Steadfast Care Planning

No Retirement Plan is Complete Without a Plan for Long-Term Care with Tom Hegna

November 01, 2022 Kelly Augspurger Season 1 Episode 1
Steadfast Care Planning
No Retirement Plan is Complete Without a Plan for Long-Term Care with Tom Hegna
Show Notes Transcript Chapter Markers

Join Kelly and her guest: Tom Hegna, economist, retirement income expert, speaker, and author. Tom is on a mission to help the world’s population understand the math and science to retire happy.

Today we’re talking about how no retirement plan is complete without a plan for long-term care (LTC).

In this episode: the importance of planning for long-term care (LTC) and how it can affect your retirement plan, the three phases of retirement, Pension Protection Act annuities, increasing income in retirement, and why it’s important to work with an independent LTC insurance Specialist. 

Watch this episode on Youtube:

https://youtu.be/HT4qHJbNA68

 
Find out more about Tom Hegna:

https://tomhegna.com/

 

Find Tom’s books online:

https://tinyurl.com/235z2722

For additional information about Kelly, check her out on Linkedin or www.SteadfastAgents.com.

To explore your options for long-term care insurance, click here.

Steadfast Care Planning podcast is made possible by Steadfast Insurance LLC,
Certification in Long Term Care, and AMADA Senior Care Columbus.

Come back next time for more helpful guidance!

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People don't want to talk about what happens in long term care situations. You know, there's toilet issues, there's dressing issues, there's all these little privacy things. You really want to have your daughter doing that? You really want that or would you rather have a caregiver help you with those things, those necessary things of living and then then you can just spend quality time with your family and not tear down their physical and emotional health? I say in the book, I say Long Term Care Insurance is not about you. It's about your family. That's what long term care insurance protects. It protects your family. Hey, everyone, welcome to the Steadfast Care Planning podcast. I'm your guide, Kelly Augspurger. Today, I have with me Tom Hegna. Tom is an economist, retirement income expert, speaker and author of books like "Paychecks and Play Checks: Retirement Solutions for Life." We'll be talking about planning for long term care and retirement. Welcome, Tom. I'm thrilled to have you on the show! Thanks for being here! Thank you, Kelly. It's great to be with you today. First, to give everyone just a little background story why Tom and I are talking. It all comes down to a dream. I had a dream about a month ago that Tom and I and then a friend of mine, Sheryl Moore, connected at a conference and Tom and I were talking about planning for long term care and how important it is and that all people need to do it. And I said, Hey, Tom, can we shoot a video about this? I think it would be really helpful for the American audience. All those out there, the baby boomers and even younger to talk about this and use like sure, yeah, Kelly, let's do it. So I took that dream, and I messaged Tom on LinkedIn. And he said yes. So here we are. So again, thanks, Tom, I really appreciate your time. I thought it'd be more of a nightmare than a dream. It was very, very positive, so I appreciate that! In all of your teaching, and speaking and writing, Tom, you talk about how no plan for retirement is complete, without a plan for long term care. So in your years of experience, and working with financial advisors and clients, why is planning for long term care and retirement so important? And how can an LTC situation blow up a retirement plan? Well, it's the one thing that most people forget about that can wipe out their entire life's work. I mean, you know, you showed "Paychecks and Play Checks," and "Paychecks and Play checks," I say long term care is a million dollar problem, because for most of the people that are listening or watching to this, they're going to find out that long term care over their lifetime is probably going to cost around a million dollars. My parents both needed assisted living and it was probably $10,000 a month, and based on how long they lived, it cost about $500,000. And that was assisted living, that wasn't nursing home. They got to stay in a nice apartment, get their meals and everything. It's a very, very expensive thing. You know, my parents were teachers in a small town in Minnesota. There were years my dad didn't make $10,000 a year, you know, but I made them buy long term care insurance, they didn't want

to:

