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The Hidden Risks in Retirement: Long-Term Care Planning · Money In Motion with Klaas Financial

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Speaker 1: Love to have you join us this morning. If you
0:02
Speaker 1: have a question for our retirement planning professionals from Class Financial,
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Speaker 1: we have a line open just for you. Six oh
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Speaker 1: eight three two one thirteen ten. That's six oh eight
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0:15
Speaker 1: about retirement planning retirement related CJ. Closs and Eric Schwartz
0:19
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0:21
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0:23
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0:44
Speaker 1: That's Coss k l aa S Financial dot com. Of course,
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0:52
Speaker 1: at clossfinancial dot com, or you can give them a
0:54
Speaker 1: call right at the office here in town six oh
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Speaker 1: eight four four two five six three seven. No charge
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Speaker 1: for that initial know your appointment tech costs financial. It
1:01
Speaker 1: will be complimentary to you again. Their number six O
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Speaker 1: eight four four, two, five, six three seven joints. This morning,
1:07
Speaker 1: our CJ Closs and Eric Schwartz from Class Financial. CJ.
1:11
Speaker 1: How you doing this week?
1:13
Speaker 2: I'm doing great, Sean, it's a it's a beautiful day.
1:15
Speaker 1: It is a fantastic day. It looks like a great
1:17
Speaker 1: day and great week ahead. And uh, Eric back from vacation.
1:21
Speaker 1: How you been too bad?
1:23
Speaker 3: Sean? Refreshed and ready to go.
1:26
Speaker 1: Did you do something fun? Did you get out of town?
1:28
Speaker 1: Did you.
1:30
Speaker 4: Well?
1:30
Speaker 3: Unfortunately I was moving. Oh but you know, took took
1:34
Speaker 3: a break at the end of it.
1:35
Speaker 1: Yes, yeah, well that is good, and you know it's
1:38
Speaker 1: all it's I love. I love the excitement around moving.
1:41
Speaker 1: There's also something at least the first few few days
1:45
Speaker 1: in the new place, it's like you kind of got
1:47
Speaker 1: to get settled in. So it's great, great to have
1:50
Speaker 1: you back along with us, and we've got a really
1:52
Speaker 1: important uh this this conversation this week is I love
1:56
Speaker 1: kind of getting that preview and going over the notes
1:58
Speaker 1: because I'm off and surprised by all the great information
2:02
Speaker 1: I learned something every week and this week, especially as
2:04
Speaker 1: we're going to be talking about the hidden risks and
2:06
Speaker 1: retirement long term care planning. We can get the details
2:09
Speaker 1: from CJ and Eric on that in just a moment.
2:12
Speaker 1: A couple of things again to keep in mind the
2:13
Speaker 1: website colssfinancial dot com. That's teleph number six so eight
2:16
Speaker 1: four four two five six three seven. That's Class Financial's
2:19
Speaker 1: office right here in Madison. Also want to hold on
2:22
Speaker 1: to that telephon number. A little bit later on the program,
2:24
Speaker 1: we'll have you a chance for you to win a
2:26
Speaker 1: fantastic prize from our friends at Class Financial. They have
2:29
Speaker 1: provided a twenty five dollars gift card to Best Buy
2:32
Speaker 1: with the class Quiz question week. Can tell you a
2:33
Speaker 1: little bit later on the program in detail how you
2:36
Speaker 1: can win that gift card. Little tip though, pay close
2:39
Speaker 1: attention to the program because just about every show, the
2:41
Speaker 1: question and answer come up during the show, and before
2:44
Speaker 1: we start talking about long term care costs and how
2:47
Speaker 1: they can affect your financial plan, Eric, let's actually look
2:50
Speaker 1: back at last week's show and get the question and
2:53
Speaker 1: the answer to the class quiz question the week as well.
2:56
Speaker 3: Absolutely, Sean, So last week our topic was on the
2:59
Speaker 3: return Hen's illusion in the impact of compounding on returns
3:04
Speaker 3: over time. So our question was a true or false question,
3:08
Speaker 3: and it was compound. Compounding is a neutral phenomenon that
3:12
Speaker 3: can impact both your portfolio positively and negatively, and the
3:17
Speaker 3: answer to that one was true.
3:19
Speaker 1: It was a great show as well, and you can
3:21
Speaker 1: listen back at class financial dot com. That's Claus Hey
3:24
Speaker 1: l Aasfinancial dot com. And if you have questions, love
3:27
Speaker 1: do you have you join us this morning number to
3:28
Speaker 1: get on the air six eight three two one thirteen ten.
3:31
Speaker 1: That's six oh eight three two one thirteen ten. And
3:33
Speaker 1: today's show is about the hidden risks and retirement planning
3:36
Speaker 1: as it relates to long term care and CEJ, why
3:39
Speaker 1: do you consider long term care one of the biggest
3:41
Speaker 1: hidden risks? Yeah, good question.
3:44
Speaker 4: I guess I should begin with saying that, you know, listen,
3:47
Speaker 4: we don't we're we're financial planners.
