Asset Based Long Term Care with Mike Mazzoni

7.28.23: Audio automatically transcribed by Sonix

7.28.23: this mp3 audio file was automatically transcribed by Sonix with the best speech-to-text algorithms. This transcript may contain errors.

Producer:
Any examples used are for illustrative purposes only and do not take into account your particular investment objectives, financial situation or needs and may not be suitable for all investors. It is not intended to predict the performance of any specific investment and is not a solicitation or recommendation of any investment strategy.

Producer:
Welcome to Retire 360 with your host, Dwight Mejan. Dwight is a licensed fiduciary and financial advisor who always places your needs first. Dwight works hard each day to educate Americans like you on how to reach the financial freedom they've worked so hard for. And he can help you, too. So now let's start the show. Here's Dwight.

Dwight Mejan:
Hey, welcome back, everybody. Welcome back to the Retire 360 show. For those of you who have been listening to us for a while, we are so glad that you're here and you take time out of your weekend to spend it with us. I am your host, Dwight Mejan, and alongside me, of course, is Mitchell Keiser. Mitchell, you are out of town last weekend, weren't you? Where were you off to?

Mitchell Keiser:
Yeah. So we got to enjoy a beach trip with my family down in Myrtle Beach, South Carolina. So it was a good week away. Good family time, but glad to be back.

Dwight Mejan:
Batteries are charged, ready to roll, right?

Mitchell Keiser:
Absolutely. And for our listeners here that are listening down in low country. So that would be the Pinehurst Southern Pines, Samford area. I just want to let you guys know that we are going to have another educational event here on August 10th and August 11th. We are going to have at 11 a.m. and a 6 p.m. class on taxes and retirement. So if that is something that you guys would be interested in learning more about as you guys are about to retire or as you already are retired, and how do you take better advantage of that? That would be something that we could offer to you for free since you guys are tuning in to us every week, just give us a call and I can try to save you a seat if we have some left. And the best number to call us at is (910) 235-0812. And if you guys are unable to make it, we do these every couple of months. We have a series of classes. If you guys are listening to us in the western part of the state, we are going to have an event in Boone here within the next month or so. So I'll give you details on that soon. But if you guys are in the Moore County area, give us a call. We'll get you a seat.

Dwight Mejan:
Yeah. Mitchell, It's great. We, uh. We did one of these, what, about a week in a little over a week ago? Guess it's been and have met with a lot of folks who wanted a tax map. We don't have time today to get in the show talking about a tax map, but a tax map. Is your personal strategy laid over your investments of ways that you can strategically? We give you specifics of things that you can do to lower your future tax rate so that when you get into your go go years and your golden years, you're not partnering with that IRS and retirement. You're disinheriting the IRS. And we want to make that available to you. To those that come to the class, there's no charge for that tax map. It's just something that we offer. Everyone loves it. I had a lady in yesterday that came to that class and she came in with her slides. Didn't even tell you this, Mitchell She had it just marked up. She said what? I couldn't keep up with all the information. She said it was awesome. She said, It's great information. She gave me three people. She wanted to come to our next tax class, people that she works with and they've had these exact discussions, hadn't gotten answers to some of the questions that they had. And she said, You answered just about everything I had. So it is a good class and we encourage our listeners to come out and take that class. It's a little over an hour where we teach it and on top of that, Mitchell, we get to meet face to face with some of our listeners. So that's always a great time for us as well.

Dwight Mejan:
Hey, we got a great show planned to you. This is brought to you by 360 Capital Management. That is our company, Retire360Show.com is where you can reach us. We had somebody this past week reach out to us on on that website booked an appointment complimentary. So if you're a listener of this show, that's one way that you can reach us. If you're in the western part of the state, you can call our office there at (828) 278-7814. We're recording today out of Southern Pines. That number for our office here is (910) 235-0812. And you can check us out. We're on Facebook, we're on Instagram. And you can also reach out to us on our YouTube channel and bring up our YouTube channel, because I know if you are listening today, I'm going to introduce our special guest here in just a moment. I'm going to tell all of you, you are going to want to get to the YouTube channel if you've never been there. And you can see our guest today, he's going to be using a whiteboard on a topic that I think is one of the most important topics we're going to cover this year. It's near and dear to my heart, and I'll tell you why in a moment. But without really any further ado, I want to introduce our guest. Our guest, first of all, his name is Mike Mazzoni. Mike is a strategic partner of ours in our office, and he works with specific case design for long term care. And we talk a lot. You hear me sometimes talk about using I love sports. I love sports analogies. And if we use football as the analogy here, football, we've got offense, we've got a defense team and we've got special teams on a football team that special teams and retirement would be your CPA, your lawyer, that's your special teams.

Dwight Mejan:
Your offensive strategy would be a person like me who's in the wealth management business, who helps you develop an income plan, who helps you come up with an investment plan, an estate plan and so forth. That's the lawyer and us working together. But the defense, like in football defense wins championships, doesn't it? And today, a very special guest, Mike Mazzoni, he specializes in the area of long term care. I know he's been a big help to us with our clients who've wanted to make sure that that portfolio is protected. And without any further ado, I'm going to stop because I know we got lots of questions for Mike, and I know our listeners are going to want to tune in here, but if you can't tune in the whole time, please go to our YouTube channel, Go to Retire 360 show, look up this episode. Mike's going to be using a whiteboard on some of the show today and we'd love to have you, you know, finish out the show with him If you're able to do that today. We're glad you're here. But Mike, thanks for taking time out of your calendar to be with us. And yeah, I just want to start out, Mike, give us a little bit about Mike Mazzoni, your your background and ultimately, how did you get into the field of long term care? I think you have a personal story you can share with us as well.

