Mark Kenney - retirement

When we see a prospective client for the first time, they often have a portfolio. However, they don’t have a five-step plan. Even if they have a plan of some kind, they’ve rarely put much thought into health care planning.

The reason is simple: health care planning, and especially planning for long-term care, can be extremely complicated, expensive, and somewhat depressing. However, being proactive can save you huge sums of money later on–and give you the opportunity to enjoy your life to the fullest.

To discuss this topic, we’re joined by Patrick Randall. Patrick is an advisor on the SHP team. He believes that financial planning is a continual process, and works with our team to provide clients with peace of mind as they transition through every stage of life. He earned his BS in Finance from Bentley University and his MS in Finance from McCallum Graduate School of Business, and is on track to become a Certified Financial Planner as well.

In this episode, we explore why you need more than just Medicare to cover your medical expenses in retirement, why you need long-term care planning no matter how healthy you are right now, and how to build a long-term care plan that allows you to mitigate risk, reduce your burden onto your family, and protect your assets and legacy as best as possible.

In this podcast discussion, you’ll learn: 

  • The six aspects of long-term care.
  • Why women and people living alone are both more likely than men or couples to need long-term care.
  • Why it can be very expensive to get on Medicaid.
  • Why so many people believe their families will take care of them in the event of a health crisis–and why this scenario rarely plays out as anticipated.
  • Why there’s no one-size-fits-all solution to long-term care planning–and how to choose the investment vehicles best suited to your situation.

Inspiring Quotes

  • “The problem with long-term care planning is we don’t really know if we’ll ever need it but not having it can be detrimental.” – Patrick Randall
  • “The more things you can control, the better off you’ll be long-term.” – Patrick Randall

Resources

Read the Transcript

Derek Gregoire: Welcome back to the SHP Financial Retirement Roadmap Podcast. I’m Derek Gregoire, joined by my partner Matt Peck, and we have one of our advisors on the SHP team here today, Patrick Randall. So, welcome to the podcast, Patrick.

 

Patrick Randall: Thank you, Derek.

 

Derek Gregoire: And I think if you look at like a full plan in the last few months, we’ve talked about the importance of a five-step plan, right? And the SHP Retirement Roadmap is having an income plan, investment plan, taxes, health care, and estate planning. We always talk about one of the few areas, few people that come into our office for the first time. So, someone here sees us on TV or hears a radio or podcast, they’re referred by their friend and they come in, most times they have a portfolio, very few have a plan that looks at other areas around it. If they do have a plan, even a fewer percentage have even thought about health care planning, right? In long-term care, one of those things no one wants to really talk about that’s kind of depressing but it’s one of the quick ways to change your retirement. So, before we get into it, Pat, if you can just give us a little background on yourself, I know you’ve been with us for a few years. How long have you been in the industry?

 

Patrick Randall: Well, going on about 15 years or so.

 

Derek Gregoire: Wow.

 

Matthew Peck: Straight out of college, right? Straight out of Bentley.

 

Patrick Randall: Yeah. That’s why I got the grays and the receding hairline.

 

Matthew Peck: Well, it makes us feel a little bit better because some of the past podcasts we had young financial advisors on.

 

Derek Gregoire: We had Nick on and Chase.

 

Matthew Peck: Yeah. So, now we can talk about… Yeah.

 

Patrick Randall: Perfect. I go well with this group.

 

Matthew Peck: Yes, absolutely. We could all talk about our gray hairs.

 

Derek Gregoire: You fit in much, much better.

 

Patrick Randall: And long-term care works well with this.

 

Matthew Peck: Right. Absolutely. It’s something top of mind.

 

Derek Gregoire: And so, I know you were in the industry, you worked for a firm in the past. You joined us. And I always like to, so listen, when you joined SHP, obviously, there was other options, probably. What was the main reason back then?

 

Patrick Randall: Well, other than you fine folks, comprehensive financial planning is the center of what we do. It’s not the investments first. It’s the planning first and that’s really where the value is that we provide to individuals and families. And as we get into this section, it’s even more so about the family.

