Your Retirement Questions: My Answers, Ep #23 

What are the insurance options for anyone who wants to retire early? What’s the difference between long-term care and hybrid long-term care? Why would I never recommend a Medicaid Irrevocable Annuity Trust? These are just a few of the many questions I answer in this special Q&A episode of the Retirement Made Easy podcast. Be sure to listen!

You will want to hear this episode if you are interested in…

• [0:52] Rapid-fire questions & answers
• [2:41] Insurance options for those retiring early
• [4:39] Should you invest in Whole Life Insurance?
• [6:00] The difference between regular and hybrid long-term care
• [9:00] How often should you meet with a financial advisor?
• [10:51] Why I’d never recommend a Medicaid irrevocable trust
• [15:51] Can you live off of social security benefits alone?
• [19:23] Should old be a portion of your investment portfolio?

Insurance options for those who want to retire early

The #1 reason people wait to retire until 65 is because health insurance is so expensive. But if you do want to retire early, what are your options? One option is to work until you’re 63 ½ and jump on COBRA for 18–36 months—but it’s insanely expensive. Another strategy is to meet with health insurance specialists to look over options available in the marketplace (“Obamacare”). Lastly, you can look at private health insurance options. Check this out before you announce your retirement.

The difference between regular and hybrid long-term care

If you should ever need long-term care, this type of policy pays a promised monthly amount of money toward that care. People dislike it because you can pay for the policy for years and may never use or need the coverage. That money is just gone. It’s like paying for homeowners insurance when your house never burns down. But it does afford you peace of mind if something were to happen.

Hybrid long-term care policies are usually combined with a life insurance component. If you did pay for the policy and never needed long-term care, there is a death benefit component. So when you pass away, your beneficiary will receive the life insurance payout (a tax-free death benefit). If you never use the care, someone will still benefit from it. Many people prefer these policies, but the one caveat is they tend to cost more.

How often should you meet with a financial advisor? Listen to hear my thoughts on this question!

Why I’d never recommend a Medicaid irrevocable trust

Some elder law attorneys recommend locking your money into a Medicaid Irrevocable Annuity Trust. Why? It moves money out of your estate, so instead of paying for your own long-term care, you force Medicaid to.

It’s essentially trying to hide the money from medicare so you can qualify for Medicaid. Your care would be paid for from social security and pensions. Then Medicaid steps in to make up the difference. Your children or family would inherit the trust. I do not morally or ethically support this practice nor would I ever recommend it.

Can you combine inherited IRA’s? Listen to hear my answer.

Can you live off of social security benefits alone?

Some people can live on their social security benefits, but it depends on your lifestyle. If you’re accustomed to more than the bare minimum, you need to supplement that income.

My social security statement says “Social security benefits are not intended to be your only source of income when you retire. On average, social security will replace about 40% of your annual pre-retirement earnings, You will need other savings, investments, pensions, or retirement accounts to live comfortably when you retire.”

They tell you this up front. The 60% needs to come from somewhere else. As long as you plan for that ahead of time, you’ll be just fine. Someone I know looks at social security as a bonus income for retirement—not what will carry you through it.

Should old be a portion of your investment portfolio? Listen to the whole episode for my thoughts on the rest of the questions!

Resources & People Mentioned

• Example Social Security Statement