Mike Mazzoni:
Well, thanks to it. I appreciate the time today. This is an area of planning that is quite often overlooked, and I find that a lot of that is just due to all the changes in the economic environment. So people are needing care at greater rates than ever before. But this is kind of a newer problem really over the last couple of decades. So this conversation around planning continues to evolve. Now I've been helping clients and advisors plan for this stuff for most of my career, about 25 years. For me, this all started when I was actually five years old and I went to see a great grandmother who was in a medicaid facility. Now, if anybody's ever dealt with a medicaid facility, it's not always a horror story, but it's usually not the type of care that we would choose for ourselves or for a loved one. And really, at the heart of this conversation is preserving that ability to choose. Not everyone's going to need care, but I find most people, when they get to that point, they want to have choices. And that's why it requires some type of planning. One of the interesting things you said a moment ago was that, you know, CPAs and attorneys are part of that client team. Now, I've been teaching continuing education around this stuff to CPAs and attorneys for years. And every attorney I've talked to has seen clients affected. But. This type of planning has changed so dramatically. There's a number of different solutions out there. There's a lot of different ways to do this, and everybody I talk to is different. Everyone has different resources, has different concerns.

Mike Mazzoni:
So I do find that the most important place to start is with the overall financial plan. Because ultimately when we talk about needing care, it's going to affect someone's overall financial situation. And when we talk about needing care, I like to think of that in the terms of income and expenses, because ultimately that's really all it is. If we need care in the future, it's just another expense. It's an expense that may or may not be there, but it is something that we can plan for. So I do think that, number one, that conversation needs to start with the overall financial plan, because, of course, the number one goal is that retirement income that is got to be where it's supposed to be. But when we're doing financial planning, one of our jobs is we've got to project over the course of this financial plan, what are the biggest threats to that secure retirement? And it does tend to be those medical expenses that come into effect. So for me, this all started when I was really little with a grandmother who just didn't really have any resources and was forced to go into Medicaid. But I had to see it several times with different family members, most recently with a grandmother that had dementia for a decade. So I've seen firsthand how important it is to have this conversation. But again, everyone's different. So I only work with financial advisors like yourself. I do find most clients want education around this type of planning, but they want to work with an advisor that's holistic and can offer a variety of solutions. And that's you.

Dwight Mejan:
Yeah, well, Mike, I can relate to that. I have a mother in law. I've shared this on the show before. She's been seven years in a facility and did some spend down before she qualified for Medicaid. And and as a result of that, even prior to this to that event, I had clients that I worked with and every single one of them, I always bring up the conversation about long term care if they've looked at it. We're going to get into some of the specific types here on today's program so people can understand there's really there was really one pathway, You know, years ago in the 90s, we didn't really have one of the more modern approaches that we'll talk about today. But I've seen firsthand not only what it can do to family members, having a grandmother myself, but also a mother in law still living today in a facility on Medicaid. And loved what you said, Mike, about the choices, because that's really what it comes down to, is when you have choices in life, that's really what our money provides us. I ask people all the time in my events, you know, what is what is something we can't get back.

Dwight Mejan:
And the response I always get is time. What is time? Particularly in the business world? What's time? It's money. And at the end of the day, what is money? Money is freedom. It's the freedom to have choices. So the more money somebody has, the more freedom, the more choices they have, the less money they have. Choices are being made for them. And that's the difference with Medicaid. And you're going to get into that. But I know Mitchell I'm going to bring Mitchell in. I know Mitchell was going to start out just kind of asking some basic questions just so maybe some of the younger people listening on the show that might have ten, 15 years left in retirement. There's some great years there to be planning for this event as well. There's not a certain age. But Mitchell, why don't you I know you had some questions that we came up with here before that we wanted to talk to Mike, so I'll let you launch one atom here.

Mitchell Keiser:
Yeah. So, Mike, what is long term care insurance and how much does it cost?

Mike Mazzoni:
So that's a great question. Now, I do find that I don't even like to use the words long term care because I know when I hear those words, I don't think of anything pleasant. I usually think of something like a nursing home. And most of the people I talk to, even if they need care, they want to preserve that ability to choose. I find most people I talk to want to stay at home as long as possible. Right. We talk about needing care. This really refers to help with what's called the activities of daily living. And these are things we tend to take for granted, like eating, bathing, dressing, continence, what's called transference. Just being able to get in and out of bed or in and out of seating or being able to use the bathroom. Once someone needs some assistance with those activities of daily living, that's what requires care or a cognitive impairment like Alzheimer's or dementia, just like what I saw with my grandmother. Now there is a wide spectrum of care. All the way from home care, where a home health aide comes out maybe just a couple of days a week. Sometimes there's some physical therapy involved. Full spectrum all the way through to a full blown nursing home memory care ward. And there's a lot of different options in between. And this is an area of planning that continues to evolve significantly. A lot of this is simply driven by population demographics. We've got 11,000 baby boomers turning 70 every day, and that's going to happen for about the next 20 years. Now, people turning 70, they don't need care right away. They're going to run around and enjoy retirement.

Mike Mazzoni:
But we're already seeing more people need care than ever before. A lot of this is simply just due to medical science. You know, think of 40 years ago, things like breast cancer, prostate cancer, those were big issues. Today, both of those things are pretty simple. Outpatient surgery. You could be home the same day. So we're living through all different forms of cancer, heart disease. We're getting things like Alzheimer's and dementia at much greater rates. And I find that's what tends to present the biggest threat. When it's something cognitive, that's when people usually need care for the longest. And of course, that's when it's the most expensive. Now, the cost of care also varies wildly, really depends on where someone lives, how close someone is to a major metropolitan area. Most care starts at home. Depending on where someone lives, the type of services that are required, home care can be anywhere from 50,000 to 80,000 a year. When someone goes to a facility, that's when the costs tend to escalate dramatically. And care in a facility can be anywhere from 80 to 120,000 or even more per year. For my grandmother. Now, fortunately for my grandmother, we had done some planning, so we were able to keep her at home for about the first seven and a half years of her dementia. But those last few years, it was over $120,000 a year. We had three different nurses rotating 24 over seven to give her the care that she needed. But fortunately, because we had done some planning, we could keep her at home for most of that time. So, Mike.

