Planning for Long-Term Care with Your IRA
When you hit your early 70s, the IRS requires you to begin taking Required Minimum Distributions (RMDs) from your IRA. For many retirees, those RMDs feel more like a tax burden than a benefit. But what if there was a way to use that money more intentionally—protecting yourself and your family while still satisfying the IRS rules?
In this video and blog, we’re talking about a unique strategy that allows you to use a single deposit from your IRA to fund a hybrid long-term care and life insurance policy—and have those distributions count toward your RMDs.
We’ve used this approach with many clients, and today we’re sharing an example of a couple—both age 73—who used $300,000 from their IRA to create a lifetime safety net for their future.
How It Works: One Rollover, Two Policies, Real Protection
This solution involves rolling over $300,000 from a traditional IRA into a new IRA held at the insurance company. From there, $37,500 per year is transferred for 10 years into a joint life insurance and long-term care policy—covering both spouses. These transfers count as RMDs, helping you meet IRS requirements without needing to tap other assets.
If neither person ever uses the long-term care benefits, a $153,000 death benefit is paid to their heirs. But if care is needed—even immediately—the policy provides monthly coverage starting at $6,400 and growing with inflation.
What Triggers the Benefits?
To qualify for long-term care benefits, you must need help with two of the six Activities of Daily Living (ADLs)—such as bathing and dressing—or have a severe cognitive impairment, like Alzheimer’s or dementia. These are standard triggers across most policies, and they’re clearly defined and easy to document.
You can receive care:
- At home (with zero-day elimination period)
- In assisted living or adult daycare
- In a nursing home (after a 90-day elimination period)
And if you start care at home and later move into a facility, those days count toward the 90-day requirement—so the benefits continue uninterrupted.
Why This Matters
This policy provides lifetime benefits for both spouses—no three-year cap or shared pool of money. That means if one or both of you need care, you’ll never run out of coverage. That kind of certainty is rare, and it’s one of the main reasons clients choose this strategy.
Even more important: this planning isn’t just about protecting your own future—it’s about easing the burden on your spouse, children, or other family members, who often become default caregivers in a crisis. Having a plan in place allows everyone to breathe a little easier.
A Word of Caution: This Isn’t for Everyone
If you need your IRA to generate income, this may not be the right move. But if you have enough income elsewhere and want to prepare for potential long-term care costs, this strategy could be ideal. It’s about redirecting money you already have to protect against one of the biggest financial risks in retirement.
And best of all—there are no premium increases. Once the policy is issued, your benefits and costs are locked in, no matter what happens with interest rates, claims, or the broader insurance market.
Want to See the Numbers for Yourself?
We’ve created a full policy illustration and a board overview that walks through the example in detail. You can download both at the link below the video, or visit us at cardinalguide.com.
If you’re approaching RMD age—or already there—this is one of the smartest, most efficient ways to handle those distributions while preparing for the future.
