Long Term Care

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ochotona
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Re: Long Term Care

Post by ochotona » Fri Apr 12, 2019 5:11 pm

Met a young very smart and brutally honest CFP at Schwab today, he looked at my plan and told me not to change anything. He said my per month LTC premium was low for the given benefit... Just continue with the current plan. He thought annuities were a poor value. They sell annuities.

LATER... methinks the young man was prejudiced. I ran the numbers, the QLAC really doesn't look so bad. See here. Absolutely nothing wrong with a 4.5% rate of return, if a highly-rated insurance company is involved. The cash starts coming to you late in life when LTC needs are likely, and you can't outlive that incremental cash stream. If no LTC needs, then you're just the most generous Granny / Grampy on earth!

If you both die early... well, you won't miss it, and your heirs get your partly used remaining portfolio.

I'm thinking of putting in 8% of the current retirement portfolio... not going all-in my any means.
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mathjak107
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Re: Long Term Care

Post by mathjak107 » Sat Apr 13, 2019 3:27 am

you would need to likely put a lot of money in a qlac for long term care .. if it wasn't enough to cover things and you have a spouse you still have no asset and income protection ...

i don't like qlac's ... the only advantage they they have is you don't need to take rmds until around 85 or so .

the disadvantage is that by starting late you likely will pay more in then you get out and the worst part is by delaying rmds the qlac has it's own accelerated rmds schedule ... that can not only create a tax torpedo but it may effect what you pay for medicare.

as researcher kitces says :

as it turns out the unique nature of a longevity annuity’s payment structure is not very hospitable as an RMD deferral strategy. The fact that it can take until a retiree’s late 80s just to break even and recover principal means the retiree risks significant foregone growth by trying to merely defer RMDs through the use of a QLAC. And of course, the RMDs will still eventually happen anyway, as the QLAC merely defers when payments begin. In fact, ironically, if the retiree does live, the accelerated payments of a QLAC in the later years can actually deplete an IRA even faster than normal IRA RMDs would have anyway!



https://www.kitces.com/blog/why-a-qlac- ... bligation/
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ochotona
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Re: Long Term Care

Post by ochotona » Sat Apr 13, 2019 4:29 am

Kitces is trying to evaluate a cat using dog criteria. The reasons he states for why a QLAC isn't any good aren't the reasons why you get a QLAC in the first place.

Also you cannot look at the annuity in isolation, you have to look at it in the context of the entire portfolio. Of course you are going to have bonds through the entirety of your life. So who cares if a portion of the bonds are really represented by an annuity? How it pays out is a little bit of a side detail but it might be important side detail for you because of the u-shaped spending profile in retirement. Lots of spending in the beginning not so much spending in the middle and lots of spending at the end.
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mathjak107
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Re: Long Term Care

Post by mathjak107 » Sat Apr 13, 2019 5:11 am

i do like spia's in conjunction with your own investing ... i don't have one but i can see it functioning well in place of some bond money..but sticking one in an ira which is what a qlac is i think will cause more harm then good compared to a plain ole spia.

in fact i like the use of a nice juicy permanent life policy with an spia and your own investing ..

an integrated strategy for a couple using a single spia , your own investing and life insurance for a spouse or heirs can provide 100% tax free income to your spouse unlike a joint annuity . no rmd's , no taxable income .

in 10,000 different scenarios run by researcher dr wade pfau , an integrated strategy
using a single spia , a 60/40 mix and a permanent life insurance policy beat out buy term and invest the rest 67% of all scenarios .

while buy term and invest the rest always had a higher balance at 65 , it dropped the ball after that point .

in 100% of the cases you always had a higher safer income with the integrated strategy and in 67% of the cases just assuming normal life expectancy you had a bigger balance too . mostly as a result of the tax free insurance money .

