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Long-term care (LTC) keeps you functioning in the face of devastating illnesses, disabilities and prolonged disorders such as Alzheimer’s disease. LTC kicks in when you lose the ability to care for yourself and can no longer do things such as bathe, dress or eat without help. These are three of the six most commonly listed activities of daily living, or ADLs. The care obviously comes with lots of emotions – and rising costs you can start addressing now.
LTC stands to impact more than 70% of Americans – including the aging tidal wave of baby boomers – at some point in their lives. More than 11 million Americans need LTC now, with almost half (43%) needing the care while still younger than 65.
Costs vary depending on where you live, as well as the type of care you need and for how long, but the costs can come close to $100,000 per year.
Below are some national average costs for long-term care in the United States as published by LongTermCare.gov:
Further, the average need for care lasts about three years – 2.2 years for men and 3.7 years for women – according the National Clearinghouse for Long Term Care Information. So, you can see how quickly the costs add up in just a short time.
Many believe that once you turn 65 Medicare pays for LTC. No: Medicare and Medicare supplements focus on medical acute care and short-term services for conditions expected to improve.
If you don’t get better, Medicare will only pay, in whole or in part, for your first 100 days of LTC. After that, you’re on your own to come up with the money.
Depending on your current financial situation, to take preemptive steps about LTC you can:
Pay with your own money. Some seniors will in fact pay less than $25,000 in private out-of-pocket expenses for nursing home care during their lifetime, and others will pay $100,000 or more annually for LTC for longer than five years.
Consider these questions before choosing this funding option. Are you in the former group, or the latter? Are your resources sufficient to cover both the costs of LTC and the standard of living of your spouse who isn’t receiving care? Are family members willing and able to provide in-kind cost savings by being your caregivers?
Buy an LTC insurance policy. The American Association for Long-Term Care Insurance finds that only 8 million Americans hold LTC policies. LTC insurance can cover nursing-home care, home-health care and personal or adult day care for those who have a chronic or disabling condition that needs constant supervision.
Know what to expect. According to a Milliman Individual LTCI Survey, insurers reject a fifth of plan applicants. Initial premiums increase proportionate to age at application and some insurance companies can increase premiums on existing policies. If this option seems right for you, look for a policy with a shared care provision to transfer unused benefits from a deceased spouse or partner to the survivor. Find out if your state participates in the long-term care partnership program and what the policy qualifications are.
Buy a life insurance or annuity contract with a specialty rider regarding payment for LTC. Some new hybrid policies combine features of life insurance or annuities with LTC benefits – though many require a single up front lump sum premium that not everyone can afford. Still, those who want to retain greater flexibility of their resources, or are concerned about the possible underwriting obstacles of a traditional LTC insurance policy, can consider this alternative.
Rely on Medicaid. Some default to Medicaid for LTC based on income and savings levels. Others spend down their assets paying for LTC and then qualify for Medicaid funded LTC. Paying with your own money and buying individual insurance policies are costly ways of funding LTC and not appropriate for everyone. Learn what to expect from Medicaid before you make your first claim.
Prepare for your future LTC well before the need arises. Despite the dollars, emotions and fears involved, you can manage the process.
Open enrollment for California state employee benefits takes place September 19 – October 14. Dates vary from state to state. Federal employee open enrollment is November 8 – December 13.
If you are employed by the State of California, you should make the time to review your benefit choices before the end of August. Now is the time to think about your health, dental, vision, and tax-saving needs.
Employee benefit experts expect benefits to change next year like few years before – given the rising costs of health care and the impact of COVID-19 on businesses this year. Even if little changed in your life in 2020 – and that’s probably unlikely – you should aim to maximize what your employer offers.
Here are a few pointers.
Even if you carry the same plan as in many past years, spend a few minutes evaluating which one is best for you and your family when you choose – especially High-Deductible Health Plans and traditional plans.
