuity could look like for you. First, let’s get some basic information on the individual seeking coverage.
Example:
Sex: Male
Age: 60
Health Status: No history of health complications, 6’0”, 175 lbs., non-smoker.
Transfer Amount: $250,000 from IRA
First, let’s look at the guaranteed values of the illustration.
By transferring $250,000 from his IRA to the Fixed Long-Term Care Annuity, he has secured a pool of over $750,000 of Long-Term Care benefit. The monthly benefit he has access to is over $10,000. The powerful thing about this illustration is that the values shown are illustrating the absolute worse case scenario. That is, the insurance carrier is contractually obligated to at the very minimum pay the interest rates shown. Now let’s take a look at the non-guaranteed illustration with current interest rates being shown for the entirety of the contract.
With the non-guaranteed illustration, the interest credited each year becomes an attractive vehicle for growth for the client. Notice also that his Long-Term Care benefit pool increases as he gets credited within the policy. This is a classic example of knocking out two birds with one stone. The client can get piece of mind that he is covered should the need for care arise. Likewise, he is growing his assets safely and securely at a favorable rate.
For as long as we have been in the industry, we have never seen an insurance carrier only credit the guaranteed rate. The non-guaranteed illustration is therefore a much better predictor of the outcome of the product. Values are likely to differ as the insurance carrier changes the interest rates they credit. However, that can go in both directions. The interest rates that insurance carriers’ credit is tied to the federal funds rate. When the Federal Reserve raises rates, typically we see an increase in crediting from insurance carriers, and vice versa. For reference, this article is written in November of 2022.
Are you interested in a Fixed Long-Term Care Annuity? Contact us today!
(559) 322-2230