Ways to Use Your IRA for Long-Term Care

Using Qualified Retirement Funds for LTC Protection

There are several ways to use IRA or 401(k) dollars to fund long-term care insurance. Below are four proven strategies—each suited to different goals, IRA types, tax considerations, and health profiles. A short review can help determine which option fits your situation best.

Strategy 1 — IRA-Funded Multi-Benefit Policy

This option uses a single policy, from an A+ rated insurance company that blends an annuity, life insurance, and a long-term care rider. It allows IRA or 401(k) dollars to be distributed gradually to fund LTC benefits. The policy also provides a 25% value enhancement when qualified funds are transferred.

Key benefits:

• Spreads taxes over 10 years (avoids one large lump-sum taxable event)
• Uses annual IRA withdrawals or RMDs to fund premiums
• Level, predictable premiums for long-term stability
• Combines LTC benefits, life insurance, and annuity value in one policy

Best for: Those wanting a simple, all-in-one policy with premium stability and a 25% boost on transferred funds.

Strategy 2 — Qualified Annuity + Hybrid LTC Coverage

With this approach, IRA dollars are used to purchase a tax-qualified annuity. Annual annuity distributions are then directed toward a hybrid long-term care insurance policy (life insurance with LTC benefits). This provides flexibility to choose from many top-rated carriers, while using taxable IRA distributions to secure guaranteed LTC benefits, cash value growth, or death benefits depending on the chosen plan.

Key benefits:

• Carrier flexibility for both the annuity and the hybrid LTC policy
• Gradual, tax-efficient use of IRA dollars
• Predictable LTC benefits and premium stability
• Ability to mix carriers for better pricing or underwriting fit

Best for: Those wanting flexibility and guarantees while spreading taxes over time.

Strategy 3 — IRA-Funded Traditional LTC Insurance

This strategy uses IRA distributions to pay premiums for a traditional long-term care insurance policy. It allows you to keep most or all of your IRA invested while redirecting only the necessary distributions toward LTC premiums. Many retirees use this to meet RMD obligations while locking in high-efficiency LTC protection at a lower cost than hybrid products.

Key benefits:

• Often the lowest-cost way to secure strong LTC protection
• Wide choice of top-rated LTC carriers
• Pure LTC coverage without tying up IRA principal
• Flexible benefit design (reimbursement or cash)

Best for: Those wanting maximum long-term care coverage for the lowest premium.

Strategy 4 — Annual IRA Distributions for LTC Premiums

For clients who prefer to leave their IRA investment strategy intact, this approach simply applies annual IRA distributions toward long-term care insurance premiums. It’s straightforward, and provides flexibility to adjust how you fund premiums as tax brackets or retirement income needs change.

Key benefits:

• Works with traditional, hybrid, or linked-benefit LTC policies
• Uses taxable IRA withdrawals to fund high-leverage LTC protection
• Provides flexibility in how you fund premiums each year
• May satisfy RMD requirements

Best for: Those wanting maximum flexibility while keeping their IRA as-is.

The right IRA funded LTC strategy depends on your goals and tax situation. We can help you compare the options.