Switching from the traditional plan to a high-deductible option might save money if you don’t visit the doctor much. Perhaps too your spouse’s company now offers a better plan and you can switch the family coverage to the better alternative.
Improved employer plan descriptions lay out plans’ differences and costs and do that much better this year. Take advantage of their free help, online or in person.
Often you receive only one choice for dental coverage, but you might be surprised at how many people decline to pay the relatively small premium for this coverage. Even if young and cavity-free, you take care of your teeth now to potentially prevent large dental bills in retirement.
If nothing else, dental insurance provides a teeth-cleaning twice a year.
This benefit works great if you wear glasses or contacts and need regular eye exams. Those with perfect vision may opt out of this coverage.
Most employers offer some basic life insurance, the coverage usually a multiple of your salary. If you are married, own a home or have kids, this basic coverage usually falls short.
Consider paying extra if possible, to increase life coverage through your employer. If that’s not an option, consider supplementing this minimal coverage with a term policy from an independent provider. These policies come with set duration limits on coverage and you decide whether to renew once the policy expires.
Remember that whatever life coverage your employer pays for vanishes if you leave that company.
Standard coverage in this category usually pays 60% to 66% of your compensation if you become disabled and unable to work.
As this coverage often comes with a cap, if you are highly compensated, this insurance might also fall short to sustain your standard of living. Estimate your minimum to live on if you become unable to work and, if that number scares you, consider purchasing a supplemental policy.
This pays for assisted living, a nursing home or in-home care late in your life.
Even as our lifespans increase, long-term care premiums escalate. If your employer offers any coverage at a relatively inexpensive group rate, consider locking in some protection. Financial advisors normally recommend LTCI when you turn age 50 – getting it while you are young and healthy under an employer plan may still make sense.
This savings account reduces your taxable income and funds medical co-pays, orthodontist appointments and prescription drug orders, among other expenses.
Figure your out-of-pocket medical costs and sign up to set aside that amount, up to $3,550, pre-tax in an FSA and $7,100 for families. Remember that if you participate in an HDHP, you maintain a related health savings account and can only take advantage of a limited FSA.
Either way, pay for the most of out-of-pocket medical costs with pre-tax dollars.
If you pay for day care, after-school programs or summer day camps for children under age 13 or for elder care for a dependent parent, DCAs help you offset that cost with pre-tax dollars. Again, a working couple can set aside up to $5,000 from paychecks.
This wide-ranging employee benefit is being offered more and more, from simple mental-health hotlines to complete menus of services.
For instance, if you lack a will, many companies now offer reduced-rate or even complimentary legal services to establish your basic estate planning documents. Others offer financial planning and weight-loss programs – sometimes even gym memberships.
Finally, while your employer will offer resources to help you navigate the menu of employee benefits, your financial advisor is well versed in ensuring your benefits are consistent with your overall financial plan and is a great resource too.
The real value of a bear market may be that it gives investors, who are temporarily frozen within its grip, the opportunity to learn or relearn important lessons regarding risk and diversification. For savvy investors, a bear market also creates a period for looking beyond emotional headlines and studying the hard facts – facts that can ultimately place them in a position to take advantage of coming opportunities.
Periods of falling equity prices are a natural part of investing in the stock market. Bear markets follow bull markets, and vice versa. They are considered the “ebb and flow” of wealth accumulation.
Bear markets create apprehension in the minds of many people. That’s natural. However, any feelings of anxiety should be balanced with reason for anyone seeking financial success. Anyone dubious about the need for a stable outlook should consider that virtually every bear market was followed by a better than average annual rate of return from the bull market.
But just as importantly, bear markets have also at times delivered very healthy returns while the bear was on the prowl. And trying to predict when those healthy returns might take place is almost impossible.
Previous bear markets have delivered some very significant rallies. And while they did not predict the end of the bear’s reign, these rallies do provide good reasons to remain invested.
