Posts Tagged ‘Long Term Care insurance’

Long Term Care Insurance in Maine: What you don’t know just might lose you a few hundred thousand dollars.

Wednesday, February 22nd, 2012

By Nova Ewers, Beach Glass Transitions, LLC

Patricia Nelson-Reade, R.N., CELA, recently gave a presentation on Long Term Care planning to  the Cumberland County Networking Group for Senior Service Providers at Sedgewood Commons in Falmouth, Maine.

Today Patty told the group about  The Long Term Care Partnership Act. The gist: this act can help you save hundreds of thousands of dollars potentially.  Yet, most people are unaware of its existence – including quite a few insurance professionals.

Here are the details:

The Long Term Care Partnership Act “permits purchasers of ‘approved’ long term care insurance policies to protect from Medicaid an amount of assets equal to the amount of the long term care insurance if the purchaser relies on Medicaid after exhaustion of the long term care insurance.”  (quoted from Patty’s blog).  So in other words, if you purchased an LTCI policy with a $300,000 payout, and you have activated a claim on your policy, you may access MaineCare when your assets are equal to or below $310,000 as opposed to the normal asset limit of $10,000 for a single person without an approved LTCI policy.

Sounds great, right?  But the problem is that with the passing of this Act in 2009, it only covered policies sold after the enactment date, which does little for the vast majority of policy holders out there.  And insurance companies were refusing to reissue older policies with new policies that could be endorsed in the Partnership Program, even if the old policies met the eligibility criteria because the insurance companies had no incentive to do so and were not required by the Act to do so.  So in 2011, Maine added a statute to the Act that said insurance companies must reissue all policies that qualify for the Partnership Program as long as the policy holder submits a request by the determined deadline – September 28, 2012. Read More…

Turning Your Savings into Real Protection for Long Term Care

Monday, August 15th, 2011

by Kerry Peabody, Long Term Care Insurance specialist

You’re a saver. You’ve saved diligently (something more people should do) and now you’ve got some money tucked away “just in case.” It’s your rainy day fund. It’s money that you don’t plan to use for anything, and if you can pull it off, it would be nice to leave it to your grandchildren. But, you don’t have any protection against long term care. So, no matter how much you’ve saved, there is still a risk you might need to spend it all for long term care. What if you could keep control of that money, but still use it to protect yourself? “Asset-based” long term care plans will do just that.

Let’s say you’re 65 year old woman, and you have $100,000 in CDs, money market accounts, savings, etc. If you needed long term care, this is the first money you’d need to spend to pay for services. But, with nursing homes costing about $100,000 per year, that may not be enough. Using one of these plans, here’s what you can do.

You could move $75,000 of that money into an asset-based long term care plan. Then, the insurance company would agree to pay up to $158,000 in benefits if you needed long term care services, or if you passed away! So, you’ve  kept $25,000 in savings for emergencies, and you’ve turned your $75,000 into $158,000 – more than double your money. If you were to use $50,000 for long term care, and then pass away, the remaining $108,000 is still paid out as a death benefit. If the money is paid out to you as long term care benefits, there’s no tax. If the money is paid to your granddaughter, as a death benefit when you pass away, there’s no tax. No matter which one happens, you’re guaranteed to get more than double your money out of this insurance policy. But, that’s not the best part.

Something happens a few years down the road and you change your mind. Perhaps they find a definitive cure for Alzheimer’s disease, or a family member desperately needs cash, and you want to help. At any time, for any reason, you can go to the insurance company and get your $75,000 back. This product has  a built-in “return of premium” feature. So, you’re not giving up control of your money; you can still get to it if you need to. Of course, if you take the money back, your long term care protection goes away, so hopefully you won’t have to do that.

There are several of these products available today, so if traditional long term care insurance doesn’t appeal to you, perhaps this will. Let’s face it, you need to have some sort of plan for care, and that boils down to having the money to pay for it. If you’re writing the checks, you’re calling the shots.

Have a great week! Next time, we’ll talk about what long term care insurance plans can pay for.