 

Derek Gregoire: Correct. Yeah. So, we look at health care, it’s really, I think health care is it’s the least amount of bullet points to cover within our planning process. Because we look at income planning, there’s inflation, expense analysis, Social Security analysis, pension analysis, allocation, tax strategies of where to draw from for the income, right? There’s all these little bullet points. When it comes to healthcare, the main two are really making sure you have a plan to get on Medicare. Medicare supplement, right? the second one is what is your plan, if any, for long-term care? And so, we’re going to actually deep dive deep into long-term care today because I think it’s an important topic to go through and we’re going to go through six aspects of long-term care. So, Pat, just to kind of kick things off, what’s a basic outline? Like what is number one out of the six I would say, what is long-term care?

 

Patrick Randall: Yeah. Long-term care is basically it’s when you reached a point in your life where you can’t do the things that you used to do on a daily basis. So, this is needing help for eating or bathing or getting dressed or even just moving from chair to chair or chair-to-bed or walking. I mean, these are things that we take for granted but as we age, our mobility and our mental capacity diminish. And so, oftentimes, I mean, the stats are, I mean, today’s 65-year-olds, 70% of them will need some sort of care. And so, it’s a huge thing and it’s often overlooked. I mean, for people that come in for the first time to have an initial visit with us, I would probably say maybe under 10% of those individuals are couples. I even talked about this. Never mind having it being part of their plan.

 

Matthew Peck: Well, now chiming in two things, I mean, number one, on the definition side of it, I often talk about the difference between kind of critical care versus chronic care in the sense that, Pat, everything you’re talking about is the inability to walk or the inability to bathe and dress. It’s considered chronic in the sense that you’re never going to be able to do it again, right? That’s it for the rest of your life whereas compared to critical care, which is, okay, you may have gone to an accident and you can’t do it for 60 days, 90 days but eventually, you get it back.

 

Derek Gregoire: Hip replacement or something?

 

Matthew Peck: Right, exactly. But where true long-term care is chronic in the sense that it never goes away but then also, it’s interesting, Pat, you mentioned about the 10%. So, 10% of families actually address it. I think those 10% are the ones that have gone through it in the past. You know, most people that talk about long-term care, they’re like, “Oh, yeah. Nobody know much about it.” And then for the people that do, they’ve seen a family member go through it, they are just like, “Yes, I need a plan, I need to address it,” because they’ve seen how difficult in so many ways emotionally difficult, financially difficult it can be.

 

Derek Gregoire: So, if we look at that being number one. Number two, let’s say I’m a client or let’s say I’m someone listening, a listener, and I’m 55 or 65, 70 and I went why is it important for me or for someone listening to understand and plan for these to have a need for long-term care?

 

Patrick Randall: Yeah. That’s a good question. Well, the problem with long-term care planning is we don’t really know if we’ll ever need it but not having it can be detrimental. We’ll get into the number side of it in a little bit but I mentioned that 70% figure, 70% of today’s 65-year-olds will need some sort of care. We don’t know how long it’ll be. We don’t know how intensive it will be. We don’t know what type of care that will be in the future. And there’s a difference between genders, too. So, the averages are about 3.7 years for women needing some sort of care and then only 2.2 for men.

 

Derek Gregoire: Why is that?

 

Patrick Randall: Women live longer, right? Plus, I mean, women tend to be good caretakers too. They may be able to lend a hand in those scenarios for the husband or for the man. And so, it’s important to understand that when it comes to planning because if you don’t have a plan, then you really only have one option. And that’s paying for these services out of pocket. We’ll get into how to approach this conversation later on.

 

Matthew Peck: And I think you also pointed out one of the difficulties of it, which is if it will happen. Sometimes I tell clients I’m not sure if it’s right or wrong. When I’m first sitting down with them, it’s like, “Okay. Let’s deal the two definites, i.e., you’re going to retire and you’re going to die. You know, those are definites, right? So, okay, let’s make sure we have retirement plan in place, an income plan, an investment plan, tax plan, etcetera, but let’s also make sure you have a legacy plan in place again because those are two definites. And I think sometimes it’s like, well, as Patty said, it’s like, “Well, I don’t know. Will it happen? Not sure if it’s going to happen.” I think sometimes we get a little people deny, our denial like I don’t want to address this. I mean, I think there are so many different reasons why people just never really look it in the face and look in the mirror. And be like, “Okay. I need to come up with something.”

 

Derek Gregoire: And everyone probably needs some sort of planning but especially if you’re living by yourself.

 

Matthew Peck: Right. Yeah. Some people are more rather than less. Sorry. Will need it more rather than less.

