KGO News, November 18th, 2009
Can you afford NOT to have long term care? The long term care crisis and its impact on your family's future financial security.
Long term care crisis:
The cost of long term
care can severely impact your family's future financial security.
Requiring care in any setting is not a topic many of us want to talk
about, for obvious reasons. But the fact is, 40 percent of Americans
who need long term care are working age adults 18-64 - and this care
comes with a very steep price tag.
For example, according to recent data from Genworth Financial the
national average cost for one year of home care is more than $42,000.
According to Dr. Dychtwald's research, the biggest financial worry
among the 55-and-older population is covering uninsured medical
expenses during retirement.
Dychtwald adds that today people
are living longer than ever before and this longevity revolution is
creating an unprecedented "age wave." However, living longer creates a
greater possibility of health issues along the way and the burden of
care giving usually falls to the closest relative.
The key steps needed to secure financial peace of mind:
There
are three things that the average individual ought to be thinking about
when it comes to long-term care in terms of next steps.
-
Talk to your family members, this shouldn't be some sort of secret or
something that people aren't comfortable discussing. You know it's...
it's a fact of life in this more lived era.
- Talk to
a financial professional and that could be an insurance agent, a
broker, an accountant, a lawyer, maybe you got a brother-in-law or a
cousin who's in the business, talk to them about long-term care.
- Don't just leave it vague and in the mist, write it down, take steps, make a plan and then execute against that plan.
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The Wall Street Journal, November 13th, 2009
Is it true that as a 64-year-old divorcee, who was married
for 13 years and hasn't remarried, I would be eligible to collect half
of my ex-husband's Social Security benefit? My ex-husband is 67 and has
been collecting full Social Security for more than a year. I have been
waiting to collect my full retirement benefit from Social Security
until age 66, rather than taking reduced benefits early.
If I could collect half of his benefit now, could I switch
to my own full benefit at 66? Then, could I switch again, to collect my
ex-husband's full benefit, if he dies before I do? Also, could I
collect his benefits retroactively?
S.A. Reagan
Houston
You don't have a choice between collecting your own benefit or your ex-spouse's until you reach your full retirement age.
If you are between age 62, which is the youngest age at which you
can collect reduced retirement benefits through Social Security, and
your full retirement age, which varies based on the year you were born,
your application for benefits generally will be based on your earnings
record, says Dorothy Clark, a spokeswoman for the Social Security
Administration in Baltimore. If the portion of your ex-spouse's benefit
to which you are entitled at the age you apply is greater than your
own, you could receive a benefit equal to that amount.
But if you wait until your full retirement age to file for Social
Security, you can restrict the scope of your application to your
ex-spouse's benefit only, and continue to accrue credits for delaying
your own retirement benefit up to age 70, Ms. Clark says.
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The Wall Street Journal, November14th, 2009
When Doug Foth, a retired accountant in Grandview, Wash., got ready to
sign up for Medicare last summer, he recruited his daughter, a human-
resources manager, to help him.
"We went through the Medicare Web site pretty thoroughly, and when
we got done, I'm not sure I knew any more than when I started," says
Mr. Foth, 68 years old. "It's very complex."
He turned to one of a handful of services that have started up, or
expanded, in the past three years to help older adults choose from a
growing number of Medicare options. He paid $150 to a new service
called Allsup Medicare Advisor to sort out the possibilities—and got
help fending off a penalty for signing up after age 65.
Tomorrow marks the start of the six-week "open enrollment" season
for Medicare, during which people who use the health-insurance program
can make changes to almost every part of their coverage (with the
exception of Part A, which is basically hospital insurance).
The addition of Medicare's prescription-drug benefit in 2006 and the
widespread loss of corporate retiree health benefits have made those
choices more complicated—and potentially more expensive—both for
current and would-be beneficiaries.
That's why more services are stepping in to offer advice. Some
charge a fee; others are free to consumers but get commissions from
insurers. Still more services, mainly supported by the government and
nonprofit groups, provide more-limited online tools or telephone
counseling at no charge.
Where to start? Read through "Medicare & You 2010," the
government's overview of the program and your primary options. (Go to medicare.gov and look under "Learn More.")
At that point, if you need help, you might want to combine free
tools with advice from a paid service. Here are some possibilities.
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Annapolis Capital, November 15th, 2009
Q: I am new to Medicare. I have my Medicare Part A and
Part B. I elected a Medigap plan to complement my Medicare A and B.
However, I am not on any medicines and so do not see the advantage for
enrolling in Medicare Part D. What are the advantages of having Part D?
