Financial
Planning
Solutions for
Long-Term Care
SM
This policy has exclusions, limitations, reductions of benefits, and terms under which the policy may be
continued in force or discontinued. For costs and complete details of the coverage call your insurance agent or
company.
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Some of us are
concerned
about our longterm health.
But all of us are
concerned
about our longterm wealth.
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After all, a long-term
illness may become
a crucial event in
your lifetime.
Or maybe
it won’t.
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A long-term illness may or
may not be a crucial event
in your life, but long-term
wealth absolutely is
crucial.
Now. And always.
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“Long-Term Wealth”
• Means enough to live on
the rest of your life, with
something
left over.
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“Something Left Over”
• For “rainy day” safety?
• To pass on to your children?
• Or grandchildren?
• To give to charity?
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“Long-Term Wealth”
• Is not a specific
dollar amount.
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Let’s assume you have
reached long-term wealth.
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You think so.
You saved.
You invested wisely.
Your home has
appreciated.
What could go wrong?
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Three things could go
wrong:
• You could spend, planning to live to
85 . . . and then you live to 95 instead.
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Three things could go
wrong:
• You could spend, planning to live to
85 . . . and then you live to 95 instead.
• Your investment returns may be poor,
and you run out of money sooner.
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Three things could go
wrong:
• You could spend, planning to live to
85 . . . and then you live to 95 instead.
• Your investment returns may be poor,
and you run out of money sooner.
• You could lose your long-term health,
destroying your long-term wealth.
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Let’s look at all three
potential situations:
• Outliving your money
(possible, but there are planning
solutions).
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Let’s look at all three
potential situations:
• Outliving your money
(possible, but there are planning
solutions).
• Poor investment returns
(less likely with proper financial
planning).
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Let’s look at all three
potential situations:
• Outliving your money
(possible, but there are planning
solutions).
• Poor investment returns
(less likely with proper financial
planning).
• You could lose your long-term
health, and then you could lose
your long-term wealth.
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Of our three potential
“situations,” the last one
is the least predictable.
• Fortunately, there are financial
planning solutions that can protect
us if we lose
our long-term
health . . . and
even if we
don’t.
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So, three important
questions:
• What are the chances we could lose
our long-term health?
• What would be the impact on our
long-term wealth?
• And what are the best financial
planning solutions to choose from?
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What Are the Chances?
100 People (Aged 65)
39 Will Need Nursing
Home Care
20 Will Need for
More Than 1 Year
8 Will Need for
More Than 5
Years
61 Will Not Need
Nursing Home Care
19 Will Need for
Less Than 1 Year
12 Will Need
for 1 to 5
Years
Source: James Robinson; Center for Health Systems Research and Analysis, University of Wisconsin, 2001.
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A Significant Long-Term
Exposure . . . Alzheimer’s
• Duration of Illness After Diagnosis
(in yrs.)
– Heart Disease 3-4
– Cancer 5-6
– Alzheimer’s 8-20
Alzheimer’s -- Studies Suggest a
significant Genetic Component -- Folks
With Two Affected Parents Have a Fivefold
Increase in Risk
Source Newsweek, Jan 31, 2000
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Alzheimer’s
• 19% of People Ages 75-84 Have
Alzheimer’s
• Nearly 50% of People Age 85 and
Over Have Alzheimer’s
Alzheimer’s Association Estimates Average
Cost of $174,000 to Pay for LTC Over
Lifetime With Alzheimer’s
Source Newsweek, Jan 31, 2000
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Types of Services Available
• Home Health Care
• Adult Day Care
• Assisted Living
• Nursing Home
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Home Health Care
• First Choice for Most
• Can Be Expensive
• 1.88 Million Home
Health Care Patients*
• Not Covered by
Medicaid
* 1998 U.S. National Center for Health Statistics. Published in Statistical Abstract of the U.S. Census Bureau, 2000
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Adult Day Care
• Excellent Option
When Parent Can
Live With Child
• Not Covered by
Medicaid
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Assisted Living Facilities
(An Attractive Alternative)
• Provided Assistance for Over 1 Million
Americans in 1998*
• Homelike Environments Offer Continuum of
Care, Including Medication Management,
Meals, and Transportation
• Preferred Option for People With Assets
Source: Price Waterhouse Coopers LLP (1999). An Overview of the
Assisted Living Industry. Fairfax, VA: Assisted Living Federation of
America.
