How to Plan for Nursing Home Care for Parents

The median annual cost of care in a skilled nursing facility in South Carolina is $42,000, according to a cost of care survey by long-term care insurance company Genworth. You can’t expect Medicare to cover it. Medicaid coverage doesn’t start in, until the value of your assets is reduced to $2,000, says The Columbia Regional Business Report’s recent article entitled “Nursing home care requires advance planning.”

Many people don’t know that to qualify for Medicaid, your assets have to be spent down to almost nothing. Planning for long-term care includes both insurance and financial planning. However, the long-term care insurance options are limited. There are only a few providers remaining in the industry, but it’s worth the effort to see what they have.

Long-term care insurance is a plan that lets you pay a premium in exchange for coverage for a stay in an assisted care facility, full-scale care facility, or even at home. Without a policy, those financial costs can be catastrophic.

Because the cost of long-term care is so high, begin planning for your later years as soon as possible. It’s likely that in the next few decades, when the baby boomer generation starts requiring long-term or assisted living care, paying for it could become a crisis.

For people who are starting to save for future care needs, financial planners earmark 10% to 15% of your income. If you’re older and see that you don’t have enough money saved, put away at least 20% of your income. IRS guidelines include catch-up provisions for people older than 50 for IRAs and 401(k)s.

Some group insurance plans offer long-term care options. There are some additions for life insurance policies that could extend living benefits for elder care. You should plan on paying for three years of long-term care.

How to pay for skilled care is just one of the issues a family may face in later years. You also should have a will, advance directives, medical or health care power of attorney and durable power of attorney in place to help your family with difficult decisions. Remember to make sure the beneficiaries on your insurance plans are up-to-date.

Talk to an attorney about late-life concerns.

It’s never too soon to develop some kind of plan that can ease the financial burden for you and your family.

Reference:  Columbia Regional Business Report (March 10, 2020) “Nursing home care requires advance planning

What Do We Know about Early-Onset Dementia?

Rita Benezra Obeiter, 59, is a former pediatrician who was diagnosed several years ago with early-onset dementia, a rare form of the disease. When this occurs in people under age 65, the conditions cause additional and unique issues because they are so unexpected and because most of the potentially helpful programs and services are designed for and targeted to older people.

One issue is that doctors typically don’t look for the disease in younger patients. As a result, it can be months or even years before the right diagnosis is made and proper treatment can start.

WLNY’s recent article entitled “Some Health Care Facilities Say They’re Seeing More Cases Of Early-Onset Dementia Than Ever Before” reports that her husband Robert Obeiter left his job two years ago to care for her. She attends an adult day care, and aides help at home at night.

If Dementia is a generic term for diseases characterized by a decline in memory, language, and other thinking skills required to perform everyday activities, Alzheimer’s is the most common. The National Institute of Health reports that there’s approximately 200,000 Americans in their 40s, 50s, and early 60s with early onset Alzheimer’s.

One conference discussed a rise in early dementia because of the processed foods and fertilizers or the other environmental hazards, and there are definitely some genes more associated with Alzheimer’s—more so with early onset.”

There is no clear answer, and most of the treatments help to slow down the progression.

There is some research showing the Mediterranean diet can be protective, as well as doing cognitive exercises like crossword puzzles and Sudoku.

It’s true that no one can predict the future of their health, but there are ways financially that families can prepare. It can cost $150,000 a year or more. That’s why you should think about purchasing long term care insurance starting at the age of 40.

Long-term health insurance can pay for an aide to come into your home, and it can pay for the cost of assisted living. And, remember that health insurance doesn’t cover long-term care, nor does Medicare. Plus, everyone over the age of 18 needs a healthcare power of attorney and a financial POA.

