Self-Insuring Long Term Care

Hey, this is Mike Zwick from If Not For God Podcast, our show.

Stories of hopelessness turned into hope. Your chosen Truth Network Podcast is starting in just seconds. Enjoy it, share it, but most of all, thank you for listening and for choosing the Truth Podcast Network. Security, Medicare, IRAs, long-term care, life insurance, investments, and taxes. Now, let's get started with Finishing Well. So, welcome to Finishing Well with my good friend and certified financial planner, Hans Scheil. Today's show, which I am just delighted to see where it goes, because I know how hard I've tried to self-insure myself over the years, is in this case, long-term care or self-insuring long-term care. And it really does fit John perfectly well with Jesus' message, because up until I was in my mid-30s, I'd been trying to self-insure my eternal care.

And in order to do that, as hard as I worked, it never felt like I had gotten there, and certainly, you know, I had left myself wide open for eternal horror had I not accepted the miraculous insurance plan, fire insurance plan that Jesus had for me that literally was able to pay something that I couldn't afford to pay. And, you know, that was, again, allowing to have this kind of a situation, but it fits perfectly well with what we're going to talk about today, because really, when we think about long-term care, a lot of people's fallback position is, well, I'll handle that if I need it, and that was certainly my father's situation. Well, you know, so if I talk about long-term care insurance and traditional long-term care insurance as a product and then as an industry, I mean, I've been offering this for more than 30 years, a touch less than 40, but a long time, nonetheless.

And ever since the first study that came out, say, well, how many people are really taking this advice and buying this insurance, coming out from LIMRA, like the Life Insurance Marketing and Research Association, stuff that people like me read, LIMRA, LIMRA, yeah, and that really interesting. But it, about 10% of the people who could buy, should buy, can qualify for or of the age to do it have long-term care insurance, about 10%, which means that 90% don't. And some of that falls on us, you know, in the industry.

I mean, it just, and we can go over that on another day, or you could say all of it falls on us, is that number should be 30, 40, 50%. If we did a better job in communicating this and offering it, more people would have it. What I'm gonna tell you as a person who's really sat down and sold this product for many, many years, and you start looking at those 90% that don't, a lot of those people are deemed, self-deemed, I'm self-insured. I'll just use self-insurance. And when you go to my book, my book, The Complete Cardinal Guide to Planning for and Living in Retirement, legitimizes self-insurance, because I would tell you that there's more people that deem themselves self-insured, more than 10% of that pool are deeming themselves in this category. Well, I'm self-insured, you know, which, so what we wanna do today on the show is just talk about that, so what does that really mean?

And in my book, I legitimized it, and I said, you know, if you're this, then what you really need to do is put together a plan, and I can help you do it. And I have some people that have taken me up on that, and we've put together a whole plan for them self-insuring long-term care, which means they're gonna pay for it themselves if they need it. So I was just meeting with an incoming client the other day who's very well off.

Well, you say very well off, I mean, according to whom, but he's got a very comfortable and secure retirement ahead of him. And he's very thoughtful, very diligent, very complimentary of us, has read the book, listened to the show, and so we're just going through, he's just coming in as a client. And when we got over, I just asked him, I just, I really just kinda said, well, let's talk about long-term care for a minute. Just as a preliminary, and he's just very quick to come out with, he says, I'm gonna take care of that myself, I'm self-insured.

He said, I'm just, you know, that $500 a month, I'm just keeping that, and I'll pay the bills if necessary. Yeah, I didn't say anything. I mean, I just, there's kinda like silence there. And then he said, are you there, John? You know, whatever, Hans. You know, and I said, well, yeah, I'm here. And I said, would you like to hear what I have to say to that?

And he said, yeah, oh yeah. I said, well, I said, if I could offer you long-term care insurance today to cover you and your wife for $500 a month, my advice would be you would take that so fast before me or the insurance company changes our mind. And the reason I'm saying that is your wife is not eligible for long-term care.

