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Financal Planning Blog | Simon Financial Group

Women and Finances

Money is one of the top stressors of women; in fact a study found that more than half of women wish they were more confident about their decision-making regarding their finances¹. Women have many reasons to stress about money. First and foremost, on average women earn less than men. Women are also more likely to take time off for care for family, and or downshift their career for the best interest of their family. These career interruptions may significantly impact the earning potential of many women. On top of a lessened earning potential, women generally live longer than men, which means they need to save more money for retirement than most men.⁴ So, this boils down to the fact that women earn less but need to save more money in order to retire comfortably. As it turns out, women are twice as likely to live below the poverty line post retirement, especially single women and minorities.²

The most important action women can take to shed stress over money is to take control of their finances, whether single or married. If your partner manages your finances, it is time to sit down and review in detail. It’s likely that a woman will end up having to manage her own finances at some point in her life, whether through divorce, or becoming a widow. Its important women play an active role in understanding their financial situation and progress towards retirement. It’s never too late to learn about finances, and the internet has a wealth of resources available to empower women.

How can I take charge of my finances as a woman?

If you manage your own finances, but haven’t started looking at your financial future, it’s time to sit down and create a strong financial plan. First, determine your current financial situation, and then select your short term and long-term financial goals. Work with a financial advisor to determine what strategies will help you best achieve them. Having a plan gives you measurable goals, and benchmarks to determine your progress towards your financial goals such as a comfortable retirement.

Be prepared for the unexpected. One short-term goal to consider is creating an emergency fund. Find simple ways to set aside a little money each month in case of an emergency, or an important purchase. Skip that Starbucks run a couple times a week and put the savings away in a savings account. Another idea might be to pick up a small side gig and deposit your earnings directly into your emergency fund. This money will add up and create a rainy-day fund for when something goes wrong, or you need emergency cash. Talk about stress relief.

As women are living longer, its critically important to begin saving for retirement as soon as possible. It is necessary to save at least 10 to 15 percent of your income each year into a 401(k), or IRA account.³ If your work offers a matching 401(k) option, then be sure to save enough to take advantage of it. It is critical to work with a financial advisor to invest your savings in a portfolio with an appropriate level of earning potential for your situation. Many of my clients hear me say, "Have your money work harder for you than you work for it.” What do I mean with that statement? Plan to save more than recommended if you can, especially if you anticipate taking time off for family care during your career. Be aware of the ways in which women are at a disadvantage when saving for retirement. Make sure you talk to your advisor about overcoming these possible hurdles in order to ensure a comfortable retirement. If you have questions, please feel free to contact me directly.

¹ https://www.orlandosentinel.com/business/os-bz-managing-your-money-20190722-b2c4whftdjfknibhnn7xa4hl5a-story.html
²https://americasaves.org/organizations/downloads-and-resources/partner-resource-packets/women-and-finances
³https://www.fidelity.com/viewpoints/personal-finance/how-women-can-conquer-money-stress?ccsource=email_weekly
https://www.cnbc.com/2018/04/30/women-need-to-take-an-active-role-in-their-financial-lives.html

 

 

Financial Protection for Disabled Loved Ones

Caring for the disabled can be a demanding task, especially when you are handling a loved one. Not only are you trying to prevent any future complications, but you are trying to protect them financially.

Nearly 58 million people nationwide over the age of five identify themselves as disabled — the largest single minority in the country1. Millions of Americans would like to reach out and assist them.  Unfortunately, without in-depth knowledge - these positive intentions can produce adverse financial results for the disabled due to the complexity of federal and state benefit programs.

