The emotion of long-term care event speaks for itself – it needs little, if any, explanation. The financial impact, however, should be explained. In detail. Over and over. Don’t stop until the client completely gets the picture.
Cost of care in this country averages $80,000 a year for a nursing home or $50,000 a year for part-time care in your own home. Assisted living falls somewhere in the middle. Twenty years from now, those costs will likely double – 20 years from now, the last of the baby boomers will be entering their 70s.
Long-term care planning shifts the risk off an individual and their family. It’s better leverage on their money. Without shifting the risk, without planning, clients by default are choosing to self-insure. When we show them how to self-insure more effectively with insurance solutions, we have to show them the financial impact of their decisions – good or bad.
A typical, standalone long-term care policy costs $2,500 a year. Average cost of care in this country is $5,000 a month. So what’s more expensive? It makes good financial sense to shift the risk and do long-term care planning.
Concerned about having to lose in order to win? The market today is ripe with solutions that offer a promised benefit. Live too long, die too soon, maintain control over your premium. If your clients have money set aside for retirement, it could be multiplied in value – sometimes two to four times – for long term care! Why wouldn’t your clients want to have their money work harder?
Put it in Practice: Make sure you move past the emotional and into the financial when you’re having the care conversation. The Ash Brokerage LTC team can help show your clients the impact of their decisions.
You’ve heard the sales pitch before: Life insurance is a Super Roth, a Roth on steroids. But has anyone really analyzed these comparisons and their validity? Let’s take a closer look at why life insurance is often compared to Roth IRAs with additional benefits.
To qualify for a Roth IRA, you have to fall under certain limits established by the IRS. If you’re married filing jointly, your income has to be less than $191,000. If filing single, your income has to be under $120,000. In addition to income limits, Roth IRAs also have annual contribution limits – currently the limit is $5,500, but people age 50 and over can contribute up to $1,000 extra per year to “catch up” before they retire.
Life insurance, on the other hand, isn’t bound by any IRS income or contribution limits. Instead, it’s bound by insurable interest and medical qualifications.
In a Roth, you always have access to the basis without penalty. However, if you are looking to access cash in excess of the basis before age 59½, you’ll incur a 10 percent tax penalty. There are exceptions for first-time homebuyers and qualified educational expenses, however.
With life insurance, you may incur surrender charges in the first 10-20 years, depending on the contract. Outside of surrender charges, there’s no penalty for accessing the cash value in excess of basis in the contract before age 59½. It’s important that early withdrawals are closely monitored, however, as they could affect the performance of the contract and create a tax liability if the policy lapses.
Life insurance policies are self-completing and provide beneficiaries a tax-free death benefit – which is greater than the account balance – should the client die before retirement. (Please note that life insurance has cost-of-insurance charges to provide this benefit.) With a Roth IRA, the account balance passes to beneficiaries and may be subject to taxes.
Beyond age 59 ½, both contracts allow the client to access the gain without paying capital gains tax. Neither contract requires a minimum distribution at age 70½ like a traditional IRA.
Life insurance and Roth IRAs have several similarities. However, a few differences may allow high-income individuals to take advantage of Roth benefits through the purchase of cash-accumulating life insurance contracts.
It’s that time of year again! Houseplant Appreciation Day (celebrated Jan. 10) is finally upon us. It’s hard to believe it’s already been a year since we last took the time to celebrate the bond between man and shrub.
Houseplants offer many benefits: They filter our air, look great and can even reduce stress. As we all know, constant time, attention and care are all required to successfully tend to our green friends. Many of us are more than up to the task.
Why then, do we neglect to care for one of our clients’ most important financial instruments: their life insurance?
Most financial professionals agree that a client’s life insurance holding should be reviewed every couple of years, or after any major life event (marriage, birth of a child, new job, retirement, etc.) If your clients own any form of cash value life insurance, reviewing the coverage regularly is even more important. Unfortunately, this rarely happens.
Maybe it’s lack of insurance knowledge that keeps us from contacting our clients. Maybe we want to avoid the image of the “salesman.” Maybe we don’t even know who to ask for help. Whatever the reason, Ash Brokerage has the solution: our Life Insurance Portfolio Analysis (LIPA) team!
The LIPA team is a dedicated group of people who specialize in the review of in-force life insurance. With a signed authorization from the policy owner or trustee, and a couple other items, they can order information from the issuing insurance company to “stress test” the health and viability of any insurance policy.
After the in-force policy performance has been reviewed, the team can look at the marketplace today and determine if there are any potential improvements to be made. The life insurance industry is a fluid marketplace; products are constantly changing and evolving, just as your houseplants are constantly growing!
All joking aside, as a financial professional, understanding the need for life insurance review is critical. The consequences of a poorly managed policy can be devastating.
