By Cary Carney
As Americans save for retirement, they tend to focus primarily on growing their investments to provide enough income for a comfortable retirement. But many are not thinking ahead to the time when retirement becomes uncomfortable - years beyond the honeymoon phase of retirement when health, memory and independence suddenly fade.
Post-retirement planning topics such as long-term care often sit on the back burner until it is too late. We all hope to live to a ripe old age before we can no longer care for ourselves or our partners. However, we must face the reality that a long-term care event can, and likely will, happen to each of us. For some, it will happen sooner than later.
My mother and three siblings are carriers of the debilitating rare genetic disorder known as CADASIL. We weren't aware of this until several years ago when a few of them started experiencing related symptoms. Obtaining long-term care insurance in their 40s was not something any of us had even considered. My mother and one sibling are currently in a care facility while my two other siblings will require care in the coming years. Nobody is too young for long-term care.
I’ve worked closely with hundreds of advisors in various roles throughout the past few decades, and I have found many don’t talk about LTC planning until their clients are approaching retirement. They work so hard with their clients to build up their financial assets throughout their working years.
If the client happens to have a good advisor, they have also protected that nest egg with life insurance. An excellent advisor will also help to preserve the nest egg from an LTC event.
This doesn’t have to be a 90-year-old spending their last few years in a nursing home. It could be a 55-year-old who had a stroke; a 72-year-old who fell on the ice, broke a hip and needs rehab, a 40-year-old with CADASIL, or anything in between. The cost of rehabilitation centers has skyrocketed and will put a dent in a client’s retirement nest egg in no time - or worse, deplete that nest egg entirely.
We build and protect the nest egg, so why are we not preserving it by talking about implementing LTC solutions? Common responses to this question include, “There are no extra funds left to pay for LTCi premiums” or “The individual can’t pass the underwriting for traditional LTCi coverage.” It doesn’t mean the client is out of options. There are viable asset-based solutions available from some reputable carriers that can be considered.
Split the existing “accumulation bucket” into two separate buckets: one for growth and income, and the other using an annuity with a long-term care rider (which could also supplement income in an emergency, or if needed). The second bucket will help preserve the accumulation bucket by providing some LTC coverage if the need arises. Each dollar moved from the first bucket to the second bucket could create three dollars for future LTC expenses. Each dollar of interest that grows in the second bucket could create three dollars for future LTC expenses. If an LTC event never occurs, that second bucket is still available to be used in other ways.
Much like life insurance, LTC planning is definitely an uncomfortable topic. However, when a client reaches out to you later because they are suddenly facing a long-term care event, that conversation will be much more uncomfortable. Because you failed to talk about LTC planning, you could find yourself explaining how they may have to spend down their assets in order to qualify for Medicaid and they are unable to use the care facility of their choice.
Every job has challenges no one enjoys tackling. But when choosing a career in the financial industry, we are obligated to discuss and plan for both the good and bad financial opportunities and risks that life may throw at our clients. Get uncomfortable. Have the conversations. If it were easy, people wouldn’t need advisors. But it’s not easy. You are desperately needed to help build, protect and preserve your clients’ nest eggs.
Cary Carney is national sales director at Guarantee Income Life. He may be contacted at [email protected].
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