2025 Long-Term Care Insurance Purchased With IRA Money

This is the Truth Network. Welcome to Finishing Well, brought to you by CardinalGuide.com with certified financial planner Hans Scheil, best-selling author and financial planner, helping families finish well for over 40 years. On Finishing Well, we'll examine both biblical and practical knowledge to assist families in finishing well, including discussions on managing Social Security, Medicare, IRAs, long-term care, life insurance, investments, and taxes.

Now, let's get started with Finishing Well. Welcome to Finishing Well with Certified Financial Planner Hans Scheil, and today's show is... 2025 long-term care insurance purchased with IRA money. And so it's beautiful as when you watch the video that goes along with this radio show that they describe this as being one of those items that a lot of people don't understand the priority of it in just much the same way that Jesus told them in Matthew 23: you blind guides, you strain out a gnat and swallow a camel.

Well, in his case, you know, he was trying to keep the main thing, the main thing, which in Deuteronomy 6 he quotes in numerous places: that here, O Israel, the Lord your God is one. Yeah. And love the Lord your God with all your heart, and with all your soul, and all your strength, and your neighbor as yourself. And so that's interesting that there's the main things. He's telling you that God's number one there, but it's also here.

Like you're supposed to listen to number one. And then we've got to love him with all our heart, and then our neighbor as ourselves.

So, to simplify that, when it comes to your financial, you know, trying to figure out. What's the gnat and what's the camel? I went and I just did, okay, according to the financial You know, AI or artificial intelligence, I asked my chat GPT, I said, what's the biggest financial consideration in retirement? Its answer? was health care costs and long term care.

Well, obviously, that long term care is very much connected to health care costs. And so what we're talking about today is an amazing way to not swallow the camel right on Well, yeah. And I think Tom and I are pointing this out to each other and pointing it out to clients. From our perspective, Of all the things we do, this is the most important thing, is if I can If I can influence somebody to take a piece of their retirement. And Segregated.

and purchase some of this long term care, life insurance, hybrid type policies where they're just going to shift assets to a new place. And protect themselves against long-term care. I get a great sense of satisfaction out of that. And to the point where I help people with taxes, I help people set up income streams, I help people with life insurance and making sure there's money there for their heirs. I mean, there's all kinds of things we do: Social Security, Medicare, and they're all important, but if there's something that stands above it all, It's having a plan so that if you can't take care of yourself, you're not going to become a huge burden to your family.

And I think that just calls for some special consideration. Yeah, it absolutely does. And a and a wake-up call. For a lot of us, we need a goad. We need Hans to remind us that this is a critical element of what you are looking at in the later part of you and your spouse's life.

Because usually it's not just one that's involved in it. And I love the example you did in the video: this is a joint thing, right? Sure. And so one of the things we hear from people that are in their seventies. Yes.

I'm too old for long term care now. I miss that boat. I looked at it years ago. It was pretty expensive and whatever. I'm in my seventies.

And I just want to tell everybody, if you're in your seventies, and you got some piece of your health together. even if you've got some real problems, we probably have something for you.

So don't use that as a way to write things off. And then I'm going to match that with A lot of the people buy this stuff with their IRA money. And you can take a chunk of your IRA money And we usually show in the videos, we're showing people that are sixty five, a couple sixty five, and we're using a number of two hundred thousand dollars of IRA money is going to produce you a pretty nice long term care policy. for both you and your spouse. and it's going to pay lifetime benefits.

you're really going to take care of this problem.

Now in today's video, in today's show, we're using a number of three hundred thousand dollars because we've got two people that are age seventy three. Yeah and The reason we chose Age seventy three is that's the year that minimum distribution starts.

So, what they're going to do with this big chunk of IRA money, the insurance company I'm talking about. is they're going to spread it out. the distribution of the IRA over the next ten years. And so this couple Um that buys it at 73 Right at the beginning of minimum distributions, they're going to have their minimum distribution covered or part of it covered. for the next 10 years till they're 83.

Um By Spreading out the distribution of this money.

So let me just go over the example real quickly.

So this couple They put in three hundred thousand dollars of their IRA. They roll it over. To an IRA at the insurance company.

So no taxes. right now. They get credited with seventy five thousand dollars of bonus interest which leaves three hundred seventy five thousand In the IRA. And that is going to create a distribution every year for ten years of thirty seven thousand five hundred dollars.

So from seventy three to eighty three, This thing is whittled down. 37,500 a year. And that money, the thirty-seven thousand five hundred is transferred. Into the life insurance long term care policy With a ten year premium of thirty seven thousand five hundred dollars a year, for a total of three hundred seventy five thousand dollars.

So That counts as your MD or your required minimum distributions, and it can cover other money.

