Our Retirement Income and Long Term Care Insurance Specialist

Michael FitzPatrick

Set Your Retirement Thermostat for Success and Sleep Well at Night

Michael FitzPatrick is committed to helping people address the two greatest fears they have over the age of 55…outliving their income and spending 50 years of hard earned savings on something that’s health related and not covered by Medicare.

Michael, a leading national authority on retirement planning with an emphasis on income strategies and long-term care options, provides education to the public about preparing for long-term living while also addressing immediate eldercare issues. He understands that innovations in medical science, technology, prescription drugs, and health and wellness have led to increased life expectancy. While these “new-found” years present opportunities for increased time with family, more travel and volunteer work or launching a second career, they also come with challenges. And outliving income and vulnerability to health issues are two very real-world concerns.

Back in 1935, the life expectancy for men may have been 58 and women 62. Today, on average men are living to at least 79 and women to 83. That’s a lot more years over which you have to stretch your income, Michael says. The fact that most companies have eliminated pensions and traded in defined benefit plans for defined contribution plans complicates matters further. “Back in the day, you worked for a company for 30 years and retired with a gold watch and guaranteed income from a pension,” Michael says. “Today, retirement is a totally different beast.”

Consider that we are currently living in an era in which we could spend as many years in retirement as we spend working. It’s a huge paradigm shift. How prepared are any of us to handle that?

Michael says that the answer may well be found in a recent Legg Mason study that says as many as two-thirds of Americans don’t have a plan. “That’s an overwhelming and frightening statistic that runs counter to outliving income being the number one concern of retirees.”

Concern #1: Outliving Income

In fact, according to the study, most people surveyed spend on average an hour and 20 minutes each day thinking or worrying about money. That amounts to more than nine hours a week, or 485 hours a year—definitely a good deal of time. “But when you consider that market risk, medical/long-term care risk and inflation and tax risk are all factors in outliving income and you balance this against not having a plan, it’s understandable that thinking about or worrying over money usurps a lot of time,” Michael says.

When something happens like prolonged or chronic illness, the death of a spouse, or external factors like a huge dip in the stock market, the nest egg and income a retiree was counting on can dwindle quickly. Factors such as a percentage survivorship benefit to a surviving spouse, the fact that only the higher of two Social Security benefits remains following the death of a spouse, or a major stock market drop like those that occurred in 2001 and 2008 can quickly alter what once seemed to be a secure financial picture. Plus, the astronomical cost of care for a serious or prolonged illness—costs for home care or transfer to an acute care facility—are typically not covered by Medicare. This creates another huge source of worry and underscores why having a sound plan is a necessity, not a luxury, Michael says.

Concern #2: Health

Health costs are staggering and one of the greatest liabilities an individual may face over the age of 45. In fact, paying for long-term care services could force an individual or family to deplete life savings in as few as 11 months.

Michael believes that part of sound planning includes getting educated about long-term care insurance. At one time, long-term care insurance policies included only a standalone policy option. Now hybrid offerings include innovative financial products that add on long-term care options and help to solve the aging issues that longevity and longer life spans have created.

“Let’s face it. Today’s retirees are aging in a way that was unprecedented in the past. Indeed, we could spend more time in retirement than we did working. While these new-found years allow families to enjoy loved ones longer and create new memories, serious challenges can arise with increased longevity. Now, more than ever before, retirees are not in a position to gamble with their money

“We help our clients sleep well at night, knowing that no matter how long they live, or what happens to their health, they are going to be fine,” says Michael. “What price tag can you put on peace of mind?”

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Long Term Care Insurance: Facing Long Term Care Challenges Head On

A health issue can wipe out a senior’s savings or make a huge dent in it, and long term care insurance is one important way to help cover these costs. Michael FitzPatrick explains why part of sound planning includes getting educated about long-term care insurance and discusses how today’s hybrid offerings include innovative financial products that add on long term care options and help solve the aging issues that longevity and longer life spans have created.