"It's too expensive. We'll never need it. It's an insurance company rip off." My dad said all those words to me, I made them by it. And like I said, those policies paid out over a half a million dollars. And I can't even imagine my parents retirement if they didn't have those policies. Absolutely. That is a real life example of blowing up the retirement plan financially, but then even the burden that that would have put on you. And if you have any siblings and the rest of the family, right, if you were to have to provide care, what are you giving up? You know, are you able to still go out and speak? Are you still able to work if you're providing care for your parents? That's a family problem and a financial problem for sure. Yeah, and another thing that people don't understand is a caregivers. It's so hard on their health, their mental health, their emotional health, their physical health, and that the life expectancy of caregivers is much lower than the life expectancy of people are not giving care. And when people say "Oh, my daughter will take care of me or my wife will take care of me. And they say, Oh, my wife will take care of me." I said, "Okay, Sir, I need you to lay down right over here. Now ma'am, I just need you to scoop him up, pick him up and carry him downstairs, put them in the car." She said, "Well, I can't do that." I said, "Well, that's long term care." You see, I think I would rather have my family around me to support me and not be you know, people don't want to talk about what happens in long term care situations. You know, there's toilet issues, there's dressing issues, there's all these little privacy things? Do you really want to have your daughter doing that? Do you really want that? Or would you rather have a caregiver help you with those things, those necessary things of living, and then then you can just spend quality time with your family and not tear down their physical and emotional health? I say in the book, I say Long Term Care Insurance is not about you. It's about your family. That's what long term care insurance protects. It protects your family. Absolutely. Do you want your kids to remain your kids? Do you want your wife to remain your wife, to stay in those roles? Do you want them to coordinate care/supervise care? Or do you want them to physically provide the care? And I think most people would choose yes, let's let them actually supervise that care and not provide the care. Yeah, right. I mean, I think that's that's the main point. Absolutely. What about the three phases of retirement, Tom, can you talk about those? Yeah, you know, a lot of people think retirements gonna be 30 or 40 years of golf, tennis, pickleball and cruises. And that's not really true. They're gonna go through three distinct phases. The first phase I call the Go Go years now the Go Go years, you're playing tennis, you're playing golf, or playing pickleball. Every day, it's happy hour, somewhere. That's the Go Go years. But then as you know, people move from the Go Go years to the Slow Go years and the Slow Go years, you can still do everything in the Go Go, you just don't want to anymore, okay, and you don't want to go downtown after 4:30 because dad can't see when it's dark out. That's the Slow Go years. And then that progresses into the No Go years and those are the years when you're probably not leaving the building until you're leaving the building, if you know what I'm talking about. So you got Go Go, Slow Go, No Go. And this is what I learned. Number one, I learned that the Go Go years is all about income, not assets. I don't care how much money you have in your 401k. What matters is what is your income, your your reliable, guaranteed income every month, because that's how you live your retirement. The Slow Go years is all about long term care and I say every retirement plan has to have some part of long term care in there that no retirement plan is complete without a plan for long term care. I mean, I hope people buy long term care insurance, but if they don't, I hope they buy a life insurance policy that comes with a long term care rider; a long term care benefit. If they have medical problems and they can't qualify for any of this long term care, there are annuities where the monthly payment can double or even triple if there's a long term care event. So there are possible solutions for almost every single person. And then the No Go years I say that's all about life insurance. When people say life insurance has nothing to do with retirement, or life insurance has a lot to do with retirement, number one, I've been moving more of my personal wealth into life insurance so that I can take take tax free withdrawals in retirement. If you look at the budget situation, this country and everything, taxes are gonna have to go up a lot. And I want to have sources of tax free income. So I've converted most of my IRAs and 401ks to Roths that will come to me tax free. Most of those are an income annuity. So I love tax free income for the rest of my life. I've been putting more money into cash value life insurance, so I can take that money out tax free. But one of the reasons that a lot of people don't enjoy their retirements is they think they got to leave their kids some money. "Oh, we gotta leave some money to Johnny and Susie, we got them some money Johnny and Susie." So they deny themselves a retirement