3:49
Speaker 2: Retirement planners.
3:50
Speaker 4: We give our clients, but we don't sell product to them.
3:54
Speaker 4: So to be super clear, as we talk about this
3:56
Speaker 4: topic today, everybody can take a deep breath because we're
3:59
Speaker 4: not here to sell anybody anything as it relates to
4:02
Speaker 4: long term care.
4:03
Speaker 2: We're simply here to talk about.
4:05
Speaker 4: It being this hidden risk, and it's hidden because people
4:09
Speaker 4: don't want to think about it, and as a result,
4:11
Speaker 4: they don't plan for it. But the reality is is
4:14
Speaker 4: people live longer, the likelihood of needing some form of
4:17
Speaker 4: care increases, and it's not just nursing homes. It includes
4:21
Speaker 4: things like in home care, assisted living, and memory care.
4:25
Speaker 4: The biggest issue is this long term care costs are
4:28
Speaker 4: not typically covered by Medicare, and they can be substantial.
4:32
Speaker 4: The risk is that it can quietly erode a lifetime
4:35
Speaker 4: of your savings. We've seen situations where clients spend clients
4:39
Speaker 4: they spend thousands of dollars per month, sometimes over one
4:42
Speaker 4: hundred grand per year depending on the.
4:44
Speaker 2: Level of care, and without a plan.
4:46
Speaker 4: That expense often comes directly out of investment portfolios, which
4:50
Speaker 4: impacts retirement income, legacy goals, and even a surviving spouse's
4:55
Speaker 4: financial security. So from our perspective, this isn't just a
4:59
Speaker 4: conversation about health, it's a financial planning conversation. We're focused
5:05
Speaker 4: on helping clients protect their assets, their independence, and their
5:10
Speaker 4: family and listen, for me, this is personal in nature.
5:15
Speaker 4: Two examples of this is right inside of my family.
5:17
Speaker 4: My grandmother on my mother's side of the family ended
5:20
Speaker 4: up being in a facility for about seven and a
5:23
Speaker 4: half years, and it was a full skilled nursing care
5:26
Speaker 4: facility and it cost a lot. Thankfully, she had long
5:30
Speaker 4: term care that covered the majority.
5:32
Speaker 2: Of that, but not all of it.
5:34
Speaker 4: And then inside of my own family, even with I'll
5:37
Speaker 4: be less descriptive, but closer to me. Inside of my
5:41
Speaker 4: own family, there's also been more recent cognitive decline which
5:45
Speaker 4: has the fear of needing again significant long term care.
5:49
Speaker 2: So for us, this is this is not just a concept.
5:51
Speaker 4: We live it up with our clients every single day,
5:53
Speaker 4: and for some of us, you know, namely me, it
5:56
Speaker 4: lives out right inside of my own family. So this
5:59
Speaker 4: is definitely a hidden risk, that kind of road to
6:03
Speaker 4: your portfolio if you're at not at least thinking about
6:06
Speaker 4: it and planning for it.
6:07
Speaker 1: Talking about some of these issues and concerns that you
6:09
Speaker 1: may not have thought about when it comes to long
6:11
Speaker 1: term planning. It's a great day to start that conversation.
6:14
Speaker 1: Of course, thinking about talking with the folks at Class Financial.
6:17
Speaker 1: They'd love to talk with you. They make it super
6:19
Speaker 1: easy to do. All I got to just pick up
6:20
Speaker 1: phone game of call six So eight four four two
6:22
Speaker 1: five six three seven no charge for that initial gets
6:25
Speaker 1: to know you appoyment Deck Loss Financial, it will be
6:27
Speaker 1: complementary to you again their number six oh eight four
6:29
Speaker 1: four to two five, six, three seven online Cossfinancial dot com.
6:33
Speaker 1: That's Coss Hey, LaaS Financial dot Com and Eric CJ
6:37
Speaker 1: did a great job. They're talking about some of those
6:40
Speaker 1: some of those issues and concerns and raising those things
6:43
Speaker 1: that a lot of folks don't always think about. Let's
6:45
Speaker 1: talk about then, some of the solutions when it comes
6:47
Speaker 1: to long term care. What options do people actually have?
6:53
Speaker 3: Yeah, that's a great question, Sean and I think broadly speaking,
6:56
Speaker 3: we look at it as kind of three primary approaches
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Speaker 3: to to dealing with long term care expenses. The first
7:03
Speaker 3: one is probably the simplest. It's it's self funding or
7:08
Speaker 3: self insuring against the cost of long term care.
7:11
Speaker 1: So this is the.
