If you need it, you probably can't afford it. And if you can afford it, you probably don't need it.

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's all about the nitty gritty.

That said, remember, this is just a show, not financial advice. Do your research. Now, with me in the studio is David Frandsen, and today we're gonna read your questions. As always, you text your questions to (913) 363-1234, and we'll answer them on the show. David, what do we got today?

Hey, Mike. Is long term care insurance worth buying at my age, or should I self insure? And can we define some of these terms?

Yeah. Okay. So first off, let's let's just define long term care. Long term care is the idea that if you need long term care assistance, that you're you're gonna be it's gonna get paid for by an insurance company. That's the idea.

Yeah. Medicare is traditionally not covered by long term care. When I say traditionally, it's the it it's not. Mhmm. It doesn't cover long term care.

It's just people associate, you know, different variations of definitions. They hear things and bring it out of context. Medicare is not helping your long term care.

Okay. Right.

That's just If you're going

to the hospital or your routine checkup or you're getting your blood That's drawn

long term care. Yeah. So just just so we define like a long term care facility in that sense. Think most people who would be interested in what long term care could be

Mhmm.

Understand what long term care is, but for the uninitiated. Yes. Just understand there's a difference there.

Okay.

Now, there's many layers to different ways people have solved for long term care. When I say solved, the top of it is that you buy traditional long term care, which is very expensive today, and very few carriers even offer it because it's just so much risk for the insurance company. But it's basically you're paying for life when you need long term care, then it pays, and there's huge benefits to it, but it's extremely expensive, all things considered. So once insurance companies realized that that was kind of a bad deal for them, When I say bad deal, you could still buy traditional long term care and never really use it, so it could be a bad deal for you. Insurance is not an investment.

It just it's the transference of risk. Mhmm. Then you've got asset based long term care. Asset based long term care is let's say you put in 50,000, then you get, I don't know, some 500,000, whatever the illustration's gonna say. If you already need long term care, then you get maybe it's 250,000, whatever the multiplier is.

Mhmm. I'm being facetious here because we don't quote products on this show. Yeah. You have to have the illustration for you specifically, but I digress. Mhmm.

But if you got sick in the first ten, fifteen years and needed long term care, you'd you'd benefit from it. Right?

Right.

Because it's getting you a multiplier of the money you put in back. And if you don't use it, you get like the 50 k back. The 50 k isn't really growing. It's just you're gonna get roughly the amount of money you put in there. Mhmm.

Okay? So the insurance company got your 50 k, and they held on to it, they made money off it for a while, and then they eventually returned it.

Okay.

Kind of what it is. Alright. So that's possible. And that assumes you never used it. Right?

It just sat there. So then you died and you get some sort of small death benefit, which is basically how much you put in there in the first place, and it might even not account for inflation.

Okay.

So that's then the next level. I I'll admit in be doing this for over a decade. I wasn't always an insurance licensed agent for the whole time I've been this, but I've worked with people or been licensed in my decade of working with the retirement planning space. And I've never actually sold someone a long term care policy or assisted that I Uh-huh. Can And the reason is, if you need it, you probably can't afford it.

And if you can't afford it, you probably don't need it. And anytime someone asked for it, we said, No problem. We ran the illustration, they said, Great. We did an application, and they were denied.

Mhmm. Because?

The break even is means you need to actually get sick within ten years, typically for these to be financially prudent. Uh-huh. And the insurance companies would say, nope, you're high risk of probably needing this, we don't wanna work with you.

Right.

They only wanna work with people where the odds are in their favor. Yes. And that's not mean. That's just how insurance works.

They're a business.

I mean, if an insurance company knew you were going to get in many car accidents over the next two years, you would probably not get auto insurance.

Right.

They wouldn't give it to you. Yes. They don't want to pay out money. Yeah. Or they don't want to pay out money for at least fifteen, twenty years, and then they don't care because they've already made money on the money you gave them.

Mhmm. So, you are a liability when you buy insurance. They want to lower their liability. That's why underwriting exists. Uh-huh.

So then you've got the next tier down which is gonna be like index universal life insurance. So this is where you've got a cash value component, you're funding it, there's cash value that can grow. It doesn't really typically grow for the first ten years or so, there's just a lot of fees. Then it becomes very fee efficient, typically, when they're built right. And if you need a long term care, you could in certain situations, you could tap into the death benefit because the idea at least is if you're on your way out because you need long term care, well, they're gonna pay out a death benefit anyway

Mhmm.

