The COVID-19 era has changed how many people nearing retirement are thinking about their “next stage” planning. Virtually everyone following the pandemic has seen the grim realities of the disease and the disproportionate impact on older people, especially those in nursing homes.
Indeed, a recent analysis from Gregg Girvan and Avik Roy for The Foundation for Research on Equal Opportunity shows the Covid-19 mortality rate has been highest among those living in long term care facilities. They conclude that among the 110,229 U.S. COVID-19 deaths, 47,670, or 43%, were nursing or residential care home residents.
One result of this is that people want to have the flexibility to stay in their home, if at all possible, should they need assistance as they age. And guess what? This same evolution has taken place with Long-Term Care Insurance (LTCi). When it was launched it was often described as “nursing home insurance”. Today, these policies can provide 100% of the daily benefit for someone to get their care at home.
Even better, it’s tax-efficient since the benefits are paid out income-tax free. Consider if you had to withdraw money from an IRA or 401(k) plan, then pay taxes and, with what’s left over, then pay the caregiver!
The desire to stay at home versus going to a facility isn’t just coming from older people. Plenty of young people want the same for their parents. And a great way to solve this challenge is through sibling-funded LTCi policies. There are different ways of doing this: by chipping in together for a traditional LTCi policy, for instance; or by choosing a “hybrid” annuity or life insurance policy that has a LTCi rider. Just think of what a great way to thank parents for helping pay for college and other life expenses.
Much has been said about retirees hoping to leave their loved ones a financial “legacy” – a.k.a. inheritance. Unfortunately, the new normal is that many older parents are more concerned now about being a “reverse legacy”–a financial burden on their adult children. The best way to avoid that anxiety is to transfer the risk to an insurance company and take advantage of the tax preference that comes with LTCi policies.
Your loved ones will be grateful that you thought ahead on this–and you’ll all enjoy the benefits.