Funding Long Term Care

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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. Well, Finishing Well is a general discussion and education of the issues facing retirees. cardinalguide.com, Cardinal Advisors, and Hans Scheil CFP, sell insurance.

This show does not offer investment products or investment advice. Welcome to Finishing Well with certified financial planner, Hans Scheil, and actually my dear friend today's show. We're going to be talking about funding long-term care, and so naturally I know when you're thinking about funding long-term care, you immediately go to Colossians 4.

Well, if you hadn't before, you will after today. So in Colossians 4, you have this phenomenal couple of verses that actually Hans pointed out to me, and so I love them, and I love how they apply to what we're talking about today. Those verses are, make the most of every opportunity. Let your conversation always believe, always be, full of grace, seasoned with salt, that you may know how to answer everyone. And so we, of course, we're going to get to how this applies to, you know, what's going to happen when we become in need of long-term care, but because I know that this is so near and dear to Hans's heart, I, he being my friend and knowing him for some time, it's like the one thing that I know Hans wants to share, the wisdom, right? The wisdom that he wants to make sure that people are aware of is that this is an event that's coming, and he wants you to be able to weather this storm for your family and for yourself, and so a lot of what he's doing here is he's saying, hey, guys, you're listening today. You're my favorites, right?

That's grace. I favor you. You're my favorites, and I don't want you to face these things without having the wisdom, and then he's going to season it.

He's pretty salty. He is going to make you thirst for some sense of, you know, God is going to have this under control, and so, you know, the neat thing about this verse is, you know, Paul was describing people who are on the outside, right? When we're talking to people that aren't on the inside of the church, that when we reach out to them, I mean, that's the bigger issue here is that we treat them in spite of their behavior as if they are our favorites. Like it says in Isaiah 61, Jesus said he was going to declare this is the year that Hans is his favorite, that Robbie is his favorite, that you are his favorite, and that's the idea of grace is favor, and then make you thirsty for where that came from, right, Hans?

Yeah, that's it. I read that this week, and I sent it right over to you, and it just it touched my heart, and it told me to just talk with grace, to speak with grace, to engage in conversation, and then season it with salt. I've got to say that I want to lead people to speak back to me the same way, because where I can put this in a little bit of a negative sense, or a judgmental sense, which we're not supposed to judge anybody, that's for God, but I don't know if I'm putting the right word on it, but I have so many people that are so cynical about certain things, and like the government, or social security, or taxes, or what the government's doing with interest rates, or how they're spending the social security money, all of which is probably true, or is true, it just it isn't helpful to our conversation. I mean, it stops people from getting what they really need, I think, is that cynicism, and it's protection many times from the real pain around a lot of the issues they need to, and so I just felt like that scripture spoke to me where, you know, it just says, it's telling me, you know, me alone to speak with grace, and so and if there's ever a need to do that, it's in the area of long-term care, and it's like bringing up a difficult subject.

It's like who invited him to the park? Yeah, I mean, it just isn't something that, you know, I'm like, oh yeah, someday, you know, I'm not going to be able to to make it to the bathroom, and all these things that are going to require this care, and, you know, who wants to face that stuff? But it is for many, many, many, I guess probably more than don't, are going to face this at some point, either long or short term, right? They are, and people that have resources or money, and they've saved for retirement, and they've saved for a comfortable retirement, and many times people have resources, more resources than they really need, because people that have accumulated things, many times have been very smart with their money or frugal or whatever you want to call it, and so they hire me to do a financial plan, and we go through all these things, and they want to know how I'm going to increase it, and how they can pay as little taxes as possible, and all of those things that are all real exciting and fun to talk about. The thing that's really going to disrupt their whole plan is if they face long-term care, so what I'm doing when I'm doing retirement planning is I'm sitting down with somebody in their 60s or their 50s if they're smart enough to get going on this a little early, or their 70s if they're a little late, there's still a lot we can do for them, and first thing on my mind is what's going to happen to their plan if either or both of them need long-term care, and what we're talking about long-term care is if you got to pay somebody to take care of you, to help you with basic activities of daily living, somebody to fix your nails, somebody to help you get in and out of bed, somebody to help you get dressed, somebody to take you to the store, take you to the doctor, just endless things, things that we all take for granted, and then many of us at some point in our aging, we reach a point because of an accident, or sickness, or memory issues that we now have to hire somebody to do this, or we have to go live somewhere that this is all around us because it's done more efficiently. I don't think it's done better, but it's done more efficiently in a facility like an assisted living, but it's done more pleasing to like me, Hans Scheil, in my home, but regardless of where it happens, it's going to be real expensive, and it's going to just wreck havoc on a retirement plan. So, this is real important to me, and, you know, what today's video, or today's video that I sent you, Robbie, to prepare for today is about comparing a hybrid long-term care plan to a traditional long-term care plan, and when I do the, for instance, or the example, I never put something up there that are just trumped up numbers, okay?

