Proposed Bill for Tax-Free 401k, IRA Withdrawals to Buy Long-Term Care Insurance

In an effort to make long-term care insurance (LTCI) more affordable for Americans, Sen. Patrick Toomey, R-Pa. is planning to introduce a bill in the coming weeks or months to amend the federal tax code. The proposed bill would allow individuals to withdraw up to $2,000 of retirement assets annually to pay LTCI premiums and other policy charges. The withdrawals would not be subject to income tax, and individuals younger than 59 ½ would not be assessed the typical 10% penalty for early withdrawals.

 

As our longevity increases, so does the number of Americans who will require some form of long-term care. Health and Human Services estimates 52% of Americans turning 65 today will need either nursing home or at-home care during their lifetime. Additionally, the median cost for a month’s stay in a private nursing home room is $8,517 in the U.S., according to the Genworth Cost of Care Survey. When it comes to paying for long-term care, Health and Human Services found 52% pay out of pocket, 34% use government funding through Medicaid, and only 2.7% pay with private insurance.

 

The proposed bill would encourage healthy Americans aged 50 to 59 to plan ahead and consider long-term care insurance. In addition to traditional LTCI policies, individuals can also choose from hybrid policies to find an LTCI plan that works for their situation.

 

Read the full article from Investment News below.

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