Long term care insurance is important right now because Americans have a long life expectancy. The cost of long term care insurance is rising, especially for some Federal workers. In a recent article for Kiplinger, “Alternatives to Long-Term Care Insurance,” Investment Adviser Ann Vanderslice talked about what is happening to current and retired Federal workers and what they can do about it. The employees who opted for the Federal Long Term Care Insurance Program are looking at premium increases of 83% on average, which equals around $100 per month more than they were paying. This will affect around 10% of the Federal workforce, which is close to 280,000 people. These workers are upset because they were under the impression that their premium costs would not rise.
The government is offering people with this plan three options to choose from in the Federal Long Term Care Insurance Program. They can keep their current plan and accept the 83% increase in premium cost, take a 40% premium increase and have their benefits reduced in proportion to that, or they can opt to keep the same premium amount and take significantly lower benefits. There are other options for those who want to look for an alternative to their Federal plan though. Many life insurance policies have options that can help you pay for long term care costs. Life insurance policies can be purchased with premium payments over time or as a lump sum. You can access either all or part of your death benefit in order to pay for long term care costs once you approach your mortality age. Any money that you use to pay for long term care costs will come out of the death benefits paid to your heirs once you die, but they will still receive the remaining death benefits tax-free. It’s worthwhile to use this money for long term care costs because otherwise your heirs might have to pay for your long term care while you are living.
Another good option for long term care coverage is to buy a fixed indexed annuity with an attached income rider. Indexed annuity products create a lifetime stream of guaranteed income. For this example, you would pay your initial premium amount and then leave your money to gain interest credits over time. Income riders do typically cost more money, but they also often increase your benefit base yearly by a percentage known as a roll-up interest rate. You’ll continue to receive the annual roll-up for as long as you wait to receive income from your rider. Fixed Index annuities are desirable for people who cannot qualify for a traditional life insurance plan or long term care insurance because there is no underwriting involved with annuities. Income from fixed indexed annuities can help pay for long term care costs as an alternative to long term care insurance. It isn’t always easy to make the decision to purchase long term care insurance because there is a 50/50 chance that you will need it. But having income to pay for long term care costs should they arise is crucial to protecting your financial future. There are many ways to do this, including funding through your retirement plan and buying a fixed indexed annuity with an income rider.
Written by Rachel Summit