Friday, December 28, 2012

Paying for Health Care in Retirement

Plan ahead. It wasn't raining when Noah built the ark.

It would be nice to believe that health care cost increases were a temporary phenomenon. Unfortunately, that's not the case…the cost of medical care has outpaced inflation for the past 20 years and predictions are that medical and long-term care costs will continue to escalate as much as 10% to 15% per year into the future.
The decisions we make as to how and where we live in retirement are unique to each individual or couple. The options open to us, however, are frequently determined by our financial resources…our ability to pay. This review of the various ways to pay for health and long-term care costs during retirement is offered in the hope that it will be of assistance to you as you make decisions regarding your retirement plans.
The options available to pay for medical and long-term care costs in retirement include the following:

Retiree Health Insurance Plans: If your company provides retiree health care benefits, make sure you know how much of the premium you will be required to pay, as well as deductible and co-payment requirements. Retiree health insurance plans are generally designed to coordinate with Medicare benefits. Caution: Even if your employer currently provides retiree health care benefits, there is no guarantee those benefits will be available when you retire. The escalating costs of medical care, combined with the "Baby Boom effect"…a large "bubble" of people who will make a substantial contribution to the size of the aging population… are causing employers to rethink their retiree health care plans. Some companies are requiring that retirees pay a higher share of the premiums to cover themselves, their spouses and any dependents. Other companies are implementing higher co-payments and/or deductibles. Still other companies are discontinuing retiree health insurance plans altogether.

Medicare and "Medigap" Insurance: Most people qualify for Medicare insurance when they reach age 65. Medicare helps to protect you from the costs of medical care during retirement. One fact, however, is evident…there is no "free lunch." You will have costs related to medical care and the likelihood is that those costs will continue to increase each year.

Medicaid: Medicaid is a joint Federal and state program that helps with medical costs for some people with low incomes and limited assets. To qualify for Medicaid, federal poverty guidelines for income and assets must be met. In addition, there are state requirements for Medicaid eligibility. Medicaid is essentially a safety net for those who didn't adequately plan for their financial needs in retirement, or who encountered unexpectedly large expenses that depleted their financial resources.

Long-Term Care Insurance: Long-term care insurance can put you in control, preserving your dignity and allowing you to select the type of facility and setting in which you want to receive long-term care services, if needed. Long-term care insurance also helps protect your personal assets, preserving them for your use or as an inheritance for your family. Suggestion: Check with your employer…your company may offer long-term care insurance as a voluntary or supplemental employee benefit!

Personal Savings: Review your retirement plan to make sure that it adequately takes into account the potential costs of medical care and long-term care in retirement. If you find a shortfall, you may want to increase your personal savings now in order to have sufficient funds available after you retire. Some experts suggest setting up a separate fund or account specifically to pay for health care needs in retirement. This approach adds focus to your plan and better enables you to assess your progress.

Home Equity: Many retired people have built up substantial equity in their homes. There are a variety of ways to tap that equity if needed to pay for health care costs in retirement, including selling the home, arranging a home equity loan or line of credit or using a reverse mortgage to supplement your retirement income.

Going Back to Work: When it comes to planning for health care needs as we age, it's time for a reality check. It's fine today, when our health is good, to state the intention to return to work if financial needs arise, but how many 70+-year-old people with health problems really want to be out looking for a job? In reality, planning to return to work in order to pay for health care needs during retirement isn't so much a plan as it is a hope…a hope that we won't face substantial health care costs as we age.
Don't wait until it rains to start building your ark… plan ahead while the choices are still yours to make!

To view the entire NFS December Retirement Readings Newsletter, click here

Contact my office if we can help.

Monday, December 24, 2012

Seasons Greetings from NFS

Seasons Greetings!!

Your friends here at Northeast Financial Strategies want you to know how much your loyalty and friendship are appreciated this year and in all years past. At the holiday season, our thoughts turn gratefully to those who have made our success possible. It is in this spirit we say...thank you and best wishes for the holidays and a happy new year.

From all of us here at NFS, THANKS!!

Friday, December 21, 2012

IRS Warns Congress Tax Season Might Be Delayed until March or Later without AMT Patch

WASHINGTON, D.C. - IRS Acting Commissioner Steven T. Miller warned Congress on Wednesday that if lawmakers fail to extend the traditional alternative minimum tax patch, up to 100 million American taxpayers could be affected, and most taxpayers might not be able to file their tax returns until late March 2013 or later.

Miller sent a letter to leaders of the House Ways and Means Committee warning of the trouble ahead. He has warned Congress in the past about not patching the AMT, but he has increased his estimates for how many taxpayers could be affected.

Thursday, December 20, 2012

IRS Offers Tips for Year-End Giving

WASHINGTON — Individuals and businesses making contributions to charity should keep in mind some key tax provisions that have taken effect in recent years, especially those affecting donations of clothing and household items and monetary donations.

Rules for Clothing and Household Items

To be deductible, clothing and household items donated to charity generally must be in good used condition or better. A clothing or household item for which a taxpayer claims a deduction of over $500 does not have to meet this standard if the taxpayer includes a qualified appraisal of the item with the return. Household items include furniture, furnishings, electronics, appliances and linens.

Wednesday, December 19, 2012

When business liquidation is the only course of action at an owner's death,life insurance can provide the funds that make the difference between a planned liquidation and a financially-disastrous forced liquidation.

