What Veterans Need to Know About Federal Debts Right Now

Economic stress is affecting everyone right now, including military-connected students and veterans. It’s more important than ever that you know your rights. And you have some important new rights about your debts.

Your Stimulus Check Can’t Be Taken for Most Federal Debt, Even Unpaid Taxes

You should know that, if you received a stimulus check as part of the coronavirus stimulus package (the Coronavirus Aid, Relief and Economic Security, or CARES, Act) signed into law March 27, that’s your money. The CARES Act prevents the federal government from taking your stimulus money to collect on certain federal debts you might have, even unpaid taxes.

If You Have Student Loans from a Private Bank or Private Lender (Not the Government)

Private student loans are also not covered under the CARES Act. If you have private student loans, your lender or servicer may also be offering temporary payment modifications or forbearances as a result of the ongoing crisis.

The good news is that a recent Veterans Education Success report found that the number of undergraduate student veterans who take out private student loans declined significantly with the introduction of the Post-9/11 GI Bill in 2009. This is a very good sign. Private student loans come with far fewer protections and are almost always more expensive than federal student loans, as our new report explains.

In addition to lower interest rates, federal student loans offer a variety of repayment options that help borrowers cope with employment challenges that may affect their ability to repay, including income-driven repayment, public student loan forgiveness, forbearance and deferment. These options may not be available from private lenders. The variety of requirements and payment options in the private market presents a challenging landscape for individual borrowers. If you have a choice, it’s best to stick to federal student loans.

If You Owe a Debt to the Department of Veterans Affairs

The CARES Act required the Education Department and Treasury Department to pause debt collection, but the law did not do the same for those who owe a debt to the Department of Veterans Affairs.

Earlier this month, a veteran in financial distress came to my organization, Veterans Education Success, with a GI Bill debt and a landlord who was threatening to evict him.

“Jack” was forced to withdraw from a class last November due to his service-connected disability, which created an overpayment debt. His March and April housing allowance went to pay for that debt. In addition to appealing the debt through the VA appeals process, he made a payment arrangement with the VA where part of his disability check would go toward the overpayment each month. When he reached out to us, he had still not heard back from the VA. Despite his payment arrangements, when April hit, the VA took part of both his disability compensation and his housing allowance to pay the debt. “Jack” was going to school full time, and his wife is unable to work because she is immunocompromised. They had no money.

Fortunately, due to the decision of the governor in Jack’s state to halt all evictions for 45 days, we were able to prevent the most immediate harm from taking place. We were also able to help him resolve his claim with the VA, but not everyone is so lucky.

In response to requests from the veteran community, the VA suspended all actions on all types of veteran debts beginning April 9 for 60 days. Additionally, the department said it will consider extending the timeline (if the situation with COVID-19 makes that necessary) and will update its website to reflect the change and automatically extend suspensions for affected veterans.

The VA’s suspension of debt collection comes with two big caveats:

If you already entered into a repayment agreement with a third-party debt collector (like a collection agency or the Treasury Department), especially an automatic payment with the Automated Clearing House (ACH), those automatic payments will continue unless you contact the Treasury Department or the private collection agency to cancel the ACH.

In other words, VA debts that happened after April 9 will be automatically paused. But for debts that existed prior to April 9,, you must contact the VA to have them paused.

If You Have Federal Student Loans

If you have federal student loans held by the federal government, your monthly payment and interest rate accrual have been automatically suspended. Also, if you have defaulted on any federal student loans, the government is not allowed to come after you to “collect” on defaulted federal loans through Sept. 30, 2020. (But this covers only federal student loans that are owned by the U.S. Department of Education. Federal Family Education Loans, or FFELs, which were issued prior to 2010 by financial institutions such as banks, and Perkins Loans, which are typically owned by colleges and universities, do not qualify under the CARES Act.)

Media accounts have revealed that about 54,000 wage garnishments are still happening on federal student loan debts. They shouldn’t be. You can report them. Also, you can contact the debt collection company directly and ask whether the payment can be reversed or whether the collection firm has “hardship” programs that could temporarily suspend payments.