7:11
Speaker 3: Idea that an individual chooses to just say, if long
7:15
Speaker 3: term care expenses come, I will pay for them out
7:18
Speaker 3: of pocket. Now, this generally requires having significant assets, right,
7:24
Speaker 3: It's not it's not often that someone who doesn't have
7:28
Speaker 3: significant assets can actually do this. But it's not the
7:32
Speaker 3: idea that you're just saying, well, I have a fair
7:35
Speaker 3: amount of net worth, so you know, what I'm just
7:39
Speaker 3: gonna I'm not gonna worry about it. I'll just if
7:41
Speaker 3: it comes up, I'll pay for it. We're still doing
7:44
Speaker 3: planning around this, right, we're stress testing the financial plan
7:47
Speaker 3: to see, you know, are those significant assets enough to
7:50
Speaker 3: actually cover the cost of long term care because in
7:54
Speaker 3: this situation, one of your biggest risks is that your
7:57
Speaker 3: costs are unconstrained. Right, you don't have an insurance company
8:02
Speaker 3: to step in and help cover some of the costs.
8:04
Speaker 3: You don't know how long you'll be in the long
8:06
Speaker 3: term care facility. So while this can seem like the
8:09
Speaker 3: simplest approach because there's no insurance company involved, there is
8:14
Speaker 3: still a lot of planning around it, and it is
8:17
Speaker 3: an intentional process. It's not just kind of, you know,
8:21
Speaker 3: the avoiding the question and just moving forward blindly. So
8:25
Speaker 3: that is self funding or self insuring against the cost
8:29
Speaker 3: of long term care. Now the second prime or the
8:33
Speaker 3: second of the primary approaches here that I think this
8:36
Speaker 3: is probably what most people think of when they think
8:39
Speaker 3: of traditional long term care insurance. But this is the
8:44
Speaker 3: idea that you are paying premiums for coverage, specifically for
8:48
Speaker 3: long term care expenses. So this can help basically offset
8:52
Speaker 3: really large expenses. In many cases, it's not going to
8:55
Speaker 3: cover the full cost of your long term care, but
8:58
Speaker 3: the idea is that you're covering a chunk of it
9:01
Speaker 3: so that it doesn't deteriorate your assets to a point
9:05
Speaker 3: where where you're running out of money. Now, the challenges
9:09
Speaker 3: here is that the premiums on these long term care
9:13
Speaker 3: policies are a rising pretty quickly, and over time we
9:17
Speaker 3: do see a pretty significant increase to those.
9:21
Speaker 1: Now.
9:21
Speaker 3: Long term care insurance, interestingly is is i would say,
9:25
Speaker 3: a newer type of insurance compared to like life insurance
9:28
Speaker 3: for example. And because of that, a lot of the
9:32
Speaker 3: companies that originally got into the space, they didn't really
9:35
Speaker 3: know how to price it. They didn't really expect that
9:37
Speaker 3: people would live as long as they do, and that
9:39
Speaker 3: you know, medical technology would come so far that there
9:43
Speaker 3: would be ways to extend people's lives. So over time
9:48
Speaker 3: that their their costs on these policies to the insurance
9:51
Speaker 3: companies have just been much higher than they expected, so
9:54
Speaker 3: they raise premiums to offset that. So that is probably
9:58
Speaker 3: one of the biggest risks this traditional long term care
10:01
Speaker 3: insurance approach. Now, the other part and people really don't
10:05
Speaker 3: like this part is that it's easier to lose it. Right,
10:09
Speaker 3: So if you never need to go into a long
10:11
Speaker 3: term care facility, you've paid premiums for all those years
10:15
Speaker 3: and you don't really get anything back out of it.
10:19
Speaker 3: So people are fearful of putting aside, you know, large
10:23
Speaker 3: premiums for something they may never use, and frankly, they
10:26
Speaker 3: hope they never have to use it.
10:27
Speaker 1: Right.
10:30
Speaker 3: So that is that's traditional long term care insurance. The
10:33
Speaker 3: third approach, which is a newer approach, and I think
10:37
Speaker 3: it's I think it's kind of creating a permission structure
10:41
Speaker 3: for folks to look deeper into long term care insurance.
10:44
Speaker 3: But this third one is like a hybrid or asset
10:48
Speaker 3: based long term care insurance policy. So what this does
10:52
Speaker 3: is it combines life insurance or an annuity with long
10:56
Speaker 3: term care benefits. Okay, so the idea here is you
11:00
Speaker 3: are paying in, you pay in premiums. In many cases
11:04
Speaker 3: these are these you're paying fewer and larger premiums, and
11:09
Speaker 3: then if care is needed, you have benefits to help
11:12
Speaker 3: pay for it. But if you don't need care, there's
11:15
Speaker 3: typically a retirement or i'm sorry, there's typically a life
11:18
Speaker 3: insurance death benefit or some remaining value that can go
11:22
Speaker 3: to that can go to your beneficiaries. So this is
11:27
Speaker 3: often much more appealing for clients who are hesitant about
11:30
Speaker 3: those traditional long term care policies. And you know, for example,
11:35
Speaker 3: just and this is a little bit confusing. So let's
11:40
Speaker 3: just say that you pay in premiums over time to
11:42
Speaker 3: this policy and then you never need long term care
11:45
Speaker 3: insurance and when you pass away, the insurance company may
11:50
Speaker 3: may just return essentially return the premiums to your beneficiaries
11:54
Speaker 3: in the in the form of a death benefit. So
11:57
Speaker 3: that would be an example of like a hybrid or
11:59
Speaker 3: as based policy. Now, this is not a one size
12:03
Speaker 3: fits all discussion at all. The right approach really depends
12:07
Speaker 3: on your financial situation, your goals, your risk tolerance. So
12:11
Speaker 3: definitely want to work with a professional in this space.
