NEW – Consumer Presentation – How You Pay

We often overlook the funding alternatives from a client’s perspective when we are making a recommendation.  Too often, we think of moving the money from one place to the next in order to pay the premium.  But, is our client thinking that way?

The easiest way to find out, of course, is to simply ask.

If you need care, how would you pay for it?

It is a simple question that can yield great results when used effectively.  Of course, you can add one word to make it even more impactful and that is adding “today”.

If you need care today, how would you pay for it?

The response to this question could differ by simply adding the time element.  But, the question puts the question of care and how it would be addressed from a financial standpoint on the table.

Go ahead, ask yourself each question.  Does that change your answer?

So, let’s dissect the response to the question from the perspective of looking down the road.  And, our client is balking …

Let’s talk about 3 possible thoughts that they might have when you ask that question – how will you pay for care.

I’ll take money from my IRA.

I can tap my investments.

I’ll use money from my savings.

Each of these, as you know, is viable but there is a cost associated with them.

Using qualified money comes with three impacts – one is the tax implications; next is the impact to their Medicare premiums and other programs that are based upon income; the third is the reduction in capital available to generate retirement income.  Here is a link to more information about IRMAA & Medicare.

Like qualified money as a funding resource, tapping investments comes with a tax component along with a market element. Depending upon the investment, the market conditions when it needs to be sold, and its overall performance – there may be liquidity challenges to overcome.  Here is a link that talks about capitals gains taxes compared to income taxes.

And, using savings is typically the least tax-intrusive and most common approaches, but ordinarily provides the smallest pool of money.  Which makes me wonder, how many people have enough cash to float an average duration care event?

Purely from a tax perspective and assuming quick and easy access to funds, if our client needs $1,000 to pay for benefits then the each one of these comes with their own associated tax implications.

Here is a high-level example from the NEW Asset Care Consumer Presentation to illustrate the taxation perspective. 

The final piece of the conversation is simply the story of leverage and how we can turn $100,000 into an pool of $250,000 or more of tax-free money.  And, guarantee that in some way that they will benefit from the policy.

So, rather than pulling $130,000 from an IRA or $115,000 from a brokerage account and paying taxes which will likely impact more than their tax return – they can access the policy for the $100,000 tax-free and know that there is more money available should they need it.

The premise of this discussion is to demonstrate the potential impact to our client’s plan given the choice that they make.  And, simply, insurance makes the most sense.

Here is my disclosure on this example … the numbers used to represent the tax rate and the leverage and benefits produced by an insurance policy do not reflect any specific scenario and are generalities. An insurance policy and non-insurance products work differently with their own specific limitations and requirements for access of funds.  You will need to examine each scenario specifically and in direct correlation to a client’s actual situation.

Want to learn more?  We have resources available to help. Follow this link to our Asset Care Consumer Presentation Resource Page. Remember, the report can be delivered and used in more than one format- as a static printed report or as a static .pdf report or as an interactive presentation that can be accessed via url. 

The consumer presentation is unique to the client and the illustration for that client.

Please, if you have questions – please contact my internal Justin Fox directly at justinfox.isp@oneamerica.com or (844) 658-3725.

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