Category

Long Term Care

Nov 30
0

Why Long-Term Care is an Important Part of a Financial Plan

By | Financial Planning, Long Term Care

It’s National Long-term Care Awareness Month, so it’s the perfect time to discuss the importance of preparing for the potential need for care.

Financial planning can be a complex process, especially for those looking for a comprehensive plan that accounts for every aspect of their life. That comprehensive plan traditionally includes budgeting, investing, tax-mitigation, estate planning, and as you get closer to retirement, should even include Medicare and Social Security. One aspect that often goes overlooked, however, is planning for long-term care. Let’s go over why it’s important to include long-term care planning as part of your holistic financial plan.

It Can Help You Preserve Your Hard-Earned Assets [1,2,3]

The unfortunate reality is that seven in 10 of today’s 65-year-olds will need some type of long-term care, and 20% will need it for longer than five years. When long-term care can cost more than $100,000 per year for a private room in a nursing home, it’s easy to see how even a short-term stay has the potential to be costly to a financial plan. Preparing early for the possibility of needing long-term care can help you take a more structured approach to managing future care expenses, potentially reducing the need for urgent financial adjustments.

It’s Not Covered by Medicare [4]

A common misconception is that long-term care or extended stays in assisted living or nursing home facilities are covered by Medicare. It does cover some stays in skilled nursing care if, for example, a medical condition has necessitated that level of service; however, long-term stays are typically categorized as non-medical expenses. As such, even with a carefully chosen Medicare or Medicare Advantage plan, there could be limitations for long-term care needs. This highlights the value of exploring additional financial strategies to prepare for potential long-term care expenses. Note that this is general information only. It is recommended that you consult with an experienced Medicare planning professional or contact Medicare directly for detailed coverage options.

It May be Able to Extend Your Independent Lifestyle

Planning for long-term care is about so much more than just the care itself. It’s about giving yourself the opportunity to make life-altering decisions in any scenario. A clearly defined plan to pay for long-term care can help you retain your agency and decision-making power, even if you’re no longer capable of living on your own. While this is a potential benefit of long-term care planning, outcomes vary based on individual circumstances. It can also be helpful to know that you have a plan in place in the event of the worst, potentially giving you confidence and saving you from the stress that can come with having to make a decision and arrange for your care at the last possible moment.

You Can Shoulder the Burden for Loved Ones

Just as your plan is about more than the care itself, your plan is also about more than you. Creating a comprehensive plan which outlines your care preferences and financial strategies for potential long-term care needs can be a proactive step. Such planning might assist your family in navigating decisions more effectively, potentially reducing the emotional and financial strain associated with urgent or unexpected care needs. However, it’s important to recognize that each individual’s situation is unique, and the effectiveness of any plan can vary based on personal circumstances. Additionally, a plan can give your family the same assurance it gives you, as they can potentially gain confidence that you’ll be in capable hands should you need high-level care for an extended period.

You May Prepare to Access Care

Early financial planning may provide more options for managing long-term care needs, though it’s important to note that each person’s situation is unique, and the impact of planning may differ. While planning can help in exploring different care options, such as at-home care or nursing facilities, and potentially aid in financial preparation, it doesn’t guarantee specific levels of care or event facility availability. We encourage thoughtful planning to explore potential strategies for funding long-term care, recognizing that each individual’s needs and capabilities are unique. While approach aims to support informed decision-making, but it’s important to note that it does not eliminate the complexities and uncertainties associated with long-term care arrangements and costs.

There Are Modern Options to Pay for It

Modern times have brought about innovative solutions to pay for long-term care. Traditional long-term care policies still exist, offering coverage that may or may not be utilized, but now, long-term care insurance can be integrated with other types of insurance products, such as permanent life insurance policies, to combine benefits. Such integration can address concerns related to traditional long-term care policies, potentially offering more flexibility in policy utilization. The cash value portion of the hybrid policy that is protected and guaranteed by the claims-paying ability of the issuing insurance carrier can be used to pay for long-term care if you need it or as a death benefit for your beneficiaries if you don’t. As with any insurance product, these policies have their own intricacies, fees, and charges, so it’s important to work with a financial advisor to understand your options and see if one of these hybrid policies matches your goals.

