The best way to handle long-term care expenses. In this episode, I'm going to
address a current question. Why is Washington state mandating that employees at any employer
have long-term care insurance? I'm going to share with you why
they're doing that and what you can do that's probably going to be better.
So, my name's Doug Andrew, I've been a financial strategist and actually helping people prepare
for a comfortable retirement for more than 48 years and I've noticed that a lot of people try
to accumulate a nest egg that will hopefully allow them to enjoy retirement at the same
standard of living or better than they had during their earning years. Sadly, a lot of people outlive
their money due to the negative impact of taxes inflation and market volatility. But there's
another expense that sometimes takes a toll on people to the tune of hundreds of thousands of
dollars and that's if they end up needing long-term care. They have to go to a nursing
home or what have you and so I'm going to share in this episode three different alternatives
that you may have. But the state of Washington is so concerned about this that they're mandating
that employers check to make sure their employees have that. Otherwise, the government is going to do
it for them and whenever government decides to do something for you I always go, oh they're not very
good at this. They haven't been very good at social security, have they? So, I'll share with you the
bulletin from Washington state because as of the recording of this episode it just is going into
effect and then I'm going to share with you what you can do that is probably going to be better.
So, I'm going to read directly from this bulletin and this came out of Seattle. Starting October
1st, now that's October 1st of the year 2021 when I'm recording this it's in the month of October.
Residents of Washington can apply to opt-out of the WA cares fund, a new long-term care
insurance benefit for workers in Washington state. The program which will be funded by a mandatory
payroll tax will help pay for eligible long-term care-related expenses. Beginning January 1st this
would be the year 2022. Every employee will pay 58 cents for every hundred dollars they earn. Now,
I know people go, "Well, that's not very much", well, if you make $75,000 a year you'll pay 435 dollars
a year for this and Washington is going to make you do this unless you opt-out. The program will
initially payout $36,5000 in long-term care benefits starting in the
year 2025. The rest of this bulletin talks about how you can opt-out of this. You have
to prove that you have done something different or that you're going to be responsible for those
long-term care expenses. Otherwise, they're going to make you pay for it or be insured through their
system. Okay, I've had a lot of people ask, "Doug, what's your take on that?", well, first of all,
yes there's a lot of people in retirement that end up in a long-term care facility. Now, the truth is
many of them don't spend a long time there. But you know they quote statistics that there's a
lot of retirees that will end up having to go to a facility. But if you stay there a long time it can
get expensive and it can wipe out your financial resources. So, let's go through the three different
ways that most people try to cover long-term care expenses. Here we go. On the screen here
I have the three different options based upon a spectrum. Now, the number one option that
has been available for the last few decades is traditional long-term care insurance. In a nutshell,
what you're doing is you're buying a long-term care insurance policy and you're paying premiums
several hundred dollars a month. If you're older maybe several thousand dollars depending upon
the benefit and it is probably the most expensive way to go because you're paying a premium that is
pretty hefty for as long as you want that coverage and you know, if you don't ever need long-term care
it's sort of money down the drain. Just like insurance, health insurance and you never were
unhealthy or needed it, it's just a premium you pay for the risk that you may need that. So, long-term
care insurance you only really get something back if you end up in a facility. Nobody wants to do
that really on purpose and so this gives you the greatest benefit for the dollar if you need it. But
it's pretty expensive and a lot of times people you know they think, "Golly, that's pretty hefty.
I'm having to give up a lot of my retirement income or resources to be able to afford that."
Now, over on the other end of the spectrum let's go to this one number three. This is where many
times people use other resources and the most common would be life insurance. Now, I've helped
people for the last 48 years to be able to insure themselves with life insurance and the way I do it
is I want uncle sam to indirectly cover their life insurance costs by redirecting otherwise
payable income tax. That's a topic of many videos on this Youtube channel three-dimensional wealth.
But what happens with life insurance is if you end up having 500,000 or a million dollars or
2 million or 5 million in death benefit many people that come to me they have
a load of money or cash value in their insurance policy because they're using it for
living benefits. So, they're actually accumulating their money tax free inside the insurance policy
and if you have a million or 2 or 3 million dollars in there I'm saying, golly you could
just dip into that and use that for long-term care and so many clients have done that. There
are some insurance companies that if you have a million dollar death benefit and you have
long-term care needs they will actually give you what is called an accelerated death benefit
it's usually a rider and that's where you go you know what I just want to access some of my death
benefit without having to die to get it. So you give up getting some of the death benefit to be
able to go to your beneficiaries and the insurance company gives you long-term care or some money for
long-term care expenses out of the death benefit and so your death benefit is going to be reduced.
That can work also. So that is the other end of the spectrum where people actually have life
insurance that they can dip into with cash value or even the death benefit if need be.
In the middle is what is called an asset-based life insurance and this is probably one
that I would recommend for many people. This is where people just want to flat out self-insure.