Senior Money: Deferred Annuities Part II, Immediate Annuities

Wednesday, July 13th, 2011

Kerry Peabody, Long Term Care Insurance Specialist at Clark Insurance

We’re talking about “deferred annuities” this week, in a three part series. Here’s Part II: Immediate Annuities.

We’ve talked about “deferred annuities,” which are tax-advantaged savings & growth tools. Now let’s take a look at the other way annuities can be used – to create a guaranteed lifetime income. A pension is simply an annuity. If you don’t happen to have a pension from an employer (and we know that far fewer of us have these than used to) you can actually “buy” one, using an immediate (income) annuity.

An immediate annuity takes a lump sum and converts it to a guaranteed stream of income. The amount of income created is based upon the amount of the lump sum and the age of the annuitants, and how long you want the annuity to pay.

For instance, let’s say that Ted is 70. He’s collecting social security of about $1,600 per month, and he takes $1,000 per month of income from his IRAs. Combined, his monthly income is $2,600. He has $150,000 in CDs. He’d like to have a little bit more money to spend every month, but he’s hesitant to start drawing from his savings accounts, because he’s afraid he’ll spend them all down.

Ted decides to purchase an income annuity with $75,000 of his CD money. At age 70, this would result in $535 per month, every month, for the rest of his life, no matter how long he lives. If Ted lives to 110, that check will still be coming, every month, guaranteed. He’s giving himself some extra income, he’s still got $75,000 in savings for emergencies, and he’s guaranteed that this check will never stop coming, no matter what.

The downside to a “life only” annuity is that Ted might step in front of a bus before the entire $75,000 is paid back to him. If that’s a concern for Ted, we can fix that by adding a “period certain” to the annuity. For instance, we could say that we want Ted’s annuity to pay for the rest of his life, no matter how long he lives, or for at least 15 years. In that scenario, Ted’s monthly check would be $464 per month. If he passes away before the 15 year period certain ends, the check would go to his beneficiary every month. So, he’s guaranteed to get at least $83,520 out of the annuity – no matter what.

Also, when the money’s being paid from the annuity, only a portion of it will be taxable. For instance, in the Life Only version above, a portion of the monthly check is Ted’s money, and a portion is the growth within the annuity. In this scenario, only $145 of the $535 per month is considered taxable income.

So, once again, annuities offer guarantees, tax-advantages, and the flexibility to make your money do what you need it to do. If you have money that’s sitting idle in savings, CDs, or money market accounts, or in retirement accounts that you don’t want to leave at risk of market losses, then you can use annuities to create guaranteed savings and income for life. By combining the benefits of both deferred and immediate annuities, you can build a guaranteed, bulletproof income stream that you and your spouse cannot outlive.

Senior Money: Part 1 Indexed Annuities

Monday, July 11th, 2011

Kerry Peabody, Long Term Care Insurance Specialist at Clark Insurance

Let’s talk a little bit more about “deferred annuities” this week, in a three part series. Here’s Part I: Indexed Annuities.

A deferred annuity is a tax-advantaged savings & growth tool. As we said before, you agree to leave a portion of your money with an insurance company, for a pre-determined period of time. In return, the company promises to pay you a minimum return. While the money grows inside the annuity, you’re not taxed on any of that growth each year, as you would be in a CD. Over time, this means that you benefit from faster growth.

Deferred annuities typically pay a higher return than CDs will. While the difference may not be huge, when you add in that your money grows tax-deferred, it can make a significant difference over time.

Usually, the longer the annuity period – the amount of time you agree to leave your money with the company – the higher your guaranteed return will be. For instance, today, 5 year annuities will guarantee anywhere from 2.15% to 3.25%, depending on the company you choose and the amount you deposit. A 10 year annuity would pay anywhere from 3.05% to 4.25% per year.

There are also annuities that give you the opportunity to make even more, by “indexing” your returns to the stock market. These are called fixed, indexed annuities. It’s important to understand that your money is not in the stock market, and it’s not subject to market risk. The carrier is taking the market risk with an indexed annuity, not you.

