Friday, November 13, 2009

401(k) Post Mortem

A recent Wall Street Journal Article has this shocking news about 401(k)s: they dropped 24% in 2008.

The author goes on to say that this could have been worse – because the S&P 500 declined by 37% in the same year.

BUT – be careful. She later writes that doesn’t mean 401(k)s did any better than the market average. Why? Because that data includes worker contributions! So the losses were actually worse than 24%, but people kept adding to their accounts!

Someone with a small 401(k) could have lost much of its value in the market, but if she contributed that same amount during the year her account would have shown no change.

Is that how we are going to prepare for retirement? Contributing more and more every year and not knowing if the money invested will grow or shrink?

No wonder author Garrett Gunderson (see Wednesday's blog on Retirement Myths) says, “A 401(k) is not the "safe" and "smart" plan that you have been told it is; in fact, it's an extremely risky investment for most people.”

No wonder people worry if they will have enough money for retirement. It is not secure money. Why lose money? There is no need to lose money – you can have no downside risk and still have upside potential in an annuity.

Thursday, November 12, 2009

Roth IRAs

Did you know that on January 1, 2010 the Roth IRA conversion rules are changing? For one year only, people who make over $100,000 may convert their traditional IRA’s into a Roth IRA. (See an example in Advisor Today.) People under that threshold may convert at any time!

Why Consider a Roth:

1. There are no required minimum distributions in a Roth.
2. Assets in a Roth grow tax free, not tax deferred.
3. Beneficiaries can inherit the accounts tax free, and also start a “stretch Roth” to provide tax-free cash flow for life.

If you plan on using your IRA funds soon (within 10 years), or you expect to spend all of your IRA funds during your lifetime, the conversion may not be right for you. When you convert to a Roth, you have to pay the taxes on the money at that time. However, if you convert during 2010, you will be allowed to stretch the tax payments over 2 years.

To find out if a Roth is right for you, ask at least these 3 questions:

1. Do you believe taxes will be higher or lower for you in the future?
2. Do you plan on growing your retirement account for at least 10 years?
3. Do you want to avoid required minimum distributions so you can accumulate your money longer?

If you answered “yes” to the 3 questions, a Roth conversion may be right for you.

To find out what to put in your Roth that will have potential for growth without any chance of loss, click on the button to the right to consult with me today.

Wednesday, November 11, 2009

Retirement Myths

We have grown up thinking certain things about planning for our retirement, and some of these are just not true. Garrett Gunderson, in his book Killing Sacred Cows, dispels some of these myths.

I also just read a very concise article that made some of the same points, which I’ll summarize here.

Myth #1: You will not need as much income in retirement. But who wants to work hard and save money only to scrimp during retirement? And some costs, notably medical expenses, can go up.

Myth #2: Taxes will be lower in retirement. However, after the current recession and bailout, the government will continue to need more, not less, revenue in the future.

Myth #3: My house can provide retirement savings. With the downturn in housing values, this will no longer work for many people.

Myth #4: I can make larger returns in the stock market. The stock market has lost money in the last decade, and many experts think it could be volatile for years to come.

There are ways to leverage your savings with tax-deferred compounding interest that is guaranteed, and at retirement can provide income for life.

Click the button at the right to contact me about preserving your retirement money today!

Thursday, November 5, 2009

Exceptional Personal Service

When I find someone who does what they promise, and is quick to return a phone call or email, what a joy that is! I want to work with them more, and I go out of my way to send business their way.

ON the other hand, dealing with someone who doesn’t take responsibility, who doesn’t act quickly and treat each matter as an important one – or perhaps with an entire company that has this attitude – that is the worst! I want to run, not walk, away and wash my hands.

I recently took the Strengths Finder test online, after buying the book, and found that the theme of Responsibility is one of my strengths. I understand: this means that I hate to let others down, I like to follow through, and I like others to do the same.

Recently I dropped the ball myself and forgot to change an appointment with a colleague when I found out I couldn’t make it. Luckily he checked ahead of time, but I still felt terrible, and had to call him and apologize and make it right.

So I know I personally put a premium on being responsible and dependable, and enjoy working with others who do the same. You may want to take the Strengths Finder test and find out if responsibility is in your top five. And even if it is not, you may likely be working with people for whom it is – and it will help you to keep that in mind.

Wednesday, November 4, 2009

Health Care Reform From the House

Last Thursday the House of Representatives rolled out their Health Care Reform bill, with sweeping changes proposed for our health care system.

