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A podcast designed to help retirees and those nearing retirement navigate finances and life planning with expert insights from financial advisor Trevor Lawson. Tune in for practical strategies and inspiring ideas to ensure your retirement years are purposeful, fulfilling, and truly your best chapter yet.
*Securities and investment advisory services offered through Osaic Wealth, Inc. member FINRA/SIPC. Osaic Wealth is separately owned and other entities and/or marketing names, products or services referenced here are independent of Osaic Wealth. Branch phone: 919-546-0400.
Trevor Lawson: [00:00:00] Welcome to The Retirement With and On Purpose Podcast. I'm your host, Trevor Lawson, and this show is all about helping you not just reach retirement. But truly thrive in it. You've put in the work. Now let's make sure you can enjoy every moment to the fullest.
Welcome back to another episode of The Retirement With and On Purpose podcast. I'm your host Trevor Lawson, and today's episode is going to wrap up this three part series on long-term care. So today we're gonna talk about paying for long-term care and potential considerations for how we would go about that.
I'm, again, gonna be using Genworth resources. They have a, an attachment or a PDF on their website [00:01:00] called Paying for Care. So I'm gonna use that as a reference today. So how to pay for care. One, oftentimes explored avenue is public programs. So think Medicare, Medicaid, people may be familiar with those terms, but many people don't know exactly what they fund or for how long and for whom.
The most important thing to know about both is that they have physical and or financial qualifications to determine if you are eligible for benefits. So Medicare, for example, does does cover some cost for skilled care in skilled nursing facilities for up to 100 days after a qualifying hospital hospitalization.
But coverage doesn't extend to long term. Custodial care. So Medicare best case scenario, if you are in a skilled nursing facility, you may have a hundred days of your care covered by Medicare, but for the most part, [00:02:00] Medicare doesn't cover long-term care. Medicaid, on the other hand, is a government assistance program that may help cover the cost of long-term care, but there are very strict financial qualifications to.
Become eligible, you must meet certain income and asset requirements to get approved for Medicaid. So for most retirees who have done a pretty good job saving and they've got. Some assets built up. Medicaid is generally not a viable solution for them just because it would require spending down most, if not all of their assets to qualify.
And that becomes difficult for, for many people to do. So other potential avenues are personal resources. So think self-funding. Self-funding is, is a very. Good option for those that may be independently wealthy. So for those that their retirement is well [00:03:00] secure, regardless of contingency, um, self-funding is, is oftentimes a great strategy for long-term care.
We're gonna essentially roll the dice. If we require some assistance, we'll pay out of pocket and, and that, that's a perfectly viable solution, especially for those that are, are very financially secure. However, I will note for those that are. Self-funding regardless of their asset level. Sometimes I've seen not having some type of formal long-term care plan in place, even if that is as simple as earmarking a specific investment account to pay for long-term care.
If we don't have that. Earmarked, it can create a, a psychological roadblock or hurdle for people later in life when they're in their retirement years and they're wanting to travel and create memories with family. Sometimes the thought of, of needing long-term care and not necessarily [00:04:00] having a formal account or plan in place.
Can create some reservation behind spending freely because they, they may feel like they're spending their, their potential long-term care money. So just be mindful. Self-funding is a great option for those that, that have done a very good job saving. But just be aware that it could create some psychological inhibitions to, to spend freely if we don't at least have certain monies earmarked for, for long-term care purposes.
So the other option is essentially to shift the responsibility away from the government and Medicaid's case away from our personal resources in the self-funding case. I. To some type of, of long-term care plan. And nowadays there are more types of long-term care solutions than ever. The the original long-term care strategy is a standalone, [00:05:00] standalone, long-term care insurance policy, and that is, I'm quoting the Genworth resource here.
Long-term care insurance can be used to reimburse policy holders for long-term care expenses administered in your home or at an assisted and living facility or nursing home. Long-term care insurance is issued as either an individual policy or you can purchase coverage through some employers that offer group plans.
So. Several decades ago, that was the only way to plan for long-term care. If you were gonna have some type of formal plan. It was standalone, traditional, long-term care insurance or, or nothing. Over time though, these plans have become less popular simply as a result of people. Having to fund these over time and running the risk of not needing long-term care.
Most of these standalone long-term care insurance policies are either A, use it or lose it. [00:06:00] Policy. So a lot of people struggle with the idea of investing money into a plan that they may not ever get a benefit from. So thankfully, the long-term care industry has evolved and taken note of that concern, and now there are what are called hybrid long-term care solutions available.
So hybrid plans generally are built around a life insurance or annuity chassis, and these hybrid plans essentially would provide some long-term care benefits if you ever needed long-term care. But if you don't, and hopefully you never will, the plan has some sort of of death benefit or legacy tied to it so that your family would, would receive some type of of benefit upon your passing.
So these have become increasingly popular for that peace of mind knowing, Hey, I'm investing for my long-term care, but if I don't ever [00:07:00] need it, at least my family is gonna receive a benefit from from this plan. So two, two variations or flavors there. Life insurance, you've got a life insurance policy With a long-term care rider, the life insurance policy is for a certain amount of death benefit.
If you need long-term care assistance, you'll start to draw down that death benefit to help pay for care. And then however much of that death benefit is not used for long-term care would being left to your beneficiaries. That's one flavor of these hybrid plans. The other, again, is built on an annuity chassis.
And these typically work well when someone is looking to, to pay up their long-term care quickly. So let's say you've sold a business, you've received an inheritance, or you've, you've just got a, a pile of cash sitting around that you [00:08:00] wanna assign a purpose to. Sometimes these annuity long-term care plans work very well when we make a lump sum contribution to 'em because they, the annuity company will give you oftentimes a multiplier of your premium deposit for long-term care benefits.
So I'm just making up numbers here, but just to illustrate the point. Let's say you put in a hundred thousand depending on your age, health, and other factors. The, the annuity company will give you. Maybe three times that initial deposit amount readily available for long-term care. And then that long-term care pool will compound by a certain percentage over time.
So there's different variations and a lot of different carriers. And I don't want to get too far in the weeds with you today, but if you've ever got questions, um, feel welcome to, to kind of reach out to myself or my team and we can provide further insights and to. [00:09:00] Specific strategies and solutions in this space.
But regardless, like I mentioned last time, when we think about long-term care planning and, and, and protecting our retirement nest egg from being burdened by this contingency. Two things to keep in mind. One, long-term care is not something we are, we're planning necessarily just for us. It's really to protect us from becoming a burden on our family and helping us maintain our independence.
And then secondly, for most folks, we do have other retirement resources. We've got social security, we've got annuity income, or we've got a pension coming in. The long-term care that we're trying to provide is really just designed. Typically to bridge the gap between your retirement income and the projected cost of long-term care.
And there's a process you can [00:10:00] go through with a financial professional to help determine what that, that gap would be and the most appropriate strategy to go about filling that gap or void. I hope you found this series very helpful. I. Educational and informative, and if you have any questions, feel welcome to reach out to myself or my team, and I will look forward to providing further educational insights on the next topic in the week's ahead.
Take care.
Thanks for tuning in to The Retirement With and on Purpose podcast. I hope you're walking away with new ideas. And a fresh perspective on how to make the most of your retirement journey. And remember, retirement isn't the end. It's your time to live with purpose. Until next time, I'm Trevor Lawson. Here's to a fulfilling and thriving [00:11:00] retirement.