Here’s how a fixed, indexed annuity works: You put your money with the insurance company, but instead of a guaranteed, flat rate, you choose an “index,” such as the S&P 500. If the S&P 500 goes up, your money goes up. If the S&P 500 goes down, you’re guaranteed not to lose any of your money. So, you go up when the market goes up, but you don’t go down when the market goes down! This is the best of both worlds. “But,” you say, “this sounds too good to be true. How does the insurance company do this?” It’s actually quite simple.

An indexed annuity also has a “cap.” The cap is the maximum you can earn if the market goes up. For instance, today, you could purchase a 7 year indexed annuity with a 6.5% cap. If your index goes up this year, you’d go with it all the way to 6.5%. If it goes up more than that, you still get “just” 6.5% return. The carrier keeps anything above that. If it goes up less than 6.5% – let’s say it goes up by 4% – you’d get the full 4%. If it goes down, you don’t lose anything.

So, by “indexing” the returns, you now have the potential to make more, but you’re still protected against the dips in the market. Not a bad deal.

Most indexed annuities also offer you a fixed option, and you can usually change your allocations every year. For instance, if you feel that the upcoming year is going to be a bad year for the market, you could change to the fixed, guaranteed option, and know that you’d make a minimum return. If the next year looks better, you could switch to the index option, to take advantage of the market’s ups, without any risk of downs.

As always, you should only put money into a deferred annuity if you’re fairly confident you can leave it alone for the entire annuity period. You will be penalized if you pull it all out early, because you agreed to leave it there. Keep in mind, though, that many annuities will let you pull some money out early – often as much as 10% per year – without penalties, as part of the contract.

Next time, we’ll look a bit more closely at “immediate annuities,” and ways to use both deferred and immediate annuities to strengthen your retirement security.

Maine Money Planning: My Family Will Take Care of Me

Monday, June 27th, 2011

“My family will take care of me.” How often have we heard that during the long term care discussion? This is a common sentiment, and it’s nice and warm and fuzzy, but in most cases is just not realistic.

First, let’s accept one very basic fact. Your family – your children, your spouse, your siblings -  will be involved when you need long term care. What do you want that involvement to be? Do you want them to be forced to actually physically provide you with care, or do you want them to be able to pick up the phone and call the professionals? For most of us, the latter is the best option.

There are several reasons why “My family will take care of me” isn’t realistic. The first is simply that they have lives of their own. Is your daughter sitting at home today, waiting by the phone for you to call and ask for help? Not likely. Our children have careers. They have children of their own. They have mortgages, car payments, and other financial responsibilities to meet. They have social lives, they have school plays, and college expenses. How realistic is it for one of your children to put all of that aside to provide care for you?

Second, if you’re 85 or 90, your “kids” aren’t kids any more. There’s a pretty good chance that your “kids” are in their 50s or 60s, or even their 70s! How physically capable are they of doing the hard work of providing care? How is their health? I heard a story yesterday about an 87 year old woman who is taking care of her 63 year old, recently-disabled daughter. How well do you think that’s going to work out for either of them over time?

When you’re 85, your spouse is probably pretty close to that. Do you really think that playing the role of caregiver is going to be good for her? Or for him? Caregiving is emotionally and physically exhausting, and it takes a terrible toll on your family. One of the hard, cold facts about family caregivers is that spousal caregivers have a higher death rate than non-caregivers of the same age. And the older the family caregiver, the more severe the impact is. Is this what you want?

Finally, what do you want your family’s memories to be? Do you want your son or daughter to spend their last several months or years with you in the role of caregiver? As distasteful as it may be, can you picture your daughter bathing you? Keeping you clean? Close your eyes for a few moments and try to envision what that would be like. Yes, there are wonderful, heart-warming stories about family caregivers, but I’d suggest those stories would be even more touching if the physical act of providing care had been delegated to a paid professional, not done by the family member. The “care” is the hard part, being together is the part we want our loved ones to remember.

Your family will take care of you. The decision you need to make today is what you want their job to be. So, what’s your plan?

