Video Transcript Below
Welcome and Housekeeping
00:00:00 — Karmi Gutman: Good afternoon everyone. It is 11:59. We will give it a couple more minutes before starting.
Can everyone hear me? If you are on camera, please give me a thumbs up. I see a thumbs up. If you have trouble hearing me, use the chat function at the bottom right. It is next to the icon that looks like two people. Click the text box. If you cannot hear me, either raise your hand if you are on camera or type in the message box. We will give it another minute or two to let everyone trickle in, and then we will get started.
It is 12:01. Looks like we have a good group here.
00:06:28 — Karmi Gutman: We will get the ball rolling. A few quick notes from an introduction perspective. We are on Google Meet, and this session is being recorded. This will be placed on our website after it goes through compliance. I am required to let you know it is being recorded.
You may also see a note taker on your screen. It is a new function we are using to create notes for those who want a transcript.
Thank you everyone for coming. Good afternoon. My name is Karmi Gutman. I am the financial planner on the Lifestyle Planning side of Keystone Law Firm. The series you are attending is from the Retirement Management Office, a partnership between Lifestyle Planning and Keystone Law Firm to provide a one stop shop for financial planning, estate planning, investments, taxes, and more. That is the brief introduction.
Agenda and How to Participate
00:07:47 — Karmi Gutman: Today we are covering long term care: it is not just for older people. The goal is to share knowledge and get everyone up to speed on what long term care is, what it includes, facts and costs in Arizona for specific types of care, and ways to consider addressing it. When I say we, I mean options for you to consider after speaking with your spouse, clergy, or any trusted person. We will end with Q and A.
During the presentation, mics will be muted. If you want to ask a question and do not want to forget it, write it down or put it in the chat. We will make sure to answer questions at the end. My goal is to leave around 30 minutes for questions.
First a few disclosures, because we have to make the lawyers happy. Everything today is educational and not financial, investment, legal, or tax advice. Please consult a trusted professional before making decisions based on today. Lifestyle Planning does sell insurance products. If you later choose to engage on insurance, we are paid by the insurance companies. The goal today is not to sell you anything. It is to share information and answer questions. If we were talking about investments, remember that investments involve risk. Again, today is purely educational.
What Is Long Term Care
00:09:59 — Karmi Gutman: To get on the same page, what is long term care? You may hear terms like custodial care, long term care, or extended health care. Long term care is not limited to a nursing home. It includes home health care, adult day care, facility care, informal care, and more.
If you are curious about what is considered long term care, you can reach out to me. My contact information will be at the end. You can also look it up on ChatGPT or Google.
00:11:11 — Karmi Gutman: Eligibility for many long term care insurance or assistance programs usually requires that you cannot perform two of the six activities of daily living. These activities include bathing, eating, dressing, transferring such as moving from a chair or bed, using the restroom, and continence. If you cannot complete two of the six activities, most long term care insurance or assistance products begin to pay benefits.
Even though we may feel invincible now, there is a high probability that many of us will need some form of long term care later in life.
Likelihood of Needing Care
00:12:47 — Karmi Gutman: According to the United States Department of Health and Human Services, once people reach age 65, there is about a 70 percent chance they will need some form of long term care before the end of life. It is important to know the facts so you can make informed decisions. If you do not plan for this, it becomes your problem if you self insure, or your caregiver’s problem such as a spouse or family member.
Typical Duration of Care
00:13:51 — Karmi Gutman: More data from the Department of Health and Human Services: the average duration of long term care assistance is about 2.2 years for men and 3.7 years for women. After an Alzheimer’s diagnosis, the average duration of long term care needs is about eight years.
When we look at costs in Arizona, you will see how quickly these needs can add up. Then the question becomes, what do we do about it if it is a concern.
Costs of Care in Arizona
00:15:10 — Karmi Gutman: These numbers are Arizona averages for 2025. The source is Nationwide, which has a public cost of care website. Based on a 40 hour work week, the average annual costs are roughly as follows:
- Informal care: annual average provided for comparison
- Home care: annual average
- Assisted living: annual average
- Nursing home care: annual average
One important point: long term care health costs increase about 5 percent per year on average, and that increase compounds over time. Over a long life, the total cost can become substantial.
00:16:15 — Karmi Gutman: Longevity is increasing, which is a good thing, but it means costs can compound for more years. In short, long term care can be expensive.
Impact on Families and Caregivers
00:17:30 — Karmi Gutman: I debated whether to include the impact on families. I decided to share a few facts from a Guardian survey from December 2023 of caregivers.
- About 20 percent of caregivers said their responsibilities limited their career growth and job opportunities.
- About 47 percent reported increased anxiety, depression, or other mental health concerns due to caregiving.
- Because of long term care costs, almost half reported concern about living paycheck to paycheck.
From this survey we can safely say that a lack of planning can have a meaningful impact on families. No one wants to place that burden on someone else. So let us talk about options if you want a game plan.
Options to Address Long Term Care
00:20:11 — Karmi Gutman: We will spend most of our time here. There are several paths to consider.
