Financial planner: look at long-term care insurance


As the United States population ages and birth rates decline from historical levels, the amount spent on long-term care for the elderly is expected to increase rapidly. For this reason, many people are probably thinking about the best methods they can use to fund long-term care (LTC).

That’s according to Robert Klein, a financial advisor and founder of the Retirement Income Center in Newport Beach, California. Klein, who in the past has discussed reverse mortgages as a potential tool in a retirement plan, explores some of the ways how he could be funded for up to 10 years in a new column at The Street.

For example, those who may not have a lump sum of cash to fund LTC insurance might consider other policies, including “limited payment” LTC insurance policies.

“Limited-pay long-term care insurance policies are traditional long-term care insurance that is fully paid out after a fixed number of years, usually five to 10, with 10 being typical,” Klein explains. “Some of these policies have a rate guarantee whereby the premium is guaranteed never to increase for the term of payment, for example, 10 years for a 10-payment policy.”

Limited-payment policies remove the lifetime commitment often associated with annual policies and could avoid some instances of premium increases, he says.

“Annual premiums for 10-pay long-term care insurance policies are about 2.5 times the initial premium for comparable annual policies,” Klein writes. “The value of a 10-pay policy versus a pay-per-year policy becomes more apparent over time as premiums on pay-per-year policies increase.”

LTC insurance policies are expensive, but can be worth it when compared to an LTC insurance event such as dementia, he explains.

“In addition to being tax-free, long-term care insurance benefits provide peace of mind because they eliminate the need to liquidate assets set aside for retirement and other financial planning purposes,” wrote Klein. “Also, care can be provided by trained professionals rather than family members. When care is provided by one family member, it can be devastating for the whole family, as it negatively impacts family dynamics, disrupts the life of the caregiver and often impacts health and well-being. – to be a helper.

Klein, a guest on The RMD Podcast in 2021, discussed potential advice for reverse mortgage professionals looking for a financial planner as a referral partner.

“Just reach out,” he said on RMD #24. “I reached out to people in the reverse mortgage industry, various people I approached, and industry experts. I had mutually beneficial relationships with these people and learned a lot about [the product]. So I think it’s a matter of reaching the people you see who are interested in the business, preferably. And then just open the eyes of other advisors who might not be so obvious that they care about the reverse mortgage industry.

Read the new column from The Street.


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