Kerry Peabody, Long Term Care Insurance Specialist

Maine Financial Planning: Safe Money in Income Annuities

Monday, May 16th, 2011

Kerry Peabody, Long Term Care specialist

“Safe money.” Isn’t that a nice phrase – soothing, even. How many of us are at or near retirement age, and worried about something bad happening to our money? Many of my clients fall into this category. They’ve worked for 35 or 40 years, and now they’re ready to start enjoying everything they’ve worked for. A few of them have pensions, but most just have money. Money in IRAs, investment accounts, 401ks, and 403bs. They don’t know what to do with it, and they’re worried about what happens if the stock market takes another dive, or if they live too long (what a horrible thought, right?) Well, this is where an understanding of annuities is vital. Today, we’ll discuss “immediate” annuities, sometimes referred to as “income annuities.”

You don’t need to have a pension from a big company to have regular, guaranteed income. You can literally buy your own pension by converting cash into an income stream that you cannot outlive. Let me repeat that – an income stream that you cannot outlive. Think about that. A pension is an annuity, pure and simple.

We all know that, unless we have a huge bucket of money out there, one that’s so big that we can live off of just the interest, then eventually that bucket will run out if we’re drawing from the principal for our income. An annuity fixes this, by combining income with insurance. For instance, let’s say that a 65 year old man has $250,000 in savings, but a very low monthly income – maybe just social security. He needs more cash coming in each month. If he takes $100,000 of his savings and buys an immediate annuity, he’ll get a check for $715 a month for the rest of his life, no matter how long he lives, guaranteed. If he makes it to 90 – a very real possibility these days – he’ll have gotten $171,600 back from his investment. Not a bad deal.

What’s the down side? If he steps in front of a snow plow tomorrow, the payments stop. But, we can fix that, too. He could choose “Life with a period certain.” This means that he’ll get a check for as long as he lives, no matter how long, or at least a certain number of years. So, if he’s really concerned with dying before he gets all of his money back, the remaining payments would go to his beneficiary – a child, or his sister perhaps. That same 70 year old could choose “life, with a 15 year period certain.” If he chooses this, the monthly check would be $620, for as long as he lives, or at least 15 years. So, even if he steps in front of that plow, the annuity’s guaranteed to pay back at least $111,600 – $620 per month for 15 years.

(I’ve used a current product and rates for the examples here. Actual rates would vary depending upon when you buy the annuity, and what company you choose, so work with an agent who can compare several good, solid companies for you.)

So, if you don’t have a pension, you can go buy one. And, there’s no medical underwriting to worry about. What a great tool!

Next time, we’ll talk about “deferred annuities.” Have a great day!  

Kerry Peabody, Long Term Care specialist

Long Term Care: Paying for LTC Insurance

Friday, April 15th, 2011

Kerry Peabody, LTC Insurance Specialist

So, we’ve talked about how expensive long term care can be. It’s not cheap. How do people pay for it? Basically, there are three ways to do this: Your money, government money, or an insurance company’s money.

The first and most common approach is using your own money, or “self-insuring.” If you consciously choose to “self-insure,” or if you simply don’t do anything and just wait and see what happens, you’re accepting the risk that your money will be enough. This is a perfectly acceptable strategy, assuming, of course, that you understand what you’re signing on for. As we’ve seen, long term care can be hugely expensive, and if your financial resources aren’t significant, you’re risking your ability to survive, financially.

Remember Dr. Spock? He sold 50 million books in his lifetime, but at the end of his life, his family was discussing whether or not to put him in a nursing home, because his home care was too expensive. His publisher actually offered to help pay the bills. Dr. Spock was pummeled by long term care costs. Do you have several hundred thousand dollars to set aside just as your long term care fund? If not, self-insuring may not be the best option.

The next option is government money, in the form of Medicare & Medicaid. I could write for pages and pages about each of these programs, and still not cover them adequately. Let me summarize each of them briefly:

Medicare – this is health insurance. As you’ve worked over the past decades, you’ve been paying into the Medicare insurance program to cover some of this. There are two main parts to Medicare – Part A & Part B.

Part A is your hospital insurance, and you’ve already paid for it. It covers hospital stays, etc. Medicare Part A will pay for a very limited amount of care in a Skilled Nursing Facility (SNF), but only under very strict conditions. These are:

1)    You must have a qualifying, 3-night hospital stay.

2)    You must be transferred to the skilled nursing facility within 30 days of this hospital stay for the same condition.