This is a real client with real people. They told me what their resources, and these people are quite well off, so if you go watch the YouTube video, or you listen to some of these numbers, I don't want the size of the numbers of the premiums and the investment that they're going to put in this to scare you off, because one of the things I'm going to tell this guy is if he wants to ensure half the risk, he could just divide everything by two, and we have, because, for instance, both of these plans start at $6,000 a month, which is $200 a day of long-term care insurance, and they both go on for like 50 months or four years of benefit, and then they both, the traditional long-term care and the hybrid long-term care, they're very similar benefits. They increase for inflation by 3% a year, so this thing in, when this guy's in his 80s, this will be, or this will be $12,000 a month, you know, so the benefits will be have doubled by that.

There's no change in the price. Yeah, I love the chart that you have that you get to see when you see the video, which, of course, if you didn't know, Cardinal Advisors is where Hans' videos are, and this one, of course, is called Funding Long-Term Care, but the chart, really, it shows these options, and then, again, you can divide that by whatever number that you're comfortable with as far as the coverage you need or the investment that you can make, right? Yeah, and so for, in this example, for husband and wife, both of these people are 64, which a lot of our clients coming in are that age, because that's right before Medicare, and in this example, it's 6,000 a month. That adds up to $288,000 of benefits if you went in the facility right now or you started using it immediately at age 64, but that isn't going to happen. Most people, it's going to be years off in the future, and like at age 80, either one or both of these people, they would have $9,628 a month because of the inflation rider, and it would be almost $500,000 in benefits, and then if they waited till 90 to use it, which is going to happen to many people, it's over $12,000, almost $13,000 a month in benefits, or $650,000. So, I was able to approximate, so I'm just showing this guy, do you want to buy a hybrid long-term care life policy with these benefits, or do you want to do a pay-as-you-go thing with traditional long-term care, which is use it or lose it, meaning that you're either going to use it and get some benefit out of it or you're not for long-term care, and there's going to be nothing paid to the estate if you don't use it or you don't use it much. So, I drew the comparison, but I don't want to get so much into the numbers as I just want to talk about nuts and bolts, because every person buying a long-term care policy, regardless of their budget or what they're trying to protect, faces these two same issues, where do they want to go the hybrid route and pay for it where it's going to return some long-term care benefits, or it has a life insurance benefit at the end, or are you going to go the traditional long-term care route where you're going to buy a policy where you just pay by the year?

Right, and one of the, I really enjoyed the video from a standpoint of it showed, like really I had never seen before some of the advantages, you know, because to me it always seemed like, well yeah, I would definitely do the hybrid, but there are advantages, actually big ones, to the traditional long-term care. And, you know, just this week I became aware, Hans, and I did not know this, that Corrie Ten Boon, who many Christians would know, you know, phenomenal saint that helped some of the Jews get out of, you know, Holland back in the day and ended up in a concentration camp herself. She had an unbelievably wonderful ministry. What you may not know about her life was she had a horrible stroke that left her without the ability to talk or the ability to write or really communicate on any level, and then she lived another ten years. So you would think, you know, just me, you know, God, how could this happen? This wonderful, unbelievable saint, but that's the way her life played out. And for her last ten years, she was in long-term care, and so, you know, God had some plan and all that.

You know, I don't know, all things work together, I know. But, you know, so we don't necessarily know what's coming, and so this show, to me, is just critical to, you know, the mission of what we do here at Finishing Well. And so, we'll remind you before we go to the break that this is always brought to you by Cardinal Guide, cardinalguide.com. Of course, Hans Schall's book, The Complete Cardinal Guide to Planning, Foreign Living, and Retirement, it's all there at his website, cardinalguide.com.

