Massachusetts Estate Planning & Asset Protection Blog

For Seniors Who Are Betting on Getting to 80

Posted by Massachusetts Estate Planning & Elder Law Attorney, Dennis B. Sullivan, Esq., CPA, LLM on Thu, Aug 28, 2014

Betting on Getting to 80 | Massachusetts Elder Care Attorney

 

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For Those Who Are Concerned About Outliving Their Money

According to research for our book The Seniors and Boomers Guide to Health Care Reform and Avoiding Nursing Home Poverty, outliving one’s life savings is a top concern for many people. One possible solution to this is what the US Treasury is pushing many baby boomers to do: start writing checks to their insurance companies for products that won’t be a financial benefit for them until they’re 80. The Treasuries new rules on annuities known as longevity insurance could allow millions of Americans fresh options for their retirement accounts and 401(k) plans. This is according to Bloomberg Personal Finance.

The challenge: convincing savers to choose that option. The annuities thrill retirement experts and policy makers who see them as a way to ensure workers don’t end up impoverished in old age. Just about everyone else ignores the products, which make up less than 1 percent of all annuity sales.

It can be a great investment too. With $125,000, a 60-year-old man can buy a policy from New York Life that guarantees an income of almost $45,000 a year starting at age 80. The same $125,000 in a regular retirement account would need to grow at the unlikely rate of 11 percent a year from age 60 to 80 to provide that income, assuming 4 percent is withdrawn annually after age 80.

Planning for the Future

Since women live longer than men, their longevity policies are more expensive, and more valuable. Millions of widows in their 80s and 90s end up living on Social Security alone. A 60-year-old woman who puts $125,000 into one of these annuities could get an annual payout of $35,268. For women with a husband and no children, a longevity benefit is a comforting buffer against long-term care costs.

Dollars in longevity policies go farther for those who buy earlier than 60 or start the benefit later than 80. If the insurance becomes common in retirement plans, the cost of policies should fall. To maximize her payout, Carson decided against buying inflation protection and a provision that refunds all the money she put in if she dies early.

Indeed, the oft-repeated big risk with longevity insurance is that buyers could die before they collect. But that chance is what allows the policies to be so lucrative for the long-lived. Those who die early help pay for those who live into their 90s and later. And even if you die at 75, the guarantee of income at 80 means you can tap the rest of your nest egg earlier without worrying so much about running out of money.

How It Works

For longevity insurance to catch on, it needs to gain a foothold in retirement plans. The Treasury rules let workers devote as much as 25 percent of their 401(k) to the products, up to $125,000. That doesn't mean employers will offer the option or that workers will choose it though.

Employers face legal liability for their retirement plan options, making them cautious about relatively unproven products. Insurance companies may need to come up with new kinds of longevity annuities that are more transparent and are geared more towards women since they tend to live longer.

Adding to the resistance is a widespread assumption that Americans don't want to lock up their cash in insurance products. They'd rather get big eventual lump sum payouts, even if they have no idea how to turn that into an income that will support them in their old age.

What the Experts Think

If longevity insurance takes off, it will be a real victory for the experts who have been striving to change that mindset. This may also provide a solution for many boomers and seniors for whom outliving their life savings is a major concern. For more information about these and other concerns see the report from the Seniors and Boomers’ Guide to Health Care Reform and Avoiding Nursing home Poverty.

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Everyone would love 401(k) plans to look more like traditional pensions or Social Security, so savers can put less focus on the balance in their account rather than on the income it will eventually produce. That's an outlook your 100-year-old self may well appreciate.

At the Estate Planning & Asset Protection Law Center, we provide a unique education and counseling process which uses a unique 19 Point Trust, Estate and Asset Protection Review to help people and their families learn how to protect their home, spouse, life-savings, and legacy for their loved ones, click here for more information. We provide clients with a unique approach so they understand where opportunities exist to eliminate problems now as they implement plans for a protected future.

