Thought for the day:

“Clothes make the man.  Naked people have little or no influence on society.”

Mark Twain

 

If you will read no further:

The Aged Based Limits chart for deducting Long-term Care premiums for 2014 is now available.  Every year, the amounts increase per age band due to inflation. Individuals can deduct LTCi premiums if they itemize more than 10% of their AGI in medical expenses (for age 65 and over, it’s 7.5%).  Also use the chart when an entity pays the LTCi premiums on behalf of employees….C Corps, S Corps, Partnership, and LLC. 

 

Thought for the week:

I recently received the following from a financial planner who has been selling linked-benefit products for several years.  The thoughts he has expressed certainly resonated with me.  Thought you might think so too.

“I believe that LTC should be viewed as an integral part of the retirement income plan.  One hundred percent of retirees will need to have resources to support their lifestyle, some for as long as 30 years. Have you ever heard anyone refuse a plan that would give them more?

Over half of our clients will have to increase that income by $thousands each month for some period of time to pay for the services from a professional caregiver. It only makes sense to acknowledge this and incorporate a strategy in the retirement plan. 

Every purchase/investment is an emotional one on some level. Whether they choose to purchase conventional LTCi insurance or not is largely based on their personal experience or attitude about insurance in general. They say they won’t need it, but that is the excuse they use because they don’t want it. Linked-benefit products allow them to incorporate an “investment” strategy that will predictably increase their income by several thousand dollars a month to help pay the added cost of someone taking care of them. Those with sufficient assets can embrace this approach with more enthusiasm because they won’t be purchasing insurance all the while hoping it will be a waste of money. 

I advise all of my clients to acknowledge that the second most significant financial issue after securing enough income to enjoy life is to arrange for the additional income that is likely to be needed for care down the line. (I always show them what I have done in my own planning for long-term care.)  Once the 100% need and the 50% need are addressed, then we can get on with legacy planning.  LTCi planning, regardless of the approach/product, will help assure the size and predictability of that legacy. “ SRC

 

What to do with the RMD:

It didn’t seem like so long ago, I sold life insurance to you young parents and the most important part of the transaction was to convince them that it was needed.  Most were sure they were going to live for a very long time. 

Now I find myself talking about the value of life insurance to people over the age of 65.  You would think that “a very long time” to 70 year old is about 15 years, since that is what the mortality tables tell us.  It has always made me wonder why someone would want to get rid of life insurance just as they are getting closer to making a claim on it.  But that is what some advisors suggest. “You don’t need it anymore.  Take the money and invest it.”  Rarely do they say, “Take the money and spend it.”   We recently presented a $250k life insurance policy to a 70yr. old client who was beginning to take Required Minimum Distributions from his IRA.  He was in average health and his first withdrawal was going to be about $11,000.  He didn’t need the money; would rather not take it; was looking for options of what to do with it.  He didn’t need any life insurance…but then he didn’t need to put the money into his investment account either.  Bottom line, he already had a substantial managed account with his advisor, but he didn’t have any life insurance.  We showed him that he could put the $8000 per year that would be left after paying the tax on his RMD into a $250k life insurance policy.  If he died a little past life expectancy at age 85 (a 32% chance that year) the tax-free annual rate of return would be 8.77%.  But if he was unfortunate and died at age 80 it would be 20.12%.  Comparing that with some other investments in his portfolio and considering the insurance provided a guaranteed result; he thought it a wise investment to put the money in the life insurance policy.  This was a good choice for all involved.