And when we come back, we got more goading from the goat himself about long-term care. Hans and I would love to take our show on the road to your church, Sunday school, Christian, or civic room. 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. And welcome back to Finishing Well with certified financial planner Hans Schall, today's show funding long-term care and looking at some different options and ways that you can go about planning for this storm that may be coming towards you and your family.

So Hans, you wanted to dig in a little bit more about this example. Yeah, so if we go to the traditional long-term care, both of these people are 64. They've lived in California. They've been very successful. They relocated to Wyoming.

They still have a type of a company opened, but they're really living out in the mountains in Wyoming and living a good life. And they're understanding that if they retired young because they retired a couple of years ago, and we've been very fortunate. And so we're now doing financial planning for them. We sold them Medicare insurance.

That's how they came to us. And so I got talking about long-term care and this guy wanted quotes immediately. And he was thinking he was asking for a long-term care insurance policy.

So I gave it to him, a pretty beefed up one. And it's the annual premium on the long-term care insurance policy covering both of them. The traditional policy is $9,885 a year, almost 10 grand a year. And so that's pretty stiff premium for a lot of people. Although I would be paying that amount of premium myself if I was just buying traditional long-term care now, because to get a beefed up policy like I have, I bought mine years ago, which I want and I'm going to have, that's about what it costs these days. And then this guy has a lot of resources, so then we can take it to the next level. We could increase that premium to $21,647.29 a year. Same policy, same everything. But then the premium only lasts 10 years.

So he would pay almost double or a little more than double for the both of them. But then in 10 years, they'd be done paying the premium. So... Wow, I got a question about that. I didn't, I've not heard of that option.

So that one kind of surprised me in the video. So if you kind of paid double in 10 years, you've kind of like paid up the policy. And so often we hear about people that have long-term care policies, but they're raised the rates. As people get older, if you paid it up ahead of time, they can't do that, I assume.

Well, that's exactly right. And then they add this company that sells the 10-year pay plan, they added it in this last year, they said, we'll guarantee that we'll never raise the 10-year. So they've even added it when you do the 10-year option, they've added a guarantee that they will never raise it, because they just don't foresee. So they said, we might as well go ahead and guarantee this, because we're not going to raise the rates on the 10 pay policy, because we wouldn't do that for five or six, seven years.

And we only got two or three years left. So let's just guarantee it to the customer. So that's a nice benefit. And this guy may very well do that. The reason I showed him this beefed up policy as a traditional is he has a way through the small corporation that he owns, that he could just pay this whole premium for his wife and him, and essentially write it off or pay it through the corporation, and then have this whole thing paid up in 10 years. So and he wouldn't have to pay tax on that premium. So I might end up helping him do that. But I actually think he's going to go the other way.

Okay. And the other way is the hybrid long term care. And so the hybrid long term care pays pretty similar benefits. Okay, because it's two separate policies, one on the Mr. and one on the Mrs. And one of the places the benefits are drastically different is the hybrid is an indemnity policy. So that means if he buys six grand a month of benefits, and then he gets to be 80, and that six grand a month has increased to 9,628 a year, which it will with inflation, it's already baked in there.

And then he has a stroke, like the lady in the example that you were giving. And he this is the kind of guy that's going to stay in his home, if it's at all possible. And they might even move back to California if this was the scenario or they'll probably have sufficient services out there in Wyoming. But we're going to bring people in. And the indemnity policy or indemnity benefit is just going to send him a check for 9,628 a month.

He doesn't have to send any receipts or prove that he's gotten the care or paid for the care. How's that? Yeah, that's like, that's my policy, right?

I've got your policies and indemnity. That's right. Right.

Yeah. And, but in the traditional long term care, there's no more indemnities on the market. So, and for affluent people, I mean, first of all, affluent people, they're going to like to stay in their house, more so, I think, just because they're accustomed to living at a certain way, and they've got the money to do it. And when they, the very time they get sick, they don't want to be moving out somewhere in a community facility, but in any way to stay home, they want to do it.

That's the first thing. And the next thing is, is if you have an indemnity benefit, you could hire somebody to just move in with you. And you could just pay them 10 grand a month and pay them off the books or whatever, let them live in there, pay for their living and pay them five grand a month. You wouldn't have to be justifying all this with the insurance company. You're just going to get a check, a tax free check for the benefit on the policy. And every so often, you're going to need to prove to the insurance company that you're still sick, or that you need the help of the activities of daily living, or you need to be supervised. So the indemnity benefit is when it's at all possible, is preferred. As I know of several friends that found an unbelievable caregiver for their relative that was able to move in. And how cool is that? Being able to stay at home and get good care?