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The State of the
Nursing Home Industry
Nursing Homes Are Facing Many
Challenges
• Cuts in Medicare and Medicaid
Reimbursement.
• Declining Base of Private Payers in
Facilities. More are Selecting Home
Care and Assisted Living.
• 1.49 Million Residents in 2000.*
* Healthcare Financing Administration, OSCAR Surveys as of September 2000.
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Government Programs
• There Are No Current
Efforts to Expand
Medicaid Services to
Provide Home Health
Care.
• Likelihood of Receiving
Government-Funded
Care at Home or in
Assisted-Living Facility
Remains Small.
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Paying From Your Assets
• Advantages
– Money Talks
– Unlimited Selection
• Disadvantages
– Depletes Your Assets
Dollar-for-Dollar
– May Have to Sell Assets
at Below-Market Value
– Increase Family Stress
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Financial Planning
Solutions
• Building Assets
• Estate Preservation
• Wealth Transfer
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Value of Long-Term Care
Protection
• Offers Choice and Security for
Those Who Want to Age in Place
• Allows People to Keep Substantial
Portion of Assets Invested
• Two in Three Caregivers State that
Having Insurance Benefits
Reduces Their Level of Stress
Source: Can Aging Baby Boomers Avoid the Nursing Home? Stucki and
Mulvey, ACLI, 2000 Client Seminar 33799 -1101
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Life/LTC Insurance
Solution
$100,000 Principal Sum
Premium will vary depending on age, sex, smoking status, and health.
Limitations, exclusions, and surrender charges may apply. LTC benefits may
have monthly limits.
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Tax Benefits of Life/
Long-Term Care Insurance
• Tax-Deferred Growth
• Long-Term Care Benefits Paid
Income Tax-Free
• Unused LTC Benefits Pass
Income Tax-Free Benefits to Heirs
We do not provide specific tax advice. Check with your personal tax advisor.
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Cash Value of Life/LTC
Insurance Policy
Purchased in 1990
1990
2001
Plus:
$ 70,000*
$124,526
- Tax-Deferred Growth
- Long-Term Care Benefits**
- Home Health Care Benefits
- Assisted Living / Adult Day-Care Benefits
- Income Tax-Free Death Benefit
* Based on policy issued in June, 1990 with a joint age of 65. This represents past performance and is
not an indication of future performance. The value in 2001 is after cost of insurance is deducted.
** Reduces the death benefit when withdrawn.
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Cash Value of Life/LTC
Insurance Policy
Purchased in 1990
1990
2001
Plus:
$ 70,000*
$124,526
Death Benefit
$142,455
$179,317
- Tax-Deferred Growth
- Long-Term Care Benefits**
- Home Health Care Benefits
- Assisted Living / Adult Day-Care Benefits
- Income Tax-Free Death Benefit
* Based on policy issued in June, 1990 with a joint age of 65. This represents past performance and
is not an indication of future performance. The value in 2001 is after cost of insurance is deducted.
** Reduces the death benefit when withdrawn.
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Funding Options for
Life/LTC Insurance
• CDs/Money
Market/“Just in
Case” Assets
• IRAs
• Mutual Funds
• Annuities
• Annual Premium
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Annuity Solutions
• Annuities designated for LTC
– Could be better than your current “LTC
Fund”
• Immediate Annuity -- designed for
someone already receiving care.
This is a crisis management tool.
– Provides guaranteed income for life at
a lower premium because person’s
health is considered during
underwriting.
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Which Solution Is Best for
Me?
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Questions & Answers
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