The Money Guy Show: Should You Use Permanent Life Insurance for Long-Term Care Expenses?
The ‘Money Guy Show’ on YouTube explores viewers’ questions about finance. One caller on a recent show shared a question with Brian Preston (CPA, CFP and PFS), Bo Hanson (SFA and CFP) and producer Rebie, regarding the trending topic of permanent life insurance and long-term care.
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The viewer, Courtney, explained that she already has a fully funded Roth IRA, essentially implying that she has a comfortable retirement savings but wants to save more. She wanted to know if it is a good idea to use a permanent whole-life insurance policy to save for possible long-term care expenses while avoiding future taxes.
Hanson addressed the question first by suggesting that Courtney consider what she’s trying to accomplish. If the primary goal is to save for financial independence in retirement, Hanson suggested a regular, after-tax brokerage account might be a better solution. If her goal is to ensure her loved ones are taken care of after she dies, a term-life insurance policy could be a lower-cost solution.
However, Hanson pointed out one circumstance where a long-term care policy might be a better choice. By purchasing a whole life insurance policy with a rider than can convert it to LTC, Courtney is serving the dual purpose of protecting her family if she dies suddenly and covering long-term care costs if she lives to need it:
“If I know that inside of my family genealogy, the cause of death at end of life tends to be long disease [like Alzheimer’s], where it’s likely I’m going to need some sort of skilled nursing care, a nursing home, or some sort of extended end-of-life care… [one way] for me to potentially plan for that [would be to] build money inside of a whole permanent, Universal type life insurance policy, now, and then convert it to some sort of long-term care policy.”
On the other hand, Hanson suggested Courtney could bolster her nest egg with other investments, which could, in turn, fund long-term care. The other option, he said, would be to buy a traditional long-term care insurance policy.
Preston then posed a question that could help Courtney and others in a similar situation determine their best course of action. “At the end of the day,” he said, “it comes down to what gives you peace of mind?”
If you’ve cared for aging parents or watched your parents struggle with long-term care costs, you may worry about placing a similar burden on your children.
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“If it gives you peace of mind, and you have enough resources that it doesn’t blow up your retirement plan, let’s buy and take this stress off your plate,” Preston said. “Just make sure you do all the exercises, all the work that goes into figuring out if this insurance product is the best solution for you.”
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This article originally appeared on GOBankingRates.com: The Money Guy Show: Should You Use Permanent Life Insurance for Long-Term Care Expenses?
