Long-Term Scenarios You and Your Families May Face

5.5.23: Audio automatically transcribed by Sonix

5.5.23: this mp3 audio file was automatically transcribed by Sonix with the best speech-to-text algorithms. This transcript may contain errors.

Val Majewski:
Well, welcome back to The Federal Retirement Show.

Val Majewski:
I'm your host, Val Majewski, with American Benefits Exchange. And I really appreciate those of you who continue to tune in and watch all of our episodes learn as much as you can about your federal employee benefits and retirement information. Today, we're going to talk about a topic that I didn't anticipate chatting about today. I had some other things planned, but also had some meetings this morning with some federal employees just like you, to go over their benefit situation, answer their questions, make sure that they're set up properly as they move forward towards retirement. And a big concern that the folks had on the calls this morning were about long term care or the concerns that they had were about LTC long term care and making sure that they're providing for those things, preparing for that potential situation down the road. So I did want to pivot and I said I had a totally different topic to talk to you about today. Something different, not even close to this, but I just said, you know what? This is current events. The purpose of this channel, the purpose of this show, the purpose of the information that I'm giving you, the federal employee, is so that you have all of the right info and you can make the proper choices, but also that you know what's going on with others just like you. What are other federal employees concerned about? What are the hot topics? What are the current events? What are the things that you need to know? So I pivoted.

Val Majewski:
I went against my regularly scheduled scheduled program and I turned to LTC. What are the options? So let's dive in to long term care and go over the different options available to you, the federal employee. So, LTC, what is it? Well, I just said it stands for long term care insurance. What is long term care insurance and what were the concerns of the people that I talked to earlier today that made me want to pivot to this? Well, people either maybe they live alone, maybe they have loved ones that they don't want to rely on to take care of them later in life. Maybe they don't want to dwindle their own assets. Well, what is long term care cover? Long term care or long term care preparation allows you, whether you're a federal employee or not, to plan ahead to make sure that if you get into a situation where you're no longer able to care for yourself or even partially care for yourself, that you are not a burden on those you care about, whether it is a spouse, whether it's siblings, whether it's kids, whether it's other family members or friends that you are providing some sort of plan of protection so that if you are in this long term care type scenario. You're covered, meaning you're you're not going to be financially drained.

Val Majewski:
You're not going to be resource drained when it comes to having people care for you. And you've got these things planned ahead. Now, in a typical way, we're going to go over a couple different things that you can do to provide that protection. But what are the general options? Well, there are group plans and there are individual plans. You may be familiar with the plan that's available to you as a result of the federal long term care insurance program. It's a benefit provided or an option that you can choose as a federal employee. There are health qualifications, though. If you do want to get a long term care insurance type of plan. And I said already planning ahead is key, but not just for the preparation to make sure that your benefits or that your situation is taken care of. Unfortunately, long term care insurance is essentially a plan that if you need it, you can no longer get it. I'm going to give you an example. When I first got into the insurance industry. Insurance and financial services, I was hoping to be able to take care of or help my grandmother. And she was dealing with some things. She was diagnosed with having dementia and she was taking some medication. She had a live in aide. And my my grandfather had already passed away. She was living by herself and she needed a 24 over live in aide. And she was self-funding this whole thing, paying for it by herself through assets that were saved up by her and my grandfather.

Val Majewski:
And I thought I was uninformed, uneducated at the time about insurance and protocols and things. I thought, okay, if I get into this industry, I can help her out. I can get her a plan that will help cover these things. And unfortunately, I found out very quickly that she was in a situation where where now she needs it. She can no longer get it right. Once you're diagnosed with having certain conditions or you're already in a long term care type scenario, you are no longer able to qualify for long term care insurance. So I said planning ahead is key because most people do not want to think about going into this situation, so therefore they don't get the coverage. But if you want to make sure you have it when you need it, you need to get it ahead of time. Hope that makes sense. So planning ahead is perfectly part or part of this plan, and you need to make sure that if this is something you want to have in place when the time is right, it's got to be in place before you get diagnosed with having some sort of ailment or condition that puts you in a long term care scenario. So a long way of describing you got to plan ahead. Okay. Now what are the options that you can do to satisfy this need If you want to make sure that you're taking care of when or if you get into this kind of scenario? And what do I mean by that? Let me back up a second.

