In this episode of the Secure Your Retirement Podcast, Radon and Murs discuss the final installment of their series on hybrid long-term care solutions, focusing on annuity versus life insurance. They provide an in-depth comparison of these two options, highlighting the pros and cons of each approach to help listeners determine which solution may be more suitable for their retirement planning. This episode serves as a comprehensive wrap-up of previous discussions on long-term care, offering valuable insights for anyone looking to secure their future and address long-term care needs.

Listen in to learn about the specifics of how hybrid long-term care annuities and life insurance policies function, including their coverage benefits, underwriting processes, and payout options. Radon and Murs discuss important factors such as guaranteed issue policies, tax-free benefits, and the impact of age and health status on insurance choices, empowering listeners to make informed decisions on planning for long-term care in retirement.

In this episode, find out:

·      The differences between hybrid long-term care annuity and life insurance policies.

·      How guaranteed issue policies work and when they may be beneficial.

·      The benefits of tax-free long-term care withdrawals and inflation riders.

·      Strategies for funding hybrid policies through lump-sum payments or ongoing premiums.

·      How to determine which option may be the best fit based on age, health, and financial goals.

Tweetable Quotes:

·      "The beauty of hybrid long-term care solutions is that they can provide tax-free benefits, giving you financial flexibility when you need it most." – Radon Stancil

·      "If you're cash flow heavy but don't have assets set aside, the Lincoln MoneyGuard's pay-as-you-go model may be the right approach for you." – Murs Tariq

Resources:

If you are in or nearing retirement and you want to gain clarity on what questions you should be asking, learn what the biggest retirement myths are, and identify what you can do to achieve peace of mind for your retirement, get started today by requesting our complimentary video course, Four Steps to Secure Your Retirement!

To access the course, simply visit POMWealth.net/podcast.

Radon Stancil:

Welcome everyone to Secure Your Retirement podcast. Today, we're very excited just to wrap up these conversations that we had previously on long-term care, in all essence hybrid solutions. And just to kind of, if you did not hear them, I'm going to reference them. It's episode 280, 281 and 282. And ultimately what we did is we started off in two 280 and we said, here's kind of this whole scenario of long-term care and what people are having to think about. And what has occurred in the industry is pretty much, hey, in these old traditional policies, big time rate increases and it's almost impossible to even buy one today. And so we said, "Look, there are hybrid scenarios, there are hybrid annuities and there's hybrid life insurance policies."

And we did that in episode 281 and 282 and what we said we were going to do now is kind of a side by side so you can kind of bring your head back around and go, "Well, what's the pros/cons between the two and how should I view them if I look at them side by side?" So today, we're going to do a very quick recap of each of them, the hybrid annuity as well as the hybrid life insurance, and then we're going to do a slide where we just kind of do a side by side.

I do want to set this up. If you're listening to this on a podcast platform, you can listen to it, but if you want to see it two ways that you can do it, you can go to Spotify, the video is uploaded, and you'll see all the slides that we're going to be walking through as well as you can go to our YouTube channel, which you can get access to as well. Very popular as well, just simply because we take all these episodes and we make them visual. So anyway, we're going to hop into this and again, like I said, we'll walk you through whatever we're talking about that's on a slide on the screen. We're going to be verbally walking you through it. So Murs, you want to get us started here on the hybrid annuity?

Murs Tariq:

Yeah, so we're going to do a quick recap on the hybrid annuity for long-term care and the name of the specific product, we don't always talk specific on products, but we thought it'd be nice to be able to get into the detail of it, is the EquiTrust Bridge. If you go back to episode 281, I believe, we go into way more detail on it. We walked through an illustration. I just wanted to give you enough to bring it back to the forefront of your mind as far as how this thing works.

The page you're looking at here, it's talking about long-term care coverage ratios. This is what makes this product rather unique is that it is guaranteed to issue. That means regardless of your health status, you are guaranteed to be able to get this policy issued. Well, what does that mean in reality? You see there's three sections of underwriting classes. There's preferred. That means you're the healthiest. There's standard. That means kind of the average, and then there's secure, which is the lowest tier of health. Secure is where you would say you're guaranteed. So even if you have bad health history and you would never qualify for say, life insurance or traditional long-term care or anything like that, in this case, you would. You would just get that secure rating.

So, depending on your health. And on this table, you'll see a bunch of ages. So depending on your health and what your current age is at the time of issue is what is going to then generate your coverage ratio. That coverage ratio is technical and there's a lot of percentages that you're seeing on the screen. Ultimately based on the rating that you get and what age you are, it's a multiplier on how much you put into the policy.

For example, on the very top, if you're 55 and let's just go with preferred and you put in $100,000 into the policy and you get that preferred status, you see there's a 325% coverage ratio. That means your $100,000 is going to turn into a long-term care bucket of 325% of that $100,000 or $325,000 for long-term care usage. So it's really just a multiplier again, based off of your age and your underwriting class. So you'll see at age 70, it's 310%. At age 80, on the preferred side, it's 300%. Again, this is just a formula really. If you understand that it's a formula based on age and underwriting, then you know what you're looking at here.

