• SPEND LESS THAN YOU EARN. You can’t make your money grow if you spend it all.
• LIST YOUR FINANCIAL PRIORITIES. Put your retirement at the top of the list.
• ESTABLISH AN EMERGENCY FUND. Low-risk, accessible cash will lessen the temptation to dip into retirement savings in an emergency.
• MAKE SAVINGS A HABIT. Even a little can add up, thanks to the power of compounding.
• PAY YOURSELF FIRST. Stock away at least 20% of your pay. Have the money automatically deposited so you’ll never miss it.
• CUT EXPENSES. It’s one of the fastest and best ways to make money. Clip coupons, buy second-hand on eBay, eat out less often. Funnel this “found money” into your investments.
• CREATE INCOME. Take a second job, rent out a room or downsize and invest the profits.
• INVEST REGULARLY. Use time and timing to get into the marketplace. If you don’t know how to invest, find out how! Go through training, read books, ask an expert and then apply your knowledge. Remember: Don’t work for money. Let money work for you.
• CREATE LONG-TERM WEALTH. Money in a savings account is safe, but inflation will erode its value. Stocks provide long-term growth.
• DIVERSIFY. The best way to balance your risk is with a portfolio that spreads your money out over a variety of financial instruments.
• REVIEW. Revisit your spending plan, savings and goals monthly to be sure you are on track.
• AVOID BAD DEBT. Don’t borrow for things such as vacations, clothing or furniture. Borrowing to remodel a home, on the other hand, may be good debt that can provide long-term financial benefits.
• BEWARE OF HIGH-INTEREST LOANS. Look at the total cost of repaying the principal and interest, not just the low monthly payment.
• GET OUT OF BAD DEBT. Otherwise, finance fees eat up principal that could be earning interest.
• HANDLE CREDIT CARDS WISELY. Keep only one or two cards. Transfer high-interest balances to zero-interest cards.
• PLAN TO RETIRE LATER. If you’re doing what you love, work is fun! You can work longer, work part-time or become a consultant.
• DELAY TAKING SOCIAL SECURITY. Benefits will be higher when you start.

“In the cold northern wastes there is a mountain a thousand miles long, a thousand miles high. Once each thousand years a small bird flies north. This small bird flies north to sharpen his beak on the cold hard stone of the mountain. When the mountain is thusly worn down, one second of eternity shall have passed.” –Tibetan Poem

Currently, 49% of LTC recipients are relying on Medicaid, but keep in mind, while some in this group come from our nation’s poor, many in this group start out paying out-of-pocket then go on Medicaid after their assets are exhausted. Only 7% of people are actually paying for long-term care with private insurance coverage they have purchased. The government took a step to reduce Medicaid roles with the passage of the DRA, making Medicaid eligibility more difficult. The three-year look back is gone. Under the new law, the look-back period is five years for all transfers, and the beginning date for the penalty period is now the later of the date the person enters a nursing home or the date the person applies for Medicaid.

What this boils down to is the penalty period will not begin until the nursing home resident is virtually destitute.

Gifts made by seniors in the most innocent manner could jeopardize their eligibility for Medicaid even if it is legitimately needed. For example, a grandparent making a monetary gift to a grandchild for a wedding or college graduation could end up delaying their Medicaid eligibility.

Also, watch out for filial responsibility. Filial responsibility laws derive from England’s Elizabethan Poor Relief Act of 1601. This law required grandparents, parents and children, to the extent they were able, to support family members who could not care for themselves. Currently, 28 states have filial responsibility laws. Pennsylvania has re-enacted its law making children liable for support of their indigent parents, and other states are likely to follow suit.

The DRA of 2005 also affects the exemption of a person’s home, the use of interest-only annuities and the forgiving of loans.
• A person’s home, formerly exempt from Medicaid eligibility limits, will be counted as an asset if the equity in that home exceeds $500,000. States are allowed the option to increase that amount to $750,000.
• Some advantages in using interest-only annuities have also been eliminated. These annuities provided a small income during life and left the original investment to heirs upon the senior’s death. Under the new rules, the state must be named beneficiary of any leftover funds in the annuity for at least the amount of the medical assistance paid on behalf of the annuitant.
• A senior can no longer loan money to their children to get it out of their estate, then, forgive the loan. In order not to be considered a transfer of assets, the repayment of a loan or mortgage must be actuarially sound and cannot be forgiven or cancelled upon the death of the lender.

Projected growth in the senior population has caused states to seriously review Medicaid programs.

