2015 Medicare Open Enrollment Checklist

healthcareIt’s that time of year again. If you’re one of the roughly 50 million Americans enrolled in Medicare, get ready for some year-end shopping.

Medicare open enrollment for Medicare Advantage and Medicare prescription drug coverage runs from October 15th until December 7th, and presents a great opportunity for senMedicareCardiors to manage their health care costs for the coming year. On offer are prescription-drug and Medicare Advantage plans, as well as the opportunity to switch plan types.

“It’s like deja-vu, all over again”

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Homeowners Insurance 101: What You Need To Know

homebuyersThe purchase of a home is an important decision and often represents the single largest financial transaction that Americans enter into. To protect that investment, homeowners insurance is recommended, and is generally mandated by a mortgage lender.

In addition to protecting your home from a catastrophic loss, and satisfying your lender’s requirements, homeowner policies protect you in other ways that you may not have considered.

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Common Questions After An Auto Accident

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Common Questions After An Auto Accident

Accidents happen, and even minor fender benders can be an unnerving experience. Advanced technology, including driverless cars, may eventually make accidents a thing of the past, but until that happens, we need to be prepared for when they do occur. This week’s blog post comes courtesy of our friends at Cook Maran & Associates, an insurance brokerage firm specializing in personal lines insurance. Personal Insurance Executive Director, Tim Brenneman, discusses what to do if you have been involved in an auto accident. Please click the link below to be directed to the original post.

http://www.cookmaran.com/blog/common-questions-after-an-auto-accident/

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Automobile Insurance 101

carcrashcartoonInsurance planning is part and parcel with retirement planning. The ability to share common risks at a reasonable cost protects us from a truly catastrophic loss and can help to ensure the continuity of our financial and estate plan. Automobile insurance, mandatory in most states, plays a foundational role in asset protection planning, and is at the same time both widely utilized and overlooked. In this week’s blog post, we will review the most important provisions of a personal automobile insurance plan and provide simple tips to help you design a thorough and cost effective plan of coverage. Before we begin, it is important to note that insurance is regulated at the state level and provisions or policy definitions that apply in one state may be different in another. Thus, the coverage areas outlined are general in nature and based on those found in a typical New York policy.

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Retirement Planning: Claiming Social Security Benefits

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In our most recent blog post, we discussed the import role that Social Security benefits play in the retirement income plan of most Americans, and provided a framework for understanding the various types of benefits. While sometimes dismissed as inconsequential, Social Security benefits provide a critical source of guaranteed income for most retirees. To wit, Social Security benefits comprise over fifty percent of the retirement income for two-thirds of current retirees and, critically, allow many seniors to live independently. In this blog post, we review how Social Security benefits are taxed and provide guidance on how and when to claim benefits. We encourage readers to review our previous blog post, A Primer on Social Security Benefits, as it provides important information that will aid in your understanding of the strategies outlined below. You can find that blog entry by clicking here.

To begin, an understanding of Social Security retirement benefits requires reviewing a few common terms that are key to making informed claiming decisions.

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Avoiding The Middle Class Retirement Maelstrom

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As financial advisors we devote an enormous amount of time and energy crafting financial and estate planning strategies for our high net worth clients. While our wealthier clients provide us with interesting problems to solve, many of us take great enjoyment in helping clients with fewer resources and options to realize their retirement dreams. Unfortunately, most middle income clients are ill-prepared to retire and are not a target market for the majority of financial advisors.

Middle class clients face many of the same risks that our wealthier clients do: outliving their money, poor stock market performance and rising health or long-term care costs are near universal concerns. Others such as inflation and the death of a spouse may be particularly impactful for those with limited resources. So what are some simple tips that middle income clients might consider in planning for retirement? Continue reading

Checklist for a Midyear Financial Checkup

With tax season ending and the start of summer, it’s easy to forget about your finances.  However, this midpoint in the year, as things begin to slow down, is one of the best times to evaluate where you stand, to become aware of issues before it is too late, and to make any necessary course corrections.

We recommend evaluating your:

BUDGET

Now is a great time to fine-tune your budget or spending plan based on any changes (raises, bonuses, additional debt).

 

SAVINGS

Make sure that your emergency savings fund is on track.  While some suggest setting aside 3 months worth of household income, we suggest 6-9 months of cash readily accessible, particularly as the timeframe to fine employment increases.

Check in on your other savings goals such as: your children’s educational planning, retirement savings, family vacation, or home improvements.