On our next slide, we're just going to remind you again how this all works. Here's an example of someone who is 70 and their initial premium, they put in $100,000 and they were put into the preferred underwriting class. So there's no guesswork here. If you go back to the previous table, you go to age 70, you go to the preferred section and we know that their selected coverage ratio is 310%. So what that means is their 100,000 immediately becomes the initial benefit base of 310,000 for long-term care coverage. So those are the numbers that we're working with within the policy.

Now, there are some stipulations in the policy, and that's what's shown here. In the illustration here at the middle to the bottom of the page, you've got guaranteed values and then you've got non guaranteed values. Don't worry too much about that. Understand though, the big thing here is that there is a vesting schedule. So it says, "Long-term care vested benefit base." And so the 310,000 of benefit base that you get, you don't actually get that until year five. So it's a 20% vesting schedule over the first five years. On year five, you're 100% vested into that $310,000 base for your use for long-term care. So very quickly I can say on this policy and we'll come back to it, but you really want to have the intention of not touching or not needing long-term care insurance for five years so you can maximize that benefit base and get that value on there.

The other thing that we wanted to bring to the table on this and what makes this product rather unique is the underwriting process. The underwriting process has been streamlined and a lot simpler. And again, it's guaranteed issue, but they've made it rather smooth. So if you've ever gone through life insurance underwriting before, there's a lot of questions involved. Sometimes there's blood work and tests involved, things like that. In this case, that does not apply. You're basically doing an interview over Zoom or over a video call with someone from EquiTrust or a partner of theirs that does the underwriting side. They're going to make you show your photo ID to prove you are who you are, ask you some few questions that involve cognitive and physical assessment and then you're done. No needles or anything like that. It's rather smooth and simple. So I wanted to point out that as well. That barrier to entry has been erased with this underwriting.

Radon Stancil:

All right, so now what we're going to do is we're going to do a quick recap of the long-term care hybrid life insurance. And on this one, we did talk about another specific product as well, Lincoln MoneyGuard. Again, we're not trying to say that the product that Murs just talked about or this one is the one you should go with. We just was trying to give an example. Ultimately with this, a little different. We're not doing a funding all up front of, I'll say $100,000 like we talked about there with Murs. What we are looking at here is that a person aged 60, what they're going to do is they're going to just pay $9,422. They're going to do that for 10 years and then they're paid up. They no longer pay any premiums. In this particular example, it was a 60-year-old female and she got a couple's discount because they're going to do this for each other.

In all essence, the basics here are that at age 85, they would have in all essence $10,469 per month of long-term care benefit. That's kind of how it works. Now remember, they're going to put in $94,000 over the course of their funding this. They're going to have guaranteed $120,000 death benefit. So the idea here is some people wonder, what if I pay all this premium in and then the money's just gone? In this case, it is not gone because I basically funded it and said, "Hey, I want long-term care coverage, but if I never need it, my beneficiaries are going to get the money I put in, plus a little bit guaranteed in this particular situation."

So again, just to recap, I pay $9,422 per year. I'm going to get $5,000 right up front as a long-term care benefit. If I wait to age 85, I'm going to get $10,469 for a benefit per month because I've got a 3% compounding factor. That's how I get from the 5,000 to the 10,469 and I've got a guaranteed $120,000 death benefit in this scenario. Again, what we tried to do is break this down. So again, I am now showing an illustration. What you'll see is you see those premiums going in, you see that the death benefit of $120,000 is always there, that my benefit though is going up. So at age 69, I've got a $327,000 benefit or a $6,524 monthly benefit. I could go say, "Well, what would this be at 80?" Well at 80, I'm going to have a $450,000 long-term care benefit and I'm going to have a $9,000 permit month benefit that I can take. This is all going down this idea of what is guaranteed.

These are all guaranteed. I don't have to worry about whether or not the policy is going to perform or not. And I also have my $120,000 death benefit. At age 85, I already talked about those numbers. I've got $10,409 a month of benefit with $525,000 in my base. I got $120,000 death benefit. So again, all of this are the guaranteed numbers, but there's some side-by-sides that we want to take you through. So let's just do it this way, Murs, just so we can keep the theme here. If you are looking at this, you'll see it side by side. We're going to basically each of us for the ones we just recap, we're going to recap them line by line. So I'll let Murs start.

Murs Tariq:

Yeah, so on the EquiTrust Bridge Long-term Care Annuity, the biggest thing, the nicest thing about it is streamlined and simple underwriting in that Zoom type of video format.

