A Hybrid Life Insurance/Long Term Care policy is an asset-based alternative to traditional Long Term Care Insurance. With Long Term Care coverage built into a Permanent Life Insurance policy, you can shift your retirement assets to meet your new requirements. Your “old” policy can be exchanged tax-free for a “new” policy that provides much more value. The Long Term Care benefit is usually a multiple of the Death Benefit.
[Learn More: Life Insurance 101]
Traditional Long Term Care Insurance is like Term Life Insurance. Its a use-it-or-lose-it proposition. Hybrid Life/Long Term Care policies, on the other hand, offer a Win-Can’t Lose proposition. There is no downside…
- If you need Long Term Care, you will utilize the benefits of the policy, or
- If you never need Long Term Care, the Death Benefit passes to your heirs, or
- You can access the cash value in an emergency
Long Term Care is a vital part of any Retirement Plan. Investing for retirement is the easy part. We just need to accumulate sufficient assets to generate the income we will need when we retire. We can plan for what we know will happen. I can even somewhat understand people stating that they are going to “self-insure” or “buy term and invest the difference” when it comes to buying permanent life insurance. We need the insurance when we are younger to ensure we take care of those who are dependent upon us.
[Read More: Buy Term and Invest the Difference: Myth Busted]
[Read More: Self Funding Long Term Care]
We buy insurance to cover the uncertainties in life. The average person will never accumulate sufficient savings to be able to self-insure against catastrophic healthcare risks. That is why we buy health insurance… as a backstop on expenses.
[Read more: Healthcare costs cause 75% Bankruptcies]
Long Term Care Insurance is much the same. Not everyone is going to need it, but it could be very expensive if we do need it. And Medicare will likely not cover it.
There is a tremendous financial risk if you DON’T have Long Term Care Insurance. The 2019 Genworth Cost of Care Survey found that the National Average monthly cost of an Assisted Care Living Facility is $4,051 in 2019. That cost is expected to rise to $7,317 by 2039. The same study found that the National Average cost of a private room in a Nursing Home was $8,517 per month. That cost is expected to be $15,383 per month by 2019.
Are you willing to take this bet with your life savings?
A Hybrid Life Insurance/Long Term Care policy is an asset-based alternative to traditional Long Term Care Insurance. Existing Annuities or Permanent Life Insurance can be exchanged tax-free for a “new” policy that provides much more value. And in the case of annuities, its a way to convert a taxable asset into tax-free income if the benefit is used for Long Term Care.
Can your retirement nest egg sustain the additional income requirement of paying for the cost of care from your savings? Can you afford to be wrong? Probably not. The 4%-Rule is 4% for a reason. Income rates higher than 4% mean that you run the risk of running out of money before you die.
Whether you purchase Long Term Care Insurance or use this Asset-based alternative, take action to Safeguard Your Nest Egg
An adverse health event could cause your retirement assets to be depleted more quickly than expected.Is your Retirement Portfolio Sustainable? Download this FREE REPORT to see how a hypothetical portfolio would have performed under heavier loads than 4%.
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Disclaimer: Innovative Retirement Strategies, Inc. does not provide tax or legal advice. This information is prepared from sources generally believed to be reliable. No express or implied warranties or representations are made regarding its completeness or accuracy.