This is the Truth Network. Welcome to Finishing Well, brought to you by CardinalGuide.com, with certified financial planner Hans Schile, best-selling author and financial planner, helping families finish well for over forty years. On Finishing Well, we'll examine both biblical and practical knowledge to assist families in finishing well, including discussions on managing Social Security, Medicare, IRAs, long-term care, life insurance, investments, and taxes.
Now, let's get started with. Finishing well. Welcome to Finishing Well with Certified Financial Planner Hans Shile, and today's show is long-term care insurance through an annuity—a little different angle on this, and it's an amazing angle of something we talk about often on Finishing Well—is long-term care insurance, and you know. There was a rich man. Actually, he was rich in the time of King David.
In Second Samuel nineteen, it talks about this eighty-year-old man that helped King David across the Jordan. And King David wanted to bring him to Jerusalem and do a lot of things for him. And he stood on the bridge and told him. King, I can't hear like I used to hear. I can't sing like I used to could sing.
You know, I'd be better off to go do these other things. In other words, he became glaringly aware of his limitations, and you know the wisdom of that is wonderful. He didn't try to go do things at eighty five that he couldn't do anymore. But you know, we now at this point in time in our lives. Whenever you are listening to this, realize that at some point in time, yeah, we're not going to be able to hear the singers, and we may not know what to do with our checkbook or or other things, and it's going to require some decisions to be made.
And all the more reason to look at this. And the beautiful thing about this particular plan plan we're going to talk about today, Hans, is From an underwriting, or in other words, a lot of people when they want long-term care insurance, it's almost like too late because a bunch of stuff has happened to them and they don't qualify anymore. But this one is actually for even some folks that are already struggling. It is, and I guess that's the first attraction to using an annuity to fund your long-term care.
Okay, is that you can. And from my perspective, whenever new long-term care products come out, which I'm on all of them, and I'm just tuned into anybody in every insurance company that's coming out with any solution for long-term care, I want to see it, and I'm on it. I get it early, and I read it, and I kind of pride myself of picking out the weaknesses in their health underwriting. Because that's the first thing I look at is the underwriting. You can have the greatest long-term care policy in the world, but if nobody can qualify for it, or they're going to hold every single illness against the applicant, then what good is that?
So the first place I go with all of them is the underwriting, and I'm looking at it generally. How's the population going to fare coming into this thing? But I'm also looking for holes in. I'm like, what did they miss? Who's got what that they can slip through?
And you know that's where annuities have had a huge attraction to me. These long-term care annuities, and specifically these two companies. And I'm consulting with one of my other companies that sells annuities, and helping them design their latest offering. And I'm kind of excited about it, but. But what I'm just go go to a couple examples.
Like we're gonna we're gonna talk about Martha in the video here, and Martha is 67 years old, and she put two hundred thousand dollars. I was showing her a hundred and fifty. These are some people that inherited a bunch of money, and they came into us over the inheritance, and it was from the the man, husband, his sister. Was very wealthy and he didn't even know this was coming. He inherited a bunch of money, and I've been helping him with the estate.
And then, you know, what that led to is the whole discussion. And we've we've bought all kinds of things. She needed long term care insurance. She had cirrhosis of the liver. I mean, you'd never guess it.
I mean, she's she's in you know, otherwise good health and doing everything she wants to do. But that's progressive. And it's pretty much a no-no on every long-term care application that we have, other than these annuities. They don't even ask.
Okay, and I mean it's just so she ended up putting two hundred grand in here, and that instantly bought her six hundred thousand dollars worth of long-term care insurance.
So her motivation was getting long-term care insurance with cirrhosis of the liver because you can't get it from anyone else. But then you sit back and you say, "Well, what if she didn't have sclerosis all over? Maybe she was just the same good health as anybody else." Does it make sense to take two hundred thousand of your money and put it in there to buy six hundred thousand dollars worth of long-term care insurance? And I would say yes in many circumstances.
So this is not only for sick people.