Instead of taking a “time out” from the market, and missing out on potential opportunities, investors should focus on five key lessons the market has repeatedly been trying to teach everyone during its naturally occurring economic cycles:
Remember that you’ll be inundated with all kinds of economic information during both bear and bull markets. There will be reports, for example, about inflation, interest rates, and unemployment figures that may entice you to either give up on the stock market or invest in it to the exclusion of investments paying relatively smaller returns. To avoid being lured to either extreme, develop a financial strategy with your financial advisor that accounts for risks you find comfortable.
Review your investments regularly to help ensure they are still relevant to your overall financial plan, and that you’re staying on track.
Then trust yourself and stick with your plan.
August is National Wellness Month, an entire month where we can focus on self-care, managing stress and promoting healthy routines on our way to a lifetime of wellness. And while we all intuitively know that simple, daily actions can have a big impact on our health, sometimes a few reminders can prove helpful.
For example, we know that we should:
But one of the most important financial journeys we can take is the path to financial wellness. Building financial security and independence, while certainly important, makes up only one slice of the whole financial wellness pie. Financial wellness also incorporates the ways that wealth and income affect our emotional and physical well-being.
The journey to financial wellness is far different than the path to becoming rich. But achieving financial wellness cannot be done in a vacuum, as it requires developing a degree of emotional and physical wellness as well.
Searching for one inherently will expand to a search for all three. And we should remember that the journey does not really have a final destination – and it’s one that too few people choose to make.
If you are considering a journey to financial wellness, here are a few suggestions to help:
1. Remember, it’s your journey.
It doesn't work to follow the path to financial wellness because a spouse, parent, friend or financial planner recommends it. If your motivation is a should or an ought, you might as well save yourself a lot of frustration and pain by stopping before the journey starts.
2. Don’t attempt to guilt, shame or manipulate anyone else to come along with you on the journey.
We can’t find financial wellness for anyone else but ourselves. We certainly can join with others for mutual support and learning along the way, but all those on the path need to be there for themselves regardless of whether others are on it.
3. Be prepared for the naysayers.
Not everyone in your life is going to support your quest for financial wellness. Many will try to convince to stop before you start or to turn back once you’ve begun. Often, the closer a person is to you and the more dependent they are on your financial choices, the more threatening your journey may be to them and the more they will resist you changing.
4. Lower your expectations of how quickly your attitudes and behaviors around money and finances will change.
Chances are it has taken you a lifetime to get to where you are with your relationship with money. Unlike the journey that Ebenezer Scrooge took to financial wellness, your relationship won’t be miraculously transformed overnight.
5. In the early stages of your journey, resist the urge to substitute getting more practical and logical information about money and finances instead of looking at the emotions and feelings you have around money.
Most of the journey to financial wellness is not about the money. It’s about the thoughts, beliefs and emotions you have about money and wealth.
6. Find one or more trusted guides to help you along the journey.
Seek out those who are traveling the path ahead of you and who appear to practice at least some of the financial wellness you want. Learn from their missteps. Benefit from their experience and wisdom.
7. Open yourself to new awareness and knowledge.
Be prepared to let go of your most deeply held “truths” about money. The more stubbornly we cling to strong beliefs about how systems work, or people function around money, the more likely that those beliefs are not serving us well.
8. Be gentle with yourself when you get off the main path and need to retrace your steps.
Everyone on the journey to financial wellness takes wrong turns. Mistakes and dead ends are inevitable and are not failures. They are opportunities to learn, to make course corrections and to continue your journey.
It is said that small, daily acts of self-care can lead to a lifetime of wellness. The same is true as you seek financial wellness.
When a company announces bankruptcy, employees usually lose their jobs and benefits. But what happens to former employees who were promised pensions or other benefits?
Well, a federal judge ruled that the Westmoreland Coal Company – one of the largest coal companies in the country – could end the health benefits for its former miners and families. And the decision has many retirees worried about their own health care and pensions. And rightly so.
