Streams Of Income

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This is the Truth Network. Welcome to Finishing Wealth, 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 Wealth, we'll examine both biblical and practical knowledge to assist families in finishing wealth, including discussions on managing social security, Medicare, IRAs, long-term care, life insurance, investments, and taxes. Now let's get started with Finishing Wealth.

So welcome to Finishing Wealth, certified financial planner, Hans Scheil, and I know you're going to be excited about today's subject, streams, and we do mean streams of income. And you know, the thing I love about that is that you might be familiar with Jesus with a woman on the well. You know, one of my all-time favorite stories, you know, here comes Jesus, wonderful, good Jewish boy, and he's talking to the Samaritan woman.

What's up with that to begin with? And then she's got all kinds of shenanigans in her life, so I can kind of relate to her. She's had numerous husbands and men, and she's kind of a hard woman. And she doesn't exactly even treat Jesus with a great deal of respect if you look at the story. However, when put to it, Jesus apparently knows that there's a good heart in this woman, and he says if you knew who was talking to you, you know, you wouldn't thirst because you'd have streams of living water, right? And the beautiful thing about that is if you think about it, this woman was changed completely to the point that she went out with those streams of living water, what was given to her, what was invested, what Jesus invested into her, right? He made an investment, and then it came back to him numerous times, as you might be aware.

She went and told half the town, right, about this man that she knew to be her Savior. So while we are talking about streams of income, you know, I just love the concept of, oh my goodness, Jesus made this investment in me, and how many people do I get to tell and share my living water that has meant so much? And another thing about living water, just because I love the topic, then on to let me talk for a minute, is that in Hebrew, the word for fountain is the same word as the word eye like an eyeball. And if you put that, and I just love to ponder things like this, like the prophet Jeremiah was the weeping prophet, and your eyes, we're told, have enzymes in them that they are in fact living water. And then when someone comes to Christ, like if you read Pilgrim's Progress, when Christian comes to Christ there at the cross, what does he do? He cries and cries and cries and cries, and maybe you experienced that, or maybe you're just going down the road one day and you heard a song, and you just had to pull over the side of the road and get rid of some of that living water. And as you did that in worship, there's just dreams that are there and available that Christians seem to, I don't know if you're like me, but I got a lot of dear friends that are Christians, and they cry a lot more than other people. And I'm convinced it's living water, Hans.

It just is. And so when we started talking about these streams of income, because we're talking about income and retirement, wouldn't it be cool that our building on the rock, like we talked about a few weeks ago, and preparing for the storms in life, that there would be streams not just for this generation, but for generations to come, based on what God blessed us with? Yeah. Well, and just today's topic is we're talking about setting up a stream of income that's available to you really at the end of your life, possibly for years at the end of your life, if you need to pay somebody to take care of you, which is long-term care. And so last week, we talked about using qualified money or IRA money to buy a long-term care policy. And that actually, it's a great alternative, especially if IRA money is pretty much all you got in terms of a lump of money.

But ideally, this hybrid long-term care, which is life insurance, long-term care insurance, many times paid for with one premium or 10 premiums over 10 years. It has a limited timeframe to pay the premium. It's best set up with non-qualified money or with money that you've already paid taxes on.

Right. So to review a little bit for that non-qualified means it wouldn't qualify as retirement income. So it's not an IRA. It's not a 401k.

It's not a Roth IRA. So this money is just like your regular income. Money in the bank.

Money in the bank. Money, you know, for me paying a premium on my policy, because we're going to be talking about what I've put in place for my wife and me today, it's money we've already paid taxes on. And it's actually, that's the easier thing to do is because we don't have to write two policies. We don't have to deal with the taxes on the premium. You know, in other words, and we also are not going to have to deal with taxes on the payout. So, so however this policy, which is primarily long-term care, but it's also life insurance, however it pays out its benefits, whether that's in long-term care benefits for me or for my wife or both of us, that's going to be tax free. And if we don't use it for long-term care or we don't use it much for long-term care, there's going to be a $300,000 death benefit that's going to be paid out to our kids under, as a life insurance policy.

And that's tax free as well. So it's after-tax money going in, hopefully many years of no premiums because it's going to be paid up in two years. So a total of 10 years, but after-tax money going in, a bunch of years with no premiums, and then a few years or several years with tax-free long-term care benefits coming out, and then ultimately a tax-free death benefit when the second one of us passes away. Darrell Bock Yeah, and the quick and easy math is you're putting in $100,000 or so and you're getting back $300,000, but you're putting it in a couple decades before it's possible that you may use it.

