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- 3. Managing assets in retirement Variable expenses Fixed expenses Wealth transfer Healthcare expenses Emergency/opportunity funds
- 4. What if the balance is destroyed? Variable expenses Fixed expenses Wealth transfer Healthcare expenses Emergency/opportunity funds
- 12. How to cover long-term care costs If you’re not doing anything, you’re self-insuring.
- 14. One simple solution Life insurance House Cash reserves Investments MoneyGuard ® Reserve While the actual proportions in this chart will differ based on a specific investor’s needs, it does show the different types of assets in a typical retirement-oriented portfolio. Designated for long-term care costs
- 15. If you need long-term care Life insurance House Cash reserves Investments MoneyGuard ® Reserve Up to 500% with MoneyGuard ® Reserve Long-term care reimbursements are income tax-free under IRC Section 104(a)(3).
- 16. If you need it back Take it back; it’s in your reserve. Life insurance House Cash reserves Investments MoneyGuard ® Reserve premium is returned Up to 500% with MoneyGuard ® Reserve
- 17. If you never need long-term care Unused portion goes to your beneficiary income tax-free. Life insurance House Cash reserves Investments MoneyGuard ® Reserve death benefit Beneficiaries receive an income tax-free death benefit under IRC Section 101(a)(1).
- 19. Money back guarantee You change your mind 2 This example is based on a 65-year-old, nonsmoking female in good health with a $100,000 single premium for a policy with the two-year Convalescent Care Benefits Rider (CCBR), the four-year Extension of Benefits Rider (EOBR), and the Return of Premium Rider (ROPR). Benefit amounts vary by age, gender (except in Montana, where male premiums apply), and health status. Benefits are adjusted for loans and withdrawals. A portion of the amount returned may have tax implications. 3 possibilities 1 You need the full benefits of MoneyGuard ® 2 You change your mind 3 You die 1 You need the full benefits of MoneyGuard ® 2 You change your mind
- 20. Income tax-free death benefit 3 possibilities 1 You need the full benefits of MoneyGuard ® 2 You change your mind 3 All three outcomes are guaranteed This example is based on a 65-year-old, nonsmoking female in good health with a $100,000 single premium for a policy with the two-year Convalescent Care Benefits Rider (CCBR), the four-year Extension of Benefits Rider (EOBR), and the Return of Premium Rider (ROPR). Benefit amounts vary by age, gender (except in Montana, where male premiums apply), and health status. Beneficiaries receive death benefits income tax-free under IRC Section 101(a)(1). Guarantees are backed by the claims-paying ability of The Lincoln National Life Insurance Company. You never need long-term care 3 2 You change your mind 3 You never need long-term care 1 You need the full benefits of MoneyGuard ® 2 You change your mind 3 You never need long-term care
- 22. Repositioning assets Hypothetical example only. Benefit amounts vary by age, gender (except in Montana, where male premiums apply), and health status. $300,000 Set aside for long-term care costs $200,000 Freed up for retirement $100,000 Repositioned for MoneyGuard payment Up to $499,218 Death benefit or long-term care benefit $166,406 $332,812 Additional long-term care benefit Benefits are adjusted for loans and withdrawals and may have tax implications. Long-term care reimbursements are income tax-free under IRC Section 104(a)(3). Beneficiaries receive death benefits income tax-free under IRC Section 101(a)(1).
- 23. Three outcomes — all guaranteed This example is based on a 65-year-old, nonsmoking female in good health with a $100,000 single premium for a policy with the two-year Convalescent Care Benefits Rider (CCBR), the four-year Extension of Benefits Rider (EOBR), and the Return of Premium Rider (ROPR). Benefit amounts vary by age, gender (except in Montana, where male premiums apply), and health status. Benefits are adjusted for loans and withdrawals and may have tax implications. Long-term care reimbursements are income tax-free under IRC Section 104(a)(3). Beneficiaries receive death benefits income tax-free under IRC Section 101(a)(1). You need the full benefits of MoneyGuard ® Reserve You change your mind You never need long-term care 1 2 3
Notas del editor
- Thank you for being here today. I’m thrilled to be here to talk about something that really matters to everyone in this room — securing your retirement future by managing the risk of long-term care. I’m sure that all of you know of at least one or two people who had to dramatically change their retirement future due to the significant financial impact of an unexpected long-term health situation. And that’s why we’re here today...to ensure that you have a strategy in place to cover your possible future needs in a way that makes sense for you today and tomorrow. [CLICK]
- Your retirement assets are the very core of your nest egg. You’ve worked hard to accumulate them, and the confidence you feel about tomorrow rests largely on knowing that those assets can provide income when you’re no longer receiving a regular paycheck. So when it comes to preparing for the future, one of the most important financial steps you can take is to protect your retirement income. MoneyGuard ® Reserve is designed to help you do that. Let’s talk about how.