Okay, that's the point I want to make: is that. Every dollar you put in buys three dollars worth of long-term care insurance, and I'm going to qualify that a little bit with some of these examples. Yeah, the beauty of it is, is it also, you know, similar to a hybrid life insurance policy. You know, if you never use a long-term care, the money's not going away either. That two hundred thousand plus interest is going to go to your heirs.
Well, exactly. That's one of the reasons they went with this. Is that some of their money is just sitting in an interest account because that, believe me, they inherited a lot, and that's been a whole tax problem—is just positioning all of that. But some of it is just in fixed interest stuff, so they've already got money sitting, but just earning kind of bank rates and MIGA annuity rates of three, four, five percent, and so all of a sudden this thing looks pretty attractive. To get that, or maybe a little less interest, but turns into a long-term care policy.
So, so yeah, this this makes sense because it you know it's actually going to pay off at death if you don't use it for long-term care. Perhaps better than the life insurance policies.
So, there's a reason to take a look at this.
So let's just talk through fundamentally about the policy.
So the underwriting is easier. People with cancer can get this. People that have had a stroke, people with heart disease, people with diabetes, people with cirrhosis of the liver. In some cases, people with Parkinson's. We've gotten a few people with MS on this, and because a lot of these diseases are not readily observable.
In a lot of people in their fifties and sixties, you know, or even seventies, that they're diagnosed earlier these serious diseases, and they're not readily observable. And when they sell these annuities, they just take a health statement. They don't ask a lot of questions, and some of them do a video interview.
So then it's just a matter of observing certain things and. With the modern medications, you you could be sitting next to somebody with Parkinson's or MS, cirrhosis of the liver, or cancer, or some of these other things, and you'd never know it, and the insurance company didn't.
So, I don't want to get everybody's hopes up too much. There's certain illnesses or certain stages of illnesses that you can't get this. I mean, we even got something else for you. But I just want to kind of paint a picture of the underwriting. It's much easier, much more flexible, and we got more than one company, and they're all different.
So sometimes we're going to pick your company based upon what's what's your illness, and then a lot of times we're dealing with couples. One of them doesn't have any serious illnesses, and the other one gets turned down for one of those other hybrid policies, and so we we put the healthy one. On whatever it was we started with, and then we go to the annuity for the for the other.
So we already talked about: don't use it, don't lose it. The 1035 exchange from an existing life or annuity—that's what some of our examples do here.
So if you've got an annuity that you bought, like say 10 years ago, and it's just sitting there, and it accumulated X amount of interest. It's just there, and you haven't paid taxes on the growth of the interest because you haven't pulled it out. It's just sitting there; it's not really doing much, other than accumulating. You could take that annuity, and you could use a Section 1035 exchange and move it to one of these annuities, and then whatever the cash value going in is, you get three times that amount for long-term care insurance. I mean, that—that's another reason to use an annuity.
You could do that from a life insurance policy or another annuity.
Okay, that's amazing, and the benefits are tax-free too, right? Exactly.
So I'm going to go back to that example. Let's say you had a hundred thousand dollar annuity you bought ten years ago, and it's grown to one hundred fifty-five thousand. And it's just—you have fifty-five thousand dollars worth of interest. That's accumulated that you have not paid tax on, but you're going to when you draw it out, you're going to have to pay taxes, or your heirs are, when they get it after your death. If you take that, originally 100,000 annuity, it's now 155.
Roll it into by section 1035, into one of these new annuities, then. That annuity is going to pay out three times the amount that's in there for long-term care. All of it's going to be tax-free, including that fifty-five thousand dollars worth of interest.
So, so, so that's a long way of saying the benefits that come out for long-term care insurance are tax-free.
So, it's very attractive to to people to take, like I said, an old policy. Of life, or maybe a not so old policy, maybe one that's five, six, seven years old, and then this is really going to do something for your long term here.
So, what does ten thirty five mean? Just out of ignorance, I'm sorry. It's like the word four hundred one k.