Reference: WLNY (Feb. 12, 2020) “Some Health Care Facilities Say They’re Seeing More Cases Of Early-Onset Dementia Than Ever Before”

The High Cost of Medicare Mistakes

A 68-year-old woman knew that she had to sign up at age 65 for Medicare Part A for hospital care and Part B for outpatient care, since she did not have employer provided health insurance from an employer with 20 or more employees. She knew also that if she did not have health insurance from an employer and didn’t sign up immediately, she’d face a penalty with higher Part B and Part D premiums for the rest of her life when eventually she did sign up, reports Forbes in the article “Beware Medicare’s Part B Premium Penalty And Surcharge Traps.”

Here’s where it got sticky: she thought that Medicare provided an eight-month special enrollment period after one job ended to apply penalty free. She is employed on a sporadic basis, so she thought she had a window of time. Between the ages of 65 and 68, she had several jobs with large employers, and was never out of work for more than eight months.

She was out of work for 25 months total between ages 65 and 68, when she was not enrolled in Medicare. She thought that since she was never out of work for more than eight months, she didn’t have to sign up until she officially stopped working and would then enroll penalty free in traditional Medicare Parts A, B, and D.

She had read information on the Medicare website and her interpretation of the information was wrong. It was a costly mistake.

In determining whether you need to permanently pay a Medicare Part B penalty, Medicare counts up all the months between age 65 and the month you first enroll in Part B, even if you have a job with a large employer with no gaps in employment for more than eight months.

She got hit with a 20% lifetime Medicare Part B premium penalty. For every 12 months that you’re not covered by Medicare B after reaching 65 and before you enroll, the penalty is an additional 10%. And making things worse, she was hit with a Medicare Part B penalty based on the cumulative (not consecutive, which is an important difference) 25 months that she went without credible prescription drug coverage.

This is the sort of problem that does not self-resolve or get better over time. In this case, another mistake in timing is going to hurt her. She sold some assets and realized a capital gain in 2018, which increased her Modified Adjusted Gross Income (MAGI). In 2020, she’s going to have to pay the Income Related Monthly Adjustment Amount (IRMAA). If your MAGI, two years before the current year, is less than $87,000, you are exempt from IRMAA in the current year. Her cost: $1,735.20 more this year. Had she instead realized those capital gains over the course of several years, her 2018 MAGI might not have crossed the $87,000 threshold. Most people are not aware of the IRMAA and take capital gains in larger amounts than they need.

This is a harsh lesson to learn, at a time in life when there’s not a lot of flexibility or time to catch up. Talking with an estate planning lawyer about Medicare and about tax planning, as well as having an estate plan created, would have spared this woman, and countless others, from the harsh consequences of her mistakes.

Reference: Forbes (Jan. 29, 2020) “Beware Medicare’s Part B Premium Penalty And Surcharge Traps”

The Need for Long-Term Care Insurance

More than 70% of seniors 65 and over will need some type of long-term care in their lifetime. This could be a few months of home health aide assistance or years in an assisted living facility or nursing home. Unfortunately, Medicare won’t pay for long-term care, which means the majority of seniors could have some very big bills.

Motley Fool’s recent article entitled “Only 16% of Older Americans Have Made This Smart Retirement Move” says that’s the reason why it’s critical to secure long-term care insurance. Your 50s are generally when it’s considered to be the best time to apply. At that point, you’re not signing up to pay premiums for too long, but you’re also more likely to get approved for a policy and get a discount on its cost based on your health. However, research from TD Ameritrade found that just 16% of Americans in their 50s have a long-term care policy.

Many seniors don’t know just how expensive long-term care is, until they actually need it. Medicare generally doesn’t cover this because its’ considered custodial care, another term for non-medical assistance. Medicare will pay for seniors to recuperate from injury or illness, but often, the need for long-term care isn’t a result of that situation.

A long-term care insurance policy isn’t cheap. Your premium costs will depend on a number of factors, such as your age at the time of your application, the state of your health and the specific amount of coverage you want.

For example, a 55-year-old man in New Jersey applying today could receive a benefit of $150 per day for up to two years. Let’s say that he ends up spending two years in an assisted living facility that costs $150 per day.