We encourage you to attend one of our free educational workshops, call 800-964-4295 and register to learn more about what you can do to enhance the security of your spouse, home, life savings and legacy.

 Click Here to Register For Our Trust, Estate & Asset  Protection Workshop

Tags: Elder Law, annuity, Baby Boomers, family, elder care, assisted living, elder care journey, assets, care, Elder Law, senior, insurance, surviving spouse, family

Massachusetts Elder Law Attorney | Want to Save Money on Long-Term Care? Get It Now!

Posted by Massachusetts Estate Planning & Elder Law Attorney, Dennis B. Sullivan, Esq., CPA, LLM on Wed, Feb 06, 2013

Whenever a client tells us they'll look into long-term care insurance "some day," ask yourself these questions: Am I a betting man (or woman)? And, if so...do I always bet against the odds?"describe the image

What we mean, is that by putting off long term care insurance, you are betting that medical costs won't go up and that long-term care insurance will be easier to get as you get older?  You are also betting that "some day" will arrive before you get sick.

A recent report revealed that the closer people get to retirement, the more frightened they become about meeting long-term care costs.  These fears impact women even more than men. And there's good reason for that. Women generally have greater long-term care needs, as they live longer, and are less likely to have a partner to care for them.  In fact, Genworth Financial, the largest long-term insurer in America, is talking about raising rates for women.

There are a few possibilities to address some long-term care costs, among them Medicare and hybrid plans, which might have riders with life insurance or annuities.

But there's only one way to get the best price: GET IT NOW!  Can you name even one item for which you pay less now than you did a few years ago?  As a general insurance principal, the older you get, the higher the premium. So, if you can pull it off now, you'll thank yourself later.

If you're betting that "someday" will come before you get sick...are you willing to bet every cent you've ever earned on it, because no insurance company will accept you after you're sick!  

At the Estate Planning & Asset Protection Law Center, we help people and their families learn how to protect their home, spouse, life-savings, and legacy for their loved ones.  We provide clients with a unique education and counseling approach so they understand where opportunities exist to eliminate problems now as they implement plans for a protected future.

We encourage you to attend one of our free educational workshops. Call 800-964-4295 to learn more about what you can do to enhance the security of your family and legacy.

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Click Here to Register For Our Trust, Estate & Asset  Protection Workshop

Tags: long term care, Retirement, Elder Law, Attorney, insurance, Massachusettes, medical

Massachusetts Elder Law Attorney | Confusion Over Medicare

Posted by Massachusetts Estate Planning & Elder Law Attorney, Dennis B. Sullivan, Esq., CPA, LLM on Thu, Oct 25, 2012

Confusion Over Medicare Provides Opportunities for Financial Advisers to Help Boomers and Seniors

With so many people now working past 65, clients often ask their financial advisers when they should sign up for Medicare.

As is often the case with complicated government programs, the answer is: It depends.

Generally, anyone who has paid into Social Security and qualifies for Medicare should sign up for Medicare part A at ssa.gov when they turn 65, Part A covers hospitalization costs and is free.Medicare, elder law, attorney

But for those who are still working, deciding whether to sign up for part B, which covers doctor’s visits and outpatient services, is more complicated and involves lifelong penalties if crucial deadlines are missed.

Most beneficiaries are paying about $100 a month for Medicare part B premiums this year, and premiums are likely to increase slightly this year. Affluent retirees – those with annual income of $85,000 or more and married couples with annual income of $170,000 and up - pay even more.

Costs Add Up

Plus there is the added cost of a Medicare supplemental mental-insurance plan to cover the gaps in traditional Medicare, such as deductibles and co-payments, and Medicare Part D prescription drug coverage, which also has a surcharge for high-income earners. All those medical costs can add up.

“If you’re not taking into account future health care costs, you are doing your clients a disservice,” said Jay Fettig, president of BATTLE System, an insurance management software firm. “If you don’t offer Medicare as part of a financial plan, you risk losing clients to someone who does.”

