This is the Truth Network. Um 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, IRAID, long-term care, life insurance, investments, and taxes.
Now, let's get started with Finishing Well.
Well, welcome to Finishing Well with certified financial planner Hans Scheil and today's episode. long-term care insurance Financial plan series four of eight. And as we've been talking about over these other episodes, this is a standalone episode on long-term care insurance, but it shows you the building blocks of doing this financial plan and why one part affects all the others so much for the first one, you know, being the first building block being, you know, Social Security. And then we did the second building block, which is Medicare. Today is the third building block because this particular one, from my standpoint, is so critical.
It can unravel your whole financial plan and unravel it quickly. And I couldn't say that I have seen so much of that in the last month and a half of my personal life of how critical this particular aspect is to you. And having gone through that recently, I couldn't help but think about the biblical Preston. For this idea of long-term care insurance, that the Good Samaritan you might remember, he helped out the. Um The man that had been injured on the road to on Jericho on his way to Jerusalem.
And When he left him with the innkeeper after he bandaged him and took him someplace for cure, he kind of gave that innkeeper a blank check because he said, take care of him, whatever he needs, and when I come again, I'm going to repay you. And so, when you think about the compassion that this Samaritan had, it wasn't just. For the man that he had a blank check, but for the innkeeper himself to say, look, you're I'm going to give you whatever resources you need in order to take care of this particular issue. And Your life can change really, really quickly. Mine did because my wife and I were in this horrible accident that was in no fault of our own.
This car slams into the back of us, came out of nowhere.
Next thing I know, we're both in the hospital for a week. She's on one floor, I'm on the other. When we're released, Um we honestly We're not in any position. To take care of each other. I had a broken back and injuries to my neck.
and she had injuries to her back and neck had a broken leg. You know, I have insurance that we talked about invoking, and if I had to do it again, I might have invoked it. Because I had to stand there three weeks later when my wife fell. And there was nothing in the world that I could do at that moment in time because I have a broken back and I'm in a neck collar and all these things. And of course, I'm standing there.
thinking through some of the decisions that I made. over that period of time where I could have brought somebody in. to make sure that Tammy and I had the care that we should have had. Uh instead You know, I had to suffer the consequences of that. And again, I know that I had the insurance for it, but I can't even imagine that I would have done it if I didn't have the insurance.
So, with all that said, I'm just saying. That Will I be kind enough to my future self to make sure that a blank check is there? Will I be kind enough to make sure that my wife has a blank check to make sure she's taken care of and it's not done at the expense of my children or the expense of, you know, because honestly, my daughters were there almost every chance they could be there, but they both work and they couldn't be there 24-7 for three weeks, which is at about the time that that fall happened. And so this is just a critical aspect from my standpoint. of anybody's financial plan, Hunt.
Yeah, and so today's episode, we're You know, we're talking about long-term care. which is the third worry of the seven worries. And we're looking at Tom and Susan. Thomas Almost 68 this summer. And Susan is almost 67, and Tom's a retiring doctor.
He's got plenty of assets. Uh we met him when he was Turning 65, and he bought a Medicare supplement from us, and then Susan, a year later, when she turned 65 and Now They're anticipating retirement. And so they hired us to do a financial plan. We've done the previous episodes. We got their social security figured out.
We got their Medicare figured out and now we're on long-term care.
Okay, and then with long-term care It has its special thing. It's not just like, what do you think we ought to do, Hans? And then we say, oh, I think you ought to get a long-term care policy. that does this and it just it doesn't work like that. It may work like that in investments.
It may work like that with a lot. People go, I don't know if I really need it. You know, it's just.
Well, if that happens to us, we'll just pay for it ourselves. That's what he was telling me three years ago. Yeah, and he's still telling me that. to a degree Now and I told him, I said, well, we're going to include this in your financial plan unless you tell us not to. If you tell us not to, then we're going to have you sign something.
Because I'm not going to do a financial plan for a person 68. And 67. um that's retiring with Much assets as you have. And I'm not going to, I'm clearly going to have a recommendation for long-term care, and then you're free to veto it. Um But we had a good long discussion about it.
Yeah. I think what's a little different now. is Susan has had some difficulty with her mother. Again, most people I talk to, when you go into their backgrounds and you tech about. you know their mother and father of the man and the mother and father of the wife.