 

Derek Gregoire: Doesn’t mean if you’re married, you shouldn’t have it because again, imagine me at 80 years old and if you’re a bigger person or even 150 or 200 pounds or more, and someone else is going to, you know, your husband or wife who’s at that same age to take care of you. Think about it. That’s like literally lifting you from place to place, getting you into a wheelchair or taking a bath. There’s a lot of things that go into it. And so, one of the questions just kind of going to the third aspect of long-term care is doesn’t Medicare cover this, right? That’s one of the common questions that we receive.

 

Patrick Randall: Yeah. It’s a great question and it’s one of the biggest misconceptions too because it, unfortunately, doesn’t. The answer is kind of sort of but no. So, Medicare will cover the critical care that Matt had already talked about a little bit but it will only cover up to 100 days of that care and then you’re on your own. So, whether you’re taking it from your investments or your portfolio but Medicare will not cover it. I mean, there are some health insurance carriers that may cover it but it’s very specific to that carrier.

 

Derek Gregoire: Got it. So, really, Medicare, in essence, from a long-term stay, you make it 100 days if you’re lucky. After that, you’re kind of on your own. What about Medicaid?

 

Patrick Randall: Yes. So, Medicaid will cover this kind of care but there are strict requirements in order to qualify for Medicaid and that can be a strategy which we’ll get into but there is definitely a strict criteria in order to qualify for Medicaid. So, with clients that we work with, there’s often a confusion between Medicare and Medicaid. So, Medicare is the health insurance coverage you receive when you turn 65. You always know when you turn 65 because you get a bunch of letters in the mail reminding you. You can’t get away.

 

Matthew Peck: Yeah. You could get buried with it. Absolutely, buried.

 

Patrick Randall: Whereas Medicaid is there for people who don’t have the resources to pay for their own care.

 

Derek Gregoire: So, Medicaid is a federal thing. So, in Massachusetts, it’s MassHealth. And so, two things. Think about to qualify for Medicaid, you have to have low assets. So, either give them away, spend them down. There’s all kinds of lookback periods. Also, to qualify for Medicaid, you also have to qualify for a Medicaid-friendly nursing home. Do they cover home care? If they do, probably not much, right?

 

Patrick Randall: They do. Yeah. But it has to be a certain type.

 

Derek Gregoire: Yeah. And so, some people do you want to really have the government decide where you get your care, right? If you want to rely on Medicaid, if clients have $1 million to $2 million, it’s going to take them years to spend down to get to that point, right?

 

Matthew Peck: Well, that’s the thing, too. I mean, just as you put it, I mean, like qualifying for Medicaid, MassHealth, a, you’re not even if you want to, as you’re saying, based on quality of care but it is not easy. I mean, you talk about the five-year lookback periods that are in place. I mean, there’s a whole cottage industry of attorneys and paralegals that work through the applications. And you have to get down all of your old statements. And where did that money go? Where did this money go? Show us your property. Show us your deeds. I mean, it is like an audit on steroids and it’s not something that’s nice to go through.

 

Patrick Randall: It’s expensive to go through Medicaid.

 

Matthew Peck: Yeah. It’s expensive even to get on it.

 

Patrick Randall: Yeah, it’s a lot of red tape, for sure.

 

Derek Gregoire: And how about when it comes to ages, right? Like, if you’re under 50 or 51 to 65, is there a right time? I don’t even know.

 

Patrick Randall: That’s a good question. So, from a planning standpoint, the sweet spot really, when you start looking at all this, I generally say in the 50s and you said mid-50s earlier, that’s a really good time to look at it but you can even start doing some planning before that. Just understanding what this is and what the cons can be by not having a plan. So, if you’re under 50, one of the important things that you want to make sure you have in place is your estate plan. But part of that estate plan is having a healthcare proxy and also a durable power of attorney. So, if there’s an event where you cannot take care of yourself medically or financially, someone can. I’ve seen situations happen where those documents are in place and it can be very expensive to go through the legal process to get someone appointed as a conservator.

 

Derek Gregoire: Well, I know you went through a recent situation with a client. I know as well but I think the husband just passed away recently. But you have changed their whole life like that family, right? You know who we’re talking about. Unfortunately, that one situation out of nowhere, was it a stroke or heart attack? And the next thing you know, their whole life is turned upside down.

 

Patrick Randall: Yeah, it wasn’t anticipated. It just happened one thing after another and then lives changed.