Val Majewski:
How do you qualify for long term care benefits? What is the the qualification to start receiving these kind of benefits or the qualification to be put into a long term care scenario? Typically, it's two criteria being unable to perform two of the six activities of daily living. Those activities are toileting, bathing yourself, clothing yourself, moving from place to place, feeding yourself. Two of the six activities of daily living. If you're unable to perform at least two of those, then you are considered into a long term care type scenario. Or having a cognitive impairment like Alzheimer's or dementia could also qualify you for needing or receiving long term care benefits or being in a long term care type scenario. It can also be confinement, right? If you go into a qualified nursing home or nursing facility, that can be a trigger for long term care type benefits. But there's multiple ways in which you can provide this coverage for yourself. You can inquire and learn about the federal long term care insurance program. We're going to have another episode. So this is going to result in follow up episodes now as a result of this one. But we're going to talk about the long term care insurance program, some of the ins and outs and some of the benefits and features that you can look at and see if that one is right for you.

Val Majewski:
There are also private plans, individual plans. So the long term care insurance program by the federal government is a group policy. You can get an individual or a private policy as well for long term care, and you can customize the features and benefits within that plan. You can do what my grandmother did and you can self-fund. There are people out there that are concerned about long term care, but they don't want to put a policy or a plan in place. Why? Because they feel like they've got enough assets and they don't want to waste money on insurance and they'd rather just self-fund and let the money drain out of their bank account, their savings, their investments, whatever it might be to pay for long term care. If they get into that situation. That's something you can certainly do as well. Then in the recent years they have come out with hybrid or combo plans and some may also call these asset based long term care. So you've got the group plan federal long term care insurance program. You have individual or private life, sorry, long term care insurance plans. You have the self-funded model and you also have the hybrid or combo, the asset based long term care plan.

Val Majewski:
Now, we're not going to go into all of these in great detail. I just want to give you some generalities because like I said, we're going to have some follow up episodes about long term care and dive a little. Deeper into each of these. But let's look at traditional long term care. Now, this is look, this is my opinion on these things. In my experience, I am not going to dog long term care. I'm not going to dog any one of these options. I'm going to give you some of the pros and cons of each of these things, but it's up to you to find which plan is right for you, your situation, which one is going to be best for the coverage you want to have, the cost, the benefits that are provided, etcetera, etcetera, etcetera. So traditional long term care. Now this is you can Google, search this and check it out. Fact check me if you'd like. But what is the the negative thing you hear about traditional long term care, why people are shying away from it. Number one, because it's pretty darn expensive. Pretty darn expensive, and it's very tough to qualify health wise for. I mentioned that earlier, there's health qualifications, traditional long term care. There have been a lot of denials, especially after COVID came out and the uncertainty of how that's going to affect the older generation. There have been a lot.

Val Majewski:
Underwriting guidelines when it comes to long term care qualifications. So not only is it expensive and tough to pay for, but it's tough to get qualified and to those premiums can increase over time. So like regular health insurance, this is long term care is a form of health insurance. Those premiums can increase over time. They are not 100% locked in. Hopefully they don't go up and don't go up drastically, but there's no guarantee that they won't. They are not locked in typically. Now, I say typically before you scrutinize what I'm saying here, typically traditional long term care is a use it or lose it benefit. What do I mean by that? Well, you pay a premium for it. And if you do get diagnosed or get put into a long term care type situation, yes, that policy will pay you a benefit. And if you're trying to be the most cost effective as you can with your strategy, with your plan, and you've just set it up for only long term care benefits, then typically, if you do not use those benefits, if you pay for it over time and something happened to you or you cancel the policy, meaning something happened to you, meaning you passed away or you cancel the policy, you no longer paid for it.

Val Majewski:
You do not get back the money that you put into the plan. Typically not in all cases. It is a use it or lose it benefit. So if you're using this as protection and you want to find the most cost effective way, the cheapest way to pay for long term care, it might be a use it or lose it type of benefit. Okay. Typically also there is not a death benefit involved within this plan. So if you happen to pass away. There would not be a death benefit or anything going towards your beneficiaries, your loved ones, because as it said on the previous bullet point, it's typically a use it or lose it deal. Not all cases are designed this way. Not all long term care is designed this way. But I just said typically. Typically. Why? Because most people are looking for the most cost effective way to do this. I said earlier, long term care has gotten very expensive. So when you outline all the costs, if you pay this, this or this for this amount of benefit, I'm going very quickly. But most people would go for the cheaper way to do it because. They realize how expensive those other options are. There are elimination periods within long term care programs, so that means you have to be in a long term care situation.

