Long Term Care Annuities...PPA News Network

From the PPA News Network

Current estimates from AARP put the annual cost of a nursing home at a national average of $78,000. Older Americans, struggling to reassemble their retirement plans from the worst economic downturn in 70 years, may be ignoring the potentially most devastating threat to their plans: the spiraling cost of long-term care.

On January 1, some important provisions of the Pension Protection Act of 2006 went into effect to help pay for those costs. Individuals no longer have to pay federal income tax on the proceeds from an annuity used to pay for long-term care coverage. That means that chronically ill or disabled people will no longer have to rely on their own private long-term care policies or Medicaid to pay for costs related to long-term care. The change is spurring the creation of hybrid deferred annuity policies that also carry long-term care coverage. These products allow policyholders to use the proceeds for LTC coverage, for income or for both. The proceeds that went to pay for long-term care costs for the policyholder would not be subject to federal tax.

This option isn’t for everyone and it’s important to consult a financial expert and more important, a tax expert to decide if this alternative is for you. It’s important to talk to both financial and tax experts before wading into this arena and to see how much coverage you can buy based on the size of the annuity you can afford.

Interview: Al Benneli CFP, FIC