Life Insurance With Long-Term Care Rider

Summary

Podcast Summary: "Life Insurance With Long-Term Care Rider" Jill on Money with Jill Schlesinger | Release Date: June 9, 2025

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Introduction

In the episode titled "Life Insurance With Long-Term Care Rider," host Jill Schlesinger, CFP®, along with co-host Mark T. O'Connor, delves into the complexities of integrating life insurance with long-term care (LTC) riders. This episode features a candid conversation with Cheryl and Harry, a retired couple from New Jersey, who seek advice on optimizing their financial strategies to ensure long-term security.

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Guest Introduction and Financial Overview

Cheryl and Harry introduce themselves as a retired couple in their mid-70s with a stable financial foundation. Harry is 75, and Cheryl is 74. They rely primarily on pensions and Social Security as their income sources. Here's a breakdown of their financial standing:

• Total Assets: Approximately $650,000
  • Cash and CDs: $300,000
  • Money Market and Savings Accounts: $155,000 and $80,000 respectively
  • Annuities: Two non-qualified annuities totaling $222,000
  • Retirement Account: Cheryl has a retirement account valued at around $117,000

Their annual income stands at roughly $180,000, with monthly take-home pay of $11,500. Impressively, they manage to save about $2,000 each month, contributing to their substantial cash reserves.

Notable Quote:

“You sound like a very good... Looking couple with those pensions.”
— Mark T. O'Connor at [04:15]

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Discussion on Annuities and Financial Strategies

The couple discusses their consideration of transferring some of their cash holdings into a fixed-interest annuity. They already hold two non-qualified annuities, purchased in 2021 and 2022, which are nearing their maturity dates in January and August respectively. This brings up questions about the efficacy and necessity of acquiring additional annuities.

Notable Quotes:

“We are trying to keep ourselves going for as long as we possibly can in looking into making some, moving some cash.”
— Cheryl at [03:35]

“You already have two annuities would almost be like the suggestion out loud to me is why?”
— Mark T. O'Connor at [07:14]

Mark suggests evaluating whether another annuity is necessary, highlighting the potential redundancy and questioning the strategic advantage of such a move given their existing financial instruments.

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Concerns About Long-Term Care and Healthcare Dependency

A significant concern for Cheryl and Harry is the possibility of requiring long-term care (LTC) and the implications it would have on their finances. Specifically, Cheryl is worried about losing healthcare coverage should Harry face health issues, given that their healthcare is primarily tied to Harry's status.

Notable Quotes:

“Just the possibility of long, of a need for, you know, long term care.”
— Harry at [08:49]

“All of our health care comes from Harry. So if something were to happen to Harry, I would have no healthcare.”
— Cheryl at [08:53]

Mark emphasizes the risks associated with their current setup, explaining how the loss of Harry's income and healthcare coverage could significantly disrupt Cheryl's financial stability.

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Advice and Recommendations

Mark advises Cheryl and Harry to seek an unbiased financial analysis before committing to any additional insurance products. He underscores the importance of working with a financial planner who is not incentivized by insurance companies to ensure objective advice.

Notable Quotes:

“I would want somebody who is not compensated by the insurance company to do the analysis.”
— Mark T. O'Connor at [11:14]

“The complexity of it is, does not come from today. It comes from what happens if Harry dies after age 82...”
— Mark T. O'Connor at [12:33]

He further recommends specific fee-based advisors in New Jersey who can provide Cheryl and Harry with a comprehensive evaluation of their options regarding life insurance and long-term care riders.

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Conclusion

The episode underscores the intricate balance retirees must maintain between securing their income, managing assets, and preparing for unforeseen health-related expenses. Cheryl and Harry's situation highlights the importance of proactive financial planning, especially concerning long-term care and dependency risks. Mark and Jill emphasize seeking objective professional advice to navigate these complex decisions effectively.

For listeners facing similar dilemmas, the hosts encourage reaching out for personalized guidance to tailor financial strategies that align with individual needs and circumstances.

