Alternatives to Long-Term Care Insurance
Certain Federal workers are facing a big hike in long-term care premiums. Stay calm and explore other options.
Federal employees and retirees who signed up for the Federal Long Term Care Insurance Program may experience a rise in their blood pressure over the next few weeks.
On November 1, their premiums will increase by an average of 83%, or more than $100 per month.
If you're one of the roughly 280,000 federal employees who enrolled in the plan (about 10% of the current federal workforce), you just watched your retirement budget collapse. And you're probably angry.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Rightfully so. You probably believed your premiums would be better controlled.
But let's give your blood pressure a chance to come down and talk about your options.
The program is offering you a few ways to go. You can lower your benefits and maintain your current premium amount. You can go halfway—increasing the premium by 40%, for example, and reduce your benefits proportionately. Or you can keep the benefits you signed up for and absorb the new premium.
But there are other options available as well—steps that can be taken outside of the federal program that might also work for you. It's important to remember, however, that everyone's situation is unique, and what works for one person may not work for another. Here are just a few options available:
You can buy a life insurance policy. There are myriad life insurance policies out there and this is just one example of how purchasing a policy can help you pay for long-term care. Premium payments can be made using a single premium or can be paid monthly or annually.
Once you need long-term care services, you are most likely approaching your mortality, so they're going to let you access either the entire amount or a partial amount of the death benefit. It just reduces the death benefit proportionately. So if, for example, you pass away after you've used half the benefit, your heirs will still get the other half tax-free. If you don't use it at all, they'll get the entire death benefit.
In most cases, once you've put that lump sum in, you'll never pay another premium.
You can use a fixed index annuity with an income rider for your long-term care fund. A fixed index annuity is designed, first and foremost, to help create a guaranteed stream of income for as long as you live. However, the idea in this instance is that you'll pay the annuity premium and let it sit and accumulate interest credits for a given amount of time. That annuity will also have an income rider, generally available at an additional cost. That rider may also increase your benefit base by a certain percentage each year, often known as a roll-up interest rate. The longer you delay the rider income, the more years you can enjoy the annual roll up.
In 10 years, you can come back to that money and start drawing income.
It may be appealing for a person who might not be able to qualify for traditional long-term care insurance or someone who might not be able to get a life insurance policy, because there's no underwriting.
Putting money aside for long-term care isn't an easy decision for anyone. It's an expense we try to talk ourselves out of, saying: "Only 50% of people need care; maybe I'll die in my sleep."
But there are ways to fit that fund into your retirement plan. So stay calm, carry on and don't be afraid to get creative.
Ann Vanderslice is president and CEO of Retirement Planning Strategies. She holds a Registered Financial Consultant designation from the International Association of Registered Financial Consultants, is an Investment Adviser Representative and a licensed insurance professional.
Kim Franke-Folstad contributed to this article.
This is not a solicitation to sell, nor an offer to buy any security. Cabot Lodge Securities and CL Wealth Management LLC mutual funds are sold by prospectus only. You should consider the investment objectives, risks, charges and expenses of any product carefully before investing.
Mutual funds, Insurance products and Securities are offered through Cabot Lodge Securities LLC [CLS]. Member FINRA/SIPC. Advisory services offered through CL Wealth Management LLC [CLW].
60 Broad Street, Suite 3402, New York, NY 10004, 888.992.2268
Retirement Planning Strategies is not controlled by or a subsidiary of CLS or CLW.
To continue reading this article
please register for free
This is different from signing in to your print subscription
Why am I seeing this? Find out more here
Ann Vanderslice, president and CEO of Retirement Planning Strategies, specializes in helping federal employees understand and maximize the value of their benefits and plan for retirement. Vanderslice holds the Registered Financial Consultant designation from the International Association of Registered Financial Consultants. She is the author of "FedTelligence 2.0: The Ultimate Guide to Mastering Your Federal Benefits."
-
Stock Market Today: Nasdaq Soars Ahead of Tesla Earnings
The EV stock rose nearly 2% ahead of its highly anticipated Q1 earnings report, due after tonight's close.
By Karee Venema Published
-
GM Stock Accelerates After Earnings Beat
General Motors beat expectations for the first quarter and raised its outlook for the year. Here's what you need to know.
By Joey Solitro Published
-
Four Tips to Make Your Sales Presentation a Winner
Being prepared and not being boring can go a long way toward persuading a potential customer to buy into what you’re offering.
By H. Dennis Beaver, Esq. Published
-
What’s the Difference Between a CPA and a Tax Planner?
CPAs do the important number crunching for tax preparation and filing, but tax planners look at the big picture and come up with tax-saving strategies.
By Joe F. Schmitz Jr., CFP®, ChFC® Published
-
Charitable Remainder Trust: The Stretch IRA Alternative
The SECURE Act killed the stretch IRA, but a properly constructed charitable remainder trust can deliver similar benefits, with some caveats.
By Brandon Mather, CFP®, CEPA, ChFEBC® Published
-
Three Ways to Take Control of Your Money During Financial Literacy Month
Budgeting, building an emergency fund and taking advantage of a multitude of workplace benefits can get you on track and keep you there.
By Craig Rubino Published
-
What Not to Do if an Employee or Loved One Is Kidnapped
Businesses need to have a crisis plan in place so that everyone knows what to do and how to do it. Sometimes, calling the authorities isn’t recommended.
By H. Dennis Beaver, Esq. Published
-
Why You Shouldn’t Let High Interest Rates Seduce You
While increased interest rates are improving the returns on high-yield savings accounts, that may not be an effective place to park your money for the long term.
By Kelly LaVigne, J.D. Published
-
Need to Build an Emergency Fund? Seven Steps to Get There
Having a safety net can mean peace of mind on top of being able to maintain your lifestyle if a financial emergency strikes.
By Justin Stivers, Esq. Published
-
Which Type of Life Insurance Is Right for You?
Life insurance isn’t a one-size-fits-all option. Here are the differences between term life, whole life and indexed universal life insurance.
By Jay Dorso Published