Some of the common financial mistakes:

  • In the past, children would be disinherited, believing it was better if they were sent to live in institutions. Many of these institutions have closed and the population has become more educated on alternatives. Now, many special needs adults live independently or in assisted living homes.
  • Giving money directly to a special needs child or adult, particularly if they're already receiving government benefits, might be a bad idea. If these individuals have more than $2,000 in their own name, they could lose the government benefits they already receive.
  • A common practice is to leave assets to disabled loved ones in a will. Unfortunately, receiving a lump sum from a will can potentially disqualify them for government programs like Medicaid or vocational rehabilitation.
  • Establishing a College Savings Plan or savings bond in your 529 dependent's name. If these total more than $2,000, your special needs dependent could be ineligible for government benefits.
  • Crowd funding websites have increasingly been used to raise money on behalf of individuals with special needs, but without planning, such funds can potentially create issues with Social Security's Supplemental Security Income (SSI), Medicaid, food stamps and Section 8 housing, which provides federal rental assistance to low-income tenants. Crowdfunding — where people don't know who else is giving or how much — can easily put the special needs person over the financial limits.
  • Relying on your other children to take care of their special needs sibling. This arrangement. Alternatively, leaving money to other siblings to care for a special needs sibling has no accounting to monitor the usage of the funds and the money could be lost in a lawsuit, divorce or through mismanagement.

Most federal and state benefits are “needs based,” so the government is always reviewing the finances of special needs individuals. If they discover assets above the allowable limits, their benefits could be cut off. So instead of giving a lump sum of cash to a special needs person, the money must be distributed in ways that won't violate legal requirements.

Providing for the future of special needs individuals has become increasingly challenging due to improvements in medical treatments that are now producing longer life expectancies. While this is medically encouraging – it gives parents and caregivers a new worry: The dependent person will probably outlive them, but still need care throughout their life.

One way to effectively provide for their needs is to establish a “special needs trust” with the explicit purpose of “supplementing, not replacing” federal and state assistance programs and create a better quality of life for this individual. The trust can provide for special medical equipment, eyeglasses, even a vacation with a caregiver.

A special needs trust may allow your loved one to benefit from your financial gift and still receive government benefits. In order to set up a trust, you must designate someone to have a trusted friend or loved one to fulfil this role, one can be court appointed.

There numerous rules and regulations involved in creating and maintaining such a trust. One is that the beneficiary — the special needs child or adult — can't own the trust. Another is that the designated trustee can use the money to improve the quality of life for the dependent, but never distribute the money directly to them.

Engaging the assistance of a financial planner and attorney with experience in establishing special needs trusts will help you navigate the regulatory complexities and establish the best possible plan to address the future financial needs of your disabled loved ones.

1 CBS News

 

National Disability Insurance Awareness Month

If you were in an accident tomorrow and could no longer earn a paycheck, what would happen to the life you’ve built for you and loved ones? All too often, people only consider the ramifications of being unable to work until it happens to them. Protecting your income with disability insurance is an often overlooked but very wise financial decision.

May is nationally recognized as Disability Insurance Awareness Month in order to raise awareness about the importance of protecting your income. The risk is real—“statistics say that that if you’re at the age forty, prior to reaching age sixty-five you have a 43% chance of becoming disabled for ninety days or more.” (GenRe Research, Disability Fact Book, Sixth Edition, 2010.) Disability insurance can replace a large chunk of your monthly income, and even be the difference between paying your mortgage and losing your home.

One of my clients, a very successful doctor, learned first-hand the incredible impact of disability insurance. My client was working six days a week at his own practice, recently married and life was beautiful until he was in a horrible car accident. In that instant, his world changed. He had suffered herniated disks in his neck, his spine was critically impacted and he lost the mobility of his triceps in his left arm and essentially that arm “died” because of the injury. He had an emergency surgery with the hopes of fusing the spine together with cadaver bone and taking pressure off of the impacted nerves. He wasn’t able to work; he was wearing a hard brace around his neck 24 hours a day and was unable to do any physical therapy on his arm until his spine had healed.

After 8 weeks, he went in for an evaluation. The news wasn’t good: his body had absorbed the calcium creating a dark space between the areas that were supposed to fuse together. The doctor wanted to give his body another 2 months to heal. Thankfully, it did. The fusion took and he would be able to start rehabilitation on his arm because after 4 months of inactivity, the muscles had wasted away. The healing process was slow, but he was determined. After 8 months, he was finally able to go back to his practice.

