Another annuity product that many clients may want to consider is a long-term care annuity. This is essentially a hybrid product, offering features of a long-term care insurance policy and annuity features.
With this type of annuity product, investors put a single lump sum into an annuity and then choose how much long-term care coverage they want, whether they want inflation coverage and how long they want that coverage to last. These choices will depend on what a particular insurance company offers, to some extent.
Money inside a long-term care annuity is free of federal income taxes when the money is used to pay for qualified long-term care expenses. And, if the annuity holder never needs long-term care, the annuity can be redeemed when it matures.
If you expect to be in a high tax bracket during retirement, buying a long-term care annuity can provide welcome relief from federal income taxes while providing insurance coverage for long-term health care without the need for a separate policy.