I mean, so you're rejecting something that hasn't even been offered to her, or maybe it was in the past, but the condition that she has is not something that just showed up three years ago or whatever. So he's been through the thing, looked at it, ruled it out, is that it's too expensive. And he just said, I got enough assets. So anyhow, that's the story about him and where that ends up going.

We'll see. And it's just kind of, I talked to him a little bit more and when we got to the end, he said, oh, I'm listening, touche, because I just moved him to his 80-year-old self. And I said, let's just talk to your 80-year-old self for a minute. Even if you have, which you do, substantial money, and it's still gonna be there when you're 80, I'm gonna tell you, it's gonna be like pulling teeth to get your 80-year-old self to approve your son going down to the bank or to the investment company and selling enough investments and actually creating the cash to hire a home healthcare agency. And your wife's gonna be over there pitching a fit. I mean, he's just, and that's a lot like the story with your dad, Robbie.

No, it is. I mean, he actually had gotten long-term care insurance on his wife, which was significantly younger than him, was not my mother, because my father had been remarried. But he was self-insured as far as he was concerned, and certainly he was retired comfortably and he had plenty of assets. And then after his fall, unfortunately for him, he wasn't able to take care of himself.

So what is that? Well, and you guys were going out of town for the weekend. Right. And so what would have happened if we'd actually, Tammy and I had moved into the house and we were taking care of him. And so he had long-term care plan.

It was called Robbie and Tammy, which was fine. I was honored to really enjoy spending the last year with my father tremendously. However, my daughter is in college at Samford University and she had a big parents' weekend that was really important that we come to her deal at college in Birmingham. And we're like, dad, you're not in a position right now to be left alone. So we're going to need to hire one of these home healthcare people to come in and dah, dah, dah. Well, we called him. He said, oh yeah, that's fine. Call him. We'll set it up. So.

You learned about all this for B because we were just new doing the show together. Right. Right.

Right. And if I'm not mistaken for that weekend, it was like six or $700. It was, you know, which is not cheap, but oh my gosh, it was like, you know, and my father was just, he was good with money from the standpoint. He was very frugal, but you know what it, you know, when we came back with this number, oh, he did. He threw him out. Cause that was insane to him that we were going to spend that kind of money.

But, but literally there he was. And so, you know, he was talking to his 80, in this case, seven year old self. And, and when it came time to actually spend the money so that Tammy and I could go away for the weekend without a, you know, guilt complex that we were leaving him unattended to, you know, that's, that's kind of where that, that was left, which taught me something, you know, it, that, you know, I'll explain with another story. Well, yeah, I mean, self-insurance when you've decided to self-insure for anything, it's just probably involves a lot more than you think it does because the insurance company is really guaranteeing you when you buy insurance, that whatever you're insuring, that they're going to have the money. First of all, to pay the claim, the money's going to be there and it's going to be in a specific place.

So it's going to say Robbie Dilmore on it. Okay. And they also are going to be prepared to hire and pay for the home healthcare agency. I mean, it's just, and it's not going to be something that you start second guessing and I'm going to throw them out.

Or it's exactly the opposite because here's the deal now. I mean, I have a policy, you know, thanks to you, but that Tammy and I both have, and I don't want them to get out of having to pay for my care. So if the same situation came up and my kids were taking care of me, I'm like, no, call these people for goodness sakes, use this money.

That's what I have it for. Well, they're still going to be there taking care of you. They're just going to have some help. Right. Okay.

And that there's a big difference. And so where I was really going with this whole topic is self-insurance for long, you know, self-insured for long-term care is your plan by design or by default. And what I would propose is most people who deem themselves self-insured it's by default.

So they've just kind of ended up there through their research. And they're just saying, they're really saying it's too expensive. I'm, it's not worth it to me to pay a premium to an insurance company. I'd much rather just keep those premiums and kind of do this whole thing myself, but that's even more laid out well by design than they really are.

