1 00:00:00,000 --> 00:00:02,340 INTRO: Hi, I'm Ed Slott and I'm Jeff Levine. 2 00:00:02,460 --> 00:00:06,090 And we're two guys who just love to talk about retirement and taxes. 3 00:00:06,120 --> 00:00:10,050 Look, our mission is simple to educate you the saver so that you can make 4 00:00:10,050 --> 00:00:14,160 better decisions because better decisions on the whole lead to better outcomes. 5 00:00:14,190 --> 00:00:16,500 And here's how we're going to do that each week. 6 00:00:16,590 --> 00:00:21,270 Jeff and I will debate the pros and the cons of a particular retirement strategy 7 00:00:21,270 --> 00:00:25,890 or topic with the goal of helping you keep more of your hard earned money. 8 00:00:26,040 --> 00:00:29,680 Yeah, but we won't know which side of the debate we're taking until we flip a. 9 00:00:30,180 --> 00:00:33,270 Winner of the coin flip gets to pick which side of the debate they want to 10 00:00:33,270 --> 00:00:37,950 argue and both of us will have to argue in favor of our respective positions, 11 00:00:38,190 --> 00:00:40,500 whether we agree with them or not. 12 00:00:40,500 --> 00:00:43,770 At the end of each debate, there's going to be one clear winner. 13 00:00:43,980 --> 00:00:47,640 You a more informed saver who can hopefully apply the merits of 14 00:00:47,640 --> 00:00:50,790 each side of the debate to your own personal situation, to decide 15 00:00:50,790 --> 00:00:52,740 what's best for you and your family. 16 00:00:52,800 --> 00:00:53,700 So here we go. 17 00:00:53,700 --> 00:00:55,860 Welcome to the great retirement debate. 18 00:01:02,099 --> 00:01:05,370 Jeff Levine: Well, welcome back to the great retirement debate. 19 00:01:05,370 --> 00:01:05,610 Ed. 20 00:01:05,610 --> 00:01:06,840 It's good to be with you again. 21 00:01:07,259 --> 00:01:08,250 Ed Slott: Great to be back here. 22 00:01:08,250 --> 00:01:12,450 I'm Ed Slott with Jeff Levine and you are listening to the great retirement debate. 23 00:01:12,560 --> 00:01:15,149 Jeff Levine: You know, I feel like every time you say the name, ed, it 24 00:01:15,149 --> 00:01:16,890 just, the debate becomes greater. 25 00:01:16,920 --> 00:01:18,509 I mean, it just it's good. 26 00:01:19,020 --> 00:01:19,710 It's good, ed. 27 00:01:20,280 --> 00:01:21,509 What's our, what's our topic today? 28 00:01:21,509 --> 00:01:22,560 What are we gonna be discussing? 29 00:01:22,560 --> 00:01:23,820 What are we gonna be arguing about? 30 00:01:23,820 --> 00:01:24,470 Debating 31 00:01:24,855 --> 00:01:25,395 Ed Slott: all right. 32 00:01:25,695 --> 00:01:31,755 Uh, a big, big topic, serious topic, long term care for those big expenses. 33 00:01:31,995 --> 00:01:37,725 Do you get a long term care policy or do you just try it on your own and self fund? 34 00:01:38,505 --> 00:01:38,985 Jeff Levine: All right. 35 00:01:39,165 --> 00:01:41,205 Well, let's flip the coin. 36 00:01:41,355 --> 00:01:41,775 Here we go. 37 00:01:44,130 --> 00:01:44,410 All right. 38 00:01:44,759 --> 00:01:45,960 Winner, winner, chicken dinner, ed. 39 00:01:45,960 --> 00:01:46,630 I get to pick. 40 00:01:47,000 --> 00:01:48,130 Alright. 41 00:01:48,150 --> 00:01:52,860 And I'll, uh, I'll take the side of let's buy insurance and 42 00:01:52,860 --> 00:01:54,510 you can argue for self-funding. 43 00:01:54,900 --> 00:01:55,230 Ed Slott: Okay. 44 00:01:55,230 --> 00:01:56,789 I'll argue self-funding go ahead. 45 00:01:57,090 --> 00:01:59,970 Jeff Levine: I'll kick it off and just say like, Hey, when we think 46 00:01:59,975 --> 00:02:05,610 about things that may happen in life long term care or the need for long 47 00:02:05,610 --> 00:02:08,790 term care, is really high up there. 48 00:02:09,029 --> 00:02:11,610 You know, when we think about, will you get into a car accident 49 00:02:11,615 --> 00:02:14,550 this year, ed, thankfully for most people, the answer is no. 50 00:02:14,700 --> 00:02:16,380 Will you die this year? 51 00:02:16,440 --> 00:02:19,500 Thankfully for most people, the answer is no. 52 00:02:19,680 --> 00:02:21,660 Uh, will you become disabled? 53 00:02:21,900 --> 00:02:25,410 More likely than, uh, you know, more people end up needing disability 54 00:02:25,410 --> 00:02:29,670 insurance than they do life insurance, but still the answer for most 55 00:02:29,670 --> 00:02:30,750 people is that they won't need it. 56 00:02:30,750 --> 00:02:35,670 But when we talk about long term care, long term care is one of those 57 00:02:35,670 --> 00:02:40,290 things where you are more likely to actually need it at some point. 