Addressing Two Major Concerns as You Age

Michael FitzPatrick understands that the two greatest concerns that plague seniors involve outliving their assets and spending all their money on health-related issues. By recommending personalized solutions regarding long term care, retirement income and asset protection options, Michael is committed to providing choice, control and peace of mind for you and your loved ones as they age.

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What is long term care? What is long term care insurance?

Long term care is the care an individual needs delivered by medical practitioners or licensed aides either at home or in a health care facility following a serious health issue or when faced with a chronic condition or disease. Because the care is delivered over an extended period of time, the costs associated with the care are typically prohibitive. 

Long term care insurance is a product that helps you pay for some or all of the costs related to long-term care depending on the policy you purchase. In other words, it’s a product that can help you deal with chronic conditions, illnesses, and disabilities—and the expenses that come along with them–over an extended period of time. 

Unlike traditional health insurance, long term care insurance is designed to cover long-term services and supports, including personal and custodial care in a variety of settings such as your home, a community organization, or other facility. Long term care insurance policies reimburse policyholders a daily amount (up to a pre-selected limit) for services to assist them with activities of daily living (ADLs that include bathing, dressing, eating, toileting, transferring, walking and continence. You can select a range of care options and benefits that allow you to get the services you need, where you need them, when you need them and for the period of time in which you need them. Sometimes that means covering some or all of the costs tied to adult day health care, home health care, or hospice care, while at other times it may mean covering the costs of care in a skilled-nursing or assisted-living community. 

What is the best age for me to look into or purchase long term care insurance?

Long term care insurance is generally available for people ages 18-84. Premiums for younger applicants are lower, since they will likely be paying premiums longer before needing benefits. As long as you are in good health, you can qualify for long term care insurance until you turn 85.

Most experts suggest that it’s best to purchase long-term care insurance during the period between your mid-50s and mid-60s. You’re free to buy it when you’re younger than that, of course, but doing so may not make the most financial sense for you or your loved ones.

What happens if I pass away and never use my long term care insurance policy?

If you or your loved one passes away and the benefit is not used, the premium is not refunded to you or your family. You can buy a return of premium rider although it is very expensive. Still, it may be something to consider if you consider buying long-term care insurance (LTC) for your parents.

Many people think if you buy a long term care insurance policy and don’t use it—a blessing really not a curse—that you’ve wasted your money on the premiums. But this is not the case thanks to a new type of policy offered in the long term care insurance marketplace today. This hybrid product, offered by the life insurance industry, offers a hybrid product in which a whole life insurance policy is combined with long term care.

With this product, you purchase a policy with a single or lump-sum premium. If you pass away, your heirs receive the death benefit as with a normal life insurance policy.

However, if you need LTC during your lifetime, you can draw down on the death benefit to pay for those needs. Whatever remains after you pass away still goes to your beneficiaries. The other advantage is the LTC benefit is income tax free since life insurance payouts are not taxed.

Won’t Medicaid or Medicare take care of my expenses? So why should I rely on long term care insurance?

Contrary to popular belief, Medicare and Medicare supplemental insurance will pay only for the cost of some skilled care in approved nursing homes, for a limited period of time and only for expenses resulting from acute-care episodes rather than for chronic disabilities. Medicare’s share of LTC expenditures has increased in recent years, however, as many nursing homes have begun providing more post-hospital rehabilitation services. Medicare shouldn’t be considered an acceptable alternative because it doesn’t cover most of the costs related to long-term care. It doesn’t cover assisted living or the on-going use of a home health aide, nor does it cover extended stays in skilled-nursing communities (“nursing homes”).

Medicaid, on the other hand, is a much more acceptable alternative to long-term care

Insurance, if you are eligible for it. People committed to a plan for Medicaid don’t need long term care insurance. That being said, you should be aware that Medicaid limits your options and choices for long term care. Also, to be eligible for Medicaid, you have to be below certain financial and health thresholds. This is why you may have heard of people “spending down” using up their assets in order to qualify for Medicaid’s assistance.

