Planning for retirement

(The Money Pros) - When planning for retirement, what are some of the biggest challenges you are faced with today?

Some examples:
• Running out of income
• High healthcare costs
• Low interest rate environment
• Market volatility

There are also costs that come up unexpectedly, such as having a major health event often requiring expensive extended care services.

No one likes to talk about it, but it’s so important to have a conversation with your financial advisor about protecting your family from this risk. Retirees age 65 and older have a 70% probability for needing extended care –that’s right – 70%!! We all say “It’s not going to happen to me” but we need to face the hard reality the odds are against us. In the unfortunate event that something does happen, it's imperative to have a plan in place to weather the financial storm.

These uncontrollable events can substantially disrupt your finances in retirement - the costs of self-paying for these services are astounding. Most people start their care at home, and the majority of those folks - about two thirds- stay at home. If needed, full time Nursing care in a facility can be as much as $100,000 per year or more.

What you can do now to get started?
The first thing to do is to ask the question: "If something were to happen to me or my spouse tomorrow, which asset would I liquidate to pay for our care?” You really need to take a half hour and have this conversation with your financial advisor - don't wait until it's too late! So what can you do, other than use your own money, to pay for care if the need arises?

Luckily, there are ways protect your family from these costs: There is traditional Long Term Care Insurance – you pay an annual premium like you do with medical insurance, and that premium buys you a large pool of benefits. Usually most clients age 65 pay $2,000-$5,000 or more annually per person.

The biggest advantage is that these products pay very rich benefits and the drawback is that the price can change - just like your medical insurance premiums can change - and we have all experienced that. The fact that these premiums can increase has scared off a lot of folks who want guarantees. These products are a great solution for clients who can afford to pay annual premiums - but not everybody can! Also, if you do not need the extended care benefits, the premiums are not refunded at death – unless you added a return of premium rider, which can increase your annual premium significantly.

There are some new solutions which solve this "increasing price” problem - they provide guaranteed benefits for a guaranteed price – and you don’t pay annual premiums!

There is actually a whole new class of products called Linked Benefit Products. These products require a repositioning of assets in one lump sum - there are no on-going premiums at all. You reposition a portion of your "sideline" money into one of these products and receive 200% -700% leverage on your deposit.

These products offer the same type of income tax-free extended care benefits plus an income tax-free death benefit, if you don't need the extended care benefits. In addition, if you change your mind at any time, you always have 100% access to your total deposit. In today's interest rate environment, many of us are earning very low rates of return on our "safe" money. It's important to remember that we are talking about money that is not needed for retirement income - money that’s there in case something unexpected happens. If all goes well, its money to pass on to your spouse, your children, or to charity. These products dramatically improve the return achieved for this type of safe or sideline money and protect your family from the potential costs of extended care, without having to pay any ongoing premiums.

Let’s look at a real-life situation:
A female who is 65 years old has $100,000 in excess assets that she does not need for retirement income. If she moves this $100,000 to a Linked Benefit Product, she will have an extended care benefit pool of $500,000 - and if she doesn't need the care, she’ll have a guaranteed income-tax free death benefit of $167,000 for her beneficiaries, and she can always take the full $100,000 back, right from day one. All of these benefits are guaranteed for life and the process to be approved is quick and easy.

Getting approved …

You don’t need to be in perfect health (high blood pressure, high cholesterol or minor health issues are normally acceptable). You will need to be able to answer some pre-screening questions and conduct a phone interview. The insurance companies are more concerned with serious or chronic illnesses. The process is very simple, quick and easy to complete. The most important step is to have the conversation with your financial advisor about your game plan for extended care costs. Then you can see if Linked Benefit Products are right for you!