3)    You must need skilled care – rehab care, in most cases.

If you meet all of these triggers, Medicare will pay all costs in a skilled nursing facility for the first 20 days. From day 21-100, you would be responsible for the skilled nursing facility deductible, which is roughly $140 per day. After 100 days, Medicare pays nothing. But, here’s the tricky part – if you stop needing skilled care, Medicare stops paying. On average, Medicare-eligible skilled nursing facility stays last just 26-28 days. Unfortunately, this is often when the family member gets the phone call that goes “Oh, by the way, Alice, Medicare stops paying today. Will you be taking your mom home, or will someone else be paying us?”

Medicare Part B is your out-patient health insurance coverage, and doesn’t offer any long term care coverage.

So now, Medicaid. Medicaid (MaineCare here in Maine) is a welfare program. It’s an excellent program, assuming that you don’t have any real assets. If you do have assets, you’re going to need to spend them down to meet the financial eligibility guidelines – roughly $10,000 for a single, or $110,000 for a couple. And in most cases, once you’ve managed to impoverish yourself, your only real care option is a nursing home. So, what have you really accomplished?

The final option is sharing the risk with an insurance company. An affordable, well-designed insurance “safety net” can make all the difference in the world. By finding an insurance plan that will supplement your money, you can stay in control far longer.  Don’t kid yourself – if you’re writing the checks to pay for your care, then you’re calling the shots. If someone else is paying the bills, they’re in charge.

Because the long term care insurance industry is evolving so rapidly, there are now several ways to share the risk, including insurance policies which will pay you a benefit even if you never need long term care. If you have assets, and a stable income, you need to explore what these options are. Because there’s so much flexibility in these products, plans can be tailored to meet most family’s needs and budgets.

Once again, you need to have a plan. Your plan might be to self-insure. It might be “the kids will take care of me.” (We’ll talk about that next week.) It might be “I’ll sell the camp and that will be my LTC money.” That may work, assuming that the camp sells when you want it to, for how much you need, and assuming your kids don’t want it. For many, insurance offers a good solution.

So, here’s the question: “What’s your plan?

Your Retirement Safety Net: LTC Insurance

Monday, March 28th, 2011

by Kerry Peabody, CLTC

Congratulations, you’ve made it! Retirement is right around the corner, and you’re ready to breathe a big sigh of relief. You’ve saved wisely and made good investments… but now there’s one more thing to take care of. You have to make sure that your family and your retirement plan are protected against the need for long term care.

You’re going to spend a long time in retirement, and your money needs to be there for you. Imagine if a few years from now, you suddenly need to start writing checks for $5,000, $6,000, even $10,000 a month to pay for long term care services? Where will that money come from? What will it mean to your spouse? Your family? What will it mean to you if you recover? Most of us would be financially devastated by an unexpected long term care need, and the majority of us will use long term care services at some point in our lives. You may know someone this has happened to, perhaps a family member. If so, then you understand that you need to be ready. If not, then talk to friends, neighbors, and co-workers who have experienced it, and see how it affected their families. Ask your family attorney about the risks. You’ll quickly realize that you need a safety net.

The secret to removing the physical, financial, and emotional burden from your loved ones is having the resources to pay for your care. Today, there are good quality home health care agencies springing up all around the area. Assisted living facilities are booming, and adult day care is now available. These are all excellent sources of quality care, but they all depend on your ability to pay.  Medicare covers only very limited long term care, usually less than a month. Medicaid, or MaineCare, will only help after you’ve spent down your own assets, and then you may not be able to choose where you receive care.

Today, just about anyone over the age of 50 is familiar with long term care insurance. These policies cover home care, adult day care, assisted living facilities, and nursing homes. They are flexible and affordable, with discounts for good health, couples, and domestic partners. New claims data from the industry has given us insight into sensible plan designs and coverage options. This coverage offers a good solution for many families, but it can be a difficult decision to make. You need to consider several things before you choose a plan:

  • Have you compared several companies? One company isn’t always the right answer, so be sure that your agent helps you consider plans and prices from a few quality carriers.
  • What kinds of care does the plan cover, and where?
  • How does your Elimination Period, or deductible, work?
  • Does your plan have Inflation Protection? Without it, you may not have adequate benefits when you need them.
  • Is the company you’re considering financially strong?
  • Is the company experienced in long term care, or new to the industry?

