Financial Abundance Calls for Long-Term Care Preparation: What's the Point?
Long-term care insurance (LTC) is not just about ensuring that care is covered for individuals; it's about maintaining the freedom to live life on your terms. And when it comes to long-term care planning, asset-based options offer a range of benefits that traditional LTC insurance simply can't match.
Asset-based LTC solutions, such as those attached to life insurance policies or annuity contracts, provide greater flexibility, tax efficiency, guaranteed benefits, and dual-use value.
One of the key advantages of asset-based LTC options is the flexibility they offer. For instance, whole life policies with LTC riders allow you to access benefits for a variety of caregiving options, from family-provided care at home to professional in-home or facility-based services. You can customise and tailor coverage to your long-term care needs and preferences, transitioning as necessary.
Another significant benefit is the guaranteed protection these options provide. Many asset-based LTC options offer whole life insurance guarantees, including a guaranteed death benefit and cash value growth. Premiums are typically locked in and will not increase after issuance, and LTC benefits do not decrease over time.
Asset-based LTC options also offer tax efficiency. Benefits used for qualifying LTC expenses may be accessed tax-free, and annuities associated with LTC provide tax-deferred growth. This tax deferral allows investments to compound without current taxation, enhancing wealth accumulation over long horizons compared to traditional LTC policies.
Moreover, asset-based LTC solutions offer dual-purpose protection. If LTC care is not needed, the policy usually pays out a death benefit to heirs, serving as an inheritance or estate planning tool. This contrasts with traditional LTC insurance, where premiums paid without claims generally do not provide a payout.
Asset-based products often have simplified underwriting and may offer compound inflation protection, significantly increasing LTC benefits over time. For example, a $100,000 premium might secure many times that amount in LTC benefits by retirement age, with remaining benefits going to heirs if unused.
Additionally, many annuities linked to LTC benefits protect principal against market downturns and offer guaranteed lifetime income, helping address longevity risk and market volatility as retirement ages advance. In-plan annuities or asset-based life insurance policies also integrate LTC protection into overall retirement income planning, reducing the complexity of managing separate LTC insurance policies.
In contrast, traditional LTC insurance typically requires ongoing premiums that may increase, often does not return unused premiums, and provides benefits limited only to LTC care without any death benefit. Traditional LTC insurance may also have more restrictive underwriting and less flexibility regarding the types of care and providers you can use.
Pre-funding long-term care can make it easier to say yes to help without guilt or second-guessing. A lack of a long-term care plan can result in stress and sacrifice for family members who step in to provide care. Developing a long-term care plan is important even if one has plenty of money to pay for care, as it ensures everyone is on the same page and knows where to turn for help.
A good long-term care plan can protect not just assets, but also the health, relationships, and future of family members. Delaying professional help for long-term care can create tension among family members, especially when caregiving falls unevenly among siblings.
The cost of long-term care could increase by at least 4.6% annually, according to the California Partnership for Long-Term Care. A good adviser can help understand today's and tomorrow's care costs, assess personal risk, and explore traditional or asset-based coverage options.
It's estimated that 70% of individuals turning 65 today could face a long-term care event, according to LongTermCare.gov. A good long-term care plan preserves relationships, protects lifestyle, and keeps options open.
The article was written by a contributing adviser, not the Kiplinger editorial staff.
- Asset-based long-term care solutions, such as those attached to life insurance policies or annuity contracts, offer greater flexibility for individuals, allowing them to utilize benefits for a variety of caregiving options like family-provided care at home or professional in-home or facility-based services.
- Many asset-based long-term care options provide guaranteed protection, offering benefits that do not decrease over time, while premiums are typically locked in and will not increase after issuance.
- Asset-based long-term care solutions offer dual-purpose protection, providing a death benefit to heirs if long-term care is not needed, serving as an inheritance or estate planning tool, contrary to traditional long-term care insurance where premiums paid without claims generally do not provide a payout.
