This blog highlights the immediate protection that new Long-Term Care products can provide to you, all while creating a safe, accumulating asset that you can access down the road.
One of the leading concerns for Americans heading towards retirement is the chance of getting ill and needing to pay for care. As of November 2022 in Fresno, CA where our main office is located, a private room in a nursing home is estimated to cost as much as $10,089 a month according to Genworth. Home health care is over $5,500, and assisted living facilities are just under $4,000 a month.
According to Nationwide, only 45% of adults have had the Long-Term Care discussion…with anyone. To us, this number is way too low as Long-Term Care requires some serious planning. We know way too many people who have had to liquidate their assets to pay for care, sometimes well in excess of $1 million. If you are in your late 40s or beyond, it is time to start planning for how you will pay for Long-Term Care should the need arise.
The good news is that there are some really awesome solutions out there to help pay for care. If you have money tied into an annuity, or cash value in life insurance, you can transfer that tax-free into a Long-Term Care annuity. Depending on your age and health, certain products allow for your pool of Long-Term Care to automatically double or triple. Some even allow for a lifetime of benefits payable should the need arise.
Example:
Joe is 55 years old and does not have a plan to pay for Long-Term Care in place. He figures that he could use the money in his annuity to pay should the need arise. Joe’s annuity is worth $450,000, and has a cost basis of $200,000. If Joe were to get sick and he used his annuity he would have a pool of $450,000 to pay for Long-Term Care. However, since annuities are taxable (LIFO) he will need to pay taxes on the first $250,000 he withdraws to pay for Long-Term Care. Taxed at a modest 20%, $50,000 is wiped out. Therefore, Joe’s pool is only $400,000.
Now, what if Joe transferred his money into a Long-Term Care fixed annuity instead? Assuming Joe is in good health, he qualified for the triple coverage in Long-Term Care. His annuity transferred tax-free and maintains the value of $450,000, but provides a pool of $1,350,000 in Long-Term Care. The new fixed annuity is also earning interest (current products as of November 2022 have fixed interest rates at 6% or greater), growing the annuity further and so his Long-Term Care pool as well.
Joe is still able to withdraw money from the annuity for other expenses or needs, just like he would have been able to with his old annuity. All withdrawals other than for care will be taxed. However, all withdrawals for care are tax-free.
Do you need to have cash value or an annuity to be able to purchase Long-Term Care? Of course not. This just served as an example. We have solutions for care whether you have CDs, IRAs, stock/bonds, or just money in a checking/savings account.
Contact us today so we can find a solution that fits your needs!
(559) 322-2230
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