Saturday, October 11, 2014
Byron W. Ellis
I have found that the No. 1 concern of most retirees is potential healthcare costs. I also have experienced that most retirees tend to avoid making a decision on how to prepare for potential long-term care costs.

When you think about long-term care, what is the first thing that comes to mind? For many, it may be nursing homes or something associated with aging and increasing medical needs. In a broad sense, this is appropriate, but much has changed in the last decade or two in regard to long-term care options and how to fund them.

Boomers (and the next generation of retirees) need to plan for long-term care in a different way than their parents as they’re facing the unclear future of entitlement benefits and rapidly rising medical costs. And they’re living longer. When it comes to long-term care planning, many people have the “it won’t happen to me” attitude; however, approximately 70 percent of people over age 65 will need some sort of long-term care assistance during retirement.

Evolving long-term care options
The difficult question that weighs on many people is how do you plan for these unforeseen expenses so they don’t derail retirement? When planning for long-term care costs, you have options such as earmarking savings for medical expenses or relying on entitlement benefits or family.
 
Long-term care insurance is another option for people to consider. Over the past several years, insurance products have evolved with care options and trends. Today, nearly half of benefits paid by private insurers are for in-home care or assisted-living care. Whereas before long-term care was primarily used to pay for skilled nursing care.** Many current policies also pay the benefit to the insured or insureds, unlike many policies in the past that paid a nursing facility directly. To understand more about the evolution of long-term care, here’s a deeper look at long-term care planning past and present:
 
 Government programs: Those in the silent generation (those born during the Great Depression and World War II) were among the first to experience longer life spans, and the first to have access to official long-term nursing care facilities. However, the question of whether entitlements would be there was not a topic of conversation for this generation. As more boomers reach retirement age, the potential of a strain on government entitlement programs has become an increasing concern as current benefits may not cover most medical services a person with long-term care needs will face.

Long-term care insurance: With long-term care insurance being a relatively new idea, many parents of baby boomers likely didn’t consider the potential needs (and realistic costs associated) of formal long-term care. Since then, a number of options have been developed by insurers to meet boomer’s long-term care needs, and over time, long-term care insurance features have evolved. Some of them include:

Straight long-term care insurance policies: These are policies that pay a benefit up to the daily or monthly maximum. The amount can be paid to the insured person, who can then pay the care provider. The insured person also can choose to pay for the care provider to bill the insurance company directly.
Life insurance policies with a unique rider: Advanced benefit riders can be somewhat inexpensive additions to a life insurance policy, and they allow the death benefit (often up to 90 percent) to be paid in advance of death if the funds are needed for long-term care. Whatever amount is provided to the insured is simply deducted from the death benefit when that person passes away.

Policies that combine life insurance and long-term care insurance into one policy: Some insurance plan options may allow a lump sum premium to be paid for insurance that provides a combination of benefits such as a death benefit and the ability to advance most of that benefit for long-term care needs. These policies may even include a “right to rescind” the contract in which the policyholder may change his or her mind after a period of time and the full premium is refunded (if no benefit has been paid).

Family: Relying on family may seem like the simplest option, and it’s one that many people with long-term care needs choose, sometimes out of necessity. However, the emotional, physical and financial stress on family members caring for a dependent family member can be a very large undertaking. If you plan to rely on family members to support your long-term care needs, make sure to tell them well in advance so they can create a plan to address your needs and wishes.

An aging person who needs care may choose from many options to help provide or fund professional care including family, government resources, self-insurance (if there are enough assets) or private insurance. Each of these options has some merit, but in most cases, no single option on its own will cover everything. It’s difficult to predict what kind of long-term care needs you may need, which is why you may want to talk with a professional who can discuss the options for your unique situation.
Saturday, October 11, 2014
Byron W. Ellis, CFP, CLU, ChFC, CRPC, is a private wealth adviser and a Certified Financial Planner with Ellis & Ellis, a private wealth advisory practice of Ameriprise Financial Services.

Vasilios "Voss" Speros 602-531-5141
#LifeInsurance #RetirementStrategies #‎sperosfinancial
http://www.sperosfinancial.com/
https://www.linkedin.com/pub/vasilios-%22voss%22-speros/60/722/67b
vsperos@sperosfinancial.com
85254

​Q. Can you retire if you have $2 million in savings at age 65?
 
A: There are 2 options:
1.Depending on how long you live -- and how you live! Think about it this way: There has been a lot of work done showing that if you pull no more than 4% out of your retirement accounts a year, your money will last for 30 years.
 