If you live in Illinois or Texas, those states have acted on their own to stop debt collection on federal student loan debt held by private entities. And California, Kentucky, Massachusetts, New York or North Carolina have also stepped in to stop some debt collection on student loans.

Additional Veteran Benefits Resources

Find veterans benefits offered by each state. Did you know that state, city, and community programs also offer a range of veteran benefits and programs for qualifying vets and their families?

City Websites, Chambers of Commerce Sites

Searching for veteran benefits by city can be a bit more challenging than searching for state resources. There are no real standardized templates for city sites, and you may find no help on one type of official site, while finding a large number of resources on a different city-specific resource.

It’s best to begin your search by checking the official page of your city, village, township, etc. If you have no luck there, try searching for veteran benefits on your local Chamber Of Commerce official site. While you’re at it, be sure to have a look at the U.S. Chamber of Commerce site for information on national programs such as Hire Our Heroes.

The U.S. Department Of Labor

This government agency offers a search tool to help veterans find career help in their local area via the DoL’s CareerOneStop program. You can search for local help from your nearest “American Job Center.”

The Department of Veterans Affairs

The VA official site has a by-state list of VA regional offices and state VA offices. Some of these site vary in detail from others, but many include lists of state resources for veterans that include both VA and non-VA benefit programs.

Organizations with Veterans Service Officers:

  • Veterans of  Foreign Wars
  • American Legion
  • Amvets
  • Disabled American Veterans
  • Paralyzed Veterans of America
  • Vietnam Veterans of America
  • Military Order of the Purple Heart

Some benefits are more well-known than others. Many states offer education assistance, housing, and employment programs for veterans. But there may be tax advantages, retirement home options, even business license exemptions available for qualifying veterans, depending on the state.

It’s always good to know as much about your state options as possible-you never know when you might need to apply for these lesser-known programs.

The U.S. Army Official Site

MyArmyBenefits.usarmy.mil offers a very helpful state-by-state clearinghouse of benefits information searchable by clicking on the appropriate state or using a pulldown menu to access information on that state’s education, employment, insurance, and other benefits. You can also find locations to that state’s VA clinics and other VA resources in this one-stop guide.

Examples of Available Veteran Benefits

Housing Benefits

There are the obvious benefits for veterans seeking e.g. VA mortgage home loans from participating lenders all over the United States, but on the state level there are some options that may be of help later in life, such as Arkansas’ state veteran retirement homes.

That benefit is offered to honorably discharged military members with a priority for Arkansas residents. Other programs include Minnesota’s short-term assistance with rent or mortgage payments for qualifying veterans.

These benefits are likely best found via the state’s official site or the state VA regional office official site such as the one for Minnesota.

Finding state-level veterans’ benefits may seem daunting at first. But you’ll discover that getting to know your state’s official site and your state-level Department of Veterans Affairs official site is an excellent way to get caught up on these benefits, future legislation or state planning that might affect them, deadlines for applications, and points of contact in your community for learning more.

Education Benefits

Many states offer some kind of supplemental or replacement education benefit for veterans. In Illinois, a program known as the Illinois Veterans Grant is for qualifying veterans who listed Illinois as their home of record while serving, or who joined the military while living in the state. This program offers full tuition coverage that can be used separately from or in conjunction with the GI Bill.

Other states offer free or reduced tuition for the dependents of military members. California, Alabama, and other states offer such programs, which may be subject to change from year to year due to legislation or budget issues.

One of the best resources you can use to find these education benefits in your state? Your local state college or state university official website. You will find that in most cases, these sites will have specific information on the veteran education assistance programs offered in that state and how to begin.

These are often listed under a heading in the Admissions section. Look for “Paying For College” or “Student Financial Assistance” headings.

Tax Benefits

Some states, including Texas, California, Alabama, and others, offer tax breaks to veterans in the form of exemptions or tax-free income options. Alabama has an exemption on military retirement pay, California offers property tax exemptions to qualifying veterans, etc.