Retirement: make sure you are maximizing your annual contributions to your 401k, traditional or Roth IRA, or any other sort of savings you’re looking towards.  For more information check out our retirement posts.  If you see you’re falling short, you may want to consider increasing your contributions.  Take the time to evaluate your company match to maximize your full match potential

 

CREDIT

Guard against identity theft.  Request your free credit report from the 3 credit reporting agencies online, for free at http://www.freecreditreport.com.  Make sure your credit report is updated and accurate – check for any problems or unusual activity.  Close down credit cards that are no longer in use.  Make sure the debt that you’ve taken out is in your name.

 

TAXES

The midyear checkup is a good opportunity to review your tax withholdings and make any estimated tax payments.  Contact your CPA or check the IRS withholding calculator.

 

INSURANCE

Take a look at your current insurance plans: life, health, disability, long-term care, auto, homeowner’s policy.  Do you have the right type of insurance and coverage? Make any policy changes or modifications based on changes in the first part of the year.

 

INVESTMENTS

Now is a good time to review and adjust your asset allocation or your goals, particularly if you want to take on more risk or your retirement time horizon has changed.

It Can’t Happen to Me: Why Forgoing Disability Insurance is a Costly Mistake (Part I)

If you had a machine in your basement that printed out $20 bills whenever you wanted, would you buy a warranty for the machine?

We recently had a meeting with a client that we’ve known for a long time.  Despite an annual income of $500K+, we were concerned; his financial plan had a few major shortfalls, which put his family – his wife and two daughters – at risk.

Of note, his financial plan:

  1. Did not have enough liquidity
  2. Had no emergency account
  3. Did not have enough savings for retirement
  4. Had no personal disability insurance

 The first few issues are ones we often encounter with new clients.  These typical financial traps can be safely avoided with a good financial plan that re-allocates income and creates liquidity in savings.

The most worrisome part of this client’s financial plan is that he didn’t have personal long-term disability insurance.

Fifteen years ago, this client had bought life insurance, but declined purchasing long-term disability insurance.   Why?  His excuses are ones we hear far too often:

  1. “My company offers disability insurance” (only for as long as you’re working there)
  2. “It can’t happen to me” (unfortunately, it can’t until it does)
  3. “I don’t want to pay for it” (if you need to use it, the investment in the premium will pay off very quickly)

Fast-forward fifteen years to our meeting last week.  This client, like many people we know, has been diagnosed with a degenerative disease (something similar to multiple sclerosis, or muscular dystrophy, Lou Gehrig’s disease, etc.).  Like many of those diseases, there’s no known cure.  Moreover, the disease will get progressively worse over time.  If/when he becomes disabled, the insurance that he bought through work will not cover him long-term.  If he was to lose his job, not only is he completely vulnerable, but so is his family – there is no coverage in place. 

Think back on the money-printing machine we asked about at the top of the page.  Would you insure it?  Most people answer yes that they would get a warranty for the money-printer; however, most people don’t take the same warranty out on their ability to work, which is their greatest asset and source of future money.

How to Shop for a Long-Term Care Insurance Policy

The last few weeks, we have discussed the basics of long-term care insurance and taken a deeper dive into why everyone needs long-term care insurance.   Now that you’re convinced of the necessity of long-term care insurance, the question is: what do you need to know when buying it?

The first question to answer in shopping for long-term care policies is: what type of policy should you buy?  There are two types of policies one should evaluate:

1. Indemnity policy.  An indemnity policy is a policy that will pay a predetermined amount for your cost of care regardless of the expenses you incur.

For example, if you have an indemnity policy that covers the predetermined amount of $300 per day, but you only incur $232 in costs, you still receive the full amount of $300 per day, despite the excess of $68 per day.

The benefit of an indemnity policy is that any excess payment you receive can be used to offset expenses that may not be otherwise covered under the policy.

2. Expense reimbursement policy.  An expense reimbursement policy pays the actual long-term care expenses, up to the daily benefit amount.

For example, if your daily cost of care is  $232, with an expense reimbursement policy, the policy will pay exactly $232.

The advantage of this plan is that excess benefits remain in the policy and extend the benefit period.

Once you have determined which type of policy will be best for you, there are several options that must be decided for each specific plan.  When looking to purchase a policy, the key points to look for are:

1.  The daily benefit amount.  The daily benefit amount is the fixed dollar amount that is payable from a long-term care insurance policy.  You want to make sure that you choose a sufficient daily benefit amount to protect yourself from spending down your assets if you need long-term care.  Your cost of care range will be determined by where you live, which should be tied into evaluating how much of a daily benefit one should purchase.

