Asset-based long-term care solutions: A more flexible option

As we’re living longer, asset-based long-term care insurance can help you live your best life well into retirement.

When Social Security was introduced in 1935, the average 65-year-old received benefits for a lifespan of 12 to 15 years. Today, about a quarter of 65-year-olds will live past age 90. This presents wonderful opportunities to lead long, full and productive lives, while also underscoring the importance of planning ahead for potential challenges as we live well into our 80s and 90s.

Studies suggest that nearly 70% of those over age 65 will need some type of long-term care for three years, and 20% will need care for more than five years.¹ As you diligently plan and save for retirement, it’s important to understand how simply living a long life can impact your income, health and quality of life. A long-term care insurance policy can cover costs that Medicare and other health insurance policies may not, such as in-home care, assisted living, adult daycare and nursing home care.

How asset-based long-term care works

Asset-based long-term care insurance can provide flexibility and value and while protecting you and your family’s financial goals. These long-term care contracts leverage the structure of either life insurance or annuities to provide long-term care benefits as needed, offering adaptability and ancillary benefits in case the policy goes unused.

These solutions combine the financial protection you and your family may need in response to a long-term care event, but with the features of a balance-sheet asset that enable flexibility not found with traditional policies.

Historically, asset-based policies were purchased with single premiums; however, today they provide multiple payment options such as 10 years or paying up to age 65. They provide long-term care benefits for typically four to six years, and the residual death benefit will be paid to your beneficiaries.

Flexibility for your future

If you need long-term care, asset-based products offer an enhanced and tax-efficient funding account for the related expenses. And if you do not end up needing long-term care, the death benefit will be paid tax-free to your beneficiaries upon your passing. Additionally, your plan has cash value that can be accessed should you change your mind and decide to choose a different strategy.

When you consider that people today are living healthier and longer lives, it’s easy to see how important creating a long-term care plan can be. Health insurance, whether provided by a private company or through Medicare, does not pay for long-term care. Coverage is limited to acute care associated with a short-term illness or injury, such as recovery or rehabilitation

In 2021, the median annual national cost for care in an assisted living community was $54,000. A private room in a full-time skilled nursing care facility costs an average of over $300 a day – more than $100,000 a year. When you combine the cost of two spouses over multiple years, you can see that housing expenses alone would run quite high.

For those seeking to protect their retirement income, investment assets and family from the risks and costs of a long-term care event, while maintaining control and liquidity, an asset-based long-term care product is worth considering. Exploring an asset-based long-term care solution allows you to make choices while you still can and better enjoy your quality of life throughout retirement, and helps relieve the burden on your loved ones.

¹ longtermcare.gov, “How Much Care Will You Need?,” February 2020; acl.gov/ltc/basic-needs/how-much-care-will-you-need

Guarantees are based on the claims paying ability of the issuing company. long-term care insurance or asset-based long-term care insurance products may not be suitable for all investors. Surrender charges may apply for early withdrawals and, if made prior to age 59 ½, may be subject to a 10% federal tax penalty in addition to any gains being taxed as ordinary income. These policies have exclusions and/or limitations. The cost and availability of long-term care insurance depend on factors such as age, health, and the type and amount of insurance purchased. As with most financial decisions, there are expenses associated with the purchase of long-term care insurance.