Mr. Fettig’s company, whose name is derived from Business Acceleration Technology Through Lead Enrichment, offers a free Medicare Genie service to help individuals and their advisors choose the right Medicare plan for their needs. The tool, available at mynewmedicare.com, matches users with appropriate plans, based on their answers to a few questions, and lists the costs of all providers in their area.

Gather the Facts

Should your client, who is still working, elect to use Medicare or stick with his or her employer’s group health plan?

“There is no quick answer to that,” said Arlie Mann, a Medicare specialist with BATTLE System. “I tell them to gather the facts about their insurance premiums and coverage, and we’ll compare it Medicare,” she said.

For those 65 or older who work for a company with 20 or more employees, the group plan is the primary user, and Medicare is secondary. As long as employees have group coverage from their current employer – or from their spouse’s current employer – they are exempt from the delayed-enrollment penalty that permanently raises their Medicare Part B premium by 10% for every 12-month period that they were eligible for Medicare but didn’t enroll.

An employee with good, affordable group health insurance may want to delay paying for Medicare Part B as long as he or she – or his or her spouse – continues to work.

Cheaper Option

For those with a high-deductible group plan, switching to Medicare may be cheaper, Ms. Mann said. B

But once an individual’s employment ends, he or she has just eight months to sign up for Medicare Part B without a penalty.

This period will run whether or not employees choose to continue to participate in their employer’s health insurance plan through the Consolidated Omnibus Budget Reconciliation Act of 1985 for up to 10 months. Those who choose COBRA shouldn’t wait until their COBRA eligibility ends to sign up.

If individuals don’t enroll in Part B during the initial eight months after they stop working, they may have to pay  penalty for the rest of their lives.

The rules are different for people who work for companies with 19 or fewer employees, said Kathryn Votava, president of Goodcare.com, a health care consulting firm that works with individuals and advisers.

Because Medicare is the primary insurer in this case, those who miss the initial enrollment deadline for Medicare Part B, which begins three months afterward, will be hit with the delayed-enrollment penalty. Plus, they may have to wait up to 15 months to sign up for Medicare during the general-enrollment period, which runs from January through March each year.

In the meantime, the employer’s insurance plan, as the secondary insurer, is on the hook for just 20% of the medical costs of individuals, who must cover the remaining 80%.

Ellen Breslow, managing partner at EAB HealthWorks, a health consulting service that works with advisers and business owners, said advisers have a responsibility to lean how to help clients with Medicare issues.

“Although health care would seem outside the scope of an adviser’s area of expertise, the ability to incorporate it into an income management plan can influence an individual’s financial future,” she said.

More information and a questionnaire are available by clicking on the“wealth managers” tab at EABhealthworks.com.

(the above article can be seen in the Investment News newsletter from October 8-12)

At the Estate Planning & Asset Protection Law Center, we help people and their families learn how to protect their home, spouse, life-savings, and legacy for their loved ones.  We provide clients with a unique educational and counseling approach so they understand where opportunities exist to eliminate problems now as they implement plans for a protected future.

We encourage you to attend one of our free educational workshops, call 800-964-4295 and register to learn more about what you can do to enhance the security of your spouse, home, life savings and legacy.

We would also like to encourage those concerned about changes as a result of new health care reform as well as incresing long term care costs to read our newest guide, the Seniors' Guide to Health Care Reform and Avoiding Nursing Home Poverty.  You will discover how the Affordable Care Act will impact your health care and the secrets millions of smart families are using to Avoid Nursing Home Poverty!

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(the above article can be seen in the Investment News newsletter from October 8-12)

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Click Here to Register For Our Trust, Estate & Asset  Protection Workshop

Tags: Medicare, social security, Retirement, Beneficiary, Massachusetts, Elder Law, insurance, financial, advisers

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