Gambrell Financial

As of 2023 49 million Americans are retired and only 7.5 million has some kind of long-term care plan in place.

With only 14% of retired Americans possessing some kind of long-term care coverage along with 10,000 people turning age 65 everyday, we could be in for a long-term care crisis.

A recent poll discovered many retirees are worried about Long Term Care Medical Cost wiping out their retirement nest egg. 

The median retirement income for married couples over 65 was about $72,800 in 2020.

 

 

It’s important to understand the financial impact a few years of long-term care can have.

According to AARP.

Nursing Home Care: The average cost of a year’s care in a private Medicare-certified long-term nursing home room is $107,000.

Home Care: The average in-home care costs $50,918 a year for 40 hours of help per week.⁴

Assisted Living Care: A year in a 1-bedroom assisted living care facility averages $57,000 per year.

 

^{With the median retirement income for married couples at $73,000 it could be financially devasting just to pay for the least expense type of care, which is “Home Care” at an average of $51,000 each year.  The average long-term care need as of today (2023) is around 3 to 5 years.} 

^{For home care that’s an average of $153,000 – $255,000. For nursing home care, it could be dramatically more, $321,000 to $535,000.}

Typical Long Term Care Insurance simply doesn’t fit the needs of most retirees. 

Most financial gurus advise their clients not to purchase LTC until age 60 or 65 but ask yourself this question. How many 60-65-year-olds “ARE NOT TAKING SOME KIND OF PRESCRIPTION DRUG” as a result of a preexisting condition? 

The facts are clear, many Americans aged 60 and older have a preexisting condition. As a result, it makes obtaining coverage at a reasonable price very difficult, I’m assuming that’s part of the reason why only 7.5 million retirees have LTC while 41.5 million retirees go without coverage. 

The next issue is this…. After considering several premium rate increases from age 65 to age 85 paying around $70,000 over this 20-year span, if you were to die without ever needing to use the LTC policy your beneficiaries would receive nothing. There’s no return of premiums, there’s no built-in death benefit to the beneficiaries. The money is simply gone!

GOOD NEWS! 

Fortunately, there is a better way. With a Long-Term Care Strategy Plan, we can double or triple your long-term care coverage, while protecting your retirement nest egg. If after 20 -25 years you decide you no longer need the coverage and assuming you didn’t use any of the benefits, simply request a 100% return of all your money. If you die without needing the coverage, rest assured your beneficiaries will receive an inheritance. Make sure you contact our office today for more information!

For example: In a typical market account, let’s say you have 1 Million. For simple math let’s also say you have 1 Million in an FIA Fixed Index Annuity.

If the market drops 44% but you only lose 35% this means your 1 Million account value drops to $650,000.

With the Fixed Index Annuity, you have what’s called a ZERO Percent floor. This means the least amount of money you will earn during a market decline is zero percent.

Using the same scenario as above, if you have a 1 Million account value and the market drops the same 44%, guess what happens?

You’ll still have the same 1 Million account value because you can’t lose any money due to market losses. 

The price for having this retirement safety net is this…. You can’t have unlimited gains if you remove the risk of market loss. 

With a Fixed Index Annuity, you have what’s called an Annual reset or annual point to point crediting.

The amount of interest in a fixed index annuity will be limited based upon caps and participation rates as defined in the annuity contract.

In exchange for receiving an income guaranteed for the rest of your life, the insurance company will limit the unlimited interest you could earn in the market, that way they can guarantee you’ll never lose any money!

Because a Fixed Index Annuity is an Insurance product and doesn’t directly invest in the market. The insurance company using what’s called mortality credits along with other crediting options, are able to provide you with a higher payout dollar per dollar than what you would receive with a typical market account.

In other words, you don’t have to accumulate the same amount of money in a FIA to equal the same payout as a typical market account.

Assuming the 4% Rule you would need a 1 Million account value at retirement in order to receive $40,000 of income with an 88% – 92% chance of not running out of money.

With a Fixed Index Annuity and as a result of mortality credits you would only need $600,000 to provide you with the same $40,000 of income while also eliminating the possibility of you running out of money.

With a Fixed Index Annuity, even if the account balance goes to zero, you will continue to receive the same income forever, guaranteed!

A Fixed Index Annuity isn’t for everyone, and you shouldn’t move all of your money to an FIA.

My rule of thumb is this…. The amount of money you need to pay the bills, keep food on the table, pay for transportation cost along with medical cost, the monies needed to ensure these basic needs are covered, should be guaranteed with an FIA! The monies you don’t need to cover basic needs can be left in market products.

Guarantee the core and have fun with the rest.

Obviously the scenario used in this example is not a representation of your situation. The only way to determine if any of the information would benefit you is to schedule a one-on-one face-to-face meeting with myself or a member of my team.