Jay Smith Well, yeah. And if we actually used it for long-term care, we're going to get as much as a million out of this, okay? The long-term care benefits, if they're used for that and they're used for a long time and potentially used by both of us, this thing could pay out a million dollars, okay, down the road. So it's substantial benefits, but that's true with a regular long-term care policy as well, as if you actually used it for what it was intended and you needed the care, you are going to receive way more than you paid into it as opposed to the person that never uses it, and they're going to get paid essentially nothing out of the thing and all the premiums are going to be at an expense.

Darrell Bock Yeah, and that, to me, that was, I found, wonderfully, I don't know, enlightening. As you described that, had you bought a traditional long-term healthcare policy and you're making, what, $1,000-a-month premiums? Tom Bilyeu Well, I am, yeah. Darrell Bock Okay, so if I'm paying $1,000 a month for a long-term care policy of this size and I paid in 10 years, I've essentially spent that $120,000, right, and that money is gone forever. It's spent, right? Tom Bilyeu Not in this policy.

Darrell Bock Right. Tom Bilyeu But if it was a traditional long-term care, but it wouldn't be $1,000-a-month, I could get these same benefits, most likely for $500-600 a month on a traditional long-term care policy. So I could effectively pay half.

I'm just guessing, but that's pretty close. So this is much more expensive, but you're guaranteed to get more out of this whether you use it for long-term care or not. I actually won't be getting the life insurance benefits. My kids will. Tom Bilyeu Right, right. Tom Bilyeu Or my estate will, however nicely you want to make that sound. Tom Bilyeu But the cool thing is that clearly you still have this, you know, from what you were showing me on your statement. I mean, you've put the money in. It's still right there.

You can get to it. Tom Bilyeu Well, yeah, this is eight years in. So what, in eight years, $12,000 a year, I've paid in $96,000. And it shows that I've got an accumulated value of $92,817.51. So I've got just about as much cash value as I've paid in premium.

And you'd say, well, that doesn't sound like a very good deal, but I've had the coverage for the whole time. And I just need to pay two more years of premium. And when I pay two more years of premium at $1,000 a month, I'll be 64 years old, and I'm just done. My wife will be 62.

And we won't be retired yet, God willing. Tom Bilyeu So when you said you had the coverage, though, it's really double coverage, because not only are you covered for long-term health care, or home health care, which we're hoping for, but you're also carried, there's also the death benefit. So you did, you had both that you wouldn't have had if you'd had a traditional long-term care policy, right? Tom Bilyeu Well, yeah, and the death benefit is $300,000. And it won't pay out until both of us are gone. So if we were both killed in an accident or something, then while we're still reasonably young, then there's a $300,000 death benefit that'll be paid out to the kids. Another scenario would be that maybe I would use this for a short period of time, 10, 15 years from now, maybe six months or something, and then pass away. Well, there'd be a little dent in that death benefit, because whatever they paid me for long-term care would ultimately be deducted from the death benefit. And then Rhonda lives on for a long time, and maybe she doesn't use it at all, or she uses it a little bit. Maybe we each use 50,000 at different points in time, and then she dies. Well, then the death benefit won't be 300,000, it'll be 200,000, because it's going to deduct whatever long-term care benefits it paid. And another scenario would be I would use it a lot. I mean, I would use it for several years. I would collect benefits, and then die, and then she would live on. And then she would use it a lot, exceeding the 300,000. Because like I said, this has an extension rider benefit on it, and it could pay out $600,000, $700,000, $800,000, $1 million to both of us. So there would be no payment to our children. There'd be no life insurance benefit, because it would have all been expended and more. So we're not really counting on this as our only life insurance.

It's more of a added benefit to our estate that makes this a wise investment either way. So today's show, Streams of Income, which has to do with retirement income, you'll find in Hans' book, The Complete Cardinal Guide to Planning for and Living in Retirement. It's all available at cardinalguide.com, which I got to tell you how cool cardinalguide.com is. It's got all the podcasts of all these previous shows.

