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Long Term Care Insurance From Your 401k Or IRA

Finishing Well / Hans Scheil
The Truth Network Radio
October 21, 2023 8:30 am

Long Term Care Insurance From Your 401k Or IRA

Finishing Well / Hans Scheil

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October 21, 2023 8:30 am

Robby and Tom are back again this week with a brand new episode! This week, they discuss long term care insurance from your 401k or IRA. 

Don’t forget to get your copy of “The Complete Cardinal Guide to Planning for and Living in Retirement” on Amazon or on for free!

You can contact Hans and Cardinal by emailing or calling 919-535-8261. Learn more at Find us on YouTube: Cardinal Advisors.


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Share it. But most of all, thank you for listening and for choosing the Truth Podcast Network. Welcome to Finishing Well with Certified Financial Plan Tom Griffith. And today we have a really, I am so excited about today's show because I've learned so much. I thought I knew a lot about the subject, but I have learned some new angles to it that I think you're going to find really helpful. And the subject is actually long-term care insurance from your 401k or your IRA, or maybe even from an inherited 401k or an IRA. And what a neat, new kind of angle we have to talk about on that.

And this idea really affects all of us. And I did not know that when I was a younger man, but as I always think about this from a biblical standpoint, like, have you ever had anybody step in on your behalf when you really weren't expecting it? And it was kind of an important person and they kind of stepped into the gap and they handled a problem for you that you really didn't see coming. And I remember when I was an eighth grader, I was on the basketball team. I didn't get much playing time. And I finally got a game where I got to play a lot and I fouled out in about 10 minutes. And I was like, oh, it just broke my heart. I thought I'd ruin my chances for any more playing time and all this stuff. And as I'm heading to the bench with my head down, man, the coach just grabs me and he goes, man, Dilmore, you gave it everything you had. I just love what you did. And he said, look at your arms, man.

They were hacking you. They should have fouled somebody else out. Not you. You were just playing your heart out. And he's so, I'll never ever forget it as long as I live, how he took what was one of the lowest moments in my basketball career and turned it into one of my favorite moments of my life. And so when it comes to this idea of long-term care insurance, obviously, you know, Jesus is going to do that for all of us, right, at the end. But isn't it a wonderful opportunity whenever we can do that for somebody?

