retirement

Long-term care agents defend insurance

Dear readers,

My rant on long-term care insurance last week generated quite a bit of feedback -- mostly angry letters from the folks who sell long-term care insurance. I will share a selection of them with you because they present sound arguments and I think it's only fair to include their perspectives. The issue is complicated and not one to be dismissed lightly. I'll also include a few other letters that clarify or shed light on the issue.

I also heard from a few consumers who are on the fence about this insurance. If you're not sure about whether it's important for you, I urge you to consult an unbiased financial planner, and don't give too much weight to the musings of a journalist. I don't want to be responsible for your decisions -- just my own!

Leslie Corcoran, a Certified Financial Planner of Family First Financial Planning in Stuart, Fla., considers herself a fan of long-term care insurance. She recommends the insurance to most of her clients, except for those in the "low or top level of assets." She encouraged both of her parents to get policies. "My mom's mom lived to be 103, and we watched a million-dollar estate evaporate -- and she was healthy."

Below is a selection of letters I received. Some are edited for length. Thanks for writing.

Dear Barbara,
I have been through the Pension Protection Act several times and don't see any language about taking money out of an annuity to purchase long-term care. I see some language about the LTC rider attached to an annuity will not be considered a part of gross income. I see some language about a special group of government workers being able to use up to $3,000 a year from their government pension to pay for long-term care insurance premiums. But, no wording about the individual taxpayer.

Is there some other area that explains this loophole that is opening in 2010? I would appreciate your direction to the section of the bill that spells this out.

Thanks,
Barclay G. Sisk
Senior Care Concepts Brokerage Inc.
Greensboro, N.C.

Dear Barclay:
You're referring to the part of my column that as originally published said:

"The Pension Protection Act, signed into law last August, uses a carrot approach to entice consumers to buy long-term care insurance. Beginning in 2010, consumers can take money out of an annuity tax free if they use the cash to purchase a long-term care policy. For those in the 35 percent tax bracket, this represents considerable tax savings."

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It turns out that this is not entirely accurate and has since been corrected. Michael Kitces, director of financial planning at the Pinnacle Advisory Group in Columbia, Md., says, "Congress really dropped the ball on this provision, because the fine print actually makes it significantly less advantageous than has been covered in the general media."

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