As you take time to celebrate the indoor flora in your life (or not) on this Houseplant Appreciation Day, at least remember this: You have a dedicated team at Ash Brokerage that is waiting to help take the pain out of life insurance review. Our goal is to be objective, efficient, and make you look like a professional. Call the team today for marketing materials, sample outputs or to simply learn more about the process!
Families take care of each other.
That’s what Charlie was taught from a young age. She grew up very poor in the Bronx, but she was surrounded by extended family members who looked out for one another.
Things changed over the years, however, and their family dynamic was forced to shift – along with the rest of society. As Charlie grew, the family unit shrank, with fewer children born and more parents out of the house and in the workforce. Extended families became more likely to be connected by the Internet or smartphones than a sidewalk.
For nearly all of Charlie’s life, Aunt Rita had been the principal long-term care provider for the family. She often played the role of caretaker, helping to raise Charlie and her siblings, attending to Charlie’s grandfather as he battled dementia and watching over Charlie’s mother in the years before she died.
But this year, when Aunt Rita began to show signs of dementia herself, the responsibilities shifted.
“I don’t even think long-term care was a phrase when I was growing up. The family unit, the structure was, ‘The family takes care of the family,’” Charlie explained. If anyone got sick or needed help in a pinch, a relative was always nearby. “There was always somebody home to care for them.”
Charlie’s family felt more like a community, she said. But, it was a different time, a different place.
Today, Charlie lives in Michigan with a family of her own. As Aunt Rita’s health began to decline in New York, Charlie felt helpless; she couldn’t do anything from hundreds of miles away.
“When it comes to your family, you always want to do the best for them … But that decision may not always be in your hands,” Charlie said.
At the beginning of the year, Aunt Rita started saying she wanted a smaller place. If her family had the means, they would have moved her into an assisted living or specialized memory facility, but it just wasn’t in the cards, Charlie said. Her family soon realized Aunt Rita wasn’t getting any better, but their former caretaker fought tooth and nail when they suggested bringing someone in to help her.
Everything came to a head, however, when Aunt Rita fell. The police had to force their way into her apartment, and the family was forced to make a decision.
“We wanted to take care of her the way she took care of us,” Charlie said, choking back a few tears. But they all had jobs, children, other responsibilities. They had to choose someone else to provide the hands-on care Aunt Rita needed.
“I think a lot of people rely on their medical professionals to say ‘OK, it’s time,’ but they still don’t want to actually make the call. There’s still a part of you that wants them to come back home,” Charlie said.
Even though Charlie’s sister was appointed as their aunt’s power of attorney, Charlie and their other family members did as much as they could to support her.
“We rallied around her, supported her, gave her suggestions – but ultimately, the decision was hers. I know it weighed heavily on her,” said Charlie, who’s an insurance underwriter. “I reached out to the resources I had available … I tried to help my sister make the best decisions she could.”
But with limited finances and no long-term care planning in place, they didn’t have many options.
“I volunteer at a very nice hospice center where I live – it’s like the Ritz of hospices. I would have loved something like that for her, but my aunt didn’t have the planning or funds for it,” Charlie said.
So Aunt Rita didn’t move to the Ritz, but she did find a great place to live. The family eventually settled her into a small, local facility where they knew some of the staff members. The adjustment was probably harder on Charlie’s sister than anyone else – Aunt Rita included. In fact, she seems to be doing very well in her new home, Charlie said.
“We made the best of a difficult situation, but without a doubt, it would have been a lot better with a plan in place,” she added. “The number one reason long-term care planning is important? It gives you control – control of your own life and decisions – I think that’s the most important thing it affords you.”
Even though she works with insurance every day, Charlie didn’t open her eyes to its impact until she was affected directly. Long-term care insurance is such a value, she explained, but there’s still a lot of hesitation due to price. “You tend to stick your head in the sand. But even if you’re just planning, educate yourself on the options out there … it could make such a difference for so many families.”
Planning sessions are uncomfortable, she said, but they force you have a talk – right then and there. And, Charlie added, it could save you the pain and stress of reacting in a crisis.
What will you do for your family? Plan or react? Get in touch with your professional advisor or contact Ash Brokerage for information about long-term care planning and insurance.
Your clients’ most loved assets – their children – are priceless. It’s your duty to help protect them, and a child life insurance policy is an easy and inexpensive way to do so.
No one likes to think or talk about the death of a young person, but there’s more to child life insurance coverage than funeral costs. Instead of seeming to place a value on a child’s precious life with a focus on death benefits, be sure to tell your clients about all the other things a policy offers:
You treat your clients like family. Make sure you are helping to protect every member by adding policies for their children.
Start a conversation with your clients today. Ash Brokerage is here to help.
© 2018 Ash Brokerage LLC.