12:14
Speaker 3: But that's kind of the high level overview of how
12:17
Speaker 3: we approach this with clients.
12:18
Speaker 1: Really interesting stuff. As we talked this morning with Eric
12:21
Speaker 1: Schwartz and CJ. Coss. They are our retirement planning professionals
12:24
Speaker 1: from Class Financial. The website Coss financial dot com that's
12:28
Speaker 1: Coss k l aas financial dot com. Great website to
12:31
Speaker 1: learn all about Class Financially. They can also schedule a
12:33
Speaker 1: complementary conversation right from the website or pick a phone
12:36
Speaker 1: give a call six soh eight four four two five
12:39
Speaker 1: six three seven. No charge for that initial get to
12:42
Speaker 1: know you appoyment at COSS Financial. It will be complementary
12:45
Speaker 1: to you again their number six oh eight four four
12:47
Speaker 1: two five six three seven. More of money in Motion
12:51
Speaker 1: with Coss Financial continues next right here on thirteen ten
12:54
Speaker 1: WIVA talking with our retirement planning professionals from Class Finance.
13:00
Speaker 1: You'll see j Closs and Eric Schwartz learn more online
13:03
Speaker 1: thewebsite class financial dot com. That's Closs k l a
13:07
Speaker 1: a s Financial dot com talking with CJ and Eric
13:10
Speaker 1: this week about the hidden risks and retirement The hidden
13:13
Speaker 1: risk there when it comes to law in the importance
13:15
Speaker 1: of long term care planning and CJ timing matters on
13:19
Speaker 1: obviously on all of this stuff, but you definitely want
13:23
Speaker 1: to start thinking about this. When should folks kind of
13:25
Speaker 1: really start looking to put pen to paper and really
13:27
Speaker 1: start trying to put that plan together.
13:30
Speaker 2: Yeah, good questions.
13:31
Speaker 4: So again to reiterate what Eric just got done saying,
13:34
Speaker 4: is there's three primary.
13:35
Speaker 2: Approaches that we see people take as it relates to.
13:37
Speaker 4: Planning for long term care, it's self funding traditional long
13:40
Speaker 4: term care, and then these hybrid or asset based policies
13:43
Speaker 4: that Eric was referencing, but exactly you know what you're asking, Sean.
13:48
Speaker 4: The next question becomes, well, when when do I move
13:51
Speaker 4: towards these solutions and when do I start this planning?
13:54
Speaker 4: And we would say that can depend on a number
13:56
Speaker 4: of individual factors, but in general, a good planning is
14:00
Speaker 4: often between your mid.
14:01
Speaker 2: Fifties to late sixties.
14:04
Speaker 4: Many people wait until their sixties or even early seventies,
14:07
Speaker 4: but by then costs can be higher, health issues could
14:10
Speaker 4: limit your ensurability, and options can be more constrained. But
14:14
Speaker 4: I want to reference one important nuance here that I
14:17
Speaker 4: think Eric can attest to. This is a little the
14:20
Speaker 4: timing is a little bit tricky because many clients don't
14:22
Speaker 4: evaluate long term care until they're closer to retirement, and
14:26
Speaker 4: at that point they have a clearer picture of things
14:29
Speaker 4: like their social Security income, their pensions incomes, their asset base,
14:33
Speaker 4: their overall financial plan, and having that kind of context
14:37
Speaker 4: being closer to retirement can help to make better decisions.
14:41
Speaker 4: So what we're trying to get at here is ideally
14:44
Speaker 4: between your mid fifties to late sixties, but with the
14:48
Speaker 4: caveat of it's often hard to purchase these policies before
14:54
Speaker 4: you have a clearer picture of what your retirement assets,
14:58
Speaker 4: retirement funding so versus, and basically your retirement and income
15:03
Speaker 4: will be. This would be the equivalent of saying, like,
15:05
Speaker 4: you know, hey, how easy is it to make an
15:08
Speaker 4: investment in something that's going to cost you five to
15:11
Speaker 4: eight thousand dollars per year throughout the remainder of your
15:16
Speaker 4: life before you even know how much income you'll have
15:18
Speaker 4: in retirement.
15:19
Speaker 2: You see the point, right, It's.
15:21
Speaker 4: Like, ooh, that would be a really difficult decision to make.
