New options for long-term care planning

Adam Cufr

            The problem isn’t going away, no matter how much we wish it would.
        As people live longer and longer lives, the chances of any of us requiring skilled nursing care, either in our home or in a nursing home, are increasing with life longevity. The big question is, how will we pay for the care we’re likely to need?
        A recent discussion with a couple revealed that both of them have parents living in nursing homes, and as a result, they are keenly aware of the cost of paying for care. They are determined to incorporate long-term care (LTC) into their planning.
        Solving the long-term care dilemma is an imperfect craft – some art and some science is involved – and you’ll never get it exactly right. Recently, however, we discovered a solution that may work really well for a lot of the families we serve. Why? The vast majority of the people we meet with have most of their retirement savings in 401(k), 403(b), and IRA accounts. This reality created some constraints that meant there were few options for funding LTC other than paying annual premiums each year for traditional LTC Insurance.
        While these traditional long-term care insurance policies are still a very effective way to protect against the costs of long-term care, a whole host of other attractive options were made not as attractive to people who had their wealth inside 401(k), 403(b), and IRA (tax deferred) accounts.
        Imagine this with me: we help you build a well-balanced investment portfolio for your retirement. This may include a combination of income annuities, stocks and bonds, and cash for emergency purposes. Pretty straightforward, right? Meanwhile, most of this (except the cash) is held inside 401(k), 403(b), and traditional IRA accounts. I then present you with two options for protecting yourself and your spouse from crippling future long-term care costs:
        1. Pay annual premiums for traditional LTC Insurance, that if unused (meaning you pass away without requiring a lengthy nursing care need), you lose the many thousands of dollars you paid in premiums over 20 or 30 years. Or
        2. Place a lump sum of money into a hybrid LTC/life insurance policy that pays money toward long-term care if you need it; or pays all of the money paid-in (and more) as a death benefit to your heirs if you don’t need care; or allows you to cancel the policy and get your money back while still alive.
        Many people will say, “Hey, tell me more about the second option because I hate the idea of the “use-it-or-lose-it” option of traditional LTC Insurance.” Well, unfortunately that hybrid option works best with a nonqualified lump sum payment, and your money lives inside the tax deferred shell of 401(k), 403(b), and traditional IRA accounts.
        It may not work as well for you.
        A new option is available that allows a person (or couple) to transfer tax deferred money into the hybrid LTC/life insurance option, thus preserving the access to the money, while creating positive leverage in the form of a tax-free life insurance death benefit or long-term care insurance benefits. It avoids the “use-it-or-lose-it” scenario while accepting IRA money. This is a big deal and a wonderful option for many to consider.
        How does it fit within your retirement plan? Glad you asked. When I asked you to imagine the well-balanced investment portfolio we built for you, there was a conservative piece to that portfolio (bonds, cash) that is essential for retirees.
        What you may want to consider is carving out some of that conservative portion and transferring it to the hybrid LTC/life insurance account so that a death or a care need results in a significant return on that investment through the positive leverage of the insurance benefits.          
        In other words, rather than settle for very low returns on the conservative portion of the portfolio, why not employ that capital to solve for your long-term care needs, should they arise, while also maintaining the conservative nature of that capital through the use of a guaranteed, insured account? And when you pass away, the money remaining in that account passes on to your loved ones.
        In short, we can now use traditional IRA money to fund LTC Insurance so the insurance company will pay for expenses should you need care.
        Don’t need long term care? Great, the money you invested, and then some, passes to your loved ones at death. Because of this, it’s a bit more exciting to discuss LTC solutions with people who may need them down the road. Now we can engage in this very serious discussion with new options that make sense.
        As the couple whose parents are living in nursing homes know all too well, this is a very serious matter, so I’m hoping that you’ll at least consider how you’ll manage this risk in your planning so you’re not caught off guard should a need arise.
        Adam Cufr, RICP®, a Northwood native, is the owner of Fourth Dimension Financial Group, LLC in Perrysburg. He is a retirement planner, a dad to six daughters, and the author of “Off the Record – Secrets to Building a Successful Retirement and a Lasting Legacy” and “Here, I Made This for You.” To learn more, visit to


The Press

The Press
1550 Woodville Road
Millbury, OH 43447

(419) 836-2221

Email Us

Facebook Twitter

Ohio News Media Association