Option 1: Self Insure
You can decide to use your own nest egg. You might set aside a specific amount and let your family or trusted person know that this money is for long term care if needed.
Pros:
- Control over how you spend the funds
- If care is never needed, you keep the assets for your own goals
Cons:
- Shortfall risk if the nest egg is not large enough
- Medicare and Medicaid have limits. Standard Medicare typically covers up to about the first 90 days fully, then a prorated amount to about day 120, and after that you are usually responsible. Medicaid requires assets below certain thresholds and restricts you to participating facilities, which not everyone wants.
If you choose this path, work with a financial professional to run the numbers. A planner can estimate how much of your current nest egg could cover different levels of long term care.
Option 2: Traditional Long Term Care Insurance
This is less common today because many insurers found it too expensive to offer, but a few still do. You apply, go through medical underwriting, and if approved you pay a premium for a set pool of benefits.
Pros:
- Benefits used for qualified long term care are generally tax free
- If you itemize deductions, a portion of premiums may be deductible, depending on your situation
Cons:
- Can be very expensive
- Premiums can increase over time
- Harder to find
- If you never use it, the premiums are sunk cost
When clients receive premium increase notices, we often evaluate whether to keep the policy as is or accept a modified option that balances cost and coverage.
Option 3: Hybrid Policies
These combine life insurance or an annuity with long term care benefits. Insurers bundle services to manage their risk, and that can also be useful for consumers.
Pros:
- Solve multiple goals with one policy
- If you do not need long term care, there can be a life insurance benefit to heirs
- Underwriting can be less strict than traditional long term care, though it varies
Considerations:
- Long term care benefits are usually provided through a rider, which has an annual fee that often ranges from about 0.85 percent to about 2 percent
- Structure can involve a lump sum or payments over time
Option 4: Income Annuities with Enhanced Benefits
These are income focused annuities that may include a wellness rider or income doubler. This is not long term care insurance, so distributions are not tax free due to care. Instead, if you qualify based on activities of daily living, the annuity may increase your income for a limited period, often two to five years, or until your principal is exhausted.
How they work:
- You purchase the annuity and typically have a surrender period such as five, seven, or ten years
- The contract tracks an account value and a separate income base
- The income base may grow by a stated percentage each year until you start income
- To activate a doubler, you usually must be taking income and meet the activities of daily living requirement
Pros:
- Often no medical underwriting, only age limits
- Can provide guaranteed income that does not rely on market performance
Cons:
- Not tax free for care expenses
- Fees apply, commonly around 1 percent, sometimes up to about 1.5 percent
- Using the rider can deplete principal faster, reducing future payments
These can be useful if you intend to leave the annuity alone for years, review it annually, and only turn on income when appropriate.
Choosing Among the Options
00:39:20 — Karmi Gutman: Self insuring, traditional policies, hybrid policies, and income annuities can all be viable depending on your goals, health, and finances. The best way to decide is to work with a trusted advisor or professional and have candid conversations with your spouse or other trusted people.
Audience Q and A
00:40:27 — Karmi Gutman: We will take about 25 minutes for questions. If you are not comfortable asking on a recorded session, you can call the office or email me at karmi at lifestyleplanningfirm dot com.
Question: What is the rate of return for annuities in option 4?
Answer: These products are not designed for return. They are designed to provide income. If you put in 100,000 dollars and receive 10,000 dollars per year, you can think of that as 10 percent of your original amount, but that is an income rate, not an investment return. Good income products often provide between 8 and 10 percent of the original premium as annual income. If you want growth, consider a brokerage account or a growth focused annuity, noting that most growth annuities do not include long term care features.
Question: What is the ideal age to start options 3 or 4?
Answer: It depends. For option 4 income annuities, favorable payout rates often appear from about age 70 to 80. Above 80, companies usually reduce the value. For option 3 hybrid products that provide tax eligible long term care benefits, a common sweet spot is about age 60 to 70, since underwriting can be more favorable. Health varies person to person, so results vary.
Follow up on option 4: When you buy an income annuity, there is usually a surrender period. The contract tracks an account value and a separate income base that may grow by a stated rate, often in the range of about 4 to 10 percent per year for the income base. The longer you wait to start income, the higher the permitted income can be. If you want guaranteed income without market risk, this may help. If you want near term growth on a liquid account value, this is not the right product. For growth with long term care features, a hybrid product may be a better fit.
Closing and Upcoming Events
00:53:49 — Karmi Gutman: Thank you all for the time and the questions. This recording will be posted to our website or YouTube after compliance review.
00:54:37 — Alexis Rico Cortes: Before we let everyone go, a quick note about our upcoming events for November.
- November 18 at 4:00, hosted by Francisco: You are already paying 1 percent, but are you getting full value for it?
- November 25 at noon, hosted by Francisco: Keystone acting as your successor trustee. This is open to the general public. Registration links are in the chat. You should also have received an email.
Karmi Gutman: Thank you everyone. Have a great weekend.
