Preserving your Nest Egg

Preserving your Nest Egg

Preserving Your Wealth

Long-Term Care Planning

People put sophisticated plans in place to support their lifestyle during retirement. These plans are designed to create an income stream to pay everyday living expenses. As we age however, our reality is that our medical costs will increase.

Let’s say you have retirement income of stream of $7,000 per month to cover living expenses for the remainder of his your life. But with the average cost for home care and assisted living approaching $7,000 per month, paying for long-term care services could quickly consume your income and you may need to liquidate other assets.

However, a long-term care insurance policy with a $7,000 monthly benefit can provide extra funds to help cover the cost of LTC services, leaving your retirement income to pay daily, weekly and monthly bills as planned. This preserves the assets that generate your income.

A long-term care plan protects your family because it…

  • Communicates where you would like to receive care and who would provide it
  • Identifies what financial resources would pay for your care
  • It eliminates confusion and conflict amongst family members
  • And it enables your family to supervise your care rather than provider care

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Life Insurance Can Preserve Wealth

For example, many people have accumulated a fair amount of money in their Individual Retirement Accounts (IRA) and may not need all of it for income when they retire. Although they are required to take distributions (RMDs) from their IRA at age 70½, there may still be a substantial amount left in their accounts when they pass away.

The funds in an IRA are heavily taxed when they pass to the next generation. If the IRA owner uses a portion of his required distribution to purchase a life insurance policy, the death benefit can be used by his heirs to pay income tax due on the inherited IRA funds. This is more cost effective than using funds in the inherited IRA to pay the income tax and thus preserves funds in the inherited IRA.

A similar strategy can be used by a surviving spouse who converts a spousal IRA into a Roth IRA and uses the life insurance benefits to pay the income tax due on the conversion. The funds in the Roth IRA continue to grow tax deferred and are not taxed when they pass to the heirs.

For those concerned about taxes being higher in the future than they are today and/or feel that their children and grandchildren will have a tougher time financially, this could be a viable strategy to maximize the wealth they plan to transfer to heirs.

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