Step up when they're not expecting it, when they don't see something coming and you stand in the gap for them, especially if you're important. And what you may not realize, but from my perspective, when you get long-term healthcare insurance for yourself, you are actually stepping up for your spouse, you're stepping up for your kids, your grandkids, by taking care of a burden that they won't have to, how to figure out how to take care of you when you're not in a position to do that for yourself. And my life would be such that I understand that at a level most people wouldn't because what happened with my father, what happened with my mother-in-law, and I saw what it did to my wife, you know, and I felt the pressure of all that and often have thought, because again, when I do this show, I know all about long-term healthcare insurance, but man, what an opportunity we have while we're in good health, while we have some financial resources, especially if we have a 401k or an IRA, and especially if we haven't inherited, like here you inherited this 401k or an IRA, but Tom, you know, if they inherited that, they got 10 years to distribute it, and this is a great way to take advantage of that, right? Oh absolutely, and I think we'll get into the specifics later, but you know, this, what we're going to talk about in the show is a way that you can use your own IRA, your own 401k, maybe a spouse's IRA or 401k, or if you inherit one from a parent or some are a loved one, you could use those funds, set them aside and provide the long-term care for yourself and your spouse, and Robbie, I think you're exactly right, I mean, I think, you know, often people think, well, you know, this care is for me, this policy is for me, you don't buy long-term care insurance for you, it's not real, I mean, it does take care of the person who gets sick, but the real reason you look at this is protecting your family, it's protecting your spouse, your kids from bearing that burden, I mean, I don't know how much many of you know sort of my story, I'm obviously much younger than Robbie or Hans, who's normally on the show here, but I have an autoimmune disease, and I was in my 20s, and I lived in the hospital for about a month where I could spend the whole show talking about the whole, all the details, but I got to experience what this looks like in real life, and yes, it was hard for me, yes, it was a struggle, I was having to relearn to walk, and I was in a wheelchair for about three months, but really, who bared the burden of that was my wife, she was taking care of our eight-month-old child at the time, she was trying to take care of the household, she was getting me to and from appointments, she was, you know, managing the money and all of this, and all I had to worry about was trying to get better, right, and so I don't want to minimize what I went through, but it was at some level harder for my wife than it was for me, and I think, Robbie, you have a similar experience in your situation, if I remember right. Yeah, I've got two of them, right, so the first one was my father, you know, he took a bad fall the last year of his life and broke his neck and required, you know, 24-7 care, and, you know, I was glad to do it, I'm his son, that's what I thought I was supposed to do, you know, this was an honor, you know, from my perspective in so many different ways, what I did not see coming was the weight that that would put on us, like, is he getting the best possible care from us, because he obviously would get sick because some of the things we were doing weren't right, I mean, he needed certain things with a catheter and he needed certain things, you know, with his back and bed sores and stuff that we just weren't, you know, didn't have the skill set, but again, when we ended up in the hospital for other reasons, you know, we started to learn all these different ideas that we did not know, we didn't understand, and then you have all the guilt that surrounds that, not to mention that, like, oh my goodness, that, you know, for those who know me well, my wife Tammy, and, you know, she ended up not only being the caregiver for my father, but then went right into being the caregiver for her mother, so for her, it was literally a five-year ordeal on her life and not being able to leave home or go do things or go on vacation and all those things, I don't think my mother-in-law or my father would have ever, if they understood all that was going to be involved, had not looked at a product like this, if they understood how easy it is to set something up, and with these having the life insurance death benefit, Tom, it's not like, well, if I don't ever get sick, I'm not going to use it, right?

Oh yeah, I mean, so that's a very good point, and I think you're right, I think there's often a misconception where people say, well, my kids will take care of me and my spouse will take care of me, and of course your kids are going to be involved or your spouse is going to be involved, but you don't want them doing the heavy lifting. I mean, absolutely, there are things that you really want professionals who are trained to do this, providing that level of care, and so let's get a little bit into kind of how this product works and sort of how it's designed and how you can use some of your IRA or 401k money to do this, and so just, I'll get into the specifics maybe on the second half of the show, but broadly speaking, what we're doing is we're setting aside some of your funds, that's still your money, it's not gone out of your estate, it's there, you set it aside, and what we've designed in this particular plan, and we have a YouTube video on this that you guys can see or you call us or we have stuff on our website about this, but it provides lifetime long-term care benefits for both spouses. This is a joint policy, this is when we're doing the center of practice, we sell a lot of this type of insurance, this is the most popular hybrid policy is sometimes what it's called, but what it does is it also provides a death benefit if you never need care, because one of the big complaints that we hear about from a long-term care standpoint is, well, what if I never need care, which is, you know, that's kind of the goal, the goal would not be to need care, we hope you never need care, and if that's the case, you still have a death benefit, kind of a return of the premium, sometimes more than you put in, going to your kids or whoever the beneficiaries are tax-free, so we're taking some of this money, we're setting it aside, really to provide this benefit, which again is the biggest risk of all the plans we do, we do lots of financial plans, needing long-term care is the largest risk that people face, because just from a pure financial standpoint, it's so costly if you're having to pay and especially if it's for an extended period of time, it can really drain people's accounts, or if you're not paying for it, you're really putting a big burden on the kids, and what this policy does is it has a death benefit off to the side, it's part of the policy, but what it pays the kids if you never need care, which is just a wonderful sort of peace of mind, you know you've taken care of the risk, and you also know someone's going to get a benefit out of this, you don't feel like you've just spent the money, and it's gone forever. Oh yeah, and you know, it's like the, that's why they call it a hybrid, because it's kind of the best of both worlds, that it's there if you need it, but if you don't need it, you know, you still have the asset, and the way this one is structured, it's sort of a one pay, and it's unlimited, right?

