Lonnie had called the office and set an appointment wanting more information about Long-Term Care policies. While in the meeting she was somewhat dismayed at the cost as well as fewer insurance carriers were even offering policies anymore. Many of them required medical underwriting and if you had even one serious chronic condition you could be denied.
"Are there any other alternatives" she wanted to know. As we chatted, she was in for a nice surprise. "Of course there are" we answered. There are Fully Insured Savings Plans (Fixed Annuities) that can have Long-Term Care or Death Benefit Riders that are very beneficial to the account holder. For example, let's say you take $60,000 of your retirement funds and purchase one of these annuities. If you go to Long-Term Care, it can potentially in time pay you $35,000 a year for 7 years. That means your $60,000 turned into $245,000 in Long-Term Care funds.
Please note: These figures are hypothetical examples for illustration purposes and may vary by product and market conditions.
"Well, what happens if I never use it?" Lonnie asked. Well, another great feature on these type products is the Death Benefit if you never use the Long-Term Care. Your beneficiaries can have a one-time payout of $160,000 or if they choose to be paid out over 5 years, they will receive $50,000 a year. This option would net them $250,000. Note: You can have one or the other benefit but not both.
"The only concern I have is that I've had people tell me that annuities are bad," she lamented. Annuities are just tools in a toolbox. There are all different types of annuities, and you get the ones that are working for you to solve an issue like the one we are discussing. Best of all there is no medical underwriting. By the way… did you know that your monthly Social Security check is just like an annuity?
You would not take all your retirement funds and place it in an annuity, just a portion of it to solve a financial issue like planning for Long-Term Care. The important thing is to discuss your options with a professional planner! Call us! We can help!
By David Edge
David Edge is a retirement lifestyle writer and contributor to the ARA monthly newsletter. His articles blend personal stories with practical insights on living well in retirement.
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Easy Eddie's Take
David's conversation with Lonnie touches on something I hear all the time: "How can I plan for long-term care when traditional insurance is so expensive or hard to qualify for?" The hybrid annuity approach he mentions is worth understanding because it addresses two big concerns at once. These products, often called "annuities with long-term care riders" or "linked benefit plans," let you access your money for care needs while still providing a death benefit if you never need care. Most people are surprised when they learn that according to the Department of Health and Human Services, about 70% of people over 65 will need some form of long-term care during their lifetime.
Here's what makes these products different from standalone long-term care insurance: there's typically no medical underwriting, your premium is a one-time payment rather than ongoing monthly costs that can increase, and you're guaranteed to get some benefit whether you use it for care or your beneficiaries receive it as a death benefit. Think of it as repositioning money you already have rather than spending new money on insurance premiums. The key is working with someone who can show you exactly how different products compare, because the benefit multipliers and payout structures can vary significantly between insurance carriers.