For a reasonable cost, life insurance with a long-term care rider can be purchased. This plan will provide funds for the insured should they need long-term care, protecting the loss of other assets they have worked so hard to accumulate. However, in the event no long-term care is ever needed, the insured has a death benefit to leave to heirs, enhancing even further the legacy they will be able to leave their loved ones.

She recently had the test done. When the bill came in, it stated…“the test costs are no longer covered under “Obama Care. You will have to pay the bill in full.”

So look at this convoluted Government thinking…. If she cannot pay for the test out of her own pocket, then, she will not find out if she has cancer. Now the treatment will be covered if cancer is detected, but if she does not pay for the tests, she will never know if she has cancer. Looks like the old Abbott and Costello routine, “Who’s on First?”

Do you see this sleight of hand? They laughed at Sarah Palin when she said the plan has “death panels.” The way these new rules are set up…sure looks like “death panels.”

There are so many wonderful options that could be instituted to cover people with health insurance at a lower cost but the Government won’t allow it. You have seen how all Government programs like AmTrack, the Post Office, Social Security, Medicare, and Medicaid work. They are all losing money and are insolvent. This program is in the same league and will follow the same route. It is slated to go before the Supreme Court. Contact your representatives to let them know how you feel.

I bring this to your attention to help you (1) plan for increased costs for your insurance when you retire, and (2) better plan in your budget to help pay big money for your parents’ health insurance retirement needs.

Need for an emergency fund has received greater attention in recent years. Many capable people have lost their jobs because of mergers and acquisitions, economic dislocations or plant closings. A reasonable emergency fund can help to prevent a temporary unemployment from becoming a financial crisis. The fund will give the family time to adjust without having to drastically change its living standards or disturb other investments.

The size of the needed emergency fund varies greatly. It depends upon such factors as family income, number of income earners, stability of employment, assets and debts. The size of insurance deductibles, health and property insurance exposures, and the family’s general attitudes toward risk and security are also important. The size of the emergency fund can be expressed as so many months of family income. As a guideline, it is advisable to reserve a minimum of two and a maximum of six months of income. The larger the percentage of your monthly expenses that are fixed and must be paid, the larger should be the emergency fund.

By its very nature, the emergency fund should be invested conservatively. There should be almost complete security of principal, marketability and liquidity. Within these investment constraints, the fund should be invested so as to secure a reasonable yield, given the primary investment objective of safety of principal. Logical investment outlets for the emergency fund would include:

• Bank savings accounts (regular accounts)
• Credit Union accounts
• Money market accounts
• Mutual Funds
• Life insurance cash values

Access to emergency funds is important. If check-writing services are available, even at a fee, it might be wise to arrange for them. The careful person may also want to have some ready cash available for emergencies, even if it is non-interest earning. Such an individual might consider setting aside $200 in cash at home to be used ONLY in case of dire emergency.

The above question continues to surface as baby boomer approach retirement. For most boomers their answer is the Las Vegas Approach. Under this approach “you’re basically asking people to roll the dice and hope for the best”.

The first step is to determine “The number”. “The number” is the withdrawal rate from a retirement portfolio that creates the highest probability of sustainability until assumed mortality. Bill Bengen’s mid-1990 research gave rise to the 4% rule. Basically, Bengen postulated that retirees can withdraw about 4% annually from their liquid asset base with a high probably that savings will last 30 years. Take out more than 4% and the odds of sustaining financial independence began to decrease. Remember the 4% rate is only one ingredient of the required seven-layer cake.

So, one approach to success it to limit yearly portfolio withdrawal rates to 3 to 4%. That equates to $3,000 to $4,000 for every $100,000 saved. I am asked if this is $3,000 per month? NO! It is $3,000 per YEAR for each $100,000.

What is a safe withdrawal approach? Well, 2% is bulletproof, 3% is probably safe, 4% is pushing it and at 5% you’re eating Alpo in your old age. If you take out 5% and you live into your 90’s, there is a 50% chance you will run out of money.

Here is where the rubber meets the road. Suppose you need $100,000 per year in after tax cash flow. This amounts to $8,333 per month, in today’s dollars, net of Social Security or pension payments. Here is what amount is needed in capital at various withdrawal rates.

Those are the facts regarding what people need. Now the sad part. A 2005 Retirement Confidence survey showed total savings and investments by age group, not including the value of the primary residence to be low. The grim results for those age 55 and older as they plan for retirement: 39% have saved less than $25,000; 12% have from $25,000-49,999; 7% have from $50,000 to $99,999; 23% from $100,000 to $249,999, and, only 19% have $250,000 or more.