58 00:02:40,650 --> 00:02:45,269 Then not need it, you know, thanks to our incredible medical advances 59 00:02:45,269 --> 00:02:47,190 and longevity getting pushed out. 60 00:02:47,519 --> 00:02:52,829 Uh, we now have situations where people are living a lot longer, but for many of 61 00:02:52,829 --> 00:02:58,320 those individuals, a lot more of those years require some additional form of 62 00:02:58,325 --> 00:03:00,060 care and that care can be all over, right. 63 00:03:00,060 --> 00:03:03,930 It can be whether it's just a little bit of home healthcare up to, and 64 00:03:03,935 --> 00:03:08,040 including, you know, skilled nursing facility, all of which would qualify, 65 00:03:08,280 --> 00:03:10,219 uh, as some form of long term care. 66 00:03:10,969 --> 00:03:13,019 Ed Slott: Yeah, it's just about, uh, a certainty. 67 00:03:13,024 --> 00:03:19,620 It's not if, but when, you know, if you're gonna live a, a long time, uh, these 68 00:03:19,620 --> 00:03:24,510 things are so bad now I gotta tell you over the last, I'd say about 10 years. 69 00:03:25,245 --> 00:03:30,135 It's not unusual to see tax returns that claim over a hundred thousand 70 00:03:30,135 --> 00:03:35,385 dollars of medical expenses, whether it's nurses aides, or nursing 71 00:03:35,385 --> 00:03:40,394 homes, or, uh, modifications of homes, ramps, and railings and 72 00:03:40,665 --> 00:03:45,105 chairlifts and stair lifts and, uh, bathroom and kitchen modifications.. 73 00:03:45,285 --> 00:03:47,835 Jeff Levine: As you know, I'm building a house as we record this. 74 00:03:47,894 --> 00:03:54,255 And in that house is going an elevator for my, an elevator for my nonagenarian 75 00:03:54,275 --> 00:03:55,975 grandparents so that they can get around. 76 00:03:56,705 --> 00:03:58,305 Ed Slott: And these are big ticket items. 77 00:03:58,305 --> 00:04:00,915 So there's no question it has to be planned for. 78 00:04:01,125 --> 00:04:03,825 So why would I take the side of self-funding? 79 00:04:03,855 --> 00:04:04,815 Jeff Levine: Well I was just gonna ask you that. 80 00:04:04,815 --> 00:04:05,685 I'm glad you brought it up. 81 00:04:06,165 --> 00:04:08,235 Ed Slott: yeah, so I acknowledge the problem. 82 00:04:08,240 --> 00:04:11,625 And in fact, anybody that's watched any of my programs or been at 83 00:04:11,625 --> 00:04:15,965 any of my seminars, I always, uh, talk about having funds funding. 84 00:04:16,475 --> 00:04:17,885 For long term care. 85 00:04:18,095 --> 00:04:22,085 I just don't agree with the actual long term care policies. 86 00:04:22,085 --> 00:04:23,075 Not that I don't agree. 87 00:04:23,105 --> 00:04:25,925 I don't really understand a lot of the policies. 88 00:04:26,195 --> 00:04:30,545 It seems like the, the current current policies I'm not 89 00:04:30,545 --> 00:04:31,745 talking about the back ones. 90 00:04:31,745 --> 00:04:34,805 My mother had one from 20 years ago is the best thing we ever had. 91 00:04:34,805 --> 00:04:36,965 It paid like crazy in her last years. 92 00:04:37,340 --> 00:04:41,270 But the more recent versions where the insurance companies have 93 00:04:41,270 --> 00:04:44,450 tightened up and realized, oh, we can't pay all of that amount out. 94 00:04:44,690 --> 00:04:45,710 So they've cut back. 95 00:04:45,710 --> 00:04:47,030 They've increased the costs. 96 00:04:47,060 --> 00:04:48,620 I don't see the certainty there. 97 00:04:48,620 --> 00:04:50,150 So I believe in the need. 98 00:04:50,390 --> 00:04:54,890 I think it can be done a different way, even though I'm arguing on the 99 00:04:54,890 --> 00:04:59,150 side of self-funding, I'm not really calling it self-funding in other words, 100 00:04:59,415 --> 00:05:04,185 It can be done through different means it has to be funded, but maybe where 101 00:05:04,185 --> 00:05:08,175 you are in more control, I'll give you one example, uh, life insurance. 102 00:05:08,175 --> 00:05:12,405 I have this for myself and my family, these cash value policies. 103 00:05:12,435 --> 00:05:15,855 A lot of the new ones are these hybrid type of, uh, policies 104 00:05:16,125 --> 00:05:17,985 that have long-term care riders. 105 00:05:18,225 --> 00:05:21,345 And if it's needed in its most simplest form. 106 00:05:22,065 --> 00:05:25,875 In essence, taking in advance on your life insurance. 107 00:05:26,325 --> 00:05:26,775 Yes. 108 00:05:26,835 --> 00:05:29,835 The children will get less, but they won't have to dig into their 109 00:05:29,835 --> 00:05:31,755 pockets every month for your care. 110 00:05:31,965 --> 00:05:33,405 Nobody wants that. 111 00:05:33,675 --> 00:05:37,755 So I think that might be a better way if your insurable, not 112 00:05:37,755 --> 00:05:40,785 everyone is to fund it yourself. 113 00:05:41,595 --> 00:05:43,275 Jeff Levine: Oh, it's a, it's an interesting argument. 114 00:05:43,275 --> 00:05:48,135 I give you two counters to the, to the thought of maybe purchasing a, a life 115 00:05:48,135 --> 00:05:53,745 insurance with long-term care hybrid type of policy versus a, a traditional 116 00:05:53,925 --> 00:05:55,635 type of long-term care policy. 