15:24
Speaker 4: Now if you're closer to retirement and you say, hey,
15:27
Speaker 4: this is going to cost me five thousand, eight thousand,
15:29
Speaker 4: whatever the number is per year, and I know I
15:32
Speaker 4: have that margin in my retirement budget, Well there you go. Good,
15:37
Speaker 4: Now we can make an informed decision. But so I'm
15:40
Speaker 4: kind of not doing a great job here of answering
15:42
Speaker 4: the question. But what we'd say is mid fifties to
15:45
Speaker 4: late sixties, with the caveat of being closer to retirement.
15:49
Speaker 1: It's interesting too, I know, for a lot of folks
15:50
Speaker 1: that are listening this morning, there's probably neurons fire or
15:54
Speaker 1: bring eye and thought about that before, and that's one
15:56
Speaker 1: of the things as we talk with c Jan Eric
15:58
Speaker 1: each week here in Money in Motion with COSS Financial,
16:00
Speaker 1: a lot of the great information you get. If you
16:02
Speaker 1: miss any part of the show, Doviga can always listen
16:05
Speaker 1: back online Cossfinancial dot com. You can subscribe to the
16:08
Speaker 1: podcast as well right at Colss financial dot com. That's
16:11
Speaker 1: Coss k l a As Financial dot com ar telphone
16:14
Speaker 1: number six so eight four four two five six three seven.
16:17
Speaker 1: No charge for the initial gets to know you appointment
16:19
Speaker 1: at COSS Financial. It will be complementary to you. So, Eric,
16:23
Speaker 1: what are some of the key factors then, as we
16:25
Speaker 1: talk about these these items, what are some of those
16:27
Speaker 1: key factors you evaluate with clients?
16:31
Speaker 3: Yeah, I think, I think when we're approaching these types
16:35
Speaker 3: of discussions with clients, we're generally looking at three main areas.
16:39
Speaker 3: The first is their assets and their income. So did
16:43
Speaker 3: they have the resources to self fund long term care
16:46
Speaker 3: expenses without compromising their their plan? And by compromising their plan,
16:51
Speaker 3: we mean, you know, without spending down assets that maybe
16:56
Speaker 3: they want to leave for children or or not leaving
17:00
Speaker 3: a surviving spouse with enough resources to live through retirement comfortably.
17:05
Speaker 3: So that's kind of the first and simplest thing we're
17:08
Speaker 3: looking at is what are their retirement resources? What income
17:11
Speaker 3: sources do they have?
17:12
Speaker 1: Right?
17:13
Speaker 3: People forget about the fact that they have you know,
17:16
Speaker 3: social Security coming in every month and that can pay
17:18
Speaker 3: for a part of their their long term care expenses.
17:21
Speaker 3: Maybe they have a pension, right, So all of these
17:23
Speaker 3: things are going to figure into whether or not there
17:27
Speaker 3: is a financial need for for insurance. Health and family history,
17:33
Speaker 3: so this this affects both the need and the eligibility
17:37
Speaker 3: for for long term care coverage. So if you have
17:41
Speaker 3: a history of longevity in your family, there is a
17:45
Speaker 3: potential that you know, you you may need to eventually
17:48
Speaker 3: move into some level of care facility, and so that
17:51
Speaker 3: would be a signal that we would want to look
17:55
Speaker 3: into this a little bit. Now, if you have if
17:57
Speaker 3: you have a personal or or family history of certain
18:01
Speaker 3: medical conditions, it can be very difficult to qualify for
18:05
Speaker 3: long term care insurance. So that's definitely going to figure
18:09
Speaker 3: into the decision making process. And finally, the third is
18:13
Speaker 3: personal preference. So you know, some some clients feel really
18:17
Speaker 3: strongly about protecting assets for their errors, or you know,
18:23
Speaker 3: they're especially concerned about a spouse that maybe isn't in
18:27
Speaker 3: a long term care facility having the resources to live comfortably.
18:32
Speaker 3: Some clients feel really strongly about not being a burden
18:35
Speaker 3: to their family, right, and I think it's safe to
18:37
Speaker 3: say nobody wants to be a burden to their family,
18:40
Speaker 3: but some people feel extra extra strongly about this and
18:45
Speaker 3: they want to make sure that they are not inconveniencing
18:49
Speaker 3: anyone at all, and insurance and being able to have
18:54
Speaker 3: that higher level of care as a way to do that.
18:57
Speaker 3: And the third and third part of the personal preferences
19:01
Speaker 3: here is maintaining flexibility and control over different care options.
19:06
Speaker 3: So people want to be able to seek care where
19:11
Speaker 3: and when they want to write So they don't want
19:14
Speaker 3: to be in a position where they can't afford care
19:18
Speaker 3: on their own and they have to depend on a
19:20
Speaker 3: program like Medicaid to provide their coverage, at which point
19:25
Speaker 3: they don't get to decide which facility they want to
19:28
Speaker 3: they want to live in, right, they have to go
19:31
Speaker 3: wherever they can get Medicaid coverage and where there is
19:34
Speaker 3: where there is space. So as you can tell here
19:37
Speaker 3: the decisions sur are hunting long term care. They're not
19:39
Speaker 3: just financial, but they're also very personal ones. And it
19:43
Speaker 3: goes far beyond just that first part. I talked about
19:46
Speaker 3: the assets and the income.