to leave money to their kids. I tell people all the time, don't do that. You're not supposed to leave your kids any money. You're supposed to spend all of your money, you're supposed to leave them life insurance, because you can do that for pennies on the dollar. And just one quick story. You know, we have four kids and one day we're sitting around saying how much we leave the kids. And my wife said, "I don't know, what do you think?" I said, "Well, if we bought a $1 million, second to die life insurance policy and named the four kids beneficiares, when we're both gone, they're gonna get a million dollars tax free, that's$250,000 a piece tax free plus whatever's left over." I said,"let's start there." So we bought a $1 million second to die life insurance policy and named the four kids beneficiaries. That policy is completely paid up. Total cost of that policy $150,000. So now think about that. For 15 cents on the dollar, we get to leave our kids a million dollars tax free. But here's the best part - who gets to spend the other 850,000? We do. So don't leave your kids money, leave them life insurance, you can do that for pennies on the dollar. This is all about what I write about on how to help people get the most for the least and retirement because that's really what it's all about. There's no dress rehearsal, there's no second chance. That's right and it's about an efficient way to actually transfer that risk and leverage your dollars and insurance is a fantastic way to do that. Right? You do talk about income all the time, guaranteed income, how can we have guaranteed income? Well, when we're specifically talking about long term care and long term care insurance, that's what it is. It's guaranteed income that you have that's designated for when you need extended care so that all of your their income and assets are free to do other things with but you've got that deisgnated bucket. Yeah, so you can spend the money on the things that you want to instead of the things that you're going to have to if you don't have some type of coverage to help you with long term care. That's right. Fortunately, we do have so many solutions available today for people to help plan but the idea is you need to plan ahead of time. You can't have a great long term care effective plan when you need the care. It's too late at that point to have an efficient plan. You need to do this years in advance before you actually need the care and I think that's a huge takeaway, and to work with someone that is an expert in a way to do that. And now for a brief message from our show's sponsor. As the premier long term care planning designation, the CLTC(Certified in Long Term Care) training program focuses on the discipline of extended care planning, providing financial advisors with the tools to discuss longevity, and its consequences on a family's lifestyle and finances. Look for the CLTC designation when choosing an advisor. One of the reasons so many advisors kind of shy away from long term care is that they feel they've been burned in the past because they submit an application, it gets declined, they submit another application and it gets declined. But you know what they're submitting? These are people who call them, they're 75, they can't remember where they put their keys anymore, they're having trouble getting dressed, or they just feel that there's going to be a problem. They call, "Hey, I need some long term care insurance,." Well, that's way too late, those people are going to be declined almost 100% of the time, advisors need to be reaching out to clients in their 30s, 40s, and 50s. Because you know, I bought my long term care policy, back in when I think I was 40 or 42. It was like $75 a month, it's got unlimited benefits, inflation, pretty much you can't buy the policy I got anymore, but compare that to $10,000 a month today for Assisted Living versus $75 a month that I can do to protect that off the table. I mean, but that's where advisors, financial advisors need to ask the people about long term care, don't wait for the call. You'll get a call, I can tell you that's almost always going to be a decline, you call them that will almost always be an accepted case. Proactive planning, right? It's proactive planning. We have to take the initiative, we can't wait for people to reach out to us because oftentimes, it's too late at that point. You briefly mentioned annuities being able to use annuities for long term care and I don't know if many people know that's actually an option, but it is. So what are your thoughts? And can you explain a little bit Tom, about the Pension Protection Act that addresses non-qualified annuities for long term care? What are the benefits? What do people need to know? When you really do the research, and I'm big into annuitization of annuities and turning it into income, but the truth is, I think less than 3% of annuities are income annuities, most of them are deferred annuities that are just growing, and people buy it instead of a CD. The CDs offering 2%, the fixed annuities offered 4%. Well, that looks good to me, I'm gonna put it there. And so they buy these things and just let them sit, and they grow for years and decades and some of these cases, you know, somebody put in$100,000, it's now worth$450,000. Well, all that gain -$350,000 gain is taxable. But you can use that to pay long term care