117 00:05:55,640 --> 00:06:00,380 The first is, uh, well, It's never gonna be as good, maybe three 118 00:06:00,380 --> 00:06:01,970 reasons, a never gonna be as good. 119 00:06:01,970 --> 00:06:07,160 And, and as cost effective, if you need long-term care as a, a true long-term 120 00:06:07,165 --> 00:06:10,400 care, kind of like a, the car insurance version of long-term care, right? 121 00:06:10,550 --> 00:06:11,390 Pay your premium. 122 00:06:11,390 --> 00:06:13,010 If you need long-term care, there's a benefit. 123 00:06:13,010 --> 00:06:14,420 If you don't you've paid. 124 00:06:14,690 --> 00:06:17,630 Ed Slott: Oh, don't tell me, you're gonna say, only pay for what you need. 125 00:06:18,210 --> 00:06:21,480 Jeff Levine: Oh, no, no, , I'm not, I'm not doing one of those car commercials. 126 00:06:21,480 --> 00:06:25,110 No, no, but what I am gonna say is that you and I are tax people, right? 127 00:06:25,110 --> 00:06:27,120 We're tax nerds, uh, at, at heart. 128 00:06:27,120 --> 00:06:31,920 And there is no tax deduction for the premiums you pay for those life 129 00:06:31,920 --> 00:06:33,840 insurance with long term care policies. 130 00:06:33,845 --> 00:06:38,610 Whereas there is a federal deduction, uh, for, or at least the 131 00:06:38,640 --> 00:06:42,660 cost of a long term care policy, depending upon how old you are. 132 00:06:42,920 --> 00:06:45,920 There are different federal amounts that can be deducted each year 133 00:06:46,100 --> 00:06:47,900 as a qualified medical expense. 134 00:06:48,050 --> 00:06:51,290 So it may help you to increase your itemized deductions and thereby 135 00:06:51,290 --> 00:06:55,520 actually defer some of that cost if you're able to itemize, and if you're 136 00:06:55,520 --> 00:06:59,510 able to take those medical expense deductions, which admittedly, and I'll, 137 00:06:59,510 --> 00:07:02,150 I'll throw out one for you here, ed, I know you've gotta have more than 138 00:07:02,150 --> 00:07:03,840 seven and a half percent of your AGI. 139 00:07:04,400 --> 00:07:08,030 So some, some people may not get that, and even if they do, they may be limited 140 00:07:08,030 --> 00:07:09,620 by the overall standard deduction. 141 00:07:09,650 --> 00:07:10,520 Cause that's higher. 142 00:07:10,955 --> 00:07:15,125 But for a lot of people that can help to increase their overall deductions 143 00:07:15,125 --> 00:07:16,595 and thereby minimize the cost. 144 00:07:16,595 --> 00:07:19,355 The other thing though, and I think my bigger issue with those type 145 00:07:19,355 --> 00:07:24,005 of policies is that it actually creates a disincentive to use the 146 00:07:24,005 --> 00:07:25,835 insurance that you actually bought. 147 00:07:26,135 --> 00:07:27,215 So ed, if you were. 148 00:07:27,415 --> 00:07:30,715 Um, uh, well, let, let's share some back history here. 149 00:07:30,715 --> 00:07:31,855 I said I was building a house. 150 00:07:31,855 --> 00:07:35,305 You've built a house before, but it's the house you already had, right? 151 00:07:35,310 --> 00:07:40,165 You had to rebuild a house years ago when hurricane Sandy came in. 152 00:07:40,165 --> 00:07:40,435 Right. 153 00:07:40,435 --> 00:07:41,335 And destroyed. 154 00:07:41,335 --> 00:07:44,785 Unfortunately, uh, the house I remember going in and opening a 155 00:07:44,785 --> 00:07:48,055 draw with you and all of a sudden water came out, like one of those, 156 00:07:48,055 --> 00:07:49,345 uh, you know, one of those movies.. 157 00:07:49,535 --> 00:07:50,825 Ed Slott: Water, water everywhere. 158 00:07:50,915 --> 00:07:51,485 Jeff Levine: Yeah. 159 00:07:52,205 --> 00:07:55,615 There was more than a drop to spare at that point, but you, you 160 00:07:55,615 --> 00:07:58,255 didn't think about whether to call your insurance company, right? 161 00:07:58,255 --> 00:08:02,065 You just did, because you paid for that insurance over the years. 162 00:08:02,065 --> 00:08:03,745 And if you didn't call you, weren't gonna get a benefit. 163 00:08:03,745 --> 00:08:04,615 Is that fair? 164 00:08:05,275 --> 00:08:06,295 Ed Slott: Yeah, that's fair. 165 00:08:06,295 --> 00:08:08,425 But that's a different kind of insurance there, right? 