And so, you know, when I was looking at the details of this, Tom, I thought man, I mean talk about put your head on the pillow at night, and go well that's just not any more worry at all. Oh absolutely, and especially when you have a joint policy where you're covering a husband and wife, you know, and there's other companies that offer joint policies, if you don't have lifetime benefits, there's always a concern like okay, the first spouse gets sick, and they start using up the benefits, and am I using up these benefits that my spouse might need in the future, right? I mean there's always that concern, whereas with the lifetime policy, you have that peace of mind, you're going to have no hesitation in starting those benefits, you're going to start receiving them, and if, you know, for some reason both of you need care at the same time, it would pay double what the monthly benefit is. And so it's a wonderful policy, like I said, it's the one that we sell the most of, that's our most popular plan. There are certain other types of companies, other things out there as well, but this one works for a lot of reasons, you know, one of the primary reasons, it's one of the only companies that we have that will accept IRA and 401k money, and when you look across the, you know, our clientele and the general population, is most people's savings, that's where it is, it's in their 401ks, it's in their IRAs, some of them don't even need it, right? They have this money, they've done a good job saving, they live within their means, and they don't even need this money, so we kind of ask them, well what's this money for? What are you saving it for?

You know, a lot of times it's hard for them to come up with a real answer, but ultimately when you push them enough, it's, well I might need it in the future. What are you going to need it? Your expenses are covered, well I might need it for care. Yeah, absolutely, and so I know you're excited to hear about the details of this, it's really cool the way that they have these buckets that all this money goes in and out of, and able to leverage this money that hasn't been taxed yet, so you know, it's a real amazing opportunity on all sorts of levels as Tom will explain, and so we want to remind everybody that this show is brought to you by Cardinal Guide,, and there you've got of course the seven worries tabs we've talked about so many times, one of which is long term care, and of course if you go to that tab you're going to find the YouTube videos and the resources that Tom said as well as show notes that are going to tell you all the details about the policies that we're talking about, you know, and the tax ramifications, all that stuff is all there at, especially the contact information for Tom or Hans so that you, you know, if need be, you can just go to 1-800-HANS, as well as Hans's book The Complete Cardinal Guide to Planning for and Living in Retirement, and so we're going to be right back with a whole lot more on this whole idea of long-term care insurance from your IRA or your 401k, we'll be right back. 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 Tom Griffith, and today's show we're talking about long-term care insurance from your 401k or your IRA, and as we talked about in the first half of the show, this is like, if you get this one done, it's unlimited, you know, if you're like me and you think, man, what if I get Alzheimer's, you know, and I'm 20 years in this situation, it's an amazing thing, right Tom, to think, man, I've got it covered. Oh yeah, I mean, it's a wonderful policy, and we've sort of been alluding to it the whole show, and so what I want to do now is really get into the specifics, and we've really designed a policy, and this is sort of a sample policy, but again, if you want one run for you, just call us, we can run the numbers, but what we have here is a male and a female, a couple, who are both 65 years old, and so they have money in their 401k, they've done a good job saving, and they don't need it, and so they don't need all of it, but they're worried about this long-term care, right, they might have had an experience with a family member like Robbie, you have, or maybe personally like I have, and they're looking to do something, and so what we have designed as an example is taking 200,000 of their IRA or 401k and transferring it, rolling it over to an insurance company, that transfer is not a taxable event, you don't pay taxes on that transfer, it just rolls over into an IRA that the insurance company is holding, it's still your money, if something were to happen to both of you and you pass away in a car accident or something, that money still goes to the beneficiaries, so you're not saying goodbye to it, but what the insurance company then does is hold that money in an IRA there and then slowly distribute it out over 10 years into the life insurance policy that has the long-term care coverage that provides the lifetime benefits, and so, you know, one of the nice things about that is it's all paid up, you don't have to pay any more premiums into this policy, there is no risk of rate increases in the future, a lot of times the traditional long-term care policies, especially historically, have had very large rate increases, and so people sort of have known that, maybe they know somebody who's had that, and it's really prevented them from looking at doing something here, the nice thing about these hybrid policies is they're guaranteed contractually, they cannot raise the rates, so you do this one-time transfer, you have this, what they do, you know, you put 200,000 in, and what they pay out is $25,000 for 10 years, so you say, wait a minute, I put 200 in, they're paying 25,000 for 10 years, they pay out a total of $250,000, and so that's true, so there is an inherent interest rate that they are providing, we've calculated it as part of the show we did on YouTube, and the return on that money, and I can show you the math if you want to, but the return on the money is 5.34% over that 10-year period. Now after the 10 years, that IRA has been depleted, it's been drawn down to zero, and it's all been moved into the life insurance policy.