On 2 million, that means you're starting by pulling out $80,000. Can you live on that?
 
Can you live on that plus Social Security when you begin taking that? The answer of course, depends on your lifestyle and whether you're planning the sort of retirement where you'll continue to earn money.
 
2.Another option would be to create a personal pension at retirement that will guarantee 8% yearly. Using only half of the $2 million you have in savings, you have created $80,000 a year guaranteed to last the rest of your life (30 years +). If you used the whole $2 million it would generate $160,000 a year guaranteed.
 
Plus your social security when you begin to take it.
 
The key to this plan is to diversify with permanent life insurance. Your Death benefit needs to match your total assets at retirement.
 
For more information contact:
Voss Speros 602.531.5141
Speros Financial
www.sperosfinancial.com

December 11, 2014 • Robert Laura
As I reflect on another year of retirement planning conversations, I’m reminded of how complex retirement has become. It requires an intricate balance among personal and financial needs, goals and desires. It’s seen as one of life’s goals, yet for the unsuspecting and unprepared, it can turn out to be anything but a cherished reward.

The following is my list of retirement musings, mined from the conversations I’ve had with individuals, families and groups this year, things advisors should consider as they lay out plans for both their clients and their practices next year:

1) Retirement success isn’t what you think. A successful retirement isn’t one without problems, but one in which clients learn to overcome them. Too often, retirement is portrayed as a utopian phase of life, void of pain, suffering and heartache. But crossing this magical line does not eliminate stress, remove relationship issues or motivate you to live healthier.

Advisors may know these things, but the ideas are often groundbreaking for clients. The conversation with those clients must first acknowledge that true independence and freedom come from managing life’s trials, not just one’s investments. 

2) Retirement isn’t just about money. One of the greatest tragedies about retirement is that too many people are concerned more with what they own than with who they are. A person may retire with all the financial resources needed to maintain a certain standard of living, but money won’t buy love, health, family or friends. 

A client’s attitude can shape both his perceptions and actions. By empowering clients to make the most of everyday life in retirement, advisors can better prepare them for a smooth transition as they seek to replace their career identity, make new friends outside of the workplace and stay fit and capable. For this, they need to develop a personal plan to replace the things work provided for them: self-worth, deadlines and relevancy.

3) Retirement is about managing feelings. Advisors often warn clients against the dangers of making “emotional” investment decisions, contending instead that successful investing is guided by good habits and self-control, not by whims and knee-jerk reactions. The same advice should come to bear when clients make certain requests -- to change beneficiaries, withdraw more money or support adult children. 

Feelings not only slow down and muddle the investment process, they also pollute a client’s retirement. Feelings by themselves aren’t always reliable and positive; they can betray and deceive clients who don’t understand underlying causes or what actions can be taken to change them. 

4) Retirement goals are not everything. The retirement savings crisis that America faces has created another problem. We have created a society that worships the dollar amount it takes to create the perfect retirement. Once again, money has an important role in retirement, but it’s essential to look beyond the numbers and consider what clients may be trading off for those precious dollars and cents.

At the end of the day -- or their lives -- very few people ask to be surrounded by their stuff as they breathe their last breath. Remember, it’s not what clients have that shapes their lives, it’s what they do consistently.

5) Retirement is a working paradox. Retirement’s great paradox is that the very thing people think they are leaving behind is required to propel them forward. Retirement takes work. Nothing about retirement is automatic. It takes, among other things, time, energy and practice. 

This seeming contradiction can get lost in the shuffle during traditional retirement planning. But it’s important to explain to clients that they may be busier in retirement than they were when employed, at least if they want to make sure that their money lasts and that they remain fulfilled and connected. This is actually a welcome aspect of retirement, however, for clients who have a hard time doing nothing. 

6) Retirement doesn’t take place on paper. On paper, a lot of things can look promising: a sports team’s starting lineup, a business idea or an upcoming event. But as the game starts, things don’t always work out as planned. Just as no couple can plan their entire marriage on their wedding day, a person can’t plan his or her entire retirement. It’s an ongoing process to which one must become acclimated and learn from over time. That’s not being negative, that’s being realistic.
Success in retirement is truly the result of good judgment. This often means learning from difficult experiences, the result of missed opportunities or bad decisions. Only by experiencing the difficulties of life and going through the transition that retirement presents each day can clients truly appreciate the freedom retirement offers.