19:48
Speaker 1: Really important planning needs to take place on this stuff.
19:51
Speaker 1: And CJ, let's talk a little more practically on this
19:54
Speaker 1: as well. I know as something you see quite often,
19:56
Speaker 1: as you know, folks coming into the office with a
19:59
Speaker 1: long term quick quote already in hand. What is usually
20:03
Speaker 1: happening in those type of situations.
20:06
Speaker 4: So I would encourage our listeners pay attention to this section.
20:10
Speaker 4: We're going to now get into the weeds a little
20:11
Speaker 4: bit of some problems we see as people move towards this,
20:15
Speaker 4: and so again encouragement would just be pay attention. I
20:18
Speaker 4: think you'll learn something. So often what happens is is
20:22
Speaker 4: that clients will come in and say to us something
20:26
Speaker 4: like the following, Hey, we were quoted a long term
20:28
Speaker 4: care policy with one hundred thousand dollars a year per
20:31
Speaker 4: person benefit.
20:33
Speaker 2: What do you think?
20:34
Speaker 4: And our first reaction is like kind of to pause
20:37
Speaker 4: and take a step back. The real question for us
20:40
Speaker 4: isn't is this a good policy or is this a
20:42
Speaker 4: good quote? The question is do you actually need that
20:46
Speaker 4: much coverage in the first place. Now, as Eric starts
20:51
Speaker 4: his section, he's going to talk about I mean, we
20:53
Speaker 4: would typically hope that a client would come to us
20:56
Speaker 4: first right to say, hey, before I go get a quote,
20:59
Speaker 4: how much you think I need? At which point we
21:01
Speaker 4: do the plan and then we kind of say, hey,
21:03
Speaker 4: go talk to an agent, and we might put them
21:05
Speaker 4: in touch with somebody or they have their own agent,
21:06
Speaker 4: and we say this is what you're looking for, and
21:08
Speaker 4: that way they're not wasting their time. But often we're
21:11
Speaker 4: that doesn't happen. People just come in and say, I've
21:13
Speaker 4: got the quote, what do you think? So for us,
21:16
Speaker 4: we have to take a step back and think what
21:19
Speaker 4: do you actually need? And here's why that matters, because
21:22
Speaker 4: you might go, what do you mean Why doesn't the
21:23
Speaker 4: insurance agent figure that out? Because they're not your financial planner.
21:27
Speaker 4: They have never said that they were, nor do they
21:29
Speaker 4: act like they are. They don't do a financial plan
21:32
Speaker 4: for you. They don't often even know how much your
21:34
Speaker 4: social security or pension is. And that is, by the way,
21:36
Speaker 4: this is not a knock on long term care insurance
21:38
Speaker 4: agents by any stretch of the imagination. They just don't
21:41
Speaker 4: typically have access to that amount of information, so you
21:45
Speaker 4: should typically start with your financial advisor. Even your insurance
21:48
Speaker 4: agents will prefer that because they're not wasting time running
21:51
Speaker 4: around getting quotes for you that you don't.
21:53
Speaker 1: Need interesting stuff. This morning, as we talk with CJ.
21:56
Speaker 1: Class and Eric Schwartz, our retirement planning professionals from Class
21:59
Speaker 1: Financial Online, Class Financial dot Com. That's coss klaas Financial
22:03
Speaker 1: dot com and Eric, can you walk us through through
22:06
Speaker 1: a kind of an example of of this.
22:10
Speaker 3: Yes, Let's let's take CJ's example that he was talking
22:14
Speaker 3: about there a little bit further. Let's say we have
22:16
Speaker 3: a retired couple. They're both in their early sixties, and
22:19
Speaker 3: they've determined that in present value terms, they would like
22:23
Speaker 3: to plan for up to one hundred thousand dollars per
22:25
Speaker 3: year per person in potential long term care costs due
22:29
Speaker 3: to the assumed skilled nursing costs and memory care facilities.
22:34
Speaker 3: So that means that the total combined cost of care,
22:37
Speaker 3: if they're both in a facility at the same time,
22:40
Speaker 3: could reach two hundred thousand dollars per year in today's dollars. Okay,
22:44
Speaker 3: so beyond that, they already have about one hundred thousand
22:49
Speaker 3: dollars per year combined coming in from social security and
22:52
Speaker 3: a and a pension.
22:54
Speaker 1: Right, So.
22:56
Speaker 3: At this point, essentially they need about a hundred thousand
23:00
Speaker 3: dollars per year in additional resources to cover their policies.
23:06
Speaker 3: All right, I'm sorry to cover their cost of care.