- This wheel represents the different uses of your assets during retirement. How much of your portfolio is allocated to each area will be based on your individual needs and goals. Variable expenses — usually include travel, leisure activities, gifts, etc. Fixed expenses — include mortgage or rent, utilities, monthly healthcare and prescription costs, and recurring bills Wealth transfer — is assets designated for your family or a foundation Healthcare assets — cover any expenses beyond routine prescription and doctor bills, such as an emergency or long-term care Emergency/opportunity funds — are immediate cash for emergencies that you may face or financial opportunities that you want to explore
- But look what happens if something such as significant healthcare expenses begins to impact your portfolio. [CLICK] If, for example, you or your spouse develops a serious illness or disease that requires you to have assistance in your home, in an assisted living residence, or in a nursing home facility. Once you have spent the money you’ve set aside for healthcare, you tap into your emergency funds — because at this point, it is a true financial emergency. After these assets are depleted, you would have to begin using money you had set aside to pass on to your children and grandchildren, or to a favorite charity. If the need for care continued, you would then be looking to cut back on some of your variable or discretionary expenses, such as gifts to family, trips to visit friends, maybe even seed for your birdfeeder or toys for your cat. And if the need continued, you would eventually be at the heart of your retirement assets — i.e., money to pay fixed expenses, like utilities, property taxes, and food. You could find yourself in real trouble. And sadly, it does happen. Many of you here today may even know someone who has had to go through this unfortunate cycle. This is not a pleasant scenario, but it does highlight the threat to your retirement security if long-term care risk is not adequately managed. Once you get to the stage where fixed expenses are at risk, your entire retirement portfolio is at risk.
- Well, you didn’t come here today for doom and gloom — and we’re not going to have a negative focus. You look like an energetic, positive-thinking group of people. We might even have some fun here together! What we want to do first is make sure we start with a solid understanding of long-term care based on the facts. Second, we’re going to look at what your options might be to cover long-term care, should you ever need it. And finally, I want to tell you about MoneyGuard ® Reserve, a universal life insurance policy from The Lincoln National Life Insurance Company. It’s an approach to cover long-term care costs that you may not have heard about. It actually lets you keep control of your assets, whereas some other solutions take assets out of your control. And it may provide one simple solution to long-term care challenges. So let’s begin with the facts of long-term care.
- Many people don’t think they’ll need long-term care, especially as they approach retirement. But as this chart shows, Americans have more than a 70% chance of needing some form of long-term care after age 65. Because of this, it’s important that you develop a strategy for long-term care needs while you are healthy.
- If you do eventually require some form of care, whatever type of long-term care you receive will be expensive. And I don’t think anyone in this room would predict that the costs will decrease in the future. According to the American Society on Aging, the national average annual cost for even basic assisted living is $21,600. And that’s with no additional care. Nursing home care runs about $70,000 on average. And for around-the-clock professional care that takes place in a person’s own home, the average annual cost is $155,520! Of course, you should keep in mind that these are national averages; in some areas, the costs are much higher. Long-term care can present a real financial challenge for even the most affluent Americans. So the question you should ask yourself is, “Who would pay for it if I needed long-term care?”
