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Why LTC Planning Is Essential for Boomers
The hefty price tag
If you or a loved one suffers from an illness that requires long-term care, get ready for some sticker shock. A year-long stay in a nursing home typically can cost between $40,000 and $80,000, often more. While prices vary by state and the type of care required, one thing is consistent across the board when it comes to long-term care: it's phenomenally expensive. Just take a look at the average costs of various types of long-term care in the U.S.:
As you can see, these costs can quickly add up and eat away at your nest egg. For example, let's say you hire a home aide to assist your husband just three times a week for four hours. At $19 an hour on average, that would come out at $228 a week. That adds up to nearly $12,000 a year. Unfortunately, Medicare does not cover these exorbitant long-term care expenses. To top it off, informal home care is simply not a realistic option for most families these days. After all, most children of baby boomers are struggling to balance their own work and family life. They simply don't have the time or resources to care for sick parents. This is why it's critical for each and every family to plan ahead for a potentially expensive long-term care event. Without the proper protection, such an event could devastate a family's finances. The simple solution: LTC insurance How can boomers handle the skyrocketing costs of a potential long-term care event? The answer is simple: long-term care insurance. Without LTC coverage, a nursing home stay or another long-term care event could destroy your family's finances. Because LTC insurance covers many of these expenses, this valuable coverage will not only protect your finances it will also help you to maintain your current standard of living if you or your spouse requires long-term care. The takeaway Without LTC insurance, the cost of a nursing home stay or a home health care aide could wreak havoc on your finances and whittle away at that nest egg you've worked so hard to build. Don't burden your loved ones with this kind of emotional and financial strain. Create a long-term care plan today to save your family a lot of heartache and stress tomorrow. If you want to discuss your long-term care insurance options, call us. A professional can evaluate your unique situation and help you customize an effective plan.
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Lower-Income Gen Xers, Baby Boomers Will Run out of Money in Retirement: Study Recent research showed that baby boomers and Generation Xers who are in the lower income brackets are more likely to fall short of their retirement goals, which will leave them lacking enough money to live on.
Researchers at Northwestern Mutual Planning & Progress found that some people may run out of funds within their first year of retiring, and that 22% of Americans have less than $5,000 saved for retirement. Even some people who fell in the highest income brackets would likely run out of money at some point during retirement. The outlook for many of their futures remains grim. The survey found:
After gathering these findings and analyzing them, researchers point out that people who are in the lowest income bracket are extremely vulnerable. With the possibility of not only running out of funds but running out quickly, people who are in this category should be concerned and take steps to enhance their retirement preparedness. People in all categories, however, can find themselves at risk, and each person's likelihood of running low on funds will depend not only on their current financial status, but also on their health status. Not all health issues are predictable, and what exists now may be complicated later. Some people may need extra funds for health care. Even if health facilities for skilled nursing care will pay 100% of costs, some households will still run out of money far before they should. What to do? First off, do not expect Social Security to keep you afloat in your golden years. It won't provide enough income for you to live off in retirement. If you're like the typical recipient, your benefits will cover roughly 40% of your previous income, assuming that Congress doesn't move to slash future Social Security benefits. If you have not started saving for retirement, regardless of your age, start doing so now. Thanks to compounding interest and earnings, the more you start socking away now, the more money you can earn in your retirement funds in the future. If you begin setting aside a decent chunk of money each month, and continue doing so consistently for the remainder of your career, you have more than enough opportunity to catch up. The following shows how much money you would have when you retire at the age of 67 if you start putting away $500 a month at different ages:
You should review your retirement plan and accounts annually and increase how much you set aside if you feel you are not meeting your retirement savings goals. It's never too late. Update your options as needed, and take into account any long-term changes in health conditions. To learn more about your options, call us. Getting All the Facts for Your Estate Planning
The threshold for lifetime gift and estate tax increased - In 2020, the amount has risen to $11.58 million for individuals; it is $22.8 million for couples. This is the maximum amount of gifting via money or asset transfer allowed during a person's lifetime without tax consequences. The limit more than doubled in 2019 after tax legislation was signed into law by President Trump.