Many individuals pay for their own care when they enter a nursing home. However, given the high cost of that care, many people deplete their assets when doing so and then qualify for Medicaid. Plus, more than four-fifths of the elderly who are living in the community and who face a high risk of needing nursing home care do not have enough assets, excluding home equity, to finance a nursing home stay of one year or more.

In fact, according to the Congressional Budget Office, it is estimated that inflation-adjusted expenditures for long-term care for the elderly will grow annually by 2.6 percent between 2000 and 2040. Those expenditures are projected to reach $207 billion in 2020 and $346 billion in 2040.

Why do I need a plan, or to pay a premium, when I have adult children who said that they will take care of me/us?

The assumption that your children will be there to help you with care when it is needed is a natural one, but one that may definitely prove challenging. With life spans increasing as they are, it may be a long time before your adult children would be called upon to provide any form of long term care. By then, they may be entrenched in their careers, married and with children of their own, which is why this group is often referred to as the sandwich generation. They may even be living in a faraway location, either across the country or around the world. In short, they will most likely be faced with the pressures and challenges of their own everyday responsibilities. Burdening them with long term care would increase this pressure—so much so that it may cause them to be away from their families for a period of time or to resign or take leaves from their jobs, or juggle both roles simultaneously. These factors can contribute to the depression and burnout of these members of the sandwich generation and have even contributed to the financial responsibilities of this sandwich generation many of whom have had to assume some or all of their aging parents’ expenses.

Overall, it would be imprudent to suggest that your living situation, whatever it is, should cause you to “ignore” long term care insurance. That said, it may allow you to ignore certain aspects of it. For example, to save money and not burden your children, you could focus your attention on policies or policy options that are geared toward paying for skilled-nursing community stays rather than in-home care assistance.

How much does long term care insurance cost? Am I better off investing my money and not buying insurance?

Long term care insurance coverage can be expensive. As is often the case with insurance products, though, it depends on what kind of policy you buy. Also, if you’re fairly young and healthy, or if you don’t think you’ll need much long-term care for some other reason, you’ll probably pay a lot less for one of these policies than someone who is older, has health issues, or has a stronger need for extended care.

According to the 2015 Long Term Care Insurance Price Index, published by the American Association for Long-Term Care Insurance, a healthy 55-year-old man should expect to pay approximately $1,060 per year for $164,000 worth of benefits. A single, 55-year-old woman looking for the same coverage, on the other hand, can expect to pay about $1,390 per year. Finally, a married couple made up of two 60-year-olds should plan on paying somewhere in the ballpark of $2,220 each year for coverage totaling around $328,000. Don’t take this information to be gospel, though, as rates tend to differ wildly from company to company. So, take your time, shop around, and field long-term care insurance quotes from several providers before settling on a policy.

But are you better off investing your money than buying a long term care policy. There is no definite yes or no answer. People who have sizable estates may have enough money to pay for long term care costs; however, because long term care costs may eat up an estate, individuals must decide beforehand whether they are comfortable with that option and also how much of “their own money” they would want to pay for care. The first question you must ask yourself: “Am I willing to accept some of the financial risk and responsibility should I end up needing some sort of long-term care:

The new hybrid policies, particularly those that pair life insurance with long term care may be an antidote to the can be effective in some estate planning situations. The life policy essentially protects the estate against the future costs for long-term care.

I’ve heard of hybrid policies and shared policies related to long term care. What are they and how do they work?

Hybrid policies are among the innovative products offered in today’s insurance marketplace. Hybrid policies, which are becoming increasingly popular among consumers, combine long-term care coverage with other forms of insurance. Specifically, they usually combine long-term care coverage with universal life insurance or fixed annuities. One of the benefits of a hybrid policy is that if you pass away without using up all of your long-term care coverage, your heirs will be given a partial refund of your premiums.

Another benefit relates only to women, as some of them will pay less for a hybrid policy than they would for a traditional long-term care insurance policy.