A: Insurance is a contradiction. You pay good money
for something you hope you never need. We pay homeowner's insurance and
hope we never have a fire. We pay auto insurance and hope we never have
a car accident. Health insurance is the same. We pay our premiums and
hope we never are in need of a doctor or a hospital.
The same is
true of Medicare Part D. Many people are not taking any prescriptions.
However, it is advisable they consider Part D. Many people are aware
that if they delay in enrolling in Medicare Part D they will incur a
penalty if they enroll at a later date.
However, the more
concerning scenario are the "healthy" people who forgo Medicare Part D
and then have an unfortunate, unexpected illness. The most poignant
illustration is a "healthy" person who is newly diagnosed with an
illness such as cancer, diabetes and/or heart disease. The medical
treatment of such illness can be extremely expensive. By having
prescription insurance, you are protecting yourself if you need
high-cost medicines.
Q: I am new to the
area. I have original Medicare and Medigap supplemental insurance. I
have already contacted Medicare to change my Part D to a Maryland plan.
My question is, how do I find a doctor in this area?
A:
Medicare has a wonderful database of providers. You may call
800-MEDICARE and they can assist you with finding a doctor. You may
also log on to www.medicare.gov and click on "Find a Provider in Your Area." This tool allows you to search by location and by specialty.
Q:
My mother was admitted to a rehabilitation facility after her
hospitalization for her broken hip. She remained there for 35 days. I
was told her Medicare Part A covered up to 100 days of rehab. However
she received a bill for $2,002.50 for days 21 through 35. Why?
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MSNBC, November 15th, 2009
Ah, retirement! Before the 1950s it was
something only the wealthy could afford to do. Everyone else needed an
income, and most folks struggled to get by in the industrial economy as
their faculties deteriorated. Back in the days before 401(k)s—let alone
Social Security—older people faced the kind of pressures portrayed by
filmmaker D.W. Griffith in his melodramatic 1911 silent film What Shall We Do With Our Old?
It's a sad tale of the setbacks endured by an elderly couple, the wife
ailing, the husband tossed off the assembly line to make way for a
younger worker.
Griffith
was one of many social activists calling for a social insurance system
to provide an income for the elderly. The social reformist dream became
reality with the 1935 Social Security Act, the spread of the corporate
defined benefit pension plan, and Medicare in 1965. For most workers
the last stage of life became a time of leisure, recreation, and
enjoyment.
The Age
of Retirement was one of America's most successful social reforms ever.
But that era is over. A new vision of old age is emerging from the
trauma of the credit crunch and the Great Recession: Forget retirement.
Keep working.
A long time coming
Surveys
show that a majority of baby boomers say they want to work during their
golden years. They're going to get their wish. The key question is no
longer "How early can I retire?" It's "Why retire?"
Of
course, like all tectonic social and economic shifts, the trend isn't
new. It has been building for the past three decades with the move away
from traditional pensions with their involuntary contributions and
steady payout for 401(k)-type plans with their voluntary contributions
and uncertain returns. We're also living longer. That's good news, but
it does mean that to maintain their standard of living the elderly have
to either earn a paycheck longer or save more—a lot more.
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Social Science Research Network, November 15th, 2009
Many
consumers make poor financial choices and older adults are particularly
vulnerable to such errors. About half of the population between ages 80
and 89 either has dementia or a medical diagnosis of "cognitive
impairment without dementia." We study lifecycle patterns in financial
mistakes using a proprietary database that measures ten different types
of credit behavior. Financial mistakes include suboptimal use of credit
card balance transfer offers, misestimation of the value of one's
house, and excess interest rate and fee payments. In a cross-section of
prime borrowers, middle-aged adults make fewer financial mistakes than
younger and older adults. We conclude that financial mistakes follow a
U-shaped pattern, with the cost-minimizing performance occurring around
age 53. We analyze regulatory regimes that may help individuals avoid
making financial mistakes. Some of these regimes are designed to
address the particular challenges faced by older adults, but much of
our discussion is relevant for all vulnerable populations. We discuss
disclosure, nudges, financial driving licenses, advanced directives,
fiduciaries, asset safe harbors, ex-post and ex-ante regulatory
oversight. Finally, we pose seven questions for future research on
cognitive limitations and associated policy responses.
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Medicine.net, November 9th, 2009
The self-reported health of the newly retired improves so much that
most feel eight years younger, a new European study suggests.
This happy news was true of most everyone except a small minority --
only 2% -- who had experienced "ideal" conditions in their working
life, anyway.
