Even in Good Times, a ‘Silent Stalker’ Can Raid Your Retirement Plan
Chances are you or your spouse will need long-term care at some point … and it isn’t cheap. A look at the options reveals one interesting possibility: hybrid long-term care insurance.


If you’re someone who pays attention to the U.S. economy and thinks about the effect those numbers could have on your financial future, you’ve probably been feeling rather optimistic lately.
The stock market has bounced back from its recent downturn. The nation’s unemployment rate ticked lower in June, with 4.8 million jobs added to the payrolls. The housing market has showed signs of recovery. And, thanks to the Tax Cuts and Jobs Act, income tax rates should stay at historic lows through 2025.
Most of the retirees and pre-retirees I meet — many of whom watched their stock portfolios soar in 2019 — tell me they’re feeling increasingly confident about their ability to maintain a comfortable lifestyle without running out of money. And isn’t that the goal for retirement?

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.
Yes, but ...
Too often, I find folks with that fat-and-happy attitude about the future having forgotten all too quickly about a silent stalker that could raid their savings and eat up their money — and fast — if they don’t put a plan in place to protect themselves.
What is that sneaky portfolio (and legacy) killer? It’s the cost and expenses of extended long-term care — the assistance many retirees will need to manage the tasks of everyday life, such as bathing, dressing and personal care, including restroom visits. For those less ambulatory, this may also include transferring to and from a bed to a chair.
Unfortunately, the odds are pretty good that you or your spouse will need this type of care at some point during your retirement. According to the U.S. Department of Health and Human Services, someone turning age 65 today has almost a 70% chance of needing some type of long-term care services and support in retirement, and 20% will need help for longer than five years.
What does that price tag look like? Well, it varies depending on where you live, but in 2019, the annual Genworth Cost of Care Survey found that the median monthly cost in the U.S. was $7,513 for a semi-private room at a nursing home, $4,385 for a home health aide, and $4,051 for an assisted living facility.
And researchers say you can expect those costs to keep rising, in part, ironically, because the economy is doing so well and qualified health care providers, who are in high demand, are asking for higher wages. A 2019 study by Georgetown University Medical Center reported: “Nursing home care is arguably the most significant financial risk faced by the elderly without long-term care insurance or Medicaid coverage.”
So, how can you get the coverage you need?
A basic health insurance policy generally doesn’t cover the long-term care costs of nursing homes, assisted-living facilities or in-home care. Medicare won’t pay for what it calls “custodial care” unless you require skilled services or rehabilitative care, and even then, there are limits. And Medicaid won’t kick in unless your income is below a certain threshold and you meet minimum state eligibility requirements.
That means the only sure way to protect yourself, your family and your assets is to purchase private insurance specific to long-term care. For many retirees, in times past, that meant paying the premiums on a stand-alone long-term care insurance policy designed to cover long-term services, including personal and custodial care.
However, in recent years, that strategy has become problematic. Fewer and fewer companies still offer traditional long-term care policies, and it has become increasingly difficult to qualify for coverage. Premiums, which are lower if you buy in when you’re young, can increase and become unmanageable when you’re older. And, just like car, health or homeowners insurance, if you end up never needing the policy, you lose all the money you’ve paid in. This is a turnoff for many retirees, who often decide to forgo the insurance and put their money into investments with a more reliable return.
But there is another way to go ...
A hybrid insurance policy, also referred to as asset-based long-term care, combines long-term care insurance with permanent life insurance. A policy of this sort provides both living and death benefits.
You can purchase this type of policy with a single upfront premium, with a set of premiums for a fixed term or with ongoing premiums. If you need long-term care (due to age, illness, etc.), you can withdraw the funds from your life insurance policy, and when those funds run out, the insurance company will pay. If you don’t need care, or if you have some money left over after receiving care, your heirs will receive the remaining insurance benefit 100% tax-free.
Like all financial strategies, hybrid policies have pros and cons. The premiums can be higher compared to a traditional long-term care policy, and it’s important to be clear about what types of care will qualify under the policy you choose. But the underwriting process is typically less rigorous for a hybrid policy, and a couple can share one policy. This can make obtaining coverage easier and more affordable than a traditional policy.
As long as you pay your premiums, you’ll have a contractually guaranteed death benefit, guaranteed cash value and a guaranteed amount of long-term care coverage. And if, for some reason, you decide to cancel the policy, you can get most of your premiums back — once you pass a designated surrender charge period. That’s a way out that traditional long-term care insurance doesn’t offer.
Does this mean you should rush right out and buy a hybrid policy? Absolutely not. But if you want to give long-term care costs the slip, you should sit down with a seasoned financial professional — someone with long-term care expertise — and talk about the costs, benefits and disadvantages of each coverage option. With this critical piece of protection in place, you really can feel good about the future.
Disclaimer
The appearances in Kiplinger were obtained through a PR program. The columnist received assistance from a public relations firm in preparing this piece for submission to Kiplinger.com. Kiplinger was not compensated in any way.
Disclaimer
The appearances in Kiplinger were obtained through a PR program. The columnist received assistance from a public relations firm in preparing this piece for submission to Kiplinger.com. Kiplinger was not compensated in any way.
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Reid Abedeen is the managing partner at Safeguard Investment Advisory Group, LLC, where he helps families create amazing retirements through a disciplined approach rooted in education, integrity and earned trust. He holds California Life-Only and Accident and Health licenses (#0C78700), has passed the Series 65 exam and is registered as an Investment Adviser Representative under Safeguard Investment Advisory Group.
-
Designing Your 'Immortal' Financial Plan
Explore an approach that offers solutions for those navigating the intersection of longevity, fulfillment and financial security.
By Dennis McNamara
-
How to Protect Your Privacy While Using AI
How to keep your information and finances safe while using AI, including ChatGPT and Perplexity.
By Bob Haegele
-
A QLAC Does So Much More Than Simply Defer Taxes
Here are the multiple ways you can use a QLAC, from managing retirement risks to creating income for specific retirement needs and wants.
By Jerry Golden, Investment Adviser Representative
-
Self-Directed Brokerage Accounts: Retirement's Hidden Gem?
SDBAs are underused and have a reputation for being risky, but when managed carefully they can help you grow your wealth faster than your company's 401(k).
By Scott M. Dougan, RFC, Investment Adviser
-
Early-Stage Startup Deals: How Does a SAFE Work?
Investing in an early-stage startup can get complicated fast, so the venture capital industry turns to other investing options. One is a SAFE.
By Murat Abdrakhmanov
-
Should You Hire a Public Adjuster for Your Insurance Claim?
As natural disasters strike more often, insurance clients are asking, 'What should I do, or who should I hire, if my insurance company is jerking me around?'
By H. Dennis Beaver, Esq.
-
Tips to Help Entrepreneurs Create Self-Sustaining Businesses
With the right processes and people in place, a truly sustainable business can be efficiently passed on to a successor and run profitably on its own.
By Jason L Smith, CEP®, BPC
-
Navigating Annuity Taxation: A Guide for Financial Advisers
Understanding the essentials of taxation in retirement income strategies involving annuities helps ensure positive outcomes for clients.
By Jake Klima
-
How Google Reviews Can Help (or Hurt) Financial Advisers
Don't leave your Google Business Profile unclaimed — someone else can make changes if they claim it. Also, here's what you can (and cannot) do with the reviews.
By Jeff Briskin
-
How Baby Boomers and Gen Xers Are Redefining Retirement Living
Both generations need to embrace change and leverage real estate as a dynamic asset in their retirement planning. Here's how financial advisers can help, too.
By David Conti, CPRC