Fortunately, as his financial planner I had encouraged him years before to invest in Disability Insurance. After the car accident, his only income was essentially the coverage from that insurance policy. He still reminds me that because of the well- rounded financial plan we had created and disability insurance coverage, he was protected. He often tells me, that he doesn’t know what he would have done if he didn’t have that coverage.

He is one of many individuals that I know who has benefitted from Disability Insurance. As a financial planner who cares about the people in my life, I often encourage them to consider this type of policy. Here are some of the basics to consider:

Do I need disability insurance? How much disability insurance is necessary?

It’s important to carefully assess both your income sources and your liabilities (expenses) with your financial planner when deciding if disability insurance is right for you. Consider the following questions.

  • How much do you have in savings? (If you save 10% of your income per year, one year of disability could cancel out ten years of savings.)
  • If you became disabled, how much would your employer or business continue to pay you, and for how long?
  • Do you have a spouse or partner who could afford to take over all the household expenses, and possibly care for you as well?
  • Do you qualify for social security? Social security benefits typically do not pay out until the fifth full month of a qualifying disability. Do you have enough in savings to wait for this payout?

Your financial planner can help you determine the appropriate amount of coverage based on the answers to these questions. Most have access to easy-to-use assessment calculators that can help you determine the amount of coverage you need, and for how long. If you own your own business, or even if your employer provides disability income benefits, you may want to consider a short term or long term disability insurance plan to protect your financial future. A financial professional can help you determine what you need.

Short Term and Long Term Disability Insurance

Most companies offer both short term (STD) and long term disability (LTD) coverage, which provide a monthly benefit if you are unable to work due to a qualifying sickness or disabling injury. It’s important to ask questions, and understand the policies you look at, as the definition of “disability” may vary.

Short-term coverage is intended to cover brief disabilities after an accident or major but non-terminal sickness. Coverage will pay out after a predetermined elimination (or waiting) period. This type of policy may be a good choice if you want to start receiving benefits immediately to cover the gap until employment disability benefits begin, and you’re willing to accept a shorter benefits period. These policies are customizable, and you can also buy additional options, such as lump sum payments for certain illnesses, etc.

Long-term coverage provides comprehensive benefits in the event of an accident or illness for a chosen time period of 2 years until retirement age. LTD coverage may be right for you if you have enough in savings to cover the first few months until benefits kick in, or you want long-term benefits to protect from accident or illness. It’s important to talk with a licensed insurance agent to understand the state regulations regarding the length and availability of disability insurance.

Please note that when applying for disability insurance, it is imperative to add an “own occupation rider” to your insurance policy. This rider covers someone who is unable to perform his or her own duties in the workplace.

There is certainly a lot to consider and it can be overwhelming to try to determine what’s best for you and your family. Please feel free to contact me directly with any additional questions.

 

Financial End of Life

Upon my departure, how do I preserve and protect my financial wealth?

Essentially, the act of creating a strong financial plan means that you are helping take care of yourself and those you love. Unfortunately, it also means having conversations that no one enjoys: how to be best prepared in case of illness, sudden death or the loss of a loved one.

I personally understand the fears and concerns that my clients have as we discuss healthcare plans, long-term care insurance and end of life financial planning.

I understand these worries because I have experienced them.

My grandmother, Mollie, was my main squeeze and I absolutely adored her. At the age of 91, her kidneys stopped functioning and she needed dialysis. Six months after starting dialysis, she looked at me and said, “This is not the way I want to live my life.” As hard as it was for me, I understood her wishes. We spoke to her doctor, who confirmed her mental wellbeing and allowed her to choose the end of her dialysis.

I will always be thankful for the time we shared listening to Jewish music in her home as the healthcare professionals administered hospice. It was such a sad time, but also beautiful because her wishes were granted.

Years later, my family is dealing with another health crisis.

My 84-year-old father has dementia and is now living in a memory care community. This transition occurred after watching my mom’s health decline, while trying to take care of my father in their home. Although we had part-time health care help coming to the house, it was simply too much for my mother to handle. As a family, we made a decision to move my parents into an assisted-living facility.

My mom lives on the third floor in an independent-living apartment and is still able to drive to meet her friends to play Mahjong. She doesn’t consider this home, and it was the first time that she and my Dad hadn’t shared a bed in 60 years, but she understands that it’s best for the family.