 

Derek Gregoire: Yeah. And so, that’s the important to try to get ahead of it because, again, most of what we’re doing, think about building a plan that looks at all areas of retirement. Well, the foundation is having enough income, making sure your investments are everything’s set up for income investments. That’s all solidified. Then it’s planning around what are the risks that could affect my income in investments? That’s taxes going up. So, we want to mitigate those risks. What about it’s health care in long-term care? So, that’s what we’re talking about today. How do we mitigate those risks then it’s estate planning and the tax is there? How do we mitigate those risks? So, the foundation of a financial plan should be that income investment, that cash flow budgeting but then once you have that foundation built, you want to put a house in roof to protect that foundation so it holds up that foundational income. Because if you have that, if you have a solid foundation but a flimsy roof, the storm comes and your house is gone, right? Where if you can build that structure the right way, looking at all these areas, looking at health care as a plan, now you can have that confidence going into retirement.

 

Matthew Peck: Well, yeah, and I think as you said about mitigating risk, I mean, you can never eliminate it. I mean, obviously, anything can happen and it can happen at any age. I mean, there’s no such thing as risk elimination but you can lower it or you can address it. I mean, you can address your stock market volatility by lowering the risk in your portfolio. It doesn’t mean you don’t lose money in bear markets. You’re going to suffer in some bears just not as less or, I’m sorry, just not as much. Same with your tax planning. That way you’re helping mitigating the risk of increased taxes. Same thing to do with a long-term care plan. You just have to address it and be like, okay, how do I address this risk and what steps do I take and when do I take them and what do I do? So, I mean, I think it’s just helpful to know that it’s all part of that same planning process.

 

Patrick Randall: It is. And it’s very important to work with a financial planner who understands how all these things work together in concert as well because each of these areas affect another area because if you have strong legacy goals and you want to leave something behind for the kids or grandkids and you don’t have this addressed a plan and place for it, then you could spend down all of your assets. It has nothing left behind.

 

Matthew Peck: Right. And then Jimmy and then let’s say vice versa, right, where you are now spending too much and then you take a look and be like, “All right. Well, guess what, Pat? You’re going to be bankrupt by age 80. So, maybe you don’t need to worry about long-term care because you’re on this path.” And if that’s the path the client likes, so be it but that’s the plan. And so, now okay, well, if you end up on MassHealth because you’re 80 because at least it won’t be a surprise to that individual. But you’re right about the idea of needing to know the entire situation, being well-versed in all of these areas so that when the time comes, you can really sit them down and get good information and then make decisions based off of good solid information.

 

Derek Gregoire: And so, as we’re going down the list of like these six areas or six aspects of long-term care, number four is one of the things we hear a lot is, “Oh, don’t worry, my family is going to take care of me. I’m all set.” And that could be, you know, sometimes it can work but that can also be a big loophole to have that as your plan.

 

Patrick Randall: Yeah. And it’s a big burden, too, because it’s a lot of work taking care of say it’s the parent, right? It’s a lot of work. It’s time. It could be money. It could be physically demanding if, like you said, emotionally demanding. Maybe the child is still working. They have a career. Well, if you’re taking care of a parent full-time, then it could take them away from that career. Or they’re in a relationship with a spouse and it could take away from that relationship with the spouse. So, there’s all these little or big ripple effects that can happen by not having a plan in place. And, yes, it can work in some situations but you may also still need to bring in help so you can bring in-home health aides to help alleviate some of that burden. So, oftentimes, some of the strategies that when I’m talking about a little bit, it’s a blend of those strategies. That would be mix.

 

Derek Gregoire: Yeah. It’s like maybe cover some of the care if you need it but not – you don’t need to have like clowns come in and dance for you while you have long-term care.

 

Patrick Randall: I think I like that.

 

Matthew Peck: Does the policy cover that? But as we say, we talk about how difficult that is nowadays too and I can speak from personal experience is just how just sort of kids of parents are now generally more geographically spread out. And so, like you know, Diane and I, my wife and I, we sort of were very worried about the future because so here I am in Boston but my parents are still in Plymouth. So, I’m local but my older brother is in Virginia. My little brother is in San Francisco. And then Diane only has one brother and he’s out in Ohio. So, I have an in-law, elderly and not yet, sorry, Rich and May, you’re fine now but potential for elderly in-laws in Connecticut and then elderly parents that’s…

 

Derek Gregoire: That’s going to be a serious caregiver.

 

Matthew Peck: And yeah, it’s Diane and, I mean, we’re the only two kids that are around right now.