166 00:08:08,425 --> 00:08:11,065 Jeff Levine: Well, but if you buy the life insurance with long term 167 00:08:11,065 --> 00:08:15,085 care kind of hybrid, it almost creates a disincentive to use it. 168 00:08:15,085 --> 00:08:20,555 For instance, let's say that, uh, Let's say that you have an IRA that has a 169 00:08:20,555 --> 00:08:25,475 million dollars in it, and you also have a million dollar, uh, life insurance with 170 00:08:25,475 --> 00:08:29,915 long-term care product right associated with it, where you can use up to the 171 00:08:29,920 --> 00:08:34,505 million dollars over a period of time to cover the cost of your long-term care. 172 00:08:34,505 --> 00:08:37,955 Well, if I had a traditional long-term care policy, as soon as 173 00:08:37,955 --> 00:08:40,985 I needed care, I'd be calling the insurance company and saying, send 174 00:08:40,985 --> 00:08:42,455 me my money, because if I don't use. 175 00:08:42,825 --> 00:08:43,365 I lose it. 176 00:08:43,395 --> 00:08:43,755 Right. 177 00:08:44,175 --> 00:08:48,105 But with the life insurance and long term care policy, if I don't use it as long 178 00:08:48,105 --> 00:08:50,685 term care, it's there for life insurance. 179 00:08:50,685 --> 00:08:55,215 And so I may be even more tempted to let's say, use my IRA to take that out 180 00:08:55,335 --> 00:09:00,465 because that IRA may be, uh, you know, if I'm using, it's say for a nursing home 181 00:09:00,465 --> 00:09:04,305 and I'm paying a hundred thousand dollars a year, almost all of my distribution 182 00:09:04,305 --> 00:09:08,590 will end up being deductible and that could end up creating a situation 183 00:09:08,590 --> 00:09:13,810 where I burn down my, my livable assets during my lifetime or for a spouse, 184 00:09:14,050 --> 00:09:18,490 because I'm using my IRA because I wanna leave the tax free life insurance. 185 00:09:18,490 --> 00:09:21,640 If I don't use it for long term care, it becomes tax free life insurance. 186 00:09:21,645 --> 00:09:24,520 Where if I leave my IRA, it's taxable. 187 00:09:24,760 --> 00:09:28,600 So it almost creates this like we are disincentive to use the 188 00:09:28,600 --> 00:09:30,380 insurance that you just bought. 189 00:09:30,910 --> 00:09:31,390 Ed Slott: Oh good. 190 00:09:31,390 --> 00:09:33,820 You just made my argument for self-funding. 191 00:09:34,120 --> 00:09:35,020 Of course I would. 192 00:09:35,025 --> 00:09:38,800 If I had the IRA, I would definitely use that IRA. 193 00:09:39,130 --> 00:09:44,230 Uh, because that, I mean, you're getting the money out at, at full deductions. 194 00:09:44,230 --> 00:09:44,560 Yes. 195 00:09:44,565 --> 00:09:48,430 If the money is big enough, you will get big tax deductions and 196 00:09:48,435 --> 00:09:50,080 that's the best thing you can do. 197 00:09:50,290 --> 00:09:54,250 You're getting rid of that otherwise taxable income on money that has to 198 00:09:54,250 --> 00:09:56,380 be spent anyway for medical bills. 199 00:09:56,620 --> 00:10:00,850 So why not get a big tax benefit out of it and bring down the balance on 200 00:10:00,940 --> 00:10:04,750 those IRAs this way, the beneficiaries, if you're so worried about the 201 00:10:04,750 --> 00:10:07,120 beneficiaries, they'll get better money. 202 00:10:07,300 --> 00:10:09,580 If you don't touch the life insurance policy. 203 00:10:09,580 --> 00:10:09,910 You're right. 204 00:10:09,910 --> 00:10:11,260 There's an incentive there. 205 00:10:11,440 --> 00:10:16,420 If you have both, if you have the traditional IRA and the life insurance 206 00:10:16,450 --> 00:10:20,590 policy with the long term care rider, you're better off using the traditional 207 00:10:20,590 --> 00:10:25,595 IRA, getting the tax deductions and leaving your beneficiaries that windfall, 208 00:10:25,595 --> 00:10:30,335 they get from the full policy amount, the policy proceeds at death, which haven't 209 00:10:30,335 --> 00:10:32,255 been hit for the long term care payment. 210 00:10:32,255 --> 00:10:36,575 So they're gonna end up in a better shape, but if you are listening to this, which 211 00:10:36,575 --> 00:10:40,560 you are, if you hear me talking, uh, you should always do what's best for you. 212 00:10:40,590 --> 00:10:42,300 People ask me that all the time. 213 00:10:42,300 --> 00:10:43,740 I said, don't worry about your kids. 214 00:10:43,810 --> 00:10:44,800 They're gonna be fine. 215 00:10:45,040 --> 00:10:47,380 You have to take care of yourself first. 216 00:10:47,380 --> 00:10:52,780 So if I was their advisor, I might say to take down that IRA first, anyway, 217 00:10:52,780 --> 00:10:56,920 for the tax benefits, they might like to hear that the kids will get more, 218 00:10:57,040 --> 00:11:00,340 but then they'll keep building more of that cash value for themselves. 219 00:11:00,345 --> 00:11:04,120 And if they need it for their own care and retirement, they can take it. 220 00:11:04,300 --> 00:11:07,810 Or for other reasons, they can tap into that cash value, which is just gonna 221 00:11:07,810 --> 00:11:10,540 grow the longer they don't use it. 222 00:11:11,615 --> 00:11:14,495 Jeff Levine: Again, I think those are, are all fair arguments to make, but 223 00:11:14,675 --> 00:11:18,605 ed let's think about what happens when you actually need this cost of care. 224 00:11:18,610 --> 00:11:18,815 Right? 