Retirees & Pre-Retirees

Aside from staying active and healthy, as you plan for or actually retire, there are Probably only a few things that really keep you up at night. They all usually revolve around money. Will it last? Will you have enough income? How can you avoid losing your nest egg? What happens if you get sick and need long term care? Let me share a few case studies:

Case Study 1: Married Couple:

Sherry and Robert just returned from his uncle’s funeral and the conversation they heard was how his long term care expenses had eaten up all of his assets and how the kids ended up having to pitch in to make sure he had the care he needed towards the end. They called their homeowner’s insurance agent to discuss LTC insurance and he called me. I met with them a quickly learned that, aside from an extended LTC situation, they would most likely have plenty of income. But if one or both of them needed LTC, they would be in trouble.

I reviewed their current insurance and found that they both had old whole life policies that together had approximately $150,000 of cash value. Those old policies had about $208,000 and $152,000 of coverage on Robert and Sherry, respectively. We did a policy comparison and found that by rolling over their current cash values into new policies with the same annual premiums, Robert could have $360,000 of new coverage and Sherry could get $310,000. The obvious question is what does that have to do with protecting against their long term care risk? Well, both of the new policies included a long term care rider that accelerates the death benefit early if they need it for long term care. They replaced their old life insurance policies with new ones that can now provide over $12,000/month each for LTC and they didn’t have to spend a dime more in premium. Also, if neither of them needs the LTC coverage, they have way more live insurance $670,000 total vs. $360,000.

Case Study 2: Single Retiree (Widow – Divorced)

Marsha is 75 years old and has 2 children and 5 grandchildren. She has a $1,200 monthly pension from her deceased husband and social security of $1,950. She also is required to take distributions from her $250,000 IRA of about $10,000. She also has $300,000 in a money market account earning next to nothing in interest. She owns her $250,000 home outright. Her total income is right at $50,000/year.

Her most important goals include:

➢ Currently she is struggling to be able to do things she wants with her kids and grandchildren. She feels like she needs another $500/month to be comfortable.

➢ Making sure she has enough money to pay for long term care

➢ Preserving her current assets for her children. She isn’t interested in taking much risk with her savings

Solution: Marsha took $80,000 of her money market and bought a fixed immediate annuity that will pay her just over $500/month mostly tax free. She took another $120,000 and purchased a hybrid insurance policy with $300,000 in combined long term care and life insurance coverage. If she never needs LTC her children will receive the $300,000. If she does need the LTC, she can take up to $12,000 per month from that and whatever is left when she passes away will be available for her children.

To summarize, Marsha has more income per month to live on, she still has plenty of cash for emergencies. If she doesn’t ever get sick, her children will inherit $650,000 vs. $550,000 before these changes. And if she gets sick and needs to pay for LTC, she will have more income and assets to draw from. The new plan meets all of her goals.