RJS 8-2-25

Episode Transcript

Speaker 1 (00:00):
Good morning to all. Craig Schillig here and this is
Safe Money. I'm here every Saturday to talk with our
listeners about financial strategies we use to manage and protect
the assets safely. I've been in an insurance agent for
over twenty four years. During that time, I've learned a
few insurance strategies, like using annuities as safe money harbors,

(00:22):
or using cash value life insurance to supplement retirement income.
Just a reminder, you can call our office at five
six three three three two two two zero zero if
you'd like to enroll into one of one of my
virtual Medicare community meetings I give two every month via zoom,

(00:43):
or you can email me at Craig at Craigshilig dot com.
And that's my name, cr Aig at cr Aig s
C H I L l ig dot com. Today, I
want to talk to you about long term care insurance.

(01:05):
I'll start by reading you an article that was written
by Nationwide Insurance Company Americans plan to lean on Medicare
to afford long term care costs. Here's a hint. Medicare
doesn't do anything for long term care, so just keep
that in mind. Yet potential cuts to the agency could

(01:27):
impact long term care expenses in the future, Nationwide warrants
as they phase into retirement, Americans aren't counting on their
savings to cover long term care expenses. Instead, they plan
to rely on Medicare. The latest research from Nationwides Retirement

(01:48):
Institute Long Term Care Surveys shows fifty eight percent of
US adults age twenty nine and over and with a
minimum household income of seventy five thousand dollars or more
are believe that Medicare will take care of their long
term care costs. The expectation might end in disappointment Nationwide

(02:12):
reports as potential cuts to medicate in Medicare could impact
long term care options for adults as they retire. Still,
fifty percent of Americans say they do not believe reductions
to Medicaid will affect their own long term care costs,
highlighting a potential need for education on the costs associated

(02:37):
with aging. Too many Americans are entering the most valuable
stage of life with a false sense of security, says
Holly Snyder, president of Nationwide Life Insurance Business. We underestimate
how long will live, how likely we are to need

(02:58):
long term care, how much much that care will cost
and how will pay for it, leaving a growing number
of Americans and their families unprepared for financial and the
emotional toll that often comes along with aging. Even those
with access to financial advisors have not thoroughly discussed long

(03:22):
term care plans. Nationwide has found thirty four percent of
respondents who work with an advisor say they have not
discussed long term care costs because it's not been brought
up as a topic of discussion, and another thirty eight
percent believe long term care insurance to be too expensive

(03:42):
and sixty four percent overestimate the monthly price of a
long term care insurance plan. When presented with accurate pricing,
forty seven percent say they would be more willing to
consider purchasing coverage. Proactive education and planning are more important

(04:05):
than ever, says Snyder. Many people don't realize how comprehensive
long term care insurance can be. It's not just for
nursing homes. It can help cover home modifications for accessibility,
compensate friends or family members who provide care, and if
the benefits go unused, it could even pay out tax

(04:29):
free two beneficiaries. While a growing number of retirees or
moving homes due to affordability reasons. Fifty four percent of
respondents to nationwide surveys say the current real estate market
has made it difficult for them to move. Others plan
to age at home to evade higher long term care costs,

(04:53):
Yet forty one percent believe their current home to not
be safe or accessible for potential long term care needs.
Of those who who plan to stay home, forty seven
percent say modifying their home would be unfavorable to them. Further,

(05:14):
forty two percent of baby boomers now planned to stay
in their current homes without making any renovations in the future.
More details on nationwide study. Many Americans are counting on
the wrong safety ned for long term care. Over half
incorrectly believe Medicare will cover long term care costs, while

(05:38):
six and ten plan to rely on state medicaid. A
dangerous myth is exposing millions of American families to financial risk.
Fifty eight percent of Americans believe Medicare will cover long
term care expenses. According to the twenty twenty five Nationwide

(05:59):
Retirement Institute Long Term Care Survey, adults age twenty nine
and over with household incomes of seventy five plus. That's
where the survey came from that was released today. In reality,
long term care coverage is limited and short term, and
does not provide the extended day to day support aging

