How can we establish a cost effective mechanism for long term care insurance? I have been told by several financial advisors that nobody wants to pay premiums for long term care insurance that they may never use. Unless you set this up early, the premiums could be $300-500 per month. This may be a tough sell for an advisor but a necessity to avoid the potential annual six figure cost of unexpected elder care needs that could decimate a family’s retirement plan.
It really comes down to looking after Mom & Dad. Current statistics indicate that only one percent of people have long term care insurance but it is forecasted that seventy percent of individuals will need it in some form in the future.
Financial advisors across the spectrum must plan for their clients. The clients and their advisors have long term trusted relationships and they often travel the financial journey of life together.
If your house burns down, you have hazard insurance. If your car gets wrecked or stolen, you have car insurance. If you get sick and end up in the hospital, you have medical insurance. Other than deductibles and minor out of pocket expenses there really is no time bomb here that is likely to destroy your financial plan. It comes down to the critical questions, “what about Mom & Dad?” The average cost of this nationwide for a single aging parent can approach $100,000 per year.
The real problem for the financial advisor is that the client may be blind to the problem that comes with longevity and living the good life. They need a plan and they also have to look after their parents.
To put things in context, I am going to pose four questions. One question requires a Yes answer.
- Can you client’s parents afford $100,000 annually each for in-home or extensive long term care?
- Do they have an effective long term care insurance policy that provides the coverage they will need?
- Does the client’s financial plan include $100,000 per year per parent for their parents long term care needs?
- Does the client plan to have their parents move in with them so they can become the primary care provider?
We cannot ignore that the Boomers are living longer and care will one day be ground zero for this cohort.
What is a practical solution?
A Reverse Mortgage provides a unique opportunity to create a very cost effective mechanism for financial security and long term care insurance with a Reverse Mortgage credit line. The feature that provides the unique benefit is the growth factor that will allow the credit line to grow by approximately 4-4.5% per year as you age. This is only available with a government insured HECM Reverse Mortgage. This will allow you to supplement your retirement income each year and maintain your unused home equity in the credit line for financial flexibility, emergencies, and long term care needs.
When compared to Medicare’s five year look back for eligibility and grab backs from your estate your options are much less flexible and leave nothing for your heirs. Alternatively, a Reverse credit line established today will allow your eligibility to grow annually and will provide immediate funding for care when, and if, you need it on your terms. This will provide you flexibility and comfort versus Medicare, and allow you to preserve your estate.
You can certainly scoff at this and pay several hundred dollars per month for a long term care policy that you may or may not need. Or you can plan on dying early or suddenly and if this doesn’t work out, you may end up sharing a room with someone you don’t know in the Federal system while Medicare cleans out your estate.
When looking for a flexible and safe solution to plan for long term care, a Reverse Mortgage gets high marks. For the long term, a Reverse Mortgage presents itself as an opportunity for the affluent to create a cost effective mechanism of insurance for long term care that will maximize timely benefit flexibility and allow the estate to remain solvent and in your control. This shines a whole new light on Reverse Mortgages.
If you would like to learn more about a Reverse Mortgage and how it can be tailored to help your clients, friends, or family address contingencies for financial flexibility and long term care, I would like to hear from you.
George H. Omilan
President-CEO
NMLS# 873983
Questions/Comments encouraged
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