My brothers and I experienced how stressful these decisions can be. It’s one of the many reasons I care so much about the families I work with, because I have experienced their concern. I dedicate myself to helping clients understand all of their options and creating a solid financial plan to best protect their wealth.

I want to share some of the pertinent topics that you should be discussing with your financial planner when it comes to your healthcare plans and overall financial well-being.

Is your wealth at risk due to an inadequate healthcare planning?

Individuals and families save their entire life in order to be financially prepared for retirement, but may make this one tragic mistake. A lack of appropriate long-term health care planning can end up costing you wealth and peace of mind. Many people don’t prepare for unexpected health crises, or the end of life care costs that may arise.

Personally, I understand there is nothing more stressful than the balance of providing the best health care possible for a loved one in need, and the ability to pay for it. It’s important to work closely with a financial planner to ensure your financial plan will cover and protect your assets from health care expenses and end of life planning.

Accumulation & Distribution Planning

I encourage you to work closely with your financial advisor to ensure your retirement funds will cover all your healthcare costs and still allow you to live on a comfortable budget. Regular check-ins will allow you to adjust your investments over time to account for unexpected expenses and life changes.

Throughout our lives, we have been focused on the accumulation of wealth. As we near retirement, it’s critical to examine how to best distribute wealth to cover future health care costs, living expenses and understanding how to prepare for the optimal distribution of those funds. There is a great distinction between accumulation and distribution planning. This can be incredibly confusing and overwhelming because of numerous moving parts including asset allocation, income taxes and required minimum distributions.

Long-term Care Insurance

Long-term Care (LTC) insurance can help cover the costs of in-home healthcare for scheduled or daily visits, a nursing home or assisted living facility. Long-term Care insurance should be considered if you have assets to protect, and you are able to afford the associated costs. Like many investments, its beneficial to buy early, as premiums increase as you age.

Statistically, the numbers show that we will all need long-term care protection. The question is how you would want to address it? Self-insure or transfer the risk to an insurance company. It is that simple.

Insurance companies have created products that can fit into many financial plans. There are also ways to secure long-term care with the intention of protecting your estate for your family. Work closely with your financial planner to identify and assess the risks to give you and your family peace of mind.

Financial End of Life

Upon my departure, how do I preserve and protect my financial wealth?

This is one of the most commonly asked questions from my clients.

No one wants to spend time thinking about what will happen at the end of our life, but its important to make plans for end of life care. Many people don’t realize how expensive end of life care is until they are mourning the loss of a loved one and trying to make the arrangements. By planning ahead financially, you can spare your grieving loved ones the expensive burden of funeral arrangements and burial/cremation. Many of these expenses can be prepaid and set in place long before they’re needed. Be sure your family knows your intentions and where your documents are safely secured, ie. a safe deposit box, a letter of instruction and your digital/banking passwords. Although these can be difficult conversations, it’s important to make sure loved ones know how to access all your important information for managing your wishes & your estate.

Smart financial planning can ensure all these factors are considered when developing a comprehensive retirement investment estate plan. Please feel free to contact me today to discuss your concerns or questions.

 

Making College More Affordable with 529 Plans

When you were younger, you may have had aspirations to be a pop star, a professional athlete, maybe even a superhero. Most of us adjusted our expectations as we grew older, ultimately pursuing careers in areas such as education, law, medicine or financial services instead. Your child is no different, and a college education may be an important part of making their goals a reality. Unfortunately, the affordability of a college education is seemingly out of reach for many Americans: in-state tuition and fees at public universities have increased by a staggering 237 percent over the course of the past 20 years.1 Choosing an appropriate savings plan may make a big difference.

What is a 529 plan?

A 529 plan is an investment account that allows for tax-deferred growth to help pay for future college costs such as tuition, textbooks, and room and board as well as other educational expenses. One of the many benefits of the 529 plan is that the earnings are not subject to federal income tax and, in most cases, state income tax if used for qualified educational expenses.2 In addition to the federal tax savings, currently more than 30 states offer a full or partial tax deduction or credit on state tax returns for 529 contributions.3 Another notable provision of 529 plans is that there are no income limits, or age limits, so participation in a plan is available to almost everyone interested in saving money for college.

