Opening Introduction 00:11
Hello, and welcome to The Amber Stitt Show. I am your host, Amber Stitt, and I am obsessed with helping people get their financial and personal lives in order. Every week, my guests and I explore the fundamentals and practices that will help you stay on top of your game in business, but also at home. I believe we all have different pathways we have to take to reach our peak performance, so that we can live up to our peak potential. And this podcast is dedicated to helping you get there. I'm excited to share the insights and habits that my guests and I have cultivated throughout our lives, so we can help you on your journey towards a happy, successful, and fulfilling life. Let's jump right into today's show.
Amber Stitt 00:59
With a lot of legislation, I know you guys have three ways to look at planning for long term care. And so, can you share those three steps with me?
Kyle Christensen 01:07
Yeah, absolutely. So, the first one is people can self-insure. And that's what most people do. Right? And probably mainly because they don't plan. Right. And we've all heard the phrase if you if you don't plan you plan to fail. Right. And that's true. I mean, think about it, what's the average cost of long-term care in the United States? Like $7,000? a month? Right?
Amber Stitt 01:28
Yeah, seven to nine, I think Arizona is $9,000.
Kyle Christensen 01:30
Okay, and that's per person. So, if you're thinking a married couple mean, we're talking possibly $14,000 a month, who has that? Who's got retirement income like that?
Amber Stitt 01:39
Well, we're talking about retirement mainly, and people are focusing on retirement. So that's not including what you're talking about.
Kyle Christensen 01:47
Right? In fact, it could be a huge drain on that, right? Let's say, let's say you got to retire, you're lucky enough to have a pension, and that's paying $100,000 bucks a year. You think life is good, right? You're doing really well. In fact, statistically, you'd be doing really well compared to the average retiree. But now all of a sudden, one of the married couple needs long term care. So there goes $7,000 bucks, right? If they're self-insuring, they're goes $7,000 to $9,000. It's all gone. There isn't anything left for the other person who doesn't need long term care.
Amber Stitt 02:18
This is something prior to people retiring earlier, because of the great resignation and some other aspects. Other factors like I don't think we have enough data to support that conversation yet. But we're talking about pre pandemic, typical planning, retirement funding, and more, right?
Kyle Christensen 02:36
Yeah, I mean, so it's scary. People are extremely ill prepared, and we're living longer and longer, right, medical technology is increasing our lifespans. But that doesn't mean... what that really probably means is that we are much more likely to need care at some point, you know, for several years.
Amber Stitt 02:54
And the COS generation factor, too. So, you and I don't want to lead out of fear. But it's a real No. And there's real numbers. We're not making this up. So how do we be constructive with our time and learn what's available to us? So that'll be coming more through other videos and things that we have, but okay, so step one: self-insuring, does it mean you've always planned to self-insure? Most people don't sign up for that? It sounds great and glamorous. But...
Kyle Christensen 03:23
Yeah, it sounds like I don't have to pay premium, which is attractive. And I love what you said, we don't want this decision to be fear driven. But you know who's not fearful? People who are prepared. That's who is not fearful.
Amber Stitt 03:37
Haha...the stress, there's no stress there.
Kyle Christensen 03:40
Like it just...let's not pretend it's not something real, or that it won't affect us. Most likely, at some point, let's acknowledge it and say, "Okay, that's like jumping off a house and thinking I'm gonna ignore gravity." You know, it doesn't work, right? It's going to affect you. Okay, so the second way people can prepare, which is the more traditional way, but it's been very unsuccessful, right? Is buying long-term care insurance. People don't want to buy long-term care, because when should people buy long term care if they're going to get it? Way early in their life, right? Like 30s and 40s, right? That's the time when you should probably get it. Do people do it? No. Because long term care is kind of long in the future. "I only need it when I'm 80, right? And so, I don't want to pay for that." Plus, the entire focus of the financial planning industry is how can we shovel more money into retirement accounts for assets under management? Yes. Right. So that's the objective. And so, people have it's been such a failure of selling that product that tons of companies have just stopped doing it entirely. And so, there are really only a few carriers that even offer long term care insurance. What are the issues, you know, with long term care traditional long-term care? You pay a premium. Does that premium level for the rest of your life? No, it increases over time, for the most part. What happens to the benefit?
