LINKED BENEFITS A Two Word Strategy for Protecting Your Retirement.
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Transcript of LINKED BENEFITS A Two Word Strategy for Protecting Your Retirement.
Agenda
Understanding the facts about extended care.
Why is now the time to consider a linked benefit product?
How can a linked benefit product help leverage your retirement assets?
What is a linked benefit product?
How does a linked benefit product work?
Open Discussion
The Facts About Extended Care
Average cost of long-term care is high and increasing
70% age 65 or older will need it temporarily or permanently
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70%
Nursing home*$80,000/year private$73,000/year semiprivate
Assisted living unit*$3,100/month
Home care aide*$25/hour
Adult daycare*$60/day
*National Averages. Actual costs vary by state.
Activities of Daily Living
To better understand “extended” care, think of the activities that you performed when you woke up this morning.
You probably:– Climbed out of bed (Transferring)– Used the bath or shower (Bathing)– Walked to the bathroom (Continence)– Got dressed (Dressing)– Used the toilet (Toileting)– Ate breakfast (Eating)
Activities of Daily Living
While we are healthy it is easy for us to take for granted the Activities of Daily Living (ADL's). However, when you or a loved one is stricken with a degenerative condition such as a stroke, performing these ADL's becomes impossible without the assistance of another person. This type of care is chronic (full-time) and thus becomes very expensive.
Cognitive Impairment, example Alzheimer’s, is a stand-alone trigger of benefits
Claims Are Lasting Longer
Average duration of claim is 4.2 years– 75% of claims start at home
Carriers are seeing significant percentages of cognitive claims– Alzheimer’s/Dementia– These claims produce longer stays
Impact on caregivers, family, and friends– Emotional– Financial– Logistical– Family dynamics– Everyday life
If You Needed Extended Care Today…
Which Asset Would You Use First?
While the actual proportions in this chart will differ based on a specific individual’s needs, it does show the different types of assets in a typical retirement-oriented portfolio.
Are You Prepared
To spend down your retirement savings?– $80,000 X 4 years = $320,000– $320,000 X 2 (includes spouse) = $640,000
To Spend $640,000?
Why Now?
2011 represents the beginning of a new era in retirement planning– New Tax Advantages– New Products
Environmental factors– Low interest rates – Lower risk tolerance– Money is not working as hard as it could be
• CDs• Savings Accounts• Cash
Your financial strategy is not complete without extended care planning
A Linked Benefit Product
Makes your money work harder; leveraging each dollar up to 5 times in the event of an extended care need
Provides a Death Benefit to beneficiaries if you don’t use all the money
Keeps you in control of your assets; a money back guarantee*
Offers a smart way to help protect your existing assets from an extended care event
*Through the Return of Premium Rider on single premium and certain flexible premium universal life policies.
What Is A Linked Benefit Product?
Linked benefit product: a base product such as life insurance or an annuity with a "rider" that provides long term care benefits if needed.
Provides multiple benefits, paying out the first benefit, as needed.
Qualified long-term care costs are reimbursed
Reimbursements intended to be income tax-free
How A Linked Benefit Product Works
While the actual proportions in this chart will differ based on a specific individual’s needs, it does show the different types of assets in a typical retirement-oriented portfolio.
OtherOther
Life Insurance to create a legacy
Investments / Investments / qualified plansqualified plans
CashCashReservesReserves
Designated for long-term care costs
More Extended Care Protection
Extended Care Reimbursement
Up to 5 times premium dollars
Reimbursements for qualified long-term care costs intended to be income tax-free
Benefits paid up to the maximum monthly amount specified in your policy
Specified amount of death benefit used to reimburse long-term care costs
Optional rider can provide coverage for specified number of years after death benefit is depleted
Cost of riders deducted from policy’s account value
If you need extended care
Long-term care reimbursements are generally income tax-free under IRC Section 104(a)(3).
Income Tax-FreeDeath Benefit
Extended Care Reimbursement
Up to 5 times premium dollars
Reimbursements for qualified long-term care costs intended to be income tax-free
Benefits paid up to the maximum monthly amount specified in your policy
Specified amount of death benefit used to reimburse long-term care costs
Optional rider can provide coverage for specified number of years after death benefit is depleted
Cost of riders deducted from policy’s account value
If you need extended care
Death Benefit
If you never need extended care
Income tax-free death benefit
Any portion of guaranteed death benefit not used for long-term care benefits will pass to beneficiaries income tax-free
Any money borrowed or withdrawn from the policy will reduce the death benefit
Beneficiaries receive death benefits income tax-free Under IRC Section 101(a)(1)
Money Back Guarantee
Extended Care Reimbursement
Up to 5 times premium dollars
Reimbursements for qualified long-term care costs intended to be income tax-free
Benefits paid up to the maximum monthly amount specified in your policy
Specified amount of death benefit used to reimburse long-term care costs
Optional rider can provide coverage for specified number of years after death benefit is depleted
Cost of riders deducted from policy’s account value
If you need extended care
Death Benefit
If you never need extended care
Income tax-free death benefit
Any portion of guaranteed death benefit not used for long-term care benefits will pass to beneficiaries income tax-free
Any money borrowed or withdrawn from the policy will reduce the death benefit
Provides a money back guarantee through the Return of Premium Rider on single premium and certain flexible premium universal life policies
Your premium payment can be returned to you, minus any loans, withdrawals, or benefits paid, and is subject to the terms of the Return of Premium Rider
Return of Premium
If you change your mind
Beneficiaries receive death benefits income tax-free Under IRC Section 101(a)(1)NOTE: This may have tax implications, so check with your tax professional.
Hypothetical Case Study Mary, Age 65
Good Health, Non-smoker
$1 million retirement portfolio
Repositioned $100,000
Leverage Up To 5 Times The Premium
Extended Care Reimbursement
Hypothetical example only. Benefit amounts vary by product, age, gender, and health status.
If Mary needs extended care
Mary will get up to $83,208 every year ($6,934 per month) for six years to reimburse qualified long-term care costs.
The total reimbursement could be up to $499,248 income tax-free.
She still has money in her portfolio to leave to her beneficiaries.
More Money To Mary’s Beneficiary
Extended Care Reimbursement
Mary will get up to $83,208 every year ($6,934 per month) for six years to reimburse qualified long-term care costs.
The total reimbursement could be up to $499,248 income tax-free.
She still has money in her portfolio to leave to her beneficiaries.
Death Benefit
In addition to money remaining in Mary’s own portfolio, her beneficiaries will receive a $166,406 death benefit, minus any loans or withdrawals.
Hypothetical example only. Benefit amounts vary by product, age, gender, and health status.
If Mary needs extended care
If Mary doesn’t use her extended care benefits
Mary Can Change Her Mind
Mary would receive her original $100,000 single-premium payment, minus any loans, withdrawals, or benefits paid.
* This may have tax implications
Return of Premium
If Mary changes her mind
*Through the Return of Premium Rider on single premium and certain flexible premium policies. Hypothetical example only. Benefit amounts vary by product, age, gender, and health status.
Extended Care Reimbursement
Mary will get up to $83,208 every year ($6,934 per month) for six years to reimburse qualified long-term care costs.
The total reimbursement could be up to $499,248 income tax-free.
She still has money in her portfolio to leave to her beneficiaries.
If Mary needs extended care
Death Benefit
If Mary doesn’t use her extended care benefits
In addition to money remaining in Mary’s own portfolio, her beneficiaries will receive a $166,406 death benefit, minus any loans or withdrawals.
Easy Process
Less than 20 simple pre-screening questions
45 minute phone interview
No exams, lab work, or doctor’s statements