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Resources Mentioned:

• Contact Jill on Money: jillonmoney.com
• Money Watch Podcast: Available on standard podcast platforms
• Fee-Based Advisors: Recommended by Mark T. O'Connor (details provided on the podcast)

Transcript

[Jill Schlesinger]

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[Mark T. O'Connor]

Welcome to the Jill on Money Show. It's Monday, June 9th and we are ready to start the work week with you. And I really want to put the emphasis on you because you guys are the whole reason this show exists. Mark and I, we're like the bit players. We're the co stars. You, you guys are the focus and we focus on you because we think there just aren't enough opportunities for you to ask financial questions or life questions that happen to do with your money in a way that's very non threatening. So here is your non threatening invitation. If something's going on in your life and it touches your money, it can be a very big issue. It could be a small issue. It could be that you're worried about something. It could be that you're starting out. It could be that you're restarting your financial life because maybe something big has happened. Something maybe you've got a new job. Maybe you're in retirement. Maybe you're just considering something and you want another set of ears and eyes on the situation. Then we got your back. Mark and I are both certified financial planners and we love answering your questions. If you've got one, go to jillonmoney.com, click the contact us button and write us a note if you'd like to join us on the air, check the box. Mark will do everything else. While you're on the website, check out all the stuff that lives there, including a link to our other shows. We've got a radio show and we've got another podcast. It's called Money Watch, which drops on Saturdays and Sundays. And I really encourage folks to get their friends who maybe are not as into money stuff into the Money Watch podcast because we are going over some of the, the basics of your finances, of your financial life. We try to cover that more in depth on Saturdays and Sundays. That's the Money Watch podcast podcast. And you can subscribe to it where you get this podcast or check out the link which is on our website. Okay. Today we are talking to a lovely couple from New Jersey. It's Cheryl and Harry. Hi Cheryl and Harry. What brings you to our airwaves today?

[Cheryl]

Hi there. Well, we're a retired couple. Harry's 75 and I'm 74. And we're trying to keep ourselves going for as long as we possibly can in looking into making some, moving some cash. We spoke to an advisor who mentioned whole life insurance with a long term care rider.

[Mark T. O'Connor]

Oh, okay. Okay. That is an interesting product and I know that a lot of people are considering it. Let's go back a step. So you guys are retired. What is the source of your income right now?

[Harry]

The source of our income is that we have, we both have pensions.

[Jill Schlesinger]

Ooh, you sound like a very good.

[Mark T. O'Connor]

Looking couple with those pensions.

[Harry]

Oh, sure. And that and pensions and Social Security is a source of our daily income at this point. In terms of our actual money right now we have total assets is about 550, 650,000. We have about 300,000 in cash or CDs. And one of the things that we're considering doing is moving some of that cash into an annuity with a fixed interest rate.

[Mark T. O'Connor]

Okay, so the 300 grand in the cash and the CDs is part of the 650,000 total, right?

[Harry]

Yes, it is.

[Mark T. O'Connor]

Okay, and the pension and Social Security, what is your total income for the year?

[Harry]

About the income on our last income tax was about 180,000.

[Mark T. O'Connor]

And how much do you spend of that? 180?

[Harry]

Well, we get, I mean just in terms of what we take in, usually our take home every month is about 11, 5. And we're gonna, we spend, we usually save about $2,000 a month.

[Mark T. O'Connor]

And is that how the cash built up?

[Harry]

Yes, the cash builds up. We, we are fortunate to be able to regularly save. We save.

[Mark T. O'Connor]

It's amazing. Okay, so when you said the 650 total, 300 in cash and CDs, where's the other 350? Is it in retirement accounts or brokerage account? Where is that?

[Harry]

We have 155 in a money market, 80 in another savings account. So that's total cash. Then we have two. Two CDs total, about 75,000. Okay, then we have $111,000 annuity.

[Mark T. O'Connor]

You already have an annuity?

[Harry]

We do have one, yes. And we have another one. For another 111,000, then Sheryl has a retirement account with about 117,000, depending on what day the market is.