When opening a 529 plan, the account owner is the person who controls the account for the benefit of a designated beneficiary. Beneficiaries may be a relative or friend, or one can even name him or herself as the beneficiary. While an account holder may wish to seek professional guidance or consult her state’s tax rules regarding beneficiary designations, it is possible to change beneficiaries on the account with no tax consequences. For example, in the case where one child gets a full scholarship or decides not to attend college, the owner can change the beneficiary so that a different family member can use the funds towards their college education, without triggering a taxable event.

There are two types of 529 Plans: a prepaid tuition plan or a college savings plan. Each provides different saving options with the same overarching goal of planning for future education expenses.

Prepaid Tuition vs. College Savings Plan

The prepaid tuition plan option is usually sponsored by state governments and allows you to purchase units or credits at participating colleges and universities for future tuition and mandatory fees (usually excluding future room and board) at current prices.4 Unfortunately, the plan may pay a lesser return on the original investment if the beneficiary does not ultimately attend a participating college or university. The prepaid tuition plan is helpful in cases where the prospective student knows where they would like to attend college - usually a public, in-state school - so they can build units/credits towards that specific college.

The college savings plan allows you to open an investment account to save for a wide range of education expenses, including room and board. Also, beginning in 2018, you may use up to $10,000 in annual tax-free 529 account withdrawals for pre-college students such as private high school and elementary costs.5The plan consists of various investment portfolio options. Typical options include various mutual fund and exchange-traded fund (ETF) portfolios as well as a principal-protected bank product. These portfolios may also include static fund portfolios and age-based portfolios. In contrast to a static portfolio, an age-based portfolio works on a glide path towards more conservative investments as the beneficiary ages closer to college. Keep in mind that while the account holder can make changes to the investment options in the plan, they are only permitted to change the investment option twice per year, or when there has been a change in beneficiary.6 Also, you may only withdraw money that you invest in a college savings plan for qualified education expenses, otherwise you may be subject to taxes and other penalties.

Similar to other investments, there are expenses associated with both plans that may include an enrollment fee, and investment expenses, as well as continuing administration and management fees. Before choosing a particular plan, we suggest that investors carefully review the plan so they fully understand all potential fees and expenses.

There are many reasons why a 529 savings plan may be beneficial to you and your children, chief among them being that by saving for college today, your children may need to borrow less in the future to cover their college expenses. Typically, most students don’t begin to consider their debt until after they graduate, but unfortunately, a large amount of college debt may leave them financially unprepared for future endeavors such as purchasing a home or renting an apartment.

Contact us to learn more about 529 plans, or to determine if a 529 plan would fit into your family’s overall financial plan.

1 https://www.usnews.com/education/best-colleges/paying-for-college/articles/2017-09-20/see-20-years-of-tuition-growth-at-national-universities 
2 https://www.sec.gov/reportspubs/investor-publications/investorpubsintro529htm.html
3 http://www.savingforcollege.com/intro_to_529s/name-the-top-7-benefits-of-529-plans.php
4 https://www.sec.gov/reportspubs/investor-publications/investorpubsintro529htm.html
5 https://www.nytimes.com/2017/12/21/your-money/529-plans-taxes-private-school.html
6 https://www.sec.gov/reportspubs/investor-publications/investorpubsintro529htm.html

Content written by Symmetry Partners, LLC. Our firm utilizes Symmetry Partners, LLC for investment management services. Symmetry Partners, LLC, is an investment adviser registered with the Securities and Exchange Commission. The firm only transacts business in states where it is properly registered, or excluded or exempted from registration requirements. All data is from sources believed to be reliable, but cannot be guaranteed or warranted. No current or prospective client should assume that future performance of any specific investment, investment strategy, product, or non-investment related content made reference to directly or indirectly in this article will be profitable. As with any investment strategy, there is a possibility of profitability as well as loss. Please note that you should not assume that any discussion or information contained in this article serves as the receipt of, or as a substitute for, personalized investment advice from Symmetry Partners or your advisor.

