One of the biggest unknowns in retirement planning isn’t the stock market. It’s healthcare.

People are living longer, and that creates another financial question: What happens if you eventually need help with everyday activities or long-term care?

Traditional long-term care insurance is one possible solution, but today’s insurance market also offers certain annuities with long-term care or enhanced-benefit features.

Here’s how they generally work.

What Is a Long-Term Care Rider?

A rider is an optional provision added to an insurance or annuity contract that provides additional benefits under specified circumstances.

Depending on the product, a long-term care rider or enhanced-income rider may provide additional access to benefits when the insured meets the contract’s qualifications.

Qualification may involve being unable to perform a specified number of Activities of Daily Living (ADLs), such as bathing, dressing, eating, toileting, transferring, or maintaining continence. Cognitive impairment may also qualify under some contracts.

The exact definition is important because every product is different.

How Can an Annuity Help?

Certain annuities can provide increased benefits when qualifying long-term care needs arise.

For example, an annuity might normally provide a particular lifetime income benefit but allow that benefit to increase for a limited period after a qualifying health event.

Other contracts may allow the owner to access accumulated value differently when qualified care is required.

These features can potentially provide another layer of protection for retirement assets.

Why This Matters in Retirement Planning

Imagine building a retirement strategy around Social Security, pensions, investments, and retirement accounts.

Everything works according to plan until an unexpected long-term care need creates thousands of dollars in additional monthly expenses.

Without a strategy, those expenses may have to come directly from retirement savings.

That can force retirees to withdraw money faster than originally planned.

A properly structured annuity with applicable care benefits may help provide an additional source of funds during those years.

It Isn’t the Same as Traditional Long-Term Care Insurance

This distinction is important.

An annuity with a long-term care feature is not automatically a replacement for comprehensive long-term care insurance.

Traditional long-term care insurance may provide broader benefits, different benefit periods, inflation protection, or other features.

An annuity-based strategy may be more attractive to someone who also wants retirement accumulation or lifetime-income features.

The right approach depends on your assets, age, health, retirement income, family situation, and overall financial goals.

Read the Details

Before purchasing an annuity because of a long-term care feature, understand:

• What conditions trigger the benefit?
• How long does the enhanced benefit last?
• Is there a waiting period?
• Is medical underwriting required?
• What types of care qualify?
• Is the rider optional?
• Is there an additional cost?
• What happens to remaining contract value?

These details can vary significantly between insurance companies and products.

Building a Retirement Plan for the Unexpected

Retirement planning isn’t only about accumulating the largest account possible. It’s also about protecting the plan against events that could disrupt it.

Healthcare and long-term care expenses are among those risks.

For some retirees, an annuity with long-term care or enhanced-income benefits can provide another tool for protecting retirement assets while helping prepare for the financial consequences of living a long life.