1. Protecting your retirement nest egg
Welcome, and thank you for attending.
Today we will be discussing retirement, preparing to live a long life, and protecting your retirement nest egg from the costs associated with end-of-life care.
Informational Seminar
Not a deposit • Not FDIC insured • Not guaranteed by any bank •
Not insured by any federal government agency
8/1/12
LTC-456
For company and recruiting use only. Not for public distribution.

2. Before we begin…
As your personal situations change (i.e., marriage, birth of a child or job promotion), so will your life insurance needs. Care should be taken to ensure this product is suitable for your long-term life insurance needs. You should weigh any associated costs before making a purchase. Life insurance has fees and charges associated with it that include costs of insurance that vary with such characteristics of the insured as gender, health and age, and has additional charges for riders that customize a policy to fit your individual needs.
A fixed annuity is a long-term, tax-deferred insurance contract designed for retirement. It allows you to create a fixed stream of income through a process called annuitization and also provides a fixed rate of return based on the terms of the contract. Fixed annuities have limitations. If you decide to take your money out early, you may face fees called surrender charges. Plus, if you’re not yet 59 ½, you may also have to pay an additional 10% tax penalty on top of ordinary income taxes. You should also know that a fixed annuity contains guarantees and protections that are subject to the issuing insurance company’s ability to pay for them.
Products are underwritten and issued by The State Life Insurance Company, Indianapolis, Indiana. Policy Forms: Asset-Care – L301, SA31; Annuity Care – SA34, R508; and Annuity Care II/III – SA35. Products may not be available in all states and state variations may apply.
Numeric examples are hypothetical and were used for educational purposes only.
All guarantees are subject to the claims paying ability of State Life.
State Life does not provide tax or legal advice. Please consult with an attorney or tax advisor
Before we begin, please allow me to share with you a few points that you should keep in mind during the presentation.
Not a deposit • Not FDIC insured • Not guaranteed by any bank •
Not insured by any federal government agency
LTC-456
For company and recruiting use only. Not for public distribution.

3. What’s more important at retirement?
Assets—relates to legacy, gifting and the next generation
Income—correlates to lifestyle and maintaining a standard of living
When thinking about retirement, and specifically how to pay for it, it’s important to distinguish between assets and income.
Assets can be thought of as relating to your legacy, to gifting and the next generation. Asset can be used to create income, but are not typically used to fund daily expenses.
Income correlates to your lifestyle and standard of living. Income is what pays your living expenses, funds your travel and fun.
LTC-456
For company and recruiting use only. Not for public distribution.

4. Ways expenses could exceed income in retirement?
Inflation
Market downturns
Health care
Especially extended health care needs
With proper planning, income can be generated to meet your retirement needs. However, there are three things that can make income insufficient in the future.
Inflation can lower the value of your income. Market downturns can as well. Health care might have the most significant and lasting impact due to the large costs associated with it. And what if care is needed for an extended period of time?
Income that was once completely sufficient to fund a comfortable retirement and lifestyle, may be wholly insufficient when there is an extended care need.
LTC-456
For company and recruiting use only. Not for public distribution.

5. What is extended health care?
Also referred to as custodial care or long-term care
Requiring assistance with the activities of daily living—or a cognitive impairment
Not necessarily nursing home care
Most prefer home health care if given the option
Extended care, or long-term care, means that assistance is required with the activities of daily living of there is a cognitive impairment. Examples of activities of daily living include dressing yourself, feeding yourself and toileting. Cognitive impairments include Alzheimer’s and Dementia.
A common misconception is that extended care means going to a nursing home. That is not necessarily the case. Most of you would prefer to receive care in your own home and there are more options than ever to facilitate those types of care.
LTC-456
For company and recruiting use only. Not for public distribution.

6. What is extended health care practically?
Care that provides the ability to live out the last phase of our lives as comfortably and with as much dignity as possible
We just discussed what extended care is technically. Now let’s talk about what it means.
Practically speaking, extended care provides the ability to live out the last phase of our lives as comfortably and with as much dignity as possible.
LTC-456
For company and recruiting use only. Not for public distribution.