Obama praised it for including a public health care option, and being fully paid for.

This would be accomplished through 4 primary measures:

1. Offering subsidies to help the uninsured purchase insurance through newly created exchanges.
2. Requiring individuals to buy insurance and all but the smallest employers to offer health coverage to workers.
3. Taxing individuals making more than $500,000 and couples earning more than $1 million; this would bring in an estimated $460 billion over 10 years.
4. Expanding eligibility for the government's Medicaid health insurance program for the poor to people with incomes up to 150 percent of the official poverty level, which is cheaper than providing subsidies.

According to the Insurance Journal, debate could start as soon as this week, and the sides are splitting right down party lines.

Tuesday, November 3, 2009

A Flexible Health Insurance Option for Small Business

Going forward, and anticipating the future with Health Care Reform, many small businesses are looking for creative options to save money and yet offer good coverage for their employees.

Here is one such creative solution.

United Health has a new plan called Multi-Choice, and it has been getting positive press, such as this article in the Puget Sound Business Journal.

The company can purchase one of two packages, each of which has multiple benefit options. The employees can choose their coverage from a variety of copay and deductible levels. The employer contribution is a set amount for each employee; the employee contribution will vary depending on the plan that they chose.

New employees can come to the company and elect a plan that is similar to their old plan. The business can grow and change, and within this one package offer options to all of their employees.

This is a win-win for both companies and their workers. It provides predictable health care costs for the company, and choice of the amount of coverage to each and every worker.

Monday, November 2, 2009

Seattle Officer Slain

If you live in Seattle, you have heard the news of policeman Timothy Brenton being murdered on Halloween night. (You can read about it the Seattle Times.)

In a random, ruthless, drive-by shooting the 39-year old officer was killed and the student officer who was with him was wounded.

This kind of horrible violence is completely senseless, and has no place in a civilized society.

And in fact it is relatively rare in Seattle – the last time a police officer was shot in the line of duty was in 1994.

Timothy Brenton was a dedicated husband and father of two, and today our thoughts and prayers go out to his family.

Saturday, October 31, 2009

Do You Have an Illness, or Does it Have You?

Do You Have an Illness, or Does it Have You?

After yesterday’s blog about health care reform needing to address bankruptcy caused by medical expenses, I wanted to make clearthat you have hope and you can be in control of your future. There is nothing inevitable about having a major illness send you to financial ruin.

Careful planning can cover these exposed gaps – and this is an example of where the “Living Benefits” solution I discussed in an earlier blog could prevent this ruin.

Then yesterday my dad sent me an article about Bill Trewin, a Canadian man with Parkinson’s disease. He had been running marathons before he was diagnosed with PD, and found that he was in danger of stumbling if he kept up his normal running.

Did he give up and go crawl in a hole? No, as Bill says in the article, “I have Parkinsons…it does not have me.”

He moved on to a different sport, Nordic walking, which allows him to get the same great exercise, but also gave him the stability of using poles while he walks. If you check out the Nordic walking site, you’ll learn how great this is for your bones, back, and posture, and can provide a workout of any intensity level.

It is important to find solutions with the help of a team or community. Working with others, often experts in the fields, we can have problems and not let them have us.

Friday, October 30, 2009

Most Bankruptcies caused by Medical Bills

Outrageous Stories

This is an amazing number, and hopefully will be one thing addressed by any health care reform: in America 62% of people who are declaring bankruptcy are having to do it because of their medical bills.

Are all of these people without health insurance?


Fully 75% of them do have health insurance, but needed costly measures that weren’t covered in their policy.

This New York Times article tells of a computer security specialist who had to go to the hospital and found that most of his treatment was excluded by his insurance. He and his wife had to declare bankruptcy.

Or look at the case of a middle-class couple who had to declare bankruptcy after she had breast cancer and he had bypass surgery, on this CBS The Early Show with Harry Smith. Their health insurance only covered about 10% of the bills.

The first thing we need to do is read the fine print of our health insurance policies!

If they are not enough to cover a catastrophic accident or critical illness, we need some additional insurance to cover those catastrophes.

Thursday, October 29, 2009

A Comprehensive Insurance Solution

“Living Benefits”

What is wrong with life insurance?

Traditional life insurance has the drawback of covering only 1 emergency – your passing away. And with term insurance, the vast majority of policies will never be paid because they are outlived. But the leading causes of death in America are also the primary causes of disability, the need for long term care, and ultimately most cases of financial struggle.