So I don't want to get into a Separate IRA discussion. But just so you can understand the concept, if you're facing RMDs, And you're right there before that, or right at it. in your you know, you don't really need them, but you have to take them. This is a way that you can get part of them or maybe all of them covered. Um for the next ten years.

Does that make sense to you, Robbie? Oh, absolutely. And again, it's what an efficient, amazing way to use that money that you set aside to really have an asset from my standpoint for your family, for your spouse and again, for your own peace of mind.

Well, yeah, and it's just so now you're going to have to pay the taxes. on the thirty seven thousand five hundred dollars out of other money or other income.

So we haven't taken care of that piece of it. And before we recommend any of these things, we're going to look into all your finances, make sure you have that and set up a system to do that.

So this is just used as an example to show you that you can move $300,000 from where it is now. tax-free rollover to the insurance company, and then the insurance company will distribute it over ten years. Just to you into your long-term care policy. that also has life insurance on it. And in the second part of the show, we're going to go over what kind of a policy that buys for this couple that are both seventy three right now.

Yeah, th that's the Amazing part really is: I really enjoyed the video, is when you see all the things that are covered, it's really quite amazing. But then the fact that you can do it out of IRA money and it's a one-time deal, like you say, but then it It doesn't hit you with this huge tax bill because you Break it down. Yeah, and what I want you to understand is even if you are 73. You don't have to have $300,000 that you're going to put into long-term care insurance. I mean, if you have less than that, Um We can come up with a policy still using the IRA money.

We don't really like to put all your IRA money into this.

So I'm assuming these people have a pretty large IRA. And so we're showing them how to use a piece of it. We also can purchase these insurance policies with regular money, and we can pay for them over years. I mean, this is just one option that I'm showing, and I'm using three hundred thousand dollars to buy a very beefed up policy.

So with this three hundred thousand dollar IRA transfer, You're really buying two policies.

So we're taking one of the couple's IRAs.

So it has to be one of them, unless we could split it up and put a little bit out of both. But for the purposes, we're going to take three hundred thousand Of one person's IRA, and we're going to transfer it custodian to custodian to the insurance company.

So now you have a three hundred thousand dollar IRA at the insurance company that's paying some pretty significant interest. over the ten years while it's being distributed. And it totals out, it makes it simple, it's seventy five thousand dollars worth of interest they're paying. on top of the three hundred thousand giving you a total of three hundred seventy five thousand dollars.

So that's the first policy. It's an IRA. And then that IRA is guaranteed to pay out thirty seven thousand five hundred dollars a year into the second policy. And the second policy is nothing more than a long-term care policy. and a life insurance policy fused together.

and it has a ten year premium, of thirty seven thousand five hundred a year.

So you're buying two policies Only one spouse is covered. On the first IRA policy, but both spouses are covered. under the Life Long Term Care Policy. And then that policy pays out significant benefits. it starts at sixty almost six thousand four hundred a month.

If they were to go in the, you know, use the long-term care, go in a nursing home, or use home health care immediately. 20 years later, it's 94.92 a month.

So it has an inflation component to it. That it's paying if these people start using it when they're 93 and somewhere in between.

So it's two distinct policies. One, which is an IRA that's liquidated over time. and it's liquidated into the life long term care policy. And both policies are paid up right from the beginning. It's all guaranteed by the insurance company, no changes.

So this would be a good time to remind you that this show is brought to you by Cardinal Guide, CardinalGuide.com. And if you go to CardinalGuide.com, you're going to see the seven worries tabs, which one of those is going to be the one we don't want you to just follow the camel. That would be long-term care. And so if you click on the long-term care button, there you're going to see a video with the same title and show notes and all sorts of details on what's involved in these policies that we're talking about and some really neat ideas from the standpoint of how to deal with this issue. And of course, they're also covered in Hans' book, The Complete Cardinal Guide to Planning for and Living in Retirement.

And there's a wonderful study guide that goes along with that. And of course, there's the contact Hans and Tom Page. It's all there at cardinalguide.com. We'll be right back with a whole lot more on 2025 long-term care insurance purchased with IRA money. Investment advisory services offered through Brookstone Capital Management LLC, abbreviated BCM.

a registered investment advisor. BCM and Cardinal Advisors are independent of each other. Insurance products and services are not offered through BCM, but are offered and sold through individually licensed and appointed agents. Cardinal Advisors is not affiliated with or endorsed by the Social Security Administration or any other government agency. Welcome back to Finishing Well with Certified Financial Planner Hans Scheil.