but in our plan all that would go with mitigating substaintial damage from long term care costs which is why if you picture a pyramid , we have at the base of the pyramid , all the insurances we feel we need to protect the assets above it and the assets above it pay to have the insurance below it .

as individuals we can't function well acting as an insurer ...insurers count heavily on those who die to pay for those who live ... last i looked we can't invest in dead bodies .

whole life sucks as an investment proxy , you never buy it for cash value ..it is awfully expensive for that .. but people get products mixed up all the time ...they buy life insurance for living ... they really should be buying it for dying and annuity is the right product for living .... this is why hybrid products are really bad ... they don't really work well in all applications .. so it is always best to get the right product for the right purpose
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Re: Long Term Care

Post by mathjak107 » Sat Apr 13, 2019 5:25 am

the only question you need to answer if you are married is will my spouse be impoverished if i have to go in a home if i am the lucky one with the extended stay ? it has to be someone so it could always be you .

can she pay for both me and make it financially without a major upset .

if the answer is yes , she would find it very hard to manage then you need to come up with a better plan no matter what you decide .

rolling the dice and hoping it isn't you or your spouse that needs the care is a poor idea . hope is never a strategy . especially because now you have 2 bets and only 1 horse .

if it is only one person that has to escape extended care , well that is one bet , but when you are married you have to both escape it . either one of you can tip the apple cart over . those are 2x greater odds of things not playing out in your favor . .

talk to any busy estate attorney and they will all tell you that the bulk of their clients are those that had no real plan and called it self insuring .

now that reality struck and someone needs care all of a sudden they are scrambling to preserve assets as the community spouse ( stay at home ) goes in to survival mode .

so whatever you decide to do , do it and don't wait until after it is to late .

it isn't about preserving assets as much as the survival of your spouse .

have a meeting with a good elder law attorney and familiarize yourself with the options , laws and tools in your state . then you can make a decision with their guidance . as you see in these discussions most folks have no plan and no clue as to what is a good move and what isn't .

they think because they have a living trust that is a comprehensive plan and they are covered and medicaid can't get to anything . but they fail to realize everything in a revocable trust counts as dollars and that they can't qualify for medicaid with the items in the trust . the old catch 22 gets ya .


some of your options can be :

making medicaid approved family loans

irrevocable trusts

long tern care insurance

hybrid life insurance policy's with long term care links

right of refusal

real- self insuring , not just your general portfolio invested in things that are volatile .

attorney negotiated medicaid rates

and likely a lot more that i am not aware of .

but none except a state partnership plan and LTC cover everything . you can save assets but lose the income for the stay at home spouse so everything else has pitfalls .
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Re: Long Term Care

Post by ochotona » Mon Apr 15, 2019 6:43 pm

Annuity sucks. If I self-fund using the Permanent Portfolio, it will last way past my wife's and my 104th birthday, to a 97.6% probability of success.

See here.

Case closed on annuities, but thanks mathjak, I'm still looking into LTC State Partnership programs....
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Re: Long Term Care

Post by Xan » Mon Apr 15, 2019 7:19 pm

ochotona wrote:
Mon Apr 15, 2019 6:43 pm
Annuity sucks. If I self-fund using the Permanent Portfolio, it will last way past my wife's and my 104th birthday, to a 97.6% probability of success.

See here.

Case closed on annuities, but thanks mathjak, I'm still looking into LTC State Partnership programs....
Are you looking for Texas, ocho? Please let us know what you find out.
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mathjak107
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Re: Long Term Care

Post by mathjak107 » Tue Apr 16, 2019 3:14 am

texas is a dollar for dollar state ...they don't offer total asset protection unfortunately .... i found this on texas partnership plans

