How a Life/LTC Combo Could Save Your Client’s Retirement

Image: digitalart /

Image: digitalart /

“Success always comes when preparation meets opportunity.”  — Henry Hartman

When thinking about the future of retirement and leaving a legacy behind for children and grandchildren, boomers characteristically stay optimistic and independently strong, thinking a financial crisis could never happen to them. While there are many events that could shatter retirement savings, one of the most daunting is an unexpected long-term care (LTC) event.

Boomers tend to lean toward optimism when it comes to their health and quality of life, understanding and implementing the growing importance of physical activity and healthy living. Even if a best friend or an immediate family member has been devastated by the cost of a serious illness, boomers hate the idea of having to pay premiums for a policy they think they will never use.

In reality, the front-runners of the boomer generation are hitting their mid-60s. This age group has a 70% chance of needing some type of extended medical treatment in the coming decades. It’s clear long-term care is one of the biggest threats to a boomer’s savings.

A hybrid plan

So what can we do to help clients realize the need for long-term care coverage? The answer is a hybrid life insurance/long-term care plan. Say a client has $100,000 deposited into his hybrid account. If he needs long-term care, he can withdraw $300,000 from this pool to finance his medical bills. (The actual figures vary by age and gender.). However, if the $100,000 is not used, a sum of, say, $150,000 in this hypothetical example comes through to the client’s beneficiary or beneficiaries as a death benefit, paid tax free in the form of a life insurance feature.

This design allows clients to plan for the worst without compromising their future retirement plans by pouring endless amounts of money into long-term policies. If their dreams of healthy living come true, with no debilitating illnesses requiring extra care, they can recoup the investment in the form of life insurance, which will guarantee a fulfilling legacy for their children and/or grandchildren.

The impact of LTC

As financial advisors, we need to show our clients the impact of long-term care planning in retirement. Boomers need to start preparing for their future now. If your clients are resisting the notion of paying high premiums for something they hope to never use, this hybrid long-term care plan may be the perfect solution. When you discuss financial planning with your clients, illustrate an ideal retirement. Help them plan for their future. Then, outline a scenario with the unexpected occurrence of bad health in one or both spouses. Life insurance and preparation for long-term care is a stride some boomers are unwilling to take, but if we can help them see the benefits, we can help pave the way for a smooth and relaxing retirement and a secure life for their children.


For more from Philip E. Harriman, see:

Baby Boomers and the New American Dream

Defy Popular Perception: Overcome the Life Insurance Taboo

Service After the Sale is Just as Important as the Sale Itself



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