As you approach another year of retirement planning, don’t build your practice on the shifting sands of numbers and returns but on relationships and service. Never surrender to what is deemed acceptable; seek out the ways that go against the grain and challenge the status quo. It’s essential to our industry that we get people to do what they resist doing so that, later on, they will become everything they want to be. What’s life’s ultimate treasure? It isn’t retirement; its wisdom applied to one’s everyday life. 

​Vasilios "Voss" Speros 602-531-5141
#LifeInsurance #RetirementStrategies #‎sperosfinancial
http://www.sperosfinancial.com/
https://www.linkedin.com/pub/vasilios-%22voss%22-speros/60/722/67b
vsperos@sperosfinancial.com
85254

​​
By Steve Vernon MoneyWatch December 4, 2014, 8:27 AM
Financial risk can be notoriously hard to spot, but there is one thing people can be certain of -- we get old. So why do so few people buy long-term care insurance?

In part, it's because only about 20 to 30 percent of the U.S. population is optimally suited to benefit from such coverage, according to a recent study by Boston College's Center for Retirement Research (CRR). But there are compelling reasons to make long-term care insurance a key element in your retirement planning.

For one, long-term care is expensive. In 2012, the average annual cost for a nursing home was $81,030, and the average hourly rate for home health care was $21. Yet only about 13 percent of the population buys long-term care insurance, which could help defray these costs. In theory, if consumers were rational planners, they'd buy insurance to mitigate the risk of running through their retirement savings on care.

Long-term care is defined as assistance with the basic activities of daily living, such as dressing, eating, taking medications, showering and using the bathroom. So it isn't medical care. As a result, neither medical insurance policies nor Medicare pay for most long-term care expenses, although Medicare will pay for up to 100 days in a skilled nursing facility (SNF) following a hospital stay and some medical insurance policies cover a minimal amount of assistance.

Medicaid, on the other hand, is a program operated by the states that pays for long-term care for indigent citizens; it usually requires that an individual first draw down most of their financial assets in order to be eligible. The availability of Medicaid has been cited as one reason why people don't buy long-term care insurance.

The CRR study calculated a "willingness to pay" ratio that analyzed the percent of the population who could expect to benefit from a long-term care insurance policy to cover costs that aren't paid by Medicare or Medicaid. The CRR study took into account:

• The likelihood of ever needing nursing home care in a lifetime, estimated by the CRR as 44 percent of men and 58 percent of women who had attained aged 65.
• The duration of such care, estimated by the CRR as averaging 0.88 of a year for men and 1.37 of a year for women.

Using the CRR's methodology, 19 percent of men and 31 percent of women had a positive "willingness to pay" ratio. These ratios are higher than the 13 percent of the population that buys long-term care insurance, so there's still a significant coverage gap.

So what's the bottom line for you? Consider the possibility that you could one day face potentially ruinous long-term care expenses.

Notably, the people most vulnerable to this threat have substantial retirement savings, since they won't be eligible for Medicaid until their savings are exhausted. Women are particularly in danger, since wives tend to outlive husbands (This is illustrated by the fact that the CRR's willingness-to-pay ratio is much higher for women than for men.)

Everybody should have a strategy to address the threat of long-term care expenses, which can include some combination of the following:

• Hold home equity in reserve as a source that can be tapped in case long-term care is needed (which might argue against using a reverse mortgage to generate retirement income).
• Buy a long-term care insurance policy.
• Maintain a substantial investment reserve that isn't tapped to generate retirement income, or only use interest and dividends for retirement income and hold the principal in reserve for long-term care costs.
• Be aware of lower-cost alternatives to a nursing home, such as a residential care facility for the elderly.
• Be vigilant about taking care of your health to reduce the odds of eventually needing care.
• Move close to family who could potentially take care of you, but make sure they're willing and able to provide this care.

With respect to this latter point, be careful! The need to provide care for elderly parents often derails the career and retirement plans of older workers, most often women, who typically reduce their hours or quit their jobs to care for an elderly relative.

Studies like the CRR analysis look for logical reasons why people should or shouldn't buy long-term care insurance.

Ultimately, the most likely reason people aren't buying such insurance is that the perceived threat of long-term care is so far in the future that it's a lot easier to ignore it. People just hope that they won't need expensive long-term care. But hope is not a strategy.
© 2014 CBS Interactive Inc.. All Rights Reserved.

Vasilios "Voss" Speros 602-531-5141
#LifeInsurance #RetirementStrategies #‎sperosfinancial
http://www.sperosfinancial.com/
https://www.linkedin.com/pub/vasilios-%22voss%22-speros/60/722/67b
vsperos@sperosfinancial.com
85254