Level 5 Financial Blog
Much like the Qualified Longevity Annuity Contracts discussed last week, umbrella liability insurance can be an effective form of protection. Umbrella insurance is a type of personal liability insurance that covers claims in excess of regular homeowners, auto or watercraft policy coverage. One might think of this type of insurance as a “supplement” to these other types of policies and it is called an “umbrella” policy because it “wraps around” all of them to augment the protection which is already in place.
Despite sounding like a creature from a Star Wars movie, a QLAC is actually a tool that can be very helpful in funding a prolonged retirement. QLAC is an acronym for a Qualified Longevity Annuity Contract. QLAC’s provide guaranteed monthly payments until death and like many other annuity contracts are shielded from the fluctuations of the stock market. Further, a properly designed QLAC can help to manage one’s Required Minimum Distributions from Individual Retirement Arrangements (IRA’s). In doing so, the QLAC may also allow its owner to reduce his/her lifetime income tax bill.
Our most recent posting discussed the looming long term care crisis within our society. This article noted that due to our collective failures to plan, Medicaid has become the default provider and pays for more than 50% of the needed care for America’s elderly and disabled. Medicaid is a federal program which is administered by the individual states, so not surprisingly, this current situation has created enormous strains on state budgets. The state of Washington has initiated the “WA Cares Fund” in an attempt to address the problem. It was rejected twice by voters but came into being via action by the state legislature.
This is a question that nearly all of us should be asking ourselves but in many cases fail to do. Even with the Covid-19 pandemic continuing to rage throughout the world, life expectancies are still increasing. Advances in nutrition and modern medicine are seeming to accelerate, and it’s clear that this trend toward longer lifespans will continue for the foreseeable future.