During this period of prolonged sheltering in place, I’ve been spending more time than I would care to admit looking at various social media postings. Recently I took an online assessment that was designed to tell me about my style of working: I thrive when I’m challenged; I am a diligent planner; I enjoy being part of a team; and I’m goal oriented. Because I’m athletic and love being outdoors, I started searching for sports that shared some of these same characteristics. Not surprisingly, mountain climbing came up over and over again. “Googling” mountain climbing, I came across the following statement: For most climbers, the pleasures of mountaineering lie not only in the “conquest” of a peak but also in the physical and spiritual satisfactions brought about through intense personal effort, ever-increasing proficiency, and contact with natural grandeur. Sounds fantastic! I’m all in! Except there’s only one problem. I don’t like heights. Nevertheless, my reading about mountain climbing gave me an entirely new appreciation for the sport and in what might be considered a strange parallel, how similar mountain climbing is to long term care planning.
When you ask most people about mountain climbing and the preparation that’s needed, they will think about the training and equipment that’s needed to climb the mountain and reach its peak. Ropes, crampons, harnesses, helmets, shoes, carabiners, and packs are just a few of the specialized pieces of equipment needed. You will also need a map and maybe a guide (probably not a Sherpa, but it sounds cool). You will need to factor in weather conditions, altitude, and other potential hazards. Depending on the climb, you will also need to be in decent physical shape. With all these tools in place, you can now climb the mountain. After great effort, you reach the apex, take a few moments to celebrate and recognize what you’ve accomplished, maybe catch your breath, and then…you have to get down. As the saying goes, “What goes up, must come down.”
Mountain climbing isn’t just about going up. It’s about going up, reaching the top, and then safely getting back down where you can once again celebrate and appreciate the complete and total journey. On the way down, you need stamina, endurance, and the same focus you used to get to the top. You need to avoid exhaustion, falling, losing your way, or getting distracted. The same can be said for preparing for retirement.
Like mountain climbing, retirement preparation is a complete journey. Too often we are focused on the uphill climb or the accumulation phase. In the initial stage of preparation, we begin saving. Just like the tools used by a mountain climber, we use asset accumulation vehicles such as 401ks, IRAs, annuities, and mutual funds. Like a map or guide, we work with investment strategies and professionals. We also factor in potential hazards, including changes in the market, interest rates and risk tolerances. If all goes as planned, we reach the peak of our financial goal and wave the flag of retirement. Once that’s done, we need to get back down the other side of the mountain safely. In our retirement years, that’s called distribution. Yep, it’s time to use what we’ve accumulated, or a portion of those assets, to live out our retirement—hopefully on our terms.
One of the factors that can impact retirement, or the downhill descent, is an extended health event or long term care. In fact, for those over the age of 65, there’s an almost 70 percent chance that they will experience an extended period of long term care. While myriad options are available today, asset-based long term care (LTC) is dramatically outpacing all other solutions.
The concept behind asset-based LTC is to reposition or leverage an existing asset that is no longer serving its original purpose and to fund whole life insurance or annuity contracts to provide clients with options on how to fund their LTC protection, often with tax advantages. As an example, an “old” life insurance policy that has built up cash value could be repositioned to provide coverage for a qualifying LTC care event, as well as provide a death benefit if care isn’t needed. Additionally, by adding a return of premium option, the policyholder can always have access to their funds. This can create a LTC protection that is accessible, flexible, and dependable. It also eliminates the concern and question of, “What if I never need LTC?” In other words, what we saved during our accumulation phase can now be repositioned for greater leverage in our distribution phase. The tools we used to get up the mountain can now be used in a different and more efficient way to protect us as we climb down the mountain.
In addition to accessibility, flexibility, and dependability, LTC care plans should also, and perhaps most importantly, provide certainty. When it comes time to file a claim, you want to know with certainty that the plan in place will cover the entire LTC event. While many producers design an LTC plan that covers the “average length of stay,” that addresses only the average care need and excludes the possibility of a lifelong diagnosis like Alzheimer’s or Parkinson’s. Lifetime protection is one of the only ways to ensure that every client has exactly the amount of protection that they need, whether it’s for two months, two years, 20 years or longer.
One thing is for sure, without proper planning and without some type of protection, many individuals will pay for care out of their pocket. In mountain climbing, you would never plan to get to the top without equally planning how you will get down the other side. Similarly, you should plan how the assets you’ve accumulated could be impacted during distribution by an LTC care event. By reallocating a small amount of funds today, pennies can protect assets from a future LTC event. With a plan that offers lifetime coverage, you can also create certainty.
Whether you are climbing a mountain or preparing for a potential LTC event, we would all agree that certainty of a safe trip down the mountain in retirement is well worth the planning.
All factors should be weighed before replacing an existing life insurance or annuity.