A lot of them are just kind of there by default. And what I'm proposing is at the very least, maybe just through listening to the show and taking some actions afterward, even if you don't buy any insurance, you could simply get a little more toward the design end as you could have a discussion with your family and with whoever handles your money to say, like, if this happens to us, I want you to do this and do this. And I want you to pay for it from this. And here's the tax ramification. I mean, that, that, then we're starting to get toward a plan by design.

Right. Which I think you're going to hear the miraculous side of that. Not unlike trying to, you know, when Jesus comes in and helps you get your fire insurance through his blood, which puts out all the fires, by the way, you know, it's kind of a miraculous thing that happens. I think when we come back, you're going to hear that there's a miraculous plan for this self-insurance thing from my perspective, when I hear how Hans explains that.

So we're going to get to that. But of course, today's show, right, long-term care, the whole concept, it's all there in Hans' book, The Complete Cardinal Guide to Planning for and Living in Retirement, which is available at cardinalguide.com, as well as the chapter on long-term care is downloadable absolutely for free. And of course, we'd love to have you visit cardinalguide.com.

So we come back even more miraculous ideas on self-insurance. Hans and I would love to take our show on the road to your church, Sunday school, Christian or civic group. Here's a chance for you to advance the kingdom through financial resources by leveraging Hans' expertise in qualified charitable contributions, veterans aid and attendance, IRAs, Social Security, Medicare, and long-term care. Just go to cardinalguide.com and contact Hans to schedule a live recording of Finishing Well at your church, Sunday school, Christian or civic group. Contact Hans at cardinalguide.com.

That's cardinalguide.com. So welcome back to Finishing Well with certified financial planner, Hans Schade is a long-term self-insured long-term care insurance. And I'm telling you, when I heard this, I was like, oh, wow, that is miraculous.

So I think you're going to be really glad that you stayed tuned for this second half of this particular episode. When I was writing in the book about self-insurance and legitimizing it, I had the experience of really doing that as a financial planner. And we do financial plans for people, written financial plans. And when people are in their 60s and 70s, we're going to address long-term care. And for the people that choose not to do any insurance solution for it, we're still going to recommend within that financial plan that they put together something by design that is going to say, you know, I just, this is the money that I want you to use. This is where I want you to go get that. This is the tax implications of that.

I want you to try to get this done for me at home. And because you're not going to be making all these decisions yourself at 80 or 85, so at least to get a plan together. And that's what I was intending on the book.

And I was writing about where I had done that. And what I had found is that many of these people that were deeming themselves self-insured in the beginning of meeting me and throughout the process, they stayed self-insured, but they deposited some money with an insurance company. So they put that money aside, which turns into much more money on any of the hybrids. It turns into much more money for long-term care.

So that's kind of an oversimplification. So what I want to do today is just talk about the simplest one of these products that I can, and we're going to talk about it with a hundred thousand dollars of deposit. And this is a hundred thousand dollars that you would just not pay to an insurance company. You would just transfer it into an account at the insurance company. And then that account grows at interest. It's not going to be huge interest, because it's kind of like a bank. It's all guaranteed, and you're just not going to get a lot of interest and a lot of growth. I mean, you're going to need to go to the stock market or whatever for that.

We could certainly help you with that. But this is taking that self-insurance money, and we're just going to use a hundred thousand as an example, and we're going to move it from wherever it is now, whether that's the bank or an investment account, and we're going to move it to an account at the insurance company. And then it's going to sit there and be the first hundred thousand dollars that you're going to spend on long-term care. And any growth you get on this money, which would normally be taxable, if you ultimately use it for long-term care, there won't be any taxes on that either. But let's just, so we've moved the hundred thousand from where it is to the insurance company. It sits there.

It grows. And then if you pass away, never using this for long-term care, which if you're self-insured, that's what you're betting on is you're thinking, my, I'm never really going to need this. So I'm just going to keep this money myself. And then if I die without using it, it'll go to my kids.

