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How to Pay for Long-Term Care Insurance Using A 401k or IRA


Using Your IRA or 401k for Hybrid Long-Term Care Insurance

Let’s face it, many responsible individuals want long-term care insurance.

However, paying for it isn’t always simple. What if I told you that you can actually use a portion of your 401k or IRA to pay for long-term care insurance?

That’s right, you can actually use a portion of your 401k or IRA to pay the premiums on your hybrid long-term care insurance policy.

So how does this work?

Well, first you would need to transfer a portion of your retirement funds into a single premium immediate annuity.

The annuity is a contract between you and the insurance company in which you may transfer a portion of your IRA or 401k to the insurer and, in return, receive regular disbursements that begin immediately.

Next, the annuity distributions would then be used to pay the premiums on your hybrid long-term care insurance policy.

It’s that simple!

The annuity allows for the insurance company to make premium payments on your behalf.

It also avoids creating a large taxable event.

For example, hybrid long-term care insurance policies can be paid in a single premium or over a numbe of years. Let’s say the total premium amount for your policy is $50,000 and you decide to pay it in a single premium.

If you withdraw $50,000 from your 401k or IRA to pay the single premium, that can increase your taxable income for the year significantly.

However, let’s say you select to pay your $50,000 long-term care insurance premium over 10 years. If you transfer that $50,000 into an annuity, the annuity can make distributions over 10 years to pay the premium.

This will help to keep your taxable income lower.

Consider this, which would you rather have, an additional $50,000 in taxable income in 1 year OR an additional $5,000 in taxable income every year for the next 10 years.

The latter may help keep your taxes down.

This company is OneAmerica and their long-term care insurance is called “AssetCare.” OneAmerica’s Asset Care is a long-term care insurance policy that allows you to rollover a portion of your 401k or IRA for long-term care insurance.

In addition, OneAmerica’s Asset Care is a unique policy as it offers Unlimited Lifetime Coverage. You can never outlive your policy’s benefits!

Now before I go any further, let me answer the “million dollar” question:

Will I have to pay taxes if I use my 401k or IRA to pay for long-term care insurance?

The simple answer to that question is “Yes.”

You will have to pay taxes on withdrawals from your 401k or IRA that are used to pay the insurance premiums.

In addition, you are required to be age 59 1/2 or over to avoid tax penalties.

Now let’s take a look at how OneAmerica Asset Care uses a portion of your 401k or IRA to pay premiums.

(By the way, nothing in this article should be considered tax advice therefore please consult your tax advisor for any tax information.)

OneAmerica’s Asset Care Makes The Process Easy For You

Using your 401k or IRA with OneAmerica’s AssetCare can be explained in 3 simple steps:

  1. When you are approved for an Asset Care policy, a portion of your 401k or IRA will be rolled over into a OneAmerica deferred fixed-interest annuity
  2. OneAmerica will then add a 20% premium bonus into the account. (Ex: If you rollover $150k, you will receive an additional $30k into your annuity)
  3. Over a 10-year period, OneAmerica will use annuity withdrawals to pay your Asset Care premiums

OneAmerica makes this process so simple and easy for you. All you have to do apply for their long-term care insurance policy. They will handle the rest!

OneAmerica’s AssetCare Helps Make The Taxes More Manageable

Since your 401k and IRA are funded with “pre-tax” dollars, any withdrawals from them will result in a taxable event.

However, OneAmerica’s AssetCare makes the taxes more manageable by spreading out withdrawals over a period of 10 years.

When you roll over a portion of your 401k or IRA to OneAmerica for long-term care, OneAmerica will use it to pay insurance premiums over a period 10 years.

Your taxes are spread over 10 years thus making them more manageable for you.

Let’s look at an actual example of using a 401k or IRA with OneAmerica’s Asset Care.

Example of Using a 401k or IRA With OneAmerica’s Asset Care

For our example, we will use a married 61 year old male and 60 year old female applying for a long-term care insurance policy.

This couple is looking to jointly move $150,000 from their IRA to fund their Asset Care policy.

A single rollover of $150,000 to OneAmerica will provide $5,287 in monthly LTC benefits to each spouse. In addition, the total long-term care benefit pool is Unlimited!

That means they can never outlive their benefits!

Also, if both spouses pass away without needing long-term care, their loved ones can receive a total death benefit of $176,246!

Both the potential long-term care benefits and the death benefit offer the couple more than what they put into the policy!

Below is an illustration. To make things easier, I highlighted the areas of importance –

Now, at the very top right hand corner, you will see this is a OneAmerica “Asset Care Annuity Funding Whole Life” policy. This means our couple will move $150,000 from their IRA to OneAmerica and OneAmerica will first put the funds in an annuity.

From their, the annuity will be used to pay for your long-term care insurance premiums over a period of 10 years.

Let’s look closely at how the annuity pays the policy premiums over 10 years. Again, I have highlighted the areas of importance:

One America Asset Care Tabular Details - 401k, IRA, 403b

When the policy is in-force, annuity withdrawals will be used to pay annual premiums of $18,000 for years 1 to 10. After year 10, the policy is fully paid up.

As stated earlier in the article, OneAmerica adds a 20% premium bonus to your annuity account once funds are received. Therefore, the couples $150,000 rollover becomes $180,000 in the OneAmerica annuity.

The 20% premium bonus allows for the annuity to be sufficient enough to pay the required long-term care insurance premium.

Using Your 401K or IRA with OneAmerica Is A Great Option To Pay For Long-Term Care Insurance

OneAmerica’s AssetCare is the perfect product to use your qualified assets with the purpose of obtaining Hybrid Long-Term Care insurance!

The make the entire process very simple and allow for most this to completed on an easy application process.

If you have more than enough assets in your 401k or IRA to cover your retirement AND fund a Hybrid Long-Term Care Insurance policy, consider OneAmerica Asset Care today!

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I have access to all available long-term care insurance companies. I am also licensed to sell insurance across the country.

Feel free to schedule a call below for a free quote. I look forward to speaking with you!

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