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Are you managing the second most significant risk to a happy, fulfilling retirement?

If running out of money is the biggest retirement risk, long-term health care is an interconnected close second.

How do you envision your retirement?

Retiring well is a top financial goal for people at all stages of life. Even starting your first job out of college, retirement comes into play as you decide how much to contribute to that long-off goal.

Then, as you approach your golden years, your days in retirement begin to take shape in your imagination. You decide if you’ll stay in your current home or relocate. You think about how you’ll spend those newfound hours in the day, possibly volunteering, traveling, or working part-time with less pressure and stress.

But do you daydream about your retirement care costs? These are the uncomfortable, though important, conversations around aging.

As we age, health risks tend to increase.

Like most of us, you recognize that your retirement income and savings may need to last 20 years or longer and account for unexpected health concerns that may leave you unable to perform daily tasks.

Understanding the costs of long-term health care.

Long-term health care isn’t typical health coverage; it encompasses more than medical costs. Instead, long-term care is the need for assistance or supervision with the activities of daily living—eating, bathing, toileting, dressing—which may or may not be caused by a medical condition.

If you lose the ability to perform these tasks without substantial assistance for 90 days or more or require supervision due to a severe cognitive impairment like Alzheimer’s or a stroke, long-term health care can help defray the costs.

For most people, the cost of this extended care is a shock: $105,850 a year for a private nursing home room, $51,600 a year for assisted living, and $24 an hour for a home health aide.1

More than cost though is the element of choice.

If you self-insure with savings and pay out of pocket, you will have your choice of care, but only if you project the future accurately. This option doesn’t leave much room for error if you need care early, and it could impact the longevity of your retirement savings.

Relying on loved ones for care also has consequences. You are dependent on their willingness and availability and, additionally, their ability to give you the specialized care you may need. Most important, however, are the consequences being a caregiver has on their overall health and wellbeing.

Finally, while government health care programs can help, especially for those with limited financial means, Medicare won’t cover expenses after 100 days and Medicaid generally only covers care received in a facility and even then, coverage only kicks in after spending down your assets.

Having a long-term care strategy offers you another option.

Preparation can help protect your retirement savings, preserve your independence, and give you choice on where and how you want to receive care.

There are two main coverage options in the financial industry: Traditional LTC insurance and hybrid or combination asset-based vehicles utilizing life insurance and annuities.

Traditional policies can be customized and may have joint coverage options. However, premiums can be expensive, and you deal with some “use-it-or-lose-it” qualities.

Many companies and their clients are moving to hybrid life/LTC insurance, or asset-based policies, as traditional LTC insurance continues its assault of massive price hikes on new and existing policyholders.2

With hybrid coverage, premiums are guaranteed and you have flexible benefits and policy customization, including long-term care benefits, death benefits, and return of premium.

Unlike self-insuring with savings where every dollar contributed pays for just one dollar of care, a hybrid life/LTC policy leverages the money you put in to provide more care dollars than you put in.

While policies differ by carrier, hybrid coverage often provide benefits for a range of scenarios, some of which include:

  • If you need long-term care, a portion of your policy’s total benefit amount would be paid out monthly upon meeting the policy’s eligibility requirements.
  • If you want your money back, depending on the carrier you may be able to elect to discontinue coverage and receive a premium refund.
  • If you can no longer pay your scheduled premiums, your policy may provide a reduced paid-up, nonforfeiture benefit, which purchases paid-up insurance for the rest of your life.
  • With some specific policies, when you die, a minimum income-tax free death benefit may be paid to your beneficiaries, even if you exhausted all long-term care benefits.

These policies are customizable based on the type of care you want, how much coverage you want each month, and where you receive care.

If choice is key in your long-term care, hybrid policies allow you to take the lead and customize a policy for you, your family, and your life.

Start building your future today.

Most days, you don’t wake up thinking about insurance policies. Chances are though, you do imagine your future and dream up your retirement plans.

Long-term care policies aren’t the goal, but they can make your goals possible, providing funds to help you to live out your golden years on your terms.

As you and your financial professional discuss your golden years, it’s important that your housing and care are part of the conversation. Talk through all your options and be honest about what you imagine for your future; ask if a long-term care policy can open doors for more choices for you and your family.

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    Chris Sitek, CLTC®, CASL®, CLU®, ChFC®, RHU®, REBC®

    Author: Chris Sitek, CLTC®, CASL®, CLU®, ChFC®, RHU®, REBC®

    Vice President Life and Long-Term Care

    Chris helps financial advisors at North Star identify the strongest insurance product solutions for their clients. In an industry with hundreds of companies and thousands of products, Chris helps narrows down the choices to the few that truly make sense based on each client’s unique situation.

    1Genworth. (February 2020). Cost of Care Survey.

    2Gleckman, H. (2019, July 3). Sales of Traditional Long-Term Care Insurance Policies Continue to Fall. Forbes.

    Chris is a registered representative of Securian Financial Services, Inc.

    This information is not intended to promote any insurance company or any particular type of insurance product

    Life insurance products contain fees, such as mortality and expense charges (which may increase over time), and may contain restrictions, such as surrender periods.

    Please keep in mind that the primary reason to purchase a life insurance product is the death benefit.

    An annuity is intended to be a long-term, tax-deferred retirement vehicle. Earnings are taxable as ordinary income when distributed, and if withdrawn before age 59 ½, may be subject to a 10% federal tax penalty. If the annuity will fund an IRA or other tax-qualified plan, the tax deferral feature offers no additional value. Qualified distributions from a Roth IRA are generally excluded from gross income, but tax and penalties may apply to non-qualified distributions. Please consult a tax advisor for specific information. There are charges and expenses associated with annuities, such as deferred sales charges for early withdrawals.

    Securities offered through Cetera Advisor Networks LLC, member FINRA/SIPC. Advisory Services offered through Cetera Investment Advisers LLC, a registered investment adviser. Cetera is under separate ownership from any other named entity.