If I Only Knew Then What I Know Now about Long-Term Care and Financial Planning

Mark Elliot: Welcome to The Retirement Income show. I’m Mark Elliot, alongside the CEO and founder of Oak Harvest Financial Group, Troy Sharpe. You can always find out more about Troy and the team by going to the website oakharvestfg.com. Troy also is a certified financial planner professional. Of course, if you have questions about anything Troy talks about today, you’re concerned about where you’re going with your money, with your retirement, and all of that, you can always call the team at Oak harvest, 800-822-6434. There is no cost, no obligation for this, 800-822-6434. Of course, their office is located at 920, Memorial City way, right off I-10 in Bunker Hill. Now, of course, the YouTube channel probably over 300 videos now. Troy would be my guest. Just search Troy Sharpe at Oak Harvest, you’ll find those. It’s free to subscribe, so you can watch any or all of those.
What’s new on YouTube?

Troy Sharpe: We launched a long-term care series a couple of weeks ago, and I think the first two videos in that series are out. Long-term care, it’s one of those things that it’s near and dear to my heart because of the experience that I went through with my grandparents. My grandfather, once he retired, he sold his home, sold his business. Very simple man. He never finished sixth grade, but he started a business. He owned some land. He was able to sell the land, pocketed about $2 million, and this was back in 2003 or so, maybe 2004. Far more money than he ever thought he would have. Didn’t have any idea what to do with it, so they just bought some CDs. I was finishing college, my finance degree at the time.

About five weeks into retirement, they retired to Murphy, North Carolina, a little small town, Cherokee County, the southwest corner of North Carolina, near Tennessee. Within five weeks, he suffered two aortic aneurysms. Home health care from there, an absurd amount of money, $40,000 a month. He ended up going into a coma after the surgery, two long-term care facilities at $10,000 a month. Then the big whammy. $10,000 a month for long-term care back then was a ton of money, but it’s what it cost. The big whammy, though, was the home health care, to have two nurses, 24 hours a day, 12-hour shifts, $40,000 a month. That’s about $80,000 a month in today’s dollars, a little bit less than that.

Today, it’s pretty easy to spend a large sum of money on long-term care, if you need home health care, and that’s the preference for the majority of the people that I’ve spoken with over my career. We started a long-term care series. If I only knew, back in 1997/1998, what I know now, I could have helped my grandparents take steps to protect that $2 million that they had received in the sale of the business and the land. Of course, I was in college. Didn’t really have any idea about personal financial planning because they don’t talk to you about personal financial planning in grade school, high school, even college. I have a finance degree, and I cannot think back to one course that I took in personal financial planning. Of course, there was corporate finance, and that’s mostly what it’s centered around.

Now they do have financial planning schools, especially here in Texas. It’s an amazing development for young men and women who want to enter the financial planning field. You can get a degree and actually be ready to sit for your Certified Financial Planner professional CFP designation out of college. That’s really cool. If I only had known then what I know now, and I say that, thinking about my grandfather because that was one of the things he always said to me growing up. He said, “Troy, I only wish that I had two lives. One, to learn everything, and then a second to go back and apply everything that I learned.”

We started a long-term care series on YouTube, and we talked about some of the hybrid strategies, so how you can use your guaranteed lifetime income from an annuity to double the amount of income that you have per year, fully guaranteed, to help pay for long-term care benefits. When you just look at that concept in and of itself, the majority of people in this country, they find a guaranteed lifetime income in retirement, whether it’s a pension, whether it’s social security, or whether it is from some type of annuity. The concept of guaranteed income, no matter if the market is going up or the markets going down is very attractive to the majority of people in retirement.
I think the last stats from a big study from either Allianz or maybe Genworth was right around 67% of people find that a very attractive option for something in retirement. There are tools out there in the industry where it’s on the fixed annuity side, but you can be 100% guaranteed to see that income double for you or your spouse if you need long-term care in a facility or home health care. That’s a pretty cool concept. If you’re getting $40,000 a year from some type of lifetime income stream, and then you or your spouse become unable to perform two out of six activities of daily living and you need a nurse to come into your home, or you need to go into a facility for a certain amount of time, knowing that you have a tool that guarantees you $40,000 per year no matter what, then it will double to $80,000 per year. That’s a pretty cool strategy that’s out there. For those that are attracted to guaranteed lifetime income and security and don’t want a lot of market risk, that’s a tool that can help provide some peace of mind, knowing that, “Hey, if I do spend more money or the markets don’t perform with my other funds, the ones that I do have invested, I still have this guaranteed income stream to go with my social security. Oh, and this guaranteed income stream will double.” We talked about that a little bit.

One of the other strategies we talked about on the YouTube channel, really cool, it’s essentially what we call an asset-based long-term care strategy. It’s different from the expense long-term care policy. Normally, when you think of long-term care insurance, you think, “Okay, that’s another cost. It’s another monthly expense. If I don’t use it, I lose it. If I have it later in life, it’s a good chance the premiums are going to increase because the insurance company is going to raise those costs.” There is another tool out there, another strategy. 10 years ago, maybe 2 or 3 companies offered this. Now, there’s five or six, but really a couple of strong, strong strategies where you can make a single deposit. Let’s say it’s $50,000. You put some inflation protection on it, and by the time you’re in your 80s– Now, this is all based on your age and gender, of course, but I’m talking about a 60-year-old person right now on average – by the time you’re in your 80s, that $50,000 deposit typically is going to be fully guaranteed to give you somewhere between $300,000 to $350,000, maybe $400,000 of fully guaranteed long-term care protection to be used either in-home or at a facility. If you never need long-term care, you have a death benefit there, so you’re not going to lose the money that you put in. As a matter of fact, you’re going to get more than what you put in as a death benefit. There are no premium increases, your cost won’t go up. It’s all fully guaranteed.