Well, this is the same way. This hundred thousand put over at the insurance company grows at interest. You die. It goes to your kids or your spouse or whoever your name is the beneficiary say, well, why would I want to do that if that's all it does?

Well, that's not all it does. So it has a tripler benefit or, you know, it has another $200,000 of long-term care insurance that sits there behind your original hundred thousand. So the way it works, if you're a single person and you buy this, if you need long-term care, you're going to get 4,200 bucks a month for either home healthcare, nursing care, assisted living, any of the stuff that's normally paid for under long-term care, you're going to get 4,200 bucks a month for the first 24 months, or you're going to essentially use up your own money. It's going to come from the insurance company, but when that runs out, when 24 months have passed and that money is all expired, you're going to have another 48 months of 4,200 bucks a month. So there's where the, we don't want to call it free insurance because nothing in this world is free, but it's gotten there miraculously without having you having to pay an ongoing premium.

So that's cool. When I think about that in simpler terms, you know, just as my simple brain works that, so if I put $100,000 in over here, I keep my $100,000. If I don't spend it, my kids are going to get that $100,000.

But almost more importantly, if I in fact do need it for home healthcare insurance, my 100 becomes 300. Sure. That's it. And that's miraculous.

It is miraculous. Now it works for couples, but it works a little differently. So now if we have $100,000 and that's what we're going to put into it, but we want to cover two people, husband and wife, same 100,000, but it now the initial benefit, 36 months, $333 or whatever.

Okay. So it's 36 months. So you're going to get a little smaller benefit or they're going to distribute your own money back to you over a little longer time. And it's a little bit less, but it's covering both of you. So if you both were in there at the same time or getting home healthcare at the same time, well then it's really only spread over 15 months because it, or 18 months because it, you know, it can pay two, 3,333 at once. So in other words, with this policy, you blow through your own savings account, your self-insurance account, your own money at different rates depending upon who's insured. But at some point, either situation, you're going to run out of your 100,000 and then you're going to have another 200,000 sitting on the back end.

Okay. And we have several couples that have bought this type of insurance and we have several single individuals. Some of them, they're people who went here because they couldn't qualify for some other things. I mean, there's, this thing is pretty easy to qualify for. I mean, some people with, like if you've got dementia, you can't buy this.

They won't take you. Or if you have, you know, if you've had several strokes or you've had Parkinson's, you have Parkinson's. I mean, there's some very debilitating chronic illnesses where the insurance company won't offer you this deal. But what I will tell you, if you've, if you've got those things or something severe like it, we have other alternatives.

I'm just talking about this policy. But you know, if you had cancer two and a half years ago and you're in remission, you can get this thing. You know, if you had a stroke three years ago and you've recovered for the most part and you could have some ongoing issues, but you can get this policy. So there's a whole lot, a list of things that you can have that they'd never take you on regular long-term care insurance.

They'll take you on this. And then if you've got things that we won't take you on this, we've got other products. I mean, we've got about 50 companies that offer this kind of stuff. So we've got a pretty big assortment of products and solutions.

We got something for everybody. But on this specific one, it's literally that simple is that you put a hundred thousand at the insurance company. That's your self-insurance fund. If you access it, you use it, you blow through it. And it's really just them giving you back your own money, maybe plus a little bit of the interest. And when your fund is emptied, you got twice as much as you put in on the front end there. And you know, that's miraculous where they're offering that to everybody.

And if you wind up needing this, it's going to be the best investment you ever made in your life. Yeah. And again, I think, you know, for me, when I first entered into the conversation, you know, when it said long-term care insurance, you know, I'm thinking the dreaded word nursing home, you know, I'm thinking assisted living or something like that. But, you know, clearly the way these are structured nowadays, and especially with all that's gone on with COVID and whatever, this is completely just like my father's situation. You can get these people to come into your house, right?