Look again at the eye popping numbers chart. Even if you cut monthly income in half to $4,167 per month ($50,000 per year) not including Social Security, and a withdrawal rate of 2% to 5%, a person still needs a capital base of $2,500,000 down to $1,000,000. Hmmm, yet only 19% of those in the survey have $250,000 or above, which is only 10% of the required level.

If you have been working with a professional advisor, then, the above numbers are not a shock. If you have been reading this blog, then, past articles have informed you generally. So, what is a “body” to do?

First off, you can use some of the principles of “Missed Fortune” that we have shared with you in the past. Make sure you work with a certified TEAM member so your program is done correctly.

Next, determine the amount of monies you need for these 5 categories:

1. Survival Income: The money one has to have to make ends meet. (That is “need” not “want”)
2. Safety Income: The money needed to meet life’s unexpected turns.
3. Freedom (Fun) Income: The money needed to do things that bring enjoyment and fulfillment to life.
4. Gift Income: The money needed for people and causes that one deeply cares about.
5. Dream Income: The money needed for the things one has always dreamed of being, doing or having.

Finally, you can determine the shortage and draft out a plan for success. Please do not wait until 5 years before your planned retirement date to start. Get assistance now!!!

Here is another reality check. Assume you are in the 25% marginal tax bracket, and, in retirement spending 4% of your base net of taxes, with a 3% inflation (low estimate). This scenario will require a gross average annualized return of 9.33%. Using all past studies a mix of 60% equities and 40% bonds at a withdrawal rate of 4%, sustained virtually every 30 year period back to 1926.

Caveat; If you retired in 1987, 1991, or 2001 you took a massive hit to your portfolio, so, it may not work out if you retire when the markets plummet.
Set up a 3 year liquid fund upon retirement so you do not have to draw on your retirement assets if the markets go into a 2-3 year dive.

Need assistance- contact us-

We will force to you have discipline, so, there is no regret.

One reason the public has not purchased a policy is because they are complicated. The typical policy has dozens of options and add-ons that can make for hundreds of permutations. The insurance industry has started a massive simplification of basic policies.

Another reason for not moving ahead with a policy is the good ol’ human trait of … procrastination. Many people wait until the horse has left the barn before closing the door. That is, they wait until later in life to buy the policy when they may not be in good health. Recent statistics show 20% of the applications from clients aged 60-69 and 42% of those aged 70-79 are declined. What is the solution …? Buy a policy when you are young and healthy, say at age 40-45.

The average nursing home (or at home care) costs $8,000/month or $100,000 per year. Assume a basic policy, at age 40, costs $500 per year and you pay it until age 90 (50 years). Then, your total cost over your lifetime would be $25,000 ($500 x 50). Do you realize at today’s cost of $8,000 per month that in 3 months you would spend the same amount as you paid for your lifetime premiums. ($8,000 x 3 = $24,000) The decision to buy a policy is a layup with a ladder, or, a stolen base on a wild pitch.

Why even consider a long term care policy? Everyone needs to be concerned about the quality of Medicaid-funded long term care. With the Medicaid system in sever financial strain and no solution on the horizon it is obvious that care will diminish. The system is underfunded.

Some people tell me that they will self fund their long term care needs. Costs today are running $100,000 per year and rising 14% annually. Some people need long term care coverage for 10 years. Do you have “loose change” of 1.5-$2 million to handle these long term care costs for one person?
As I have written many times in this blog the new Federal rules for transferring your assets to obtain Medicaid are super tight. Thus, this can be an option only if done 6-10 years in advance of the need.

Are there alternative ways to fund long term care coverage? Yes. See your financial advisor TODAY to develop some strategies.

In general, here are a few ideas and tips for buying long term care insurance (LTCI):

• Buy young, when premiums are less expensive
• Women are more likely to need LTCi as 72% of nursing home patients are women
• Avoid lifetime coverage to save on your premiums
• Buy joint spousal coverage
• Set up a side business and have your business pay the premiums. The premiums are a tax deductible expense
• Buy inflation protection. (Compound inflation rather than simple inflation)
• Avoid future purchase option riders
• Examine new lifetime benefits life insurance that pays for your needs when you are alive, not, after you die

I implore you to examine this area. I have seen emotional strain and financial strain of long term care costs demolish a family.