Thought for the day:
“I’m working as hard as I can to get my life and my cash to run out at the same time. If I can just die after lunch Tuesday, everything will be perfect.” – Doug Sanders, professional golfer
If you read no further:
I have been thinking about what it will be like when your clients die without using their long-term care policies. Will their heirs bemoan the fact that you wasted $50K or 75K of their inheritance? Probably not. But what about if they needed care and didn’t have an insurance plan in place; and now it is cost the estate $75k -$100k a year? Might they regret the decision to ignore it when given the chance?
If there is a Linked-Benefit product in their portfolio whichever way it goes is protected.
Thought for the week:
A Letter to Scott
You asked me, “Since at age 52 I am on track to create a liquid estate of $2-3million, why would I need an annuity, permanent life, LTC insurance….etc.?” My short answer is…you don’t need it! But in light of future uncertainty, you may want one or more of these in your portfolio.
Nobody “needs” to have any particular financial instrument; bank account, stocks, mutual funds, REITs, ETFs and so on. If your estate is worth over $1million from term insurance and other assets, you probably have enough to replace enough of your future living value should you die in the near future. With you gone and $1million from insurance in your wife’s pocket she might get by with only a part time job. And she won’t have to be concerned about paying for your care someday.
Once retired, that insurance will have expired but you will probably have plenty of money. Other than making sure you don’t outlive your income, the only major concern you face is the cost of long-term care, with odds at 60% of needing it at some point; and possibly for several years. If you plan on paying the bills yourself from your wealth you surely will have the money. I imagine some of it will be invested in a portfolio of stocks and bonds, perhaps some real estate and some in a risk-free and liquid account.
Frankly, that sounds typical of many of my clients. At age 70 I can tell you, things look a lot different from here. Each year as I watch friends and acquaintances age, get sick and die, I become more aware of the possibilities I face and I understand from experience that personal care as we get older is the number one need if we are lucky to live into our 80s and beyond. That said, personal care is very expensive and I don’t EVER want to be in a nursing home….which makes it even more expensive…..unless you want to turn your wife into a nursemaid. Shortly her health will be ruined as well.
You can pay for it. I have observed that the dynamic changes when they start writing those checks for $6-10 thousand per month. There is not one of them who wouldn’t like to have a fat check coming every month from an insurance company to help cover those bills. Today it would cost you about $7,000 per month for care and in 20 years perhaps as much as $15,000 per month. That could be over half a million dollars if you languish for 3 years (30 months is the average). Your $3,000,000 may or may not cover the bills without some additional help. If you are certain you will never need care then we can be certain that you don’t need to buy insurance…but frankly no one will notice either way. If you do need care and you didn’t buy insurance it could be financially devastating…especially when you leave a wife that is 15 years younger than you. We won’t know until you get there….and I certainly won’t be around to tell you, “I told you so”.
OK, so the money has to be somewhere. If you put $100,000 in one of my insurance policies it will immediately be worth over $550,000 for long-term care at $7,200 per month. In 20 years it will be worth $1million at $12,000 per month.
- 1.If you never need care, your wife or kids will say, “what are we going to do with this $170,000 dad left us in the insurance policy?”
- 2.If you do end up needing it, you wife and kids will say, “it sure is a good thing dad bought that insurance policy. We only have to come up with $1200 per month.”
- 3.If you need care and don’t have the insurance the wife and kids will say, “I sure hope he doesn’t last very long cause these bills are killing us.”…or something like that.
So do you need it? Probably not. But not having it will be no big deal unless you need care someday. Then it will be a very big deal.
So I guess the real question is, “Do you want it?”