Last week, I shared with you a little bit about the gap that self-funding poses based upon information presented on the Federal Long Term Care Insurance Program website which made the case against self-funding LTC.

I’d like to present an alternative to the risk-retention approach that most people accept.

Using a similar set of numbers that was used by the FLTCIP, I want to make a case for a pure leverage play.  Here are the numbers that I will use to make my point.

$86,909 (source: OneAmerica Cost of Care Map)	Average annual cost of care national average (aggregated formula 50% home care + 25% assisted living + 25% nursing home)
3.0% (source: Federal Long Term Care Insurance Program )	Annual inflation cost of care (rounded to next full percentage)
3 years (source: AALTCI)	Average duration of care (gender neutral)

Let’s assume that our person starts their care plan at about age 60 using the assumption that they are likely to experience a long-term care situation in 20 years at age 80 possibly later.  (Age 80 or 81 is the typical age for the initial LTC claim occurring.)  Being an optimist, they believe that nothing will happen prior to age 80 giving them 20 years of “good living”.

Here is how their cost of care would look for a claim starting at the end of the year and lasting 36 months.  The cost will remain level for the duration of the claim for easier math.

*42 hours of LTC care per week (168 hours per month)

** 24×7 care in private room

***weighted cost of care using 50%+25%+25% formula

If you are one to “play the averages”, then a dedicated pool of $500,000 should get them pretty close to what 3 years of LTC services might run.  The question is … how do they get that pool. 

And, remember, we are trying to create a dedicated pool of resources for this concern.  This simply means that money will not be used as part of their retirement income plan.

We will look at what results (assuming a consistent pre-tax rate for the next 20 years) from the following:

• a Multi-Year Guaranteed Annuity (MYGA) at 6.0% (which was cited as a top rate for a 7 year & 10 year MYGA on Annuity Advantage website on June 9, 2026.)
• a money market account earning 4.0% (which is the top side for an online money market account according to USBank on June 9, 2026.) 
• a fixed indexed annuity with an 8.0% cap using point to point crediting with 10 year surrender, 10% free withdrawal, and 20.0% premium bonus (which was found on Annuity Advantage website on June 9, 2026.)

To get things started, we will start with $50,000 of “seed money” – coming from cash.  With the fixed indexed annuity and MYGA, their performance will be driven purely by the crediting rate.  With the money market, we will add $2,000 annually.

Remember, each of these self-funding approaches has an element of taxation to it.  The MYGA & Indexed Annuity will be taxed at distribution (gain only) while the money market will have taxes assed on interest or dividends annually.  For all three of these, the numbers represent pre-tax values.  According to the National Bureau of Economic Research, the marginal tax rate on interest & dividends for an 80 years old is about 20%.

Assuming that our person lives to age 80 and uses one of the self-funding strategies above, after applying a 20% federal tax, they will roughly have available from their pool about:

• $138,285 from the MYGA
• $147,195 in the money market account
• $233,726 in the fixed indexed annuity

As an added bonus, some states may apply additional taxes to these distributions reducing the usable monies further.

Here is an option that uses the same “seed money” along with the same annual contribution that was used with the money market strategy.  What it does is producer a bigger tax-free pool of LTC money.  It’s called Asset Care.

Here is where it get’s interesting.  We create the pool of money using a 3% inflation strategy to that will last for the duration of the policy.  It will create a guaranteed pool of $301,788 tax-free money LTC money in year 20.

Check this out …

So, the next time there is a discussion of self-funding … remember that there is a better way.

One other point to remember, this doesn’t fully fund their long-term care plan but it gets them more than two thirds of the way there and in the most tax favorable way.

This is just one solution for client with a small premium and account balance. With other variable come other solutions.

Give my internal Kelley Hilliard or me a shout to discuss premium & benefits strategies that allow you to build a plan to meet your client’s needs.