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The Long-Term Care Option You Never Heard Of…

Publish Date: April 12, 2022

Charlie Gipple, CERTIFIED FINANCIAL PLANNER™­  writes several articles a month for various financial industry media and educational outlets.  Through this blog, he is bringing his educational writings and videos directly to you, the consumer!!!  Subscribe at the bottom of this page and enjoy.

First off, if Long-Term Care planning interests you, make sure you register for our FREE “Addressing Long-Term Care Expenses In Retirement” Webinar that is happening on May 26, 2022. Register HERE.

The most emotional scenarios that I see with my clients have to do with Long-Term Care. Many of the fine folks I work with are farmers in Southwest and Central Iowa that own a significant amount of land. Unfortunately, over the years I have had more than a few conversations with some of these folks that were looking at the prospect of having to sell their farmland in order to pay for the cost of Long-Term Care. This is because somebody in their family could no longer care for themselves. Again, these are the most emotionally charged conversations that I have ever been a part of. After-all, many times those farms have been in the family for over a century!

It has always been my objective to make sure that my clients are aware of all of the options available to them, should they need Long-Term Care. After-all, there is a 7 in 10 chance that one over the age of 65 will have a “long-term care event”, which is expensive!!! Today, the average cost of a private room in a nursing home is over $100,000 per year. Around $50,000 per year is what it costs to be taken care of in your own home by a care provider. That last statistic is important because folks want to stay in their own home, not the nursing home!!!. To sum up these thoughts before getting into a unique solution that you may like, Long-Term Care is not only probable to happen to you, it is also extremely expensive. That calls for insurance.

Most folks are familiar with the “Traditional Long-Term Care” that works like health insurance. Although today’s “Traditional LTC policies” are still great options, they have two primary areas where consumers criticize them:

  1. Premiums have historically increased substantially.
  2. If you don’t use it, you lose it.  If you die without ever needing care, many folks view it like you “wasted” your premium.

Although these perceptions are not unfounded, I do like traditional long-term care insurance because per dollar of premium, you generally get the highest long-term care coverage of any of the products. Plus, I believe premiums are much more sustainable on the new generation of products than the previous products. CG Financial Group represents almost all of the major Traditional LTC companies and you wont find a more knowledgeable source for LTC information.

The LTC Solution You Have Not Heard Of

What is this product I am referring to? It is a long-term care annuity, also known as a “hybrid annuity.” If you have say, $100,000 that is in a low interest bearing product – certificate of deposit for example – think of this. By moving that money into this annuity, it gets an interest rate that is likely higher than your CD. A common interest rate today is close to 3.5% in the first year with a minimum rate in the following years of around 1%. It can go higher than 3.5% or it can go lower than 3.5% but can never be less than 1%. Additionally, there is a relatively small GUARANTEED monthly LTC fee deducted from this value on a monthly basis.  Even after the Long-Term Care fee, many times your money is growing by more than what it was doing in the CD. Eventually, if you wanted to cash it all out, you could. Just keep in mind that – like most annuities – there are surrender charges that go anywhere from five years to 10 years, depending on which Hybrid LTC Annuity you choose. 

So far, what I have just talked about is just like many other fixed annuities.  And with merely what I just discussed so far, a particular type of consumer is already interested, and I haven’t even gotten to the long-term care part!  That “particular type of consumer” I am referring to is, again, the one that has their money in a certificate of deposit – for example – earning nothing!!! Note: The average 5-year CD today is paying .39%!!!  Just last week I got to this point in the presentation on this LTC annuity and my client said, “why would I not do this?”  I said, “well hold on, we haven’t even gotten to the main reason to consider this solution, the LTC benefit.”

Now, if you aren’t jumping up and down over a 3.5% or 1% rate, we are getting to the good part. What is the long-term care benefit?  It is triple what the “accumulation value” is! So, if you put in $100,000, and that $100,000 has grown to $110,000, the long-term care pool is $330,000!  Generally, you get access to the $330,000 once you cannot do two of the six “activities of daily living” for a 90-day period and a doctor can attest to the insurance company. Activities of daily living are:

  1. Eating
  2. Bathing
  3. Dressing
  4. Toileting
  5. Transferring
  6. Maintaining Continence

One thing to note is, it’s not like you can just cash out the entire $330,000 at the time you qualify for the LTC benefits.  You certainly can cash out what you put in plus what it grew to, while taking into consideration surrender charges. But, what about the $330,000? There are “benefit periods” that you need to abide by. The common benefit period Is 72 months- or 6 years – with the products I am referring to.  So, in my previous example, $330,000 divided by six years is $55,000 per year that you can be “reimbursed” for from the policy when it comes to long-term care benefits.  This means that if you are in the nursing home or receive in-home care for a period of six years and if at least $55,000 per year was spent on that care, you would receive $330,000 in tax free benefits, even though you only paid $100,000 in premium. What if your care only costs say, $30,000 per year? Then you would be able to get the LTC benefit for 11 years ($330,000 divided by $30,000)!!! Basically until the entire “LTC BENEFIT” is gone.

An Analogy:

Let’s say that your $100,000 is a very tasty but magical fruit. You can eat (spend) that fruit of $100,000 anytime you like right now. Conversely, there is a way where you can take this magical fruit and plant it.  By doing so, it will immediately bear a tree that will have three of those fruits on it.  You have tripled your fruit.  Kind of cool huh?  Granted, this tree will require a little watering and nurturing (LTC fees) but that is what allows you to have triple the fruit that you have right now. The only rule is when you do start eating this awesome fruit, you cannot eat any more than 1/2 of one fruit (1/6th of the total) each year in order for you to not shock and kill the tree.  We do not want the tree to die before harvesting all three fruits (the $300k LTC Pool).  Granted, you can rip your one fruit (surrender value) off the tree anytime if you like, but it’s wiser if you eat only half a fruit at a time to not shock the tree. That is effectively how this product works.

Inquire with CG Financial Group for additional details. And, if you are beyond this stage and in a position of Medicaid Planning, that is something CG Financial Group specializes in as well. Do not lose your hard-earned assets to “Medicaid Spend-Down”. Additionally, we do offer annuities that guarantee over 3% for three to five years that a lot of retirement savers are finding interest in.

Phone Number: 515-986-3065

Written By:  Charlie Gipple

Written By: Charlie Gipple

Charlie is the Founder and CEO of CG Financial Group, a financial services company that serves consumers as well as financial professionals. Charlie also owns and operates The Retirement Academy, which is an online resource to help financial professionals in running successful practices. Charlie is recognized throughout the industry as one of the foremost thought leaders and subject matter experts on retirement planning, life insurance, long-term care planning, leadership, storyselling, and behavioral finance. He is also an industry keynote speaker conducting 100-150 speeches per year. He has spoken at the MDRT Top of the Table as well as other large forums and has also appeared on TheStreet.com and AM Best TV. Gipple has vast leadership experience in the insurance industry as he has been an executive of various insurance companies and large Independent Marketing Organizations. With over two decades of experience, Charlie is unique in his broad knowledge across the life insurance, LTC, annuities, and securities businesses. He holds a bachelor’s degree in Finance from the University of Northern Iowa, is FINRA Series 7 and Series 66 licensed and also holds the CFP®, CLU® and ChFC® designations.

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