Every 29 seconds someone suffers from a coronary event, and 45% of heart attack victims are under the age of 45.

Every 45 seconds someone suffers from a stroke.

The chance of developing cancer during your lifetime is 1 in 3 for women, and 1 in 2 for men.

Of all Americans who reach age 65, about 60% will eventually need some form of long term care.
There are so many challenges a family faces long before the worst possibility of losing a loved one. What is wrong with life insurance is that it doesn’t address all these risks.

What is wrong with disability insurance and long term care insurance?

Disability insurance is very important for the breadwinner of the family to have, for how many months can your family live without that income? And yet, disability insurance will never pay the full amount of the income, and often comes with waiting periods.

Long term care insurance is another valuable protection, because the costs of long term care are so high that it protects your assets from being depleted in the event you need this care. However, many people hesitate to get it because they don’t know for sure that they’ll use it. Or what if you have a heart attack or stroke, but recover enough that you do not trigger the long term care because you can still perform the activities of daily living?

A Comprehensive Solution

The solution to these shortcomings of traditional, separate insurance policies is to get one policy that will provide “Living Benefits” as well as death benefits.

It is now possible to get such a policy through a 150-year-old, A-rated mutual company. The one policy will pay in three ways:
· Acceleratd living benefits
· Retirement income benefit
· Death benefit.

We can design a policy to cover disability, chronic and terminal illness, and long term care. In addition, you will be able to access the value for retirement or other needs.

We all have multiple risks to insure against, and it is hard to know which one we will need first. A “Living Benefits” life insurance policy provides one combined, affordable solution to all of these needs.

Friday, October 23, 2009

Quality Time or Mess & Stress?

How do you make Quality Time out of your Final Moments?

I was sitting in my client’s living room and we were laying out the map to start planning his estate. Legal documents need to be signed, insurance needs to be set up, and most of all, basic values need to be clarified.

In this case, I didn’t need to remind him how so many people procrastinate making these decisions and clarifying their values. He told me a story himself that made the point.

He had recently been at the funeral of his friend’s mother. She had been on her deathbed when the family realized that she hadn’t left a living will. The doctor was asking the family for a decision, and soon, about how long to maintain her life artificially. They had to make that difficult decision right there. Next, they realized that she had never said what she wanted done with her remains. They started asking her, and her mute reaction at the mention of cremation led to their decision to have her buried. That was just the beginning. Dealing with the estate after she died became messy too.

To illustrate the point of how common this is, I met two people at a workshop the very next day and when I mentioned this story they both quickly recited similar tales from their own family. Their frustration at the chaos and hurt feelings and wasted time was still palpable. One family was still arguing over who was responsible for what. Another saw the breadwinner pass away and leave the spouse, who needs assistance, without long term care insurance.

Why not make even your last moments quality time? Instead of the pressure to make difficult decisions, leave your heirs with clearly written wishes and directions. In fact, be creative, and write in your will and fund with your life insurance a big family reunion in your honor to celebrate your life! Or set up a trust for your heirs and fund their education. Or leave a gift to a charity that is close to your heart. And spend your last moments with your family without the stress of having to get all these decisions made.

Take some time, before it is too late, to clarify your values, what you stand for, and then pass on to your heirs some of who you are as well as what you accumulated.

Tuesday, October 13, 2009

Guard Thy Treasure

Rule #1: Do Not Lose Money

In his book The Richest Man in Babylon George Clason describes how someone could become wealthy by saving and investing 10% of his earnings every year. However, what was done with that money was very important. The vehicle for the money had to be safe. In the book he tells the story of one man who gave his money to someone pretending to be an expert investor and he never saw the money again. He was the Bernie Madoff of Babylon! So if you work hard to be able to put that 10% aside, the first rule has to be: do not lose the money. Or as he put it in step 4, “Guard thy treasures from loss.”

Their Investments Were a Waste of Time

Have you lost money in the market? You are certainly not alone. And yet, it may not be as bad as you think, for your investments are not what will create your wealth. Instead, look at the last lesson in Clason’s book: “Increase thy ability to earn.” In a study done at Harvard Business School that followed a group of people who wanted to become millionaires, they found that their investing was largely a waste of time. Those who did become wealthy did so not in the market but by continually increasing their earning potential. They made themselves more valuable and earned more, or they grew their business; ultimately their cash flow, not their investing, made them wealthy.