Dwight Mejan:
What does it average here in North Carolina? If we talk about like facility based care, what would you say to average going rate is per month?

Mike Mazzoni:
It's usually going to be about 7500 a month.

Dwight Mejan:
Okay. So I like our listeners just for a moment to give you a visual picture of that. Imagine all of your assets in an hourglass, just everything you have, you know, from a liquid investment standpoint in that hourglass and you or your significant other, your spouse needs care. Flip that hourglass upside down and just imagine it being sand running out at 7500 bucks a month and just divide that into your portfolio. That's how long you could self-insure, which is one of the ways that we can go. And I can tell you on the wealth management side, I got a call about six weeks ago from a client who we had to have a meeting and had to rearrange the portfolio because they didn't have private insurance. Medicare had run out. We'll get to that in a minute. And they were into their own pocket for investments and they had some income coming in. Like a lot of people, Social Security had some pension money but still needed additional money. So I had to look for a way to de-risk the portfolio based on their current objectives to just get income out of that portfolio. And I can tell you, sitting with that spouse, her main concern outside of her husband, which was the main thing, is getting his quality care. But right up alongside that was am I going to have enough money? Is this going to is it going to last? And to a certain extent, just based on her situation, I couldn't give her the definitive on that because we don't know where the care is going. But it did cause a shift and change in terms of the whole strategy that we had for retirement. And that's just not something that I don't think anybody listening to this wants to do. Your money is your peace of mind and your choices. But Mitchell, I think you're following up on a couple other questions here that you had for Mike on that topic.

Mitchell Keiser:
Yeah. So just leading into something you said. So there's a whole bunch of different sectors of long term care where it could start in your home versus moving into an assisted living facility all the way to skilled nursing. So do you know what is the current ratio of people that will need any form of that care during their lifetime?

Mike Mazzoni:
Well, I don't like to talk a lot about statistics or averages because everybody's different. But the scary statistic out there, there's two of them. The first one is that 70% of people are going to need some form of care. So that's most of us. The second scary statistic is that about 20% of people are going to need care for five years or longer. And these are the expenses that can absolutely derail everything else that's happened in the portfolio. So it is important to plan, But you hit on a couple of important points. There is absolutely the aspect of protection with this type of planning. But I find that sometimes even more of a concern for clients is what is going to be my experience if I actually need care. And of course, when someone needs care, it's an ongoing experience for them and for the whole family. And I find that most of the clients I talk to, even if they have plenty of money, they usually don't want the family to have to deal with providing any care or dealing with that care provider. So that's an important aspect that sometimes often gets overlooked with this type of planning is the way the claim is being paid and the overall experience. So I'll talk about that a little bit towards the end. But I do find that that becomes a very important part of the conversation. Not always is it about the money. It's more about what's going to actually happen if I need care. Yeah.

Dwight Mejan:
So, Mike, this is probably a good time to just so our listeners are clear here as well, especially some that are maybe a little ways from Medicare. I think there's some misconceptions out there for, you know, how long maximum potentially is Medicare going to pay for this and what are the options for financing long term care? You know, we don't want this just to be about people think we're on this show trying to sell insurance. I think people need to understand who is covering long term care and what's the length of time each of those different, you know, entities, if you will, or individuals, how long are they going to be covering care if we need it?

Mike Mazzoni:
So let's talk a little bit about the spectrum of planning. Now, by default, everyone does have a plan. Even if you don't have a plan, you actually do have a plan. Of course, by default, that is no plan. Now, some people will call that self-funding. You have some people that may have heard that term self-funding. So this is pretty simple. This just simply means it's never going to happen. But if it does, I will just pay dollar for dollar out of pocket. Well, 40 years ago this worked okay because we didn't need care anywhere near as much or for as long. But now this can become a problem. So don't hear this as much anymore. If I do hear this, it's usually one of three things. The first time I'll hear this is if someone says, Mike, I've never had this conversation with my financial advisor before. But more and more people are getting aware of the risks. Certainly, ignorance is not going to help anyone. The second time I'll hear this is if someone says, Mike, I've got a crystal ball. Everybody in my family drops dead at 70. I know I'm going to drop dead at 70. I'm not going to need this stuff. But of course, the medical issues that affected previous generations are not having quite the same effect on us anymore.

Mike Mazzoni:
The last time I'll hear this is if someone says, Mike, the government's going to take care of me. Now everybody's got a different opinion on the government. We are not going to get into that or we'll be here all day. But most people I talk to don't want to have to rely on a government program to pay for care. They are not designed to pay for care from a financial planning perspective. All they do is give us a little bit of help for a short amount of time. There are some caveats. Or you have to be destitute. So I'm talking about Medicare and Medicaid. Now, with Medicare, you have to get sick or hurt requires a three night stay in the hospital and then Medicare will pick up 100%, but only for the first 20 days. So very short amount of time. Starting day 21, there is a $200 per day co-pay. So the cost jump pretty quickly and they jump pretty dramatically. That $200 a day co-pay applies from day 21 through day 100. After 100 days, Medicare pulls out. It's all 100% out of pocket.

Dwight Mejan:
And now you're Mike only skilled care. Correct. We're not talking about the because there's three levels of care skill. Intermediate custodial Medicare doesn't address those. We're talking about only skilled care here. You got it.

Mike Mazzoni:
Only skilled care.

