Create a dual purpose for certain assets. In this episode, I'm going to address the question.
How to self-insure for long-term care expenses? Get ready, I'm going to share some things with
you that maybe you didn't even know existed before as far as your options to self-insure.
So, my name's Doug Andrew and I've been a financial strategist actually helping people
prepare for retirement as a specialist now for more than 48 years and during that time
I've helped a lot of people optimize their financial assets minimize taxes and empower what
I call their authentic wealth. Well, many times, people would come up at my educational events
and they would ask me, "Doug, what's your take on long-term care insurance?", so, I'm going to
share with you what I usually told these people as far as self-insuring. But now there are two
ways that you can self-insure by using asset-based self-insurance to take care of those long-term
care expenses rather than maybe paying for long-term care insurance per se. So, first of all,
let's talk about what long-term care really is and those expenses. Simply put many times as people
age they end up having expenses that require them to go into a nursing home a facility for a long
term period and those expenses can get pretty high as it adds up over two or three or four months.
Sometimes it may happen because of an accident when you're younger. But a lot of times people's
nest eggs their retirement assets are depleted in short order because of these long-term care
expenses and of course, those who sell long-term care insurance tell you the statistics of how
many people will likely have to make a claim and what have you. I know that the reality is you may
need to go to a care facility. But many times I do the math and I take the amount of money
that people would pay into long-term care insurance policies which are pretty expensive.
It usually requires that you pay premiums the rest of your life into a policy that you will only benefit
from if you do go into a long-term care facility. But sometimes those can be pretty expensive and so
you are sort of paying in advance for those expenses by using a long-term care insurance
policy just like any type of insurance. Well, usually, what I would tell people is you know what?
I would actually recommend that you consider self-insuring. Now, it used to be there was only the
two options. You could buy long-term care insurance and pay a premium usually the rest of your life
or you could self-insure by having money that's on hand liquid and safe that you could dip into
that you could use to cover these long-term care expenses. But it would have to be a pretty a good
chunk of money if you ran up you know 3, 4, 5 hundred thousand or heaven forbid
a million dollars which is highly unlikely but it could happen. But I usually recommend that people
do that with what I call a maximum funded indexed universal life insurance contract. I call it the
laser fund and I'll explain that here in just a moment. So, many times as a retirement planning
specialist I would recommend one of my favorite vehicles that I personally feel that retirees
in particular should have 40 to 60 of their retirement assets be in what I call the tax-free
bucket. Because there are three big dangers that cause most retirees to outlive their money. Taxes,
inflation, and market volatility, and unfortunately, a lot of retirees have their money at retirement
in yet to be taxed IRAs and 401ks invested in the market and I go, what are you thinking? See,
wall street was never built to create predictable cash flow. what you did for retirement planning is
something totally different than what you do at retirement for your planning. So many times
I would help people reposition their assets. Now, one of my favorite vehicles that allows
people not just retirees but anybody to accumulate their money tax free under section 72e of the
internal revenue code and then be able to access their money tax-free all throughout their life.
I mean even if they retired in their 30s and 40s you don't have to wait till you're 59 and a half
is in a max-funded indexed insurance contract. Because you can access your money tax-free.
Every million dollars can generate 70-80 thousand even a hundred thousand a year. That would be a ten
percent payout from age 65. if you live to be 120 without depleting principle. Not very many
IRAs and 401ks can do that. In fact, most of the broker-dealers will recommend that you only take
out four percent a year. That a million-dollar nest egg you should only take out about 40,000 a year
because most Americans only average about three and a half percent with their money in the market
in traditional IRAs and 401ks. To me, that's pretty pathetic. In fact, it's unacceptable to me and so
I would often do what I call strategic rollouts. Get their money out of those IRAs and 401ks.
Get the taxes over and done with sooner than later and then reposition that after-tax money into
something that's going to be tax-free the rest of their life and then when they ultimately pass away
it blossoms and endows their spouse their kids their grandkids with way more money than what
they shelled out in tax by doing the strategic rollout. Those types of strategies are discussed
on this very Youtube channel and by the way if what I'm already sharing with you is intriguing
you. I would strongly recommend that you click like and share this video with somebody who ought to
be watching this. I'm going to share some things with you that you probably didn't know existed
but subscribe to the channel it's free and click the little bell. So you'll be notified every time
I post an in-depth answer to a financial question which I do almost on a daily
basis on this channel and stay with me to the end because I want to gift you a copy of my
most recent 300-page best-selling book called the laser fund. So, let's go into this self-insurance.
