Protect Your Clients American Dream — With LTC

In our first blog, I talked about where LTC was headed in the aftermath of the ILTCI meeting in San Antonio.

Today, I have an idea for a conversation starter for you and your clients to help them understand just how deep in they are.

Is your retirement plan insured? Have you taken steps to protect your own personal American Dream?

Boiled down the American Dream is simple and a process – wealth accumulation — that most working folks engage in. The details vary, but it’s about making certain that funds are available to allow continuing to live a lifestyle we’re comfortable with.

Bob Davis had been employed at Amalgamated Engineering for 30 years when he had a stroke at the age of 57. While his long-term prognosis was good and he was expected to eventually return to work, overnight, all the work he had done to plan for retirement was in jeopardy.

Bob’s $130K pre-tax retirement plan was his only real source of liquidity, so when he had to begin paying caregivers, he had no choice but to tap those savings. But first, he had to deal with early withdrawal penalties and taxes which cost him nearly $40,000.

Regardless of what the cost of Bob’s care will be, there are two stories here – both tied to a failure to plan for Long Term Care.

The first is that Bob and his family lost $38,000 – the better part of one year’s living expenses at retirement. – to mandatory taxes and penalties. Several years’ worth of investing gone in a blink.

The second is that the failure to plan and use LTCi leverage that approaches 99 percent – depending on age, LTC can cost less than 1 cent on the dollar – meant that Bob had to use his personal funds on a dollar for dollar basis to pay for care.

That’s right. At age 57, Bob could have purchased a plan ($6K month, $225K pool, 3% inflation) for $1832 a year or $165 per month. Quite a bit less than a penny on the dollar. And it goes without saying that if he purchased at a younger age, the premiums for that coverage would be less.

Bob was able to return to work about 16 months after his stroke. His 401k balance when he resumed working was $14,000.

Make certain you’re not the next Bob.

 

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