[Mark T. O'Connor]

Okay, we'll take the about and that retirement account. And the two annuities. Are those retirement annuities? In other words, was the source of the 111,000, did it come from a retirement account or did it come. It did not. So they're non qualified annuities, meaning after tax money, the retirement account is 117,000 that has not been taxed yet. Right. And that you are now. You're withdrawing.

[Jill Schlesinger]

Right.

[Mark T. O'Connor]

You've got minimum required distributions going on from that account.

[Cheryl]

Exactly.

[Mark T. O'Connor]

Okay. And that's the only RMD account that I have to worry about, right?

[Cheryl]

Yes.

[Mark T. O'Connor]

Okay, so next question. House. How much is your house worth?

[Cheryl]

Probably close to 400,000.

[Mark T. O'Connor]

Okay. Is there a mortgage that's outstanding on it? No mortgage. Any other real estate now? Okay, grown kids. No kids. What's happening?

[Harry]

We have three grown kids. Seven.

[Cheryl]

Okay, seven.

[Mark T. O'Connor]

Wow.

[Harry]

And our children are happily independent, well employed. Well employed. Yeah.

[Mark T. O'Connor]

I love that. I love well employed children. You did a good job. Or you got lucky. Either way, we'll take. We'll take both. Okay, so the fact that you already have two annuities would almost be like the suggestion out loud to me is why? Why another annuity? In other words, you already. When did you purchase those two annuities, those non qualified annuities?

[Cheryl]

One was in 2021, I believe.

[Harry]

Okay, 2022. I think we basically, just to give you an idea, the. The five year comes out next January and the three year actually comes out this August.

[Mark T. O'Connor]

So those two annuities are now going to be done.

[Cheryl]

Yes.

[Harry]

Yeah.

[Mark T. O'Connor]

So in other words, in addition to that big pile of cash, there's going to be something like $225,000 of annuities that are going to be flowing out, is that right?

[Harry]

Right. Unless we renew them as annuities or something.

[Mark T. O'Connor]

Yeah, Right. Let's not do that. Let's not do that. Okay, so. And of course you'll have to pay some tax on those. Right. Okay, so which is fine. Is there anything on the horizon that gives you pause about your financial life? Like you, it seems to me like you make a lot of money. You've got pension, Social Security. You're saving two grand a month, which is incredible in your 70s to be saving, to be net savers. Is there anything that is out there that is worrisome to you?

[Harry]

Just the possibility of long, of a need for, you know, long term care.

[Cheryl]

And also the fact that all of our health care comes from Harry. So if something were to happen to Harry, I would have no healthcare?

[Mark T. O'Connor]

Well, I mean. You mean that you would have no health care? Medicare?

[Cheryl]

Yes, I would just have Medicare.

[Mark T. O'Connor]

Right. Okay. So you got me nervous. I'm like, why did someone take away our Medicare system yet? Not yet. It's still with us. Right. Okay, so it's interesting. I understand that it's a weird thing. Okay, so what happens if, if Harry predeceases Cheryl, Then you lose this extra coverage of medical. But would you get a portion of his pension?

[Cheryl]

I would not.

[Mark T. O'Connor]

Okay, so what you would lose would be how much Are the pensions about equal or are they sort of.

[Harry]

No, no, no.

[Mark T. O'Connor]

Harry, what's your pension?

[Harry]

About $6,000 a month.

[Mark T. O'Connor]

Okay. And Cheryl, what's yours?

[Harry]

About 2,100.

[Cheryl]

2,100.

[Mark T. O'Connor]

2,100. So to me there's the risk.

[Jill Schlesinger]

Right?

[Cheryl]

Right.

[Mark T. O'Connor]

Harry passes away, you get 0 of his pension, you lose some health insurance. You are now surviving on your pension plus, you know, some Social Security and survivor benefit. But it's probably not enough to really float all of your expenses. Is that right?

