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have an annuity question?

Do you need long term care insurance if you have an annuity?

It’s no secret that people are living longer now. But along with this longevity comes an increased need for long-term care – and that can be expensive. While some people own long-term care insurance coverage, others plan to take the chance of paying for care out of personal assets or their future income. So, if you have already constructed a stable retirement income plan, do you need long-term care insurance if you have an annuity?

The answer to that can depend on a few key factors. First, based on U.S. government statistics, someone who is turning age 65 today has almost a 70% chance of needing at least some type of long-term care services and support in their remaining years.

If you don’t already have a long-term care payment plan in place, are you comfortable with those odds?

Strategies for Paying the High Price Tag on Long-Term Care Services

Regardless of whether you receive long-term care services in your home or in a facility, the price tag can be quite high. According to Genworth’s 2019 Cost of Care Survey, the average cost of a private room in a skilled nursing facility is more than $8,500 per month (in 2019).

If you don’t mind having a roommate, you could scale down to a semi-private room, where the average price is just a tad over $7,500 per month, which equates to $90,000 per year. Even if you’re able to remain in your own (or in a loved one’s) home, the average monthly cost for a home health aide is $4,385, and nearly $4,290 for homemaker services.

Medicare pays very little for long-term care needs. And if you’re hoping that Medicaid will pay the tab, you’ll first need to spend down your assets so that you’re at your state’s poverty level before you qualify.

So, unless you have some other type of plan in place, that leaves long-term care insurance and/or your personal assets as the payment sources for a long-term care need. And, with an average care need standing at roughly three years, could your portfolio withstand that…especially if anyone else like your spouse is also counting on those assets for income in retirement?

How a Long-Term Care Waiver on an Annuity Works

One alternative for helping to pay long-term care expenses is accessing the funds you may have in an annuity. Typically, annuities are not considered to be highly liquid. This is due in large part to the surrender charges that may be incurred if you withdraw funds during the annuity’s surrender period. (In many cases, you are allowed to access up to 10% of the contract’s value each year without penalty – even during the surrender period. Once this period has elapsed, there will be no surrender charge. But you may still be subject to taxation on some or all of the withdrawal.)

Many annuities today, however, offer a feature that is referred to as the long-term care or nursing home waiver, which gives you the right to access the money in the annuity if you must reside in a nursing home (or an assisted living facility) without being charged a surrender fee.

Some annuity providers are now also offering policies that “blend” an annuity income benefit with long-term care payment strategies. In this case, you are usually required to contribute a lump sum, and if the need for long-term care arises, you can access a percentage of the account value on a monthly or annual basis until the money has been used up.

Items to Consider When Using an Annuity for Long-Term Care Costs

While annuity funds may be a viable source for paying your long-term care needs, there are some items that you should consider before moving forward. First, the income from an annuity is based in part on the amount of money in the contract. Therefore, if the account value is reduced (or worse yet, eliminated) from making long-term care payments, the amount of income you will eventually receive will also be diminished.

It is also important to keep in mind that even though you may be able to access the funds from an annuity surrender penalty-free, there is still the matter of taxation. In addition, in some cases, if annuity funds are withdrawn before you turn age 59 ½, you may also be subject to a 10% IRS “early withdrawal” penalty.

Still Have Questions About Annuities and Long-term Care Benefits?

There are many factors to keep in mind when it comes to using an annuity to help with paying for long-term care expenses. With that in mind, discussing all of your potential options with an annuity expert can be beneficial.

That’s where Annuity Gator comes in. At Annuity Gator, we are a team of annuity and retirement income professionals, and we can help you to compare various strategies that may be available to you, based on your short- and long-term financial goals.

You can reach us directly by phone at (888) 440-2468, or you can message us here through our secure online contact form to schedule a chat with one of our Annuity Gator research specialists.

Do you need long term care insurance if you have an annuity?

  • Tom
    1:45 PM, 17 January 2020

    Tanx for the info provided, it’s very helpful,in checking,more on what is available to use in an annuity

    • Annuity Gator
      4:54 PM, 21 January 2020

      Hi Tom – Thank you for your message.
      We would be happy to provide you more details on any annuity you might be considering and even comparing them to other similar annuities. In order to best support you, we would need some additional information from you. Rather than sending the info back and forth via email, it would be best to discuss it by phone. Please feel free to contact us directly, toll-free, at (888) 440-2468 to chat with one of our annuity specialists or visit
      We look forward to hearing from you.
      Annuity Gator

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