Rule #2: Refer to Rule #1

This bit of wit and wisdom is attributed to Warren Buffett, who detests risk, and has carefully built up a track record of strong returns. Yet even he, a full-time investor in the market, has lost money. So what can we do? Look for a place to put your money that cannot lose money, and yet has potential for making gains when the market goes up.

The Power of Zero

One solution that has these qualities is the equity-indexed annuity (EIA), which offers returns tied to a market index, such as the S&P 500. It also features a minimum return rate guarantee like traditional fixed annuities. In the past this minimum, or floor, was often 0%, and so the insurance companies used the phrase “the power of zero.” That is, when the market goes up, you participate in the gain. When the market goes down, your annuity holds it’s value. Now, however, many annuities have a floor not at 0% but somewhere between 1 and 3%. Indexed Annuities are popular with investors who want to benefit from the upside potential of the market without forfeiting the security of a guaranteed return.

So to follow the path of the richest man in Babylon – to guard and increase your treasure – consider indexed annuities as one vehicle to get you where you want to go.

Thursday, October 1, 2009

A Tale of Two Startups

The Bust
Recently I got a call from a woman who needed to talk about health insurance for her family.

“My husband’s company is folding, so we are not going to have health insurance through the company anymore. It was a high-tech, mobile communications company, and he helped to start it. They have a great product, and they were doing well, but the economy just hit them hard.”

It turned out that she was not as worried as I thought she might be. He had been doing these types of ventures for 15 years, and she was used to the changes. Also, he knows a lot of people in the industry so she sounded confident that he would land on his feet somewhere.

However, we did have to do a bit of research to find a solution to their family’s health insurance. She needs certain prescription drugs, but to get a family plan that has a rich prescription drug coverage would cost double what she was budgeting to pay. We found out that she could order her medication from Canada at a fraction of the cost of covering it here, and her doctor confirmed that this would work fine. The important thing was that her family did not have a gap in coverage, so there won’t be any questions of pre-existing conditions.

The Boom
Soon after that, another call came in, from a friend involved in a new startup.

“Bengt, I volunteered to be the one in the group to take care of the health insurance. Can you look into it for me?” he asked.

“Sure,” I answered, “I’ll do the work for you. And it doesn’t cost you anything extra!”

These are six guys on the other end of the cycle, with a big idea, full of hope, some angel financing already in, and working out of the founder’s home. While some companies are cutting back on health insurance, they are setting it up before they had even turned a profit.

Their big idea is to help people maximize the profitability of their websites (check them out at ). Since they already had become members of the Washington Technology Industry Association, I was able to get them a great deal for their health insurance through the employee benefit trust run by the WTIA. So now all these young guys have great health benefits and some life insurance as well.

With all the other challenges and changes they are facing to build their new startup, at least they have the peace of mind that having health and life insurance provides. I look forward to them doing great things in the near future!

Thursday, September 24, 2009

How Life Insurance Can Save your Business

A Casual Request
We were sitting in the second floor office, overlooking the water, discussing the company’s commercial insurance. At the end of a productive discussion, the one business partner said, “Oh, by the way, we are also going to need some key man insurance.”

The Surprising History
At the next visit, we learned that there had been three founding partners, and one of them had a sudden heart attack in his mid-fifties. The other two partners had to set up a payment plan to buy out the survivors of the deceased partner. As it turns out, they are still paying large amounts of money every quarter. “We have had a buy-sell agreement from the beginning,” they said. “And as you can see, we have had to use it. That determined how much each partner’s share of the company was worth. But now we want to fund it with life insurance, so it doesn’t become a huge operating expense.”

The Solution
They are now setting up cross-purchase life insurance to fund their buy-sell agreement. Each partner is the owner of a life insurance policy on the other one. If one partner were to die, the other would receive the death benefit, and would have to use that to buy out the family or estate of his partner. He would then own the business, and it could survive.

Final Piecees of the Puzzle
As it turns out, they decided to purchase key man and disability insurance as well. Key man insurance is a life policy taken out by the company on a key employee to help the company continue with normal operations in the event of their passing away. And disability is the most common cause of businesses and families alike running into serious trouble.

A Common Sense Investment in the Business
Life insurance is the most economical way to ensure a business can continue operating smoothly in the event that something happens to a key employee or partner. It is a small investment in the security and stability of a company, and to future thinking businessmen like my clients, it just makes sense.