It's got access to PDFs of all the chapters of his book. But also, you know, you can just email Hans and tell him we need to talk as you begin to plan how to build your finishing well ideas out on the rock. So when we come back, more on Streams of Income on Finishing Well. 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. Welcome back to Finishing Well with certified financial planner, Hans Scheil. Today's show, Streams of Income. And of course, we're talking about streams of income, you know, in the later parts of our life and even on into the next generation. And we've been talking about this hybrid long-term care policy, life insurance policy. It's really cool to me that, you know, I know in some long-term healthcare policies, the premiums can go up and things change within the policy.

This stuff's locked in on this one, right? It's guaranteed. Everything about it, every number that was put forth is guaranteed not to change for the rest of my life from eight years ago when I bought it. So I bought this plan right after Dr. Bob became a client. And I was so impressed with this company.

And really, this was the second policy that I wrote with this company was on myself. And that's one of the first things I love about it is my premiums were high, but they stopped after 10 years. So, you know, when I'm 64 and my wife will be 62 then, we're done paying premiums for the rest of our life. So if we're lucky and we don't start using this thing till we're in our 80s, and we're probably going to use it.

I mean, I just, I wouldn't have bought it if I didn't think that, you know, there's a pretty good chance that one or both of us are going to use it. There's going to be potentially, you know, a 20-year period where we're not sending them any money and they're not sending us any money, but this thing is just sitting there. It's inflating. It's got inflation on it. So the benefits are going up. The long-term care benefits are going up every year by 5%. And then all of a sudden we start to use it and they can't send us a premium increase or a premium change or a benefit change or filed.

I mean, it's just, it's beautiful. And so it's investing month by month, $120,000 over 10 years from 54 to 64, essentially, until 2022. And then hopefully a period of nothing for a good long time. The Lord may have other things in mind for me, but being an insurance man, so, you know, stranger things have happened, but just to have this all paid up before I'm even retired is wonderful. And, you know, I bought a pretty large policy here is if you, you know, you might be listening and you might be saying, you know, I don't have a thousand dollars a month to kick into this. Well, you know, this covers two people and we could, you know, we could cut about half of this policy and we'd still have a substantial benefit and it would look somewhat like about what we're offering to people. So, you know, it could be substantially less. Another thing I want to talk about is for those of you that have some money in the bank and you've got a CD or you've got an investment, you've got some non-qualified money. And I did have that at the time, but I just wasn't willing to part with it or to commit it all to an insurance policy. But I could have paid in the very beginning about 80, $85,000 in one premium and I could have bought the same policy eight years ago.

And then I'd just be done forever. Okay. Right. And the other cool thing about it is this particular policy, you don't have to be like a health giant.

No. In fact, this company has, I think it's six or seven versions of this same thing. So in other words, the extension rider on it is pretty much the same on all seven of them. An extension rider means is you're giving these companies a hunk of money and all they're agreeing to do is if you need long-term care, we're just going to give your own money back to you. So I want to go to the other side of this and just say, this is a big deal, but just at its surface, it's not that big of a risk. You know, if I'd have given them 85 grand or another way to put it is I've given them 96 grand to date. You know, if I started using home healthcare tomorrow and I used it for three months and they sent me, you know, 18 grand, they still haven't given me 96. I mean, so, so what they're doing on the front end of a claim or the first year or two or three is they're just giving you your own money back. They're giving you your death benefit early. You know, if you happen to die, well then they're giving you a substantial benefit because that's going to be a lot more than what you paid in unless you die when you're 90 something then, you know, like I do.

And if I'm lucky to live that long and well then you'd have the interest on the money. So what an extension rider is, is after they get done giving back your own money and you're essentially out of money and benefits, now you just get pure insurance to pay for long-term care. And Dr. Bob's policy is a lifetime. So once you get into the extension rider, you can't outlive it. Mine is not lifetime. It's a hundred months. So mine is like eight years.

And if I had to do it all over, I wish I'd have bought a lifetime. And you can buy that from this company. Now, when you talked about the people in poor health, if you're in very poor health, I mean, you know, like there is some level where you can't qualify for this. Okay. So there are some conditions and some situations.

Like me. Yeah, no, you'd qualify for this. I mean, we have people that had cancer and they were cleared six months ago. Maybe they had surgery eight months ago.

They had two months of treatments and they've been six months, no treatments. They can buy a version of this that doesn't have the life insurance on it. It's just simply an annuity and an extension rider and an annuity that grows. And they can take a hundred thousand or 150,000 of either IRA money or non-qualified money like we're talking about, put it in here that covers long-term care for two and a half years for two people.

