Leveraging Your Assets with an Annuity to Protect Against Long-Term Care Costs
Long-term care (LTC) can be one of the largest and most unpredictable expenses in retirement. Whether it’s home health care, assisted living, or nursing facility care, the costs can quickly deplete a lifetime of savings. Fortunately, there are financial tools that can help protect your assets while ensuring you’re prepared for the possibility of extended care. One powerful strategy is leveraging an annuity with a built-in long-term care benefit.
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How It Works
An annuity with an LTC rider allows you to reposition a portion of your assets into a contract that serves two purposes:
- Provides a dedicated pool of funds for long-term care expenses
- Passes remaining value to your beneficiaries if you never need care
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Step 1: Repositioning Your Assets
You start by moving a lump sum—often from low-yielding savings, CDs, or other non-qualified assets—into a specialized annuity. This annuity earns interest, and because it is designed for LTC planning, it offers enhanced payouts if long-term care services are required.
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Step 2: Leveraging for Long-Term Care
If you ever need care, the annuity’s value can be multiplied, often doubling or tripling the amount available for qualified LTC expenses. This leverage means you can access significantly more care dollars than the amount you originally contributed—without tapping into other retirement accounts.
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Step 3: Preserving Your Legacy
If you never require long-term care, the unused annuity value is not lost. Instead, it transfers directly to your named beneficiaries, typically avoiding probate. This ensures your loved ones receive the benefit of your planning efforts.
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Benefits of This Approach
- Asset Protection: Helps shield other investments and retirement income from being drained by care costs.
- Tax Advantages: Depending on the type of annuity and how it’s funded, payouts for qualified LTC expenses may be income-tax free.
- Flexibility: If care is never needed, the annuity remains a valuable financial asset for your heirs.
- Peace of Mind: You have a clear plan in place for both care needs and legacy goals.
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Prepare for a long and comfortable life with a plan for long-term care.
Long-term care refers to medical and support services for those who have difficulty in executing routine daily functions, or those individuals with prolonged or degenerative illnesses, cognitive disorders, old age and or other conditions. Nursing homes are probably what come to mind first when discussing long-term care, but long-term care can also include assisted-living facilities, continuing-care retirement communities and home healthcare, among others.
One reason long-term care planning warrants more consideration today than in decades past is because we’re living longer lives. According to the U.S. Department of Health and Human Services, most people turning age 65 can expect to use some form of long-term care during their lives. Not having a plan can mean that costs fall on younger family members, causing a financial strain; or on a retired spouse, leading him or her to potentially deplete their own retirement savings.
As the baby boomer generation ages and the demand for long-term care increases, new methods of paying for long-term care have surfaced. In addition, individuals may look for assistance from life insurance and annuity policies that may include features that provide enhanced benefits if the policy owner becomes impaired (subject to certain requirements).
Since dramatic changes in our health can surface quickly and without much warning, it can be beneficial to have a plan to be able to fund long-term care, should you need it at any point in your retirement. We are here to help you prepare for a long and comfortable retirement.
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Annuities are long-term insurance products generally designed for retirement income. Additional benefit riders may come included in the policy or may only be available at an additional cost. The type of benefits provided depend on the insurance carrier and the specific type of policy that is purchased. Life insurance may require health underwriting and, in some instances, financial underwriting.