Radon Stancil:

All right. On the Lincoln MoneyGuard Long-term Care, it is not a guaranteed issue. It's not as simple. I do have to go through underwriting. So if I were to compare the two here, if I am really good health and maybe I'm 60, 65, I'm probably going to lean in the direction of the Lincoln MoneyGuard. If I have maybe a little bit of health issues, I maybe got a lump sum amount of money. I'm going to look more toward the EquiTrust Long-term Care Annuity.

Murs Tariq:

Right. So yeah, the EquiTrust is that guaranteed issue. And going back to those coverage tables, it's all based on your age and class. There really is no guesswork as far as what the underwriting delivers. You know what you're going to get once you have your age and your coverage class assigned.

Radon Stancil:

On the Lincoln MoneyGuard, it is not a guaranteed issue. Again, you're going to go through underwriting. If you get turned down, you won't have the policy. So again, there's some preliminary questions you can go through to help understand a little bit, hey, should I even be applying for this? But again, if I'm pretty healthy, a little bit more along the younger age, 60, 65 might be a good scenario to look at.

Murs Tariq:

The beauty of or true long-term care insurance, whether through an annuity or life insurance is that there is tax-free long-term care usage. So this applies to both the EquiTrust and the Lincoln MoneyGuard. One's an annuity, one's life insurance, but they're both in the category of long-term care. So when you get in that scenario of where you need the benefits and you cannot perform two out of the six activities of daily living, you're allowed to tap into that bucket, that long-term care benefit and those withdrawals are tax-free in both of these products.

The EquiTrust Bridge, the most common or really the only way is a lump sum funding in most cases. So you could say, "Well, I've got $100,000 in the bank and I want to get long-term care set up for me." You could put $100,000 into this policy and then that sets you up.

Radon Stancil:

On the Lincoln MoneyGuard, I can do the annual. I just went through a whole illustration with you of doing the $9,000 a month for... I mean, I'm sorry, not a month, per year. 9,000 per year. And I do that for 10 years and I'm paid up. But I also, if I wanted to, I could just go put a lump sum in there and have it all paid up right in the beginning. So I've got a little bit of option there on how I do that.

Murs Tariq:

Yeah. So just a quick one on that is maybe you are older and you just need to reposition assets. Maybe the EquiTrust makes more sense. You've got a brokerage account or you've got, and the bullet point here, you've got another annuity that is non-qualified money. You could say, "Let me reposition into this long-term care policy."

Radon Stancil:

Let's explain what non-qualified means. Basically, I have an annuity, it's not an IRA, I put in after-tax money and it's appreciated. Perfect place to put this is the EquiTrust. Think about it. If I had a hundred thousand dollars in my old annuity, it's grown to whatever, 150, 200,000. If I take that growth out, I'm going to be taxed on it. So if I say, "look, I'm just going to allocate this over to the benefit in the EquiTrust." I now could take that money out if I needed it for long-term care tax-free. So I could convert really that money to a tax-free distribution for long-term care benefit,

Murs Tariq:

Right. And on the flip side of lump sum funding is the Lincoln MoneyGuard is, well, what if you're cashflow heavy but you don't really have assets, but you want to plan for long-term care? That's where you could say, "Let me come up with a 10-year pay," like we showed where you're paying 9, $10,000 a year to build up a long-term care bucket.

Radon Stancil:

And then if I don't need the Lincoln MoneyGuard for long-term care, all that money is going to go to my beneficiaries on a tax-free basis.

Murs Tariq:

The EquiTrust, when you have the policy in place, in force, it does have a growth factor on the long-term care benefit and that is a 2% inflation rider. So every year that benefit, as long as you haven't used it or tapped into it, it's going to grow by 2%.

Radon Stancil:

The Lincoln MoneyGuard is going to grow at 3% inflation. So I get a little bit more of a step-up on that. Again, I'm kind of weighing this back and forth on whether or not my health is there or not.

Murs Tariq:

And then something to know about, I mentioned it earlier, but you need to know about it, is the best way to use the EquiTrust is if you do not, I know we don't know the future, but ideally we're not touching this for five years so that we've got the full vesting taken care of and we get that max benefit on that coverage ratio.

Radon Stancil:

All right. That's our comparison. So where we are at this point is if you are listening to this and you're thinking, "Hey, you guys talk fast or it's hard for me to understand it, I want to understand it for myself, feel free to reach out to us." Here's the easiest way to do it. Go to our website, which is pomwealth.net. Top right-hand corner, click on schedule a call. That brings up our calendar. You would get then on a 15-minute call with us. We'll walk you through, kind of have a conversation and determine which one of these is the best. And if you say, "I want to see what this looks like," we can actually have an illustration built specifically for you and kind of give you some guidance around what looks the best. We are not people who say everybody should have long-term care insurance, but we know it's a big concern and we know this is something that many people should be concerned about.

I know I'm 51, I have now got my own long-term care policy. I did the hybrid life insurance plan because I feel like it's important. I want to have something in place in case I were to ever need that in the future. And if I don't need it, my children get all the money tax-free. All right, well we hope this has been beneficial. We will talk to you again next Monday.