Dwight Mejan:
We always talk about what Mike's saying here is you got to jump through some hoops that Medicare put in place. And if you don't make it through one of those hoops, Medicare can shut it down. I know in my grandma's case, you didn't get to this point yet, but she wasn't showing improvement after about 30 some days, even though she met the other criteria. She wasn't her condition wasn't improving. And they cut her off before that 100 days hit. But go ahead.

Mike Mazzoni:
That's exactly right. That's the caveat, is that the doctor has to say that it's rehabilitative care. So the doctor has to certify, oh, this person's going to get better. They're going to walk out of here just fine. As soon as the doctor says they might need a little bit of help going forward. Medicare pulls out even in the first 100 days. So I'm sorry you had to see that. But you know something cognitive that can't be rehabilitated, Medicare is usually not involved at all. So just a little bit of help, short amount of time. Remember, three nights, stay in the hospital first, but just really that first 20 days, that copay jumps in pretty quick. So you got.

Dwight Mejan:
Go ahead, Mike. You were going to say something?

Mike Mazzoni:
I was going to say, of course, the other government program is Medicaid, but that's where you have to be totally destitute. And with Medicaid, you lose all ability to choose. You essentially become a ward of the state. You have to go wherever they happen to have an open spot. And it's just not ideal. One of the worst stories I've heard a couple of years ago I did a client seminar and the lady raised her hand, said, Hey, Mike, four years ago, my mom was 89, got Alzheimer's, had about 400,000 in the bank. So they figured, okay, 89 Alzheimer's, 400,000, they'll probably be okay. Of course, fast forward four years. Well, they spent all 400,000 of her money on care. So now Medicaid stepped in. Now, fortunately, they did allow her to stay in the same facility. She had been paying 100,000 a year. She had a semi-private room with one other person. Now she shares a room with five other people. The level of care is different, the food is different, the medication is different. Medicaid reimburses these care providers a fraction of the cost, and fewer and fewer care providers even want to deal with all the hoops to jump through to get reimbursed from Medicaid. So I don't see this as much anymore because more and more people are realizing that this is not something you should leave up to chance. And unfortunately, the government programs are really not going to give us any help here.

Dwight Mejan:
Yeah, well, that's that's where we go into where I'm going to have Mike address next is so you see, there's your self-insuring. It's Medicare, which is limited maximum up to 100 days. And if you have a supplement that could pick up that copay depending on what you have for secondary. And then there's Medicaid. And this is where the private sector has come up with its own solution for those that want to explore it. And that's where Mike's going to dive into next. But Mike, I think it would be helpful for the listeners to understand a little history of what's come about, because there's really more of a I call it more of a traditional approach to financing long term care, using private insurance, traditional based policies versus more of a modern based approach, which is more using assets from the portfolio. Could you just speak briefly to to those two and then maybe a little bit of the pluses and minuses of those two programs?

Mike Mazzoni:
Well, let's talk about the traditional first or the first plans that came out, because this is where there's a lot of confusion. There has been a lot of change with this type of planning. So the traditional plans were the health based long term care plans came out about 40 years ago. So think of mid to late 80s Miami Vice Times were good. Unfortunately, there were a couple of assumptions that the insurance companies got wrong and that changed these types of plans dramatically. One of the biggest things they got wrong was interest rates. So any insurance that we own, the price in part is built on interest rates. You pay a premium, the insurance company invests that money so that it can grow so they can pay their claims down the road. Now, by law, those investments have to be very conservative. These are things that are tied very closely to interest rates. Well, 40 years ago, when these came out mid to late 80s, we had double digit interest rates. Interest rates were pretty high. Well, unfortunately, the pricing was built on those high interest rates pretty much ever since those plans came out. We were in a declining interest rate environment until recently. And interest rates were so low for such a long period of time, it had a dramatic effect on these policies. The insurance companies never earned the rate of return that they thought they would.

Mike Mazzoni:
So low interest rate environment for that long had a huge effect. Second big thing they got wrong was the overall marketplace for people doing this type of planning. So there was an assumption it was going to be mainly people 55 to 75 years old. So the thought was, well, some of these younger clients will pay more premiums to offset some of these older clients that are probably going to need care sooner. They thought there'd be kind of an even spread of risk here. Well, what actually happened, you get about 15 years into these plans, the average issue age was right about 72 years old. So the insurance companies started to realize, oh, no, we are heavily weighted towards clients that are probably going to need care sooner. They weren't getting enough of these younger clients to offset that. Now, this is the biggest thing that's changed in the last decade. I've done more planning with clients in their 40s and 50s than I ever would have thought because they're seeing their parents affected. I'm 48. I have my own personal long term care plan. I've just seen too many people in my family affected. But those original plans, the companies were heavily weighted towards riskier clients. They're already paying out hundreds of millions more in claims than they ever thought they would.

Mike Mazzoni:
Last big thing they got wrong was what we call the lapse rate. Now the lapse rate. I know that sounds fancy. It's very simple. All this refers to there are a number of contracts that are taken out every year where somebody pays premiums maybe for several years. They wake up one day and say, I don't know if I need this. They stop paying the premium and the policy goes away or lapses. So the insurance company is off the hook. So insurance companies know there's a number of contracts where they're going to take in premium payments. They're never going to have to pay anything out because that policy is going to lapse. So they can build that into the pricing. Now, because these were new, the only thing they had to look at was life insurance. When you look at life insurance over the first decade of a policy, they lapse about a third of the time. So about a third of the time the insurance company knows they're going to be off the hook. They're never going to have to pay a benefit. So they'll build that into pricing. Now, this number is always shockingly high to me when we dig into that further. Normally, a policy lapses because it was a temporary need or it was something that was just bought, not not part of the financial plan.

