Category Archives: Medicare/Healthcare

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Long-Term Scare

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I find it interesting how many people take their health for granted. Not only when they are in their 20s and 30s but even in their 50s and 60s. It’s as if we can will good health in spite of the reality that we can’t. The need for long-term care insurance is greater today than ever before which is why I have titled this article “Long-term Scare” because the consequences of not being prepared for health care in retirement are scary.

Only about 10 million people have long-term care insurance in the United States even though about 58% of us will need long-term care by age 65. Let’s define long-term care. Long-term care involves a variety of services designed to meet a person’s health or personal care needs during a short or long period of time. These services help people live as independently and safely as possible when they can no longer perform everyday activities on their own. The services can be provided at home or in a hospital or other care facility.

With the risk so high, why do people avoid buying long-term care insurance? A lot of the reasons mirror why people don’t buy life insurance. They feel they don’t need it, it’s too expensive, Medicare will cover long-term care or a family member will take care of them if they get sick. Let’s take a look at each of these reasons.

First, many people feel that they don’t need long-term care insurance. When you are younger than 50 you are probably correct, which is why most people who buy long-term care insurance do so in their mid-50s. As we get older the risk for a long-term care event increases. Stroke, a fall, cancer or any number of illnesses can strike at any age buy certainly the frequency increases as we age.

The expense argument is real. Long-term care is not inexpensive. The average cost of a policy for a 55-year-old couple in 2019 was $3,055. For a 60-year-old couple, it was $3,400. However, there are a number of hybrid products that can overcome that excuse. For example, some life insurance policies will allow you to use part of the death benefit for long-term care expenses without penalty. Some annuities have riders available that will pay for long-term care expenses. Talk to a financial advisor about these options.

Medicare will cover long-term care is one of the most common misunderstandings. Here is what Medicare will cover:

  • Skilled nursing care. Medicare helps to pay for your recovery in a skilled nursing care facility after a three-day hospital stay. Medicare will cover the total cost of skilled nursing care for the first 20 days, after which you’ll pay $170.50 coinsurance per day (in 2019). After 100 days, Medicare will stop paying.
  • Home health care. If you are homebound by an illness or injury, and your doctor says you need short-term skilled care, Medicare will pay for nurses and therapists to provide services in your home. This is not round-the-clock care. Generally, it’s for no more than 28 hours per week. With your doctor’s recommendation, you may qualify for more.
  • Hospice. Medicare covers hospice care. Hospice is care you get to make you more comfortable when you are in the last stage of life with a terminal illness. You’re eligible if you are not being treated for your terminal illness, and your doctor certifies that you probably will live no longer than six months. You can get care for longer than that, as long as your doctor says you are still terminally ill.

Finally, getting a family member to care for you if you need long-term care can be disastrous for you and your family. Many spouses end up needing long-term care themselves after attempting to help a loved one with the requirements of daily living such as lifting and transporting. Most of us are not qualified or equipped to take care of someone who needs long-term care. It is a heavy burden to place on a loved one.

My grandfather lived the final months of his life in a Medicaid facility because he didn’t have the resources to be cared for in a more fitting facility. My parents cared for him at home until it became unreasonable to do so. Medicaid is meant for the poor. Please make that your last resort. Consider your options today. Relieve your family of the potential burden and enjoy the peace of mind knowing that you will be cared for in the event you need long-term care!

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My Grandfather’s Gift – Long-Term Care Insurance

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If you happen to be a parent then you can hopefully understand what I mean when I say that the older we get the more we appreciate our parents, or at least understand them. Raising our own children puts us in touch with what our parents had to put up with back when we thought we were the perfect teenagers. Yeah, right. In other words, life gives us perspective.

Life’s experiences also provide us the opportunity to learn from our parents’ mistakes when it comes to managing money and other aspects of personal finance.

My grandfather spent the last year of his life in a Medicaid approved nursing home. That was in 1974. For those of you who are not familiar with Medicaid it is the state’s long-term care program for the poor. In order to qualify you have to be poor or become poor. For more details on Medicare click here. My grandparents were not what I would call “poor” but they could not afford a suitable facility for my grandfather when he needed critical care. I idolized my grandfather and it killed me to see him in what I felt at the time was a “dump” of a care facility surrounded by people who didn’t care for him like I did. It left a lasting impression on me. You see, he developed pancreatic cancer and was given just a few months to live. He lasted almost a year. He and my grandmother moved in with us during my senior year in high school shortly after his diagnosis. The sicker he got the more difficult it became for my mother and grandmother to care for him.

