That's what one of my
own family members pays, and it's not unusual. Everyone needs a solid long-term
care plan. Here are four ways to layer yourself with protection.
by: Mark Pruitt, Investment Adviser Representative
February 26, 2018
I’ve
seen what Alzheimer’s disease and dementia can do to a family.
Six
members of my wife’s family have had Alzheimer’s. My sister-in-law started her
journey with the disease when she was just 55; she is now 65. My mother-in-law
had it for 16 years. One of the things I’ve learned is that it is an extremely
slow goodbye.
People
tend to think that you get the disease for three or four years and then you
pass away. That’s not always the case. Medical advances are helping people live
longer, and some people with Alzheimer’s survive for decades.
That
brings about all types of challenges, not only for the person who is sick but
also for the family members who love them. And particularly for the caregiver,
who is usually the spouse.
Frankly,
my concern is more focused on that caregiver than the one needing the care. The
person with dementia may not even be aware of what’s happening. But eventually,
everything the caregiver does is geared to that loved one — from paying the
bills to being there around the clock without a break. It wears you out.
If
you and your spouse can prepare for the possibility of long-term care ahead of
time, you’ll potentially be better off. You might not ever need to implement
your long-term care plan, but having it in place is an important part of
planning. Once problems start, options become limited, and it’s hard to make
good choices when you’re in a reactive mode.
Before
making any moves at all, I recommend talking to a financial adviser who is
well-versed in long-term care solutions — someone who has dealt with these
issues many times. You’ll also want to consider meeting with an elder law
attorney who can help protect your assets when the bills start coming. That’s
especially important for the surviving spouse.
And
remember, it isn’t just Alzheimer’s or dementia that could devastate your
family and your finances. It could be Parkinson’s. It could be a debilitating stroke.
It could be a car accident. We think these are worries for older people, but
health problems can happen at any age.
As
an adviser, I always like to let clients know what many of their options are,
including:
Traditional long-term care insurance.
Much
like term life insurance, with long-term care insurance, you pay a stated
premium. You have to be able to afford it (it can be expensive, and premiums
may increase over time), and you have to be healthy enough to qualify. The
insurance contract will state how you qualify for benefits, but often the buyer
must need assistance with at least two of the six activities of daily living
(ADL) — such as bathing and eating — as certified by a doctor. Many people
don’t start off needing nursing home care, so be sure your policy will pay for
in-home care or an assisted-living facility. Coverage will vary by policy, but
frequently lasts for five or six years, and then you have to find another way
to pay your bills. So even if you go with a long-term care policy, you might
consider “layering” other options.
A fixed index annuity with enhanced benefits.
One
of your layers of coverage could be a fixed index annuity with a rider that
offers enhanced benefits if you become ill. Again, be sure of what you’re
getting; all annuities are not created equal. Some will pay 25% more than the
income stream you were receiving, some pay 1.5 times your normal amount, and
others will double it. So, for example, if you were receiving $20,000 annually
from your annuity payout and you could no longer perform two of the six ADLs,
you would receive $40,000 annually, usually until the qualifying account
balance is depleted or the maximum amount of time, whichever is earlier. (After
that, the payout would go back to $20,000.) You can roll over funds from your
IRA, 401(k) or 403(b) tax-free to fund this annuity, and you can fund it with
money from your Roth IRA or bank account as well. Riders are generally optional
and may come with an additional cost. Make sure to consult a professional to
best avoid incurring penalties.
Life insurance with living benefits.
The
life insurance industry also offers an opportunity to accelerate your death
benefit to get the money you need if you suffer a terminal, chronic or critical
illness. The plus if you don’t need care, the death benefit will go to your
beneficiaries when you die. There are several types of policies available, so
be sure to work with an experienced insurance professional if you decide to use
this alternative or consider it as one of your layers. The addition of an
accelerated death benefit rider may require an additional fee, and they are
subject to eligibility requirements. The amount of the death benefit that may
be accelerated will vary by policy and will directly reduce the amount the
benefit paid to the beneficiaries at the insured’s subsequent death.
Dividend-paying securities.
The
goal of these investments is more focused on income, not growth, which could
add yet another layer of money when it’s needed.
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