225 00:11:18,815 --> 00:11:21,005 We, we said it could be pretty expensive. 226 00:11:21,035 --> 00:11:23,345 Uh, one of the, one of the insurance companies out there 227 00:11:23,350 --> 00:11:27,005 Genworth each year runs, uh, kind of an annual cost of care service. 228 00:11:27,005 --> 00:11:30,725 And we can put the link to that, uh, that site in our show notes here for folks 229 00:11:30,965 --> 00:11:37,890 the, you know, the average, the average, the, the, the monthly median cost for 2021 230 00:11:38,130 --> 00:11:43,080 for a semi-private room was about $8,000. 231 00:11:43,290 --> 00:11:47,520 Now that's about $8,000, but that includes high cost of living 232 00:11:47,520 --> 00:11:49,200 areas, low cost of living areas. 233 00:11:49,200 --> 00:11:54,835 If I take an area, let's say, uh, Where like close to your neck of the woods. 234 00:11:55,045 --> 00:11:58,825 And, and we put that in and we say, how much, you know, would that be in, 235 00:11:58,825 --> 00:12:03,765 in a particular area, like a, in a, in a New York area comparatively, right? 236 00:12:04,035 --> 00:12:07,405 That becomes just astronomical. 237 00:12:07,405 --> 00:12:10,345 We're talking about over $12,000 a month. 238 00:12:10,525 --> 00:12:13,855 That's $150,000 a year. 239 00:12:14,275 --> 00:12:18,355 Even if you've accumulated a good amount over the course of your lifetime, that 240 00:12:18,355 --> 00:12:20,725 could very quickly erode your portfolio. 241 00:12:20,725 --> 00:12:25,255 If you're married, uh, how do they have, does your spouse have enough income? 242 00:12:25,525 --> 00:12:28,735 Uh, and of course, once you need it, then it's too late to get it right. 243 00:12:28,735 --> 00:12:30,765 And so, the idea that. 244 00:12:31,430 --> 00:12:35,150 You know, and here's one other thought for you, ed, you know, some 245 00:12:35,150 --> 00:12:37,490 people may be fortunate enough. 246 00:12:37,550 --> 00:12:38,120 Well, I don't know. 247 00:12:38,120 --> 00:12:40,430 I guess you can look at that as two sides of the coin as well. 248 00:12:40,550 --> 00:12:43,790 They're fortunate enough not to need long term care for a long time because 249 00:12:44,330 --> 00:12:49,900 they go in and, and they, you know, they either they pass or much less likely 250 00:12:49,900 --> 00:12:51,370 they end up not needing long-term care. 251 00:12:51,370 --> 00:12:51,490 Right? 252 00:12:51,495 --> 00:12:54,520 Most people, once you need long-term care, you need long-term care. 253 00:12:54,520 --> 00:12:56,500 And, and that's gonna be that way forever. 254 00:12:56,890 --> 00:13:00,130 About 20%, according to recent government research. 255 00:13:00,130 --> 00:13:02,680 And we can put the link to that study in our show notes as well, 256 00:13:02,950 --> 00:13:07,960 about 20% of people will need that care for more than five years. 257 00:13:08,660 --> 00:13:12,620 So there's kind of this long tail risk where, you know, if you have, let's 258 00:13:12,620 --> 00:13:16,100 say Alzheimer's or some other cognitive decline where you know, your heart 259 00:13:16,100 --> 00:13:20,720 works great, your, you know, your, your, your bodily body, function's fine. 260 00:13:20,720 --> 00:13:25,130 But maybe it's just a situation where, you know, you need help because of cognitive 261 00:13:25,130 --> 00:13:29,660 decline or there's just a serious physical injury that is not life threatening. 262 00:13:29,660 --> 00:13:31,490 It just means you require a lot of care. 263 00:13:31,760 --> 00:13:33,890 You could end up needing long term care services. 264 00:13:34,940 --> 00:13:36,680 A decade in some cases or more. 265 00:13:36,680 --> 00:13:36,740 Ed Slott: Yeah. 266 00:13:36,800 --> 00:13:41,390 Well, I agree it has to be planned for, but I'm not sure seeing the current 267 00:13:41,690 --> 00:13:47,360 types of long term care policies out there, whether, uh, you would get all 268 00:13:47,360 --> 00:13:53,030 of that without paying a fortune and every story I see recently, I'd say 269 00:13:53,030 --> 00:13:57,050 going back the last five years, when this comes up, they're all, all the 270 00:13:57,050 --> 00:14:01,340 insurance companies are going to the state regulators to raise their premiums. 271 00:14:01,610 --> 00:14:04,970 And then it comes to a point where people are starting to say, I can't afford 272 00:14:04,970 --> 00:14:06,950 the long term care insurance anymore. 273 00:14:06,950 --> 00:14:07,670 I'll just wait. 274 00:14:07,910 --> 00:14:11,990 And, uh, that's why I would take the idea of self-funding. 