 

Derek Gregoire: Well, the burden is I’ve heard so many stories about the burden of the caregiver is really can be tough. And the other thing too, I hate to even go down this road but think about if you’re a child taking care of your mother or father like you’re not just getting a meal for them. It’s bathing, showering, things that they don’t want to talk about but they’re just trying to be real, like incontinence and like stuff that neither one of you, your parent, your child like it’s a tough position to be in. So, again, some people have that relationship and they are fine and that’s fine. If that’s your plan and everyone agrees on it, that’s fine but these are just some of the things we hear. Number five, Pat, we hear people say, “I don’t want to go into a nursing home and I don’t want to be a burden.”

 

Patrick Randall: Yeah. And so, to your point that you ask me, too, it’s all about having that and it’s not one solution fits all, right, but it’s having that conversation amongst the family. So, if that is an option where the children can take care of it, they understand what that looks like. Now, I think long-term care planning is often, I guess, the concept is misunderstood because what I bring up in meetings, people think about insurance, oh, long-term care insurance. I don’t want it expensive but it’s not the case. And they kind of transition to nursing homes. Well, long-term care plan isn’t just nursing homes. I guess we’ve been talking about you can stay in your home and you can bring an aide and you can kind of vary how much aid you receive. Full-time, 24/7, that could be pretty pricey or part-time. Just a little bit of help during the day. Well, maybe the kids are at work or if there are any medical needs involved in that, maybe you need a little bit more advanced care. But there’s also adult daycare. There’s also assisted living, right? Then you have a nursing home.

 

There’s different avenues in which you can go and you can implore. It’s not just going into a nursing home because I think especially during COVID, when you hear all these stories about COVID going crazy through nursing homes, it’s spreading like wildfire. You kind of question like, well, what is the quality of some of these places? And so, oftentimes a lot of people want to stay in their homes and that’s completely reasonable. It’s just about having a plan to do that in advance.

 

Matthew Peck: Well, on that too, I mean, talking about if home is going to be the place to be, I mean, there’s renovations you need to make. You think about like the plan that would have to go into, obviously, the financial aspect of doing the caregiver. But do you need bars in the bathroom? Do you need ramps? Do you need door handles that aren’t the twist type and some of these things that as arthritis really kicks in or whatever that may be? So, just having that plan to cover those renovations because there’s a whole industry dedicated to doing that so it can be done. It’s just you got to have the funds to pay for it.

 

Patrick Randall: Right.

 

Derek Gregoire: So, there are so many aspects, I mean, that we’ve talked about just kind of recapping some of the areas like we talked about really what long-term care is and why it’s important to understand and plan for long-term care, especially as you get close to retirement. We talked about Medicare, I mean, the fact that Medicare doesn’t provide a lot of coverage. We talked about the alternative, like, “Hey, my family’s going to take care of me.” Well, is that what you want for a plan? And then we also talked about the thought of not wanting to go into a nursing home, wanting to stay at home but also not wanting to be a burden at home. And so, again, in our world of financial planning, this is an area that we look at because, obviously, multiple people think of us as we have managed a lot of money in the market and we have portfolios and we mitigate risk there and all that. But this is an area of risk that you have to at least look at and have a plan for. So, what are some ways that folks listening like how do they plan for this? What are some of the planning approaches to long-term care?

 

Patrick Randall: So, before we get into that, I’m going to share with you guys some stats. So, in the Massachusetts area, we are one of the more expensive areas to receive care. I mean, just like the housing market.

 

Matthew Peck: This is probably a long shot.

 

Patrick Randall: Just want to share with you. So, here are some stats for you. So, in Massachusetts, and this is 2021, if you were to bring in in-home health aides, it cost about almost $62,000 for 44 hours a week. That’s bringing them in. That’s basically a full-time job for them but it’s not 24/7. So, there’s still going to be some involvement from family. Now, if you go to adult daycare route, it’s about $20,000. So, it’s less expensive but it’s five days a week and you drop off, pick up. Assisted living for a private one-bedroom, about $54,000 so now we’re getting a little more and more costly because the care is a lot more in those areas. And then when you start talking about nursing homes, this is $95,000 for a semi-private room and a little around $110,000 for a private room. Those are the national figures. Now, in Massachusetts, that same private room…

 

Derek Gregoire: It sounded pretty cheap.

 

Patrick Randall: The same private room, $173,000.

 

Matthew Peck: Geez.