And then maybe aunts, uncles, brothers and sisters, people have stories. Yeah, and we want to zero in on that, but You know, they don't even really have a full story yet, but she was open. Her mother has developed dementia, and so she's been into her stuff with her sisters, and so they were just enough to listen to it. Yeah. Before I even get into the plan that we recommended for them, But you know, I made a list for the video of You know, the six things.
That I think caused him to change his mind. and be open to this and then ultimately buy this policy and it says Number one. is the effect on their kids. I mean once they started to view this. From a perspective of their children, because we're doing all this estate planning, it's all about the kids and the grandkids, and we want to.
You know, we want to leave them something, leave them in a state. We want to help them now. We've been helping them through college. It's all about that with people in their 60s and 70s. You know, so.
What I want to share with you is that long-term care. If you have an episode, either you or Tom does or Susan does. or you folks listening. It's going to have an effect on your kids whether you have insurance or not. I mean, it's going to have.
Your kids are going to be in charge then because you're going to be. 85. and you're going to be needing your kids. I mean I mean they're going to be probably making the decisions.
So and they're going to be making decisions about their own Situation as well. They're going to have a job and they got kids and they got things going on in their life, and they're all of a sudden going to have to be zeroed in on you.
So Once we kind of got that picture And it was real clear with them that they don't want to put this burden on their kids. And I got news for you. They are putting a burden on their kids. It's just not as big of a burden if we take care of the money.
Okay. The next thing was the tax-free benefits. Is that people really don't think about that? If you had to pay a $10,000 a month bill yourself, $120,000 a year. I mean to come up with $120,000 a year you're going to have to take out of your IRA 170 or something.
because you got to pay taxes. On the money before you Spend the money.
Okay. Yeah, and there's there's some tax deductibility there, but it just The long-term care insurance comes to you tax-free. And that's just about what their benefit is going to be. in a few years. their benefit of $10,000 a month.
And just the idea of that, and they could both collect on this policy at the same time. And the idea of that tax-free was a big bugaboo for me, big positive for him. Really the third thing. Is that he can purchase this, and the example we're going to be showing you is with IRA money because the IRA money is kind of over there, and it's the bulk of their money. And a lot of their financial plan is about distributing that money, paying taxes on it.
being left with something. after the taxes To live off of. and then hoarding enough of it. converting it to a Roth IRA to leave to these kids that they love. and grandchildren.
I mean, I mean, it just, the IRA is a big deal to them, and it hasn't been a big deal while they've been accumulating, because you just kind of view that as separate. But we have a way to take a chunk of that IRA money. and purchase a very large long-term care policy on both of them.
So just the concept of that. open him up even more. Um Then the fourth area is he very well understands RMDs. required minimum distributions. that are gonna hit.
Both of them at 73. which is only five years away for him.
So in a lot of the planning we're doing, we're getting ready for that. and doing things around the RMDs and when he learned that within this long IRA long-term care policy. which I'll explain in the second half of the show. Um It's going to cover part of his RMD. during all those years after 73, or at least about four or five of them.
So you like that. The fifth area is this policy has a death benefit.
So a lot of these folks are, well, what if I never use it?
Well, if you never use it for long-term care. Both of you never use it, then there's a life insurance benefit that pays to those kids and grandkids.
So that was attractive. And really the big the big deal number six is home health care benefit. is as soon as people start talking about long-term care insurance, They think, oh, nursing home, I don't want to go there. And I don't want to even buy a policy. I don't want anything to do with nursing homes.
And neither do I. I mean the reality is when it's time to go though, I'm going and so are you. I mean it just and Who is people with money A nursing home is really an assisted living. I mean, it's a much different ballgame. Yeah.
This insurance will pay for either one. Um What? The alternative to that, and really this is getting more and more and more, is to be cared for at home. They sent you home. and your wife home from the hospital.
directly home. They didn't send you to a nursing home. Yeah, and they probably maybe should have. I mean to the shape you were in. But they sent you home.
and you couldn't care for yourselves. Yeah. If you would have So so your home health care insurance that you have would have paid for that. I mean, it would have paid you very dearly and taken care of that. But even that for a few months, I mean you're in good shape now, so a couple of months that would have been real helpful.
But I'm not really talking about that when we talk about long-term care. I'm talking about needing somebody to come into your home every day. for five years.
Okay. I mean, that that that kind of a thing. Again, it's very expensive. But just the fact that that's a growth industry. And that's where the care is taking place in a lot of situations.