Now, before I explain that, I want to share with you why you should subscribe to this channel. If this
is resonating with you and you want to learn more. I'm very passionate about educating people like
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your free copy of one of my books to help you learn more about all kinds of options you have
if you're already intrigued from what I've said thus far. But get ready, I'm not done. Here we go.
So, let's go back to this asset-based concept. I've found that a lot of successful people
they self-insure. They have like a rainy day fund and so if you have a rainy day fund
you're self-insuring many people say, "You know what, I don't want to sit there and pay a
thousand a month into a long-term care policy. I would just like to earmark 50, 100,000 200,000
in our bank or credit union", and so they choose to do that. Now, I look at it and I go
the banker credit union is only crediting you a measly one percent or less that's pretty pathetic.
But it's amazing how many people have a rainy day fund of a hundred, two hundred thousand and they
say, "Well, just in case we need it for long-term care expenses", I go okay and so they do that and
let me just show you uh three different scenarios. If they live and they need to dip into
let's say a hundred thousand dollar you know rainy day fund at the banker credit union. Basically, it's
there it's not even keeping up with inflation. So we're just going to say the purchasing power
is going to be a hundred thousand or maybe less in the future. Because if you're rowing
upstream at the rate of one percent interest one mile an hour and the current of inflation
is coming down at three or four you're actually losing. But you have it there while you're
living. If you quit you can go just withdraw the hundred thousand you say,
"You know what, I'm just going to use the money for something else. I'm not going to worry about it."
If you die and you have that hundred thousand in a bank or credit union you leave behind the hundred
thousand. It's a hundred... live quit die. Let's look at a different way to approach this.
Many times when I come across these people I'm saying, "Well, if it's just going to sit there in
a bank or credit union earning a pathetic interest rate why don't you do an asset transfer?". Now, that
means you're taking that 100,000 in this example that rainy day fund and you're moving it from this
pocket in the bank or the credit union account over to this pocket into an insurance company
and generally insurance companies and the one that I'm talking about is called pacific life
it's rated aaa. Many banks are only rated triple b. So this is like six not just higher in safety
than most banks and credit unions and so you're simply moving the hundred thousand over to the
insurance company. Now, they will hold that hundred thousand they're going to use that money of course
but here's the difference. If you put the hundred thousand into the insurance company with this what
is called premier care choice is what they call theirs and you all of a sudden had to go have
long-term care really soon. You would qualify for 346,600 of long-term care benefits on day one.
At age 80 if you did this when you started at I think age 65 it would end up paying out 647,992.
The point is this if you need long-term care the insurance company is on the hook to pay it out.
Whereas if this was still sitting in the bank it would be gone once you used up a hundred thousand.
Now, anytime you quit with this one you say, "No, I just want my money ",the insurance company will give
you your 100,000. You get your 100,000 you can take it out anytime you want.
You're no longer going to have this benefit if you need long-term care but you can go grab your
100,000 out just like a bank or credit union and if you happen to die they will payout
a 100,000 dollars to your beneficiaries if you didn't use it. The difference is if you
leave it in a bank or credit union it's only a 100,000 whether you live quit or die.
If you put it here you're transferring it from this pocket to this pocket increasing
the safety and if you need it it's incredibly better. But if you decide to quit you just take
out your 100,000 or if you die you leave behind a 100,000 if you didn't need it.
To me, this seems like an absolute no-brainer and so there's a lot of options and if you
chose something like this this would be far better than giving up a bunch of your paycheck
in a state like Washington. Because I can assure you other states are watching what's happening
in Washington and they're going to probably start doing this and requiring it in those states and in
Washington you only had like a window of time to opt out. I would recommend you opt into something
like this before your state may implement it so that you're already covered and you can opt out
within the time frame and say, "Nope, I have taken care of my long-term care expenses if they happen.
So, if this is intriguing you I would recommend that you learn more. Now, many people they simply
maximum fund their insurance contract and that suffices because they can access money tax free
if they need it. You may even want a combination of these two strategies the second and third that I
had on the screen. So, if you want to learn more go to laserfund.com... and you can click on
the link below to do this. You contribute a nominal amount towards the shipping and handling and I'll
cover the rest of that cost. I'll pay for the book it's 300 pages and this will teach you how to
diversify and create the foundation for a tax-free retirement. This white covered site is 200 pages 14
chapters with all kinds of charts and graphs and explanations for the left-brained learner.
If you're a right-brained learner you learn more by stories and examples you flip it over
and this has 12 chapters with 62 actual client stories and you'll be able to understand how you
can diversify and create the foundation for a tax-free retirement. When you do subscribe
then you'll be on the notification list that when we teach educational sessions and webinars on this
you'll be able to attend to learn more about strategies like this so that you'll be prepared
and not be taken off guard if your state adopts the same laws that Washington just put into effect.