275 00:14:13,205 --> 00:14:18,155 Uh, planning for it, not, not having it, but self-funding by planning in other 276 00:14:18,155 --> 00:14:20,615 ways, life insurance is one may way. 277 00:14:20,645 --> 00:14:24,725 May not be the only way building up a large IRA may be a way and if it happens, 278 00:14:24,730 --> 00:14:28,595 it happens, but you don't have to come up with the money until it happens. 279 00:14:29,310 --> 00:14:31,050 Jeff Levine: Yeah, I'll throw maybe one more out there. 280 00:14:31,080 --> 00:14:35,580 And that's the idea that if you buy certain types of insurance, you may be 281 00:14:35,580 --> 00:14:38,580 able to protect, uh, additional assets. 282 00:14:38,585 --> 00:14:42,390 So of course, if you find yourself in this situation, right where you do need 283 00:14:42,390 --> 00:14:47,580 long-term care or spouse needs long-term care, uh, in most places in most states 284 00:14:47,580 --> 00:14:52,270 and medicaid is a very complex program. 285 00:14:52,270 --> 00:14:53,920 It's a state and federal partnership. 286 00:14:54,130 --> 00:14:57,370 And so the rules vary dramatically sometimes between 287 00:14:57,370 --> 00:14:58,720 states and different locations. 288 00:14:58,720 --> 00:15:03,830 But you know, in most places you have to spend most of your own assets. 289 00:15:04,430 --> 00:15:07,340 And the assets that belong to your spouse, right? 290 00:15:07,340 --> 00:15:10,460 Income is generally looked at individually, but assets are generally 291 00:15:10,460 --> 00:15:15,800 treated as though they belong to both of you and that can, you know, if you run out 292 00:15:15,800 --> 00:15:20,210 of money, if you get to the point where you are, are so low in assets, uh, and 293 00:15:20,215 --> 00:15:25,130 income that you now qualify for Medicaid, you know, in, in some places, the care 294 00:15:25,130 --> 00:15:27,860 you receive may not be as, as, as strong. 295 00:15:27,865 --> 00:15:31,995 That's the, um, One of the best things about some insurance policies. 296 00:15:31,995 --> 00:15:35,835 In some states, they have these, what are are called partnership programs, where 297 00:15:35,835 --> 00:15:40,185 if you purchase a, a qualifying long term care policy, the state will actually 298 00:15:40,185 --> 00:15:42,795 allow you to keep more of your own assets. 299 00:15:42,795 --> 00:15:46,785 In other words, you can go on Medicaid sooner, uh, with a higher level of 300 00:15:46,790 --> 00:15:52,215 assets, and that will protect more for, let's say, a surviving spouse than 301 00:15:52,215 --> 00:15:55,665 if you don't buy these long term care policies, you may have to dwindle down 302 00:15:55,665 --> 00:15:59,025 your assets to, you know, pretty, pretty. 303 00:16:00,345 --> 00:16:01,580 Slim pickings at some point, 304 00:16:01,580 --> 00:16:04,370 Ed Slott: Right, but you could be dwindling down your assets, just paying 305 00:16:04,370 --> 00:16:08,060 the premiums every month, over a long period of time when you didn't need the 306 00:16:08,060 --> 00:16:09,590 money when you didn't need the care. 307 00:16:10,580 --> 00:16:11,450 Jeff Levine: Well, that's true. 308 00:16:11,510 --> 00:16:15,500 And, but, but you know, ed, it's a, it's a, you make a great point there, 309 00:16:15,500 --> 00:16:17,000 but I, I will make the counterpoint. 310 00:16:17,000 --> 00:16:19,910 And I always, like, I talk about this with social security as well. 311 00:16:19,910 --> 00:16:21,530 People say, well, what if I die? 312 00:16:21,780 --> 00:16:22,260 Great. 313 00:16:22,290 --> 00:16:24,930 So you died and you didn't run out of money, like here. 314 00:16:25,020 --> 00:16:25,350 All right. 315 00:16:25,350 --> 00:16:29,280 So you paid like, do you walk around every year going, ah, shucks, this year, 316 00:16:29,280 --> 00:16:31,950 I didn't get into a car accident and I paid all that money for car insurance 317 00:16:31,950 --> 00:16:35,580 or, oh man, I I'm hoping for do, do you hope for another hurricane ed? 318 00:16:35,585 --> 00:16:38,520 So you have to rebuild your house again so you can call the insurance company. 319 00:16:38,620 --> 00:16:43,620 Ed Slott: Nobody wants that, but you have to look at how far your assets will go. 320 00:16:43,620 --> 00:16:46,200 And when to spend them down, I guess, is the real answer. 321 00:16:46,200 --> 00:16:49,650 Do I wanna spend them down right now, monthly payments 322 00:16:49,800 --> 00:16:51,540 while I can get the policies? 323 00:16:51,580 --> 00:16:55,045 Because if you don't do it while you're healthy, it's almost impossible. 324 00:16:55,555 --> 00:16:58,825 Once the situation occurs where you need long term care, it's going 325 00:16:58,825 --> 00:17:00,385 to be very difficult to get it. 326 00:17:00,415 --> 00:17:03,445 Even the way I'm saying through a life insurance policy. 