You still got your family connected to you. This isn't like the nursing home policy. You can even get them to do household chores and pay for it under this policy, so long as you're getting care along with it.

They can do things like cleaning the house and mowing the yard. And I don't know, just stuff that you can't do for yourself. Now, you can't get the policy to only pay for that. Like you can't just be an older person that just says, hey, I want somebody to come do all.

I mean, you've got to need the care and be getting the care where they're helping you with bathing and dressing and doing all those kinds of things. But once you're there, then you can have this other stuff thrown in there. So, and we used a number of $100,000. I mean, somebody that says, well, that's not enough benefit. Well, then you could put 200,000 in it. Or we have some people that say, I don't have $100,000.

I can think of some clients that have bought this with 50 or 75. I mean, it's gonna give them a smaller benefit. But a lot of folks, people up in their 70s, 80s, and they've got a savings account put aside and they don't really spend in it. And when I asked them as a financial planner, well, what's that money for?

Well, it's not really for anything. I'm gonna give it to my kids. Well, why don't you just give it to them now?

Oh no, I don't want to do that. I might need it. Well, what might you need it for? And then, you know, we go through a whole question and say, well, in case I ever need care, in case I ever had to go to a nursing home or assisted living, somebody like that, this product makes a lot of sense for them, okay? Somebody who's wealthy that has a lot of $100,000 around different places, then from a practical standpoint, if your dad had had something like this, I mean, the insurance would have never paid off on him, but it would have been a lot easier to talk him into paying for those people for 600 bucks for the weekend or to have that over six or eight months.

Even if they were just doling out his own money, it's a plan by design for long-term care. Yeah, well, let's just take my dad, for example, because of the way his estate was structured, it would have been a lot easier since I was essentially his executor, you know, had he taken the money that he actually had in another fund. And I had to go get a stamp. It had to go through all kinds of shenanigans to get it. I had to pay taxes on it through a state tax. I had to distribute it in a certain way to all the different and all sorts of stuff. If that had been in one of these accounts, right, and he'd had a beneficiary, they'd have sent it to everybody it was supposed to get, wouldn't have gone through probate, wouldn't have been taxed by the, you know.

And there's all kinds of benefits from getting somebody that knows what they're doing to arrange your money. I don't care whether you're 60, 70, 80, or 90-something. And even if you're going to say, oh, we've already done that, okay. I mean, your dad was there. He said, yeah, all taken care of, okay. And it went into his credit for what he, you know, I loved him. And he enjoyed doing what he did with that money, and I wouldn't take that away from him for any, you know, but from just a straight practicality standpoint on the way that things came down, which he had no idea they would come down, you know, it would have been a lot better to have it.

His advisor was not looking at the end or even close to the end. His advisor was looking at the here and now, advising him on his finances, okay. And what, you know, what we do and my practice is all about is, sure, we're going to look at the here and now, and we're going to try to get you what you need and accommodate what you need, but we're going to plan for later years and the end years, and then what your family's dealing with after you die in your estate. So again, this topic is all there at cardinalguide.com, which, you know, today's show is long-term care or self-insured long-term care, what that looks like.

It's in his book, The Complete Cardinal Guide to Planning for and Living Retirement, again, right there at cardinalguide.com. We're so glad you listened today. Thanks for listening.

Thank you. We hope you enjoyed Finishing Well, brought to you by cardinalguide.com. Visit cardinalguide.com for free downloads of this show or previous shows on topics such as Social Security, Medicare, IRAs, long-term care, life insurance, investments, and taxes, as well as Hans' best-selling book, The Complete Cardinal Guide to Planning for and Living in Retirement, and the workbook. Once again, for dozens of free resources, past shows, or to get Hans' book, go to cardinalguide.com. If you have a question, comment, or suggestion for future shows, click on The Finishing Well radio show on the website and send us a word. Once again, that's cardinalguide.com, cardinalguide.com. This is the Truth Network.