Alternatives to Long Term Care

“Age Wave” has found that people underestimate how long they will live. They also underestimate their need for Long Term Care (LTC). That is, 37% think they’ll need it, but 70% actually do and only 8% have any coverage.

The issues with typical LTC policies are: They are expensive, premiums continue to rise, areas of coverage are being dropped and some companies have just cancelled policies.

The two types of coverage are:

    (1) Use it or lose it. You pay a premium for a specific amount of coverage. If you never use it the money is just gone. Premium cost for a healthy 59 year old is $6,000 per year to develop a pool of $328,000 with a maximum of $300/day.

    (2) A Hybrid policy. You pay an initial lump sum for a certain amount of care later. No further annual payments. You can get your premium money back after a time, or, your heirs can get two times your principle amount if you die before using the insurance, or, you could get up to 5 times the principle payment in LTC benefits.

Keep in mind for your planning… the median cost for a private room in New York City is $170,000 per year. In Florida, the median is $90,000 per year.

The best time to start planning and to take action is in your 40’s and 50’s.

Another family approach is, say, you are in a nursing home that costs $200,000 per year for 20 years, then, you will spend $4 million of your own money. Many parents will buy a $4 million life policy on themselves, then, upon their death the family gets the $4 million, tax free from the insurance. Since their estate has been dwindled by the $4 million of LTC costs.

Our favorite approach is a multi approach hybrid policy. The primary purpose is to be used to generate TAX FREE retirement income. It can also be used to pay for LTC, should it arise, and lastly, it can pay family members a tax free death benefit.

So, if you are in your 40’s, 50’s or 60’s contact us on the best option for yourself.

Sabotage Retirement (Why do people do this?)

There are far better alternatives to build your retirement than the traditional approach. Why do people not take advantage of these other superb methods?

    (1) There are incorrect internet articles written by brokers and agents who do not like these alternatives. Their displeasure with these alternatives is because:

      (a) The brokers do not make anywhere near as much money as through the traditional route

      (b) It takes a huge amount of knowledge and education to implement these other alternatives

      (c) The traditional approach benefits the agent more than the client

    (2) The government has brainwashed the public to follow the traditional route which allows the Feds to extract the maximum amount of tax during your retirement years.

      (a) The Feds encourage companies to offer traditional retirement programs by giving the firms tax benefits for offering matching incentives

      (b) The government rules to benefit from the non-traditional retirement programs are detailed and complicated

Why not look at the alternative route. You have nothing to lose and every thing to gain.

Financial Education for Children

It is so important to teach your children the basics of money and how to manage it. (I find most parents do not manage their own money very well.)

I often counsel parents when they provide children with an allowance they are put the money in 4 “bucket.” Twenty five percent can be spent now; 25% set aside to buy Christmas or other items during the year, 25% for long term savings (home purchase or retirement) and 25% for education (college or trade school.) There are piggy banks that can be purchased to facilitate this, but, maybe if the children “make” the containers, well, they maybe more interested.

If you’re looking to entertain the youngster set while establishing the concept of spending, sharing and saving, refer to online video sources such as Sesame Street’s “For Me, For You, For Later” series: sesamestreet.org/parents/topicsandactivities/toolkits/save.

For slightly older children with a penchant for online gaming, maybe linking to an interactive game such as Disney’s “The Great Piggybank Adventure” will capture their attention and teach some lessons along the way: piggybank.disney.go.com.

For children more interested in managing their own money than playing games, a slate of applications billed as allowance mangers teach important concepts in a fun and practical way. One favorite is bankaroo, where a child can set spending goals, log allowance earned and add moneymaking chores as they are completed. Think of it as the virtual equivalent to your traditional piggy bank: bankaroo.com.

These are only a few resources to get you started, but once you start exploring the web, you will soon find many more. Stay true to your theme and take the role of a financial educator by selecting relevant resources for the families you know best.

As the children are in the 8-12 year old range read with them The Richest man in Babylon. Discuss each page and chapter together. They may not totally understand it now… but in later years they will thank you. (My folks had us do little plays or skits in front of them to demonstrate the concepts in the book. Your kids maybe can create their own videos to show you the ideas :) )

Into their teen years teach them the use of a checkbook and ATM with their own money. They will make mistakes and get burned with service charges. So what, a great way to learn on a small balance than later in life on a mortgage payment.

Introduce them to “Mint.com” it will help them set up a budget online and how to use a checkbook.

Plant the good money ideas with your kids, fertilize it, and, in your old age they may be taking you on a great family vacation.

Checklist for family survivors

When someone you love dies, you find yourself overwhelmed with friends and family, random advice, and casseroles. Eventually, you must throw them all out.

If ultimately you are on your own, where do you begin? Consider Sally Hurme’s latest book, the ABA/ AARP Checklist for Family Survivors: A Guide to Practical and Legal Matters When Someone You Love Dies (2014).

Each chapter presents a different checklist, from funeral to probate, with enough detail to be helpful but not overwhelming.

Family Survivors, Chapter 3, has my favorite checklist, Assigned Tasks. If anyone is reckless enough to say to you, “Just let me know how I can help,” you can whip that out and confidently delegate anything from taking care of pets, to making funeral arrangements, to cleaning up the house. At about $15 from Amazon, you can afford to give volunteers their own copy.

There are no end of organizers, checklists, and books on the market advising how to prepare for or respond to a death. This one is pitch perfect, consistently striking the right balance between what the author knows and what family and friends actually need to know.

Is your Financial Planner a CFP®?

Only about 20 percent of financial planners, investment advisors, stock-brokers, insurance salesmen, etc. are CFPs® (Certified Financial Planner) . There is a reason for this. The exam is very difficult.

Many people are surprised to discover this fact. Professionals from all financial disciplines figure the CFP exam would be similar to various insurance and securities continuing education exams. How wrong they were.

Many attorneys that take the CFP exam find they studied harder than for the bar exam. The CFP exam covers five subject areas: income-tax planning, retirement planning, insurance principles, estate planning, investment planning, and principles of financial planning.

The CFP exam is a 10-hour exam over two days. The passing rate is about 60 percent. Many people taking the exam have a college degree in a related field. Many are engineers looking to start a new career. Everyone has at least a bachelor’s degree.

In addition to passing the exam, each CFP certificant must satisfy educational, experience and ethics requirements. Continuing education is required. Most importantly, CFPs are held to a “fiduciary” standard – they must act in the best interest of their clients at all times. The CFP Board’s rules of conduct require CFP professionals to put the interests of their clients ahead of their own at all times and require a CFP to uphold the principles of integrity, objectivity, competence, fairness, confidentiality, professionalism and diligence as required by the CFP Board’s Code of Ethics. The CFP designation can be revoked if these standards are not adhered to.

So, if you are considering working with a financial planner on a comprehensive plan, or just looking for a second opinion concerning investments, investigate the credentials of the person advising you. Inquire if the person you are working with or are considering working with is a CFP professional. You owe it to yourself.