It’s really cool to see what the life insurance companies are doing to help meet the need for those that are concerned, “Hey, how am I going to pay for long-term care later if I have to go into a facility, if my spouse has to go into a facility, or if we need nurses to come into the home and take care of one of us?” Maybe you’re a single person, and it’s on the back of your mind where, “Hey, I don’t have anyone later in life to help take care of me. I’m going to have to finance this myself,” to know that you’re going to have a fully guaranteed leverage of let’s call it 5 to 10 times your deposit for long-term care, guaranteed, no cost increases and, under current tax law, a majority of that benefit would be tax-free, that’s a pretty comforting tool that’s available in the marketplace.

We talked about that because when we look at what we do here at Oak Harvest Financial Group, we are not just an investment advisory firm. We provide investment management, of course, and we have an in-house investment team, and we do the analysis and dividend-focused, growth-focused, et cetera, but that’s just one part of what we call a successful retirement plan. We call it a retirement success plan.
Step one, get that risk analysis done, manage risk, allocate the portfolio. How much in equities? How much in stocks? Are we going for growth? Do we want to generate income? What’s the strategy with the investment portfolio? We want to make sure that your principal is protected from more loss than you can either emotionally withstand or what we call your portfolio’s capacity for risk, more risk than what your portfolio can sustain in order to still generate the income you need for your standard of living.

Step two is a specific income plan. How much are we taking from the IRA? How much are we taking from the non-IRA? Looking at when do we take social security? How do we incorporate maybe some guaranteed lifetime income in? All of these tools in the marketplace, that’s all they are, they’re just tools. They’re not inherently good, they’re not inherently bad, but they do have a specific purpose. When we really home in on your goals and understand what’s important to you, and then we can communicate what the different tool is out there, what they mean for your security, what they mean for your quality of life, what they mean for you, not just today, but later in life. That’s what an income plan looks like.

Step 3 of the retirement success plan, of course, is the tax strategy. We want to pay less tax in retirement. It’s a huge part of what we do for clients. You need a tax strategy, and I’m not just talking about when to buy or sell to minimize taxes. I’m talking about that tax infested 401(k) that you have. The tax-infested IRA that you have. How are we positioning that account to make sure over the course of time, you’re in the best position to pay the least amount of tax while also maximizing your values and your standard of living again?

Step 4 of the retirement success plan is the healthcare planning. If you want to retire before 65, you better have a plan in place because health insurance premiums for a spouse or 2 spouses, you’re looking at anywhere from $1,800 to $2,000 a month, prior to age 65. That doesn’t count for your out-of-pocket costs, your co-pays, your deductibles, your prescriptions. We want to have a health care plan, and it’s not– again, just prior to 65, it’s this long-term care stuff that I’m talking about here as well.

Then, of course, the estate plan is a huge part. Do you need a special needs trust? Do you want to make sure that someone is taken care of when you’re gone? Any type of estate tax concerns? Are there income tax concerns later? The advance directive, just those basic documents. We want to make sure that you’re sitting with a properly licensed attorney to have those documents not only completed but updated and also a part of your financial plan.

One of the big challenges we see when people have an already existing estate plan is the financial planning side of things. The attorneys typically do a fairly good job putting these things together. Although, what I’ve noticed over the years is attorneys typically do the same thing for everyone who comes in. There’s not a lot of creativity, from my experience, in the legal industry. An attorney is really focused on doing trusts, and that’s all they do, or maybe it’s a family-limited partnership or whatever it might be.

Having the financial advisor, the CFP Pro involved in that process, working with the attorneys, like we do, ensures that there’s coordination between the financial plan, the tax plan, the health care plan, but then also the estate plan. Then, also, part of our responsibility as CFP Pros is to facilitate, over the years, a conversation with family, and what we like to do is bring the kids in, bring the family in. We have big group meetings. I wouldn’t call them conferences but small workshops where we’re starting to introduce your children into concepts of financial planning because the majority of wealth in this country, I believe the last stats I saw were about 90%. 90% of wealth is gone by the third generation. That’s an astounding number.

That’s the retirement success plan from the financial side of things, the mathematical side of things, but retirement success is about far much more than that. That’s what we’re going to get into on the rest of the show today. If you don’t have a success plan in place, if you don’t know or don’t have a strategy for everything that I’ve talked about, I do encourage you to give us a call. The phone number is 1-800-822-6434. Go to the website oakharvestfinancialgroup.com and check out the YouTube channel. Just go to YouTube, search “Oak Harvest,” you’ll see tons of videos up there. We want to help you be a more intelligent and informed retirement investor and strategist.

Mark: We’re just getting started. I got Troy off track. That would involve what we’re going to talk about, the YouTube channel, but I know there’s always something new on there. It’s an opportunity for you to search for Troy Sharpe and Oak Harvest. Over 300 videos now and, of course, the new long-term-care-type information on there and the series that they’ve got going, a lot of great stuff on the YouTube channel. There’s no cost whatsoever to subscribe to that, YouTube, Oak Harvest, and you are good to go with whatever area of the financial world, retirement world, you have questions about, there’s a video that the team at Oak Harvest has put up there just for you. When we come back, how do you manage your money when it comes to pre-retirement and retirement? Is it the same? Is it different? Troy will expand on that when we come back. This is The Retirement Income Show with Troy Sharpe, the CEO, and founder of Oak Harvest Financial.

Moderator: Oak Harvest Investment Services is a registered advisory firm. Troy Sharpe is an investment advisor representative and insurance professional. Investing involves risk, including the potential loss of principal.