premiums tax free but you got to work with a with a qualified professional who knows how to set it up properly, because it's got to be set up properly. But you can do that and so you can literally have tax free money, or the money that you would have sent to the government in taxes can be helping to pay for your long term care premiums. That's right, not only you're able to transfer those gains tax free, but those gains can be withdrawn later tax free for long term care, which is why we love being able to use those Pension Protection specific annuities for long term care. Yeah, I think it's kind of a secret that not many people know about, but that's why we're talking about it because more people need to understand this. Also another key is that if you have an annuity like that, we want to make sure that you don't need it for income. If you need it for income, we don't want to use that type of an annuity for long term care benefits. We want something that you're not depending on covering your Yeah and that's why I think it's so important to work with a monthly bills. financial professional. I mean, you know, you don't do your own dental work in your garage with your drill set. I have to have a root canal in two days, you think I'm going to do that in my garage with drill set? No, I go to a professional and it's the same with retirement, why would anybody think that they would know all the things that need to know about retirement when that's not what they do that, they're not a mechanic or they're a plumber or something, they're going to do their own retirement planning. You can't do that. It's just like me trying to do my own plumbing. I call a plumber. I can do stuff around my house, but you know what I don't do? I don't do plumbing. I don't do electric. Okay, I call for those things. But I can patch holes in walls. I can do some stuff, but I'm not gonna do any of that stuff. Right. That's where we need to outsource those. Yes. Well, how can people have increasing income in retirement, Tom? I know you're big on this. Well, you know, inflation was dead for 30 years. Well, it's not dead anymore. All right. And so when you go into retirement, you just can't have income for the rest of your life. You need to have increasing income for the rest of your life. There's really three ways to do that. Probably more than three ways. But things that I talk about is number one, you should cover your basic living expenses in retirement with guaranteed lifetime income. So figure out how much money you need to pay for your your housing, your food, your clothing, your electric, your all your utilities, everything that should be covered the guaranteed lifetime income. Well, what counts? Social Security counts, because it's a lifetime income annuity. It's a guaranteed paycheck for life. Pension counts, because it's a lifetime income annuity. It's a guaranteed paycheck for life. But whatever, you're short, that's where the annuity fits. Okay. But once you cover your basic living expenses, people will say "yeah, but things don't stay the same price. They keep going up." Yeah, that's why you invest the rest of your money to protect yourself against inflation. So that's where stocks fit. That's where real estate fits. That's where maybe some commodities, things that can protect you, if we get inflation, they'll go up in value, you have more money to turn into more income. That's one way. Another ways you can do it. I've done I have some annuities that start kicking in income at age 60. I got some that kick in at age 62. Some that are gonna kick in at age 65, 67. 70, so I am guaranteed to have increasing income for the rest of my life. And then there are also some annuities that you can buy, that will go up every year by 3 to 5%. You know, so if you want to an annuity where your paycheck goes up by 5%, every year, you can buy that, but you want to have increasing income for the rest of your life. So important. When we're specifically talking about long term care, there are options to have inflation protection. We're able to add inflation protection riders on there so that if I buy a benefit, today, that's $5,000 a month, in 20 years, it's going to be worth a lot more, it's going to grow by maybe 3% compound, maybe 5% simple, something in order to keep up with the cost of care, because we know every single year cost of care keeps going up, and it will continue to, so we need to have that protection in place, not only for our long term care policy, but also for income in general. So that's great, great advice, Tom. And then why is working with an independent Long Term Care Insurance Specialist so important? Well, I mean, from my experience, if you look at 100 financial professionals out there, there are maybe three out of every 100 that really know their stuff in long term care. And it might be less, it might be two. There might be 15 or 20, out of that 100 that have sold long term care and know something about it. But you really I believe, you need to know somebody who knows, a traditional long term care policy, what are the pros? What are the cons? What are the pricing right now? What looks to be the best? And then a life insurance with a annuity or with long term care rider? What does that look like? What are the pros, what are the cons? What does it cover? What it doesn't cover? I would say this. You always want to have home care