327 00:17:03,970 --> 00:17:04,210 Jeff Levine: Yeah. 328 00:17:04,210 --> 00:17:08,410 And I think maybe that's one of the best points uh, we could make is that if you're 329 00:17:08,410 --> 00:17:12,880 thinking about this, doing it while you're younger, while you're healthier, can 330 00:17:12,885 --> 00:17:15,130 be, uh, can be a pretty powerful thing. 331 00:17:15,135 --> 00:17:19,839 And, uh, you know, I, and I think while as we come to kind of the, 332 00:17:19,839 --> 00:17:23,589 the end of this debate for today, I would be remiss if we didn't. 333 00:17:23,880 --> 00:17:27,060 Even though it's to, to, to the point of maybe more self-funding, I'd be 334 00:17:27,060 --> 00:17:31,500 remiss if I didn't really hit on the issue of, uh, that, and you, you 335 00:17:31,500 --> 00:17:34,620 touched on it before of people going back to the insurance regulators. 336 00:17:34,740 --> 00:17:38,385 So as many people know, you know, insurance is kind is 337 00:17:38,390 --> 00:17:39,765 a, is a regulated thing. 338 00:17:39,770 --> 00:17:42,225 You have to follow state guidelines. 339 00:17:42,225 --> 00:17:45,285 There are some federal laws as well that can apply in certain cases. 340 00:17:45,615 --> 00:17:49,575 Uh, but when we're talking about long term care insurance, generally 341 00:17:49,575 --> 00:17:53,740 someone can't say like, You were healthy years ago when you bought 342 00:17:53,740 --> 00:17:56,000 this policy, but now you're not. 343 00:17:56,090 --> 00:17:58,649 And so now we're going to increase your premium that's general. 344 00:17:58,649 --> 00:18:00,050 Ed Slott: Oh, that's not what I was talking about. 345 00:18:00,050 --> 00:18:00,409 Jeff Levine: Correct. 346 00:18:00,470 --> 00:18:00,740 Right. 347 00:18:00,740 --> 00:18:02,330 I just wanna make sure that people understand that. 348 00:18:02,379 --> 00:18:06,304 Talking about regular cost increases because the costs are going up. 349 00:18:06,665 --> 00:18:10,895 And in most cases, insurers kind of, I don't wanna say they promise, but they 350 00:18:11,044 --> 00:18:17,225 strongly hinted that their premiums may not rise, but costs are so much, 351 00:18:17,225 --> 00:18:21,425 so insurers have kind of been hit by a, a, almost like a trifecta, right? 352 00:18:21,425 --> 00:18:23,385 People are living longer. 353 00:18:23,625 --> 00:18:27,315 Uh, we we've got costs of care that have dramatically risen 354 00:18:27,315 --> 00:18:28,695 that have outpaced inflation. 355 00:18:28,695 --> 00:18:32,925 So people needing care for more years, that care is more expensive than ever. 356 00:18:33,135 --> 00:18:36,435 And the other thing that goes into this is that interest rates have been low. 357 00:18:36,705 --> 00:18:40,515 So the insurance companies, right years ago, when they bought these, 358 00:18:40,515 --> 00:18:43,655 you know, when they, when they took in these dollars and said, Hey, 359 00:18:43,865 --> 00:18:47,765 we've gotta save these dollars and grow them for the future amounts. 360 00:18:47,765 --> 00:18:48,635 We'll have to pay out. 361 00:18:48,635 --> 00:18:51,785 They assumed that they were going to be actually generating some 362 00:18:51,785 --> 00:18:53,255 sort of real interest on them. 363 00:18:53,285 --> 00:18:58,445 And for a really long time, interest rates have been pretty low. 364 00:18:58,595 --> 00:19:01,955 And so insurance companies in, in large respects, haven't made near the 365 00:19:01,955 --> 00:19:06,185 returns that they were counting on for years and so we do see that a lot 366 00:19:06,185 --> 00:19:10,431 of times where they go back and will be able to increase for everyone in 367 00:19:10,436 --> 00:19:12,380 a certain class, like all 45 years.. 368 00:19:12,380 --> 00:19:15,500 Ed Slott: If you don't have stability in your monthly expenses, I guess that's, 369 00:19:15,500 --> 00:19:19,700 what's bothering me about paying it out monthly, but the bottom line with 370 00:19:19,700 --> 00:19:24,650 all of this, I think we both agree it has to be planned for and prepared 371 00:19:24,655 --> 00:19:28,580 for, because at some point it, it could be a likely thing in your life. 372 00:19:28,760 --> 00:19:32,330 So however you prepare, whether it's the self funding through IRAs or 373 00:19:32,330 --> 00:19:35,990 life insurance, or actually going out and researching a long term 374 00:19:35,990 --> 00:19:39,440 care policy, something should be done while you're healthy enough. 375 00:19:39,440 --> 00:19:41,300 Like hopefully right now to do it. 376 00:19:41,570 --> 00:19:41,810 Jeff Levine: Yeah. 377 00:19:41,899 --> 00:19:42,530 I, I agree. 