Mike Mazzoni:
Well, this type of planning doesn't work like that. It's got to be part of the financial plan. And most people realize if they need care, it's probably going to be towards the end. So nobody let these go. So instead of lapsing a third of the time, these only lapse about 2% of the time. So 98% of the time the insurance company is on the hook. They're going to have to pay a benefit. So these are the three big things they got wrong that's led to all these changes. Most of the companies that used to do these plans have gotten completely away from it because they've already got too much risk on the books. Now, very important to note. If these plans are used correctly, they can be worth their weight in gold. If you ever know anyone who has used one of these, they will tell you that is the best money they've ever spent. But there are three complaints that I continue to hear about these. The first one is, Mike. I bought this thing 20 years ago. I've never heard from my person again. I don't even know what I have. So I do a lot of reviews with these. But the big reason why I do a lot of these reviews is the second complaint. These are not guaranteed and premiums can go up.

Mike Mazzoni:
And a lot of times these premium increases happen when clients are older, maybe not as healthy. They might not have any other options. And I do find that most of these clients don't want to have bills suddenly increasing in retirement. Normally one bills to go away. So the lack of guarantees from a financial planning perspective can make these a little bit more difficult. I find most people don't want to pay for something they feel like they're never going to use. Even so, the last complaint I'll hear about these is that these work like fire insurance on your house. House has to burn down to get a benefit. So I talk to clients every day, say, well, I don't know if I'm going to need care. I don't want to pay premiums for 20 years and then have all that money just go into the black hole. There's usually not a cost recovery feature. So the lack of guarantees, the lack of cost recovery, make these plans a little bit more difficult from a financial planning perspective. Again, if they're using the right way in the right scenario, they can be fantastic. But I do find a lot of clients want to make sure that, hey, no matter what happens, if I never need care, I still want someone to benefit.

Dwight Mejan:
Well, the other thing, Mike, to the exact point you're talking about, I get people who call me to come into my office that bought these things before I was even their advisor. They come in with these policies and they have a letter from the insurance company with with basically a couple choices. One is we're raising the premiums, let's say 30%, so you can pay the extra premium or we'll trim your benefits down and keep your premium the same that you've been paying. Not a fun choice, is it? You know, you're going to we're going to reduce your benefits or you're going to pay us more money. So that premium guarantee is not on there. And that's that's tough. Those are tough decisions for people to have to make. It also depends on their income sources in retirement. Some people have enough income. They could make that decision and go, Yeah, I believe in this. I'm going to pay the higher rate. And then there's other people who budgeted this based on their income at that time. And we know we all know what inflation has done and then they're faced with the only choice for them is to cut the benefits.

Dwight Mejan:
And no one wants to do that. So but hey, Mike, maybe let's do this. Let's let's take a break and we come back. We'll get into some of the meat here in the second part of the show. So if you got somebody who's been talking about long term care, we're going to dig into the meat of it. And I can tell you from a financial perspective, from the wealth management side, we're going to give you some really good creative ideas that you could do with money in your portfolio, which is going to come back to the second form of long term care. If you've got people who have looked this before, call them up here a minute. We'll take a quick break and we'll be back. But reach out to us if you want to talk with us. (828) 278-7814. If you're in the western part of the state or (910) 235-0812. If you're in low country or go to Retire360Show.com. We'll be right back.

Producer:
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Dwight Mejan:
Okay. Hey, folks, we're back. Welcome back. If you're just joining us here on the Retirement Wealth radio program here, brought to you by 360 capital. We've got a special guest with us today, Mike Mazzoni. He is a specialist in the field of long term care planning. And Mike just did an awesome job just setting up the problem and the need. If you have assets and you are in retirement or getting ready to retire, if you do not have a plan in place for long term care, you are the plan. Right now. You are self insuring and at a cost of anywhere from 7500 to 10 grand a month here in North Carolina. You do the math on your own portfolio. Just put it all in hourglass, flip it upside down and imagine it being drained somewhere at 7500 to 10 grand a month. Mike's going to get into this next segment here about the solution of using what's called asset based care. He just got done before the break. Sharing with us about premium based care, two big problems. Their rate increases. Those of you that have these older policies, you've probably can relate to this. You've had a letter in the mail and you've had your premium go up. The other issue with those policies many people have is it's use it or lose it. If you have an event, you know you're going to receive some benefits with that premium type policy. Traditional based policy. But if you never need it, you've paid all those premiums and nobody receives a benefit. Well, there's a cool solution on the market today called asset care, asset based care. I'm like, why don't you tell our listeners about the solution and some of the features of these products?

Mike Mazzoni:
So when we talk about potentially planning for care, I always like to look at someone's overall financial plan because everybody is different, everyone has different concerns and different resources. But most people, when I look at their plan, they've usually got their assets carved into different buckets.

Dwight Mejan:
He's on a whiteboard right now, so you can go to our YouTube channel and you can watch kind of what he's doing on a whiteboard if you want to see that, especially if you're just coming in here halfway through the show. So go ahead, Mike.

Mike Mazzoni:
And usually those buckets have very specific instructions on what they're supposed to do for retirement. I find a lot of clients I talk to, bulk of their assets are qualified, so they're in an IRA or a 401. K, sometimes at a at a former company. Now, the way this money is taxed has changed with recent legislation, and we have the ability to use qualified money for tax free long term care protection. This is actually the bucket of money that I'm using personally for my wife and I using an inherited IRA. So again, a number of ways to do this. Now, some people I talk to want to keep as much of their money invested as possible. And of course, that's goal number one, right? We've got to make sure that retirement income is where it's supposed to be. So I'm talking to a business owner. Well, a lot of business owners, most of their retirement equity is in the business and we have the ability to get deductions through the business. Sometimes I'll talk to an older client who may not be healthy, but if they have an old annuity, we have the ability to use a special annuity tax free for care. An annuity can be a very valuable financial planning tool. It's the only financial instrument that can act like a personal pension. Give us that guaranteed income stream. A lot of clients like annuities because they grow tax deferred and they can offer some guarantees. But ultimately when you use that annuity, it is taxable. So the government put in special legislation to give us a special annuity that we can use tax free for care. So this is a huge tax incentive the Government has given us. Government does not want people on Medicaid. It's a huge loss for them.

