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Welcome to How to Retire on Time, a show that answers your retirement questions. Say goodbye to the oversimplified advice you've heard hundreds of times. This show is about getting into the nitty-gritty so you can make better decisions as you prepare for retirement. Text your questions to 913-363-1234 and we'll feature them on the show. Don't forget to grab a copy of the book, How to Retire on Time, or check out our resources by going to www.retireontime.com.
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 by going 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 talk about it all. Now that said, please remember this is just a show.
Mike:Everything you hear should be considered informational as in not financial advice. If you want personalized financial advice, then request Your Wealth Analysis from my team today by going to www.yourwealthanalysis.com. With me in the studio today is mister David Fransen. David, thanks for being here.
David:Yes. Glad to be here. It's fun.
Mike:David's gonna be reading your questions, and I'm gonna do my best to answer them. You can send your questions in right now either by texting them to 913-363-1234. Again, that number, save it in your phone. 913-363-1234, or email them to hey mike@howtorettime.com. Let's begin.
David:Hey, Mike. I don't want to buy a long term care insurance. So what other ways could I prepare for future health care costs?
Mike:Yeah. That's a fair question. And the joke I've got is I've been licensed to sell long term care. I've never actually sold a long term care policy.
David:Yeah. What does that mean?
Mike:I I think that's maybe why this person probably heard that somewhere and and asked the question. Uh-huh. They probably read the book. I talk about this in my book. So for all those who haven't read my book, let's open this up.
Mike:It's not just a long term care conversation. It's just the fact that we're living longer than before and we're getting sicker for a longer term period of time than before. Actually, in point of fact, this new, statistic just came out. Glad you're sitting down for this one. 4 in 10 adults, 55 years or older are expected to develop dementia.
Mike:Wow. Let that sink in for 4 in 10 people. Now, if you're a couple, then the odds increase for 1 of you getting dementia. That's a problem. Yeah.
Mike:How in the world are you supposed to manage your assets if you're having a hard time remembering what you did yesterday? How do you know you're not making bad trades because or you just didn't realize you made the trade? I mean, if your mind goes, there's a significant problem. Now, fellas, listen up because the reality is if you're doing the finances for your spouse and they don't have a clue and you're the one that gets dementia, that is a very difficult situation. You have now put your spouse, the person you've probably spent your life trying to provide for, and now they're in a tough spot.
Mike:Yeah. So first off, all people listening in and I don't wanna say the husbands always do the finances. That's just not true. It's a cliche. It's common.
Mike:But I know a lot of women. They handle the finances in their household and they do a phenomenal job. Mhmm. It just there seems to always be imbalance one way or the other. The reality is you gotta get on the same page first and then and we'll talk about how to prepare for health care costs in the future.
Mike:But you you gotta make sure that you've got a plan that both parties understand, that you've got strategies that both parties could implement, and that you've got a portfolio that both parties are comfortable with. That is the most fundamental position that every couple listening in needs to understand. Now if you're single, it's it's a bit more complicated because because it's either you managing it or a financial professional. Now you've also wanna make sure that you've got a financial power of attorney. So if your mind is going, maybe you've DIY your your plan or your portfolio for life.
Mike:If your mind's going, that financial power of attorney is very helpful. Because if it's not there, it can be very tricky to try and get someone to help out at that point. A lot of red tape. So first and foremost, when it comes to health care, just understand our health maybe isn't as good as it used to be. And I would implore everyone listening in.
Mike:Look, I'm not a dietitian. I'm not a nutritionist. I'm not a doctor. But for goodness sake, please stop eating as much sugar. Please incorporate some healthy diet and exercise.
Mike:Please, please, please. I I I'm not paid by these folks, but function health dot com by doctor Mark Hyman and his team from the Mayo Clinic put out an app. You can literally pay, like, $500 once a year or twice a year. And they run all this blood work and they proactively tell you these are some adjustments based on your bio individuality that can help you live a longer and healthier life so that your health care costs could be less. We don't have complete control over our health, but we kind of do.
Mike:Yeah. That's another thing, you know, in this conversation. Let's let's address these things. Alright. First off, everyone needs to be on the same page.
Mike:Yep. And it it's helpful. This is a shameless plug, but it's helpful to build a relationship with a trusted financial professional in case 1 or both of you get there because you don't want to be developing that relationship If 1 or both of you do there, you don't want to be making important decisions when you're stressed or your mind is going.
David:That makes sense.
Mike:Yeah. I've got a lot of clients where we manage a little bit of their assets. So that if their health goes, the relationship is already built. So that they know they can transition in and the relate it's trust and respect. And there's nothing I could say today in 1 or 2 sentences that builds that time builds trust.
David:Mhmm.
Mike:So you gotta go dating basically a financial professional if you want that one as one of your backup strategies. But let's get back to the original question. So if you don't want long term care insurance, what are the the other ways you could pay for it? Alright. Let's let's now address that.
Mike:Was that too much of a rabbit hole?
David:That was We dipped our toes in the water, maybe the whole foot, but, it's okay.
Mike:So here are the different ways that you could prepare for long term care. And remember, there's no such thing as a perfect investment product or strategy. I'm just gonna share a couple of ways and the benefits and detriments associated with them. So you've got traditional long term care. Traditional long term care, you probably already have it if you because they don't really offer this much anymore.
Mike:You're paying basically premiums until you need it. And it's a very comprehensive amount of benefits that are available to you. If you qualify, that means you don't do it. What's it? 2 in most policies, it's like 2 or 3 of the everyday lifestyle activities and then you can qualify, tap into the benefit and so on.
