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Build That Wall!

by smeneshi - Mar 30, 2016

Up to this point, the 2016 presidential election race has been quite contentious and with eight months left before the final ballots are cast, I’m sure there will be more fireworks ahead.


Donald Trump kicked off his presidential bid by promising to build a wall on the border with Mexico should he become elected. He also has promised that he will get Mexico to foot the bill. Opponents of Trump have vociferously opposed his idea, while most of his supporters (especially those living near the border) are in favor of building a protective wall.


When it comes to protecting what you’ve saved for retirement, most of you have figuratively built a wall around your precious savings using various types of insurance. For example, you protect your home and car with home and auto insurance. You protect the financial survival of your spouse and dependents with life insurance, and shelter your money from high medical expenses with health insurance.


However, when it comes to protecting your money from high (and rising) long-term care expenses, most of you have not put any protection into place; you have not even laid the foundation for a wall. From my experience, there are two main reasons why most of you have not taken the appropriate action: 1) Disbelief that you will need long-term care 2) The perceived high cost of long-term care insurance. As for the first point, it’s understandable that if you are in your 50s or early 60s, it can be hard imagining yourself suffering from dementia or a debilitating physical ailment. However, if you’ve watched a parent or loved one struggle with long-term care, the reality of what may be down the road for you sets in fairly quickly. Most of the clients that we have placed in the right type of protective insurance have watched one or both of their parents suffer through long-term care. It’s their main motivation for building a protective wall around their assets.


As for the second point, which is not dealing with the potential of financial ruin during your retirement years due to high long-term care expenses, the cost to insure against this major risk is not as high as you might think. In fact, if you do it the right way, you shouldn’t even have to use any money from your monthly income sources such as your pension or Social Security. You can build a very sold wall around your savings, and make your investments pay for it!


I’ve written about this straightforward idea in the past, and I propose it to virtually every client that I advise, but it’s worth repeating over and over again. The way to ensure that you can freely spend your money during retirement is to build an impenetrable wall between any long-term care “attack” and your savings. The trap most retirees fall into is hesitating to spend a good portion of their savings for fear of getting blindsided with high long-term care costs. This fear is well-founded, but can easily be alleviated.


Most of our clients have a guaranteed income source from a pension and Social Security, so their annual spending costs are usually more than covered. Most of our clients also have investment assets of over $500,000 so all they need to do to build a security wall around their savings is to take just a very tiny portion of the interest and dividends that their savings are generating, and fund a protective insurance policy.   The right type of policy will depend upon the client’s unique circumstances, but typically a life insurance policy with a long-term care rider works best when enacting this simple strategy. This is because you are cornering long-term care expenses and not giving them the opportunity to wipe our your savings.


For example, let’s examine a married couple named Jack and Jill and assume Jack is older than Jill. If Jack needs long-term care, Jill will probably be the one to provide it for him in their own home. As a male, Jack has a shorter life expectancy than Jill, so it’s likely he’ll pass away first. Up to this point, Jack and Jill’s savings have remained intact because Jill was able to take care of her husband without hiring outside help or moving him into a nursing home. If, however, after Jack passes away Jill needs long-term care, costs can start to snowball out of control in a hurry.


But let’s imagine Jack and Jill each bought a $300,000 life insurance policy with a long-term care rider. This means if Jack or Jill needs long-term care, they can actually dip into the $300,000 pot of money while they’re living and pay the needed expenses. If Jack or Jill don’t need care, then the death benefit gets paid to the surviving spouse.


So in my example, let’s say Jack needed long-term care, but Jill provided it for him. When he passed away, Jill got paid $300,000. Now, Jill not only has the $300,000 that was paid to her as a death benefit, but remember she still has her OWN $300,000 pool of funds to dip into during her lifetime should she need long-term care. The couple has effectively built a nearly impenetrable wall around their savings and almost as importantly, have secured their peace of mind. From a psychological standpoint, Jack and Jill have given themselves the freedom to spend their accumulated savings during their “go-go” years (ages 60-70) and “slow-go” years (ages 70-80) without the constant worry that they will run out of money if one or both of them need long-term care.


The best part of using this simple yet very powerful and effective strategy is most of you that are reading this post have more than enough in savings to put this simple plan into place. The tricky part is getting you to acknowledge the risk that you face and proving to you just how inexpensive it really is to protect your savings during retirement. So while Donald Trump favors building a wall to keep out non-citizens and having Mexico pay for it, I’m all in favor of having you build a wall to protect your money from long-term care expenses… and you can even make the income generated from your savings pay for it!


Securities and advisory services offered through Ausdal Financial Partners, Inc.  Member FINRA/SIPC 5187 Utica Ridge Road Davenport, IA 52807    563-326-2064  Public Retirement Planners, LLC and Ausdal Financial Partners, Inc. are separately owned and operated.


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