Dwight Mejan:
Was just going to say that, Mike. That's exactly why folks listen to what Mike's saying. That is the benefit. When the government says you could take an investment that you would otherwise be taxed on if you pulled money out and says if you roll this into this asset based plan for long term care, we're going to give you the benefits tax free. They don't want the liability. There's incentive there. So go ahead, Mike. It's exactly, exactly the point.

Mike Mazzoni:
Well, in about half of my conversations are as much about tax planning as they are about planning for care. Sometimes we just want to find the most tax efficient use of resources. And if we have something that's tax deferred but ultimately taxable, we have the ability to use it tax free. That should be in the consideration. So the whole idea here from a financial planning perspective, you may never need care, but if you do, ultimately all it is, is another bill just another expense? Well, we're going to need to sell something. We're going to need to pull from one of these buckets of money. So if you need care in the future, what bucket would you pull from first and what would be the tax ramifications? If you have to liquidate investments? Well, you're probably going to have to pay capital gains tax. If you have to pull out more from that 401. K, well, that's going to create some additional tax issues. So the whole idea here is just like any financial planning, we want to identify the most appropriate resource to allocate. So all we're doing is identifying an asset to allocate towards these expenses that are likely to occur. This is usually a bucket of money that's geared towards safety protection or even legacy. I find a lot of times the bucket of money we reposition is something that we just want to go to the kids or the grandkids. But the whole idea here is if we can carve out a piece, well, the younger and healthier you are, the longer we can make that money last, which has the effect of putting a shield around the rest of the assets. So just like any financial planning, we're going to try to cover some of these risks to let the rest of the assets do what they're supposed to do. And so this is going to give us that ability to choose and give us some flexibility in our plan. What I like.

Dwight Mejan:
About that diagram, Mike, is it's a great visual. I encourage you to go on to YouTube channel and just look. The way Mike drew that up is a lot of clients that we serve, they don't depend on 100% of the portfolio assets for income. They're to put it bluntly here, those clients, when they get their wings and fly out of here, those are assets that are intended to go to the kids anyway. So why not slice a piece of it off? Will help determine what the right slice of that is and use it, like Mike said, a shield around the rest of the portfolio. So you're not using those assets and bleeding them down to where you might be affecting the assets that you do need for income and retirement. So.

Dwight Mejan:
That in your next good stuff.

Mike Mazzoni:
These plans are called asset based because they involve other financial instruments like life insurance and annuities. But we're not using those things for what they normally do. We're just using those for guarantees and for cost recovery. So these plans are fully guaranteed. What you see is what you get. And if you never need care, the money can go to wherever you want. Any beneficiary. Now, these are very customizable. This is not a cookie cutter, one size fits all conversation, but they can all be broken down very simply and do a couple of pieces. We have a base contract that can be either life insurance or annuity. Now, for clients that are younger and healthier, think sort of that 50 to 70 range. We're going to lean towards the life insurance chassis that gives us a little bit more benefit per dollar for clients that are older, maybe not as healthy. We might lean towards the annuity chassis, which is a little bit easier to underwrite and can actually cover clients all the way up to age 85. So number of ways to do this. First example I'm going to give you is that life insurance chassis. Now the way we do this, we use something called survivorship whole life. I know that sounds fancy. It's very simple. When you hear the word survivorship, just think of two people.

Mike Mazzoni:
We have the ability to cover both spouses on a single contract. Now. I like that. I don't like to talk a lot about statistics, but it does paint some of the picture. Average length of care for a man is about 2.2 years for a woman, almost twice as long, closer to 3.7 years. But those are averages. Those are right down the middle. Half the people go past that when it comes to something like Alzheimer's or dementia. Now our average length of care is closer to eight years. So my grandmother even made it past that eight year average into her 10th year of dementia. But while I don't like to talk a lot about statistics or averages, most people when they see this joint contract realize there's a really good chance one out of two is going to need some type of care. Most of my conversations are with husband and wife. Usually it's the husband that says, I don't know if we're going to need this. And then I can hear the wife kick him under the table. This is clearly an issue that faces women to a much greater degree and a much greater extent. I don't want to guess. I want to make sure they're both protected. So that's all that means to people on a single contract.

Dwight Mejan:
So, Mike, can they do that on like if this was being funded with let's just say the husband has traditional IRA pre-tax money, Are you saying that the wife can be covered on that same contract even though we're using his funds, which are under his Social Security number, she can draw benefits off of that?

Mike Mazzoni:
Yes. There's several provisions in the tax code that they've allowed a spouse to be able to access for long term care benefits. That's unique. So this is definitely something the government continues to pass legislation and make changes in the tax code for us to be able to do this stuff. So that's all that means up to two people. And of course, whole life insurance, that is the oldest type of insurance there is. It's all built on guarantees. So these plans are very black and white. It doesn't matter what the market does, doesn't matter what interest rates do. This is going to behave exactly the way we think. No surprises. I find that's very important because some clients, they don't need care for 20 or 30 years. We want to make sure that bucket of money is going to be there. The second piece is really where we're adding the additional leverage for care and we can sort of dial that up or down. But we do have the ability to offer a benefit that will last as long as care is needed. So this doesn't have to run out. That's important. I find most people the biggest concern is something cognitive, like what I saw with my grandmother. Well, my grandparents years ago, they did their planning with their outside advisor. My grandmother had a six year benefit. It was great. We got a check for six years. But I can tell you very clearly the trauma in the family. When the check stopped coming, we had to pay over 120,000 a year out of pocket the last three and a half years of her dementia.