Mike:Every policy is a little bit different. But that's the most comprehensive one and it's also the most expensive. And if you're in your sixties or seventies, you may notice that your premiums increase from time to time because they did not price it right. And insurance companies are trying to increase their premiums not because of greed, because it's getting more expensive and they need to stay, you know, solvent.
David:Mhmm.
Mike:So that's one of them. Long term care has evolved into what's called asset based long term care, which is really where you put some money in. K. Not IRA money. This is after tax money, like, by from your checking or savings account, your brokerage account.
Mike:Right? Anything like that. You put money into a policy. And if you were to get sick or need long term care, let's say for the 1st 10 years, you get a really nice benefit. You get payouts for 3 to 5 years.
Mike:It's structured. The more you put in, the more you would get out of it. It's intended to absorb the shock or the damage from from your overall portfolio. But the reality is if you don't get sick or need long term care for over 10 years, you can't promise market performance, but might have been better to put money in the market instead because we're talking about cash used. There's some nuance in there, but that's a personal question.
Mike:You're buy insurance, you're you're transferring risk to an insurance company so that you can buy peace of mind in case an event that a insurance company believes has a low probability actually happens. That's how insurance works. It's when there's a small chance that it happens, but if it does happen, the insurance company will pay. Insurance is not an investment. There's a huge cognitive distortion around the insurance space that they think, oh, well, if I pay my premiums, I get more money than I put in.
Mike:That's not how it works.
David:Mhmm.
Mike:So and we'll we'll spare the the the soapbox for today. Maybe we'll get into that later. Yeah. Then you've got other versions of insurance like indexed universal life. So it's not traditional long term care.
Mike:It's not asset based long term care. It's that in certain situations, if you need long term care, the insurance company would believe in these situations that maybe you're not gonna live that much longer. So you've got a death benefit. They gotta pay it out at some point. So in certain situations, you may be able to tap into that death benefit.
Mike:But you're paying for these riders in many situations. So you wanna be careful about fees, benefits, and and the qualification to tap into it. And there are things like long term care riders. There's terminal illness riders. There's a lot of different riders.
Mike:And rider is just a fancy word for basically saying additional feature for a fee. Usually, there's a fee. If there's not a fee, the fees baked into the cost somewhere else because there's no such thing as free money.
David:Yeah. But that'd be a lesson to you.
Mike:Yeah. And then you've got lifetime income. So this is a different way that some people will will use it. So you can buy an annuity, turn on your income. Let's say you buy an annuity and and you're getting 50,000 a year of benefits.
Mike:Right? And you enter into a long term care facility or terminal illness or something like that. Some of them will do things like double your income. So instead of 50,000, you get a 100,000 for, like, 5 years. But there are caveats with this.
Mike:So it's associated with the cash value. So if the cash value is out, you might not get the benefit. So maybe the benefit doesn't work in your late eighties, but maybe it was available to you in the late sixties, early seventies. So the details matter. Can I say that enough?
Mike:The details matter. Some people will buy an annuity and use a period certain strategy. So that's, like, basically saying it's kinda like the asset based long term care except for you've got more control over the cash growth. So if you don't use it, there's more cash that can go to your beneficiaries. If you need long term care, you would turn it on for period certain or 5 years, in my example.
Mike:So that means you're gonna get a certain payment every month for 5 years. And if you were to die in the 2nd year, year 3, 4, 5 is gonna go to your beneficiaries, spouse or someone else. So it's just it's a different way to think about the asset based long term care. It's just there's not asset based long term care, you can put less money in and you get a significantly higher payout under a very specific situation. Annuity period certain.
Mike:You don't think it's gonna happen, but you just wanna have that there. But the money could go to legacy. The payout is not gonna be as big, but you've got more flexibility and maybe some more cash growth overall. Again, you can't have your cake and eat it too. These are just different ways that you could plan for it.
Mike:And I'm neutral about any of these options as long as it makes sense to
David:you. Mhmm.
Mike:And here's the the best for last.
David:Okay.
Mike:So the most common strategy that I see is where someone uses a basically, your traditional asset allocation portfolio. So you've got some stocks, some bond funds, you know, all of that. And they basically just have a side account. You know, it's a different account number. It's invested, and they just say, look.
Mike:That's just for legacy, but if we need it for health care costs, we'll just dip into that. And they're they're basically creating micro portfolios. So they intend to self insure. They've put it into something that has risk but has growth potential, more growth potential than probably any of the other categories, and it works better for their situation. So is there a right way?
Mike:No. I'm trying to be neutral than just saying these are ways that people will operate. You can blend the strategies. I mean, it's it's really up to you. I I think that's the beauty of financial planning is when you don't create a bias one way or the other towards the different options, but you just understand the the benefits of each option or each tool in the toolbox, the detriments associated with it, and then you use the tools based on what you want.
Mike:I I was at a conference recently, and the guy said, well, how do you plan? I said, well, what's your favorite topping on a pizza? He said, pepperoni. I said, mine's Italian sausage. That's how I plan.
Mike:You just do what's right for the person. Like, you can put whatever you want in the pizza. Great. As long as it tastes good to you, that's what your solution should be. Yeah.
Mike:Even the people that like Canadian bacon and pineapple on their pizza.
David:I admit I do.
Mike:Yeah. I can't stand that one. But do you see my point here?
David:I do. Yeah.
Mike:We we need to stop creating stigmas against certain solutions and start being able to name them for what they are and then pick the tools that are most appropriate to you. This is how to retire on time. 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. Just search for how to retire on time.
Mike: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. Go to www.yourwealthanalysis.com today to learn more and get started.