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Long-term care: What you don’t know can hurt you


No one should ever have to choose between quality health care and preserving money, especially for those we love or for ourselves.

Of all professionals, the last ones who have to be convinced that long-term care cost is a reality are physicians. Physicians see this every day with their elderly patients. However, almost every family has been touched by the challenges of finding proper care facilities, then having to find ways to pay for them.

Families are caught between the reality of what they can afford and the quality of care they can extend to those they love. This can become a very hard decision to make as well as a very emotional one, something we have witnessed in our business and outside of it. No one should ever have to choose between quality health care and preserving money, especially for those we love or for ourselves. But when we do the numbers in a retirement analysis, adding in an extra $80,000 or $90,000 for 4 to 6 years of long-term care, we find that the probability of running out of money increases substantially.

We have seen firsthand that the old traditional long-term care policies (where you pay annual premiums for life) have not always panned out as planned. In fact, for many years we have been witnessing annual increases in premiums, going as high as 69% in some of these policies in 2022 alone. This in essence forces some individuals to drop their coverage just when they need it the most. Insureds can choose to reduce their benefits to keep premiums the same for a while longer, but this is reminiscent of term insurance in which insureds pay premiums for most of their lives only to be forced to drop the policies because of astronomical premiums that come due at the end of the term period. Again, this forces people to drop policies after all those premium payments just when the likelihood of a death claim becomes more probable.

We hope to inform ophthalmologists of the many exciting options now available in the area of funding long-term care, whether for themselves or their parents. We include parents because we have often seen doctors taking care of their parents. There are strategic ways to prepare for this situation that now offer a return of premium to you in the event the coverage is never used. You maintain the ownership and control of the asset, but at little cost if it is never needed.

Because of the limited space, we will be very general in describing what we feel you need to know but most likely do not know. In addition to using cash, here are 3 other ideas for funding asset-based long-term care policies:

Using individual retirement account (IRA) or 401(k) money to fund an asset-based long-term policy

Rolling over an annuity to a long-term care policy

Doing a 1035 tax-free exchange of a life insurance policy to an asset-based long-term care policy.

For those of you who are thinking “I am self-funded or I will be self-funded,” becoming familiar with these high-bred policies and strategies may alter your current mindset. In our experience, there are ways to funding long-term care that should be explored:

  • Premiums can never increase (or are needed)
  • Benefits never decrease
  • Reimbursement or Indemnity plans available
  • Inflation protection riders available
  • Values, benefits and deaths benefits can be tied to an equity index
  • Coverage can cover single or joint lives
  • Marriage discounts even if only 1 spouse applies
  • Guaranteed cash values, return of premium
  • Guaranteed death benefits

There is a great benefit to utilizing IRA, simplified employee pension, or 401(k) funds, as this enables the cash value to stay in your account while being leveraged 3 to 4 times in long-term care benefits. In addition, there is an added tax advantage whereby, if used for long-term care, benefits are withdrawn tax free from a normally taxable account.

Another option available allows an individual to use an annuity that has grown and who does not want to withdraw money because of the ordinary income taxes. Now individuals can initiate a tax-deferred exchange to a long-term policy that would also pay out tax free if used for long-term costs, as per the January 1, 2010, long-term care benefits of the Pension Protection Act. And with all these plans, you have the right to get a large part of your premium back if never used.

There is also a death benefit to heirs if you should die before using the benefits or using up benefits that are less than what you paid in the premium. Benefits are for in-home care and outside facilities, and in many cases can be used to pay family members to care for you at home.

Long-term care coverage is generally available from age 35 to 80 years. Long-term care is a sophisticated and complicated area. It is imperative to evaluate all the carriers available and consider ratings, financial statements, future plans and expectations of the companies, benefit costs at various ages, and so on. Each individual is unique and it is critical to choose the right carrier and product that match that individual’s needs.

The steps we use for our clients and recommend to anyone looking for a long-term care policy is to first, figure out the strategy as it applies to your individual circumstances, then find the policy that best matches your long-term care goal. The second step is getting a blanket approval from a number of companies prior to applying for a specific policy, so you can ascertain what companies you qualify for be a fit and narrow down the available options.


John J., John S., and Traudy F. Grande, CFPs, are co-editors of the "Money Matters" column in Ophthalmology Times. They are owners and principals of Grande Financial Services Inc., Oakhurst, NJ (www.grandefs.com). The Grandes advise doctors across the country on a diverse range of investment and financial matters. Readers may submit their financial questions to them at john.s.grande@grandefs.com or call 800/722-1258.

The views depicted in this material are for information purposes only and should not be considered specific advice or recommendations for any individual. All investing involves risk, including the potential for loss. Past performance is not indicative of future results. No investment strategy can ensure a profit or protect against loss in a declining market.

John J. Grande, John S. Grande, and Traudy Grande are Registered Representatives offering securities through Cetera Advisor Networks LLC, Member FINRA/SIPC. Advisory services offered through Summit Financial Group, Inc., a registered investment adviser. Summit and Cetera are related and are under separate ownership from any other named entity. Registered Branch: 257 Monmouth Rd, Oakhurst, NJ 07755. Phone: 800/722-1258. Website: www.grandefs.com.

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