You will find tax exemption information on your state’s official site. It’s not safe to assume that any tax breaks you may be entitled to are automatic. Consider the requirements of the New York State official site which includes the following:

“If you’re an eligible veteran, you must submit the initial exemption application form to your assessor. The deadline in most communities is March 1—please confirm the date with your assessor. Proof of discharge under honorable conditions including times and places served in active duty (usually form DD-214) must be attached to the exemption application”.

Military Retirement: Financial Issues

You will face many challenges and opportunities as your retirement approaches. And, planning for your family’s financial security is one of those challenges. This guide is merely intended to give you some things to think about as you begin your transition to civilian life. It’s based on my personal experiences and feedback from countless counseling sessions.

Most retirees will find that they still require private, individual life insurance. Many experts recommend a mix of both permanent (whole life) and term coverage.


Life Insurance Planning is not easy. Most people spend more time researching and buying a new car than they spend putting a good plan in place for the financial security of their survivors. Below are some common life insurance mistakes to look out for. Call one of our Counselors or another life insurance professional to learn more about avoiding these mistakes.

  1. Making policies payable outright t minor children/grandchildren.
  2. Failing to review your coverage periodically to ensure that it adequately addresses the changes in your life.
  3. Naming your estate as beneficiary
  4. Failing to name contingent beneficiaries and failing to keep beneficiaries up to date
  5. Not having enough insurance (Use Navy Mutual’s Needs-Based Calculator).
  6. Forgetting the termination date of your Term plan.
  7. Buying insurance as a commodity. Seek the help of a knowledgeable life insurance professional. Our Counselors can help you determine what is best for your family.
  8. Failing to buy the right type of life insurance (Term and Permanent insurance both have a place in your plan).

Disability Insurance. This is one area that most active duty service members don’t think about since they enjoy significant benefits when they become disabled in the line of duty. However, as a civilian, you should pay particular attention to this insurance. If you are starting a second career, most employers will provide you with both a short-term and long-term disability policy on a group basis. You need to review these plans carefully to ensure the protection is adequate. Don’t forget, your excellent military pension continues for life even if you become disabled. This is a significant benefit that you have over your civilian counterparts. You should also evaluate your occupation and your avocation to see what affects they may have on this decision. Is your occupation one such that there is an increased probability of disability? Is your occupation one in which a disability would end your employment? For example, a surgeon who suffers a disabling injury to his/her hands or an airline pilot whose vision becomes impaired? Purchasing an individual disability policy may be a consideration.

Property and Casualty Coverage. This is the one area of insurance planning that you may have best under control. However, if you move to a new state to begin your retirement, you will need to re-evaluate your Homeowner and Automobile policies. Some retirees also look at insuring their household goods in order to have adequate protection as they are trucked off to the new homestead. Look to companies that serve service members and veterans as their primary mission, such as USAA and Armed Forces Insurance (AFI).

Financial Planning

I am not going to tell you which stocks, bonds or mutual funds to buy. But, I will hopefully stimulate some thoughts as you make a significant financial transition in your life. A very small number of military retirees truly retire when they leave the service. However, for most military retirees, retirement means starting a second career when they are not financially secure enough to stop working. In most cases, this second career will provide you with a significant increase in discretionary income and an excellent opportunity to save for your eventual full retirement. It is a great time to plan and a good time to seek the services of a professional financial planner. Most planners will tell you pretty much the same thing: When you get ready to retire you will need to establish an income stream of about 80 percent of your final working income to sustain your lifestyle. This income will come from three sources: a pension, Social Security, and private savings. The good news is that as a military retiree, the first two already provide you with a solid foundation.

Individual Retirement Accounts (IRA). You probably have an IRA established for both yourself and your spouse. You may have ROTH IRAs that are superb vehicles for retirement savings since you never pay taxes on any money that comes out of them. However, when you start your second career, you may no longer be able to contribute to your ROTH because your Adjusted Gross Income (AGI) will exceed the allowable limits. You may need to shift to a conventional IRA. How much can you contribute each year? If you are over age 50, are you taking advantage of the “catch up” provision? When can you withdraw funds without penalty? When do you have to start withdrawing funds? These are important questions.

