PROTECTING Your Retirement Income

Long-Term Care Insurance

In a 1997 speech, Rosalynn Carter, the wife of Jimmy Carter, the former President of the United States, made a statement, "There are only four kinds of people in this world":

  • Those who have been caregivers,
  • Those who currently are caregivers,
  • Those who will be caregivers, and
  • Those who will need caregivers.
When a loved one requires long-term care, it can have a profound effect on a family and one's retirement income plan. Studies have shown that providing care to people who are chronically ill can have a detrimental effect on caregivers.


Courtesy of Northwestern Mutual
Robert Klein and Retirement Income Center
Have no affiliation with Northwestern Mutual.

Not having a plan for extended care is terribly disruptive to your retirement income plan. In addition to resulting in the premature or unnecessary payment of income taxes, it disrupts the plan you established to keep financial commitments during retirement. In addition, the financial viability of a spouse is jeopardized when there's no long-term care plan in place.

Long-Term Care Expertise

At Retirement Income Center, we're fortunate to be able to rely upon Robert Klein's expertise and experience in long-term care. In addition to his other licenses and credentials, Bob has held the Certified in Long-Term Care, or CLTC, designation since 2006. Bob has personally implemented many long-term care plans as part of the retirement income planning he does for his clients.


The Wall Street Journal has published Bob's articles on long-term care protection:

    March 18, 2013 - Protecting Mom, Protects You

    March 11, 2013 - Women to Pay More for Long-Term Care Insurance

The Need for Care

The need for long-term care is created by one or both of the following conditions/impairments:

  • A chronic medical condition that compromises the individual's ability to get through the most basic of daily routines
  • A cognitive impairment that compromises one's ability to safely interact with his/her environment 

Consequences of Not Having Long-Term Care Protection

There are two sets of consequences to your family of not having long-term care protection:

  1. Emotional and physical wellbeing of caregivers
  2. Financial

Emotional and Physical Wellbeing of Caregivers

By definition, extended care is all-consuming. If you ever need care over a period of years, your life won't end, however, someone else's may. 

Financial Consequences

Care can only be paid for in one of two ways:  from the family's "hide" or retirement portfolio. If paid from the portfolio, it requires a reallocation of income that was intended for retirement. If the illness lasts long enough, it leads to an unintended invasion of principal.

Other financial consequences include unnecessary, or prepayment of, income taxes and the undermining of the financial viability of the surviving spouse or children who may depend on an inheritance.

Long-Term Care Plan

The foregoing consequences of not having long-term care protection can be mitigated through the creation of a plan.  A plan will allow you to remain safe in the community while preserving the emotional, physical, and financial wellbeing of those you love and care about.

The plan's goal is to place your family back to where they were emotionally, physically, and financially, as best as possible, prior to a long-term care event.

Assets Don't Pay for Care

Many people believe that they have enough assets to self-insure a long-term care event. It's important to keep in mind that assets don't pay for care. They are simply generators of income. 

Let's assume that you have an investment portfolio of $2 million, a 5% return, and 100% of your portfolio is committed to income to provide for lifestyle. Assuming this is the case, how can you support your lifestyle and pay for extended care at the same time?

In addition to the conversion of retirement income plan assets to pay for long-term care, there are other considerations when considering self-insuring long-term care including the following:

  • Liquidity:  Will assets be able to be converted to cash?
  • Income taxes:  Capital gains and ordinary income tax if qualified funds need to be liquidated.
  • Timing:  What if assets have to be sold in a down market?
  • Lost investment opportunities  

What Long-Term Care Insurance Does

There are two purposes of long-term care insurance:

  1. Protects your family
  2. Provides a stream of income which funds the plan

Protects Your Family

Long-term care insurance allows those whom you care about to supervise, not provide, care. It keeps siblings together by keeping them apart.

Provides a Stream of Income Which Funds the Plan

Long-term care insurance provides a stream of income which funds a long-term care protection plan. The income stream is used to pay for care, which allows those people who you love to supervise, rather than provide, care.

Retirement income continues to be used to keep financial commitments. Since your retirement portfolio never has to be used, your retirement income plan executes properly.

Questions to Ask Yourself

As you consider your need for long-term care insurance, ask yourself the following four questions:

  • Do you believe that you will live a long life?
  • Are you aware that when you live a long life, it's likely that you will need care?
  • Do you understand the consequences that providing care can have on your family and your finances?
  • Do you understand that nothing will pay for your plan of care other than the assets and income you've saved or long-term care insurance?

Long-term care insurance is an essential tool that protects your family. It doesn't protect you! You'll be taken care of whether you have long-term care coverage or not. What coverage does is pay for the types of care that your family and friends will find the most time consuming, stressful, and perhaps the most embarassing.  

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