Mike Mazzoni:
And that's what tore everything apart. So I do tend to lean towards this now. Not everybody needs this. Not everybody can qualify for this. But I find that this is really what puts an ironclad shield around those assets. Most people I talk to, if they need care for a year or two, that's not that big a deal. It's usually the big stuff that we want to protect ourselves from. So that's all that means. Up to two people fully guaranteed, can last as long as either or both of them need care. Now, these plans give us flexibility. They give us guarantees and cost recovery. If we don't need care. So very important with these type of plans, only three things can happen. There's only three outcomes. First thing most likely thing clients are going to live a long life. They live a long life. At some point they'll get sick or frail. Need some type of care. It's the most likely thing to happen now. Of course, not everyone lives a long life. Some people just drop dead. And the third thing? Some people change their minds. So live, die or quit. Those are the only three things that can happen. If you can come up with a fourth, I'll change my whole presentation. Actually, I had a I did a live seminar a couple of years ago. I had a pastor in the audience. He said, What about the rapture? Well, it's probably in the middle here somewhere. Who knows? We could be in the Rapture right now. But normally live, die or quit. That's it. With this type of planning, in each case, you have a benefit.

Mike Mazzoni:
So let's say we have husband and wife, 62 years old now. A lot of people I talked to, they've done some research. They've looked at the statistics, they've looked at the costs or they've had a family member or a friend affected. It's become real. So a lot of my conversations are with clients that have already accumulated their assets. They've already built up their nest egg for retirement, so they're just carving out a piece of that. So most of my cases are a single premium. Now we do have the ability to pay over multiple years a number of ways to do this. But the first example we're going to show is a single premium. And in this case, we're going to start out with a single premium of 200,000 that everybody's different. Some people do more, some people do less. But I think the reason why a lot of my conversations start out there is a lot of these clients were thinking, well, probably just one of us. And if one of us needs care for even a couple of years, we're going to need to have some money for this. So that's what I like about starting there. Either one of these clients need care for even an average amount of time. Well, there's certainly likely to spend this, so we're going to position this all at once. Single premium, fully guaranteed. It's all set up and we can forget. So let's say 20 years from now, we cure Alzheimer's, no longer a concern. Well, because of this whole life chassis, this has guaranteed cash value.

Mike Mazzoni:
So it remains a conservative asset in the overall portfolio. Money continues to grow. Now, we're not doing it for this. Every once in a while, a client will ask, Well, how does it grow? What can I use it for? Well, it's their money. They can use it for whatever they want. But I always want to come back to remember why we're talking about this. This is not there to build wealth. It's really protecting the rest of the assets. Well, we know things can change. So if things change, at least we can get some or all of that money back. Just depends on how we design the contract. So we're not really doing it for this. That's just there to act as our exit strategy. If things change. Now, in this example, let's say they pass away, never need care. This will pay a death benefit of 270,000. So we're not really doing it for that either. That's just there to act as cost recovery. A lot of these clients say, I don't know if I'm going to need care or not. I just don't want to waste the money. Well, this goes wherever you want Children, charity trust. Their money goes wherever they want. Now, remember, in this example, we've got both husband and wife protected. So first spouse passes away, nothing happens. Policy stays intact because they're both protected. So this would pay the death benefit on the death of the second spouse. So it's a second to die contract. So we're not trying to buy a lot of death benefit here. We just want to recover that cost. So, Mike, what.

Dwight Mejan:
We're really doing here for the listeners to really grasp this, we're we're merely repositioning an asset that's in our portfolio and earmarking it or designating it for a highly likely event for one of two of us. If there's two of us on the contract. And it eliminates the traditional based long term care policy that says we might pay this premium and never need it, this addresses that issue head on and says, if neither one of us need it, someone's going to receive the benefit of what we invested in the form of tax free death benefit in the form of life insurance. You got it exactly right.

Mike Mazzoni:
So we're not really buying it for that. It's just there for cost recovery, right? Yeah. But now if they live in the care most likely thing to happen, this is going to pay $97,000 per year. But that's also per person. They're both protected, so they both need care at the same time. This would pay 194,000 per year. And in this example, these numbers never run out. This will last as long as either or both of them need care. Our longest claimant had dementia for 19 years. We also paid for her husband a couple of years. This is what I find makes the difference in most of the planning. So what I like about the way these numbers work, either one of these clients need care for an average amount of time. Well, they're likely to spend this 200,000 now by reposition running it ahead of time. If either one of them need care for just an average amount of time, well, there's certainly going to recover their cost. But now they're both protected if something bad happens. So for those clients who are self-funded, which most of them are, well, that's exactly we're doing we're just doing it better because we're making sure the money never runs out. So some of my conversations are pretty simple. Mr. or Mrs. Jones, what do you think you might spend on this anyway? Let's go ahead and reposition it now while you're healthy. Make sure it never runs out. And one of the most important parts of this is the experience with having somebody at the insurance company dealing with that care provider and handling all the billing and administration. Most people don't want family involved at all. So that's another area where this planning is important. So no matter what happens, they're going to recover their cost. But now if it is something bad, this will last as long as care is needed. So that's pretty simple.

Dwight Mejan:
It's a great, great lay out there. We've got, I think, just a few minutes left. Mitchell, Did you have something else? No. We had put some stuff together here before Mike got on. Is there anything that you want to ask or something you want to rebound on here that he had addressed? Sure.

Mitchell Keiser:
So is there a certain amount of ADLs that a person must not be able to perform, or is there something that triggers somebody from being able to use their long term care insurance? Because I'm sure somebody can't just get older and say, hey, you know, I feel like going into a facility now, so what? What are the qualifying triggers guess that a person would have to have.