(06:21):
Americans will eventually need. As Americans live longer than ever,
With the US Census Bureau projecting the number of centurions
to quadruple by two fifty four, the likelihood of needing
long term care insurance and needing it for many years
is rising sharply, and many are not ready. Forty one

(06:47):
percent of Americans doubt they will live long enough to
use long term care insurance, even though nearly seventy percent
of Americans turn in sixty five today will need some
sort of long term care. The financial strain of long
term care is already felt, as these expenses are increasing

(07:08):
sharply across all care types. More than half of the
Americans fifty eight percent are concerned about their ability to
pay for theirs and their partners long term care, and
a shocking fifty nine percent say they plan to use
Medicaid to help pay for those expenses. This suggests many

(07:32):
expect to spend down savings enough to qualify for the
safety net program. Intended for individuals with very limited income
and assets, one currently under threat of major cuts. Potential
cuts to Medicaid could significantly impact long term care options

(07:53):
for our aging population, as the program is the single
largest source of funding for these types of services. Despite
its critical role, fifty percent of Americans do not believe
that cuts to Medicaid will affect their own long term care,
a disconnect that highlights the urgent need to educate the

(08:16):
public about the real financial risks associated with aging. Too
expensive to move, too risky to stay. Many see aging
at home as a way to avoid rising long term
care costs, but it's not necessarily without challenges. While seventy

(08:36):
seven percent of Americans would prefer to receive long term
care in their own home, forty one percent say their
current home may not be safe or accessible enough for
aging in place, and nearly half of them forty seven percent,
say they expect modifying their home for aging in place

(08:58):
to be on affordable. For those considering to move, the
barriers are just as steep. Fifty four percent believe today's
real estate market makes it difficult for them to move
or find an ideal home for retirement. As a result,
forty two percent of baby boomers and older age over

(09:24):
sixty one plan to remain in their current homes without
making renovations or changes once they retire, despite the potential
risks that accompany that decision. These growing pressures are also
affecting family finances across generations. Half of Americans say long

(09:47):
term care costs will diminish their child their children's inheritance,
and many are already bearing the burden of caregiving. Caregivers
report spending an average of nearly four hundred dollars a
month on non reimbursed out of pocket expenses, sech azz, prescriptions, transportation,

(10:11):
and home necessities. On average, it's about three hundred and
seventy two dollars a month. This creates a financial ripple effect,
with forty two percent of caregivers believing it will likely
use up the inheritance they had hoped to leave to
their own children. Too. Many Americans are entering the most

(10:34):
vulnerable stage of life with a false sense of security,
says Holly Snyder, president of Nationwides Life Insurance. Business People
underestimate how long will live, how likely we are to
need long term care, how much that care will cost,
and how will pay for it. Leaving a growing number

(10:55):
of Americans and their families unprepared for financial and the
emotional toll that also goes along with aging. Long term
care insurance is misunderstood and underused. Long term care insurance
is specifically designed to address these concerns, but awareness and

(11:18):
usage remain low. While thirty two percent believe long term
care insurance would be one of the most helpful resources
for preparing to live to age one hundred, only one
in ten actually report owning a long term care policy,
according to a separate report released by Nationwide and the

(11:41):
American College of Financial Services. Even more concerning, the intent
to purchase long term care insurance appears to be declining.
Of Americans aged twenty nine plus in Nationwide twenty twenty
five long Term Care survey, they said they do not

(12:01):
plan to purchase coverage, up from thirty two percent the
previous year. I would argue inflation has a little bit
to do with that. Cost continues to be a major
perceived barrier. About four in ten, or thirty eight percent
of adults believe long term care insurance is too expensive.

