Long-Term Care Strategies

A 55-year-old male buying long-term care insurance can expect to pay ~ $2,000 a year for $165,000 in total benefits, including a 3% CPI adjustment rider (source: American Association for Long-Term Care Insurance). New underwriting has become more strict; applicants in their 40s now require blood work, urinalysis, weigh-ins and cognitive tests to look for signs of chronic illnesses or dementia. The result is higher rejection rates.

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Gross Pay After Taxes

Living Benefit Riders

The vast majority of variable annuities include an optional rider known as a living benefit (a fair description since no one has to die for the benefit to kick in). There are four basic living benefit riders (sometimes referred to as “enhancements”):


[1] GMIB—guaranteed minimum income

[2] GMAB—guaranteed accumulated benefit

[3] GMWB—guaranteed withdrawal (percentage)

[4] GLWB—guaranteed lifetime withdrawal benefit (similar to GMWB)

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Variable Annuity Charges

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Home-Equity Loans

Variable Annuity Charges

There are four costs associated with variable annuities: [1] a possible upfront sales charge (similar to mutual fund A Shares), [2] sliding scale surrender charges (typically range from 0-8%), [3] insurance charges (i.e., mortality and expense, administrative, and possible distribution), [4] management fees (expense ratio, similar to mutual funds), and [5] an additional annual expense if a rider is chosen).

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MLP Questions to Ask

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Annuity Death Benefits

It is difficult to measure the real value of a variable annuity death benefit. Conceptually, the value of any death benefit (except the “standard” death benefit that only pays contract value at death) is enormous if the investor has donative intent. The death benefit allows the contract owner to invest in one or more subaccounts he would not normally consider because of risk.

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