Social Security is probably something to which you have not paid much attention. You should because it is the second important element of your plan. Review your most recent Social Security statement carefully with your spouse. If your spouse has a work history, review his/hers as well. Pay particular attention to the retirement estimates. You need to consider several things: How long do you want to work? When do you want to start drawing retirement benefits? What effect does earned income have on Social Security benefits? How does your military pension affect Social Security benefits? (I’ll answer that one now — it has no effect!) Do you understand that special Military Service Credits may be available to you? Is it better for your spouse to draw retirement based on their Social Security Account or your account? Why would you want to wait until age 70 to start drawing benefits? Answers to these types of questions will be important inputs to your financial plan.

Your military pension is one of the best, if not the best, pensions that exists in America today — Cost of Living Allowances (COLA) protected, income for life starting the month following your retirement. It is so valuable that there are companies willing to “buy” your pension from you. Do not be tempted, these schemes are egregious rip-offs. Your pension is the first element of your financial plan. Another piece of advice is to use the “myPay Account” feature available on-line with DFAS (https://mypay.dfas.mil) to monitor and make changes to your retirement account. Remember in almost all cases your active-duty allotments will carry right over to your retired pay account.

Private Savings is for many, the most important element of their plan. How much savings you have now? How much do you need to fund a comfortable retirement? How do you get there from here? Answer those three questions and you have your plan. You may be able to go it alone, but most retirees would probably benefit from some professional help.

  • Qualified Employer Retirement Plans. Your second career will most likely come with a new retirement plan opportunity. They come in the form of qualified plans that means that they enjoy favored tax status. Contributions to some plans can be made with pretax dollars. All plans allow your money to grow tax-deferred. Most employers offer a 401 (k) Plan. A relatively new variation is the Roth 401(K) that is funded post-tax dollars. What type of plan does your new employer provide? This may be an important factor in your job search if you are still looking. Is it a defined benefit plan or a defined contribution plan, or are both types offered? Which is better? If it is a defined contribution plan, does your employer provide matching contributions? How much? How much are you allowed to contribute each year? Are there “catch up” provisions for those over age 50? How long before you become vested? Is the plan “integrated” with Social Security? Is the plan portable if you leave that employer? The last question is important since many military retirees change employers four times or more. When can you start drawing a retirement benefit? Does that benefit enjoy COLA increases? What if you start your own business? What retirement plans are available?
  • Thrift Savings Plan (TSP). Hopefully you were able to take advantage of this Military 401 (k) plan. It is a good solid qualified retirement plan. It is comprised of five funds with different focus that provide good diversification and it has an incredibly low fee of only six basis points. The plan has recently added a six fund – a Lifestyle Fund which uses a combination of the five previous funds to meet your retirement goals. However, once you retire you can no longer contribute to the TSP. What are your options? You can keep it and continue to manage the funds inside the plan as your assets continue to grow. In many cases, you may be able to roll it over into your new employer’s qualified plan. In some cases, you may be able to roll it over into your personal IRA. Which option is best for you?
  • Deferred Annuities. Once you have maximized your contributions to your IRA and employer retirement plans, you may still want to invest more money on a tax-deferred basis. A Flexible Premium Deferred Annuity (FPDA) is one product that allows you do this. Annuities can be either fixed or variable. A variable annuity has more risk because it is invested in the equity market and therefore also offers the potential for higher returns. Fixed annuities are more conservative, but they also have a guaranteed minimum interest rate. What is your risk tolerance? Which annuity is right for you? Navy Mutual offers an excellent fixed FPDA. To learn more about annuities, visit our website and review our Annuity Tutorial or call us and ask for a copy of the annuity tutorial pamphlet.

