Protect wealth from poor health
September 29, 2013
A wise man once said, “It’s really hard to go from healthy to dead without getting really sick first.” In the business of creating wealth and saving for retirement, we don’t always think about the things that could easily wipe out a lifetime of work. However, we are living a good deal longer than ever and it’s highly likely that about 70 percent of us will get injured or get sick enough to need some care assistance in our lifetimes, according to the U.S. Department of Health and Human Services, National Clearinghouse for Long-term Care information. When this happens, medical insurance may cover our initial treatments, but the ongoing costs for care can be very expensive and most of us would much rather be cared for in the comfort our own homes. When assistance is needed an extra $2,000, $5,000, $10,000 or more in monthly income would certainly give you and your family additional choices with less stress.
One strategy to help protect your wealth that you most likely don’t know about is, “asset based” long term care insurance.
Traditional LTC insurance is where you pay an annual premium and if you get sick, the insurance begins to pay a benefit. If you never needed care, or received care for a very short time, the premiums paid are just expenses that are not recoverable.
However, with “asset based” LTC insurance you always have a benefit. It pays benefits for care when you get sick, a death benefit if you don’t get sick and guaranteed options to get all your money back if you change your mind. (This is a return of premium. If you decide Asset Care III no longer meets your needs, we will return to you no less than the single premium you paid for the annuity policy. This amount will be reduced by any prior distributions (loans, long-term care benefits paid, non-automatic annuity withdrawals).
Premiums paid for any riders or additional benefits may not be eligible for Return of Premium.)
One “asset based” long term care idea, that is a solid option to consider, is a product called Asset Care III, that uses a portion of your IRA or 401(k) rollover to protect your portfolio from the high risk and potential high cost of long term care.
This is a program that has been around for more than 20 years and is an efficient strategy that combines an individual retirement annuity (IRA) and a 20-pay whole life insurance plan.
The annuity automatically pays the life premiums and all benefits and costs are guaranteed for life, a very clever combination. This program is available to single or joint insured’s, and key aspects of the joint version have received a patent from the U.S. Patent and Trademark Office. Options to extend benefits and for inflation increases are also available.
One quick hypothetical example is a couple, George and Sandy ages 69 and 64.
They reposition $150,000 from George’s $450,000 IRA into the strategy described above.
They also elected to pay the extended care lifetime option of only $1,537 per year.
This solution provided that both George and Sally could each receive $5,000 per month in added income for as long as care is ever needed, a death benefit to their children of no less than $220,000 (tax free) if care is never needed and money back if they ever changed their mind.
The information contained in this column is general in nature and should not be construed as comprehensive financial, tax, or legal advice.
As with any financial or legal matter, consult your qualified securities, tax, or legal representative before taking action.
Allen Ostrofe, MBA, CFP®, AIF® is President of Ostrofe Financial Consultants, Inc., a S.E.C. Fee-based Registered Investment Advisor. Securities and Advisory Services offered through National Planning Corporation (NPC), member FINRA/SIPC, a Registered Investment Advisor. Ostrofe Financial and NPC are separate and unrelated companies. For questions or suggestions, visit ostrofefinancial.com. Branch address: 565 Brunswick Road, Ste. 15, Grass Valley.
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