Val Majewski:
Usually about 90 days is a typical elimination period before benefits will kick in. So just understand, you know, not only is it difficult to qualify traditional long term care, which includes the federal long term care insurance program, the group plan. Could be expensive. Rates can go up over time. It's typically a use it or lose it benefit no death benefit if you die before using your long term care insurance program benefits. And there's elimination periods within there. Now there's there are some features in ways in which you can get a death benefit. So don't get me wrong, I'm not again, blanketing all long term care plans as use it or lose it or no death benefits. So just just typical traditional run of the mill long term care insurance programs. That's the way they look. And we will dive deeper into some of those as we go through future episodes. Okay. I also mentioned asset based long term care. Now, there are pluses and minuses to this as well. You can though, utilize in this case a lump sum benefit or you can pay recurring monthly premiums just like you do with traditional long term care.

Val Majewski:
But these asset based meaning there's more than one feature.

Val Majewski:
Involved within this type of plan, right? So some people have looked at this and maybe not all, but some people have said, well, I want to get more value for my money. I don't want to just put it aside and and just pay the lowest premium amount and only get one type of benefit for it. I want to get more value for my money. How can I do that? Well, I can put money aside and I can get long term care benefits for that. I can get a tax free death benefit for that. Maybe I can get some cash value build up for that. So now you've got a few extra things. Now over time, yeah, you might have put more money into this asset.

Val Majewski:
Based.

Val Majewski:
Program than you would have with a traditional long term care plan, but you've gotten more value for those dollars over time. And if you want more value, you want more options with your money. This may be a good thing for you. It may not be, but it might be okay. So cash value remains in accumulates. I skipped over the bullet point, but premiums are locked in, so you're either paying that one time lump sum. And I'll give you an example. Let's say you put in $100,000 lump sum. You either had that in cash that was sitting around or you had it in your TSP and you said, I want to turn this into value that will provide not only a death benefit, I don't I don't necessarily need to utilize the money in retirement, but I want to add more value to it. I want some death benefit protection and I want some long term care protection with this $100,000. Now, please don't quote me on this, but here's an example of how this could work. Let's say that 100,000 turned into 200,000 of a death benefit and that 100,000 turned into 300,000in long term care benefits. You would say maybe that was getting you more value for that 100,000 potentially. It may not be the best plan for you, but it could be a good option for some of you. There are elimination periods as well now, usually for traditional long term care benefits. Yes. If you're in a facility or qualified care place, if you're getting home health care, typically there's a zero day elimination period. So you can start receiving benefits immediately as long as those benefits are being utilized for home health care.

Val Majewski:
So asset based LTC, again, it may not be for everybody. There are always the pluses and minuses with every plan. But just so you know your options, if you're concerned about long term care insurance, there are things that you can do to provide. Now, most people I talk to, if they're really concerned about long term care or the the future of their health and what situation they might go into, most do not want to self-fund. I'll just be be honest with the conversations I'm having with federal employees. Most do not want to self-fund or rely on draining their assets because who knows where health care costs will be or long term care costs will be in the future. We've always seen we've seen a rise in nursing home or assisted living facility rates going up across the country. So just understand, the cost for long term care has only been going up over time. And I'd rather you not have to take that money out of your own pocket. You can utilize money that you've got today, whether it's monthly premiums you're going to pay or lump sums that you have, whether it's in TSP or in a checking and savings account or somewhere else that you can utilize to get better value and provide that long term care protection to save you from having to, I said, drain your own assets or rely on family, friends, relatives, whoever to take care of you if you're in that situation.

Val Majewski:
So I said all of.

Val Majewski:
This to say my story changed.

Val Majewski:
Based on the.

Val Majewski:
Conversation I had this morning with some federal employees just like you, who are concerned about long term care and the protection for themselves and their family. And I really now want to take a deeper dive into this topic. So in future episodes, we will go into the federal long term care insurance program that the government offers. We'll go into some private options. We'll go into that asset based care option. And that way you can see what is available and what may or may not be good for you and your family. So I hope you found this information extremely valuable. Maybe you're concerned about long term care and you wondering how this works as well for for you and your situation. Reach out to us.

Val Majewski:
If that's the case, you can go to FederalRetirementShow.com fill out the form. We'd be happy to get you all the information you're looking for so you can make the right decision. Again, my name is Val Majewski.

Val Majewski:
With American benefits Exchange. I really appreciate you joining me for today's.

Val Majewski:
Episode and look forward to seeing you again in the near future.

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