client seminar 33799 -11011 financial planning solutions for long-term care sm this policy has...

Client Seminar 33799 -1101 1

Financial Financial Planning Planning Solutions for Solutions for Long-Term CareLong-Term CareSMSM

This policy has exclusions, limitations, reductions of benefits, and terms under which the policy may be continued in force or discontinued. For costs and complete details of the coverage call your insurance agent or company.


Some of us are concerned about our long-term health.

But all of us are concerned about our long-term wealth.


After all, a long-term illness may become a crucial event in your lifetime.

Or maybe it won’t.


A long-term illness may or may not be a crucial event in your life, but long-term wealth absolutely is crucial.

Now. And always.


“Long-Term Wealth”

• Means enough to live on the rest of your life, with somethingleft over.


“Something Left Over”

• For “rainy day” safety?

• To pass on to your children?

• Or grandchildren?

• To give to charity?


“Long-Term Wealth”

• Is not a specific dollar amount.


Let’s assume you have reached long-term wealth.


You think so.

You saved.You invested wisely.Your home has appreciated.

What could go wrong?


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Three things could go wrong:• You could spend, planning to live to

85 . . . and then you live to 95 instead.


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• Your investment returns may be poor, and you run out of money sooner.


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• Your investment returns may be poor, and you run out of money sooner.

• You could lose your long-term health, destroying your long-term wealth.


Let’s look at all three potential situations:

• Outliving your money(possible, but there are planning solutions).




• Poor investment returns(less likely with proper financial planning).




• Poor investment returns(less likely with proper financial planning).

• You could lose your long-term health, and then you could lose your long-term wealth.


Of our three potential “situations,” the last one is the least predictable.• Fortunately, there are financial

planning solutions that can protect us if we lose our long-term health . . . and even if we don’t.


So, three important questions:• What are the chances we could lose

our long-term health?

• What would be the impact on our long-term wealth?

• And what are the best financial planning solutions to choose from?


12 Will Need for 1 to 5

Years

100 People (Aged 65)

39 Will Need Nursing Home Care

61 Will Not Need Nursing Home Care

19 Will Need for Less Than 1 Year

20 Will Need for More Than 1 Year

8 Will Need for More Than 5

Years

Source: James Robinson; Center for Health Systems Research and Analysis, University of Wisconsin, 2001.

What Are the Chances?


A Significant Long-Term Exposure . . . Alzheimer’s• Duration of Illness After Diagnosis (in

yrs.)– Heart Disease 3-4– Cancer 5-6– Alzheimer’s 8-20

Alzheimer’s -- Studies Suggest a significant Genetic Component -- Folks With Two Affected Parents Have a Fivefold Increase in Risk

Source Newsweek, Jan 31, 2000


Alzheimer’s

• 19% of People Ages 75-84 Have Alzheimer’s

• Nearly 50% of People Age 85 and Over Have Alzheimer’s

Alzheimer’s Association Estimates Average Cost of $174,000 to Pay for LTC Over Lifetime With Alzheimer’s

Source Newsweek, Jan 31, 2000


Types of Services Available

• Home Health Care

• Adult Day Care

• Assisted Living

• Nursing Home


Home Health Care

• First Choice for Most

• Can Be Expensive

• 1.88 Million Home Health Care Patients*

• Not Covered by Medicaid

* 1998 U.S. National Center for Health Statistics. Published in Statistical Abstract of the U.S. Census Bureau, 2000


Adult Day Care

• Excellent Option When Parent Can Live With Child

• Not Covered by Medicaid


Assisted Living Facilities (An Attractive Alternative)• Provided Assistance for Over 1 Million

Americans in 1998*

• Homelike Environments Offer Continuum of Care, Including Medication Management, Meals, and Transportation

• Preferred Option for People With Assets

Source: Price Waterhouse Coopers LLP (1999). An Overview of the Assisted Living Industry. Fairfax, VA: Assisted Living Federation of America.


The State of the Nursing Home Industry

Nursing Homes Are Facing Many Challenges

• Cuts in Medicare and Medicaid Reimbursement.

• Declining Base of Private Payers in Facilities. More are Selecting Home Care and Assisted Living.

• 1.49 Million Residents in 2000.** Healthcare Financing Administration, OSCAR Surveys as of September 2000.


Government Programs

• There Are No Current Efforts to Expand Medicaid Services to Provide Home Health Care.

• Likelihood of Receiving Government-Funded Care at Home or in Assisted-Living Facility Remains Small.


Paying From Your Assets

• Advantages– Money Talks– Unlimited Selection

• Disadvantages– Depletes Your Assets

Dollar-for-Dollar – May Have to Sell Assets

at Below-Market Value– Increase Family Stress


Financial Planning Solutions

• Building Assets

• Estate Preservation

• Wealth Transfer


Value of Long-Term Care Protection• Offers Choice and Security for Those

Who Want to Age in Place

• Allows People to Keep Substantial Portion of Assets Invested

• Two in Three Caregivers State that Having Insurance Benefits Reduces Their Level of StressSource: Can Aging Baby Boomers Avoid the Nursing Home? Stucki and Mulvey, ACLI, 2000


$200,000 Available for LTC

$100,000 Principal Sum

Premium will vary depending on age, sex, smoking status, and health. Limitations, exclusions, and surrender charges may apply. LTC benefits may have monthly limits.

Life/LTC Insurance Solution


Tax Benefits of Life/Long-Term Care Insurance

• Tax-Deferred Growth

• Long-Term Care Benefits Paid Income Tax-Free

• Unused LTC Benefits Pass Income Tax-Free Benefits to Heirs

We do not provide specific tax advice. Check with your personal tax advisor.


Cash Value of Life/LTC Insurance Policy Purchased in 1990

$ 70,000*$124,526

19902001

Plus: - Tax-Deferred Growth - Long-Term Care Benefits** - Home Health Care Benefits - Assisted Living / Adult Day-Care Benefits - Income Tax-Free Death Benefit

* Based on policy issued in June, 1990 with a joint age of 65. This represents past performance and is not an indication of future performance. The value in 2001 is after cost of insurance is deducted.

** Reduces the death benefit when withdrawn.


Cash Value of Life/LTC Insurance Policy Purchased in 1990

Death Benefit$ 70,000* $142,455$124,526 $179,317

19902001

Plus: - Tax-Deferred Growth - Long-Term Care Benefits** - Home Health Care Benefits - Assisted Living / Adult Day-Care Benefits - Income Tax-Free Death Benefit

* Based on policy issued in June, 1990 with a joint age of 65. This represents past performance and

is not an indication of future performance. The value in 2001 is after cost of insurance is deducted.

** Reduces the death benefit when withdrawn.


Funding Options for Life/LTC Insurance

• CDs/Money Market/“Just in Case” Assets

• IRAs

• Mutual Funds

• Annuities

• Annual Premium


Annuity Solutions

• Annuities designated for LTC– Could be better than your current “LTC

Fund”

• Immediate Annuity -- designed for someone already receiving care. This is a crisis management tool.– Provides guaranteed income for life at a

lower premium because person’s health is considered during underwriting.


Which Solution Is Best for Me?


Questions & Answers

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