And today's show, 2025 Long-Term Care Insurance Purchased with IRA money. And so, Hans, You know, I love this. Yeah, what we've been talking about is taking IRA money. In this case, it's a Man 73, female 73, and we're doing that just to show they're right at minimum distributions. And so we're showing them buying two policies, rolling the three hundred thousand out of the IRA.

Over to An IRA at the insurance company. No tax is due at this time. and then the insurance company credits them with seventy five thousand dollars worth of bonus interest. In a total of $375,000 is in the IRA. which distributes thirty seven thousand five hundred a year into the life long term care policy that covers both of them.

Okay. And all this in the policy in both policies is guaranteed from day one.

So in other words, there's not going to be any rate increases. There's not going to be asking for more money, a lowering of interest rates. This is all cooked Right from the beginning. And the benefit that they qualify for is almost six thousand four hundred a month. for long-term care.

and the benefit limit is unlimited.

Now, a lot of these policies we write for four years, five years, six years. Because this is a combined policy, And because it's with this specific company, they offer unlimited.

So, in other words, if the man gets sick first, and he's using it for a long time. She's healthy.

Well, he's sick. He passes away. He hasn't used up all of her benefits because you can't use them all up. because both of them qualify for unlimited benefits.

So that's seventy six thousand dollars a year of long-term care coverage H. from the very beginning. And twenty years later, because of the inflation component, It's nine five hundred bucks a month or almost nine five hundred bucks a month. for a total of one hundred and thirteen thousand nine hundred and four Um if they were using it when they're 93. But the real important thing to remember with this policy is you can't it does not ever run out of benefits with these.

people having dementia and Dementia lasting for so long, and with modern, we don't know how long people are going to be alive with that. And so it just removes that worry. Yeah, that's been believed me. Hi, yeah, back hard. You know, I was I I I do a devotion at a nursing home on Wednesdays and Thursdays now.

And again, I was just with a lady and just sweet. Sweet lady. And, you know, in talking to her, you would think she was totally fine until she goes back and asks you your name again after you told her five minutes ago. And what do you do now? And it was just obvious that here was this wonderfully beautiful lady.

That all of a sudden found herself in this situation that clearly she's going to live a long time. I mean, it it would appear to me. And oh my goodness. Um What coverage is going to be needed is amazing, especially since. You know, you guys talk about it in the video that people, when they think of long-term care, they think that they're going to a nursing home, but this provides a An opportunity for even like, like you guys were talking about, like an adult daycare where they could drop off mom there and then take care of her at night, and that kind of stuff is some beautiful stuff.

It pays for home health care. Mean meaning that you could bring somebody in? Um through an agency and have them sit with mom. Make her meals, give her a bath, help her get dressed. Um this could be somebody that is Homebound.

But they don't want to leave their home and they don't want to go to one of those places. could be a couple Where the other one thinks they can take care of the one that's fallen but you know, having home health care coming in Eight hours a day. Yes. makes the job of the healthy one a lot easier.

So this has a lot of flexibility in it. They've even added to this particular policy where you can take seventy five percent of the benefit for the first three years and they'll just pay you in cash. And you can set up, you could hire one of your neighbors or somebody, or put them through a training, or your sister, or somebody. I mean, it's really one of your adult children. Um it has a lot of flexibility built into these policies now.

Yeah, because uh to me, you know, as long as I can stay home. The more I want to. And so, again, it's the idea, like, I don't know, you want to as well, you know, stay home, get the care you need. Not put the the burden on your family. You know, those are all things that this can give you the flexibility to do.

Well, yeah, so and this policy is also life insurance.

Now it's on a couple.

So They both have to be gone before the life insurance. pays off. And it's really there because some people just have concern, I transfer all this money The end. You know, what if both of us You know, stay healthy for a long time and then we're killed in a car accident or something that never pays out anything to anybody.

Well, first of all, you're going to be deceased, and it's really kind of a blessing. You never had to. use it for long term care, but it's still a reasonable concern. And so this thing has one hundred fifty three thousand dollar life insurance benefit. but it's only going to pay the one hundred fifty three if you collected nothing out of it for long term care.

So The first dollars you use of this for long term care come off of the life insurance.

So effectively, when you've flown through one hundred fifty three thousand dollars of long term care insurance benefits, There is no life insurance left.

Okay. Um so that's only there for the people that Really didn't use the policy or didn't use it much. Make sense? Oh yeah, absolutely.

Okay. And the qualification, this is another question we get a lot.

Well, how hard is it to collect off these policies? Here's the rule is you've got to meet You have to need human assistance with two out of the six activities of daily living. Or you need to be si have severe cognitive impairment.

So that's an OR.

So if you have severe cognitive impairment, like this lady that you were praying with earlier today, or Yesterday. G. she would meet the severe cognitive impairment.

