How do we address LTC insurance when the over-arching concern is retirement funding?
Recently we had the pleasure of meeting with a couple, aged 65 and 53, regarding a Long-Term Care insurance policy (LTC). Like many others in their age group, they were addressing concerns about the possible cost of care if a chronic illness arose in the future; the effect on the family and other spouse could be devastating.
We discussed the structure, benefits and costs of the LTC, and then affordability. That point, affordability, is very personal. There is always an over-arching concern as to the costs of retirement.
Statistically, there is certainly a likelihood that, if you live a long life, you will need some form of care. Yes, it can be very expensive.
But, for most people, LTC is a tangential, in-the-moment concern. Is it important? Absolutely.
Again, the real underlying concern for most of us is “do we have enough for retirement?”
After that, we think “what if we spend that money on LTC premiums and don’t use the policy?” “Do we take the risk of not needing it and, in reality, self-insure?” And “how do we make sure the money we have does what we need it to do?”
Over the last few years, several insurance companies have developed LTC “riders” that can be added to new Life Insurance policies. In that creation of these “Hybrids”, an opportunity was created for us: to take a holistic approach.
We have the potential for efficient use of the cash in and from a life insurance policy.
For our money, we can take advantage of (at least) “guaranteed returns”, fairly consistent growth, liquidity, tax benefits, LTC (if needed) from day one, and all without stock market volatility. Could this enhance and possibly both finance and secure retirement? Yes.
The couple referenced here ultimately purchased Whole Life Insurance policies through a re-allocation of savings. They, of course, had concerns about stock market performance long-term and this approach fit rather well for them as a centerpiece of their portfolio.
Over the course of the last two years, almost every client who initially asked about traditional LTC policies has seen the value of Whole Life with the LTC rider, and has applied for that policy.
P.S. There is a great deal of aggressive marketing of hybrid policies utilizing some form of Universal Life insurance (UL or VUL or IUL). We refuse to use any form of UL; take a look here for an explanation: