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Long Term Care Insurance Decision – Should You? Which One?

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In the vast world of all kinds of insurance products, include finger insurance for a pianist, long term care insurance often takes the back burner because it is typically not considered until later in life and thus “skips the mind” per se.

I was recently involved in the process of researching, screening and executing a long term care agreement for my aging parents.  Because my parents are not formally educated, and because they are immigrants who moved to America rather late in life, they rely on their kids (me) for these matters (and rightfully so).

So in this guest post I will share what I have learned about long term care (LTC) insurance and some of the best companies out there offering it.

long term care insurance

Long Term Care Insurance: What Is It?

LTC insurance mainly helps pay for long term care needs such as nursing home admission for senior citizens or in home health care assistance as one gets older.  Because most of us don’t really think of LTC day to day, most of us have no true idea of how much this type of care can cost.  We all typically do agree that it is EXPENSIVE.

And with average life expectancies on the rise, I learned in my research that more than 50% of Americans will spend at least part of their golden years needing long term care. Sure, medical care is better and we are more aware of what we eat and what it does to us, but no one can defy the law of nature; aging and a deteriorating physical condition.

As I was researching cost trends, I came to know that approximately 12 million Americans needed LTC about 12 years ago, with the average cost at $50,000 per year.  Inflation adjusted cost in today’s terms is roughly $75,000.  This number is projected to rise to near $300,000 in another 20 or so years. Yup, I too was shocked and in recovery mode for at least 8 minutes after reading that fact. I just couldn’t digest it.

The bottom line of all the research led to me acquiring a LTC policy on behalf of my parents.  Why did I decide to do this? Because they fit three key criteria which I hope you find useful:

  1. LTC insurance is not for someone who has gobs of money (which in my estimation is $2M or more in today’s dollars), or for someone who doesn’t have a lot of wealth / assets. The premiums are hefty!  My parents fit this criteria.
  1. LTC insurance can be bought at anytime, but after numerous consultation sessions with “experts”, the best time to buy seems to be between 55 and 65.  My parents fit this range.
  1. Finally, there are many companies in this space.  You shouldn’t even consider any company that has less than an A+ rating.  You can independently validate each company’s rating and don’t have to rely on what they tell you.  Why does this matter? Highly rated companies do not tend to sneak in steep price increases in your premiums. Second, you want these companies to be around to fund your LTC needs if and when you need them.

Finally, the best three companies that I concluded on after conducting all the research are Mass Mutual (A++), Northwestern Mutual (A++) and State Farm (A++).

I did call USAA (A++) as well and loved everything about what I heard. Unfortunately my parents do not qualify as they don’t have military history. I on the other hand, because of my military history, will likely subscribe to USAA’s plan if and when time comes and I feel I need / want it for my wife and I.

I tried my best not to recommend any specific company because I am not affiliated with anyone.  But I hope the three guidelines proved useful.

Readers: What’s your take on LTC insurance? Do you / will you have one? Why or why not?

Sunil owns over a dozen profitable niche websites and is the author of “How to Go from $0 to $1,000 a month in Passive and Residual Income in Under 180 Days All in Your Spare Time”, a FREE report you can download instantly from his Extra Money Blog, where he discusses how to create multiple streams of passive and residual income, entrepreneurship, internet marketing, blogging and personal finance. In 2007, he sold his ecommerce website for $250,000 to a top Ebay Power Seller and since then has sold several niche sites for five figures each. You can read more about him and his work on his blog.

How To Avoid Rising Healthcare Costs

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The downgrade of the U.S.'s credit rating from AAA to AA may not seem to directly impact you yet. Sure, gas prices have dropped which is beneficial, but there are other costs that will soon rise looming on the horizon – and food and healthcare costs are just a few of those expected to increase in costs.

Healthcare, in particular, is expected to see a spike in price, and those enrolled in medical and nursing schools are already gearing up for the challenge these price hikes with bring. Higher prices will generally prevent individuals from seeking health care services until they are already too sick. However, there are ways to keep your health care costs low while still receiving the quality care you need to do the following things.

Health Care Costs

Know What Your Insurance Offers

Because of the rising costs in healthcare, you need to remain aware of any changes that may occur in your health insurance. Some providers may change the amount they are willing to cover for certain procedures, or reduce the number of cost-free visits they allow. They may also increase your co-pay. To ensure that you aren't left with large bills, review your health insurance policies to determine what is and isn't covered.

Choose Urgent Care over Emergency Room

Most health insurance policies offer a good co-pay rate for urgent care visits, but offer little help for emergency room visits. Emergency room visits often cost triple the amount of an urgent care visit so if you can stand to wait, always choose the urgent care unit. A sprained ankle or a cut may hurt now, but a $400 bill from the emergency room will sting a lot worse than the $50 you would have paid for the urgent care visit.

Choose Out-Patient Services

Hospitalization is one of the highest costs to any patient, and as health care costs increase you can expect that $9 band aid to increase to a $15 band aid. If you must have surgery, opt for an out-patient or same day surgery. You won't have to pay for overnight expenses, and your hospital bill will be practically cut in half.

Always Review Your Bills

The healthcare industry frequently makes errors when billing individuals. Hospitals and clinics deal with hundreds of patients on a monthly basis, and on occasion, a patient is billed for another patient's procedures or medical supplies used. Always review your bills before paying so that you only pay for the treatment you received.

Take Care Of Yourself

While we can't always avoid getting sick, we can take better care of ourselves to prevent frequent sickness. Try to maintain a balanced diet, exercise, drink plenty of fluids, and take a multivitamin. Also, routinely give yourself the appropriate self-examinations so that you may find small issues before they become large health concerns and possibly large bills.

Everyone is trying to reduce their spending so that they can survive the downturned economy, but you shouldn't have to risk your health to do so. Healthcare may be expensive, but you can avoid paying outrageously high prices by simply remaining aware of who is taking care of you and the treatments you are receiving.

Are You Prepared For A Stock Market Drop?

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The last few days have been quit volatile on the stock market. Big drops, big gains, bigger drops, more rallies, and more slides. With all this volatility, some people are in a panic, ready to sell. However, panic selling rarely does you any good when it comes to a long-term investing strategy. Being prepared for a stock market drop isn't about have stop loss orders ready to trigger; rather, it's about being ready to seize the opportunities that come in your way.

Bargain Hunting During Times Of Stock Market Decline

If you aren't maxing out your tax-advantaged retirement accounts, now might be a good time to add a little more. Over the long haul, the stock market has consistently gone up (of course, there's a first time for everything — including long-term stock market losses). This means that if you take the opportunity now to buy more for your retirement account, you have the chance to reap better tax-advantaged gains in the future. This is especially true if you happen to have a Roth account. Those bigger earnings could be tax-free when the time comes to withdraw.

Another way to bargain hunt during times of stock market decline is to look for good quality stocks with solid fundamentals. Dividend investing can be a great opportunity at this time. Many dividend stocks — especially dividend aristocrats — have a history of coming through tough times. These stocks are “on sale” during a market decline, and you can buy more shares for your dollar. This means that you have the chance to reap bigger gains on increases in stock prices, as well as owning more shares that pay dividends. If you want to boost your income portfolio, now might be the perfect opportunity.

Tax Planning During A Stock Market Drop

A down market isn't just great when it comes to bargain hunting. You can also use this as an opportunity to reduce your tax liability. As you know, you have to pay capital gains taxes on your earnings. The good news, though, is that you can offset your gains by losses. If you locked in some investment profits earlier this year, you can lock in some losses now to offset the income. You can use up to $3,000 in capital losses to offset capital gains each year. If your capital loss is more than $3,000, you can carry over the excess to another tax year, so that losses incurred this year can help offset capital gains in years to come.

You do have to be wary of the wash sale rule, though. If you buy the same security again within 30 days (before and after the sale), you will fall afoul of the IRS if you try to claim the loss. This prevents people from selling a stock at a loss and using it as an offset, and then turning around and buying the same (or a very similar) stock at a lower price to profit from later.

Bottom Line

One of the best things you can do for your finances is to order them so that you are prepared to take advantage of opportunities that come in your way. If you are properly prepared, either with capital to buy more stocks while they are on sale or a plan to sell at a loss to offset earlier gains, you can benefit from stock market declines.

Retirement Savings By Age: Are People Saving Enough For Retirement?

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One thing I'm often interested in is to hear about what the current actual savings rates are for people in our country.

What have they saved?  Have they started saving enough?  Will a majority of people in our country be secure enough to retire?  Have people woken up to the fact that their retirement is creeping up on them, and they're going to need a substantial nest egg in order to maintain the same lifestyle?

Today I thought I'd look at some of the numbers that are out there, to see where people are.

Savings Rate By Age

Actual Savings Rates By Age

I came across a study by the Employee Benefit Research Institute where they did a survey of workers to find out where they were with current savings rates, and to see what their confidence was in whether they could retire on what they were saving.

Here is what they found for actual savings rates, by age groups.

Reported Total Savings And InvestmentsAllAgesAgesAgesAges
Workers25-3435-4445-5455+
Less than $10,00046%59%45%44%29%
$10,000-$24,999 10121087
$25,000-$49,999 119131014
$50,000-$99,999 9981010
$100,000-$249,999 149151222
$250,000 or more 11391519
Source: Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc., 2011 Retirement Confidence

What they found was that not many people were likely to have saved very much for retirement.

Most workers have little put away in savings and investments, but older workers are more likely than their younger counterparts to report higher amounts of assets.

Workers today are less inclined than those even 10 years ago to believe they'll have enough money in retirement, and less confident that they'll get enough from Social Security.   Those very confident in the financial aspects of retirement dropped from 22 percent to 13 percent from 2001-2011.

The decline in overall retirement confidence between 2001–2011 is statistically significant across all age groups. Today’s workers are also less likely to be highly confident about being able to pay for basic expenses, medical expenses, or long-term care in retirement. Workers age 55 and older are more likely than younger workers to be very confident that Social Security will continue to provide benefits of at least equal value to the benefits received by retirees today.

Have People Actually Calculated How Much They'll Need?

So while most people really aren't saving that much, and aren't that confident that they'll have enough, does that mean that they're realizing the dire straights they're in and trying to figure out now how much they'll need?  Not necessarily.

Despite approaching retirement age, half of workers age 45 and older have not tried to calculate how much money they will need to have saved by the time they retire so that they can live comfortably in retirement. Nevertheless, the likelihood of trying to do a retirement savings needs calculation increases with age.

So older folks are more likely to figure out how much they'll need, but still only half are trying to calculate the amount they'll need, while the rest are winging it.

Surprising to me was just how little most people think they'll need to retire comfortably in retirement. When all ages are considered over 72% thought they'd need less than 1 million, with 50% thinking they'd need less than $500,000.

Workers ages 55 and older are more likely than younger workers to think they will need to accumulate less than $250,000 by the time they retire so that they can live comfortably in retirement.

As time goes on and we see the cost of living rise, I thin a lot of these folks are in for a rude awakening when either they don't have enough, or something they were counting on like Social Security  isn't there anymore – or not at the same levels they thought it would be.

Working Later In Life

When they were polled more people expected to be working later in life than ten years ago.  In 2001 70% of people expected to be retired by the age of 65.  In 2011 less than 49% expect to be retired by the same age.

Workers of all ages appear to be planning to retire later, on average, than similarly aged workers were in 2001. In  particular, the percentage planning to retire at age 66 or older has increased significantly for every age group

What Does This All Mean?

While I'm not going over all the data in the linked study, I think we can pull some takeaways from this survey.

  • People aren't planning ahead
  • People aren't saving enough
  • People aren't saving early enough
  • People are planning on working later in life, and depending on Social Security to a degree.

It really is a sobering picture to say the least.  If our country does have to take on some austerity measures soon to help cut rising spending, I'm sure there are a lot of people hoping that their level of government benefits aren't cut because most of them have not planned ahead.

What do you take away from this picture? Are you planning ahead for a rainy day, and for retirement?  Have you figured out how much you need, and have you taken the steps to start saving to reach that amount?

Are You Maxing Out Your Tax-Advantaged Accounts?

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As you put together a plan for the future, and as you plan for your retirement, one of the things you should consider is whether or not you are maxing out your tax-advantaged accounts before investing in other accounts.

Part of getting the most out of your money is enjoying as many legal tax advantages as possible. Maxing out your tax-advantaged retirement accounts before turning to other accounts can help you make the most of your resources — and help you build up your wealth faster.

Maxing Out Tax Advantaged Accounts

Saving Money On Taxes

One of the ways you might be wasting money is by paying taxes you don't need to. While you should pay what you owe, obviously, you can keep more of your money by being aware of the tax breaks available to you. Some of those advantages come from the way you plan your retirement contributions. Some of the tax advantaged accounts you can use to save for retirement include:

  • IRA
  • Roth IRA
  • 401k
  • Roth 401k
For “regular” accounts, you can receive a tax deduction for your contributions. You contribute it without paying taxes on it, so the savings in your tax liability can be used now to increase the effectiveness of your investments. When it's time to withdraw your money, you pay taxes on the withdrawals.
Roth accounts, however, do not offer you an immediate tax advantage. You make contributions with after tax dollars. As a result, your money grows tax-free. When you withdraw it, you don't have to pay taxes on it. This means that you don't pay income tax on the gains from the investments in your Roth account. That can be a real advantage later, especially if you end up in a higher tax bracket. Here's a comparison between a Roth 401(k) and Roth IRA.
Before you open a regular investment account, it might be wiser to max out your tax-advantaged accounts first. If you can, max out your 401k, and an IRA, before turning to other investments accounts. Remember that your spouse can have his or her own investment account (including a spousal IRA if he or she doesn't have a job) as well. As a family, try to max out these accounts before turning to other investment accounts. Your money will go further, and you'll get to keep more of it in the long run (provided you're smart about low-fee accounts).

HSA: Another Tax-Advantaged Account

If you have a high deductible health plan, you have another option for a tax-advantaged account. You can make tax-deductible contributions to your Health Savings Account now, and reap the benefits later. If you use the money in the account later, as long as it is for qualified health and medical expenses, you never have to pay taxes on it. After the age of 59 1/2, you can make withdrawals for non-health costs using the same rules as a traditional IRA. You have to pay income taxes on the withdrawals, but, beforehand, you have the advantage of the tax deduction. Plus, your health care dollars can go further if you aren't paying taxes on them.
In the end, getting the most out of your money requires an understanding of your options. As you decide how to invest, consider maxing out tax-advantaged accounts before turning to investment accounts without the same tax benefits.

Is Money A Means To An End? Or An End Itself?

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One of the questions you have to ask yourself when you begin probing your relationship to money is this: Why do I want more money? It makes sense to want to earn more money, but why are you so interested in having more money?

Think about why you want more money, and try to define some of your reasons for making the effort to amass wealth. Your reasons for striving for more money can reveal a lot about you — and your level of happiness.

Do You View Money As The End Result?

It's easy for money to become the end result. If you want money just to buy more things, or just to have more money, you have made money the end. You may not have a plan for that money. Instead, it just sits there. And the more money you have, sitting without purpose, the more likely you are to be dissatisfied. In some cases, amassing wealth can become something of a hobby — or even a measure of status. When you begin to confuse net worth with personal worth, it becomes harder to be happy with what you have. After all, there is always someone with more, and you can never get all the money there is. Without a purpose for your money, you can quickly get caught up in deciding that money is the end result, rather than viewing money as a means to an end.

Money As A Means To An End

Most of us recognize that money is a necessity. We need money to buy clothing (or at least cloth to make our own clothing), and many of us have to buy at least some of our food, no matter how great our gardens grow. Additionally, we use money to pay costs associated with maintaining an adequate living space, and for other necessities of life. Having money can help you improve your quality of life, and it can provide you with the things you need. However, it helps to have a purpose for your money, so that you are using more effectively. Plus, you are more likely to enjoy your life more when your money is used for things that bring you pleasure and a sense of fulfillment, rather than having it just sit there, granting you some perceived social status.

The first thing to do, when you want to use money as a means to an end, is to figure out your priorities. Decide what's important to you, and then direct your financial resources in such a way as to make those important dreams a reality. Try to be as specific as possible. Sure, you want to save up money for a comfortable retirement. But what do you want to be comfortable doing? Consider what your ideal retirement would like, whether it's travel, volunteer work, or entertaining family. Then, make a plan for your money so that you can accomplish your goals. The same is true if you want to go back to school, pay down debt, donate more to charity, or build alternative income streams so that you can quite your day job.

Rather than looking at money as an end itself, consider money a tool to help you accomplish your goals. You'll be more likely to live the life you want — and have the financial resources to succeed.