378 00:19:42,669 --> 00:19:48,065 I, I think, uh, without a doubt, when you create your retirement plan, It's 379 00:19:48,065 --> 00:19:52,655 understanding what the impact would be if there's a long term care event 380 00:19:52,655 --> 00:19:57,005 or need and how that might impact look, if, if you I'll make the extreme 381 00:19:57,010 --> 00:19:59,105 example, if you've got a hundred million dollars in the bank and you 382 00:19:59,110 --> 00:20:02,885 wanna, self-insure like, okay, fine. 383 00:20:03,125 --> 00:20:04,445 Uh, that would be just fine. 384 00:20:04,445 --> 00:20:07,475 But if you have a scenario where, you know, you've got 385 00:20:07,475 --> 00:20:09,695 a million dollars or so, and. 386 00:20:10,080 --> 00:20:13,830 You know, having that long term care need could mean a spouse goes from 387 00:20:13,830 --> 00:20:17,970 living in a really nice apartment to living in a, not so nice apartment or 388 00:20:17,975 --> 00:20:22,440 from driving their nice car to never having another car again, you know, 389 00:20:22,500 --> 00:20:24,150 that's something you wanna be aware of. 390 00:20:24,390 --> 00:20:26,610 And so just running the numbers, crunching the numbers. 391 00:20:26,615 --> 00:20:29,700 I, I, I think is probably the, the critical element here and just 392 00:20:29,705 --> 00:20:32,370 understand how that would impact you. 393 00:20:32,370 --> 00:20:36,985 And then from there, Whether you decide to insure, self-insure, whatever 394 00:20:36,985 --> 00:20:39,145 it is there it's up to you agreed? 395 00:20:39,150 --> 00:20:39,595 Ed Slott: That's right. 396 00:20:39,865 --> 00:20:40,105 That's all. 397 00:20:40,405 --> 00:20:43,195 Jeff Levine: So we actually agree on something in this debate. 398 00:20:43,225 --> 00:20:44,125 That's fantastic. 399 00:20:44,485 --> 00:20:48,895 Uh, and, and with that, ed, this is obviously a huge topic because most 400 00:20:48,895 --> 00:20:52,255 people are likely to need long-term care at some point in their life, 401 00:20:52,255 --> 00:20:55,525 especially if they're fortunate enough to live those long lifetimes. 402 00:20:55,525 --> 00:20:55,705 Right. 403 00:20:55,705 --> 00:20:58,645 If they, if they don't pass away early, which certainly we would hope. 404 00:20:59,035 --> 00:21:02,575 Um, alright, well, ed, you know, there are two sides to every coin. 405 00:21:03,150 --> 00:21:08,160 Your life and retirement decisions are too important to leave up to a coin flip. 406 00:21:08,160 --> 00:21:12,240 And that's why one thing that you and I always agree on is making sure 407 00:21:12,240 --> 00:21:16,050 that you're talking through any big decision like this with a knowledgeable 408 00:21:16,055 --> 00:21:19,650 financial advisor or tax professional, so that you could weigh the pros and 409 00:21:19,650 --> 00:21:23,340 the cons of different options against your specific goals and objectives. 410 00:21:23,700 --> 00:21:26,460 If you'd like to continue the discussion with Ed and I we'd love to hear from 411 00:21:26,460 --> 00:21:31,225 you, you can reach out to Ed on Twitter using the handle @TheSlottReport, that's 412 00:21:31,225 --> 00:21:35,185 at the Slott report with two T's and slot, or you can reach out to me using 413 00:21:35,185 --> 00:21:38,805 the handle @CPAPlanner . Uh, if you think we missed something or you think a 414 00:21:38,805 --> 00:21:42,915 particular side of the issue is, is more important, or you just like to suggest a 415 00:21:42,915 --> 00:21:47,655 topic for a future debate, let us know, let us hear from you and until then, 416 00:21:47,895 --> 00:21:50,595 uh, ed always fun, always educational. 417 00:21:50,595 --> 00:21:53,415 I know every time we chat, I learn something new in myself. 418 00:21:53,415 --> 00:21:56,705 So, uh, thanks and look forward to our next debate! 419 00:21:57,165 --> 00:22:00,880 Ed Slott: OK, Jeff, I'll see you on the next great retirement debate. 420 00:22:01,360 --> 00:22:04,600 OUTRO: Jeffrey levine is chief planning officer for Buckingham wealth partners. 421 00:22:04,660 --> 00:22:07,840 This podcast is for informational and educational purposes only, and should 422 00:22:07,845 --> 00:22:11,110 not be construed as specific investment accounting, legal or tax advice. 423 00:22:11,170 --> 00:22:14,050 Certain information mentioned may be based on third party information, 424 00:22:14,055 --> 00:22:16,900 which may become outdated or otherwise superseded without notice. 425 00:22:16,960 --> 00:22:19,270 Third party information is deemed to be reliable, but it's. 426 00:22:20,020 --> 00:22:21,640 And completeness cannot be guaranteed. 427 00:22:21,760 --> 00:22:24,760 The topic discussed in corresponding arguments are those of the speakers 428 00:22:24,940 --> 00:22:27,730 and may not accurately reflect those of Buckingham wealth partners.