If you have any questions about how you can prepare to fund long-term care, please give us a call today! You can reach Bulwark Capital Management in Tacoma, Washington at 253.509.0395. 

Sources:

  1. https://www.genworth.com/aging-and-you/finances/cost-of-care.html/
  2. https://acl.gov/ltc/basic-needs/how-much-care-will-you-need
  3. https://www.theseniorlist.com/nursing-homes/costs/
  4. https://www.medicare.gov/what-medicare-covers/what-part-a-covers/how-can-i-pay-for-nursing-home-care

Trek 23-766

Aug 18
0

How Rich Do You Have to Be in Order to Retire?

By | Health Care, Long Term Care, Retirement, Tax Planning

Even though perceptions have changed during the pandemic with more Americans now saying they need less money to feel rich1, when it comes to retirement, most people are still unclear about how much they will need to have saved before they can quit their jobs.

The answer to that question is different for every person.

Here are some of the things you need to think about in order to get a realistic retirement number in mind.

 

What do you want to do during retirement? Where will you live?

Different people have different retirement goals and visions. You may not realize that you need to answer lifestyle questions before you can answer the “how much do I need” question.

Think about it this way. A single woman downsizing into a tiny home in a rural community to enjoy hiking in nature is going to need to have saved up a lot less money than a couple who wants to buy a big yacht, hire a crew and travel around the world docking at various international ports. A man who wants to spend all his time woodworking in his garage in the Midwest will need a smaller nest egg than a power couple collecting art and living in a penthouse in New York.

Most people are somewhere in the middle of these extremes. Yet answering these questions for yourself is very important both financially and emotionally for everyone entering retirement. You don’t want to end up feeling lost or bored not working—you want to feel that you are moving forward into a phase of life that is rewarding to you. And you certainly don’t want to run out of money because you miscalculated.

Take some time to get specific about your needs and desires. Will you want to spend holidays with family or friends? Start an expensive new hobby like golf? Take a big vacation every year? (The pandemic will end eventually!) Visit your grandchildren who live across the country multiple times? Go out to eat every day?

Based on your goals and objectives for your retirement lifestyle, your financial advisor will help you prepare a realistic monthly budget, adding in calculations for inflation through the years.

Once you’ve developed your monthly budget, it can be compared against your Social Security benefit to give you a good idea of how much additional monthly retirement income you will need to generate from your savings. From there, your advisor can come up with strategies to help you create income from savings, and then give you a realistic figure that you will need to have saved up before you retire.

But in addition to your retirement lifestyle, there are a couple of other things that need to be considered.

 

How is your health?

Nearly every retiree looks forward to the day they can sign up for Medicare. But Medicare is not free; the standard Part B premium for 2020 is $144.60 per month2 for each person. Your premiums for Medicare are usually deducted right from your Social Security check.

If you elect to purchase additional coverage through Medicare Advantage, Medigap and/or prescription drug plans, your premiums will cost more. And there will still be deductibles to meet and co-pays you will owe.

Some estimates for health care expenses throughout retirement are as high as $295,000 for a couple both turning 65 in 2020!3

Even worse, keep in mind that this figure does not include long-term care expenses—Medicare doesn’t cover those after 100 days.4

 

Have you planned for taxes?

It’s not how much money you have saved, it’s how much you get to keep net of taxes.

When designing your retirement plan and helping you calculate how much you need to save, your advisor will take into consideration an important piece of the puzzle—taxes. Tax planning is often different than the type of advice you get from your CPA or tax professional when you do your tax returns each year. Tax planning involves looking far into the future at what you may owe later, and finding ways to minimize your tax burden so you will have more money to spend on things you enjoy doing in retirement.