Consider the uses to which life insurance can be put in the planned liquidation of a business:

Estate SettlementLife insurance proceeds can be used to pay estate taxes and other estate settlement costs, allowing the liquidation to proceed on an orderly basis.
Family IncomeUsing life insurance proceeds to provide the surviving family with a continuing income can avoid a forced liquidation of business assets for this purpose.
Working CapitalIf the executor needs additional cash to temporarily operate the business, life insurance can serve as the source of that cash.
Offset ShrinkageEven a planned liquidation will usually result in some shrinkage in value, as compared to what the business was worth as a going concern. Life insurance can be used to replace the value lost in the liquidation.
For "pennies on the dollar," life insurance provides the cash needed to avoid a forced liquidation will be available exactly when needed -- at the business owner's death.
To view the full NFS December Business Briefs Newsletter, click here

Monday, December 17, 2012

WOTC for Hiring Military Veterans by Year’s End

The IRS is reminding employers to act soon if they plan to claim a Work Opportunity Tax Credit (WOTC) for hiring certain military veterans. The expanded credit may provide thousands of dollars of benefit to qualified businesses, but only if they hire veterans before the end of 2012.

The WOTC rewards employers with a tax credit for hiring individuals from targeted groups. The Three Percent Withholding Repeal and Job Creation Act (2011 Heroes Act) expanded this tax incentive to encourage employers to hire military veterans by creating the Returning Heroes Tax Credit and the Wounded Warriors Tax Credit.

Wednesday, December 12, 2012

Estate Shrinkage Profiles

You may be interested in what the public probate records of the estates of businessmen, attorneys, entertainers, accountants and even a President have to show.

NameGross EstateNet EstatePercent Shrinkage
Franklin D. Roosevelt$1,940,999$1,366,13230%
Henry J. Kaiser, Sr.$5,597,772$3,109,40844%
Edwin C. Ernst, CPA$12,642,431$5,518,31956%
Robert S. Kerr (U.S. Senator)$20,800,000$11,300,00046%
A.H. Wiggin (Chairman, Chase Bank)$20,493,999$5,646,66672%
William E. Boeing$22,386,158$11,796,41047%
Rick Nelson$744,357$506,63632%
Elvis Presley$10,165,434$2,790,79973%
Rock Hudson$8,600,000$3,926,28854%
James S. Kemper (Insurance Executive)$10,948,356$7,007,56036%
Nelson A. Rockefeller$79,249,475$56,727,62828%
Conrad Hilton$199,070,700$93,288,48353%
Source: Public Probate Records
If these people, who had access to the best advice money could buy, were not able to avoid the "unwanted heirs" (federal and state estate taxes and estate administrative costs), it will be difficult for the rest of us to avoid estate settlement costs.
Proper advance planning, however, can minimize the impact of estate settlement costs on the value of your estate.
To view the full NFS December Estate Ideas Newsletter, click here

Monday, December 10, 2012

Can I Have a SEP IRA and SIMPLE IRA For Employees?

Q: Can an employer offer both a SIMPLE IRA plan and a SEP IRA to his/her employees?

Friday, December 7, 2012

IRS Offers Tax Tips for “The Season of Giving”

December is traditionally a month for giving generously to charities, friends and family. But it’s also a time that can have a major impact on the tax return you’ll file in the New Year. Here are some “Season of Giving” tips from the IRS covering everything from charity donations to refund planning:

Wednesday, December 5, 2012

Long Term Care - Did you Know?

Did You Know...
>About one-third of individuals turning 65 in 2010 will need at least three months of nursing home care, 24% more than a year, and 9% more than five years.
(Source: What Is the Distribution of Lifetime Health Care Costs from Age 65?, Center for Retirement Research at Boston College, March 2010)
>About 71% of nursing home residents are women.
(Source: CDC Vital and Health Statistics, Series 13, No. 167, June 2009)
>The national average daily rate in 2011 for a private room in a nursing home was $239, an increase of 4.4% from 2010.
(Source: 2011 MetLife Market Survey of Nursing Home, Assisted Living, Adult Day Services, and Home Care Costs)
>The average length of a nursing home stay is 835 days.
(Source: CDC Vital and Health Statistics, Series 13, No. 167, June 2009)
>At an average daily rate of $239, an average nursing home stay of 835 days currently costs almost $200,000 making it virtually unaffordable for many Americans.
>Medicare does not pay for long-term care services, as explained by the Social Security Administration:
“About Social Security and Medicare... Social Security pays retirement, disability, family and survivors benefits. Medicare, a separate program run by the Centers for Medicare & Medicaid Services, helps pay for inpatient hospital care, nursing care, doctors’ fees, drugs, and other medical services and supplies to people age 65 and older, as well as to people who have been receiving Social Security disability benefits for two years or more. Medicare does not pay for long-term care, so you may want to consider options for private insurance (emphasis added).”
Without proper planning, a serious accident or illness could rob you of your financial independence.

Whether purchased for yourself, your spouse or for an aging parent, long-term care insurance can help protect assets accumulated over a lifetime from the ravages of long-term care costs.
For the complete NFS December Financial Facts Newsletter, click here

Tuesday, December 4, 2012

Medicare Part B Premium Changes for 2013

The new Medicare Part B premium amounts for 2013 have announced.  The base monthly premiums increase $5.00 from $99.90/month in 2012 to $104.90/month in 2013.

Some taxpayers have to pay higher premiums due to high AGI.  The amount varies based on the taxpayer’s income as shown on the income tax returns and their filing status.  The monthly Medicare premium (base + extra) amounts for 2013 based on 2011 income and filing status are:

Monday, December 3, 2012

Tax Impacts of President Obama's Re-election


President Obama secured a second term in office November 6, 2012, in the end winning the Electoral College by a wide margin. The President's re-election now sets in motion what will likely be difficult negotiations between Democrats and Republicans over the fate of the Bush-era tax cuts, nearly $100 billion in automatic spending cuts, and the more than 50 expiring tax extenders, which include the alternative minimum tax (AMT) patch for tens of millions of taxpayers. The President's re-election has also significantly changed the dynamics for reaching an eventual agreement over long-term tax reform.

General Impact