Okay, what does four hundred one k mean? It's just section four hundred one dot k of the code, and section ten thirty five. Is the place where they cover insurance exchanges. You could take one insurance policy that has accumulated tax-deferred interest inside of it, and move it to a new insurance policy meet certain criteria, and not have to pay taxes on the gain.
Okay, that didn't make sense.
Well, this would be a good point to point out that this show is brought to you by Cardinal Guide, CardinalGuide dot com, and if you go to CardinalGuide dot com, you're going to see these seven worry tabs right there on the front page. And today's worry is long term care, as you might imagine. And so, if you click on that long term care worry, you're going to see a wonderful video, exactly the same title, right? Long term care insurance through an annuity, and it's got. Show notes, all these examples aboard.
You can see all these numbers up close and personal. Follow along with a lot more detail. It's all there at CardinalGuide. dot com, as well as Hans's book, The Complete Cardinal Guide to Planning for and Living in Retirement, and the workbook that goes along with that, which explains annuities a lot in there. I found out my first information about annuities by reading that book, and then, of course, my favorite.
Because this stuff, you know, obviously you need some help if you're if you're in this situation with long-term care, and there's there's so many different neat products they can kind of match up with you if you contact Tom's or Tom there at the contact page at CardinalGuide.com. We'll be right back with a whole lot more long-term care insurance through an annuity. Investment advisory services offered through Brookstone Capital Management LLC, abbreviated BCM, a registered investment advisor. BCM and Cardinal Advisors are independent of each other. Insurance products and services are not offered through BCM, but are offered and sold through individually licensed and appointed agents.
Cardinal Advisors is not affiliated with or endorsed by the Social Security Administration or any other government agency. Welcome back to Finishing Well with Certified Financial Planner Han Shile in today's show: Long-term Care Insurance through an Annuity. And you know it's kind of just a strange idea to begin with, and I don't think we talked about at the beginning of the show that when I think of an annuity, I think of you know something that's going to pay me some income. But I guess this income's coming at the point that you need long-term care insurance. Yeah, I mean, you could pull money out of this thing anytime you want, but you're robbing your long-term care bills.
So. Really, when people set these up, I tell them you've said bye-bye to the money in your lifetime for play money or spending for lifestyle money. You're taking, like in the case of Martha, you're taking two hundred thousand dollars of your savings, and this is a beefed-up policy. By the time she's eighty-five, this thing's going to pay sixteen grand a month for long-term care, and it's going to pay that for sixty months.
So it's going to be a maximum benefit of over a million dollars for her tax-free benefit of over a million dollars if she lasts sixty months for her original two hundred thousand that she put in there of after-tax money.
So if she doesn't use it, you know, if she just puts the money, she did put the money in there, and it just sits there. And then she lives to eighty-five, and then passes away with never using it. Her heirs are going to get about three hundred and thirty grand. I mean, it's just it's just going to go to them, and they're going to have to pay taxes on the extra one hundred and thirty thousand of interest that accumulated, tax deferred.
So, you know, it it it it's not too hard to justify these things. I mean, that's not a huge amount of interest. I don't want people get to thinking these are whiz bang investments. In fact, the interest is lower than it is on other annuities because the cost of the long term care insurance is being paid out of the interest. You're never paid.
Another plus to these things is everything's fixed right from the beginning. There is no, I mean, you know exactly what you got. I can just show you on a printout. Exactly what your hundred thousand or one hundred and fifty thousand, two hundred. The most popular amount that people put into these things is a hundred grand for one person.
If we take, you know, we've probably written a hundred of these policies in the last two years, and I would say the most popular amount is people put a hundred thousand, and then many. That's what we show them first, and then a lot of people talk themselves up to one hundred and fifty. Because it seems like a hundred is going to give them a good basic plan, but if they've got a hundred, if they got an extra fifty grand, they're going to talk. This lady, she talked herself up to two hundred grand, just because she had the money and she could just see what it does. Which brings up another point: this is an indemnity benefit on all these annuity plans, and what we mean by indemnity, as opposed to reimbursement, an indemnity means.