Please be advised that Symmetry Partners, LLC does not provide tax or legal advice and nothing either stated or implied here should be inferred as providing such advice. The information is provided for educational purposes only. Please be advised that Symmetry Partners is merely relaying this information and has no control if some of the timelines are amended.

CRN-2071572-032818

 

Simon Says: Gain Control of Your Financial Life

click hereDear Friend,

I hope this message finds you and your family healthy and happy.

Each week I provide an e-mail communication that covers a wide variety of financial related topics. The content is educational in nature and considered "general information" which I hope you continue to find interesting and helpful.

However, your specific needs might require more detail and depth. Click on the informational brochure to the right. It "dives a little deeper," and speaks more specifically to coordinating the different pieces of your financial life.

Even in today's digital era, there is no substitute for one-on-one conversation. If/when convenient for you, I would love to schedule a time to talk, address any financial questions, issues or concerns you may have.

Please reply to this email with a few dates and times that work for you - I look forward to catching up.

Best,

Saul

 

 

 

Charitable Bequests: Strategies for Supporting a Charitable Cause and Your Heirs

Are there causes and charities that you would like to fund or donate to while also helping to ensure that your family is taken care of after you’re gone? Fortunately, leaving a charitable legacy doesn’t have to mean that you’d be short-changing your family. With the help of certain estate planning strategies, you can create an income stream during retirement, or provide for your heirs, while also supporting a charity of your choice.

Very simply, a charitable bequest is the giving of personal property to an organization through the provisions of a will or an estate plan, and donations can be made in many forms including cash, stocks, bonds, or real estate. Many people make charitable contributions prior to their death because, typically, they can benefit from an income tax deduction in the year that the gift was made. If you’re planning to leave a gift once you’re gone, however, there are different strategies that you may wish to consider.

One simple strategy is to bequeath the asset to the charity under the terms of your will. In this scenario, the donor’s estate may benefit from a tax deduction while the charity would benefit from the gifted assets once the donor’s estate has been settled. For those of higher net worth, or who plan on leaving a very generous bequest to charity, however, a charitable trust may offer some significant benefits.

Charitable Trusts – Some Common Types

One of the most popular types of charitable trusts is the Charitable Remainder Trust (CRT). Typically, this option enables the donor to claim a charitable income-tax deduction in the year that they contribute the assets to the trust. If the eligible deduction exceeds the donor’s income in that year, he or she can carry it forward to offset any income in future years.1

In addition to the tax deductibility benefit, CRTs allow the donor to place appreciated assets such as stock or bonds into the trust, and then sell those assets without incurring any income or capital gains taxes. Proceeds from the sale can then be invested into income producing vehicles that can provide the trust’s beneficiary - either the donor or another named individual - with annual income over the donor’s lifetime, or a specified term. Once the term is up, or upon the passing of the donor, the remaining assets would be given to the charity named in the trust.

As opposed to generating income for the trust’s beneficiary, Charitable Lead Trusts are created to generate income for the chosen charity for a specified number of years, or over the donor’s lifetime. During the period where income is being paid to the charity, the underlying assets remain invested, thereby giving them the potential to appreciate in value during that time. Once the specified term is up, the remaining funds can be passed to a non-charitable beneficiary – usually one or more family members - either partially or completely free of estate or gift taxes.2

While charitable trusts can offer significant benefits from an estate planning perspective, there are many things to consider before you call your alma mater with the good news that you are interested in supporting them financially. First of all, it may be wise to discuss your planned donation with the charity prior to making the gift. In doing so, you may discover some specific needs of the organization, or similarly, you may be able to offer insight as to specific projects or initiatives that you wish to fund.

Additionally, bear in mind that once assets are placed in a charitable trust, they are often irrevocable. As such, it’s important that you’ve carefully weighed both the pros and cons of placing assets in a trust, and that you’ve adequately planned for your heirs’ financial well-being before committing to a charitable organization.

