Final discussion on long-term care insurance I have a few final items to cover this week concerning long-term care insurance policies. Specifically, there are three areas I want to discuss. This week, I am using a quote Deb and I received from Genworth Life Insurance Company. First, instead of Deb and I buying individual policies, should we take the alternative of buying a joint policy? Second, should we buy a survivorship rider that will pay up all future premiums should Deb or I pass away? Third, should we buy a rider that will return our unused premiums if we die before making a claim? First, it does appear to be cheaper to buy a joint policy than Deb and I each buying individual policies. The joint policy annual premium for the quote was $2,415 for a total of 72 months of coverage. That compares to a total annual cost of $2,815 for individual Deb and Jerry policies that covers 36 months for each of us. On the joint policy, we do get a little more flexibility, because it doesn’t make any difference which one of us uses the 72 months. I could use two months, for example, and the other 70 months would be available for Deb, or vice versa. The minimum months of coverage on joint policies does appear to be 48 months of insurance coverage, while individual policies can be purchased for as short a period as 36 months. It might make sense for Deb and I to purchase a joint policy for 72 months rather than individual 36-month policies. Of course, that presumes we will never let the policy lapse. If we have two individual policies, we could let one lapse, mine for example, and keep Deb’s in force. We would not have this option available to us if we had just one policy. Dropping that policy would drop everything. It can’t be a snap decision to buy the joint policy. Second, the question becomes should we buy a rider that pays up all future premiums should Deb or I pass away? As part of this particular policy, and at no extra cost, should we pay in for 10 years without making a claim, and then Deb or I pass away, and […]
Useful tax tips and information from Jerry Coon of Action Tax Service.
One of the reasons I love baseball left us last week. Ernie Harwell passed away last Tuesday from cancer. Ernie and his partner, George Kell, were the voices of baseball when I was growing up in Coopersville in the 1950s and 1960s. Ernie had a special way of bringing the game alive for me and George was among the best third basemen ever. Back then, there was no ESPN, no Fox Sports, and no cable TV. The Tigers were on Channel 3 and the picture was fuzzy, at best. Few games other than Saturday day games were on TV and, since I wasn’t about to stay inside to watch baseball on TV in the summer, radio was my connection to baseball. It’s still my preferred way to take in a ballgame. In the 1970s, Ernie teamed up with Paul Carey. Ernie was still Ernie and Paul had that deep voice that I imagined was what God must sound like. They were even better to listen to than Ernie and George. Too bad the teams, for the most part, were so bad. Paul retired in 1991, but Ernie hung in there until 2002, when the Tigers requested his retirement. I am one of those who do believe there will be baseball in heaven. I might actually be able to hit a curveball and maybe will get a chance to do some announcing. Who knows, maybe Ernie will be able to hit a curveball, too, and instead of always announcing, he will get to play, too. Imagine that, me announcing a game and Ernie playing. That could only happen in heaven, but how much fun that would be. Before some of us get to heaven, we are going to go through some bad times down here. Those bad times may include home health care, assisted living, or nursing home care. Those bad times can be very expensive. So expensive, in fact, that many of us will spend every cent we have accumulated and will be forced to go on Medicaid. An alternative available to cover some of that expense is to buy long-term care insurance. Deb and I were given a quote from three popular carriers, John Hancock, MetLife and Genworth. The basic quote covered $230 per […]
More on cost of health, nursing care Last week, I began a discussion on the subject of the costs of health and nursing care and how we are going to pay for that cost during retirement. According to the Department of Health and Human Services, the blunt fact is that taxpayers age 65 and over have a 40% chance of enduring a stay in a nursing home. The trade group, America’s Health Insurance Plans, reports that taxpayers age 85 and over have a 55% chance of being sufficiently disabled; they will require long-term care. The average stay in a nursing home is currently 875 days or 2.4 years—55% of all people pass away within one year of being admitted, but 21% stay for more than five years. The average total time spent between home health care, assisted living, and nursing home totals to just over three years. These time spans and percentages have been climbing as our life expectancies have been climbing. Unfortunately, the costs of home health care, assisted living, and nursing home care have also been rising. Currently, on a national average, home health care costs $25 per hour, unless you need certified nursing help, then the cost rises