Like if she's eighty-five and she's needing home health care or she's living assisted living, it doesn't matter what she's paying the facility. She's going to get a check for sixteen grand a month every month, and even if she's only spending seven of it, okay. That's what an indemnity is—a reimbursement. If you got a sixteen thousand dollar benefit but you only spent seven, you only get seven. On an indemnity, you get sixteen.
I want to emphasize with these, you can't put IRA money in these, so it's got to be money outside of an IRA, which is limiting for some people. We have a lot of people that want these, but they just don't have a hundred grand. One of these companies will let us start with as little as fifty.
Okay, and I say as little as fifty. Fifty grand is still a lot of money, but you can start the policy with fifty grand, and then you got up to five years. To put more money in there, and there's not a limit on that without having new underwriting.
So we sold a lot of these where we start with 50, and then we got a plan to get it to 150 by putting in 20 grand a year, which we might pull out of an IRA 30 grand to be left with 20 to stick in the. Plans that when you need it for long-term care, you've got amounts to one hundred fifty thousand dollars policy, with four hundred and fifty thousand dollars worth of benefits.
So there is a little flexibility, and I'm encouraging this new company coming in to have the same kind of benefit.
So I told you about Martha. Let's talk about Don and Lisa. Don seventy-three, Lisa seventy-two. They've got some illnesses. That probably are going to kick them out for the hybrid long-term care.
We were still going for that, but they kicked themselves out because they just weren't going to take that big chunk of their IRA money. I was recommending four hundred thousand of their IRA money because these people have millions, and we're really working on a Roth conversion strategy and a whole bunch of other things. But I said you can't forget about long-term care. You don't want to be ninety years old and having your millions. That your kids are there and having you stop putting a stop sign on bringing in home healthcare workers, you need to get you some insurance, even if it doesn't pay the whole bill.
So they rejected all that, and so I think this is what you're going to do as a minimum.
Okay, this is what I'm going to recommend you do as a minimum. We're going to go to one of these annuities. They've got almost a million dollars in savings. Just it's like eight hundred fifty grand, just in CDs and money market accounts.
So we're going to take two hundred thousand of it. You're seventy three, she's seventy two, and it's going to buy you an immediate fifty five hundred bucks a month, which is not enough to pay the whole nursing home, or assisted living, or home healthcare bill. But fifty five hundred bucks is still a month is way north of zero. It just is, and you're going to take a lot of comfort. This happens to you, happens to your family, and your kids are knowing that the first, well, it'll be sixty-two hundred by the time they're eighty-five, sixty-two twenty-four.
The first six grand is coming from the insurance company, tax-free, and then we can figure out the rest out of the rest of your money. And with he had prostate cancer. And some some hypertensive something to do with his lungs and hypertension, or I can't remember exactly the disease, but somewhat concerning that whether the underwriter with both of those things are going to take him on this thing. It's a piece of cake. It's a different company than Martha did.
I guess we got time for another one. Let's talk about Dutch, who's 77 years old, didn't have any long-term care. The way I found Dutch is, I'm down at a long-term care conference in Florida, the association of all the insurance companies that sell this stuff, and a guy comes walking up to me at the table. He said, "Are you Hans?" He says, "I watch your videos all the time." Great. He said, "Do you mind if I ask you a few questions?" I was eating my lunch, kind of after it.
And sat down and started. I was just flattered when people pick me out of the crowd and they see me on videos. They listen to finishing well. Like, I mean, I'm just like flattered. And he said, "What are you doing here at this conference?
You know more than most of these people." As soon as I start thinking that way, I'm going to be over the hill.
So, but he ended up telling his father-in-law about me. Because I figured out he's not licensed in Pennsylvania, okay.
So he just told it. He didn't tell me that. And then his father-in-law called in here to the office and made an appointment on Zoom. And seventy-seven years old, and you know, he couldn't qualify for just about anything, but he can get this all the way through age eighty. He took a hundred thousand dollars, put it in there, and he bought an immediate benefit of.
