State Life Annuity Care and Asset Care – Protecting Your Retirement Nest Egg

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Welcome, and thank you for attending.
Today we will be discussing retirement, preparing to live a long life, and protecting your retirement nest egg from the costs associated with end-of-life care.
Before we begin, please allow me to share with you a few points that you should keep in mind during the presentation.
With proper planning, income can be generated to meet your retirement needs. However, there are three things that can make income insufficient in the future.
When thinking about retirement, and specifically how to pay for it, it’s important to distinguish between assets and income.
Assets can be thought of as relating to your legacy, to gifting and the next generation.  Asset can be used to create income, but are not typically used to fund daily expenses.
Income correlates to your lifestyle and standard of living.  Income is what pays your living expenses, funds your travel and fun.
With proper planning, income can be generated to meet your retirement needs. However, there are three things that can make income insufficient in the future.
Inflation can lower the value of your income.  Market downturns can as well.  Health care might have the most significant and lasting impact due to the large costs associated with it.  And what if care is needed for an extended period of time?
Income that was once completely sufficient to fund a comfortable retirement and lifestyle, may be wholly insufficient when there is an extended care need.
Extended care, or long-term care, means that assistance is required with the activities of daily living of there is a cognitive impairment.  Examples of activities of daily living include dressing yourself, feeding yourself and toileting.  Cognitive impairments include Alzheimer’s and Dementia.
A common misconception is that extended care means going to a nursing home.  That is not necessarily the case.  Most of you would prefer to receive care in your own home and there are more options than ever to facilitate those types of care.
We just discussed what extended care is technically.  Now let’s talk about what it means.
Practically speaking, extended care provides the ability to live out the last phase of our lives as comfortably and with as much dignity as possible.
Being unprepared for extended health care can have a big impact, not only on your life, but also that of your spouse and your family.
Your spouse may feel an obligation to become the caregiver, or perhaps the financial situation will dictate it.   The stress and responsibility of being a primary caregiver can often make the caregiver ill as well.
If a spouse isn’t involved, often children or other loved ones carry the burden.
It’s been said that when you need extended care, your life doesn’t end, but someone else’s may.
Being unprepared for extended care can also have a big impact on the dynamics of your family.  The burden of care may not be shared equally among your children.  Often one child bears the brunt.  It’s not hard to imagine how this can affect their relationship with their siblings.
Other consequences of being unprepared include unnecessary losses.
You can never avoid all losses, however proper planning can help mitigate the emotional, physical and familial losses that result from a lack of preparedness.
Financial losses can be mitigated as well.
There are several ways to fund extended health care that we will examine.
•Long-term care insurance
•Government programs
•Self-funding
•Asset-based long-term care strategies
Long-term care insurance can be a great way to prepare for extended care—if care is needed.  The problem is that we have no way of knowing if it will.
Many don’t like the idea of another bill to pay and qualifying for coverage can be a challenge.  Long-term care insurance also brings the possibility of future premium increases—potentially making an affordable premium, unaffordable in the future.
You have likely heard of Medicare and Medicaid.
Medicare only provides rehabilitative services.  It does not pay for long-term care.
Medicaid is a government program that does pay for long-term care, however, it is needs-based.  Benefits can vary from state to state and you must first spend-down you own assets before qualifying. In addition, popular care options like assisted living and home care may not be available.
In the end, there is also a loss of choice and control.
If you haven’t prepared for extended care, or do not feel the need to, what you are doing is called self funding.  It means that if there is an extended care need, you will bear the entire cost and risk.
Assets can be set aside “just in case”, however the problem is not being able to know how much is “enough”.
Some people can afford to absorb the cost of a few years of care, but what if the need becomes catastrophic?  What if care lasts 10 years?
Another option is called asset-based long-term care.
Asset-based long-term care consists of specific insurance products based upon life insurance and annuities.  Some advantages they offer include: income-tax free care benefits, benefits even if care is never needed, and the ability to obtain premiums that are guaranteed to never increase.
Here is a visual of how life insurance-based long-term care insurance can work. In this example, optional lifetime LTC benefits can be paid for with an additional annual premium.
Here is another visual of how life insurance-based long-term care insurance can work.  In this example, a portion of the premium is used to pay a single premium for optional lifetime benefits.  This method avoids on-going annual premiums.
Here is an example of how an annuity-based long-term care insurance can work. Note that certain products can also offer income-tax free withdrawals for qualifying care expenses. These annuities must meet the guidelines outlined in the Pension Protection Act.
Regardless of the path you choose, it’s important to be prepared for extended health care.  Remember, it about your future and your family’s.
The good news is that options exist and being prepared can help lessen the impact.

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