Wednesday, August 19, 2009

Your Health is your own Choice

Make a Decision
How long do you plan to live?
What steps are you taking to get there?
And will you be healthy and wealthy, or decrepit and broke?

The first thing that you need to realize is that you are responsible for your health. The mental attitude comes first, because all else flows from that. There have been too many placebo studies to have any doubt that our beliefs have a very powerful effect upon our health. Even medicine that itself is quite potent will often only be as useful as the patient thinks it will be. So you need to think healthy all the time. Picture yourself as completely healthy, and as acting only as a completely healthy person would act.

The next thing you need to do is act on your beliefs – otherwise you will consider yourself a fraud and erode those very beliefs. Begin by moving more. Movement is the key to life. Muscles, blood, oxygen, and waste – everything needs to move. I have done Aikido, a Japanese martial art, where we move our bodies, our breath, and our ki (or chi/energy). In fact, in the East, they measure your health by the movement of your internal energy. When you are ill they say you have a blockage. So move. Take a walk. Climb the stairs. Do some gardening. Slow and steady is the safest, and will keep you living the longest.

Again, many studies confirm that you will live longer if you simply eat less. Digestion is the largest single expense of energy your body has to make during the day. We literally wear ourselves out with our large plates of food. Also, another handy guide to eating that is less well known is to compare the acidity and alkalinity of your food more than the calories. Your body and blood need to be slightly alkaline to make the most energy out of your oxygen. Foods like avocadoes and almonds may have a lot of fat, but they are alkaline foods, very healthy. Green foods are alkaline. Meats and dairy and breads are acidic foods. Eat them in moderation and make sure that you have a lot of vegetables and water to go along with them. If you are really serious, check out apple cider vinegar, the elixir of the Greeks, & favored by the Braggs.

How will you feel?
When you reach your target age, whether it is 75 or 100, how are you going to feel? Of course our health care system has serious problems – but what if every individual took it upon himself to think, act, and be completely healthy? It will be a small consolation when you end up feeble and diseased to be able to blame the poor health care system. Instead, take control of your destiny, and choose today to think, act, and live as healthy as you possibly can.

Wednesday, August 12, 2009

Health Savings Accounts

Is a Health Savings Account for you?
A Health Savings Account can be a great option to consider as more and more employers are cutting back on their health care offerings. The health care industry also recommends that employees understand the true cost of their health care, and having to pay for more of their health care certainly is doing that. But a Health Savings Account is one way to take more responsibility for your family’s health care that has a number of benefits.

How it works.
An HSA can only be created alongside a high-deductible health insurance option. The idea is that the savings in your account will cover your first health care costs until you reach the deductible in your plan. The insurance companies can charge much lower premiums for the coverage because they don’t have to pay for all the small charges that fall under the deductible.

The benefits:

· The high deductible health plans save on premiums
· The HSA belongs to the individual, even when he changes jobs
· HSA contributions – and growth – are non-taxable
· Qualified withdrawals (for health care expenses) are non-taxable
· No limits to the amount that can accumulate in an HSA
· HSA’s roll-over; they are not “use it or lose it.”
· Employer and employee can both contribute.
· Contribution limits are released on June 1 every year, so you can plan ahead. And if you start mid-year, you can still contribute the maximum amount.

Healthy, Wealthy & Wise
Having more financial responsibility for your health often leads to making healthier lifestyle choices. And as you become healthier, your Health Savings Account could grow wealthier.

Tuesday, August 11, 2009

Charitable Giving

Leveraging Life Insurance for Charity

Are you aware you can donate your life insurance to charity? This can work with an existing policy, or can be accomplished with a new policy. The irrevocable gift of an existing policy puts the charitable organization in full possession of the life insurance policy. Or you can purchase a new life insurance policy, give the charity ownership of the policy and name the charity as your beneficiary.

Life insurance is an excellent choice for making a gift because it multiplies the amount you are able to give. When you are committed to giving an annual gift to your favorite charity, you can use this to fund an insurance policy. Then your contributions are leveraged – payments that add up to thousands of dollars get turned into a gift of hundreds of thousands or even millions of dollars to support your charity.

In addition, your annual premiums paid into the life insurance policy are tax-deductible.

Another solution provided by life insurance is to allow someone with wealth replacement. A person with land, stock, or other property that would be heavily taxed upon their death donates their property to the charity, and receives a tax deduction. At the same time, the donor purchases a life insurance policy equal to the gift, which would create an inheritance that is liquid and tax free, since life insurance benefits can be received income and estate tax free if properly structured.