That’s going to total $109,500. Assume you also pay an annual premium of $1,195.43 for 20 years to obtain that benefit, for a total of $23,908.60. Even with the large amount of money you’ll end up paying in premiums, it’s nothing when compared to the $109,500 you might otherwise be required to shell out for your care.

It’s impossible to predict whether you’ll need long-term care, but if you’d rather not risk bankrupting your estate and yourself, look at a policy. Even though it’s ideal to apply while you’re in your 50s, you may qualify for affordable coverage in your 60s. Therefore, despite the preferred application window being closed, it may be beneficial to see what options are available to you now.

Reference:  Motley Fool (Jan. 25, 2020) “Only 16% of Older Americans Have Made This Smart Retirement Move”

Should I Purchase Long-Term Care Insurance?

According to Covering Katy’s recent article entitled “How to Protect Yourself From Long-term Care Cost,” to answer the question of long-term care, think about two variables: your likelihood of needing long-term care and the cost of the care.

Government statistics show that a person who’s 65 today has nearly a 70% chance of eventually needing some kind of long-term care. The average cost for a private room in a nursing home is about $100,000 per year, and a home health aide costs about $50,000 per year. When you do the math, your chances of needing long-term care are good and it’s expensive. If you needed several years of long-term care, it could seriously deplete your savings.

Since Medicare typically pays only a small part of long-term care costs, you should consider the following options for meeting these expenses:

You could “self-insure” against long-term care expenses, by setting aside some of your investment portfolio for this. However, it looks like you’d have to save a lot of money before you felt you were truly protected. This could be especially tough with the need to save and invest for the other expenses associated with retirement.

When you buy long-term care insurance, you’re moving the risk of paying for long-term care from yourself to an insurance carrier. Some LTC policies pay costs for a set number of years, while others cover you for life. Shop around for a policy that offers the combination of features you think best meet your needs. Long-term care gets more expensive as you get older. Therefore, if you’re interested in this type of coverage, don’t delay in your search.

A “hybrid” policy, like life insurance with a long-term care/chronic illness rider, combines long-term care benefits with those offered by a traditional life insurance policy. As a result, if you were to purchase a hybrid policy, and you never needed long-term care, your policy would pay a death benefit to your beneficiary. Conversely, if you ever do require long-term care, your policy will pay benefits for those expenses. The amount of money available for LTC can exceed the death benefit dramatically. There are quite a few different types of hybrid policies, so do your research before choosing a policy.

While you may decide you’re willing to take the chance of never requiring any type of long-term care, if you think that’s a risk you’d rather not take, look into all your coverage options thoroughly.

Reference: Covering Katy (Jan. 13, 2020) “How to Protect Yourself From Long-term Care Costs”

Facts and Figures for Older Workers and Retirees in 2020

A new year always brings change, and this year is no exception. From Market Watch, the article “Numbers that older workers and retirees need to know in 2020” provides key information for this new year.

Retirement Plan Changes. Limits for how much can be saved in 401(k), 403(b), Thrift Savings Plan, and most 457 plans have increased by $500 to $19,500 for 2020. If you are 50 and older, the “catch-up” contribution has also increased by $500, so you can now save an additional $6,500 in those accounts.

For those with SIMPLE retirement plans, which are usually from small businesses with 100 or fewer employees, you can increase savings by $500 to $13,500.

What hasn’t changed—if you have an individual traditional IRA, you can save $6,000, with a catch-up contribution of $1,000.

Social Security Changes. The Social Security Administration reports that the average monthly benefit in 2019 was $1,356.05. This will rise by 1.6% in 2020, which will mean an increase of $21.69 per month. Last year, some 63.8 million Americans took Social Security benefits. It was the first year since the program began in 1935 that spending topped $1 trillion.

Another change to Social Security in 2020 is the longer period of time to reach full retirement age. For people born in 1958, this now increases to 66 years and eight months. If you were born in 1958, you’ll need to be that age to collect your full retirement benefit. The longer period is also going to increase in 2021 and 2022—making the full retirement age 67 for anyone born in 1960 or later.