According to the Genworth Financial 2013 Cost of Care survey:

  • In New York, the annual cost for
    • Private room in a nursing home: $125,732 (requiring $350 of benefit per day)
    • Home health aid: $50,336 (requiring $140 of benefit per day)
  • Compare this to the annual cost in the state of Alabama
    • Private room in a nursing home: $69,543
    • Home health aid: $36,608

2.    Inflation protection.  Most long-term care policies offer inflation protection, which is a valuable way to plan for the ever-increasing cost of long-term care.  Inflation protection allows you to purchase premiums at a fixed cost; in other words, you can increase your coverage over time without increasing your premiums.  Inflation protection gives you peace of mind tomorrow with prices today. The younger you are, the more important it is to have inflation protection.

For example, as noted above, the 2013 cost of a home health aid in New York was $50,336.  Assuming a 5% rate of inflation, in 15 years, that same care now costs $144,575.  With inflation, long-term care can become costly quickly; it is important to hedge against inflation.

There are several rider options for consumers including: no inflation, compound inflation, and simple inflation.  Inflation protection is the costliest rider for long-term care policies.

 3. The elimination period. The elimination period refers to the waiting period before the policy coverage kicks in.  Some people view long-term care insurance as catastrophic coverage; therefore they purchase a long-term care policy with an elimination period.  You can determine the appropriate length of an elimination period based on how much out-of-pocket cost you are willing to pay.

For example, if you put a 100 day elimination period into your policy, and something happens wherein you incur $300 a day in care costs, you will be liable for that $30,000 out-of-pocket until the elimination period ends (on day 101).

4.    Length of coverage.  To determine the length of coverage, many people look at the average stay in a nursing home.  Determining the length of coverage on your policy – whether it’s 3 years, 5 years, or a lifetime benefit – is a function of how much money will be used up over what period of time.  Of course, the longer the period of time, the more expensive the policy is.  It is important to note that most long-term care premiums are not guaranteed; insurance companies generally can increase the cost of premiums.

 

For more information on long-term care policies and retirement planning, contact us.

Long-Term Care Insurance – Do You Need It?

“There are 4 kinds of people in the world.  Those who have been caregivers, those who are currently caregivers, those who will be care givers, and those who need care givers.” – Roslynn Carter

Which one will you be?

Financial planning focuses on building and accumulating wealth for your retirement and, ultimately, the transferring of your wealth to the people that you love.

When people think about the challenges and threats to their retirements, the most commonly thought of culprit is financial losses in the stock market.  However, people typically fail to consider the risks of other types of ‘retirement invaders’ such as health care costs and long-term care costs.  Both of those situations can cause costly problems, often much more so than volatility in the stock market.

Planning for long term care is more than just more than simply planning for how to pay your bills.  From a financial planning perspective, long term care insurance planning determines how much of the monetary risk a client wants to assume versus how much they are willing to shift to an insurance company.

So what does Long-Term Care Insurance do?

1. Long-Term Care Insurance is a tool that protects your lifestyle as well as your retirement nest egg and savings.

2. Long-Term Care Insurance provides and preserves the freedom of choice as to how and where care is to be received.

3. Long-Term Care Insurance gives your loved ones peace of mind to care about you and not care for you.

One of the greatest myths about Long-Term Care is as it relates to Medicare.  Generally, Medicare does not pay for Long-Term Care.  Under limited circumstances and for a limited period of time Medicare will pay for medically necessary skilled nursing facilities or home health care. You must meet the rigorous conditions to be eligible for Medicare to cover the costs.  Most Long-Term Care is to assist people with support services, for example: activities of daily living like dressing, bathing, or using a bathroom.  Medicare does not pay for this type of care called custodial care.

4.  Those who purchase qualified Long-Term Care Insurance can take a tax deduction for part of the premium.  The tax deductibility limits for 2013 and 2014 are:

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For those who live in certain states (for example, New York), your state may provide a special tax deduction or special tax credit.

Why is it important to consider Long-Term Care Insurance now?

“Old age is like everything else, to make a success of it, you’ve got to start young.” – Theodore Roosevelt

1. Eligibility for the purchase of long term care insurance: any change in health, can impact your ability to obtain Long-Term Care Insurance.  Waiting to apply could be a very costly mistake.

2. Potential $ Savings: The younger you start Long-Term Care Insurance, the more you can save on premiums.

If you want to learn more, contact us.