The nursing home that he moved into was close to our home but it became clear with each of our visits that the “care” in this Medicaid facility was lacking to say the least. When you go on Medicaid they tell you where to go for care. It’s not your choice as it has to be a Medicaid-approved facility and as the saying goes, “you get what you pay for”. Among other things my grandfather’s money and watch were stolen by employees and they were not understanding of his failing mental capacity due to his advancing cancer. In short it was a nightmare.

As I stated, that experience left an indelible mark on my psyche and I pledged that my parents would not end up on Medicaid. When I became a Financial Advisor I made it my mission for my parents to get long-term care insurance. I thought the experience with my grandfather would sway my parents as it did me so as to not have to face the prospect of having to rely on Medicaid. As with a lot of people like my parents other life “priorities” got in the way over the years and by the time they got around to getting serious about looking into long-term care insurance they found that they couldn’t afford it. By that time my Mother was diagnosed with Type 2 Diabetes and my Dad had high blood pressure.

With no other viable option we were able to arrange for a Medicaid Asset Protection Trust or MAPT as it is often called. The MAPT protects assets like your home and your life savings that would otherwise have to be used before Medicaid kicks in to pay for care. The MAPT does not provide care it is a defensive tactic. For people like my parents who don’t have the assets to cover a critical care stay in a long term care facility it is a wonderful tool.

Is it what I envisioned for my parents after what we experienced with my grandfather? No, it is a huge disappointment. I don’t know what I could have done differently short of writing the check for a policy myself. Even that would not have worked as pride comes before charity in many families. Fortunately, I did follow through and get long-term care insurance for my wife and myself. Even though the lesson skipped a generation my grandfather taught me an important lesson about taking care of my family. Although I’m sure it wasn’t the way he intended the lesson to be learned.

I believe that each generation has an obligation to improve from the previous one. It is often because of the mistakes of our parents and grandparents that we learn and hopefully succeed where they failed.

Time Out! What financial lessons have you learned from your parents’ life experiences? You can leave a comment here.

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4 Keys to Financing Your Retirement if You Plan to Work Longer Than Expected

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A recent survey by Charles Schwab found that 95% of baby boomers say they won’t be willing to spend less in retirement. According to the Schwab survey people are coming to the realization that they want to have a good lifestyle in retirement even if it means they have to save more and work longer. Some of the frugality of the post 2008 meltdown appears to be wearing off. Some other survey figures show that 47% of workers age 65 and over are prepared to work in retirement.

Against the backdrop of those survey results it makes sense to look at some ways that boomers can maximize their income when they plan to work longer than perhaps they originally planned.

  1. Take Advantage of Your Salary Benefits. As long as you are making a salary you can continue to contribute to a retirement plan i.e. 401(k) or IRA. It’s a good idea to max out your contributions if possible. That way your accounts can continue to grow and take advantage of time and compounding before you start drawing on them for income once you retire. On the debt side you can also start using your salary to pay down debt before retirement. This will help lower your expenses once you retire.
  2. Higher Social Security benefits. As a general rule waiting to take Social Security benefits makes sense. Applying for Social Security benefits at normal retirement age produces a 25% higher benefit than applying for early benefits at age 62. If you wait until age 70 you will more than double the benefit compared to taking benefits at age 62. Keep in mind that Social Security is based on your highest 35 years of earnings. So if you work longer at your peak earnings you can replace some of those zero earning years early in your working life. You can get more details on Social Security in my FREE Guide to Social Security.
  3. Higher pension benefits. If you are fortunate to have a pension then your ongoing employment will likely boost your retirement payout since most pension payout formulas account for earnings and years of service. If your company has a 401(k) with a match you can continue to earn that match the longer you work. Again, put time and the compounding effect to work for you.
  4. Save on health insurance premiums. Always a big concern. Prior to Obamacare delaying retirement to ensure continued company-paid health care was an important consideration. Even with Obamacare affording pre-65 healthcare coverage can still be a concern. The chances are your company-provided plan is less expensive than an Obamacare plan.

Not everyone will be able to work longer to help finance retirement. The number one reason people are forced to retire early is health issues. Still, many boomers will decide to work in retirement by choice as well as by necessity. In either case it makes sense to take advantage of the benefits of earning a salary pre and post retirement. Plan well. Live better and enjoy retirement on your terms by taking advantage of the time you have now to finance it.


Time Out! How do you feel about working longer to finance your retirement? You can leave a comment here.

 

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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.