They didn't understand that. but Tom and Susan didn't, and they they do now. And so the plan is to be to start at home, stay home as long as possible. and then ultimately, if necessary, go to an assisted living.
So This is a great place to pause and remind you that the 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. And as you might imagine, the third one is Long-Term Care. And that's what we're talking about today. You go to that, you're going to see a video exactly the same title as today's show, Long-Term Care Insurance Financial Plan Series, episode 4.
And it's got show notes with all kinds of details, especially into what Hans is going to talk about in the second part of the show, the plan that he sold them, which is just an amazing hybrid life insurance policy. That we're going to get into all that. Of course, you can find that also in Hans's book, The Complete Cardinal Guide to Planning for Living in Retirement. And of course the ever popular, this is a great thing that they would love to talk to you about. Contact Tom's or Tom.
It's all there at CardinalGuide.com. We'll be right back with a lot more long-term care insurance financial plan series four of eight. 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. Welcome back to Finishing Well with certified financial planner Hans Scheil, and today's episode. is the Long-Term Care Insurance Financial Plan Series episode Four of eight, and this is some amazing products. That are out there.
And certainly, you know, when I heard what you guys did for Tom and Susan, it just man, it just tickles me that God has provided such a plan. Uh for folks To that really just write an open check. That that both people know that It's going to be handled, right? Yeah, and they hired us. to put together an income plan, an investment plan.
and a tax plan.
so that they could turn their big IRA Into a lifetime income. where they're going to live happily ever after. And that's what they hired us for. and to minimize tax doing that. Um and to combine that with their social security.
Again, so they can take all their money and live happily ever after and still leave something to the family. They didn't really hire us. to provide for long-term care. I understand most people don't. In fact, if you ask them, they say, I don't even want to talk about that.
But What we did in the first part of the show is we walked you through. I really won't quote premiums on long-term care until we have a discussion like we had in the first part of the show, which is. Do I really need this? Why do I need this? What's life going to be like if I don't have it?
and something happens. We did all that. first part of the show.
So now we're going to talk about what's the solution. And the solution for them. was to take three hundred thousand dollars out of their $1.8 million IRA. We're just seeing more and more people coming in with higher than a million bucks in their IRA. I think some of that has to do with People are working longer and what the stock market's done in the last 10 years.
Last 15 years, it's just been on fire. And so now people have this big boat of money. Yeah. to to some degree they don't know what to do with it and they're scared of it going down and you know, all all of that kind of stuff. And then we throw a long-term care event.
15, 20 years from now, 10 years from now. Yeah. Uh you know that worry meter gets up really high. The product that we recommended for them. Yeah.
A three hundred thousand dollar rollover from their IRA. to an IRA at the insurance company.
Well, there's no tax due. We're just taking $300,000. And we're moving it. And this is a very large policy. Many of the people that buy this use 200,000 or 150,000.
Don't let the size of the money scare you away. These people have a lot of resources and this just made sense for them.
So 300 grand goes from Thank you. Pre-tax, IRA, where it is now. Custodian to custodian. 300 grand is in an IRA at the insurance company. And then what this IRA does is it shoots out.
Uh 37,000. $500. A year. starting with the first year for 10 years.
Okay, and was shooting it into is a life long-term care policy that has a 10-year premium. each year $37,500. for ten years.
So You know, and what So how do you put in 300,000? But you get 375,000. out of the thing over ten years, well there's seventy five thousand dollars worth of interest. on your 300,000 that was in there.
So, I don't want to get too deep into the mechanics. You could watch the video, you could go to the show notes, look at the thing, or you could call us. and we'd show one for you. But the point being is it pulls the money out of the IRA. for ten years.
and then you got to pay taxes on that amount coming out of there. in a smooth fashion. But the net result is you end up with this long-term care. life insurance policies and let me just tell you about the benefits of it real quick.
So for both Tom and Susan. It starts at $6,864 a month. That's their benefit. And if you turn that into a yearly benefit, Um That's around $80,000. It's $82,368 a year.
But that's only if you use long-term care in the first year.
Okay. Um If you 20 years from now in 2046, that monthly benefit is twelve thousand three hundred and ninety seven dollars.
So it goes up by 3% a year.
So if you used it 10 years from now, the long-term care policy would be somewhere in between there. But I put it out to 2046 for Tom and Susan.
So they're both about 88 then.
Okay. And now they got 12,397 a month. for almost $150,000 a year. of benefits Tax-free. for long-term care.