23:10
Speaker 3: But at the same time, they're considering policies that would
23:12
Speaker 3: pay one hundred thousand dollars per year per person in
23:15
Speaker 3: long term care benefits. So at at first glance, it
23:18
Speaker 3: sounds reasonable given the costs associated with skilled nursing care
23:22
Speaker 3: or memory care facilities. But when we dig deeper into this,
23:26
Speaker 3: we ask if care costs one hundred thousand dollars per
23:29
Speaker 3: year per person and you already have one hundred thousand
23:31
Speaker 3: dollars of guaranteed income coming in from social security and
23:34
Speaker 3: a pension, then you really only have to cover roughly
23:38
Speaker 3: a fifty thousand dollars per year gap per person.
23:43
Speaker 1: Right.
23:43
Speaker 3: It's not the full hundred thousand dollars, and in many
23:46
Speaker 3: cases that gap could be even smaller once you factor
23:49
Speaker 3: in the income that is generated off your investment portfolio
23:52
Speaker 3: on an annual basis. So the key point here is
23:56
Speaker 3: while the insurance agent may have done an excellent job
23:58
Speaker 3: providing a quote that is the entire expected present value
24:02
Speaker 3: cost of both individuals in a in a skilled nursing facility.
24:06
Speaker 3: The policy in the quote feels to account for the
24:08
Speaker 3: fact that a significant portion of that cost is already
24:11
Speaker 3: covered by existing income that's coming.
24:14
Speaker 1: In interesting scenario there, and we're going to get a
24:17
Speaker 1: little bit more into that little more insight from our
24:20
Speaker 1: retirement planning professional CJ. Closs and Eric Swartz. Don't forget
24:23
Speaker 1: about the website cossfinancial dot com. That's Coss k l
24:25
Speaker 1: Aasfinancial dot com. Their telephon number six so eight four
24:29
Speaker 1: four to two five six three seven. No charge for
24:32
Speaker 1: the initial gets to know you appoinment dech loss financial.
24:34
Speaker 1: It will be complementary to you again their number six
24:37
Speaker 1: oh eight four four two five six three seven. More
24:40
Speaker 1: of money in motion with COSS Financials next right here
24:42
Speaker 1: in thirteen ten WIBA talking with our retirement planning professionals
24:46
Speaker 1: from Class Financial CJ. Closs and Eric Schwartz. Don't forget
24:49
Speaker 1: about their telephone number six so eight four four two
24:52
Speaker 1: five six three seven. No charge for the initial get
24:55
Speaker 1: to know your appointment dech costs Financial. It will be
24:57
Speaker 1: complementary to you and CJ. Just before the break, Eric
25:00
Speaker 1: did a great job laying out a great example of
25:04
Speaker 1: some of the considerations when it comes to planning for this.
25:08
Speaker 1: Then let's let's kind of talk then for folks that
25:10
Speaker 1: are listening today, what are the next steps they should
25:13
Speaker 1: be taking if they haven't addressed this stuff.
25:16
Speaker 4: Yeah, so again, like you just said, Jean, I hope
25:18
Speaker 4: people paid attention to that example because we see it
25:21
Speaker 4: all the time, right. It's that your insurance agent isn't
25:24
Speaker 4: your financial planner. They've never claimed to be. And you
25:26
Speaker 4: come in saying, hey, we think the present value cost
25:29
Speaker 4: is going to be about one hundred grand because my grandmother.
25:31
Speaker 2: Was just in a facility. Can you get us quotes?
25:33
Speaker 4: Agent does a great job gets your quotes, but they're
25:36
Speaker 4: not realizing that you have a you know, half of that.
25:40
Speaker 2: Cost already covered by other income sources.
25:43
Speaker 4: So work with your financial advisor to make sure that
25:45
Speaker 4: the quotes you're getting from the insurance agent match the need.
25:49
Speaker 4: Now to you to your point, I'd suggest three simple
25:52
Speaker 4: steps for kind of like where people go from here,
25:54
Speaker 4: and number one would be acknowledged the risk, don't ignore it,
25:57
Speaker 4: even a basic awareness puts you ahead of moment most people.
26:01
Speaker 4: Number Two would be numbers, So understand what care costs
26:05
Speaker 4: could be in your area and how it could impact
26:07
Speaker 4: your financial plan. And this is where working with an
26:09
Speaker 4: advisor is obviously really valuable because they can run those
26:12
Speaker 4: numbers in your behalf and then number three evaluate and
26:16
Speaker 4: right size your options. You don't have to commit right away,
26:19
Speaker 4: but you should understand what insurance could look like for you,
26:22
Speaker 4: whether self funding is realistic, and how that hybrid solution
26:27
Speaker 4: could fit in. And I will address one kind of
26:30
Speaker 4: misinformation piece here, which is people will often say, well, gosh,
26:34
Speaker 4: wouldn't it be great to just self ensure And I'll
26:36
Speaker 4: bet everybody who can self insure does self ensure.
26:38
Speaker 2: No.
26:40
Speaker 1: No.
26:41
Speaker 4: Eric just mentioned earlier, like what if your legacy goal
26:44
Speaker 4: is to leave X number of dollars or a million
26:47
Speaker 4: dollars to each of your three children. Well, I don't
26:50
Speaker 4: care if you can self fund the long term care cost.