Taxes. Most retirees are shocked by the big jump in their tax brackets. Military compensation has many tax benefits that will no longer exist in your civilian career. Most retirees will receive a straight salary instead of the more complicated system of military pay and allowances. Maybe you avoided state income tax during your military career and that may factor into where you live in retirement. You should note that just because a state does not have a state income tax does not mean it has a low-tax burden.

How will your military retired pay be taxed? One thing to remember is that there is no FICA tax taken from your military retired paycheck. Be prepared for your first tax return to be a little more complicated than it was in the past, and expect to see a larger tax bill. You may get into the business of paying estimated taxes for the first time in your life. You may also get caught up in Alternative Minimum Tax (AMT) provisions. You may feel it necessary to visit a tax professional. There are a few things that you may be able to take advantage of in the tax area. First, you may be able to defer tax on some income by contributing to a qualified retirement plan as discussed above. Your employer may offer a Flexible Spending Account (FSA) that allows you to use some of your salary on a pre-tax basis for qualified medical expenses and childcare. There may be some other areas where tax breaks are allowed that you had not considered. Be prepared to do some tax planning.

A prominent financial planning firm notes the following nine big mistakes that people should avoid when saving for retirement. They are provided here for you consideration as begin, review, or refine your financial plan:

  1. Relying solely on the investment returns of your portfolio.
  2. Forgetting about the effects of inflation.
  3. Not having a properly allocated portfolio.
  4. Underestimating taxes.
  5. Underestimating your spending during retirement.
  6. Having unrealistic investment expectations.
  7. Underestimating the time you will spend in retirement.
  8. Failing to plan for unexpected health care expenses.
  9. Mismanaging your tax-deferred assets.

In summary, retiring from the military and beginning a second career offers enormous opportunities for securing a very comfortable, financially secure and full retirement. Do not waste these opportunities by failing to plan.

Estate Planning

Estate planning is not a pleasant subject or an enjoyable task. What is estate planning? Estate planning means more than simply preparing a last Will and Testament. In its broad sense, estate planning must address the administration and protection of assets during your lifetime and for decision making in the event that you are unable to make decisions for yourself.

Estate Planning also involves the preparation of several key documents: a will, one or more Durable Powers of Attorney, Advance Health Care Directives, Living Wills, and one or more trusts. What do these things do? Which do you need? How do you have them prepared? Who should be involved in the planning? These questions should be considered during the planning process. While you can do many of these things yourself, this is one area where professional legal advice is essential if you want to ensure the documents? validity for you and your family. The military Legal Assistance Centers can prepare many of these documents for free while you are still on active duty and many of these centers may offer services to retirees on a space-available basis.

However, estate-planning issues can become very complicated and they vary widely from state to state, so you may need the advice of an estate-planning attorney. Estate planning firms may offer a free consultation to assess your needs and then will discuss what they will provide and their fees. A comprehensive estate plan includes all the documents above plus some continuing service can cost about $2,000 to $3,000. The more complicated your estate, the greater the cost. Most retirees have relatively simple estates so costs can be less. Just because your estate is simple now does not mean that you will not need estate planning in the future. Also, estate planning is not a task reserved solely for the elderly.

Trusts can help avoid tax liabilities. While most retirees may not have estates large enough to be concerned about estate and inheritance taxes, this can change. Hopefully you will see a substantial increase in your estate as you pursue your second career. Also, many retirees underestimate their estates by failing to include the real value of their home or by failing to include the large death benefits of their life insurance policies. In some cases, there is even a value attached to survivor pensions such as SBP. So while tax planning should not be a major focus of a trust, it can be a valuable tool.

Incapacitation. What if you are involved in a serious accident or contract a serious illness? Who will make the decisions regarding your medical care? What medical measures do you want taken to save your life? What if those measures reduced you to a prolonged vegetative state? Who has the power to make significant financial decisions if you are incapacitated? Who will take care of your children if you are unable to do so? Durable Powers of Attorney, Living Wills, and Advance Health Care Directives can answer most of those questions. A Will is used to designate the guardians of your children. All of these are legal documents — and in today’s litigious society are challenged frequently. This is why they need to be prepared by competent attorneys. These documents represent the cornerstones of your estate plan.