7. Consequences of being unprepared
To your spouse—many times caring for a chronically ill loved one makes the caregiver chronically ill as well
To your children —When a spouse isn’t involved, other loved ones carry the burden
When you need care, your life doesn’t end – someone else’s may.
Often the eldest daughter quits job, moves in or moves parent in her home, gives up career—as any decent child would feel obligated to do
Being unprepared for extended health care can have a big impact, not only on your life, but also that of your spouse and your family.
Your spouse may feel an obligation to become the caregiver, or perhaps the financial situation will dictate it. The stress and responsibility of being a primary caregiver can often make the caregiver ill as well.
If a spouse isn’t involved, often children or other loved ones carry the burden.
It’s been said that when you need extended care, your life doesn’t end, but someone else’s may.
LTC-456
For company and recruiting use only. Not for public distribution.

8. Consequences of being unprepared
To family dynamics—When informal care is needed, it may not be shared equally amongst the adult children
Often one sibling bears the most burden
Can affect relationship with siblings
Being unprepared for extended care can also have a big impact on the dynamics of your family. The burden of care may not be shared equally among your children. Often one child bears the brunt. It’s not hard to imagine how this can affect their relationship with their siblings.
LTC-456
For company and recruiting use only. Not for public distribution.

9. Consequences of being unprepared
Unnecessary losses
You can never avoid all losses
However, the unnecessary spiritual, emotional, physical and familial losses could be mitigated when you are prepared
Unnecessary financial losses could be mitigated as well.
Other consequences of being unprepared include unnecessary losses.
You can never avoid all losses, however proper planning can help mitigate the emotional, physical and familial losses that result from a lack of preparedness.
Financial losses can be mitigated as well.
LTC-456
For company and recruiting use only. Not for public distribution.

10. How to fund extended health care
Long-term care insurance
Government programs
Self-funding
Asset-based long-term care strategies
There are several ways to fund extended health care that we will examine.
Long-term care insurance
Government programs
Self-funding
Asset-based long-term care strategies
LTC-456
For company and recruiting use only. Not for public distribution.

11. Long-term care insurance
Good way to pay, if care is needed
However, few pursue this option. Why?
Another bill
Health qualifications may be a challenge
Will future premiums be affordable?
Benefits are payable if care is actually needed.
Long-term care insurance can be a great way to prepare for extended care—if care is needed. The problem is that we have no way of knowing if it will.
Many don’t like the idea of another bill to pay and qualifying for coverage can be a challenge. Long-term care insurance also brings the possibility of future premium increases—potentially making an affordable premium, unaffordable in the future.
LTC-456
For company and recruiting use only. Not for public distribution.

12. Government programs
Medicare—only provides rehabilitative services, does not provide long-term care
Medicaid
Benefits vary by state
Must “spend down” your assets first
Some options like home care and assisted living may not be available
Can mean loss of choice and control
You have likely heard of Medicare and Medicaid.
Medicare only provides rehabilitative services. It does not pay for long-term care.
Medicaid is a government program that does pay for long-term care, however, it is needs-based. Benefits can vary from state to state and you must first spend-down you own assets before qualifying. In addition, popular care options like assisted living and home care may not be available.
In the end, there is also a loss of choice and control.
LTC-456
For company and recruiting use only. Not for public distribution.

13. Self funding Bearing the entire risk of an extended care need
Setting aside assets “just in case”
IRAs, cash, annuities, etc…
Some can afford to absorb costs for a few years
What if the need became catastrophic?
If you haven’t prepared for extended care, or do not feel the need to, what you are doing is called self funding. It means that if there is an extended care need, you will bear the entire cost and risk.
Assets can be set aside “just in case”, however the problem is not being able to know how much is “enough”.
Some people can afford to absorb the cost of a few years of care, but what if the need becomes catastrophic? What if care lasts 10 years?
LTC-456
For company and recruiting use only. Not for public distribution.