- Many people assume that Medicare and Medicaid will cover their long-term care needs; however, due to numerous restrictions with these programs, it is not something you can rely on. Medicare is designed to pay only for “acute” care. It has limited long-term care benefits. And Medicaid is only for those with almost no personal assets. It is basically a federal welfare program administered by each state. It covers long-term care expenses once you qualify. Both income and assets are eligibility factors for Medicaid. You must reach “spending down” limits before you qualify — and that does not appeal to everyone. In addition, long-term care facilities usually have only a limited number of beds, reducing your ability to choose the best facility for your needs. Now that we’ve discussed the facts of long-term care — your chances of needing it, how much it costs, and what you can’t rely on to cover it — let’s move on to the next item on today’s agenda…how you would cover long-term care costs.
- When it comes to paying for long-term care, it’s really up to you. There are two ways to cover long-term care expenses — paying (meaning that you purchase traditional long-term care insurance) and self-insuring. But you have an additional opportunity that you probably haven’t thought of — repositioning. Let’s look briefly at these options.
- Traditional long-term care has its advantages — it offers guaranteed benefits, and most policies do cover all levels of care. However, premium payments can be expensive, they are recurring, and they may increase over time. In addition, after paying those expensive premiums for years, if you never need care, your money is typically lost forever.
- What about self-insuring? Some of you may be doing this right now because you’ve explored traditional long-term care insurance and found that, for the reasons we’ve just discussed, it’s just not for you. If you’re self-insuring, you do maintain control of your assets and you don’t pay for coverage you may never need. But here’s something important to consider. If you do self-insure, you must set aside significant liquid assets and hope that the amount you’ve saved will be sufficient to cover long-term care costs. There’s always a chance of depleting assets too quickly and having to rely on others. Remember our discussion about managing assets in retirement? The wheel showed all the different ways you use assets during retirement and how the balance is affected by significant healthcare expenses. As our wheel example illustrated, once liquid assets for healthcare expenses are consumed and your need for care continues, you are forced to spend money you’ve set aside to pass on; money you’ve set aside for variable expenses like gifts or trips; and then, finally, even money allocated for fixed expenses, such as utilities and food.
- And for those of you here today who haven’t yet done anything to address long-term care, that’s basically the same as self-insuring, isn’t it?
- Other than traditional long-term care insurance and self-insuring, what options do you have? Fortunately, there is another alternative that lets you reposition. MoneyGuard ® Reserve is a universal life insurance policy from The Lincoln National Life Insurance Company. It provides benefits that you can tap into to reimburse long-term care costs in a way that makes sense for today and tomorrow. It’s a smart way to cover long-term care costs.
- So how does MoneyGuard ® Reserve offer one simple solution? As we’ve discussed, how you prepare for the possibility of long-term care directly impacts the security of your entire portfolio, posing a threat to your retirement income. Even if you’re still saving for retirement, you should consider the threat of long-term care now. A typical portfolio consists of investments for growth and income; life insurance to efficiently provide for your heirs; and assets reserved for financial emergencies, including medical or long-term care costs. Generally, the emergency funds are in the form of cash reserves, such as savings accounts, certificates of deposit, Treasury bills, or money market funds, which provide low volatility and ready access to assets. Few people want to risk these assets…or their retirement. [CLICK] By simply repositioning the cash reserves designated for long-term care into a MoneyGuard Reserve policy, you immediately help increase the protection for the rest of your portfolio from the challenge of those costs.
- If you need long-term care, MoneyGuard ® Reserve, in many cases, will help the assets you’ve set aside for long-term care work up to three, four, even five times harder, [CLICK] significantly increasing your capacity and helping you get more for your long-term care dollar.
- If you need your money back, MoneyGuard ® Reserve provides a money back guarantee that will return your original premium payment any time you request it. [CLICK] Of course, that amount will be adjusted for loans, withdrawals, or benefits you may have taken, and a portion of the money you receive may have tax implications. You can then return these assets to the cash reserves in your portfolio. This money back guarantee is included at the time your policy is issued when you fund your policy with a single payment. And remember: This and other guarantees are backed by the claims-paying ability of The Lincoln National Life Insurance Company — a company with a 100-year heritage of strength and integrity.
