The Cold Hard Facts

Paying for Health Care and Long Term Care Expenses

​For many retirees, paying for out of pocket medical expenses will become a huge drain on their retirement savings. These expenses include everything not covered by Medicare and the various supplemental medical plans, as well as long term care expenses. Remember, Medicare does not pay for long term care!

Let’s look at some facts pertaining to these expenditures.

Fact: According to Fidelity Investments, couples now approaching retirement may easily spend upwards of $250,000, or about $12,000 per year, on out of pocket expenses, including co-pays for medical care and prescription drugs. (This is based on an average of 20 years spent in retirement.)

Fact: Long term Care rates vary by state, but the national average for 2018 hovers at around $7,500 per month! Almost $90,000 per year! The average length of stay in long term care is 2-3 years.

Fact: With costs becoming almost prohibitive, many insures are pulling out of the long term care market. This may present a considerable problem in the future.

Fact: According to AARP, in the year 2000 there were 125 insurance carriers providing long term care coverage.

By 2018 there were 13.

The future of long term care insurance as we know it may be in question.


Previously, the only options available to retirees were to :

1. Self-insure. The dangers here are obvious. Unless you have substantial retirement savings, at almost $90,000 per year for long term care alone, you can deplete a sizeable nest egg in a hurry.
2. Purchase private long term care insurance at a cost of $3,000 to 3,500 per year, per person, (and rising). In the event that long term care is not needed, this premium not refunded. It is money lost.

New generation insurance and hybrid insurance/ annuity products.


These products are generally designed to pay for both in- home and extended care LTC expenses. Some will fund LTC and/ or health care expenses for as much as 3 to 4 times the amount of the original premium.

If you don’t ever need these funds for LTC or health care expenses, you don’t LOSE that money. It will always be available to you. And some products will return the full amount of the original premium upon request at any time!.

IRS 1035 Tax Free Transfer. With this program, The IRS will permit transfers of existing, older annuities or life insurance policies to the newer hybrid insurance/annuity products using an IRS CODE 1035 Exchange/Transfer. As long as it’s done properly, there is no tax on the transfer. This is an excellent way to maximize existing annuity and life insurance policies.

IRA - Funded LTC. There is now a way, using new generation insurance products, to convert your IRA to pay for LTC and health care expenses, with minimal tax impact.

These are great tools for insuring that funds will be available if needed for LTC or health care expenses without paying any additional premiums!

But here is some good news!

​With the huge demand for services from the boomer generation, insurers have stepped up with new products designed to deal with these problems.

There are now excellent programs available that serve multiple needs and can conserve and enhance retirement capital.

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