3 January 2014 0 Comments

Transferring Capital For Maximum Effect

maximum impactMany people whose family has grown and are in a reasonably sound financial position are sitting on substantial money in bank CD’s.  The interest credited, they admit, is lousy, but it’s their safety cushion.  They don’t want to risk it.  Here’s an interesting option:

Pete and Sue have been married for many years and, at their ages of 55, their kids are grown, they are both still working and they have a nice start on a retirement nest egg.  They do not have Long Term Care Insurance.  They looked at it, but it was so expensive, they passed.  They both have some term life insurance, but they plan to discontinue it at the end of their current term duration since permanent insurance is too expensive and they question the continued need of life insurance after their term policy ends.

Then they hear about a way to transfer $100,000 of their current bank CD deposits to a program that will provide them with Long Term Care (LTC) Insurance plus Permanent Life Insurance without depleting their $100,000 of principle if they should need it for other emergencies.  Here’s how it works:

Pete and Sue each apply for a policy with a onetime premium of $50,000. Assuming they qualify as Preferred Best risks, at age 55 they receive the following benefits:

Pete                 Sue

Life Insurance Death Benefit                          $125,537         $136,782

Monthly Maximum LTC Benefit                    $    5,231         $    5,699

Lifetime LTC Benefit                                          $125,537         $136,782

Residual Death Benefit                                      $  12,554         $  13,678

From the very first day of their policies they are each guaranteed the right to surrender their policies and receive the entire $50,000 refunded.  The death benefit shown is reduced by any amount received in LTC benefits during their lifetime, but if the maximum LTC benefit is paid out, the death benefit paid will never be less than the residual Death Benefit.

What a safety factor this ads to their retirement planning!  And it’s all done without loss of the amount of funds transferred to premiums.  It’s a real life example of having your cake and eating it too.

Coming up will be some more planning for retirement.

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