The odds of your house burning down are pretty small. It happens to just .08 percent of U.S. citizens. Chances of being involved in an auto accident during your lifetime are .4 percent. The risk factor of being hospitalized for an illness or accident rises to 12 percent. The biggest bugaboo? Sixty percent of us will someday need assistance in our daily living.
As he jotted these statistics on a flip chart, Randy Watson, CLU, BCE, noted that most of us buy insurance for the house, the car, and the hospital, but we shy away from long-term-care insurance because of the cost.
“The average cost for daily living assistance is $70,000 a year,” said Watson, a trim, dark-haired man who started his lecture with the promise he wouldn’t try to sell us anything.
“So what can you do?” he asked.
Number One, the choice of most Americans, is to do nothing. A variant on that is to spend down until one becomes eligible for Medi-Cal. As a sidelight, Watson described a little-known Veterans Administration benefit under Title 38 of the United States code that provides an Aid and Attendance Pension up to $1,949 per month for veterans who qualify and need some type of human intervention.
Option Two, long-term-care insurance, is regarded as too expensive, but seniors should “price it out,” he said. Number Three is the “reserve parachute” of a reverse mortgage, a step that doesn’t suit everyone, and should be used as a last resort, he said.
Number Four is called asset-based long-term-care insurance, and involves the conversion of an asset, such as a CD, into long-term-care coverage worth a much larger amount with possible tax advantages. “You still have control of your investment, and you’re covered whether you need assistance at home or in a nursing home,” he said.
Watson said his father, who worked in the financial services industry for 40 years, taught him, “Never spend more than you make,” an aphorism that the U.S. forgot, and he offered figures to prove it. He also suggested shifting a conventional IRA to a multi-generation IRA. When you die, the children would be prevented from accidentally receiving a lump-sum, and thus avoid paying taxes on the total amount at a much higher rate.
“Either you give it to the government or you give it to your kids,” said Watson who has earned the designation of charter life underwriter and is a board certified estate planner. Additionally, Watson serves on the board of advisors for the Institute of Business and Finance.
For more information, contact him at [email protected] or phone 866-973-1088.
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