Advisor Today - September/October 2015 - (Page 25)

product spotlight LONG-TERM-CARE INSURANCE By Tom Riekse, Jr., CEBS, ChFC Discussing Your Client's LTC Needs in Retirement Start by working the topic of LTC into the broader topic of health-care planning in retirement. C Consider using the cost of care at home for a three-year period of time and project that cost out at a reasonable inflation rate in the future. Getting started We now know that the cost for LTC insurance has substantially increased. Conversely, the need for LTC planning has not diminished; in fact, it has become more urgent. Given the fact that the old way of securing LTCI is no longer available, how should advisors work with clients when it comes to discussing their LTC needs in retirement? The answer is to work the topic of LTC into the broader topic of healthcare planning in retirement. With almost everyone now holding a smartphone with a perpetual calendar, it is easy to schedule out meetings over a long-time horizon. And a long-time horizon (plus patience) is necessary for successful work with clients. Industry research has shown it's a long sales cycle for LTC insurance from the time people are aware of the policies to the time they actually buy-often up to five years. Therefore, building continual awareness through education is very important and should be part of the plan. When should this planning begin? A good time to start is when a client turns 50-just 15 years away from Medicare eligibility. This is the best time to begin to understand the concerns about the costs of healthcare planning. Many higherincome people will be surprised to find out that Medicare Part B and prescription drug premiums are different for them, or that Medicare doesn't cover LTC needs. After gaining the understanding that planning needs to occur, the first consideration is estimating the amount of money that may be needed for long-term care in the future. A common mistake advisors make is to try and plan for an unrealistic cost of care-for example, using the cost of a private nursing home room for five years. Although there is a possibility those kinds of costs could occur, the amount of money that would need to be set aside for such care either though savings or insurance may be so large that it will discourage the start of realistic planning. Instead, consider using the cost of care at home for a three-year period of time and project that cost out at a reasonable inflation rate in the future. A 50-year-old, for example, oncerns about health-care costs in retirement continue to be a leading topic among people planning for retirement. Studies from firms like Fidelity Benefits Consulting show that the out-of-pocket costs for healthcare throughout retirement now average $220,000 for a 65-year-old couple -and that's before long-term care (LTC) is even considered. The research shows that if you're not factoring health care costs into a client's retirement savings strategy, they could be in for an unwanted shock. Planning for LTC costs used to be a relatively easy proposition-many people chose plans that included lifetime benefits, high benefit levels and compound inflation options. Those older long-term-care insurance products were affordable due to the higher interest rate assumptions of the past. Someone fortunate enough to have purchased one of those older plans will find out what a smart move they made when comparing the costs of current policies. That's why very few LTCI policyholders drop coverage or switch carriers. may need to plan for long-term care costs of $250,000 at age 65 and an increasing amount until the time care is most likely at age 85. After a number is decided upon, the different options for getting there are ready for discussion. Some of the ways to fund an LTCI plan are: 1) Standalone LTC insurance. 2) Linked life/LTC plans. 3) Tax-qualified riders on life insurance. 4) Chronic illness riders on life insurance. 5) Annuity/LTC plans. 6) Savings specifically allocated to LTC. Planning discussions that include the different ways to fund LTCI should consider each client's particular financial situation. In addition to finances, key factors in the evaluation include current health requirements, the need for life insurance, tax considerations and what's involved in reallocating current assets. Our experience has shown that annual planning meetings are the most systematic way for advisors to work with their clients to plan for long-term care. Advisors are encouraged to seek help from carriers and brokerage general agencies for ideas and trends in best practices to ensure they are supporting each client's unique needs. Tom Riekse, Jr., CEBS, ChFC, is managing principal at LTCI Partners, a brokerage general agency specializing in long-term-care insurance. Email him at September/October 2015 | ADVISOR TODAY 25

Table of Contents for the Digital Edition of Advisor Today - September/October 2015

Why You Need a Mentor
The Key Attributes of Top Performers
Success Tips from a Golden Gloves Boxer
How I Use Social Media to Build my Practice
Getting Started on LinkedIn
Discussing Your Client’s LTC Needs in Retirement
How to Boost Your LTCI Production
¿Habla Español?
Providing a Retirement Safety Net
Ongoing Challenges, New Solutions
Four Under Forty
NAIFA’s 125th Anniversary
Demystifying CPA Alliances
Building Your Natural Audience
Holding Workshops?
Ideas to Help You Sell More
Special-Needs Planning
Planning for Divorced or Widowed Women

Advisor Today - September/October 2015