These are a few of the things to keep in mind when choosing a plan, but you also must consider your age and health. If you’re fifty or older, then the best time to do this is now. You will not save money by waiting until you’re older to put this in place; in fact, you’ll pay far more over the long run by putting it off. And remember, you will need to be medically underwritten to get a policy. This means that the company will review your health history, so apply while you’re young and healthy. It’s not uncommon for people in their 40s to purchase long term care insurance.

Right now you’re self-insured for long term care. That means that the first place you’ll turn to pay for care is your own money. Can your retirement plan support a cost like this? If not, then explore your options. Talk to your elder law or estate planning attorney and CPA, find a long term care insurance specialist, and explore your options. Don’t walk the retirement tightrope without a safety net.

Kerry Peabody, CSA, CLTC

Ask Lynn

Thursday, March 24th, 2011

Q: I’m a social worker trying to help a friend who lives in Maine. I understand all you have said (referring to a recent blog on Medicaid), but am wondering, if a spouse who will remain in the community, partially retired, with a 401K he still hasn’t touched, will his 401K have to be spent down?

A: Kerry Peabody, our expert blogger on LTC insurance, says that the 401K is considered. “If they’re married,” says Kerry, “the community spouse’s 401k is still considered a “countable resource.” So it would be included in determining eligibility, and subject to the spend down requirements.”

Maine Medicaid: What’s Your Plan Part II

Thursday, March 24th, 2011

In my last blog, (Maine Medicaid: What’s Your Plan?) we talked about Medicaid/MaineCare financial qualification. It boils down to this – you can ask the state for help, but before they’ll help you, you need to spend down to the required asset levels. You can keep a few things, and a little bit of money, but if you have resources, you’re going to need to use them to pay for care before the state will help you. And, really, isn’t that the way it should be?

Fortunately, if you plan now, before you find yourself in the middle of a crisis, you do have options. There are many steps that you can take that will help you prepare for potential care needs and expenses.  

First, you need to stop hiding from it. Talk to your kids, your siblings, your spouse, and even your parents about this. You can’t have a plan if you don’t acknowledge the need for one, so have the discussion. Practice this line: “We need to talk about what I’d like to happen if I need help with things around here for some reason, or if I can’t make decisions for myself.” That’s not so hard, is it? I’ve had that discussion with my wife (she’s pretty sure that I can’t take care of myself now). Once you open the door for discussion, everyone will slowly become more comfortable with the topic, and then you can make some progress on discussing your wishes.

Once you’ve talked about what your wishes are, you can move to “If this gets to the point where I need regular help with things, it’s going to be expensive. How can we pay for this?”

Here’s where you need to think long and hard about how much LTC costs, and what your resources really are. You may feel that you have enough savings to cover a need, but if you don’t accept the real costs involved with LTC, you could come up far short. Most people say to themselves “I’m never going in a nursing home, so it’s not that expensive.” Think about this. Unskilled care costs, on average, $22 per hour in Maine. If you need someone in the house for eight hours a day, five days a week, that’s $880 per week, or $45,760 per year in today’s dollars. What if you need 24-hour care? Basic care services at home would cost $192,720 per year. That’s a lot of money. Perhaps you can spend that much on your own needs, but what if your spouse needs that money? Or what if you’d planned to leave it to the kids?

At that point, you may choose to find a quality assisted living facility as a less-expensive option. Private assisted living facilities cost anywhere from $3,000 to $6,000 per month, so you’re paying less than you would to get round-the-clock coverage at home. If you look at long term care insurance claims experience, most clients are managing to stay out of the nursing home, simply because they have the financial resources to pay for care in these other settings. So, having a plan will help to keep you out of the nursing home, not force you into one!

So, what’s your plan? Next time, we’ll talk about the most common ways to pay for care.  

Kerry L. Peabody, CSA, CLTC, a Long Term Care Insurance Specialist with Clark Insurance