"The results really say three things: That work
puts an extra burden on the health of older workers, that the effects
of this extra burden are largely relieved by retirement and, finally,
that both the extra burden and the relief are larger when working
conditions are poor," said Hugo Westerlund, lead author of a study
published online Nov. 9 in The Lancet. "This indicates that
there is a need to provide opportunities for older workers to decrease
the demands in their work out of concern for their health and
well-being."
But of course, added Westerlund, who is head of
epidemiology at the Stress Research Institute at Stockholm University
in Sweden, "not all older workers suffer from poor perceived health.
Many are indeed eminently healthy and fit for work. But sooner or
later, everyone has to slow down because of old age catching up."
Last week, the same group of researchers reported that workers slept better after retirement than before. "Sleep
improves at retirement, which suggests that sleeping could be a
mediator between work and perception of poor health," Westerlund said.
This
study looked at what the same 15,000 French workers, most of them men,
had to say about their own health up to seven years pre-retirement and
up to seven years post-retirement.
As participants got closer
to retirement age, their perception of their own health declined, but
went up again during the first year of retirement.
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Associated Press, October 14th, 2009
A surprising number of frail, elderly Americans in nursing homes are
suffering from futile care at the end of their lives, two new federally
funded studies reveal.
One found that putting nursing home residents
with failing kidneys on dialysis didn't improve their quality of life
and may even push them into further decline. The other showed many with
advanced dementia will die within six months and perhaps should have
hospice care instead of aggressive treatment.
Medical
experts say the new research emphasizes the need for doctors,
caregivers and families to consider making the feeble elderly who are
near death comfortable rather than treating them as if a cure were
possible — more like the palliative care given to terminally ill cancer patients.
"We probably need to be offering a palliative care option to many more patients to make the last days of their lives as comfortable as possible," said Dr. Mark Zeidel of the Beth Israel Deaconess Medical Center in Boston, who was not involved in the studies.
Palliative care focuses on managing symptoms of a disease and a main goal is to relieve pain at the end of life.
End-of-life care became a divisive issue in the national health care
reform debate this summer after one proposal included Medicare
reimbursement for doctors who consult with patients on end-of-life
counseling. Critics called the counseling "death panels" and a step
toward euthanasia. The Obama administration denied those claims, yet
has signaled the Medicare benefit will be dropped.
The new studies are published in Thursday's New England Journal of Medicine.
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Reuters Health, November 9th, 2009
Older people with stronger muscles are at reduced risk of developing
Alzheimer's disease compared to their weaker peers, a new study shows.
Dr. Patricia A. Boyle of Rush Alzheimer's Disease Center
in Chicago and her colleagues found that the greater a person's muscle
strength, the lower their likelihood of being diagnosed with Alzheimer's over a four-year period. The same was true for the loss of mental function that often precedes full-blown Alzheimer's.
Studies have linked grip strength
to Alzheimer's, while a person's weight and level of physical activity
also influence risk of the disease. To date, however, no one has
studied whether muscle strength in and of itself might play a role in
dementia risk, Boyle and her team note in November's Annals of Neurology.
"These findings support the link between physical health and cognition
in aging and the importance of maintaining good physical function and
strength," Boyle told Reuters Health via E-mail.
The researchers measured the strength of nine muscle groups in the arms
and legs of 970 dementia-free men and women 54 to 100 years old (their
average age was around 80). They also tested the strength of study
participants' breathing muscles.
During follow-up, which lasted about four years, 138 people developed
Alzheimer's. These individuals were older and had worse mental function
than the rest of the study participants. They also were weaker.
But even after the researchers adjusted for age and education
level-which can influence Alzheimer's risk-they found that muscle
strength had a strong influence on the risk of the disease. People who
ranked in the top 10 percent for muscle strength were 61 percent less
likely to develop Alzheimer's than the weakest 10 percent. Stronger
people also showed a slower decline in their mental abilities over time.
The relationship between muscle strength and mild mental difficulties,
which occurred in an additional 275 people, was similar, with the
strongest 10 percent being at 48 percent lower risk than the weakest 10
percent.
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Detroit Free Press, November 9th, 2009
Seniors looking to buy supplemental Medicare policies may have to do
more work to learn about them. They often aren't widely advertised by
leading insurers.
But several companies new to the business
hope to capitalize on complaints that the state's leading insurer, Blue
Cross Blue Shield of Michigan, doesn't widely advertise its
money-losing Medigap policies.