Life insurance provides a gift that is flexible, free of market risk, and has no delay or transfer costs. It can be done without diluting your business or investments, and can be done in ways that enhance rather than subtract from the assets you leave to your heirs.

For anyone with a long-term perspective and an interest in philanthropy, life insurance provides a powerful tool that should be considered as a way to leave a serious legacy to a cause or organization that you believe in.

Friday, August 7, 2009

Business Planning

Why an Exit Strategy?

In the now classic book, The E Myth, by Michael Gerber, he recommends that business owners move away from seeing their business as something they work in, and see it as something they work on. Instead of selling products or services, he counsels them to see the business itself as the product they are creating, and to get it to the point where it could be sold. This causes the owner to truly build a business, rather than just creating a job for himself.

Imagining that you are going to franchise your business accomplishes two goals – you gain a future-oriented vision, and you adopt an outside perspective.

When you make a clear vision of your future business, you no longer only see the day-to-day operations as your only goal, but you also focus on the long-term smooth functioning of your business. You envision where you want your business to be, and you put structures and systems in place to support that future entity, even if you don’t quite need them now.

Secondly, you see your business from an outside point of view. In your mind you prepare to sell the entire business itself, not just the products or services that the business sells. Imagining the business as operating without you someday, you work to get it more and more to the point where it can operate without you already.

And what if something were to happen to you while the business still needs you? Could your partner keep it up? Could your family run the business? What resources would they need to be able to keep the business together and carry on your legacy? This is where insurance can help prepare your exit strategy for your business.

In the case of a partnership, a buy-sell agreement should be drafted, laying out the terms of what would happen in the case of one partner retiring, walking away, becoming disabled, or dying. Life insurance policies provide the funding so that in the worst case scenarios the surviving partner can buy out the estate of a deceased or disabled partner. In the case where the business depends upon a very important employee, key-man insurance will provide a payout if that key employee passes, so that the business can continue to function smoothly.

In any case, to build a business you are proud to put your name on and leave behind takes vision and planning. Then you will be putting in place the structures – including insurance – to take you from where you are to where you want to be.

Wednesday, August 5, 2009

We Can All Feel Lucky

Do You Feel Lucky?
My father has Parkinson’s disease, and his father before him had Parkinson’s disease.
In the words of Michael J. Fox, I am a lucky man. Fox titled his book “Lucky Man” because he felt he grew as a family man and human being because of his Parkinson’s disease. If you can believe it, he is grateful to the disease.

I may or may not get Parkinson’s disease, but I need to be aware of it. That awareness alone makes me grateful for what I have – a healthy family and time to enjoy with them.

Thinking Ahead
I am also lucky because my father acted in time to take care of himself. He did his research, and before he was at a stage in the disease where he would not be admitted, he and my mother moved into a life care community or a CCRC (continuing care retirement community) which offers three levels of living: independent, asssisted, and skilled nursing care. They are now ready for all the possible developments with the Parkinson’s.

Buying into the facility essentially provided them with long term care insurance. And now as his condition progresses it would become more difficult for him to buy into such insurance. They were wise to act when they did. They have secured their future care and peace of mind for our whole family.

Read the Warning Signs
Now I too am doing my research and will act before it is too late to secure my own family into their future, when I may or may not be able to do everything I can now. I am lucky to have such a clear warning sign in my family history.

Peace of Mind
We can all consider what is in our history that should be prompting us to act. But then, some things come without such clear warning signs, and we can all take steps to insure our family against those unknown events as well. My wish for you is that you have peace of mind about your family’s future, and you can enjoy each day you have with them, and feel lucky.

Tuesday, August 4, 2009

Long Term Care

Who can benefit from Long Term Care Insurance?

In the 90’s my grandmother had to go to a nursing home, and had no choice in which home to go to because she had no long term care insurance. She used up all of her assets very quickly, and then was covered by Medicaid. She was never quite happy in the nursing home, and I always wished we had other choices available.

Long term care insurance is a tool for those who want to remain independent and desire the ability to choose the setting for their care. While it was begun in the early 80’s as nursing home insurance, it has changed a lot since then. Now the coverage includes not only nursing home care, but services in assisted living facilities and adult day care centers, as well as home health care, and respite care for the care giver.

