David Monheit, CPA, PFS
As financial planners, we often focus on helping clients grow and preserve wealth. But one of the most overlooked threats to that wealth—especially in retirement—is the cost of long-term care. With the national average for nursing home care exceeding $100,000 annually, and home health care often even higher, planning for these expenses—especially with above-average inflation—is no longer optional. It’s essential.
Long-term care insurance (LTCi) offers a powerful way to leverage current assets to cover future care needs, preserving wealth and providing peace of mind. At Landmark Financial, we guide clients through four primary LTC strategies, each suited to different health profiles and financial situations:
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Traditional LTC Insurance: Just in Case You Need It
Traditional LTC insurance remains a valuable tool, particularly for clients with modest assets. These policies offer robust coverage at a relatively low premium, and many states—including Arizona and Arkansas—participate in LTC Partnership Programs. These programs allow policyholders to protect a portion of their assets from Medicaid spend-down requirements, effectively extending the value of their coverage.
However, traditional LTCi requires medical underwriting and premiums can rise over time. Still, for clients who qualify and want to protect their estate from long-term care costs, this remains a foundational option.
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Asset-Based LTC Insurance: Protection with a Death Benefit
For clients with higher net worth and good health, asset-based LTC insurance—often structured as a life insurance policy with an LTC rider—can be an elegant solution. These policies allow clients to reposition existing assets (often from low-yield accounts) into a single premium policy that:
- Provides tax-free LTC benefits
- Offers a death benefit if care is not needed
- Returns premiums if the policy is canceled
This strategy requires medical underwriting, so it’s best suited for clients in good health who want to avoid the “use-it-or-lose-it” nature of traditional LTCi.
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Annuity-Based LTC Solutions: No Underwriting Required
For clients with health conditions that disqualify them from traditional or asset-based LTCi—but who still have a healthy portfolio—annuity-based LTC solutions offer a compelling alternative. These contracts allow clients to carve off a portion of their assets into a specialized annuity that:
- Grows a withdrawal base over time
- Provides enhanced payouts for qualified LTC expenses
- Requires no medical underwriting
This approach is particularly attractive for clients who want to self-insure but still seek leverage and tax advantages. It’s also a way to earmark assets specifically for care, without sacrificing liquidity or legacy goals.
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Self-Funding: For Those with Adequate Accumulated Assets
For clients with significant accumulated wealth, self-funding long-term care may be a viable option. However, this strategy requires careful modeling. A realistic plan should account for a progression of care needs:
- Several years of assisted living
- Transition to part-time care
- 2 to 5 years of full-time care
We typically use a hybrid annual cost in today’s dollars (pre-inflation) to model these scenarios and stress-test the plan against market volatility and longevity risk.
Self-funding offers flexibility and control, but it also places the full financial burden on the individual or their estate. That’s why even high-net-worth clients often blend this approach with other LTC strategies to optimize protection and preserve legacy goals.
Final Thoughts: LTC Planning Is Asset Protection
Long-term care planning isn’t just about insurance—it’s about protecting your financial future. Whether through traditional policies, asset-based solutions, annuity contracts, or self-funding, the right LTC strategy allows you to turn today’s assets into tomorrow’s care—without jeopardizing your retirement or estate.
Take the next step. Schedule a conversation with a Landmark Financial advisor to explore which long-term care insurance strategy aligns with your health, wealth, and long-term goals. Your future self—and your family—will thank you.
Investment strategies discussed may not be suitable for all investors; please consult with a financial professional to determine suitability.