Funding Hybrid Life + Long-Term Care Insurance (LTCI) with Social Security

With good reason, most Americans are anxious about retirement. About 33% of US households earn over $100k annually, yet only a little more than 10% (13m out of 123m) of them have saved $1m or more for retirement.?

According to the Motley Fool, “40% of Americans making $100k live paycheck to paycheck.”

Why are Americans willing to take so much risk? One reason is Social Security. Of course, there are some truths about the financial safety of Social Security that need to be faced, such as how the $30 trillion of US debt and the ageing of Baby Boomers will deplete the surplus in about 12 years.

However, imagine you are a citizen of China, even a high-ranking member in its Communist Party. The current real estate bubble is a much bigger problem than it was for the US in 2008-09. While real estate was 15% of the American economy then, it represents 30% of the Chinese economy today. And their local governments have been relying on real estate to fund 40% of its budgets.

Plus, the adjusted net national income per capita in China is only about $9k, versus about $56k in the US.

But most important, there is no Social Security system in China. Instead, the middle class has been investing in its stock market, and in urban areas over 80% of residents own their own homes—with an oversupply of housing that will last 10 years.

Hopefully, this provides you with some perspective about risk management for retirement. When it comes to funding Hybrid Life + LTCI, sources can come from places other than current income, such as savings in a low-yielding ETF or cash surrender value from a permanent life insurance policy that is no longer needed for its original uses.

One other tactic is to defer taking Social Security until age 70. It is true that Covid-19’s impact reduced the average US lifespan to age 77 this year, but for those whose health and lifestyle places the odds in favor of living beyond age 84, then deferring to age 70 may be a good idea.

According to Kiplinger.com, waiting until age 70 will result in more than a 75% higher benefit than starting to collect at age 62.

And that can be a source to repay yourself for buying a Hybrid Life + LTCI policy now.?

Yes, Social Security may be in trouble, but the risks are relative.