The annual gift exclusion amount is $15,000 - The annual federal gift tax exclusion allows you to give away up to $15,000 ($30,000 for couples) in 2019 to as many people as you wish, without those gifts counting against your $11.58 million lifetime exemption. Some types of gifts are not subject to this limit. For example, gifts to a spouse, a medical fund or an education fund are not included. Also, education and medical gifts are not taxable. When making medical or education gifts, transfer the funds directly to the institution rather than sending them to an individual recipient. Lifetime exclusion amount portability is still an option - Estate tax laws started allowing surviving spouses to use remaining lifetime exclusion amounts of their deceased spouses in 2011. In addition to simplifying estate planning, this gave couples a way to access exclusion amounts. Couples can transfer up to $22.8 million of their taxable property to their heirs without estate tax penalties. However, transfers must be made by election in the estate. The gift and estate tax effective rate is 40% - If your estate is under $11.8 million, congratulations: The federal estate tax will not apply to your estate. Any amounts over that threshold will be taxed at marginal tax rates that cap out at 40% for an estate worth more than $1 million over the cap. Remember state gift tax laws - While the rules covered in the previous sections apply to federal laws, they do not apply to state laws. Many states have laws that require estate and gift taxes. If the taxes include lifetime exclusion limits, they will be lower than the federal limits. To learn about individual state laws, discuss concerns with an agent. It is not possible to avoid these taxes in the states where they are required. The takeaway While estate planning is not something most people think about often, it should be considered every year - and when any major life changes happen. A new addition to a family, a marriage, a death in the family, getting a major promotion and big health changes are just a few examples of times when estate plans should be reviewed and changed as necessary. Neglecting these changes can cost a person's heirs a considerable amount of time and money. Stay on top of these issues to keep plans running smoothly. Call us 540-712-2199 to learn more about optimizing estate planning. Five Smart Things You Can Do with Life Insurance Cash Value
Stay put -Let life insurance be life insurance. Your money is growing tax-deferred within the policy. And in the event of your death, an amount much greater than your current cash value will generally pass to your heirs, tax-free.
That's a significant benefit right there, and a compelling reason not just to let your policy grow, but to add more premium to it if you can. Borrow against the death benefit - You can withdraw accumulated dividends, and then borrow against the rest of it, generally with no tax consequence, as long as you don't completely surrender the policy. Interest will accrue, but you don't have to repay the loan yourself unless you want to. If you don't pay it back, the insurance carrier will simply subtract the balance due from any death benefit they pay to your beneficiaries. Cash out the policy altogether - This option lets you get substantially all the cash in your policy. However, you may be subject to capital gains tax to the extent your cash value exceeds the amount you paid in. Exchange for another life insurance policy - If you choose, you can execute a Section 1035 exchange of one life policy for another, tax-free. You may opt to do this if you find ongoing premiums at a new carrier are lower for some reason, or if you want some specific protections or riders you can't get from your old carrier. For example, you may be able to exchange a straight-ahead universal or whole life insurance policy for a policy that also provides a benefit in the event you need long-term care insurance. Exchange for an annuity - You can also exchange a life insurance policy for an annuity, tax-free, under Section 1035. You might choose to do this if you decide you no longer want the life insurance protection, but you do want regular and reliable income. For example, if your beneficiaries are grown up and no longer rely on your life insurance death benefit, you may execute a 1035 exchange to a lifetime income annuity - maximizing your income over your expected lifetime, rather than paying a large death benefit. You can choose a joint and survivor annuity to guarantee income to your spouse as well. The takeaway Life insurance is among the most flexible and powerful resources you can have in your portfolio as you grow more established. But to have all of the above options later in life, you must plan ahead now. Talk to us today. We can help you develop a plan that meets your needs and financial objectives. New Law Makes Big Changes to Retirement Savings Plans President Trump has signed landmark legislation that will make the largest changes to the U.S. retirement system in years. The new Setting Every Community Up for Retirement Enhancement (SECURE) Act makes sweeping changes on rules governing individual retirement accounts and employer-sponsored 401(k) plans. They affect not only people enrolled in 401(k)s and IRAs, but also small firms that want to offer 401(k)s to their staff. Most of the changes the law ushers in apply to the 2020 tax year and beyond, unless noted below. Here are some of the main changes:
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