At NAILBA 33, I had the chance to hear Andrew Bucklee discuss the importance of long-term care insurance. Bucklee is Lincoln Financial’s head of Insurance Solutions Distribution, and is well aware of the biggest roadblock to LTCI: Funding.
Bucklee is passionate about educating consumers as well as advisors about the various funding options available. “The options for consumers are there, but we need more awareness,” Bucklee said. “With so many of the Sandwich Generation” being hit from aging parents and college-geared children, it’s imperative that the funding options are made clear to consumers.
Five of the most popular traditional funding options for LTCI are found on the following pages.
This includes CDs, mutual funds, individual stocks and bonds. Using your personal savings gives you the ability to choose the long-term care services you prefer. To avoid spending down your personal savings, you’ll need to accurately estimate future costs of long-term care and set aside enough money to cover those costs for several years. Take into consideration the tax consequences of a large drawdown in one year. It could potentially impact your tax bracket and deductions.
Distributions from your employer’s retirement account, such as your 401(k), 403(b) or pension plan could cover long-term care costs. You won’t have to spend down other assets in your portfolio. But consider the impact to future retirement income should you recover after years of receiving long-term care. Retirement income may not be sufficient to cover long-term care costs, especially if a married couple is living on one income and one spouse requires long-term care.
Long-term care insurance
These policies provide specific medical expense coverage related to long-term care. While you may not have to spend down other assets with this insurance, you’ll have ongoing premiums that vary depending on benefits and benefit periods. Also, if you never need care, the premiums may not be returnable.
Hybrids combine life insurance and long-term care benefits. If you need care, the death benefit is accelerated to provide tax-advantaged long-term care benefits. Unlike traditional long-term care insurance, hybrid policies provide benefits even if you never need care, which may include a return of premium and a death benefit. Other common hybrid features are inflation protection options and a variety of covered expenses from assisted living to nursing home care.
Family and friends
You may have relatives or companions who are willing to take on the responsibility of caregiver. Whether they provide assistance with transportation, meals and expenses, or take you into their homes and care for you on a full-time basis, caregiving can be an overwhelming experience. It could become an emotional and financial burden for your loved ones.