covered, if possible. Like, I don't want to go to a nursing home. And I call I call Long Term Care Insurance, anti-nursing home insurance because if you don't have a policy, you are more likely I believe, to wind up in a nursing home than if you have a policy because if you have a policy, the policy allows you to stay in your house. You need handrails put in? Some policies will pay for that. You need a ramp going up to your house so they can wheel you up there? Some policies will pay for that, you know. You need a nurse to come in to provide assistance part of the day or all day? Some of these policies will pay for that. And so to me, home care is so important because I don't think most people want to wind up in a nursing home. Assisted living facilities are nice. I mean, they can be great. It's like being in college again, you just go down the hall, all your friends are there, you got activities. So some assisted living facilities might be attractive, but I would prefer to stay in my house as long as possible. I know you're not alone in that, Tom. I know most of my clients agree with you. And they want to stay put as long as financially possible and as long as it's feasible and it makes sense for their situation. There are times when it might make sense to move to facility, if you need round the clock care, and it's becoming financially really exorbitant. I mean, you could potentially have $20,000 a month in expenses if you're receiving round the clock care, or if you really want that socialization, and some people are just social butterflies, and they need that and crave that. Then that might be a good fit for them. But you're right, most people want to receive care in their home. I think also, when you're working with a Specialist, yes, you want them to know all those products and solutions and to be very familiar and intimate with all of those, but I think even finding a Specialist who is independent, having lots of carriers available to them is important. And then even having comprehensive knowledge. Do they have a good network of industry experts? Not necessarily in the insurance industry, but do they have home care agencies, facility locators and home modification companies and a great network of people that they can look to and refer to for help? And even having a comprehensive planning perspective. So yes, we know that insurance is an important piece of the puzzle, but it's not the end all be all. We know it's a piece of the puzzle - that a policy funds your plan, but it's not your entire plan. So having the conversation who's going to provide care? Where do you want to receive care and how you're going to pay for that care? Personally, I created a Family Roadmap, a guide to extended care planning and end of life planning. It's a 40 plus page document that really helps people think through these things and document a lot of important pieces of information so that they can have a plan and be prepared. I think the last thing that most of us want is for us to be in crisis mode, where you know, we're scrambling, something happens to mom, she falls, she's admitted to the hospital. She's going to need 24/7 care for the rest of her life maybe. What do we do? If we've had these conversations ahead of time it's going to save a world of burden for everyone involved. Yeah, I mean, I remember when my dad went to the hospital first and I mean, you know, I'm in the industry and yet, you know, who do we call? There's all kinds of things that you got to figure out, like in a very short period of time, and the average person is not trained in this stuff. And that's why I think it's so important to have a plan. Absolutely. We really appreciate your time, Tom. One more fun question for you. I noticed that orange and or peach is a common color that you wear and it's on your books. It's everywhere. Is that your favorite color? Well, it is my favorite color, but it's a branding thing. You know, I mean, there's some speakers, they wear red dresses and red shoes, everything. You know, Joe Jordan wears a bowtie and pirate suspenders. And, you know, it's, it's kind of a branding thing. Like if you're going to be out there, you know, Steve Jobs always wore just those little mock turtlenecks,. If you look at Mark Zuckerberg, he's got the same t-shirt on every single day. It's kind of a branding thing. And that's all it is. Yeah. Well, it's kind of fun. It is fun. I definitely noticed and I think people probably noticed as well and we're matching a little bit today. So look at us, loving the orange and the peach. I really appreciate it. Thanks, Tom. Again, appreciate your time. And thanks for joining us. Thank you, Kelly. Thanks for joining us on today's episode of Steadfast Care Planning with Kelly Augspurger. For more information about today's guest, please check the show notes. And for additional information about Kelly, look her up on LinkedIn or find us online at www.SteadfastAgents.com.This show was made possible by Certification for Long Term Care and Primary Residential Mortgage Incorporated. Please come back next time for more helpful guidance and thanks for listening!

Welcome
Why is planning for LTC in retirement important?
3 phases of retirement
Proactive planning
Pension Protection Act annuities
How can people have increasing income in retirement?
Why is important to work with a Long-Term Care Insurance Specialist?