14. Asset-based long-term care
Specific products based on life insurance and annuities that can provide long-term care benefits
Some advantages
If care is needed, income tax free benefits
If care is never needed, asset passes to next generation
Some companies offer premiums that are contractually guaranteed never to increase
Another option is called asset-based long-term care.
Asset-based long-term care consists of specific insurance products based upon life insurance and annuities. Some advantages they offer include: income-tax free care benefits, benefits even if care is never needed, and the ability to obtain premiums that are guaranteed to never increase.
LTC-456
For company and recruiting use only. Not for public distribution.

15. Example of life insurance-based long-term care
Life Events
LTC benefit:
$5,859 for 50 months
Optional lifetime LTC benefits $1,619 annual premium
Live a long life and need long-term care +
Single Premium:
$150,000*
Year 15 surrender value:
$198,761
Decide to quit or surrender the policy
Here is a visual of how life insurance-based long-term care insurance can work. In this example, optional lifetime LTC benefits can be paid for with an additional annual premium.
Death benefit:
$292,968
At death
*Based upon joint male and female, both age 65, preferred underwriting class, minimum 4% cash value accumulation, minus cost of insurance.
Numeric examples are hypothetical and were used for educational purposes only.
LTC-456
For company and recruiting use only. Not for public distribution.

16. Another example of life insurance-based long-term care
Life Events
Live a long life and need long-term care
$5,063 monthly LTC benefit for life
Single Premium:
$150,000*
Year 15 surrender value:
$171,759
Decide to quit or surrender the policy
Here is another visual of how life insurance-based long-term care insurance can work. In this example, a portion of the premium is used to pay a single premium for optional lifetime benefits. This method avoids on-going annual premiums.
*Single premium includes $131,861 base policy single premium and $18,139 single premium for lifetime benefit rider. Based upon joint male and female, both age 65, preferred underwriting class. minimum 4% cash value accumulation, minus cost of insurance.
Death benefit:
$253,167
At death
Numeric examples are hypothetical and were used for educational purposes only.
LTC-456
For company and recruiting use only. Not for public distribution.

17. Example of annuity-based long-term care
Existing annuity
(funded with after-tax dollars)
$50,000 basis +
$100,000 gain =
$150,000 cash value
Taxes owed on gain
which is withdrawn first
Withdrawal
1035 Exchange
Long-term care expenses
$150,000
Here is an example of how an annuity-based long-term care insurance can work. Note that certain products can also offer income-tax free withdrawals for qualifying care expenses. These annuities must meet the guidelines outlined in the Pension Protection Act.
Annuity with LTC benefits—Pension Protection tax advantages
Withdrawal
Income tax-free as a reduction of cost basis
Numeric examples are hypothetical and were used for educational purposes only.
LTC-456

18. Important points to remember
Extended health care is not only a life changing event for an individual, It’s also life changing for the family
Preparing can help lessen the impact
Options exist
Regardless of the path you choose, it’s important to be prepared for extended health care. Remember, it about your future and your family’s.
The good news is that options exist and being prepared can help lessen the impact.
LTC-456
For company and recruiting use only. Not for public distribution.

19. Next steps A trusted professional can help you prepare
Talk with your insurance professional about your health care strategy
The next step is to speak with a trusted professional about your specific situation.
LTC-456
For company and recruiting use only. Not for public distribution.

20. LIFE INSURANCE | RETIREMENT | EMPLOYEE BENEFITS
The companies of ONEAMERICA®:
AMERICAN UNITED LIFE INSURANCE COMPANY®
AUL REINSURANCE MANAGEMENT SERVICES, LLC
ONEAMERICA SECURITIES, INC.
PIONEER MUTUAL LIFE INSURANCE COMPANY
A stock subsidiary of American United Mutual Insurance Holding Company
THE STATE LIFE INSURANCE COMPANY
Thank you for attending. I will be happy to answer any questions you may have.
LTC-456
For company and recruiting use only. Not for public distribution.