In general, people are not happy when the market takes a downturn. Finding instruments that work in a down market can be few and far between. The Inverse Performance Trigger is one index allocation that can leverage a negative market. 

The Inverse Performance Trigger is calculated by taking the index values from the beginning of the contract year and comparing it to the index values at the end of the contract year. 

Downside protection is a feature found in all fixed index annuities. Not only are the funds protected from market volatility, but for those with annual crediting methods, the funds lock in on the annual anniversary and will never be reduced due to market volatility.

During the course of the year, the indexes can change, up and down, and are reflected within the allocated index, sometimes averaged and other times compared annually based on the beginning and ending values. Regardless of the method used, at the end of the contract year, if the allocations were to reflect a negative impact on the contract, no growth and no loss would be applied to the contract. 

Fixed index annuities are long term insurance products with guarantees backed by the issuing company. In general, the purpose for insurance products is to help provide protection, and for annuities to also provide guaranteed lifetime income. As mentioned earlier, downside protection is a feature built into fixed index annuity products. 

Fixed index annuities provide the potential for interest to be credited based in part on the performance of specific indices, without the risk of loss of premium due to market downturn or fluctuation. When funding a fixed index annuity, selecting one or more allocations is required. Although the allocations address indexes referenced in the financial market, fixed index annuities are not a direct investment in the stock market. The allocated index is used as a barometer to help determine the value applied to the contract. With that said, a fixed index annuity credits interest to the annuity contract value based upon the movement of the underlying market index. Growth of the fixed index annuity is calculated based on the index and it is linked to how that index performs. 

Some fixed index annuities offer optional benefit riders addressing lifetime income streams and health-related benefits. These benefits are either built into the contract or added as a rider for a cost. Although fixed index annuities guarantee no loss of premium due to market downturn, deductions from your accumulated value for additional optional benefit riders could under certain scenarios exceed interest credited to the accumulated value. For example, if the annuity does not have the rider built in, during a down market when the annuity doesn’t experience growth, the rider cost may be subtracted from the value. The annuity would experience a deduction from the accumulated value, lowering the value in proportion to the cost of the rider. 

Optional benefit riders generally help address the need for guaranteed lifetime income and health-related benefits. The guaranteed lifetime income rider payout is calculated based on the individual’s age, the accumulated contract value, and the insurance company’s payout percentage determined upon the inception of the contract. Some contracts offer a level payout, some offer an increasing payout, and some offer a choice of either payout options. Once the payout option is established, it is irreversible. A level payout option provides the same income for the life of the annuitant, while the increasing income option can create a potentially larger payout each year depending on the growth of the index allocation. The initial payout with a level option is generally larger than the initial payout from the increasing option.

Whether it’s for yourself or someone you care for, long-term care is an issue that we need to confront. When the time comes, most people will need help paying for care.

This article presents three strategic models and options for paying for the cost of long-term care, whether leveraging a retirement or investment account. Your specific objective will determine which model works best for your situation. 

Not everyone needs long-term care insurance, but the majority of us will need care. How your care is paid for is up to you and your financial situation. 



Leveraging a Retirement or Investment Account

Most people need to use their retirement or investment account to pay for long-term care, whether it’s through an insurance policy or directly from their account(s). Leveraging your retirement or investment account to create an income annuity is an effective way to minimize the cost of paying for a long-term care insurance plan.


Using an income annuity is the least expensive way of paying for long-term care insurance.


Each of these three models is designed to accommodate different needs and objectives.

Model 1: Funding a Traditional Long-Term Care Policy

In model 1, an income annuity funds a traditional long-term care insurance policy. Generally, once a traditional long-term care policy is in claim and the elimination period is satisfied, the premium is no longer required; however, the annuity continues to pay out. This model leverages a portion of a retirement or investment account and returns nothing to the beneficiary or estate.

Model 2: Asset-Based Funding

In model 2, an income annuity funds a traditional long-term care insurance policy. Once the long-term care policy is in the claim process and the elimination period is satisfied, the LTCI premium is no longer required; however, the annuity continues to pay out. Upon the insured’s death, the life insurance policy proceeds will reimburse the beneficiary/estate for the money used to fund the annuity.

Model 3: Hybrid Asset-Based Life Insurance with LTC Rider

In model 3, an income annuity funds a traditional long-term care insurance policy. The life insurance policy has a qualified LTC rider attached that mirrors the face value. If you are receiving care at home, going to day care, or living in an assisted living or a skilled nursing facility, the LTC rider will provide a source of funds up to your monthly allowance until the policy is exhausted. Funds that are not utilized for long-term care are distributed as a death benefit and paid to the beneficiary or estate.


Our help line is there for you.

For assistance to determine the model that best fits your situation, please feel free to reach out to one of our certified long-term care specialists to discuss your situation. 

Phone: 617.982.3692


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Imagine never running out of money— Having a monthly income that provides for all your expenses including food, entertainment, and gifts for the rest of your life and your spouse’s life. Imagine having funds beyond your income that can be dedicated to having fun and enjoying retirement. Imagine waking up to find out a world tragedy has struck and the foreign markets have crashed. Others are watching their funds plummet and scrambling to contact their advisors while you sit secure. You have a guaranteed income supporting your everyday lifestyle and no reason to worry about the financial markets to pay your bills.

That’s what our upcoming blog series is about—satisfying your everyday obligations so you can sit back, relax, and enjoy your retirement.

It would be much easier to prepare for retirement if we understood the distribution phase. 

As we get closer to retirement, we begin to imagine what our lives will be like. How we will pay our bills and how much money will we have to spend on vacations and hobbies are generally considered. Most of us have been contributing to a retirement plan through an employer and/or independently. Many of us have multiple homes and have developed hobbies we would like to carry with us into retirement. After all, isn’t that what retirement is all about, doing what we want and enjoying what we have accumulated?

You begin to review your retirement programs, pensions, Social Security, investments, personal savings, and so on. Your advisor who has helped you get where you are projects your funds to carry you into your 90s. Your financial concerns are health insurance and Medicare, not running out of money, Social Security, assistance while aging, estate planning, and taxes. 

Over the next week we will release a blog series linked below covering 5 Steps to Income Planning:

  1. Annualizing Expenses and Considering Inflation
  2. Organizing Incomes—Social Security, Pension, Etc.
  3. Calculating Income Shortfall or Surplus
  4. Establishing Lifetime Income Streams
  5. Finding a Qualified Professional to Create Income Streams 4 Life

These 5 tips to income planning should help you think through the process of organizing yourself for the distribution phase, known as retirement. For 35 years or so, you have focused on accumulating and growing your funds. Now, utilizing the funds to provide the necessary services to last a lifetime is the issue. Leaving a legacy to children may also be desired, but it can conflict with avoiding the uncertainty of running out of money and preparing for the potential challenges life throws at you as you grow older. No one can tell you exactly how to accomplish what you are trying to do. The subject is often left ambiguous and open ended.

The intent of this series is to help answer some of the questions you have and provide suggestions, ideas, and direction, leaving you with less ambiguity.