As we live longer, more people will need some form of long term care. Yet most of this care is increasingly provided at home. Over 12 million Americans (of any age) need long term care, but only 2.4 million live in nursing homes. Further, younger people often have need of this care as well. It is estimated that 40% of the people receiving long term care are between ages 18 and 64.

What triggers long term care insurance? Usually a policy pays benefits when you cannot do two or more “Activities of Daily Living” (ADL’s), either because of old age, mental or physical illness, or injury. There are six activities of daily living, developed through years of research: eating, bathing, dressing, toileting, continence, and transferring (getting out of a chair or bed). Many policies also pay benefits for cognitive impairment – for example, if you develop Alzheimer’s disease, but can still perform the ADL’s.

If you have significant savings, long term care insurance is a way to protect those assets in the case that you need long term care. Consider the costs of care in a 2008 survey. In Seattle a room in a nursing home cost $277 a day, and the rest of the state averaged $189 per day. A one bedroom unit in an assisted living facility cost $3,340 per month in Seattle, and $2,890 in the rest of the state. A home health aid costs $22 per hour, or just over $45,000 per year. These costs could quickly consume a very healthy savings account.

When looking for long term care insurance, keep in mind these questions. What services are covered, and how much would be paid for each service? How long would the benefits last, and does the policy have a lifetime maximum benefit? Will it pay benefits based on expenses incurred, or a set dollar amount? How many days would you wait before benefits begin? Does the policy offer an inflation feature? Is there a waiver-of-premium provision for once you enter a care facility?

Then, based on your age, and family situation, you can map out your goals for long term care insurance with an insurance professional, and craft a policy that works best for you.

Monday, August 3, 2009

Six Reasons to get Life Insurance

Why do I need life insurance? Here are 6 fundamental reasons…

Since life insurance is something many of us put off for another day, let’s think about reasons why we should act now. And ask yourself, how much is it about me?

Reason #1: to pay for final expenses. Even if you are single, your passing will put a burden on others if you don’t have any life insurance. Do you know how expensive those costs can be now?

Reason #2: to replace your income. If you have a spouse, and especially if you have children too, your life insurance can take care of them for some time after you pass on.

Reason #3: Create an inheritance. Even if this is your only asset you leave, life insurance is a leveraged way to leave an inheritance tax-free to whoever you name as beneficiaries.

Reason #4: Pay your estate (“death”) taxes. By paying these taxes with insurance, your heirs won’t have to liquidate assets to pay the taxes on your estate.

Reason #5: Make a large charitable contribution. Here again, the leverage of life insurance comes in. If you choose a charity as the beneficiary of your policy, you can leave them a much larger contribution than the amount you pay in premiums.

Reason #6: Savings. Permanent life insurance builds up a cash value, which you can access, tax free, by taking a loan on the policy. Plus, the interest credited to the policy as it grows is tax deferred.

6 key reasons to act today. And what do you think? Who is your life insurance really for?

Wednesday, July 29, 2009

Clear Vision, Decisive Action

When is a good time to provide for your future?

When I got out of college, I wanted to see the world. My friends were on the fast track to become lawyers and doctors and teachers, and they advised me that if I followed my dream, I would get behind. Well, I went, telling them that I would take my retirement then, and if I was behind I would just have to work in my later years when they were all retired.

You know what? I was behind them, and am still working to catch up. But I wouldn't exchange my two-and-a-half years living in Hawaii, Asia, Australia, and the Middle East for anything. I grew up, and gained a global perspective. I made friends I connect with to this day. I am grateful for that early retirement.

And who knows which of us will enjoy a full retirement? One of my classmates got on a cross-country flight out of Boston on 9/11, and we never were able to see him again. Others have contracted serious diseases, even in their 30's.

Adolescents typically think that they are invincible, and take risks. It is in their wiring, and they cannot help it. But after about age 20, when our brains have finished growing, we realize full well that we are not invincible. And if we're smart, we begin to take steps to prepare for our future; we calculate the risks; we take responsibility for the little ones in our lives who now depend on us.

Why do sensible people still procrastinate and put off taking action? In the back of our minds, we know we should take action to provide for tomorrow. But we think tomorrow will never come, and that is where surprises and even tragedies can occur.

You can be smart and take action before tomorrow comes. Think about your future needs and those of your family, take steps with an insurance professional to plan for them, and then enjoy your present moments with the ones you love. You may not be able to predict exactly what the future will bring, but you'll have the peace of mind of knowing, come what may, you provided for your family.