I mean, that's a huge thing. Well, and sometimes this is the daughter who's divorced or never married or somebody, a niece, or nephew. And you can go to courses now.

You can even take them online to become a caregiver where you're not going to get a certification, but they're at least going to give you some training on doing the basic stuff of caring for somebody that needs help. And it's appropriate to pay that person, even in a well-to-do family. And then there's resentment with the other siblings. First of all, I'm taking care of dad.

You guys are living your life somewhere else. If it's a niece or a nephew or somebody like that, then it gets to be having this insurance that just pays if you need the benefits without having to use a home health care agency is nice. So enough on that. Well, I think it brings up a great point, Hans, because as I look at these options, so you have this traditional long-term care, which to some extent has more bang for the buck because of the benefits versus how much you pay in if you're using it. And then the indemnity idea of what we just described of being able to get the money to use without having to come in with the receipts and all the different things. But it all points to the fact that you're going to go, this is why it's so helpful to have somebody like Hans who knows this stuff, who's dealt with these situations time and again of a family that's gone through these things to go, okay, he knows my financial under, he understands my financial situation, which in my case he does. And he actually knows my health enough to know what I qualified for, what I didn't qualify for. And then putting all these different nuances together in order to develop something that's custom made for your situation is just a godsend from my standpoint, right? That these people have Hans that understands their financial situation to some extent, but also understands their needs in their life. And that's why it's so critical, really, I think, so awesome that God put you with him, Hans.

Well, you know, I'm blessed to be there. So just, I'll give you the numbers on their part of it. For the Misses, women pay a little more for this stuff. The single premiums, the the single premium is $152,000. For the Mister, it's $140,000. That's if they pay it all at once. Now, we could spread these things over a lot of years, but these people are not going to do that, they're going to pay for it all at once. And the depth benefit for each of them, if they don't use the long term care is $144,000. So pretty much the insurance company is going to just return their money or pretty close to their money to their beneficiaries, if they never use it, which is nice.

And if they do use it, they're going to be very happy they bought it. And the, you know, the depth benefit is $144,000, the long term care benefit is $288,000. So and then the long term care benefit grows over time.

So you can blow through the depth benefit and have a very much extended benefit. And then even if you use it to the max for long term care, it pays out way more than you put in there. And then when you ultimately pass away, both of these policies still have almost a $30,000 inherent death benefit. So the insurance company is still going to pay a depth benefit. Even if they paid out all the that for long term care, they're still going to pay their beneficiaries $30,000. Wow.

He's all over this. And the other thing that you pointed out in the video was that if one of them passes away, because you got both people, right, right, that they can set up the policy if they don't need the money, which doesn't look like they will, to just go right straight to their heirs, or to the other spouse, right? Well, yeah, you set it up with the spouse as the beneficiary. And then the heirs, as the children as the contingent beneficiary, and then you just we make a provision and we advise the surviving spouse to disclaim if they don't need the money. So that happens after the fact they just disclaim it. And then the insurance company pays off the kids. It's a way of just passing the money on. But they could be an appropriate way to do that. But they could be in a position or some people could be in a position where that surviving spouse wants the death benefit out of the other policy because they need that to live because they're going on living as a single person.

So we can set it up where they'd have the option to do both and make that decision at the time. Well, as always, we ran out of time before we ran on a show. Yeah.

But I can see that. Well, I'm hoping that you're that you're listening to Hans and you have an idea that this is this is something that takes some planning and take some customized planning. And so I want to remind you that the show is brought to you by Cardinal Guide, cardinalguide.com, where you can obviously email Hans, call him.

He would love to hear from you, get his book, The Complete Cardinal Guide to Planning for and Living in Retirement. Of course, the video that we're talking about, if you want more information on that, it's at Cardinal Advisors, of course, Hans Schile, not to you know, there aren't a lot of whole, whole lot of Hans Schiles out there doing videos. It's H-A-N-S and away you go.

That's that's how easy that is. Thank Hans. Thank you, Hans. Great show. Thank you. God bless you.

Same here. Finishing Well is a general discussion and education of the issues facing retirees. cardinalguide.com, Cardinal Advisors and Hans Schile CFP sell insurance.

This show does not offer investment products or investment advice. 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' bestselling 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.