Shared policies or shared care policies, as they are sometimes called allow you and your spouse, partner, or adult relative to pool benefits that can be divided between the two of you. As an example, a three-year policy will provide you and your spouse, partner, or relative with six years of coverage. If they use just two years of it, you will be able to use the remaining four. Although shared policies tend to cost more than traditional long-term care insurance policies, they also may provide you and your loved one with more coverage for less money than you would spend on separate policies. At the very least, they allow you to buy a shorter policy benefit period than you may buy otherwise.

Are there any discounts I should be aware of (being married, in good health, etc.)

Virtually everyone will qualify for at least one discount. Whether it’s an average of 8% savings by paying for your coverage once a year or a 35% spousal or partner discount, you can save substantially with smart decision making.

Spousal Discount:

A discount of 25-35% depending on carrier applies if both spouses or partners apply together.  Some carriers will offer a 10-15% discount if only one spouse applies.  This can be useful when one spouse wants insurance but the other is uninsurable.

Health Discount:

Some insurance companies offer a 10% good health discount.  We do not include this in quotes automatically, as it is increasingly rare that this discount is offered when applying for coverage. Some plans do not offer health discounts at all.

Group Discount:

Small businesses with five or more employees applying for Long Term Care coverage may qualify for an additional 5% discount with some carriers.  Ask your adviser if you and your company may qualify for a group discount when purchasing together.

Experts say taking discounts in a certain or right order will amplify the amount of the discount you receive.

What is the average length of time that someone needs long term care?

The duration and level of long-term care will vary from person to person and often change over time. Women typically tend to need care longer than men, 3.7 years compared to 2.2 years respectively, according to the U.S. Department of Health and Human Services.

Insurance companies use benefit triggers as criteria to determine when you are eligible to receive benefits. The most common benefit triggers for long term care insurance include:

  • Needing help with two or more Activities of Daily Living
  • Having a cognitive impairment such as Alzheimer’s Disease

Is there any way I can protect against inflation and the inevitable rising cost of care?

Policies that have inflation protection through an inflation rider typically provide annual 5% compound increases. If prices rise—and they usually do—your benefit is designed to keep up with the growth more so that get ahead of costs. Experts recommend all policies sold to those younger than 75 years of age should be purchased with an inflation rider. Your inflation protection will continue to be at work while you are on claim and receiving benefits payments.

What happens if I purchase long term care through my employer and I change jobs?

Some employers recognize an opportunity to boost retention of experienced, high-value employees and have begun adding long-term care insurance to their employee benefits packages. One consideration that impacts decision-making about whether to buy a long-term care policy through work: what tradeoffs do you want to make between premium costs and coverage features and benefits. One advantage of an employer plan is typically lower cost when compared to purchasing an individual policy.

Still, you could lose coverage because of a change of employment, and you will have to foot the bill. This means you must be as sure as you can be upfront that you can cover the premium if it falls to you either  if you move to an employer that doesn’t offer long term care insurance as a benefit or when you retire and your income likely will be less.

Is my long term care insurance premium tax deductible?

The tax deductible limits for traditional long-term care insurance premiums paid in 2017 represent an increase from the eligible deductions in 2016, according to the Internal Revenue Service. These deductions offer a real incentive to consumers when they retire and income typically declines. It is important to note, however, that the special tax advantages are not available when individuals purchase linked-benefit products such as life insurance or annuity policies that can provide a future long-term care benefit.

Starting in 2017, all individuals may deduct qualified medical expenses that exceed 10 percent of adjusted gross income (AGI) for the year.   For 2016, individuals age 65 and older the threshold remains at 7.5 percent of AGI.

Premiums paid for traditional long-term care insurance are includable in the term ‘medical care’.   The following are the 2017 limits published by the IRS:

Attained Age Before Close of Taxable Year 2017 Limit 2016 Limit
40 or less $410   (+5.1%) $390
More than 40 but not more than 50 $770 $730
More than 50 but not more than 60 $1,530 $1,460
More than 60 but not more than 70 $4,090 $3,900
More than 70 $5,110 (+4.9) $4,870

Life Resource Plan

What is the best course of action for you and your loved one? Find out by talking to a consultant and creating a Life Resource Plan.

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