 

Patrick Randall: Now, these numbers are from Genworth. They did a study. Genworth is a large insurance carrier that kind of focuses on long-term care insurance. So, on their website, they allow you to do some projections. So, that same $172,000, 20 years from now, projected to be $321,000.

 

Derek Gregoire: And those numbers have inflated more than general inflation. Health care and education have inflated more than inflation as a whole, right? So, basically, we have the figures. We know it’s a risk but the client probably has what? Four or five options. Maybe let’s go through them.

 

Patrick Randall: Definitely. Yeah. So, the first option, I guess to kind of start off is if you don’t have a plan, you’re going to self-fund it, and that’s a strategy. If you have enough resources and you understand kind of where this is going, you can plan for that, though. But if you don’t have a plan, that’s your only option. So, number one, you can self-pay it. Number two, you can use traditional long-term care insurance.

 

Derek Gregoire: When they hear long-term care, they assume this…

 

Matthew Peck: They think it’s automatic insurance.

 

Derek Gregoire: Think of, “Oh, that’s long-term care insurance.” And I know it’s not something that’s been done a ton here because there’s a lot of reasons that go into but what are some drawbacks to that?

 

Patrick Randall: Yeah. So, some drawbacks is it’s use it or lose it mostly. I mean there are…

 

Derek Gregoire: You pay for it and if you don’t use it, there’s nothing.

 

Patrick Randall: Yeah. Plus, the premiums you pay, we’ve seen some substantial increases. I mean, I have some clients that are seeing 60% premium increases. And so, that’s a variable for your income plan, right? So, all these areas interact. And so, if you have this variable that premiums are rising, it could impact other areas. I mean, you don’t want to forgo the long-term care insurance, you’ve been paying it for so many years, but you have to kind of work that in. And the more things you can control, the better off you’ll be long-term.

 

Derek Gregoire: And do you have any idea, any like ideas on premiums like you said, just a ballpark range? I know it’s not going to be exact because…

 

Patrick Randall: I know. There are so many different ways you can structure it. You can have joint policies, single policies, and depending upon the age and the health in which you receive it.

 

Derek Gregoire: I’m looking at some of the stats here that you provided, right? Like, in 2021, a single 55-year-old male purchasing $165,000 benefit, pays $950 a year where a woman would pay $1,500 a year. And that’s only for $165,000 but you’re telling me the average is 173?

 

Patrick Randall: Yeah.

 

Derek Gregoire: So, I mean, where does that get you, right?

 

Patrick Randall: Yeah. That’s a partial solution. And so, it leaves you short. Now, there are some benefits, though, to have interest to long-term care. So, you can buy what’s called the qualified long-term care policy, which covers the Massachusetts Recovery Act.

 

Derek Gregoire: And what does that mean?

 

Patrick Randall: Which basically, if you buy a certain amount of coverage with certain terms, then the state of Massachusetts, if you were to spend down all of your assets, they’ll waive the right to put a lien on your property, your residence, after you pass away, you and your spouse pass away. So, there is a benefit there but how does that fit in? What are the pros and cons of that?

 

Matthew Peck: Well, also too, I think you mentioned about how just when you talk about self-funding and whatnot, any time we talk about the insurance route we ought to be talking about doesn’t fit into your overall income plan either. So, then you sort of compare income plan covering some of these costs versus self-funding, which is another way of saying self-insuring in the sense of, okay, the other thing I was going to say too I know is actually part of the solution. But even when people go to self-funding route or self-insuring route, there are different strategies that fall into that category too, like putting aside, obviously, setting aside some money for that purpose. And then there are specific products that are designed for long-term care to kind of have like these incentives and different sorts of doublers and different things too. So, I do like how it’s always like all of the above options but to consider all these different things as you look at it.

 

Derek Gregoire: We’re not saying one’s right or one’s wrong. We’re just giving you the options. So, one is self-insurer. Two is by traditional long-term care and coverage. What’s another one, Pat?

 

Patrick Randall: Yeah. The third one to play off of Matt’s comment is the annuity route, where some annuities have this option, where if you’re receiving income from that annuity, then they’ll double it if you need some sort of long-term care.

 

Derek Gregoire: Got it

 

Patrick Randall: So, usually, if someone’s unhealthy, they can’t underwrite for traditional or another type of long-term care insurance we’ll cover in a second, then the annuity route may make sense to help with that burden, with that bill.