Lastly, there are other types of charitable trusts in addition to those mentioned in this brief overview. Each is designed to help the donor achieve different estate planning objectives in addition to supporting a worthy cause, so becoming familiar with their potential benefits is essential.

Given that trusts and their related taxation can be complicated, determining whether a charitable trust would be beneficial for you, as well as the most appropriate type of trust, are decisions that should be made with the guidance of a qualified estate attorney.

As always, please contact us with questions, for additional information, or if we can provide assistance with any of your other financial planning needs.

1 www.cnbc.com/2015/07/16/donations-the-gift-that-keeps-on-giving-for-donors.html
2 www.fidelity.com

*Trusts should be drafted by an attorney familiar with such matters in order to take into account income, gift and estate tax laws (including generation skipping transfer tax). Failure to do so could result in adverse tax treatment of trust proceeds.

 

 

How to Be Aware of Long-Term Care

Each decade, American lifespans increase. Today, some 2 million people are 90 years of age and older, and that population is expected to quadruple by 2050. While most welcome the chance at longer life, fewer are ready to deal with the ailments and chronic conditions that often accompany the latter years. That’s why understanding long-term care services is an important part of planning for the future.

The majority of people 90 and older have some type of disability or chronic condition. The cost of care for these people can be staggering. A private room in a nursing home costs around $97,000 a year (national average). For those who prefer to receive care at home, the national average hourly rate for a home health aide is nearly $22 per hour, while skilled home health care rates are significantly greater, with the national average fee for a registered nurse at $79 per hour.

As eye opening as these figures can be, there are several other important factors to consider when thinking about long-term care.

Don’t Count on Medicare

Many retirees are surprised to learn that Medicare, the health insurance program for those 65 and older, doesn’t pay for nursing homes or in-home care. Medicare pays for only a few, limited services, such as:

Skilled nursing care. The program will pay for rehab in a skilled nursing care facility following a hospital stay. For example, if you fell and broke your shoulder, you would be entitled to a stay in a facility that helped you recover so that you could go back home and continue living independently. Medicare only covers up to 100 days of this type of care.

Home health care. If you need short-term care while you recover from an illness or injury, Medicare will cover the cost of having nurses or therapists come to your home. However, this is not around-the-clock care and is limited to 35 hours per week, though your doctor can help you qualify for more. It should be noted that Medicare does not cover the largest aspect of long-term care, which is custodial care, such as help with bathing or dressing.

Hospice. Medicare covers end-of-life care for a terminal illness. You are eligible if you are not being treated for your illness, and your doctor must certify that you have no more than six months left to live.

Medicaid Will Pay, But Only Sometimes

Medicaid, the government health insurance program for low-income people, does cover long-term care services. However, eligibility requirements vary from state to state, restricting access for those with income and assets above their state’s threshold. This often requires individuals to spend down their assets before qualifying, potentially impacting the standard of living of a spouse and legacy plans.

The program is careful in ensuring people aren’t sheltering money elsewhere, so there’s now a five-year “look back” period. In other words, if you transfer assets to a trust or to your children, you cannot apply for government aid for at least five years.

Additionally, only certain nursing homes accept Medicaid patients, so you might be limited in which facility you can go to.

Pay Out-of-Pocket

Paying for long-term care on an as-needed basis is how some people plan to address this expense, or in combination with the other options. However, nearly 75 percent of people significantly underestimate the costs associated with long-term care.

Long-term care can be a difficult topic to discuss. A majority of people do not believe they will have a long-term care need in their future, and the thought of aging can be unsettling. But if it’s left unaddressed, families may be left to make some very rushed and expensive decisions. Advisors estimate that clients who experience a long-term care event and do not have protection in place could draw down their retirement savings at rates two to three times faster than planned.

While it’s true that most long-term care needs begin in the home with care provided by family or friends, the number of people using nursing facilities, alternative residential care places, or home care services is projected to increase from 15 million in 2000 to 27 million in 2050.

Plan ahead for long-term care by determining where you’d like to receive care if you need it and how you would pay for the care so that you can spend your latter years enjoying life with dignity and not worrying about how you’ll get the care you need.

LCN-1327541-101615