That doesn’t mean people can’t get Social Security benefits earlier—you can elect to take benefits as early as age 62—but you’ll receive less. If you take benefits at age 62, they’ll be 75% of the monthly benefits because you will have added 48 months. At age 65, you’ll receive 93.3% of full benefits because of adding an additional 12 months. If you are taking spousal benefits, there are more numbers to consider.

Medicare Changes. The good news was the increase from Social Security. The bad news? Standard monthly Part B premiums will increase 6.7%, from $135.50 in 2019 to $144.60. That’s the minimum premium. Depending upon your premium, they could go as high as $491.60 per month. Medicare officials blame higher drug prices on the increase.

Health care costs are part of a rising tide of costs facing retirees and older workers. Considering how few Americans have enough money saved for retirement, this is going to become more of a national issue as boomers and millennials age. It should serve as a reminder for all—save as much as you can for retirement, starting now.

Reference: Market Watch (Dec. 28, 2019) “Numbers that older workers and retirees need to know in 2020”

Is Medicare Coverage Free?

Medicare has a variety of expenses—including premiums, copays and deductibles. CNBC’s recent article, “Here’s what you should know about Medicare costs if you’re nearing age 65,” found that half of respondents in a recent poll by consumer website eligibility.com, said they believe Medicare is free.  If you fail to sign up on time, you may face penalties for the rest of your life.

Fidelity Investments estimates that the average male-female couple will spend at least $285,000 on health care in retirement. The items not covered by Medicare—dental, basic vision, over-the-counter medicines, long-term care—would be in addition to that amount.

If you have at least a 10-year work history, you pay no premiums for Medicare Part A. This will cover hospital stays, skilled nursing, hospice, and some home health services. However, Part A has a deductible of $1,364 per benefit period and some caps on benefits. Part B—which covers outpatient care and medical supplies—has a standard monthly premium of $135.50 (in 2019). Higher earners pay more. This part has a $185 deductible (for 2019). After it’s satisfied, you typically pay 20% of covered services.

Those parts of Medicare don’t cover prescriptions, so a Part D drug plan is needed.

You can get a separate plan to use with original Medicare, or you can enroll in an Advantage Plan (Part C). This plan usually has prescription drug coverage. If you go with this, your Parts A and B benefits also will be delivered through the insurance company offering the Advantage Plan.

The average cost for Part D coverage in 2019 is $32.50 per month, according to the Centers for Medicare and Medicaid Services. However, high earners pay extra for their premiums. The deductible for 2019 is $415.

If you accessed your Social Security benefits before age 65, you’ll automatically be signed up for original Medicare. A month or two before you turn 65, you’ll be automatically enrolled, and your card will be delivered in the mail. You’ll see your Social Security check decreased by the cost of the Part B premium.

If you haven’t yet used Social Security, you must enroll proactively. There’s a seven-month enrollment period that begins three months before your birthday month and ends three months after it. If you have insurance through an employer when you reach age 65, you may be able to wait to enroll in Medicare without a penalty.

Even if you don’t take medicine right now, at least sign up for the cheapest drug plan just so you don’t face a penalty. This is because if you don’t enroll in Part B when you’re supposed to, you’ll see a 10% penalty for each year that you should’ve been enrolled. The amount would be in addition to your monthly premium. Part B enrollment isn’t required, if you have medical coverage from your job.

As far as Part D, the penalty for not enrolling when you were first eligible is 1% for every month that you could have been signed up—unless you have qualifying coverage through an employer’s plan.

Many people couple their original Medicare benefits with a supplemental policy—known as Medigap—to help cover out-of-pocket costs like deductibles and coinsurance. However, you can’t pair a Medigap policy with an Advantage Plan.

If you select an Advantage Plan, there may be limited coverage for dental and vision.

Reference: CNBC (August 29, 2019) “Here’s what you should know about Medicare costs if you’re nearing age 65”

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