to $36 per hour. Nationally, assisted living costs $2,714 per month or $32,572 per year and nursing home care costs $204 per day or $74,806 per year. Those are astronomically high figures, especially the nursing care cost. However, here in Michigan, our costs are lower than those on the east and west coasts. In San Francisco, the daily cost is $300 or $109,500 per year and in New York, a person will pay $314 per day or $114,610 annually. From my personal experience, I would say our costs in Michigan are closer to the national average. We can draw at least two conclusions from these facts and figures. The first is that it’s going to be expensive if we require some form of health care, whether it is home health care, assisted living, or nursing home care. The second is that it’s almost a certainty, if we live long enough, that we will require some type of nursing care. That form of care could involve paying for home health care, paying for assisted living, […]
Make retirement income last There sure is a lot of concern and discussion these days about making retirement income and retirement assets last through all of a retiree’s retirement. A married couple at the age of 65 today can be expected to have one of the two reach the age of 92. With any luck at all, they could both easily reach 85. However, if they retired at the age of 62, this means the savings they accumulated over the 40 years they worked would have to withstand not working for another 30 years. Let’s analyze that 40 years of working and I think we will find that saying the couple accumulated money for 40 years is really not too accurate. In the first working years, most people don’t save a whole lot of money. There is a whole lot more outflow to places other than savings accounts. In their 20s, it’s a time of spending money on children, accumulating money for a down payment on that starter home, purchasing something other than a 10-year-old vehicle, and paying off student loans. Let’s say that spending time frame lasts until our couple turns 32. This means they are really saving for about 30 years, age 32 to age 62. And what they save for, that 30 has to last for another 30 years, age 62 to age 92. When you look at it like that, it’s easier to see why people do run out of money. In addition to the regular, everyday expenses that everyone has to deal with, such as property taxes, utilities, car-operating expenses, food, clothing, prescription and out-of-pocket medical expenses, there are wild-card, catastrophic type events that might happen to quickly to deplete much of the money saved throughout those 30 years. Most of these catastrophic events are medical in nature. According to the Department of Health and Human Services, Americans age 65 and over have a 40% chance of being disabled enough that they would qualify to enter a nursing care at some point in their lives. At the age of 85, that figure increases to 55%. We have the misguided understanding that Medicare or Medigap or Medicare Advantage policies will pay for this nursing care. This is not true. These policies […]
What now? The tax season ended on April 15. The question I now get to answer is what exactly tax professionals like me do for the rest of the year. No, we don’t take the next eight months off, although that does sound good. We do continue to prepare tax returns and we answer lots of questions. Last week, I discussed the fact that nationwide approximately 80% of all taxpayers file their returns by April 15. That leaves about 20% still in need of getting their returns filed. We prepare those returns all year around. Personally, I’m not sure about that 20% figure as it pertains to West Michigan. In our market, it seems like it’s more about 90% file on time and 10% file later. In any event, that means we are working on and filing quite a few returns between now and next January. The other factor that comes into play today is the complexity of our tax system. Back in 1978, when I started in the tax business, it seemed like taxpayers filed their tax returns and we didn’t really have any contact with those taxpayers until the next tax season. An exception would be the time that a letter was received from our friends at the Internal Revenue Service or from the state of Michigan. In that event, we got a pretty fast call. That seemed to change in the late 1980s. Oh, we still got calls based on letters, but our tax system itself began to change. It started to become more complicated with phase-ins and phase-outs to almost all credits and deductions. Congress began tinkering more frequently with the system and frequently passing major tax legislation. This bend toward complication coincided with the emergence of computers. The first software preparation programs were developed to help tax professionals prepare returns. Now, of course, there are many tax programs that also help taxpayers file their returns. Action Tax Service has used Drake Professional Software since 1992. Without software, it would be darned near impossible to prepare many returns. All of that complication leads to more questions being asked by taxpayers. Being open year round is not an option today. Congress passes laws daily, it seems, that affect all taxpayers. We prefer […]