(12:22):
That's a perception often driven by lack of information. Sixty
four percent overestimate the monthly price of a long term
care insurance plan. When presented with accurate pricing, about half
or forty seven percent would be willing to consider purchasing
long term care insurance. Even those with access to financial

(12:49):
advisors are missing the opportunity plan properly. Among respondents who
work with a financial professional but have not discussed long
term care costs with them, the most common reason is
simple their advisor has not brought it up as a
planning topic, and in fact, sixty six percent say they

(13:10):
trust their advisor and would tell them when the right
time to buy long term care insurance is. I'll help
you with that. The younger and healthier you are, the
better the time to buy it. Proactive education and planning
are more important than ever, says Snyder. Many people don't

(13:32):
realize how a comprehensive long term care insurance plan can be.
It's not just for nursing homes. It can help cover
home modifications for accessibility, compensate home health, or family members
who would provide care, and if the benefit's going used,

(13:54):
it could even pay out a tax free benefit to
beneficiaries from a a life insurance or annuity high bred contract.
Financial professionals have an opportunity and a responsibility to critically
guide clients through these conversations, break down the misconceptions about

(14:17):
costs and coverages, and help families understand what solutions will
work best for them and their families. Planning for long
term care is not just about protecting assets. It's about
protecting families. It's about having choices for care and the
time to make an informed decision and not be backed

(14:39):
into a corner. If you don't have a plan, don't worry.
One's already set up for you. You will go to
the nursing home. Long term care insurance keeps you out
of the nursing home by having the time. You won't
sell all your assets at a fire sale. You can

(15:01):
use the policy payments instead of your assets to help
pay for your care. This year's survey highlights how urgently
society needs to address the myths around Medicare, shift perceptions
about affordability, and help Americans take control of their future care.

(15:24):
My practice over twenty four years has really changed when
we talk about long term care insurance. I remember group
long term care policies being sold at a very generous discount,
only to have them incur substantial premium increases ten to
fifteen years later, like fifty to seventy five percent premium increases,

(15:48):
practically forcing the policyholder to bay out and surrender the policy.
We used to sell standalone long term care insurance policies.
They weren't cheap, but they were more affordable twenty years
ago than they are today. I sold a lot of
paid up long term care policies. They were called ten
and twenty pay premium policy payments. Once the ten or

(16:12):
twenty years was up, no more premiums are due. Those
were slick policies, but understand they were expensive. Most companies
have been forced to have premium increases due to claims,
and that's not a picnic. It's not a picnic for
the client, and it's not a picnic for the advice

(16:35):
or ease either, who has to explain those premium increases
to the insured. But the premium increases are better than
no coverage at all. I would say there's maybe six
carriers still in the long term care insurance arena today.
Today I focus more on getting a chronic condition rider

(16:57):
or a long term care rider in sight of a
life insurance contract or an innuity contract, versus just selling
a standalone long term care contract policy. A couple of
reasons for that one. Life insurance in many cases is
easier to obtain and qualify for now, You'll still have
to answer questions for the long term care or chronic

(17:20):
condition piece. The qualifications for a standalone long term care
contract are more stringent than your basic life insurance contract.
In many cases, using a life or annuity writer contract
is better use of your premium dollars. And for younger

(17:42):
people they think they'll never use the long term care
portion of the contract. Take note, people under the age
of forty do end up in a nursing home facility.
Sometimes it does happen. I've seen it, and that can
be an expensive visit. Even with Great Health Insurance, with
your Great Health Insurance Group policy from work, you get

(18:07):
more value for your money. We know and this is
in referring to a life insurance contract with a long
term care writer. We know you're going to die at
some point in the future, so hence the premiums are recaptured.
Even if you use all the benefits derived from the

(18:29):
chronic or long term care portion of your life insurance contract,
the policy will still pay some sort of death benefit
there's provisions in there that won't let you exhaust more
than ninety percent of the contract. That way, it would
still pay out a tax for you death benefit for

(18:51):
married couples, a chronic condition rider inside a survivorship whole
life contract is a great value for your money, both
for the state tax savings rate and the use of
premium dollars for the long term care portion if one
or both of you use it. Now, please understand there

(19:13):
are provisions in the IRS Code today that allow you
to deduct a portion of long term care insurance premium. Now,
you can't deduct a writer on a lifeer annuity contract
under IRS Code right now. That could change in the future,
but forget about the tax deduction for a minute. If