Defined benefit pensions, long on the decline, continue to disappear. In fact, according to the Department of Labor, since 1983 US companies have eliminated over 125,000 defined benefit plans.
If you are in one of these traditional pensions, odds are that, sooner or later, you won’t be.
With traditional plans, called defined benefit, employees don’t contribute and companies put away the money for retirees to draw on. Under defined benefit plans, you get paid a specified amount, usually monthly, calculated based on your final salary and your years of service. The onus is on the employer to keep the plan funded, even though the amount needed is fluid and unpredictable, which is one big reason for companies to abandon them.
Why are company pensions evaporating? Partly because the Pension Protection Act of 2006 established new accounting rules under which companies with pension plans must recognize their plans’ funded status on their balance sheets each year.
Since analysts and investors scrutinize those balance sheets and lots of pension plans are underfunded, companies decided to take action - because underfunded plans constitute a corporate finance headache.
According to a Towers Watson survey, many companies with pension plans are trying to limit the effect of those plans on their financial statements and cash flows, as well as trying to reduce the overall cost of their plans. And to do that many are simply ditching their plans and giving employees lump sums.
Here’s what to know about your options.
Why should you object to a wad of retirement cash all at once? Lump sums make sense if you expect to die soon without a surviving spouse who will need lifetime income. They also work if you already have another secure source of retirement income or are trained in handling such amounts of money at once.
In many other cases, accepting a lump sum payout rather than income from a pension may significantly affect your retirement funding unless you take proper steps.
Tips to consider:
As you might after any large windfall, plan with a good financial advisor.
While pension plans are heading toward the same fate as the Dodo bird, your retirement benefits don’t have to.
After the Great Recession from 2007 to 2009 hit, far too many Americans found themselves without any savings to get through the hardships of unemployment, falling house prices, dwindling 401(k)s and increased financial anxieties. Don’t let this happen to you.
Getting into some simple saving habits now can really help you down the line. Social Security and unemployment checks are a lifeline to many, but usually not enough to maintain a decent living standard. The rule of thumb for emergency savings is three to six months’ worth of living expenses.
In light of our current economic slump, most financial advisors will tell clients to save even more – at least six to 12 months of expenses. One way to do this is to set up an automatic deduction program through your employer or through your bank.
You can set up a program that transfers a certain amount from your checking account to your savings. Once established, you can change it, but you probably won’t because we are all busy and it’s easier to keep things as they are. Also, once you learn to plan your finances around the remainder of your paycheck not transferred into savings, you won’t miss the money you saved.
You can also start an automatic increase if you get a raise. This simple strategy is also helpful when saving toward any goal, such as retirement.
With a 401(k) or similar program, you can automatically put money away, sometimes with an employer matching contribution.
The government uses this system by withholding taxes. It takes taxes from your paycheck, and you live on the remainder. If you pay into your retirement fund automatically, you can save without feeling that pinch of dread when you pay monthly bills.
Write down how much you want to save every month. It helps if you also tell someone about your goal. These two steps greatly increase the likelihood that you will achieve your goal. When you have a set goal and a partner to hold you to it, you stay more focused and are less likely to spend money on things that you don’t need.
When on a dubious shopping spree, for example, ask yourself, “Is this purchase going to help me or hurt me?” Americans often boast that they are number one in lots of things, but saving the money that we earn would probably be our worst event at the Olympics. American households save only about 4% of their disposable incomes, far less than other developed countries and far less than we should.
We are far better at spending money that we haven’t earned yet. The same lack of fiscal probity is evident on the national level. Our national debt is over $30 trillion – which is more than $91,000 per citizen and almost $250,000 per taxpayer!
If there is a silver lining to the black cloud of the Great Recession from more than 15 years ago, it is that it helped Americans to be more thrifty, put off gratification and think more about the long-term financial health of their family and community.
People were forced to decline needless, unwise purchases because they didn’t have the access to credit they had before. As a result, Americans were paring down debts and saving more money.
Let’s get back to that. Before the next recession hits.