Different types of accounts are subject to different types of taxation. “After-tax” money that you invest in the stock market can be subject to short- or long-term capital gains taxes. Gains accrued on “after-tax” money that you have invested in a Roth IRA account are not taxed due to their favorable tax rules. Interest paid on “after-tax” money in savings, CDs or money market accounts is taxed as ordinary income, although this usually doesn’t amount to much especially with today’s low interest rates.

What your financial advisor will be most concerned about is your “before-tax” money held in accounts like traditional IRAs or 401(k)s which are subject to ordinary income taxes when you take the money out, which you have to do each year starting at age 72 per the IRS. (These mandatory withdrawals are called required minimum distributions.)

If “before-tax” money like 401(k)s are where the bulk of your savings is held, you will want to run projections to calculate how much of a bite income taxes will take out of your retirement, especially since tax brackets will go back up to 2017 levels5 beginning in January of 2026. There may be steps you can take now to help you lower your taxes in the future.

 

Please contact us if you have any questions about your retirement. Contact Bulwark Capital Management in the Seattle area at 253.509.0395.

 

 

Sources:

1 https://www.financial-planning.com/articles/americans-now-say-they-need-less-money-to-feel-rich

2 https://www.medicare.gov/your-medicare-costs/medicare-costs-at-a-glance#

3 https://www.fidelity.com/viewpoints/personal-finance/plan-for-rising-health-care-costs

4 https://longtermcare.acl.gov/medicare-medicaid-more/medicare.html

5 https://taxfoundation.org/2017-tax-brackets/

Nov 26
0

5 Things to Know About Long-Term Care

By | Long Term Care

November is long-term care (LTC) awareness month. Here are five things you should know.

 

  1. There are different types of facilities providing increasing levels of care.1

If you hear the words “long-term care” and automatically think “nursing home,” you should know that long-term care encompasses a wide range of options and a progression of choices. The most self-sufficient seniors might live in independent retirement living facilities, while assisted living often adds medication management, daily personal care, meals and housekeeping.

Continuing care retirement communities (CCRCs) offer a tiered approach so that seniors can transition on site as they require more services. Adult foster care is available in private homes run by trained caregivers—there are even special homes designated for military veterans with chronic medical conditions overseen by the Dept. of Veterans Affairs.

Of course, nursing homes are also part of the spectrum, offering 24-hour supervision, nursing care, help with daily living activities and three meals per day. Secured memory care units, which are more expensive, are often located within nursing homes to provide a safe but more homey environment for people suffering with Alzheimer’s or dementia. Skilled nursing facilities (SNF) are not identical to nursing homes—they often staff doctors and nurses around the clock and offer physical rehabilitation services. People in these facilities may be bedridden, need two people move them, and require dialysis or other intensive treatments.

 

  1. Statistics vary on how many people will need long-term care.

With 10,000 people turning 65 every single day in America until around year 20302, there are varying statistics regarding the need for long-term care—some as high as 75%.3 In late August, Morningstar put together their 2018 updated statistics, placing the percentage of people 65 or older who will need long-term care at 52%, the majority female.4

 

  1. Alzheimer’s dementia is on the rise due to longevity.5

According to the Alzheimer’s Association, “Someone in the United States develops Alzheimer’s dementia every 66 seconds.” An estimated 5.5 million Americans—one in 10 people age 65 and older (10%)—are living with Alzheimer’s dementia, almost two-thirds of them women.

In addition to gender, race evidently also plays a role in the risk of developing the disease. Hispanics are about one and one-half times as likely to have Alzheimer’s or other dementia as whites, while African Americans are about twice as likely to have Alzheimer’s or other dementia as whites.