Income & Asset Protection
An Texas Partnership for Long-Term Care qualified policy provides you, as the purchaser, with the right to apply for Medicaid under modified eligibility rules that include a special feature called an ‘asset disregard’.
This allows you to keep assets that would otherwise not be allowed if you need to apply, and qualify, for Medicaid in order to receive additional long-term care services. The amount of assets Medicaid will disregard is equal to the amount of the benefits you actually receive under your long term care Partnership qualified policy.
Since these policies must include inflation protection, the amount of the benefits you receive can be higher than the amount of insurance protection you originally purchased.
If you have a Partnership-qualified long term care insurance policy and receive $300,000 in benefits, you can apply for Medicaid and, if eligible, retain $300,000 worth of assets over and above the State’s Medicaid asset threshold. In most states the asset threshold is $2,000 for a single person. Asset thresholds for married couples are typically more generous.
Years ago you could protect your assets by creating a trust, but today only an irrevocable trust would be exempt and it would still be subject to the 60-month "look back" period. To be exempt, assets must be transferred 60 months before you apply for Medicaid. (We won't know with 100% certainty what will happen 60 seconds from now let alone 60 months.)
Under a qualified partnership policy, personal assets in the amount of the total benefits paid are disregarded when Medicaid asset eligibility is calculated. For each dollar of benefits paid, one dollar of assets is not counted toward the eligibility limit. This means you get to keep those assets and don't have to spend them before qualifying for Medicaid.
With a Partnership policy it also means that the state will not seek to recover money spent for your care from your estate. Estate recovery means that the state can require repayment from your estate for any costs paid by Medicaid. Thirty states have filial laws that that give the state the right to require your children to reimburse Medicaid for your expenses.
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Re: Long Term Care

Post by sophie » Tue Apr 16, 2019 7:20 am

Annuities aren't about getting a great return. I see it as a form of insurance against my getting befuddled in old age and messing up with portfolio management or drawing down.

I suppose if you take care to hire a competent and trustworthy financial manager/accountant, or designate a similarly capable family member with DPOA to handle these things ahead of time, that would work too.
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Re: Long Term Care

Post by ochotona » Tue Apr 16, 2019 8:42 pm

sophie wrote:
Tue Apr 16, 2019 7:20 am
Annuities aren't about getting a great return. I see it as a form of insurance against my getting befuddled in old age and messing up with portfolio management or drawing down.

I suppose if you take care to hire a competent and trustworthy financial manager/accountant, or designate a similarly capable family member with DPOA to handle these things ahead of time, that would work too.
By the time we're old and feeble, I think I could instruct my engineer daughter to rebalance annually. Just divide by four!
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Re: Long Term Care

Post by mathjak107 » Wed Apr 17, 2019 3:49 am

the problem is generally not dividing by 4 ...it is the fact those who you leave the money to either to manage for you or to inherit may not understand the investment . they won't rebalance , they will look at the losers and go who wants this junk .
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Re: Long Term Care

Post by sophie » Wed Apr 17, 2019 7:25 am

ochotona wrote:
Tue Apr 16, 2019 8:42 pm
sophie wrote:
Tue Apr 16, 2019 7:20 am
Annuities aren't about getting a great return. I see it as a form of insurance against my getting befuddled in old age and messing up with portfolio management or drawing down.

I suppose if you take care to hire a competent and trustworthy financial manager/accountant, or designate a similarly capable family member with DPOA to handle these things ahead of time, that would work too.
By the time we're old and feeble, I think I could instruct my engineer daughter to rebalance annually. Just divide by four!
Well, that and keeping the checking account ahead of auto-paid bills, and not falling prey to scammers. That's really more of a concern. Missing rebalances is probably the least of the worries.

I am seeing all this stuff happen with my mother - no matter how often I lecture her about not opening emails from unknown senders and never clicking on links in emails, plus the fact that she's still fairly sharp given her age, it still manages to happen. She was somehow induced by a random email to change her Google password last month, the day before I was headed out on a business trip. I ended up walking her through re-changing her password, verifying identity, and re-entering her new password in all the gzillions of required places over the phone from the airport, because I thought likely that she'd just handed her password to a phishing hacker.
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