In terms of what you get from a long-term care standpoint, and again this is per person, so if you have a couple, and they're both needing it at the same time, they both get this monthly benefit, but you have a monthly benefit of $6,754 a month per person, and again, we structured this under a lifetime policy, so there is never an end to that money. If you needed care for 20 years, you would get that for the 20 years. There actually is currently a different insurance company, but they have someone on claim right now where they've been paying for 22 years, right, and so it's, is it likely?

Probably not, but could it happen? Sure, and we just, we don't have that crystal ball where we know how long you'll need it, and the nice thing about the lifetime coverage is you know that you're never going to run out. And so you say, okay, that sounds great, we have this long-term care, it's lifetime, what happens if we never need care?

Which again, there's a chance, and the goal really is to never need care. Hopefully you live a long life, you die peacefully, never needing care. Well what your beneficiaries get is a death benefit, a little bit more than you put in, of $225,000 that they would get if you never needed care. Another thing to know about this death benefit is if you use some care, so let's say between the two of you, the husband and wife, you use a total of $100,000 worth of care. That just reduces the death benefit down by $100,000, so you'd still have $125,000 going to your beneficiaries.

So one way or another, someone is at least getting $225,000 of tax-free benefits out of this policy, and potentially a lot more if you need some type of extended care situation. And so this is just, it's a wonderful way to take some of this IRA money, this 401k money that you might not even need really to live off of, and set it aside, get these benefits, cover the largest risk that you face in retirement, and just have that peace of mind that you know that that risk has been taken care of. Yeah, I'd love the idea of, you know, and the way you guys show it in the YouTube video, that you show here's this money that's on your balance sheet right now in your IRA of $225,000. So if you kind of picture that money sitting there, and then, you know, so monthly, you're moving it over to this life insurance policy that's, or excuse me, it's $200,000, and they're moving it over to life insurance policy that's $225,000.

So effectively, and I do have a question in this Tom, but I think I'm right. So let's just say, and obviously this isn't the plan, but if it were to happen financially, it's like a chain. So if both you and your spouse were to be killed in an airplane accident or something, you know, a year into this deal, then all that IRA money that did not go into the life insurance policy is still on your balance sheet, plus you have a $225,000 life insurance policy, so the beneficiaries are going to get the money remaining in the IRA and the life insurance, am I right?

That's exactly right. And so, again, this is not a good strategy, but to get the highest return on this money would be to put it in there, and both of you die immediately. Again, that's not what we're recommending, that's not why we're buying this. But to illustrate that point is the remaining IRA money is still on your balance sheet, you haven't given that up. And so both of you pass away, that money still goes to the beneficiaries, plus the death benefit, the $225,000. And so, I mean, in the show notes, we actually could show you where the, you can see it sort of going down because the IRA is being drawn down. But yes, there would still be a benefit there that would go to the kids.

So it's not money that's completely gone, it hasn't been spent for nothing. It really is, someone's going to get a benefit out of this policy, and potentially you are going to get a lot higher benefit from a long-term care standpoint, if you ever need it. And then it also, right, whether it's an inherited IRA or your IRA, you know, it counts towards your minimum distribution, right? Oh, sure.