(19:34):
you have this sort of coverage on that type of contract,
you're still going to derive benefit from it. So it's
a good use of dollars now. Using the same strategy
in citing an annuity contract isn't a bad shake, but
it's much easier to use if you're over the age
of fifty nine and a half. If we're talking about

(19:55):
an annuity that has a long term care or chronic
writer in it. That's again why life insurance is better.
It covers all ages, it could happen to any of
us at any time, and you don't have to deal
with any tax ramifications. The under fifty nine year olds
may have a problem accessing a long term care writer

(20:19):
or portion without incurring a ten percent early withdrawal penalty,
So that's kind of one of the minor issues on
an annuity contract. If you're in the younger age bracket.
Now there's some criteria that needs to be satisfied here,
so again it's just a little trickier. Some contracts require

(20:40):
you to be permanently disabled under the condition, so it's
a case where you may recover after a long period
of time. It's just easier to access these funds from
a life insurance contract and you don't have to deal
with any taxation that might be involved from the annuity contract. Again,
if you were under age fifty nine and a half,

(21:04):
you've heard me say this before, but remember the only
certainties are death in taxes. It sounds harsh, but know this,
the IRS still taxes you when you're sicker, hurt ie,
disabled and can't work. If you don't like that rule,
then talk to your legislator. The rule's been around for

(21:24):
over one hundred years, so that's not going to change
anytime soon. You need to have some sort of long
term care plan as you progress through life. This long
term care plan will protect your overall assets and give
you time to make informed and rational decisions. Especially if
you're a business owner, it's better to sell your business

(21:48):
while it's profitable and making money, as opposed to the
buyer finds out that your sicker herder can't work due
to sickness or injury, and they're just going to sit
back and wait so they can purchase the business at
a fire sale. If you don't have a long term

(22:08):
care plan in place, don't worry about it. The government
already has one for you. It's called you spend all
your money and your assets and leave nothing behind. How
does that idea sound? Getting back to long term care
here for a minute, Especially the under fifty crowd, getting

(22:31):
a chronic condition or a long term care writer built
into a life insurance contract is a really slick move.
It doesn't cost that much. It solves a lot of
problems both now and in the future. And sometimes what
I do is I sell some peda policies. So think

(22:54):
of an amount of money that you'd like to spend. Now,
this can't be one hundred bucks. Minimum buying is going
to be like three year five thousand dollars but a year.
But let's just argue and call it five thousand dollars.
You spend five thousand dollars a year for ten years,
and then you make no more payments. You now have

(23:16):
a life insurance contract that's paid up that you can
access for later in life cash money needs. Or you'd
have your built in safety net with a long term
care chronic condition rider to cover that basis as well,
and with a waiver premium disability rider. If you're sick

(23:37):
or hurt in your paying those five thousand dollars a
year premiums for a few more years because you're not
a ten years yet, the company will pick up the
premium for you. Your four oh one kay and your
iras aren't going to do that for you. Again, they're
not sexy. It doesn't have sizzle. They're not going to

(23:57):
have a twenty two percent raid to return the market would.
But it does put your guarantees in place and does
protect your overall assets. Don't forget I give monthly virtual
meetings regarding Medicare for two different companies every month. In
one meeting, I will cover the Medicare Supplement plan with
a standalone drug plan. That meeting sponsored by will Mark

(24:21):
United Healthcare is a sponsor. For my other virtual meeting,
I focus in that meeting on Medicare Parts C and
known as Medicare Advantage Plans, and I'll cover the benefits
of that platform. You can call my office at five
six three three three two two two zero zero for

(24:41):
the zoom meeting codes and additional dates and times. You're
also welcome to email me at Craig at Craigshilig dot
com and that's my name, cr Aig at cr Aig
SCCHI L l I G dot com, and I'd be

(25:02):
happy to send you the virtual zoom link meeting codes.
This is Craig Chillig with Safe Money.