LTC/annuities: big sellers in a bad economy

"Well, although those are valid concerns, they are minor in comparison with what happened to many people the last time we had a bear market of this magnitude.

"If you have a 50/50 chance of needing healthcare in your lifetime and you 'flipped the wrong side of the coin up,' you could spend 100% of your assets regardless of what the market does on your care. If your portfolio goes down and you need just a few months of LTC, you would be forced to sell those assets at extremely discounted values, even if you didn't want to. If the market has declined even further, you would have to liquidate at the worst possible time.

"If the market does recover and someday you can look back on 2009 as a 'bad dream,' you may find that you wake back up in the same nightmare again sometime later. This time, though, the cost of uninsured LTC itself wipes you out rather than bad economic news or a recession.

"So, whether the market goes up or down from here on is unimportant if you are going to spend down your assets to zero no matter what the economy has in store for us–because you're going to have an uninsured healthcare need.

"But with the proper tools, such as a fixed index annuity/LTC insurance hybrid product, we can insure that LTC risk. As a side benefit, we could also create more safe money against further losses. We could accomplish that and still have some upside potential beyond bank certificate of deposit rates, if we do have a stock market comeback.

"For now, the point to keep in mind is that, while your assets are declining in value due to the stock market upheaval, it would take very little uninsured LTC expense to do real damage to your financial health Is that a fair assessment, Mr. Jones?"

The point is, by taking the subject away from scare tactics and focusing on real needs-based items other than the obvious, the professional agent can motivate that deer in headlights not to stand in the road.

In fact, a deer will hardly notice the road; it will dash right in front of a car when being chased by a coyote. In a deer's world, the coyote is a bigger threat than a car. A car only "might" be a problem.

So, talk to clients about their other needs, not the one presenting the biggest threat. This can include things like uninsured deceased income earners, uninsured LTC needs, or excessive taxation. Put the focus on good old needs-based selling.

In that process, clients will discover that the tools used to solve those problems will most often also make them feel better and help fix the obvious problems that the fear-mongers always bring up.

Paul A. Dyer, CLTC, CRFA, LUTCF, operates Tax Partners, LLC in Glenburn, Maine. His e-mail address is [email protected].