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Stephens Inc. is a full service investment banking firm headquartered in Little Rock, Arkansas. Since its inception in 1933, privately held Stephens Inc. has served a broad client base which includes corporations, state and local governments, financial institutions, institutional investors and individual investors throughout the United States and overseas. For more information, visit www.stephens.com or www.thisiscapitalism.com. Member NYSE, SIPC.
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Mar 6, 2018

Olin Wage, Senior Vice President and Long-Term Care Advisor for Stephens Insurance, is interviewed by Frank Thomas in this episode of Stephens Viewpoints. Frank and Olin discuss why long-term care insurance should be considered as part of a prudent retirement plan, the options available, and options for providing for long-term care needs and expenses.

Key Takeaways:

[:44] Olin explains that long-term care addresses the needs of an individual because of a chronic condition, accident, or trauma, which requires assistance with the basic activities of daily living, including transferring, toileting, bathing, dressing, and eating.

[1:18] There are six activities of daily living. To qualify for a long-term care claim the individual needs assistance with at least two of the six activities. Alternatively, a cognitive impairment alone could qualify a person to receive benefits.

[1:39] Many researchers estimate that more than half of today’s 65-year-olds will need long-term care, at an average total cost of $138,000. A recent Forbes article says only 89,000 bought private long-term care insurance in 2016, a decline of 14% from 2015.

[2:06] Unfortunately, most people think that the government, their health insurance, or disability policy will take care of long-term care expenses. Some people assume that they can self-insure, without actually investigating the implications of using assets to pay for expenses.

[2:29] Medicare and Medicaid are not good for long-term care. Medicare is very limited and only pays for skilled care, up to 100 days. Medicaid requires a person to be financially poor to qualify.

[2:52] Purchasing long-term care in your mid-forties to mid-sixties is optimal. It’s important to act while you’re in good health, because the cost of long-term care is highly dependent upon your physical condition.

[3:14] It’s important to have long-term care insurance in place before you become disabled and dependent on care, even before your retirement age. Income from a disability policy won’t be sufficient to cover the long-term care expenses.

[3:44] In a typical long-term insurance claim, people qualify for benefits after 90 days. Benefit periods run from four to 10 years. The average length of care needed is statistically less than three years.

[4:17] Insurance companies are trying to minimize their risk to a sustainable level by reducing benefit durations and having a broader selection of inflation riders. Some insurance companies are offering life insurance policies with long-term care riders.  Also, annuities have been used for long-term care benefits.

[4:56] Elder care costs continue to rise. Live-in facilities may cost in excess of $90,000 annually. Insurance companies adjust for increases in cost through inflation riders on the long-term care policies. Each year that you own the policy, the benefit increases.

[5:37] Stephens advises clients, both individuals and employer group clients to include long-term care in their overall financial plans. Having a long-term care policy protects their financial plan and their investment portfolio, and protects their family from becoming their caregivers.

[6:18] More and more employers are embracing long-term care benefits for their employees, largely because of the tax benefits associated with the deductibility of the premium for companies, and also the tax-free benefits for their employees. Some employers carve out their top executives and provide long-term care benefits for them.

[7:01] Olin is encouraged to think that long-term care benefits will become a common employer benefit offering as employers learn the tax benefits on both the employer and employee sides.

[7:33] Clients should make sure that they have a financial advisor that is well-versed in long-term care. Clients should involve all their advisors — attorneys, CPAs, insurance agents. When all are involved, it works for the betterment of the client. The need for long-term care is an integral part of their retirement plan.

[8:20] Retirement health-related risk could involve the need for long-term care insurance. If you are limited in the six activities of daily living, and you need help in that regard, there needs to be a means of paying for those expenses. Especially if you need multiple caregivers or 24-hour care, the expenses are higher than average.

[9:32] Another option beyond the traditional long-term care policy is a life insurance policy with a long-term care rider. Discuss this with your Stephens Insurance advisor and your other retirement plan advisors.

[10:00] For more information on this topic, please contact Stephens Insurance at 1-800-643-9691. To listen to more Stephens Viewpoints, check out our website.

 

Mentioned in This Episode:

Stephens Insurance

Stephens Viewpoints Podcast

Olin Wage, Sr. Vice President and Long-Term Care Advisor

The Traditional Long-Term Care Insurance Market Crumbles, by Howard Gleckman for Forbes

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