Thought for the day:
The first person to live to age 150 has already been born. Dr. Aubry de Grey
If you will read no further:
LTCi RATE INCREASES EXPLAINED
From Chris Ridd, Westland LTCi guru:
Insurance companies conduct comprehensive claims studies every three years to examine the usage trends for each LTCi block of business. John Hancock has recently received permission from the states for a third rate increase since 2008. Not all blocks of business are affected. In order for a carrier to increase rates on existing LTCi policies, they have to request it from each state insurance dept. on a certain policy form and/or a “block” of business. (For example: policy form XYZ in the state of CA sold between 2001 & 2003) They can never single someone out because they are older and are paying a low premium for their age.
The state can either accept the percentage increase requested, a lesser percentage or deny the request altogether. Usually the LTC Company has enough data to back up their original request….even for “rate stabilized” states, like California. Long-term Care insurance companies collect data constantly to sure their policies are priced correctly. In addition to the current low interest rates they are finding that people keep their policies (instead of lapsing a certain percentage), live longer, and claims are lasting longer. All this means that there will be more claims then anticipated in the future.
For outstanding insights into the world of long-term care planning, go here http://goo.gl/aCGnnL and consider attending the LTCi Summit next May. There is still time to get in on the $69 pre-registration.
Our own Gene Pastula, CFP will be a featured speaker.
Thought for the week:
Contrary to common belief, preparing for long-term care or guaranteeing income for life cost nothing if done correctly. But it can be financially devastating if it is not done at all.
Stretch or no stretch that is the question:
I see it every time I do a client seminar on long term care. A third of the audience raises their hands when I ask “who has to take required minimum distributions from their qualified plan that they don’t need and would rather leave behind?”
There is an app for that….available from the insurance carriers.
- The Straight Forward Stretch IRA.
- Put the amount of money you want to stretch in an annuity inside the IRA. (a separate annuity for each beneficiary)
- Take only the RMDs as required leaving the rest to grow in the Annuities.
- Sign forms with each beneficiary acknowledging that they will receive their share of the IRA remaining at your death through annual payments for the rest of their lives. At death, each beneficiary will commence receiving annual taxable income for life. Any remaining funds will go to their heirs.
- 2. More clever way to stretch the IRA
- Use the RMD to purchase one or more life insurance policies for the benefit of the heirs.
- The death benefit can be accessed, tax-free by the insured, if needed for long-term care.
- At death the heirs will receive any undistributed death benefit, free of income tax, allowing them to “recapture” much or all of the taxes paid on the RMDs.
- This can be done in tandem with the Straight Forward Stretch.
The point here is to assist the client who wants to leave a greater after-tax legacy for his/her heirs with assurances that it will all work out as planned regardless of the uncertainty in the economy, the political climate or even the need to pay for long-term care.