Now let me tell you about the time frame. That most long-term care policies have a limit of like three years or four years or five years. Care. This policy is unlimited as far as time.
So it's impossible if both of them got dementia. Both of them needed 10 years of care. this policy is going to pay. 10 years of care. at the monthly amount.
you know it's it's it's it's something special.
Okay, now the death benefit with this policy. Starts at $433,000.
So if they were both to pass away, So like they were killed in an accident or something like that. Their heirs would get back $433,000.
Okay. So now what? What if you don't mind me asking, jumping in here?
So they bought the policy. They put the $300,000 in with this new custodian. But this custodian hasn't paid out. All the rest of it.
So there's this hundred four hundred thousand dollars worth of life insurance.
Well, what happened to the rest of the of the 300 that hadn't been The 300 is part of the 433.
Okay. The four hundred thirty three is really the death benefit. It's not all life insurance. It's you could say that 300 of it is just The 300 going back to the airs, and 133 of it is. Life insurance.
Okay. But just the point being, is you're not signing over your money to an insurance company, and nobody's ever going to get anything out of it.
So if you Both of you lost your life, both Tom and Susan. lost their life. In the first few years, they're going to get that IRA money back, their heirs will, and they're going to get some life insurance. And then I took the life insurance. 20 years from now in 2046.
The life insurance is $164,000.
So, you know, it it in Um Just that would assume that both of them are gone. And neither one of them used any long-term care.
So The likelihood of that is pretty slim. Um But Nonetheless, it's there. Yeah, and so If they use some long-term care. It's a dollar dollar dollar for dollar reduction of the life insurance.
So people don't buy these for the life insurance. The life insurance is just Kind of a peace of mind that I'm going to put this big chunk of money over to an insurance company. And if I never used it for long-term care, she never used it for long-term care, at least somebody's going to get something back out of it. That's really what it is. Um and nothing more because I don't I think the odds of neither one of them using up $164,000 of this unlimited policy is pretty low.
Um So another thing that I wanted to bring out I'm I'm certain it's right. Yeah. that that 300,000 that they moved over one time is only going to hit their taxes. 10%. Per year.
So it only So it doesn't hit their income because they're going to tax the money at 10% a year, right?
So every year you got 32%. Let's leave percentages out of this because it gets people confused. Let me restate what you said. is they move over 300,000. Right.
No taxes at this point. But immediately, just as soon as the policy gets issued, they're going to take $37,500. and move it over.
So now you've got to pay taxes on 37,500. which you know at 25 percent it'd be you know somewhere around Um you know, above 10 grand.
somewhere.
So you you're going to have a tax bill every year associated with this. That you're going to have to do. But also, it's your RMD, right? If you've got you're at 73, it definitely counts towards. It does.
I tell others. But just to answer your question. That's going to go on every year for 10 years.
So you're going to have $37,500. worth of income that you'll have to account for in taxes. Um Yeah. That becomes a sticking point for some people, but What we generally do when we do a financial plan and we did for them is we account for the taxes somewhere else. I mean, we just.
We make all this stuff work together in their income plan and their estate plan. um their tax plan.
Okay, all that stuff is all blended together. And that's, we actually do that first before we arrived at the amount of 300,000.
Okay. But I say that actually to make a point that for somebody. That has that kind of money in a Roth, or they just have that money in a savings account, or whatever, they can buy this long-term care plan with one lump, $300,000. And not have the The other ramifications of it, right? They absolutely can.
And it's actually a little less than $300,000. is if they were going to put in a lump it'd probably be around two hundred and eighty thousand dollars of money single premium And they've got these benefits for the rest of their lives. We want to remind you that the show is brought to you by CardinalGuy.com or we can. You know, kind of step you through it, but you can also get the whole plan through Hans' book: the complete cardinal guide to planning for living in retirement. Of course.
There's a long-term care worry at the seven worries tab. If you click on that, you're going to see lots of shows. But this exact show with show notes on exactly what that policy is. And it's really neat what Tom has there is it shows you actually what the financial plan looks like with the long-term care. Like they showed Tom and Susan, which is just a beautiful example of how all these things come together.
As well as, of course, if you go to cardinalguy.com, you got the contact Tons and Tom page so you can put together one of these for you. You know, that's custom made for your situation and your investments. And so. Again, it's CardinalGuide.com. Great show, Hans.
Thank you, 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 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.
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.
CardinalGuide.com.