Well, it starts out at twenty four eleven. This company, if you buy it and then go right in the nursing home or start using it immediately, you get a smaller benefit.
So let's look at the fifth year benefit. It's six thousand and thirty six a month. For his hundred thousand, he's going to have six thousand a month. In the fifth year, from day one, and you know, of a claim, but it's just the policy's got to be five years old before he gets his full benefit or beyond the fourth year. You know, that's seventy-two thousand a year for sixty months or five years, all purchased for a hundred grand, right?
Which he had about eight hundred thousand in CDs. I I really suggested he do 150, and he he didn't. But you know, we're using him as an example. And so, this video you may want to go to that, and you can look at. We have six examples in the video, and I actually made the video for this insurance company that I do a lot of annuity business with that are coming out with this kind of product.
And they've come to me and asked me to provide them some advice on what you know what I need to see in a product to sell it.
Now, one of the things that I saw in the in the video that astounded me that I'd not seen before, you know, with other products, is how the the benefit grew so substantially. Um, the the older you got, you know, I guess because the interest that's growing in the annuity and and that kind of thing. But talk about hedge against inflation, like oh my goodness, the the longer you wait before you do the long term care, I mean the thing just gets giant.
Well, it does, and and that's it's an inflation benefit that's built in because if you think about it, if you start with a hundred thousand and you get three hundred thousand. Of maximum long-term care benefit, but when the hundred thousand grows to a hundred and twenty thousand, you know the long-term care benefit is now three hundred and sixty thousand.
So it's it always stays three times your cash value when you start.
So, you know when these things sit there for a long time and then they do well, then you've got a nice large benefit. And then multiplied, where you got a nice large cash value, but then the benefit is three times the cash value.
Now I'm going to tell you a little secret that the insurance, these insurance companies, they're not stupid. I mean, they just knowing that I've been doing this 50 years, and don't ever worry about these insurance companies. They know how to take care of themselves. Is the the secret on these things is the first two years they're just giving you back your own money. I mean, if you think about it, if you got seventy-two months of benefits for six years, is the first twenty-four months all you're doing is you're getting your own money paid back to you, tax-free, but it's your own money.
So they're not, you're not into their money till the twenty-fifth month, but then it's their money from the twenty-fifth month to the seventy-second month.
So that's where it's real insurance. And that's why I recommend it. But all the short claims, of two years or less, the insurance company is just giving you your own money back, and it's got a tax benefit. But nothing wrong with that. There you go.
Well, this would be a good time to remind you that the show is brought to you by Cardinal Guide, CardinalGuide.com. And if you go to CardinalGuide.com, there you're going to find the seven tabs. Today's tab is long-term care, and there's a video like we've talked about, right along the same lines, with all kinds of notes and details on these products. But of course. You know, to contact Hans and Tom Page, the easiest way to access the information, as well as Hans's book, "The Complete Cardinal Guide to Planning and for and Living in Retirement." Great show, Hans.
Thank you, and God bless you. The opinions expressed by Hans Shile and guests on this show are their own and do not reflect the opinions of this radio station. All statements and opinions expressed are based upon information considered reliable, although it should not be relied upon as such. Any statements or opinions are subject to change. Without notice, investments involve risk, and unless otherwise stated or not guaranteed, past performance cannot be used as an indicator to determine future results.
Any strategies mentioned may not be suitable for everyone. Information expressed does not take into account your specific situation or objectives, and is not intended as recommendations appropriate for you. Before acting on any information mentioned, please consult with a qualified tax or investment advisor to determine if it's suitable for your specific situation. Finishing well is designed to provide accurate and authoritative information with regard to the subject covered. Investment advisory services offered through Brookstone Capital Management LLC, abbreviated BCM, a registered investment advisor.
BCM and Cardinal Advisors are independent of each other. Insurance products and services are not offered through BCM, but are offered and sold through individually licensed and appointed agents. Cardinal Advisors is not affiliated with or Endorsed by the Social Security Administration or any other government agency. We hope you enjoyed finishing well. Brought to you by CardinalGuide.
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