- If you never need long-term care, MoneyGuard ® Reserve efficiently passes any unused portion of your death benefit income tax-free to your beneficiaries. [CLICK] Remember that loans and withdrawals will reduce your death benefit and may have tax implications. And you should know that benefits you receive to cover long-term care expenses are income tax-free as well. Death benefits are received income tax-free under IRC Section 101(a)(1), and long-term care reimbursements are received income tax-free under IRC Section 104(a)(3). Just as MoneyGuard Reserve can provide leverage when it comes to assets you've set aside to cover the costs of long-term care, it can also provide some leverage for the amount of death benefit you can provide. If you never need long-term care, your loved ones or favorite charity can receive the death benefit, which may be more than the original premium used to fund the policy. The original death benefit amount is reduced if benefits have been used or if there are outstanding loans or withdrawals on the policy. MoneyGuard Reserve lets you get more for your long-term care dollar and be tax-smart about long-term care.
- To give you a better understanding of how this might work, let’s assume that you are a 65-year old, healthy, nonsmoking female who has $300,000 in readily available assets. After talking with your financial advisor or insurance agent, you’ve decided to reposition $100,000 of your assets into your MoneyGuard ® Reserve policy, and you’ve selected a six-year policy, which includes a four-year Extension of Benefits Rider. Remember, there are three possibilities when it comes to MoneyGuard Reserve. You need the full benefits, you change your mind, or you never need to use it. Let’s look at the first possibility — you require long-term care and need the full benefits MoneyGuard Reserve can offer. [CLICK] In this example, you’ll get up to $83,203 each year for six years in monthly reimbursements of up to $6,934 to cover monthly long-term care costs. And you’ll receive these benefits —up to a total of $499,218 — income tax-free. That’s nearly 500% of your original premium payment…now that’s what we mean by leveraging long-term care assets.
- Now let’s look at the second possibility — you change your mind. [CLICK] If you decide that you want your money back, you need only notify us in writing and we’ll mail you a check for your original single premium payment, no questions asked. Remember that the amount returned will be adjusted for any loans, withdrawals, or benefits you’ve taken, and a portion may have tax implications.
- And now, the third possibility — you never need long-term care. [CLICK] Looking at our hypothetical example in this scenario, MoneyGuard ® Reserve will provide your loved ones with a $166,406 income tax-free death benefit. If you use only a portion of the death benefit for long-term care, MoneyGuard Reserve passes the remaining benefit income tax-free to your beneficiaries. You’ll recall that loans or withdrawals reduce the death benefit and may have tax implications. So with one simple solution, MoneyGuard Reserve, you can prepare for three possibilities with three outcomes…[CLICK] and all three of these outcomes are guaranteed by the claims-paying ability of The Lincoln National Life Insurance Company.
- Let’s revisit how this all works by looking at Nancy Arneau — a 65-year-old, healthy, nonsmoking female who has decided against traditional long-term care insurance and is currently self-insuring for her possible future long-term care needs. She has $300,000 in readily available assets. After meeting with her financial advisor or insurance agent, Nancy determined that MoneyGuard ® Reserve would meet her long-term care needs. She opted for a policy with the two-year convalescent care benefits option and the four-year extension of benefits option, and she decided to fund her policy with a single premium payment of $100,000. Naturally, the figures I’ll show you here apply only to Nancy Arneau. If your own age, gender, or health status is different, your actual benefit amounts would be different too. But these figures do help illustrate the benefits of MoneyGuard Reserve.
- Remember: Nancy had set aside $300,000 specifically for an “emergency.” If she needs long-term care, these funds would be liquidated first. She’s fortunate — her “rainy day” funds are adequate for the average long-term care need. However, she would prefer to use some of those funds for other purposes. [CLICK] So she moved $100,000 of assets into MoneyGuard ® Reserve, which provides an immediate death benefit or long-term care benefit of $166,406, and if needed, an additional benefit of up to $332,812 for extended long-term care. She now has more value than she had before dedicated to long-term care — up to $499,218 (which is up to $83,203 each year for six years to reimburse long-term care costs, a maximum of $6,934 per month). And she’s accomplished this for a fraction of the amount she had set aside. This now frees up $200,000 for other uses, such as providing additional retirement income security.
