I had a conversation a short time ago with an advisor asked him to prove to me his allocation strategy was solid enough to meet my two basic retirement objectives – income in retirement I will not outlive as well as leave some money for my children and grandchildren.
It all went really well until I asked about whether I should include long-term care in the plan since it is an important to me based on my family experience. Without even asking any questions, he said “don’t worry, you’ll have enough money.”
“Will I? Please humor me and run a scenario where I need to pull an extra $150,000 a year for 3 years,” I asked. He obliged and replied that my plan was solid if I did that.
He asked, “what made you pick $150,000 a year?”
“It’s close to the average cost of nursing home care in the northeast,” I replied. (The OneAmerica Interactive Cost of Care Map can help you find what it costs across the country.)
“I want you to look at one more thing for me. What happens if I need $500,000 a year?”
“That will change everything and in a big way. Where did you come up with that number?”
“Well, if I want to stay at home and have 24 hour care – 7 days a week like my friend’s father did, that’s about what it is projected to cost in 20 years.”
“Where do we come up with a million and a half dollars,” I asked.
“It’ll be tough but we can change our asset allocation and try to build a bigger pool. You might need to change your timeline or add more money, but we can try to get there,” he told me.
I fired him… his blind spot was the use of insurance.
Here is what he could have done to generate that pool of benefits.
He could have …
… used $200,000 of an IRA money as a funding source for an Asset Care 2024 policy. It would have provided me day 1 – $10,777 a month of benefit growing compounded at 3% for the life of the policy. The minimum that would be paid out in any way shape or form would be $258,638 (as a death benefit or combination of death benefit & LTC benefits), or
… he could have reallocated $350,000 into Annuity Care II and created a LTC benefit pool of $1,429,136 starting on day 1 of the policy.
Both of these would have minimally impacted my plans as both were not important elements to the retirement income plan but did slightly reduce the guaranteed amount of money in my legacy plan. This is an adjustment that I would be more than willing to make.
As you can see from my situation, LEVERAGE of insurance allowed me to have my cake (retirement income with a legacy plan) and eat it too (by protecting it from a forced liquidation due to LTC).
Fridays with Fisher 