Category Archives: Life Insurance/Long-Term Care

What you need to know about life insurance and long-term care for retirement planning.

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5 Reasons You Need to Discuss Your Finances With Your Family

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iStock_000006643046XSmallA recent study from Merrill Lynch concluded that investors with at least $250,000 in assets do not talk to their families about money. The main reason stated in the survey was to avoid family conflict. I believe the problem is not just for the so-called “mass affluent”. It extends to all of us. If they conducted as survey of all Baby Boomers I believe the overwhelming majority of us just don’t make finances a family discussion. I also believe that the reasons would be more varied than the “family conflict” reason given by the mass affluent in the Merrill study.

Here are 5 reasons you need to discuss finances with your family:

  1. It’s selfish not to. That’s right; there is more at stake than who gets your checking account or 401(k). What about health issues? If you had a stroke tomorrow and couldn’t speak who would make financial decisions for you? Have you looked into Powers of Attorney for Healthcare for example? If not then you are placing a heavy and unnecessary burden on your loved ones.
  2. There are people ready to make decisions for you. Probate courts are busy making decisions for families like yours. Why? Because many people don’t even bother to make a will. As a result they die “intestate” (without a will) so the probate court decides how your money and possessions will be split up between your wife and kids and it probably won’t be according to what you wanted. So take care of it while you are alive. Spend a few hundred dollars for a will. Oh, and if you have kids, at the top of your list should be naming guardians for your minor kids. Life has its twists and turns. Don’t take chances.
  3. Blood can run cold. It’s funny (or sad) how death can change people. We all have stories of people we know or have heard of fighting over grandma’s famed rolling-pin or mom’s wedding ring. Your kids probably won’t say anything to you while you are alive but once you’re gone, the gloves may come off. Talk about “who gets what” while you are still alive. Better to deal with the potential hurt feelings while you are alive to explain and smooth things over.
  4. Your retirement is yours not your kids. It’s OK to explain to your kids that you plan to use the equity in the house to supplement your retirement income, for example, and there may not be a house to leave when you die. Not that you have to explain where every penny is going but clue your family in on your retirement plan and reasoning.
  5. You may need them to help out with your retirement plan. I don’t mean you plan to move in with them rather they may need to be a part of your retirement strategy. For example, in order to qualify for Medicaid and keep the family home you might consider a Medicaid Trust. In that situation your home would be deeded to a child to get it out of your estate so it could potentially be used to pay for long-term care expenses under Medicaid. It pays to visit an estate planning attorney to avoid any pitfalls with this strategy. Here’s a good article from the Wall Street Journal on this topic if you are interested.

The Merrill study also showed that families who had conversations around finances were twice as likely to feel prepared in the event of a sudden family emergency. Yes, it can be uncomfortable but the end result will be that you maintain control, something you lose if you die or become incapacitated before you have these discussions and/or make the necessary plans. Keep in mind that it shouldn’t be a one-and-done conversation. Life changes as will your plans. Keep the family updated as well. Avoid surprises and hurt feelings that you may not be around to discuss. Get comfortable with the uncomfortable.


Question: What makes you uncomfortable when it comes to discussing your finances with your family? You can leave a comment here.

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How to Estimate Your Healthcare Costs in Retirement

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There are two misunderstandings that I hear when I speak to people about healthcare costs they will face in retirement. One is they think that Medicare is free. They believe that once they retire Uncle Sam will pick up the tab for healthcare. Secondly, they think Medicare will cover all of their long-term care needs should they arise. Unfortunately, both of these misunderstandings can lead to financial disaster in retirement. So let’s set the record straight and tackle each one so you can plan for the expenses you will encounter in retirement.

  1. Medicare is free – No it’s not. Medicare will cover about 62% of your healthcare costs. Part A is free if you have paid into the Medicare system (through Social Security) for more than 40 quarters during your lifetime. You will pay for part B and D. Remember, Part A is the hospitalization part of Medicare. There is no out-of-pocket to you for the premium, however, there are deductibles and copays associated with Part A. Part B will cost each enrollee $104.90 per month in 2013. The income related adjustments will also stay the same in 2013 (these are explained in the free guide you can get from me). Part B is your doctor related expenses i.e. visits, tests, etc. Part D is your prescription drug coverage and that cost is all over the board. You must shop carefully for your Part D coverage. You can do this on the Medicare website here. Make sure that you have your prescription drug information handy in order to get the most accurate quote.

    Oh, and don’t forget, there are copays and deductibles associated with Part A, B and D so you need to build those into your budget. How much are we talking about? According to a Fidelity Investments study the average retiree will need about $200,000 at the start of retirement to cover health care expenses and that does not include long-term care. That leads us to the next misunderstanding.

  2. Medicare will cover my long-term care expenses. There is some confusion here because Medicare will cover the first 100 days of hospitalization. After 100 days there is no coverage for skilled nursing care. Medicare will not provide coverage for assistance with Activities of Daily Living (bathing, eating, dressing, etc.). Medigap plans will not cover long-term care expenses either. Long term care costs are expensive. The most expensive type of care is in a nursing home. A private room ranges from $89 per day to $826 per day. The median daily rate is $213 and the median annual rate is $77,745. So what are your options? You can pay out-of-pocket, get long-term care insurance or utilize Medicaid in your state of residence or have a family member take care of you.

    If we add the possible cost of long-term care to our projected lifetime healthcare costs they can easily exceed $400,000 over a 20-year retirement. What can you do right now to get ready for your own healthcare plan? Here are three steps you can take right now.

1.  Understand the healthcare costs that lie before you in retirement including Medicare, long-term care and all of the associated deductibles and co pays. A good place to start is to get a copy of “Medicare and You” handbook from the Medicare web site. Click here to get your copy.

2.   Start planning now. As you consider the income that you will need and the planned expenses that you foresee make sure that you include healthcare as a major expense category.

3.  Get an estimate of what your healthcare expenses will be. A good place to start is with a MyRetirementPlaybook Healthcare Estimator.

By becoming informed about your anticipated healthcare expenses you can begin to plan and avoid the costly mistakes that many people make. Learn now and live well in retirement!

What other questions do you have about healthcare? Leave your comments and questions by Get Your FREE Guide to Medicare.