So she wouldn't need to get into the Two or six ADLs. But the people who have their mind and their awareness and their memory. The the ADLs you know, are bathing, dressing, eating, transferring. toileting and continents. And so that's kind of spit out a whole bunch.

We generally, when we're helping people with claims, We use bathing and dressing. Because those are the simplest for people to understand. And they're typically something that you're going to need help with if you are needing help in general. In other words, getting dressed is harder than it seems. if you're sick and you're you know, you've got health problems.

Same thing with taking a bath. Taking a bath is dangerous. Um If you're not getting assistance with it when you're When you're not well. And so, and they're also just pretty cut and dry. I mean, when we get into the other four, if they're there, we tell them to go ahead and put them there.

But it gets into real. gray area of whether you need help getting in and out of bed and in and out of a chair and transferring. It's a lot of gray area.

So we typically use and we advise people to use bathing and dressing is to test those first. And if there's there, you don't need any to prove anything else. Makes sense. And those are the ones that, you know, from my experience and taking care of parents and stuff, those are the ones that go first. Bathing and dressing.

Well, they do, and that's what I actually use for my mom. Um just real clear, I had to go back to the doctor and have him rewrite the thing. and just leave all the other stuff out and just put those two things in there and it flew through claims very quickly.

So Um This policy covers informal care, like I told you before, There's some different rules around it, but it'll pay if you want your sister or somebody wants to go through some they can do some online training. which they don't have to do, but you would want them to do that. And then it'll pay you seventy five percent of its benefit. It pays for home health care. pays for nursing home.

pays for adult daycare and it pays for assisted living.

So it's a pretty thorough comprehensive policy. Um There's a ninety day elimination period, meaning that for facility care.

So if you need to go to a facility to get your care, and you haven't had any home care. There's going to be a ninety day period where they're not going to pay and then they're going to start paying on the ninety first day. But if you start with home care, There's a zero-day elimination period.

So the very first day you get home care, they're going to pay for it. And then their calendar days.

So if you're receiving home health care, whether it's every day or not, for a while, and then you go to the facility, those days you use the home health care count toward with a ninety day elimination period.

So Theoretically, you could have no elimination period on the policy. Does that make sense? Oh, I love it. Absolutely. And like you said, most people are going to start it at home anyway.

And we're always encouraging people to start these policies and start collecting from them as soon as they possibly can. A lot of times, we meet with resistance because if you put yourself in that situation, I think your dad was a little bit like this, Robbie, where You know Even if it means collecting money from the insurance company, they don't want to They don't really want to admit, look, I need help. And so they're going to put it off. And so we need to come in and say no, you actually need to get this help. and we need to bring it in and get it at home.

Because you need it, and let's just go ahead and get it started. There's a lot of financial reasons to. Doing that as well. And again, this is a good time to remind you that this show is brought to you by CardinalGuide.com. And if you look at CardinalGuide.com, you will see on the Seven Warriors tab, one of the big ones is long-term care insurance.

And so, you know, we want to remind you that you don't have to pay for this kind of thing with IRA money. If you have other money, you know, there. You know, this is just a way if you're trying to figure out the tax benefits of it. These are all things that you can do by going to the Contact Hans and Tom page. They're at cardinalguide.com.

So one size clearly doesn't fit all, but the ideas are still wonderful as you begin to un Rathom, on rathlum, and so whatever word you want to use there. And we also want to remind you that, of course, Hans's book, The Complete Cardinal Guide to Planning for and Living Retirement, all there at cardinalguide.com. I love this. I love this idea. I love this show, Hans.

Thank you. Thank you so much, and God bless you. The opinions expressed by Hans Scheil and guests on this show are their own and do not reflect the opinions of this radio station. All statements and opinions expressed are based upon information considered reliable, although it should not be relied upon as such. Any statements or opinions are subject to change without notice.

Investments involve risk, and unless otherwise stated, are not guaranteed. Past performance cannot be used as an indicator to determine future results. Any strategies mentioned may not be suitable for everyone. Information expressed does not take into account your specific situation or objectives and is not intended as recommendations appropriate for you. Before acting on any information mentioned, please consult with a qualified tax or investment advisor to determine if it's Suitable for your specific situation.

Finishing Well is designed to provide accurate and authoritative information with regard to the subject covered. Investment advisory services offered through Brookstrone Capital Management LLC, abbreviated BCM, a registered investment advisor. BCM and Cardinal Advisors are independent of each other. Insurance products and services are not offered through BCM, but are offered and sold through individually licensed and appointed agents. Cardinal Advisors is not affiliated with or endorsed by the Social Security Administration or any other government agency.

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 Han's 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 Han's 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.

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