Trusts. Many people consider trusts something that only the wealthy need and use. However, a trust can be a valuable tool for almost anyone. A trust is a set of instructions that tell the world how you want things done if you are not around or able to do them yourself. The most popular and widely used trust is a revocable trust that you own and manage while you are alive. It also carries out your wishes when you die. There are some key reasons why you might want to consider a trust:

Trusts avoid probate. Trusts avoid delays in settling your estate and will save your survivors both time and money. Another good reason to avoid probate is privacy. Any of your assets that pass through a normal probate process become part of the public record and are available to creditors and others who might want to take advantage of your family. Trusts are private.

Trusts can help plan for known or unexpected family situations. How can a disabled child, sibling or parent be cared for? How can you ensure that funds will be available and be used to fund college education for your children? How can you protect your married children in the event of a divorce? How can you ensure funds are controlled so that they do not pass to a person who is not mature enough to receive them? How can you prevent a guardian from squandering your young children?s inheritance? How can you help a family member with a drug or alcohol problem? There is an almost endless list of problems and issues that can be helped by a properly prepared trust.

Trusts can be used with Life Insurance Planning. A trust can own or be the beneficiary of a life insurance plan. Residuary trusts can be set up to dispense the proceeds of a large policy to your children in a controlled manner if you and your spouse should die prematurely. An estate planning attorney/tax expert should be consulted to discuss the advantages of using trusts with life insurance.

The estate planning tools and documents will be based on your own family circumstances. Hopefully, I’ve given you some things to consider. Most retirees would benefit from speaking to a professional to get additional insights. However, there is one element of estate planning that every retiree should seriously consider. For example, have you informed your family of your wishes if you should pass away? And have you provided them with sufficient information on your finances and other key issues that will allow them to carry on when you are gone?

Health Care Planning

As a retiree, you are pretty well set as far as medical care goes, especially when compared to the average American. Tricare provides an array of options for health care and Tricare for Life ensures that when you reach senior citizen status you will be well cared for when Tricare and Medicare benefits are coordinated.

Dental Care. Dental Care is an important health care benefit that you need to replace. Most employers provide some type of dental plan as an employee benefit. If not, you are eligible for the Retiree Dental Plan. However, be prepared to absorb some out-of-pocket expenses if you have any dental issues above the normal two cleanings per year. Even the best plans only cover 80 percent for routine fillings and major work such as root canals and crowns may only be covered at the 50 percent rate. A couple of bad teeth can reach that maximum quickly.

Tricare provides you and your family with an excellent medical care benefit. Get a good briefing on the program at the Transition Seminar so you enroll in the option that best fits your needs. Tricare Prime is probably your lowest out-of-pocket option if you are near a military health care facility. You may also want to purchase a Tricare Supplement Policy at age 65. When you turn 65-years-old Tricare-for-Life kicks in and no further supplemental policies are needed.

Tricare and your Civilian Employer. Most retirees pursue a second career with a civilian employer. Typically, the most expensive employee benefit is the health care plan, so you may be able to leverage your Tricare benefit to your advantage. In many cases, an employer will be willing to compensate you for declining their health care plan in favor of Tricare. For example, they may pay all your Tricare costs as an alternative or provide you with an increase in another benefit, such as a better dental plan increased life insurance, etc. This is worth discussing with your employer. If your employer offers a cafeteria plan for benefits, staying with Tricare will give you an opportunity to select other employee benefits from the menu.

Flexible Spending Accounts (FSA). One great way to mitigate out-of-pocket health care expenses is to pay for them with pre-tax dollars. You can do that through an FSA if your employer offers one. An FSA allows you to put cash out of your salary and into a pre-tax account which can be used to reimburse you for out-of-pocket health care expenses, often including many over-the-counter medicines. You must use all the funds in your FSA each year or any unused funds will be forfeited. I suggest that you might want to be conservative at first until you get a feel for your medical expenses. You can also establish a separate FSA up to $5,000 to pay for child cares/adult day care expense. Discuss the FSA with your new employer’s HR director.

