Some Annuities Offer Big LTC Benefits Boosts

True Tamplin thinks one annuity feature that agents and advisors should consider talking more about is long-term care benefits boosters.

Most financial professionals know that annuities can provide a steady stream of income in retirement, but they may not understand what some products can do for the holders later in life, Tamplin, founder of Finance Strategists, said in a recent email interview.

“One distinctive feature often overlooked is the potential for an annuity-LTC hybrid to have a ‘doubled benefit’ feature,’” Tamplin said. “Not all annuities offer this, but in some LTC annuity contracts, the lifetime income can be doubled for a certain period (typically five or six years) if the policyholder requires long-term care services.”

What It Means

Life insurance hybrids that offer LTC benefits tend to get more attention, partly because of tax considerations, and partly because some clients are more enthusiastic about leaving a big death benefit than about paying home care or assisted living facility bills.

But an annuity with extra LTC benefits may be offering something that a mutual fund or a well-managed portfolio of stocks and bonds cannot offer, and it makes sense for financial professionals who are helping clients with retirement income planning to understand the strengths and weaknesses of any LTC-related provisions in the products they’re discussing.

The Clients

Tamplin works for Finance Strategists, an affiliate of Carbon Collective Investing, an RIA based in Berkeley, California, that serves clients who want their investment portfolios to reflect concerns about climate change.

Tamplin said one consideration for financial professionals talking about the LTC provision in an annuity-LTC hybrid is the nature of the client.

“This feature could make annuity-LTC hybrids more appealing to a specific demographic of clients: those who are concerned about outliving their resources and the escalating costs of care in their later years,” Tamplin said.

“However,” he added, “this type of annuity would be less appealing to individuals with a higher risk tolerance, who might prefer to invest their money in riskier, higher-yielding assets, or to individuals who are confident in their health status and don’t foresee requiring long-term care.”

The Products

Two well-known carriers that offer annuity-based LTC hybrids are OneAmerica and Global Atlantic.