"We have real customer service
with low wait times," said Joan Budden, chief marketing officer for
Priority Health, which has new supplemental Medicare, or Medigap, plans.
Aetna and Blue Care Network, a Blue Cross subsidiary, also have new Medigap plans for 2010.
Medicare
supplemental plans are policies that help pay for doctor visits and
medical services not typically covered by basic Medicare Part A and B
coverage.
Their
appeal is that they usually have no co-pays, and they pay for care in
broader areas of a state or in another state where a person may live
part of the year.
Medigap
policies "are good for people who are frail and who have high medical
needs," said Jennifer Houghton, a Medicare specialist with the Area
Agency on Aging 1B in Southfield.
Insurers take on Blue Cross
George
Williston considered buying a Blue Cross Blue Shield of Michigan
supplemental Medicare policy. But he had such trouble finding
information about the plans on the company's Web site that he decided
to keep looking.
"I consider it a disgrace for a nonprofit organization," said Williston, 82, of Hastings, a retired nonprofit executive.
This
year, Williston and other seniors will have more choices as insurers
introduce new Medigap products to compete with Blue Cross, which is
seeking a 36.7% rate hike to offset mounting losses selling the
Medicare product.
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Nevada Appeal, November 8th, 2009
After a lifetime of hard work, no older American deserves to spend
their later years struggling with medical bills, foregoing or cutting
prescription drugs to make them last or avoiding preventative or basic
care because they can't afford the out-of-pocket costs. That is why
AARP has been fighting so hard to ensure older Americans are getting
the health care coverage they deserve.
After carefully reading
both the Affordable Health Care for America Act and the Medicare
Physician Payment Reform Act (HR 3962 and HR 3961), AARP's
all-volunteer national board has endorsed these bills because they meet
the critical needs of older Americans and future generations.
For
the more than 45 million Americans in Medicare — 320,000 in Nevada —
the House plan makes prescription drugs more affordable by completely
closing the dangerous gap in prescription drug coverage known as the
doughnut hole, and allowing Medicare to negotiate with drug companies
to reduce prescription drug costs.
Right now, the law does not
allow Medicare to negotiate prices, and the program must accept the
prices given by the pharmaceutical manufacturers. The House bill
changes that.
The bill also adds preventive benefits like free
cancer screenings, cracks down on waste and fraud, protects the
traditional Medicare benefits people in the program rely on and ensures
seniors get access to the doctor of their choice or can find a new
doctor when they need one.
For all Americans — including more
than 70,000 uninsured Nevadans age 50 to 64 who often struggle to find
affordable insurance — the House plan makes coverage more affordable by
strictly limiting how much more insurance companies can charge based on
age.
The House plan guarantees that you'll never be denied
affordable coverage because of your health or age. AARP has fought to
prevent anyone from coming between you and your doctor; and we've
fought to make sure your health care does not take a back seat to
insurance company profits.
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Business Week, November 8th, 2009
Markets may have rebounded in 2009, but individual investors are still edgy and shell-shocked.
Even
as the broad Standard & Poor's 500-stock index remained up 56%
since March, the U.S. unemployment rate crept above 10%, according to a
Labor Dept. report released Nov. 6. "I don't think many people are
feeling very relieved," says Milo Benningfield of Benningfield
Financial Advisors in San Francisco. Many people believe the "[stock
market rally] can't last," he says.
These remain risky times,
and the last few years have demonstrated to investors the high cost of
doing the wrong thing. Against that nervous backdrop, BusinessWeek asked financial advisers what common mistakes investors are making, and how to avoid them:
1. Don't Jump In All at Once
A
little optimism can be a dangerous thing. Individual investors are
notorious for selling stocks when markets have already dropped and
buying after they have risen. And, says Susan Elser of Elser Financial
Planning in Indianapolis, "Selling low and buying high is the worst
thing you can do for your returns."
Among those who stayed away
from stocks and other risky investments for the past year, many are
irked to have missed out on the recent rally. But is now the right time
to buy again?
Don't rush back into the market because you worry
you've missed the rally. "The biggest mistake is [to try] to make
everything up at once," says Micah Porter, president of the Minerva
Planning Group in Atlanta.
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US News & World Report, November 4th, 2009
Almost half of laid-off workers succumbed to the temptation of spending their retirement
stash last year. Some 46 percent of retirement savers who left their
job in 2008 cashed out their 401(k), according to a new Hewitt
Associates study of 170,000 401(k) participants who terminated
employment last year. The rest kept their savings in their prior
employer’s 401(k) plan (29 percent) or rolled the money over into an
IRA or a new employer’s 401(k) plan (25 percent).
