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Welcome to How to Retire on Time, a show that answers your questions about all things retirement, including income, taxes, Social Security, healthcare, and more. This show is an extension of the book How to Retire on Time, which you can grab today on Amazon or by going to www.howtoretireontime.com.
This show is intended for those within 10 years of their target retirement date or for those are are currently retired and are concerned about their ability to stay retired.
Hello, and welcome to How to Retire on Time, a show that answers your questions about all things retirement, including income, taxes, Social Security, health care, and more. This show is an extension of the book, How to Retire on Time, which you can grab today on Amazon, or you can go to www.how to retire on time.com. My name is Mike Decker. I'm the author of the book, How to Retire on Time, but I'm also a licensed financial adviser, insurance agent, and tax professional, which means when it comes to financial topics, we can pretty much discuss it all. Now that said, please remember this is just a show.
Mike:Everything we hear should be considered informational, as in not financial advice. If you want personal financial advice, then request Your Wealth Analysis from my team by going to www.yourwealthanalysis.com. With me in the studio today is my esteemed colleague, mister David Fransen. David, how are you doing today?
David:I'm well.
David:How are you?
Mike:I'm doing well too. David's gonna be reading your questions that you've sent in, and I'm gonna do my best to answer them. Now you can send your questions in right now to 913-363-1234. Again, that's 913 363-1234.
Mike:Save that number in your phone in case you think of a question later on in the week, or you can email us to hey mike@howtoretireontime.com. Let's begin.
David:Hey, Mike. What do you think of long term care insurance?
Mike:Oh, that's a timely question, but we just talked about.
Mike:That's right. Alright. So here's my opinion. If you need it, you probably can't afford it, and if you can afford it, you probably don't need it. So here's the reason why I say that.
Mike:At the end of the day, it's cash. How much cash is the insurance company gonna either pay for you, or how much cash are you gonna take out of your portfolio? Because whoever's receiving the money from your long term care policy doesn't care where it comes from as long as it's real. Yeah. Alright.
Mike:You know, the the good old greenbacks. Whether it's Washingtons, Hamiltons, or Benjamins, they don't care. It just has to be real, cold, hard cash in their mind. They don't care. So it's a money problem that needs to be solved.
Mike:And I have found that a 60 year old, if they're looking at an asset based long term care, and I'll explain the different versions, but let's say an asset based long term care, you can put in some money in there. K? And if they were to need long term care for the next 10 years, from a monetary standpoint, in many situations, it would have been worth it. The insurance company knows this. But after 10 years, it would not have been worth it if the market averages, let's say, 6 or 7% average growth year over year.
Mike:It may have been better to have just put the money into the market and then use the cash from that account instead. No one knows the future. We could enter into a flat market cycle. We could have a major crash at any point. And so insurance really is the transference of risk to an insurance company.
Mike:And if peace of mind is more important to you than cash accumulation, then it may make sense. But remember, you're buying peace of mind at a premium. That's how insurance works. And that the insurance companies know that on the grand scale of things, that the odds are in their favor, That most people won't use the policy when it becomes expensive to the insurance company so that the few that do, they they can absorb those those higher costs because overall, they they would win. Insurance only it's not deceptive.
Mike:Insurance companies aren't mean. They pull a number of people together and transfer the risk to them knowing that a few people will need it, and the most people won't, and everyone wins. That's that's how insurance works. I don't understand why people villainize insurance company. Yeah.
Mike:But notice that my definition is transferring risk. It's not an investment. Long term care or any insurance product should never be considered an investment. It is transferring a risk to an insurance company with a bunch of other people. That's how it works.
Mike:Now there's there's really two kinds of long term care. You have traditional long term care, which many people listening right now probably have, and that's a lifetime benefit of a fixed amount as long as you need it. In most situations, there's always exceptions to these policies, but, you you get a benefit. You pay this benefit for the rest of your life, and then when you need it, then it switches on. You have to qualify for long term care.
Mike:That means you can't do 2 of the, what, 5 or 6 daily activities that they would expect. You get a doctor's note, and then eventually, 90 days or what a 120 days, whatever the policy says Sure. You start receiving that benefit. You need to understand though and plan into your cash flow that those premiums will probably go up especially around the sixties, early sixties, and you can either pay more money to maintain this policy, you can cancel it and get next to nothing, or you can keep the same premium but lower your benefit. And there's things you could do with it, but that's probably coming, so just be aware of that.
Mike:Asset base is more of a cash standpoint. You pay a certain amount over a certain period of time or a lump sum, and then you get the benefit, but it's just it's 10x or 6x of the cash value in different times and that changes over time as well. Index universal life insurance or annuities are not long term care policies. Don't treat them as such. They might have a benefit that's similar to it, but it's not a long term care policy.
Mike:It should become very suspicious to you if someone says you can use this for long term care when the insurance company isn't asking for a medical examination of you. K. Long term care means they're looking at your health. Yeah. K.
Mike:They care. That's it. K? And then the the last one is to self insure, and that's a conversation about do you self insure and and how do you invest a portfolio that you're gonna set and forget in some sense and then use it later on in life? And then when you use it, is it gonna be a tax problem?
Mike:Is it not gonna be a tax problem? It's a more complicated situation if you're going to self insure, but you're maintaining more flexibility in the future. You're preserving your cash for the future, which is a legacy potential and so on. So when all is said and done, there's no such thing as a perfect investment product or strategy. I do get a lot of people that say I want long term care, and I ask why, and they they give me their reasons.
Mike:And then we do a comparative analysis. I run an illustration, and they say, I'm good. Yeah. I don't want it anymore. I say, great.
Mike:I'm glad we figured out what is right. Yeah. You gotta see it. And if you wanna have this kind of a conversation with someone that just gonna break down the comparative analysis from a break even standpoint, in such simple terms that you don't need a financial background to understand, that's our job Yeah. And we present it in very easy to follow math, then let us know.
Mike:You can text analysis right now to 913-363-1234. That's keyword analysis to 913-363-1234, or go to your wealth analysis.com to request a comprehensive analysis that also is gonna take into consideration your long term care needs and if you can afford to self insure or if you wanna take a different route, what that would look like. The point of it all is to figure out what is right for you. And the way we do that is we put together a a lifestyle legacy plan. We explore the efficiencies and strategies, and then we look at investments and products because the investments in products are supposed to support you, your lifestyle, and your legacy intentions.
Mike:It's not the other way around. It's all about you and your quality of life. Text analysis right now to 913-363-1234 or go to yourwealthanalysis.com for more. That's all the time we've got for the show today. If you enjoyed the show, consider subscribing to it wherever you get your podcast.
Mike:Just search for how to retire on time. Discover if your portfolio is built to weather flat market cycles or if you're missing tax minimization opportunities that you may not even know exist. Explore strategies that may be able to help you lower your overall risk while potentially increasing your overall growth and lifestyle flexibility. This is not your ordinary financial analysis. Learn more about Your Wealth Analysis and what it could do for you regardless of your age, asset, or target retirement date.
Mike:Go to www.yourwealthanalysis.com today to learn more and get started.