And that's a very good point. And so with the $25,000 coming out, and so one thing I do want to make a point on is that $25,000 coming out each year, going into life insurance policy, that is a taxable event. You would get a 1099 from the insurance company saying, we distributed $25,000 this year out of your IRA.

So you would have to pay taxes on that amount, but we're spreading it out over 10 years where we're not having to pay taxes on the full amount right away. But because it's an IRA distribution, if you were 73 now, or potentially 75 in the future, depending on your age or your date of birth, is the IRS says you have to start taking money out of your accounts, 401Ks, IRAs, and you have to start it and do it every year based off the schedule they lay out. And so this $25,000 coming out counts towards that RMD, potentially satisfying most of the RMD requirement that you would have on your IRA or 401K, again, depending on your particular balance.

So it counts towards that. Where it's really helpful is from an inherited IRA standpoint. And so this is a really unique way to use an inherited IRA. So it used to be with inherited IRAs that if you were a non spousal beneficiary, so spouses are kind of handled differently, but let's assume a child in this scenario. If you're a child, it used to be when you inherited an IRA, you had the rest of your life to spread out those distributions. A couple years ago, they passed the SECURE Act, which says you now have 10 years, that IRA has to be emptied.

You can, by the end of that 10th year, it has to be a zero balance. You have to have drawn it, withdrawn it, pay taxes on it, and just be done with the IRA. This policy works great with inherited IRAs. If your parent or loved one has died recently, if it's been several years, there's other things we can do.

So call us if that's you. But let's assume they've just passed away, and you're inheriting this IRA, you didn't even know it was coming, you weren't planning on it, you don't know what to do with it, you could set it aside. Again, over at this insurance company, it satisfies those 10 year withdrawals because by the 10th year that IRA is depleted just contractually on this policy. So it's all out of the IRA, you've satisfied the IRS requirements for drawing it down. And you've just provided lifetime benefits from a long-term care standpoint for you and your spouse. It works great with inherited IRAs. And so I think that's a wonderful use for it for sure. Darrell Bock And also, Hans said in the video, and I love this, that for those of us like me who couldn't afford to pay the taxes on it, there are ways that you guys have to take that either out of the IRA money or set up other things, right?

Oh, sure. And this company actually gives you the option. So let's say we've run into the life insurance policy. But that doesn't mean you have to come up with the taxes with other money to cover that difference. So they would even let you do that internally in the policy. The result would be just a little bit lower death benefit, a little bit lower long-term care benefit. But again, you don't have to come up with the tax money from other sources.

Darrell Bock Right. And again, that illustrates well that this is just one scenario, right? If you have a different amount of money you can use, it would give you different coverages, but still have the same benefits without the same obvious, you know, death benefit without the same amount of long-term care per month. Hans Zimmer Absolutely.

These are very customizable, right? I mean, this $200,000 is just to illustrate how the policy works. I mean, we have people buying this with much higher amounts, much lower amounts, and it really depends on the client, their particular situation, how much money they might need from their 401k.

Darrell Bock Right. And unfortunately, we've run out of time before we ran out of show. But we want to remind you that, of course, this show is brought to you by Cardinal Guide, And there you're going to find, under the long-term care tab in the Seven Worries, you know, the YouTube video, which goes into great detail, as well as show notes and all sorts of things about this particular plan.

Again, it's under the idea of long-term care insurance from your 401k or your IRA. And it's all there at And of course, importantly, the contact information for Hans, for Tom, and Hans' book, The Complete Cardinal Guide to Planning for and Living in Retirement. So great show, Tom.

Thank you so much. Hans Zimmer Well, thank you. Darrell Bock 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 Whale 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. Once again, for dozens of free resources, past shows, or to get Han's book, go to If you have a question, comment, or suggestion for future shows, click on the Finishing Whale radio show on the website and send us a word. Once again, that's This is the Truth Network.
Whisper: medium.en / 2023-10-21 10:14:44 / 2023-10-21 10:26:29 / 12

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