Long Term Care (LTC). Long term care is one area where you are not covered. Neither Tricare nor Medicare provide for custodial care which is what most LTC consists of. Medicaid is usually a non-starter for a military retiree due to your pension. LTC is a growing topic of interest in this country. Statistics show that with people living longer than ever. The probability of their needing some type of assisted living is also rising. In your family, the person with the most need is usually the female spouse This time of transition from active service, may be a good time to consider your future LTC needs and start planning now.

Long Term Care (LTC) Insurance Plans. These are plans that you purchase much like Term life insurance. You pay an annual (or more frequent) premium and if you meet one of the triggers for LTC your plan pays you a monthly amount. These triggers are either one, the inability to perform two of the five or six Activities of Daily Living (ADL) without assistance or two, serious cognitive impairment such as dementia or Alzheimer’s Disease. ADLs typically include eating, bathing, dressing, toileting, and transferring from bed to chair. LTC Plans have a variety of benefit elections which impact the price, such as the amount of the daily benefit, the length of the benefit period (usually three to five years), the length of the elimination period, inflation protection options, etc. Your age is a major factor in your premium costs. The best place to start is with the Federal LTC Program. Use it as a benchmark.

Self-Insure. Some financial professionals believe that if you have sufficient assets, you can provide for you and your spouse’s long term care. However, there is a risk that you could run out of funds and, of course, any assets used for long term care would not be available for other uses or for passing them on to your family. You should consider seeking the counsel of a financial professional if you think you can self insure. Additionally, some of the other options below could be used as part of your overall LTC Self Insurance Plan.

Family Care. About 70% of long term care is still being provided by family members. However, this can be a significant physical, mental and financial burden on a family. It can require modifying a home to accommodate the LTC needs of a person. In many cases, families eventually have to turn the care over to professional care givers or turn to a nursing home anyway. Some children have also turned to paying the premiums for LTC Insurance for their parents.

Continuing Care Retirement Community (CCRC). One popular self-insurance plan is a CCRC. These are facilities that offer the full range of living arrangements ? from separate homes or apartments where couples live independently, to nursing facilities where a person requires continuous LTC. There is typically a large entrance fee ($100,000 to $300,000 or more) and then a monthly fee ($1,000 to $3,000 and up). For those with sufficient assets CCRCs offer an attractive option for insuring LTC needs.

Annuities. An annuity can provide monthly income for life or for a specified number of years. This income could be used to fund LTC needs or could be used to pay LTC Insurance premiums. The best way to use an annuity for this purpose would be to purchase a flexible premium deferred annuity at a young age and then make monthly contributions to it. Let it grow tax deferred and then annuitize it later in life to pay for LTC expenses. This is probably not a viable option for most retirees. However, it might be an option for a younger retiree. There are also some hybrid annuities available that can have a LTC Option where the annuity payment would be increased if the annuitant met certain LTC criteria.

Life Insurance. Some permanent (whole life) life insurance plans have a LTC Option which allows an accelerated payout of the death benefit if the insured meets certain LTC criteria. Again, this would work best if the policy were purchased at a younger age with lower premiums. Most retirees will find whole life insurance to be an expensive alternative. However there are advantages: You have the LTC protection if you need it and life insurance and cash value if you don’t require long term care, so it may be well worth the cost.

Reverse Mortgages. A reverse mortgage is a nonrecourse first mortgage loan against a home’s market value that advances cash to the borrower who remains the homeowner. It requires no installment payments, and proceeds from the sale of the home are used to repay the loan when the borrower no longer maintains the home as a principle residence (e.g. dies or moves into a nursing home, etc.) A reverse mortgage is an option for obtaining funds to pay for LTC. Reverse mortgages are provided through the federal government and private lending institutions.