So in other words, you got to use up your own money first and then the extension rider kicks in and it will pay if you want to for life. People in their seventies, we write a lot of those kinds of policies where they're just, they're leveraging their money. They're saying, look, I have, you know, this amount of money saved that I could use for long-term care, but it's going to run out pretty quick if I have to spend my own money. So then they move it to this company. They still got their pot of money there.

They could get it if they needed to, but they're going to leave it there. If they need care, they're going to use their own money first. When their own money runs out, then the extension rider kicks in and then the insurance company is paying a stream of income, either for the rest of your life or for so many years. I mean, there's a lot of different ways to do it, but we can deal with people with health conditions.

And you know, as my, my old buddy, Jelly, that I used to work with, he used to always say, you know, Johnny, he's this fellow, he's bad sick. You know, if you're bad sick, you can still, we still have some things we can do for you to set up some insurance to get you benefits. Right. Which, you know, one of those is short term for what, you know, home healthcare policies like I have. And yours has really got a couple of years of benefits if we structure the care properly.

So yours is, yours is still pretty substantial. We're actually offering, selling more of those types than we are this type. This is the hardest product that we have to sell.

You know, in other words, of all the different things that we do for people, including selling them life insurance, insuring their lifespan and annuities and Medicare and just all the different insurance products and investment products. I mean, sure, people raise some objections. People hide from us over this stuff.

They just, the conversation is difficult enough and painful enough. Only 11% of the people are like you and me that have long term care. Only 11% have it. That's from a government study that I just was reading, which means 89% don't.

Right. And then, you know, that's in large part because I think, you know, I never would have wanted to look down the road and say, gee, you know, when I looked down the road in my dad's life, I didn't want to think, well, yeah, at some point in time he's going to need care. Well, he sure did. I wouldn't have wanted to think that in my mother's life.

But, oh yeah, she sure did. And what kind of planning, you know, do we really have? Listen, my dad was a 35 year insurance man. I mean, he brought me in the business. This product was invented about when he retired. You think I could sell this to him? I take it no.

No way. I mean, he just, I even, when he was partially sick, you know, or he wasn't, he had a stroke by the year before he died. But even short of that, I had an alternative for him, which was a short-term care policy that I was going to pay the premium on. All he needed to do was just sign.

He wouldn't do it for nothing. I'm just telling you that after he passed away, about a month after that, I bought my mom long-term care insurance and I paid the premium. And after about a year or two, she just insisted on paying the premium. I'm just, people, people get weird over this stuff. I mean, they just, they do, including my dad.

And you, you know, it's just, you know, I can speculate why that is. And it's just, it's the hardest thing to come to, people know they're going to die and they know their family is going to be in a bad way. And they know they need life insurance. They still get a little squirrely about life insurance, but people feel really good when they buy it and they get it and they're, and people do buy it. With this, is people really the thought of being alive and being reliant upon other people and unable to care for yourself is just so threatening to people that I'm just speculating. And the reality is when it does happen, people are older and they're generally very appreciative.

It's really not as threatening, it's welcomed. I mean, when you're in this situation and you've had a stroke like my dad, and he got cared for, he was very appreciative of it. And, you know, it's, so it's, it's really the younger people that are looking forward who need to be buying this stuff that have the most difficult time. And, you know, despite that, we sell a lot of it and, you know, and we're also understanding when people are just, we have some people that call us up, they want to hear all about it, and then they want to say no. We say, okay, we'll just manage the rest of your money and hope for the best. Well, having had my hand in both my parents and, and now my mother-in-law, I, you know, you know, part of finishing well for me just has to be like, I want to make sure Tammy gets what she needs.

I want to make sure that my kids aren't put in a position where they feel like, you know, they didn't have any choice but to put me somewhere and all those kind of things. So, you know, we leave it to you and, and, and your decisions. Again, we can go to cardinalguide.com. Call Hans, he would love to talk to you about this subject.

And the thing about it is he knows angles. He knows ways to create these streams with IRA money that you're going to have to make minimum distributions or, you know, all sorts of different ways, you know, if you will, you know, just engage them. Cardinalguide.com. Again, go to their website and check out our podcast, Previous Shows. We are so grateful that you spend time with us today on Finishing Well. Thanks, Hans. Thank you. 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.