Covering Health Care Costs When Retired

Posted on October 24, 2012 by stcroixinsights

If you’re like many American workers, you’re eyeing retirement with apprehension. If you’ve been following our blog series on Retirement this month, you know that we’ve been covering some of the tough topics that individuals face as they prepare for retirement. When my clients come to me, no matter the reason or the stage of life, there are always two questions that they ask me, two main questions. They are, “Will there be enough money?” and, “Will everything be okay?”

As with any other situation in the financial landscape of your life, retirement is no different. Planning and being prepared ahead of time, covering your bases and managing potential factors before they arise is key to any sound retirement plan. One such potential factor that weighs in is that of health care coverage when retired.

The rising costs of healthcare (especially as we age) is a known factor, and one that is enough to strike fear in the hearts of many approaching retirement. Health care costs can eat up a sizable chunk of retirement savings, especially given the hit that many retirement accounts took in the last decade.

When it comes to planning for retirement, healthcare costs and planning for healthcare cannot be ignored. This is definitely one situation where careful planning is key, because many approaching retirement fear that they will be stuck working to maintain health care benefits long after they’d planned on retiring. Outliving one’s retirement assets is becoming a real fear for those approaching retirement, as people are living longer and also being forced to spend diminished retirement income on rising healthcare expenses.

You shouldn’t be forced to spend your retirement years worrying about whether or not you’ll be able to qualify for Medicare or if your retirement nest egg will run out too soon. You should be enjoying these golden years of your life. This can be accomplished through the peace of mind that sound planning affords. Plus, as I’ve stated previously, you have options, many options, for both healthcare coverage as well as retirement saving and investing.

If you’re like the 62% of Americans in the pre-retirement stages (ages 50-64) who are not at all confident that they have enough savings to weather their healthcare costs in retirement, I encourage you to contact St. Croix Advisors or another qualified financial planner today. Don’t waste another second of your life worrying about the future that you could be looking forward to.

Final Expense Insurance – Is it for you?

Posted on October 15, 2012 by stcroixinsights

Unlike with other types of insurance that protect you and/or your family in the event something bad happens, Final Expense Insurance protects your family by ensuring they’re covered when the inevitable occurs.

While you may not need to ever make a claim on your homeowner’s policy, car insurance policy, or others, as blunt as it sounds, life has a 100% mortality rate. As you and/or your loved ones age, speaking about topics such as death and funeral arrangements can be difficult. However, the more prepared everyone is ahead of time, the easier the situation becomes when it occurs. You don’t want to waste time scrambling to make arrangements and worrying about expenses when you can be honoring your loved one’s memory.

Additionally, by discussing your plans ahead of time and making arrangements, you and/or your loved ones are able to have a say in their own funeral proceedings. This can be a very productive and positive experience, in that survivors aren’t left wondering if they’re doing the “right thing” and following their loved one’s wishes.

Final Expense Insurance can be a great tool in your toolbox for precisely this purpose. It gives individuals greater power over their own wishes as far as their funeral arrangements go, while still alleviating the expensive burden a funeral has on survivors. Since policyholders will need to decide ahead of time the amount of coverage, they will already be thinking about costs and can certainly map out the type of arrangements they desire ahead of time.

Final Expense Insurance policies are relatively straight-forward. Most policies range between $5,000 to $30,000 and are issued for individuals between 50 to 85 years old.¹ Most policies simply require some forms and a medical questionnaire to be filled out prior to approval or denial. Then, a monthly premium payment is typically in force for the life of the policy. Plus, the biggest benefit is that the proceeds are distributed income and capital gains tax free.

With the cost of funeral expenses rising, why rely on tapping into savings or being forced to charge the expense to a credit card when Final Expense Insurance is an option? (Often, survivors will need the remaining savings anyway since the deceased’s stream of Pension or Social Security income will no longer be available).

For more information on Final Expense Insurance or to apply for a policy, please contact me, Brett Anderson, today.

¹ Frahm, Michael. “Opportunities in Final Expense Insurance.” Advisor Today. January/February 2011: 20

Think Twice Before Passing the House On

Posted on October 11, 2012 by stcroixinsights

When it comes to passing home ownership from aging parents, grown children often seem the most likely choice. However, if you’re in this position, you may want to reconsider and tell Mom and Dad, “Thanks, but no thanks.”

In many cases, aging parents feel that transferring ownership of their home to one or more of their children is the best bet, so that they can qualify for nursing home assistance. Parents may also feel that by transferring the home to the kids prior to their deaths, they are able to spare their children any lengthy probate proceedings.

First and foremost, I need to say that everybody’s situation is different and if you or your parents are debating transferring home ownership, your best bet is to consult both your financial advisor as well as an estate planning attorney to determine the full magnitude of any decisions.

When considering whether or not transferring home ownership is really advantageous for all parties, you must first consider whether the potential implications outweigh the benefits.

Not even factoring in Mom and Dad’s long-term care preparations or health, most people will not spend an extended amount of time in a nursing home. Consider the following statistics:

Roughly 65% of all men and 30% of all women older than 65 will never enter a nursing home.
Of those that do, only about one in ten men and one in four women older than 65 will spend more than a year there. Less than 10% of all residents stay beyond three years.
Only 10% of all residents will stay longer than three years.
Over half of all care facility stays last six months or less, with the average stay of those who enter a nursing facility hovering around 18 to 20 months.¹

Given those odds, the costs of nursing facility care still remain a significant cost, but not one that should force parents to shed their home in an attempt to qualify for assistance. (Often, an individual’s primary residence can even be excluded from the asset pool that’s looked at when applying for Medicaid eligibility).

In addition to transferring home ownership to offset nursing facility costs, many aging parents feel that this strategy is also good for sparing kids the long and costly journey probate requires. However, in his April 2011 Registered Rep article, “Going Home Again”, Kevin McKinley disagrees. McKinley argues that given the gift and capital gains taxes heirs could face, probate just may be the lesser of the two evils.²

As with any situation of this magnitude, the decisions are never easy and the options are plentiful. Other avenues that bear exploration include long-term care insurance and/or the establishment of a trust prior to making a decision to simply keep or transfer home ownership.

Just make sure that when you’re ready to start walking those avenues, your financial advisor and estate planning attorney are matching you step for step.

Should you have any questions on long-term care insurance or whether or not you or your parents are prepared in the event of a nursing facility stay, I encourage you to contact me.

¹ Matthews, Joseph. “Long-Term Care Insurance: The Risks and Benefits.” NOLO, Law for All. http://www.nolo.com/legal-encyclopedia/long-term-care-insurance-risks-benefits-30043.html. 11 Oct. 2012.

.² McKinley, Kevin. “Going Home Again.” Registered Rep. April 2011: 78-79