- The first possibility [CLICK] — Nancy needs the full long-term care benefits MoneyGuard ® Reserve can offer. She’ll get up to $83,203 each year for six years to reimburse monthly long-term care costs (i.e., up to $6,934 per month). And she’ll receive these benefits — up to a total of $499,218 — income tax-free. The second possibility [CLICK] — Nancy decides that she wants her money back for any reason. She need only notify us in writing and we’ll mail her a check for her original single premium payment, minus any loans, withdrawals, or benefits she’s taken. Also, remember that there may be tax implications on a portion of the amount returned. The third possibility [CLICK] — Nancy never needs long-term care. MoneyGuard Reserve will provide Nancy’s loved ones with a $166,406 income tax-free death benefit. If she uses only a portion of the death benefit for long-term care, MoneyGuard Reserve passes the remaining portion income tax-free to her beneficiaries. You’ll recall that loans or withdrawals reduce the death benefit and may have tax implications. Again, we’ve seen three possibilities with three outcomes that are guaranteed by the claims-paying ability of The Lincoln National Life Insurance Company.
- Now that we’ve seen how it can work, here are some important things you should know about MoneyGuard ® Reserve. It’s a universal life insurance policy that can provide you with retirement income security whether you face long-term care costs, need access to your assets, or wish to pass assets to your heirs. [CLICK] MoneyGuard Reserve covers qualified long-term care costs — your specified amount of death benefit is used to reimburse monthly long-term care costs. Should you need care for an extended period, an optional benefit can provide coverage for a specified number of years beyond the depletion of your death benefit. [CLICK] MoneyGuard Reserve includes a money back guarantee — if you fund your policy with a single payment, you can request a return of your money at any time. The amount returned will be adjusted for any loans, loan interest, withdrawals, or benefits paid and may have tax implications. This and other guarantees are based on the claims-paying ability of The Lincoln National Life Insurance Company. [CLICK] MoneyGuard Reserve helps you leave money to your loved ones — if it isn’t used to reimburse long-term care costs, the guaranteed death benefit will pass to your beneficiaries income tax-free and sheltered from probate if someone other than your estate is named beneficiary. Even if the entire specified amount of death benefit is used for long-term care costs, a residual death benefit is still provided for your beneficiaries. Any money borrowed or withdrawn from the policy will reduce the death benefit and may have tax implications. [CLICK] MoneyGuard Reserve helps you maintain control of your assets — by repositioning some of your assets into a MoneyGuard Reserve policy, you free up assets you set aside for long-term care because you no longer have to use them for that purpose. [CLICK] There is another way Money Guard Reserve can help you control your assets — it offers an optional benefit that can help protect you from rising long-term care costs and inflation by increasing the amount of annual long-term care coverage over time. (Not all features of this optional benefit are available in all states.)
- READ FROM SLIDE
- We’ve talked a lot today about the importance of preparing for long-term care and the direct impact it has on the security of your entire portfolio. Long-term care can certainly pose a threat to your retirement income security. There are really three specific challenges to your asset base. Challenge #1: If you rely on personal savings, you may quickly deplete those assets. Even if you reserve a considerable amount using cash or cash equivalents, you face the prospect of a relatively insignificant return on a potentially significant portion of your portfolio. Challenge #2: With investments outside of cash or its equivalents, getting to your assets quickly can become an issue. Challenge #3: With long-term care insurance, if you don’t need it, you typically lose the assets you put into it.
- However, MoneyGuard ® Reserve offers one simple solution for these long-term care challenges: MoneyGuard Reserve can help you leverage your long-term care dollar. MoneyGuard Reserve provides a money back guarantee on single premium policies that will return your initial single premium payment at any time. MoneyGuard Reserve not only provides income tax-free long-term care payments, but also efficiently passes any unused benefits income tax-free to your beneficiaries through a death benefit. By meeting these challenges, MoneyGuard Reserve can help you secure your retirement income.
- So what are the next steps? Now that you know there’s an alternative to traditional long-term care insurance and self-insuring, talk with your financial advisor or insurance agent today. He or she can help you make sure you’re protecting your retirement income by keeping it safe from the threat of long-term care.