You might as well get some of it early. So I've seen people use that as kind of an easier way to get in to long term care, but not actually do long term care, and then also have the bond funds alternative quote unquote component, the cash value that's growing. Mhmm. It's not a bond fund. It's not an investment.

It's just that in index universal life insurance, there's a cash value that has growth opportunity that you can borrow against as income, and also can help with your long term care needs. And because you're borrowing against it, you're not paying taxes on it, so it's very efficient. So I've seen people do that, and that's fine. Just don't expect the IUL to grow more than the stock market would grow. Mhmm.

Okay. Okay? Yes. It's it's an insurance product. Expect it to not grow very much for the first ten years because there's high fees.

And maybe if you drop the death benefit, you know, the thing that's supposed to pay out your long term care, maybe you drop the death benefit, you lower your cost of fees, then you're able to grow a little bit better. I mean, that's very possible, very doable, not tough to accept. It's just different. Yeah. And then you've got the next tier down, which is some people buy annuities and turn on lifetime income with an income multiplier.

So if you qualify for long term care, they will double your income stream for up to five years. Oh. I've seen policies with that. The problem though is if you need long term care, like, let's say fifteen, twenty years after you've bought the policy Mhmm. Your cash value is probably drained, and so now you don't qualify for the income multiplier.

Oh. Because the income multiplier is only relevant if there's still a cash value associated with it. And typically, I see the cash values running out around ten to fifteen years in the at least the illustrations.

Yeah. Lots to think about here. Lots of So and

then you've got the last version, which is just self insure. Oh, yeah. And that just means if you need long term care, paid for it yourself. So that's

a pretty simple like, it sounds more complicated self insuring, but it's really just you have cash that you can use to pay for your expenses.

Yeah. It's self pay. Yeah. I mean, most of my medical right now, I'm just self paying. It's just because insurance won't cover half of it.

And just so I can you know, I'm not sick or dying or anything.

It's Right.

I I pay $500 or so to functionhealth.com. Insurance doesn't cover it.

Uh-huh.

But I want to pay it so I can get the blood work done, so I can get these results and stay healthy. Yeah. Right? Yeah. I am very open to paying a dentist out of pocket instead of the company having dental insurance.

We have dental insurance, but it's it's because I I would rather just pay for certain things that are predictable as opposed to paying more for things that are already routine. Does that make sense? Mhmm. Like, I I wanna know what I'm paying for that transfers the risk to an insurance company Mhmm. And then pay for things that I expect.

That I find more efficient from a cash flow standpoint Sure. Than just trying to get an insurance company to do it. And people are gonna argue with that all the time. Well, you know, it's already built in the policy. It's the same difference.

I get that. But when you understand just how insurance is priced in, there's there's more than one way to skin that cat. Mhmm. So you need to know your options. So I'll just kind of reiterate that one more time.

Okay. Yeah. So it's it's long term care. Is it worth buying at my age?

Yeah. Whatever your age is. Yeah. We don't know

what this person's age is, actually.

Yeah. So if

if Let's see you're if they're, like, 60.

60 year old years old or younger, it might be better. If you're 60 or older, it could be slightly pricey. If you're 70 years old, probably not worth it. Yeah. I don't know if they can get some of these policies at that age.

Because the insurance company will see, oh, they're 70, so now they're more their risk for getting sick is higher.

Well, it's like their breakeven's what? Fifteen years? Ten, fifteen years? And if the average life expectancy is 86 or whatever it is today, 91, I don't know. It keeps changing.

I think it's actually in the upper seventies. Did it go down? Yeah. It went down after COVID big time.

I thought it came back up, though.

Maybe a year or two. Wait. We can look that up, but

Yeah. Jeez.

It's it's lower than you might think, I think.

Yeah. Well

But we're gonna break that

trend. Yeah. Whatever it is. Yeah. Where were we?

Yeah. So is it worth it? Oh, yeah. Ten to fifteen year break even point.

Sixty years or younger, it's it could be good to start buying in or do something. If you want to transfer the risk to an insurance company. Yeah. If you want to just have cash growth and you're willing to pay for it yourself, it's a risk. But there's I mean, long term care doesn't cover everything.

It gives you an allowance. I think that's an important distinction too. Yeah. And then you just look at the prices, traditional long term care, asset based long term care, index universal life with the long term care writer. You've got annuities with the income stream, the income multiplier as a writer, or you got self insure

Okay.

In your portfolio. Yeah. Those are kind of the options. Hey. Thanks for watching the show.

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