 

Derek Gregoire: And we’ve heard I know trust planning but again, we’re not attorneys. We work with a lot of attorneys but there’s irrevocable trust and ways. There’s timeframes and things you can get into there but again, if you have a lot of assets, that’s really tough by doing trust planning, you’re really trying to qualify for Medicaid. You’re basically trying to hide assets, which you have less access to. So, it’s an option but if your assets are over a certain amount, it becomes a very almost unrealistic option.

 

Matthew Peck: Yeah. And I think that’s why you hear a lot of commercials on radio and different things saying like, “Oh, if you’re losing money to nursing homes, call us right now.” And sometimes they have to do that Medicaid planning route, which is trust planning. There’s also, it’s funny, you talk about the annuities that are for long-term care plan. There’s also annuities that are specifically for Medicaid planning that really lock it up to specific terms. But there are ways of somewhat protecting assets that way but it’s not a pretty picture when you’re going down that route.

 

Patrick Randall: And the other thing that you had brought up early on, Derek, is the Medicaid route. Certain facilities qualify, certain services qualify for that, right? So, that has to come into play. Do you want to control the care you receive or do you want to protect your assets? Some people can do both. Others have to choose.

 

Derek Gregoire: Okay. And then there’s one more option, too, that people can choose.

 

Patrick Randall: Yep. So, you could actually use life insurance as a potential solution for it where these life insurance, we call them hybrid life insurance policies, where you have a death benefit. So, you pass away, someone receives something but then you can also use that death benefit or pool of money, depending upon which option you go with to help pay for these costs. And they’re very flexible.

 

Derek Gregoire: So, I had a recent client and they probably didn’t even need it. They’re really concerned about $3 million saved but they had no children, but they had certain things they wanted to leave a legacy behind for. And they had said one of our big concerns is long-term care. We’re almost 70 now and like we don’t have it covered in our plan and my first thought is, “Hey, you can self-insure. You can have enough money to self-insure.” But then like, yeah, but if we need it, we’re going to go through a lot of assets and we really want to try to protect it. So, one way to kind of self-insure but still it’s almost like self-insuring but hedging your bets a little bit is they took about $200,000 and they shifted it to that hybrid life insurance. So, in essence, what it did is it gave them, by the way, they have all their investments built out, their income plan, all that’s already done, the tax strategies. This is just a final piece that we added. They’ve been with us about a couple of years in 200,000, I forget the exact amount but they each had if they passed away, there’s some death benefit that passes on to their heirs.

 

If they need long-term care, they each have a pool of money, which is much more than 200,000 that they can use for home health care, assisted living, nursing home. So, in essence, the way they looked at is because I said, you can probably do it without this but if you want to do it, this is a good way to kind of help. You’re just moving 200,000 at a three point something million to protect hundreds of thousands of dollars’ worth of long-term care expenses should they come. They’re still self-insuring in a way but now they have to worry about premiums going up. The money is just repositioned from one bucket to another and adding more value.

 

Matthew Peck: And that’s why I think it’s so individualized. It’s like how much money do you have but also how healthy are you? You know what I mean, where certain options, unfortunately, will be like these especially in that situation, we like these hybrid products but they’re also underwritten. You know, the certain ones aren’t unwritten so it’s like, how old are you? How much money do you have? How healthy are you? What are your overall goals? You know, how important is it to you? And so, that goes back to the very beginning, which is like that’s why you need that comprehensive planning into it because all of those factors play a role in just this decision alone.

 

Derek Gregoire: So, this is a lot of information. And, Pat, any last thoughts on I know this is one aspect of planning, there’s a lot of other areas that we cover, but any last final thoughts around long-term care? Anything else you want to share?

 

Patrick Randall: Yeah. Just the importance of understanding it, being aware of it is there’s plenty of great resources out there if you want to dive in and do some more, LongTermCare.gov, even Medicaid.gov if you want to learn about that route but just having to plan for it because without a plan you’re kind of stuck. So, you can’t control it if it does happen. We don’t know if it’s going to happen but then obviously building a plan around it, especially if legacy is important. So, spend all those assets.

 

Derek Gregoire: Awesome. Well, thank you, Patrick Randall, for joining us on the SHP Retirement Roadmap Podcast. We appreciate the value. And all those kind of the best subject that people want to hear about in terms of like it’s a scary one but super valuable, nonetheless. And thank you for joining us. We appreciate it.

 

Patrick Randall: Thank you, guys.

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