[See 7 Things to Consider Before You Move Your Nest Egg into an IRA.]
Workers with small 401(k) balances were the most likely to raid
their retirement account. Some 85 percent of retirement savers with
balances under $1,000 cashed out or were forced out of the plan due to
low balance provisions and 45 percent of employees with between $1,000
and $5,000 saved for retirement withdrew the cash. More diligent savers
generally left their retirement stash to further accumulate, tax
deferred. Just 17 percent of workers with between $20,000 and $99,999
in their retirement account requested a cash distribution and only 8
percent of those with 6 figures accumulated cashed out.
[See 5 Ways to Protect Your 401(k) if You're Laid Off.]
Younger employees also tended to withdraw the cash and pay the
resulting penalties when they left a job. Some 60 percent of
20-something employees took a cash distribution from their 401(k)
compared to 34 percent of those in their 50s. But 20-somethings give up
a huge amount of compounding interest when they cash out even small
balances. For example, an employee who cashes out $5,000 from a 401(k)
at age 25 will receive just $3,500 after paying a 10 percent early
withdrawal penalty and income tax, assuming the worker is in the 20
percent tax bracket. If the same worker simply left that $5,000 in a tax-deferred account and earned a 7 percent return annually, he would have $75,000 at age 65, according to Hewitt calculations.
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CNN Money, November 3rd, 2009
Question: My husband and I are in our late '50s and haven't
put anything away for retirement, although we do own our home. We
figure we'll work another 10 years or so before retiring. Do you have
any helpful suggestions for us so we won't have to live solely on
Social Security?
--Peggy, Rockvale, ColoradoAnswer:
Sure, I've got a few recommendations. But since there are no secret
formulas or magical fixes for making up for a lifetime of saving little
or nothing (aside from what you have in home equity), I doubt that most
of them will come as blinding revelations to you.
What you may
find surprising, though, is how much you can still improve your
retirement prospects if you really commit, even though you're getting a
relatively late start.
1. Save, save, save
The first
thing you've got to do is start socking away as much as you possibly
can. Ideally, you'll do this saving in 401(k)s, IRAs or other
tax-advantaged retirement accounts, although barring that, plain-old
taxable accounts will do.
Granted, starting from scratch in your
late 50s isn't an ideal position to be in. But it's not hopeless
either; you still have time to accumulate enough of a retirement stake
to make a difference in your eventual standard of living.
You say
that you expect to work about 10 more years. Even if you can manage to
save just $250 a month over that period, you would have a nest egg
worth roughly $43,000, assuming a 7% annual return. If you can boost
the amount you put away to $500 a month, you'll end up with twice that
amount, or $86,000, and if you manage $1,000 a month, you'll have
$172,000.
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The New York Times, October 16th, 2009
MANY retirees are in a cash crunch — with a lower income stream from their investment portfolios, personal expenses that are higher than expected, or both.
While
most assets can be used to generate liquidity, deciding what to do
requires careful deliberation; there are many pitfalls. Here are the
most commonly used approaches for people who find themselves coming up
short during retirement, and an analysis of their pros and cons.
CASH FROM YOUR HOME Mortgage rates are so low that many financial planners
say the best way to raise money is to take out a conventional mortgage
or a home equity line. But reverse mortgages, which allow homeowners
who are at least 62 to borrow against the equity in their homes and
receive regular monthly payments, are often seen as a last resort. Some
financial planners even advise retirees to sell their investment
portfolios or cash in their life insurance policies before taking out a reverse mortgage.
Unlike
traditional mortgages or home equity lines, a reverse mortgage requires
no payments until the borrowers die or no longer use the home as their
primary residence. Then the mortgage must be paid in full. Closing
costs, fees and interest rates are also generally high, reducing the
amount of money that borrowers can leave to their heirs. Yet if
retirees have exhausted other options, a reverse mortgage may be worth
considering, especially for those with high medical expenses, said
Alicia H. Munnell, the director of the Center for Retirement Research
at Boston College. “If you’re not planning on leaving your house to a
child, then this is an option, rather than depriving yourself during
your lifetime,” she said.
TAPPING LIFE INSURANCE Retirees
often decide that they no longer need life insurance once their
children are grown. If they own whole-life policies, which have an
investment component, and want to drop them, they can either cash them
in with their insurers or sell them to investors, who will pay the
premiums until the policyholders die. An advantage of dealing with
investors is that you can sometimes get a better deal than from the
insurance company.
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