For the past few weeks, we have been focusing on the statement from an advisor that $1.5 million is enough to “self-insure” (his words not mine).  Last week, I shared the leverage story of using annuity dollars and Annuity Care II as a way to improve the situation.

As I have come to expect, the reaction has been all over the board.  Thanks for reading and commenting … one that grabbed my attention was the one that said “your hypothetical example is not representative of real life.”

How wrong you are … a week after I posted the first installment, a couple of advisors reached out and shared their experiences with clients of similar financial positions.  The one client who had the leverage of insurance had a far more favorable experience financially than the one who paid dollar for dollar from their lifetime of savings and investments.

Last week’s idea was based on leveraging nonqualified deferred annuity monies for a couple in their early 70s.  The solution is intended to cover a portion of the cost of care and reduce the tax impact that self-funding brings.

So, let’s throw another wrinkle into this scenario.  Qualified money … they are stacked in qualified funds.  Let’s say that they are both insurable and believe that a pool of money would be a good solution (contrary to their advisor’s assertion that they have enough money to “self-insure”).

Let’s say that they are insurable (at age 73, this is a possibility with Asset Care).  They are approved and elect to “hedge their bets” and using a portion of their qualified money secure a half million dollars of tax-free LTC benefits.  To make this happen, they elect to roll-over $275,000 to OneAmerica Financial into the Annuity Funded Whole Life (Asset Care) solution.

Remember, the qualified money strategy is a tax-free rollover that is then used to fund the Asset Care policy of a 10 year period of time.  Since the clients are over 73 years old, the distribution can be counted to meet their Require Minimum Distributions (RMD) and a portion of it may be deductible if they itemize their return and have medical expenses in excess of the Adjusted Gross Income (AGI) threshold. 

The OneAmerica deductibility summary sheet shows that they can each deduct in 2026 up to $6,200 of their premium if they are eligible.

Like last week’s scenario, the pool of money helps defray some of the cost of an extended care event and preserve income producing capital and not push them into an IRMAA surcharge situation.  Again, this is a pool of money that will be exhausted after 4 years but it reduces the erosion of their income producing capital.

 If you have a scenario that you would like to discuss, please let me know.  I can be reached at (678) 512-9627 or via email at kevin.fisher@oneamerica.com