Amber Stitt 05:06
Hang on a second. So, to the traditional...to your point, what we've always learned is that it can move. Now there's new products and hybrids out there. But that's where a lot of our personal experiences come from the old way of doing things. Old products that would be so expensive, and then keep going up in price.
Kyle Christensen 05:24
Yep. And here's the thing, too, is long term care is a lot like term life insurance, right? If you if you die while you're paying for the term life insurance, it's going to pay, right? But what happens when you cancel the term life insurance policy? What if you don't die while it's enforced? Right? What happens to all the money you've ever paid into it? So, it's just gone? Right? Yeah, it's use it, or lose it. And that's how long-term care insurance is too. Now there might be some that have riders that say, refund a premium if you don't use it after a period of time, or whatever. So, you'd have to look for those options. But that's what I'm saying, what scares people away from option number two a lot of times, right, is that feeling like I'm gonna pay for something, and I may or may not even use it. So, to me that leads us to the third option, which I think has really been innovative, right, the life insurance industry has said, you know what, "we can offer a rider on the life insurance policy, or we can make the accelerated benefit rider, not just based on terminal illness, we can base it on chronic illness, or a critical illness," right. And chronic illness, they'll define as saying, "Look, you can't do two or more of the activities of daily living. So, you can dress feed, bathe, transfer, you know, toilet, or continence, right, so those are the six, if you can't do two or more of those, and you're considered chronically ill. And you can, in a lot of cases with these new policies get up to half your death benefit while you're living, tax free, right, for those purposes, sometimes up to a million dollars, right? And so, I mean, that's a great option, because what happens if you don't use the long-term care benefit side of that, let's say you don't have a chronic illness, what are the chances of you dying eventually,
Amber Stitt 07:07
It's a definite, just when...we don't know.
Kyle Christensen 07:10
Yeah, death and taxes, right, they're for sure going to happen. And so that's kind of reassuring, I think, in my mind, is that look, I can get this product and maybe I don't want to go to the traditional long term care out, which I'm not saying don't do that. This is not for everybody, right? It's much better than self-insuring, right? And option number two, and number three.
Amber Stitt 07:32
Yeah, and I came across that myself working with my husband on this running the analysis, and he just goes, "I will not buy a long-term care product." And it was frustrating for me for a little bit being in the business. But it did open my eyes to the fact that there's product education that needs to happen. So, everyone gets to choose their own plan. And so, thank you for sharing your three steps, because I want people to know, there's multiple ways to go about it outside of self-insuring and take some time and just learn because there's different ways some of these plans could trigger and could pay out some payout cash, and some pay directly to the facilities and different things. So, this is some terminology that you can learn about, and we're happy to help there. Just really take some of the stress out of that overwhelming concept and fold it into your overall plan because it has to be there. We know that these statistics exist. And so, if you're just not sure if people are doing this, or are you know, you could even test talking with friends and family. What is your plan? And I think, Kyle, you can agree, almost everyone we know doesn't have an answer besides self-insuring, most often if you're just talking, or in my experience, and that's why I become so passionate about it, we need to do something else. We need to put some steps in motion because most people are underprepared. They're not prepared
Kyle Christensen 08:53
That's right. And if they really don't want to be fearful, or have fear drive them financially, then it's education, right? It's knowing your options, and being able to be proactive about it.
Amber Stitt 09:06
Wonderful. So, I know you're always happy to help and so am I. So, thank you for sharing your three steps. Kyle, always appreciate you being here. Thank you.
Closing Outro 09:12
Thank you for joining us on today's episode of The Amber Stitt Show. For more information about the podcasts, books, articles, and more, please visit me at AmberStitt.com. Until next week, enjoy your journey at home and at work. Thank you for listening!