Federal employees and retirees who signed up for the Federal Long Term Care Insurance Program may experience a rise in their blood pressure over the next few weeks.
On November 1, their premiums will increase by an average of 83%, or more than $100 per month.
If you're one of the roughly 280,000 federal employees who enrolled in the plan (about 10% of the current federal workforce), you just watched your retirement budget collapse. And you're probably angry.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Rightfully so. You probably believed your premiums would be better controlled.
But let's give your blood pressure a chance to come down and talk about your options.
The program is offering you a few ways to go. You can lower your benefits and maintain your current premium amount. You can go halfway—increasing the premium by 40%, for example, and reduce your benefits proportionately. Or you can keep the benefits you signed up for and absorb the new premium.
But there are other options available as well—steps that can be taken outside of the federal program that might also work for you. It's important to remember, however, that everyone's situation is unique, and what works for one person may not work for another. Here are just a few options available:
You can buy a life insurance policy. There are myriad life insurance policies out there and this is just one example of how purchasing a policy can help you pay for long-term care. Premium payments can be made using a single premium or can be paid monthly or annually.
Once you need long-term care services, you are most likely approaching your mortality, so they're going to let you access either the entire amount or a partial amount of the death benefit. It just reduces the death benefit proportionately. So if, for example, you pass away after you've used half the benefit, your heirs will still get the other half tax-free. If you don't use it at all, they'll get the entire death benefit.
In most cases, once you've put that lump sum in, you'll never pay another premium.
You can use a fixed index annuity with an income rider for your long-term care fund. A fixed index annuity is designed, first and foremost, to help create a guaranteed stream of income for as long as you live. However, the idea in this instance is that you'll pay the annuity premium and let it sit and accumulate interest credits for a given amount of time. That annuity will also have an income rider, generally available at an additional cost. That rider may also increase your benefit base by a certain percentage each year, often known as a roll-up interest rate. The longer you delay the rider income, the more years you can enjoy the annual roll up.
In 10 years, you can come back to that money and start drawing income.
It may be appealing for a person who might not be able to qualify for traditional long-term care insurance or someone who might not be able to get a life insurance policy, because there's no underwriting.
Putting money aside for long-term care isn't an easy decision for anyone. It's an expense we try to talk ourselves out of, saying: "Only 50% of people need care; maybe I'll die in my sleep."
But there are ways to fit that fund into your retirement plan. So stay calm, carry on and don't be afraid to get creative.
Ann Vanderslice is president and CEO of Retirement Planning Strategies. She holds a Registered Financial Consultant designation from the International Association of Registered Financial Consultants, is an Investment Adviser Representative and a licensed insurance professional.
Kim Franke-Folstad contributed to this article.
This is not a solicitation to sell, nor an offer to buy any security. Cabot Lodge Securities and CL Wealth Management LLC mutual funds are sold by prospectus only. You should consider the investment objectives, risks, charges and expenses of any product carefully before investing.
Mutual funds, Insurance products and Securities are offered through Cabot Lodge Securities LLC [CLS]. Member FINRA/SIPC. Advisory services offered through CL Wealth Management LLC [CLW].
60 Broad Street, Suite 3402, New York, NY 10004, 888.992.2268
Retirement Planning Strategies is not controlled by or a subsidiary of CLS or CLW.
-
What's Worth Your Time in Retirement?Retirement can be a period of personal growth. Acknowledging that your time is precious — and investing it wisely — will help you reap huge rewards.
-
This Late-in-Life Roth Conversion Opportunity Spares Your HeirsExpensive medical care in the later stages of life is an unpleasant reality for many, but it can open a window for a Roth conversion that benefits your heirs.
-
Women, What Is Your Net Worth?Many women have no idea what their net worth is, or even how to calculate it. Many also turn to social media finfluencers for advice. Here's what to do instead.
-
California Wildfires and Insurance: Looking for HelpLos Angeles-based insurance expert Karl Susman shares the view from his agency’s office as all hands are on deck to help their policyholders.
-
A Strategic Way to Address the Tax-Deferred DisconnectWhat you don't know could cost you a fortune. Here's how to make the most of a tax-deferred retirement account and possibly save your heirs a bunch on taxes.
-
To Insure or Not to Insure: Is Life Insurance Necessary?Even if you're young and single with no dependents, you may need some life insurance. Here's how to figure out what and how much you may need.
-
How to Organize Your Financial Life (and Paperwork)To simplify the future for yourself and your heirs, put a financial contingency plan in place. The peace of mind you'll get is well worth the effort.
-
Saving for Your Emergency Fund: As Easy as 1-3-6An emergency fund that can cover six months' worth of expenses is far easier to build if you focus on smaller goals at first.
-
The Wrong Money Question to Ask After Trump's ElectionIf you're wondering what moves to make with a new president moving into the White House, you're being dangerously shortsighted. Here's what to do instead.
-
All About Six Types of Auto Insurance CoverageDo you know what your auto insurance policy covers? Here's a primer on some coverage categories, along with examples of how each type of coverage works.