Mike Mazzoni:
So it is those activities of daily living. And what I like about the way some companies do this is it can actually be the client's doctor that certifies that they need help with those activities of daily living. So I mentioned the activities of daily living earlier. There are six of them. It's two out of the six. Once the doctor says you need a little bit of help with two out of the six activities, that's what triggers a benefit or cognitive impairment like Alzheimer's or dementia requiring supervision. So that's that's what's going to trigger the benefit.

Mitchell Keiser:
Okay. So two out of six, That was kind of my question.

Dwight Mejan:
I think Mike did a great job just kind of laying that out there. But folks, I would just encourage everybody, you know, with the odds, the statistics and like Mike said, this isn't to scare people, but with the odds of something being so high, you know, I always say somewhat of a joke. There's two people on the planet I've learned not to argue with. One is an actuary because they're always right. They can look down on a population and within a very small fraction of a percentage point, they can estimate certain things and they know the likelihood of all of us needing long term care. The other person is my wife. I've learned not to argue because she's usually right at the end when I'm when I get to that situation. But seriously, folks, it is something that if you have looked at this before, maybe you looked at this and maybe you got turned down for insurance. Mike, just speak to that. How is the underwriting for this done? Because I've talked to people who've been in my office and said I looked at this five years ago or seven years ago. I got turned down. They kind of have that sheepish discouragement look on their face because they'd like to have it, but they just think they're done for good. And sometimes they are, but sometimes they're not. So maybe in a minute or less than a minute, just tell folks how do they qualify to see if they're eligible, if this is something they want to pursue and they talk with with us.

Mike Mazzoni:
So it is absolutely someone's health that buys this, not necessarily the money. Now, some companies to do the approval is a telephone interview. And so you don't ask any health questions. I'm not asking any health questions. It's a licensed nurse that calls and interviews the clients separately. But there are some ways that we can be flexible with underwriting because of how these policies are structured. So we can cover things like rheumatoid arthritis, insulin dependent diabetes. If someone's had cancer with us, you have to wait about a year. But we can underwrite. Even if someone has had cancer, heart attack or stroke. Now the underwriter might want to look at the medical records to see the severity. Usually they're looking for a level of stability or control. But I had a gentleman last month who is 72. He's already had both his knees replaced. He got declined by four other companies. We were able to approve him. They did not approve Lifetime for him. He's certainly not a standard risk. So, you know, it just works out different. If anyone is aware of a health concern that they know will come up in underwriting, we can always go to an underwriter ahead of time just to get an idea of what an approval might look like. So not everybody gets lifetime, but there's a number of different ways to structure these, where if we have somebody who's maybe not as healthy, we can usually still get something.

Dwight Mejan:
And it just speaks to to the importance folks that you're dealing with. We haven't said this a A+ rated companies. Mike brings that to the table for our clients. This is not companies you want to deal with that don't have a strong balance sheet. And certainly the companies that we're talking about here have very solid financials. That's very, very important because this is a long term commitment you're asking and for some of you, age wise, may not need this for 20 years, but you're putting a plan in place today. So you want rock solid financials. You're going to get that from us here as fiduciaries. And as someone who's looking out for those financials for you, we do that. But Mike, any last thing here, 30s you want to say to the audience? I want to thank Mike for being on here. Any any last words for our listening audience today?

Mike Mazzoni:
Think the most important thing they can do is sit down with you to have this individual conversation. Because while we touched on a couple of ideas today and everybody's different, there are a number of different ways to do this. But I do think most people like to preserve that ability to choose. And when it comes to needing care, it is absolutely an experience for the person needing care, but the experience for the whole family. And that's why it's so important to do some. Planning ahead of time. Insurance may or may not be part of that, but make sure you have a written plan to understand how things are going to be affected. And some people have sort of a general idea of what they might want to happen. But if it's not written down, who knows? So make sure you understand exactly how this could impact your overall situation. And then it's up to you to do whatever you want to do for your peace of mind. It's your plan. It's your peace of mind. You can do whatever you want. All I can really do is educate. It's up to you to make the decision.

Dwight Mejan:
Hey, information without transformation leads to frustration, and we don't want that here on this show. This is about empowering our listeners to win with their money. Mike, you've helped our listeners do that today. Appreciate you being on the show. This was unbelievable how fast this hour went. It's all the time we have for today's show. Don't think it'll be the last time we hear from Mike. Mike, we'll have you back soon again. But for those today who are listening, most importantly, here's our contact information. Reach out to us today. Go to Retire360Show.com there's a consultation tab there. It's a free consult. Take advantage of it. Reach out to us. Call us (828) 278-7814. If you're in the mountains, if you're in low country (910) 235-0812. We'll be back on this same station next week. Thanks for your time today, folks. And thank you to Mike and you all have a great rest of your week. Thanks again.

Producer:
Thanks for listening. To Retire 360. You deserve to work with an experienced and licensed expert who will strategically work to protect and grow your hard earned assets. To schedule your free no obligation consultation with Dwight, visit Retire360Show.com or pick up the phone and call (910) 235-0812. That's (910) 235-0812.

Producer:
Investment Advisory Services offered through Brookstone Capital Management, LLC. Bcm A Registered investment Advisor. Bcm and 360 Capital Management are independent of each other. Insurance products and services are not offered through BCM, but are offered and sold through individually licensed and appointed agents. Investments involve risk and unless otherwise stated, are not guaranteed. Past performance cannot be used as an indicator to determine future results.

Producer:
Fixed annuities, including multi year guaranteed rate annuities, are not designed for short term investments and may be subject to restrictions, fees and surrender charges as described in the annuity. Contract guarantees are backed by the financial strength and claims paying ability of the issuer.

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