26:53
Speaker 4: You can sell fund, but you're not going to leave
26:54
Speaker 4: that dollar amount to the kids if you end up
26:56
Speaker 4: in a facility. So we often see people who could
27:00
Speaker 4: choose the option of self funding choose not to because
27:04
Speaker 4: they would rather offload that risk of spending down their
27:07
Speaker 4: estate to an insurance company because they can afford the premiums.
27:11
Speaker 4: So there's a lot of like, there's a lot of
27:13
Speaker 4: nuance in this conversation. And what we would say is
27:16
Speaker 4: this is where working with a fee based fiduciary financial
27:20
Speaker 4: advisor who's not selling you the product or selling you
27:22
Speaker 4: the insurance policy can be really really fantastic in this
27:27
Speaker 4: and kind of like you know, helping you make good.
27:29
Speaker 1: Decisions, absolutely fantastic insight. And before we get to the
27:32
Speaker 1: Claws quiz Questions of the week and wrap up this
27:35
Speaker 1: week's show, Eric, what's kind of the biggest mistake as
27:38
Speaker 1: we wrap this stuff up this morning that people make
27:41
Speaker 1: when it comes to evaluating long term care? Did we
27:45
Speaker 1: lose Eric?
27:46
Speaker 3: Oh? Eric, I think on that.
27:50
Speaker 2: Oh I'm still here.
27:50
Speaker 1: Can you hear me? Yep, loud and clear?
27:53
Speaker 2: Hello? O?
27:55
Speaker 3: Okay, good?
27:56
Speaker 1: Yeah.
27:56
Speaker 3: I think I think Sean that the simple part of
28:00
Speaker 3: this is, or the simple answer is they either wait
28:03
Speaker 3: too long or they plan based on assumptions instead of
28:07
Speaker 3: actual analysis. Right, So planning doesn't mean that you expect
28:11
Speaker 3: to need care. It means that you're prepared if you
28:14
Speaker 3: actually do need care. The goal here isn't to ensure everything.
28:19
Speaker 3: It's just to make you know, really intentional and informed
28:21
Speaker 3: decisions about what risks you you keep and which ones
28:26
Speaker 3: you actually transfer to the insurance company.
28:28
Speaker 1: As CJ was saying, great stuff this week as always
28:31
Speaker 1: from our retirement planning professionals from Class Financial or forget.
28:34
Speaker 1: If you missed any part today's program, you can always
28:36
Speaker 1: listen back online the podcast right at Cossfinancial dot com.
28:40
Speaker 1: That's coss k l a as financial dot com. You
28:42
Speaker 1: also learn about COSS Financial and make an appointment right
28:45
Speaker 1: from the website lossfinancial dot com or pick up phone
28:47
Speaker 1: game a call six so eight to four four two
28:49
Speaker 1: five six three seven. No charge for that initial get
28:52
Speaker 1: to know you appointment tech loss Financial. It will be
28:54
Speaker 1: complimentary to you again their number six O eight four
28:56
Speaker 1: four two five six three seven. You want to hold
28:59
Speaker 1: on to that teleful number as well, because it's time
29:00
Speaker 1: now for the Class quiz question of the week. It
29:02
Speaker 1: works like this and just a moment, I'll ask you
29:04
Speaker 1: the class quiz question of the week. You will then
29:05
Speaker 1: have thirty minutes from the today's program to call the
29:08
Speaker 1: Class Financial office right here in Madison at six oh
29:10
Speaker 1: eight four four two five six three seven if you
29:13
Speaker 1: are the first call correct answer to win this week's prize,
29:15
Speaker 1: which is say twenty five dollars gift card to best
29:18
Speaker 1: buy this week's Closs Quiz question the week. Is this
29:21
Speaker 1: true or false? Long term care costs are fully covered
29:26
Speaker 1: by Medicare? Is that true or is that false? Telephone
29:29
Speaker 1: number six SOH eight four four two five six three seven.
29:32
Speaker 1: That's also Class Financials office right here in Madison. CJ. Eric.
29:36
Speaker 1: It's always great chatting with both of you, guys. Fantastic
29:38
Speaker 1: show as always. You enjoy this great day.
29:41
Speaker 2: Thanks Sean.
29:42
Speaker 1: Thanks Sean, take care guys. News comes your way next
29:44
Speaker 1: here on thirteen ten, double u IBA. This is Money
29:48
Speaker 1: in Motion with Cost Financial Asset Advisors, LLC, a registered
29:52
Speaker 1: investment advisor registered with the SEC. The contents of this
29:56
Speaker 1: show are for informational purposes only and should not be
29:59
Speaker 1: considered individual investment advice. Class Financial does not offer tax
30:03
Speaker 1: or legal advice. Any opinion offered during the course of
30:06
Speaker 1: this show is the opinion of that particular investment advisor representative,
30:11
Speaker 1: and not necessarily the opinion of COSS Financial