Many times the clients that I would work with would reposition their money or sometimes I caught
them early enough where they began to sock away 500 a month, 10 000 a year, 100 000 a year and they
could suck away money and accumulate it tax-free in what I call the laser fund and then later on if
they retired at age 50, 60, 70, 80, they didn't have to start taking money out. They're not penalized
like you are with an IRA 401k if you don't start to get out money by age 72. That's why
I love the flexibility of the laser fund in a nutshell. I had many people who would put in like
500 thousand dollars over a five-year period. A 500,000 a year for five years
they would stop and that 500,000 would double to a million in about seven and a half years on the
average. That's a return of about 9.6% average. Yep, tax-free and so a half million
would double to a million. Another seven and a half years and that million would double to two million.
Another seven and a half years and that two million would double to four million and the last
seven and a half years uh the four million would double to 8 million. Yep, I had many people
that started out with 500,000 and 30 years later they had 8 million dollars
tax free. That can generate 600 to 800,000 a year of tax-free income for as long as they live.
So, when they would ask me about long-term care insurance or expenses here's what I would tell
them. I would say, well, golly, you are now sort of self-insured. Because this money is liquid
if you had a long-term care need expenses 50,000, 100,000, 200,000.
My heavens, you've got a million bucks sitting over here. You have 8 million dollars sitting
over here for some of our clients. You could just tap into that and it's tax-free. You don't
have to pay tax on that and you can pay for these medical expenses. They are self-insured.
They don't need to pay for an insurance policy because they have the money that was earmarked.
So far so good? So that's self-insuring and some of these life insurance contracts if you don't
have enough money in there to sustain you if you had to pull out 2 or 3hundred thousand.
Maybe you only have a million in there. Some of these contracts have what is called an accelerated
death benefit writer. Which means if you're insured for let's say two and a half million dollars. You
don't have to wait to die to get the two and a half million death benefit. You can actually
get up to maybe half of that death benefit while you're still alive to pay for those long-term care
expenses. You're going to be narrowing down the death benefit when you die but you can actually
use some of the death benefit early without having to die to get it to take care of this. Those are
some of the solutions that I would tell them. Well, now, there's another option let me tell you what it is.
It's called an asset-based long-term care strategy. So, let me frame it this way. There's a lot
of people I meet that they have 100,000,, 200,000, 500,000 dollars
sitting in a bank or credit union unfortunately earning a pathetic rate of return usually less
than one percent and I go, "What's this earmarked for?", "Well, it's our rainy day fund", "Whoa, that's a
pretty hefty rainy day fund. Well, what for? "Well, in case we get into a nursing home or we have a
a physical condition we need long-term care." I go, "Okay, so we'll call it your rainy day fund
but you're earning less than one percent. It's just sitting in the bank or credit union.
You're rowing upstream at the rate of one mile an hour of interest and the current of inflation is
coming out at three you're going backwards." What if you were to um move that money a hundred thousand
from this pocket the left-hand pocket over here to the right-hand pocket. It still shows up on your
balance sheet it's still an asset. You can still go grab it if you needed it. If you die you still
leave behind a hundred thousand like you would in a bank. But with the money sitting in the bank it's
your rainy day fund in case of this long-term care need but there's only a hundred thousand there.
What if you moved it over here into what is called an asset-based long-term care insurance contract
with an insurance company. What's the difference? It's still an asset you can grab your hundred
thousand if you want it. When you die you leave behind 100,000. But if you
have a long-term care claim you can actually qualify usually right off the bat for maybe
350,000 of expenses when you're in your 60s. If you didn't need to make a claim until you were 80
that might be $650,000 that you could benefit. But it's really the same thing as far as your balance
sheet is concerned. You simply move the asset from this pocket over to this pocket it still shows up
on your balance sheet. You still leave behind the money because you can get a refund of your
100,000 anytime you want. But if you have a long-term care need they will pay it. This is
called asset-based long-term care insurance and so if this is intriguing you, you could even leverage
and take money out of an existing asset maybe even an insurance policy and put it into this
type of a situation and you're leveraging just in case you have long-term care expenses
that become very exorbitant. If this is intriguing you this is what I want you
to do so that you can learn more and be aware of any educational webinars that we do on these type
of topics. Here's how you can claim your free copy of my most recent best-selling
book called the laser fund. So I've been blessed in my life to have authored 12 books thus far
and this one is flying off of our warehouse shelves. We send out 100, 200, 300, of these a week.
You can claim your free copy of this 300 page book by going to laserfund.com...
This will teach you how to diversify and create the foundation for a tax
free retirement and you'll learn in here why this is liquid in case you may want to use it
for long-term care expenses. But also when you go into claim your free copy
you'll enter our database and you'll be notified when we teach educational webinars that answer
questions like this one, how do we self-insure the best way. And so folks, go to laserfund.com
claim your free copy you contribute a nominal amount towards the shipping and handling.
I cover the rest of that cost and I fire out a copy to you and then there's also options there to
listen and learn or watch and learn. There's even an 18-hour master class on how to optimize your
assets and minimize taxes and there's actually 62 client stories on the other side of this book
that teach you how people have implemented these strategies to increase the liquidity safety and
rate of return on their serious cash. So, claim your book and here's to your brighter future.