 

  1. Long-term care costs are high, and rising.

According to Genworth’s 15th Annual Cost of Care Survey, the “blended annual median cost of long-term care support services has increased an average of 3% from 2017 to 2018, with some care categories exceeding two to three times the 2.1% U.S. inflation rate.” 7

Annual National Median Costs 2018 8

Homemaker Services: $48,048

Home Health Aide: $50,336

Adult Day Health Care: $18,720

Assisted Living Facility: $48,000

Semi-Private Room in a Nursing Home: $89,297

Private Room in a Nursing Home: $100,375

Most expensive states in order are Alaska, Hawaii, Massachusetts, New Jersey, Connecticut, New York, New Hampshire, North Dakota, Vermont, Delaware, Maine, Washington, Minnesota, Oregon and California.7

 

  1. Hybrid policies are now more popular than standalone LTC policies.9

When it comes to helping people solve the problem of potentially needing long-term care, hybrid whole life, hybrid indexed universal life (IUL) and hybrid annuities have been more popular than traditional long-term care policies, and they are becoming more popular every year.

The reasons for the rise in popularity have to do with a combination of factors, including the rising cost of standalone LTC policies as well as the attractive features of some new hybrid annuities and life policies.  The elimination of the “use it or lose it” nature of typical long-term care insurance policies, in some cases providing a death benefit if the policyholder does not need long-term care during their lifetime, is often cited as the most attractive feature of hybrid policies.

 

 

If you would like more information about how to make sure you are covered for long-term care if you need it, please call Bulwark Capital Management in Silverdale, Washington at 253.509.0395 or email us at invest@bulwarkcapitalmgmt.com.

We can help you compare your many new LTC policy options!

 

 

Sources:
1 “What’s the Difference Between Types of Long-Term Care Facilities?” USNews.com. https://health.usnews.com/wellness/aging-well/articles/2018-10-30/whats-the-difference-between-types-of-long-term-care-facilities (accessed November 5, 2018).
2 “Baby Boomers Retire,” Pewresearch.org. http://www.pewresearch.org/fact-tank/2010/12/29/baby-boomers-retire/ (accessed November 5, 2018).
3 “Long Term Care Statistics,” LTCtree.com. https://www.ltctree.com/long-term-care-statistics/  (accessed November 5, 2018).
4 “75 Must-Know Statistics About Long-Term Care: 2018 Edition,” Morningstar.com. https://www.morningstar.com/articles/879494/75-mustknow-statistics-about-longterm-care-2018-ed.html  (accessed November 5, 2018).
5 “Alzheimer’s Is Accelerating Across the U.S.,” AARP.org https://www.aarp.org/health/conditions-treatments/info-2017/alzheimers-rates-rise-fd.html (accessed November 5, 2018).
7 “Top 15 Most Expensive States for Long-Term Care: 2018,” Thinkadvisor.com. https://www.thinkadvisor.com/2018/10/24/top-15-most-expensive-states-for-long-term-care-20/   (accessed November 5, 2018).
8 “Cost of Care Survey 2018,” Genworth.com https://www.genworth.com/aging-and-you/finances/cost-of-care.html (accessed November 5, 2018).
9 “Why hybrid policies are so popular,” Thinkadvisor.com. https://www.thinkadvisor.com/2018/03/28/why-are-the-new-hybrid-ltc-policies-so-popular/  (accessed November 5, 2018).
Further reading:
“How clients can use annuities to pay for long-term care,” Financial-planning.com. https://www.financial-planning.com/news/as-ltc-insurance-prices-rise-long-term-care-annuities-gain-popularity (accessed November 5, 2018).
 “Could Your Long-Term Care Premiums Be Hiding in Plain Sight?” Morningstar.com. https://www.morningstar.com/articles/879259/could-your-longterm-care-premiums-be-hiding-in-pla.html (accessed November 5, 2018).
“Hybrid policies for long-term care,” Chicagotribune.com. https://www.chicagotribune.com/business/sns-201806261243–tms–savingsgctnzy-a20180626-20180626-story.html (accessed November 5, 2018).
“Hybrid Policies Allow You to Have Your Long-Term Care Insurance Cake and Eat It, Too,” Elderlawanswers.com. https://www.elderlawanswers.com/hybrid-policies-allow-you-to-have-your-long-term-care-insurance-cake-and-eat-it-too-15541 (accessed November 5, 2018).