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.
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