[Cheryl]

Right. We did forget to mention that Harry does have a life, a term life insurance.

[Mark T. O'Connor]

How much?

[Cheryl]

He's 82. It's 500,000 dol.

[Mark T. O'Connor]

Harry, I don't want you to die before you're 82. But that still leaves, that still does leave a gap.

[Cheryl]

Yes.

[Mark T. O'Connor]

Right. Okay, this is interesting. I think that some of these products are interesting that have long term care riders. So when you looked at the whole life policy with the long term care rider, do you manage your own money or do you work with an insurance person or how are you managing things?

[Harry]

Right now we do have an advisor. He's the one who mentioned at our bank and he mentioned the long term care. We have not gotten any details on that in terms of costs and whether eligible or anything. So we kind of wondered from your point of view, what would be the things to look for?

[Mark T. O'Connor]

Well, I think there's two things. Number one is, I think that if I were looking at this situation objectively, I would want somebody who is not compensated by the insurance company to do the analysis. So that's number one. So what I would do is I would probably pay somebody out of my pocket right now to do that analysis for you. And when we get off, I'm going to have Mark send you the name of somebody who I know in New Jersey who is a fee based advisor, meaning no commissions, no nothing to give you an objective picture of this situation. Because the complexity of it is, does not come from the today. It comes from what happens if Harry dies after age 82, which he, you know, I hope that he doesn't die before that. But like that could put Cheryl in a, a little bit of a bind. And you know, it's a weird thing because you have sort of a double whammy risk. One is if Harry got sick and then depleted some of your nest egg, your six or seven hundred thousand dollars, right. Then it leaves you, Cheryl, with a lower base of assets to draw from to survive your own life.

[Cheryl]

Right.

[Mark T. O'Connor]

But I'm not sure if the best product is a whole life with a long term care rider or if a better product might be to take these annuities and, and roll them into something else that would also have a long term care rider. So I don't know what the right, I don't know what the right product is, but I do understand that we have risk here. It's a strange thing because you are in great shape, I think in this situation. Again, like you're in amazing shape right now. But I would not buy a product until I did more analysis. Now do you want the good news and the bad news? The good news is somebody can do that analysis. The bad news is it's going to cost you some money to do it, but it's worth it to get an unbiased look into that. So this is what we're going to do. We're going to finish up with you. You guys are in very good shape. But I'm going to give you two names of people to talk to. Okay? And one is going to be in New Jersey, one is going to be in the Northeast somewhere else. But I want to give you two different folks to just chat with and see how it goes. But I really want an unbiased view on this, not an advisor at a bank. Okay. Sound good?

[Cheryl]

That sounds really good.

[Mark T. O'Connor]

Thank you so much for calling. It's A fascinating situation because for me I've heard so much, so many more stories about folks who are like this where there is an actual risk of long term care coverage that would leave the healthier spouse a bit behind the eight ball. And this can happen with people who have money like you guys have income. And just like even if you have three or four million dollars, it can also be a similar thing. So let's, we'll get you some names and we thank you for raising the issue for everyone else. So if you're hearing this and you're like, do I need long term care insurance? You know these policies, just standalone long term care insurance policies are extremely expensive. So there are other insurance products that might be able to solve your problem and if that is something that you are thinking about that get in touch with us before you purchase the product. Because they're expensive, they're complicated and sometimes it's good to have an advisor or a financial planner who can look at this who is not getting compensated by the insurance company themselves. Okay, so get in touch with us. Go to jilonmoney.com, click the contact us button. Let us know if you want to come on the air by checking the box. And while you're on the website, don't forget, got all the content that lives there. We've got another podcast, we've got a radio show, we've got resources. We've got the free weekly newsletter which comes out every Friday. Mark does an incredible job with that. Try to do something nice for someone else today. Change your work, change your wealth, change your life. Thank you for listening. We'll talk to you tomorrow.

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[Mark T. O'Connor]

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[Jill Schlesinger]

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[Mark T. O'Connor]

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[Jill Schlesinger]

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