Holistik Planning

With the economy in  a slump many retirees are wondering whether they should begin taking their social security benefits at the first chance they get.  While it is tempting, waiting until your full retirement age could lead to less taxes and more money in your pocket.

While every situation is different, there are a few facts about taking Social Security early that everyone should know.

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With long-term care (LTC) costs growing exponentially, the need for long-term care insurance is growing as well. Advances in bio-science have lead to longer life expectancy, and, with older age comes the need for assistance.  As baby boomers continue to reach retirement, the need, and ultimately the cost, of long term care will continue to grow.  So what can you do to protect yourself from the costs associated with long-term care?

Long-term care insurance can help you reduce the potential exposure related to long-term care costs.  When buying long-term care insurance, there are a few things you should consider.

• Daily/Monthly Benefit Amount –This is the amount, per day, or per month, the policy is scheduled to pay out. If your daily benefit amount is $200 per day, your policy will pay up to $6,200 per month. If your monthly benefit amount is $6,200, you will also receive up to $6,200 per month.
• Elimination Period – This is the period of time you must wait before your benefits begin to pay.  This period typically ranges from 0 – 180 days.  The longer the waiting period the lower the cost of the policy. (This is similar to the deductible on a PPO plan)
• Benefit Period – This is used to determine the total benefit amount.

These are a few of the key factors you should understand when purchasing LTC insurance. When purchasing LTC insurance for yourself or your parents, be sure to read the policy carefully.  It is important to understand how much coverage you have and under what circumstances you will receive benefit.  For a no-cost review of your LTC policy, give Guide My Finances a call today.

When you meet with a financial planner, the first thing they will likely ask you is “what are your financial goals?”  I have found, through experience, that this question is more difficult to answer than you may think.  While many of us have defined financial goals in our heads, we find difficulty speaking them out loud, especially if they seem unattainable in the short term.

It is extremely important to identify what you want out of life.  From here, you can determine what financial goals you will need to meet to get there.  To help you get started, I have compiled a list of the most common financial goals I come across.

1. Accumulating a nest egg for retirement
2. Preparing for an income strategy in retirement
3. Planning for longevity.  Ensure your savings will last as long as you need
4. Saving for a child’s/grandchild’s education
5. Paying off credit card debt, student loan debt, or housing debt
6. Purchasing a home, trading up a home, selling a home
7. Purchasing a new car every 5 years
8. Taking a vacation once a year
9. Protecting your estate from taxation
10. Ensuring your assets are transferred to your beneficiaries properly
11. Protecting your income from disability
12. Protecting loved ones from a premature death
13. Reducing exposure to health care and long term care costs

While everyone’s goals are different, it is important to take a minute to write yours down.  No matter how unattainable they may seem, with a proper plan they may not be out of reach. I encourage you to take a moment to determine what financial goals you would like to accomplish.  Need help?  Give us a call.

When it comes time to purchase life insurance you will be faced with the question, “term or permanent?”  You have probably heard the phrase “buy term and invest the rest”, but, that may not be the end all be all solution for you.  Let’s take a look at the difference between term and permanent insurance to distinguish which type, or combination is best for you.

Term Insurance:

Term insurance is most suitable for individuals who are looking to put insurance in place or a short period of time.  I typically recommend using term insurance to protect your loved ones from any outstanding debt, such as a mortgage, to ensure a spouse has the income they need to cover fixed expenses, and to cover the costs of children while they are in the house.  Term insurance will protect your family during your income earning years.

Pros:

• Cheap, Cheap, Cheap!  Term insurance is the least expensive option when it comes to life insurance coverage.
• Great for short term coverage needs like paying off a mortgage or protecting family
• Your monthly premiums are locked in for the term specified and cannot increase

Cons:

• Once the term (number of years specified in the contract) has passed, you are no longer insured.  In some cases you can renew your term for another period, but you will pay a premium based on your age at the time of renewal.
• There is no option for cash accumulation.

Universal Life/Whole Life:

This insurance is most suitable for individuals looking to guarantee a benefit to a beneficiary at an undetermined date in the future.  I recommend using this insurance to protect a spouse in retirement, leave a legacy to your beneficiaries, and to cover potential estate taxes.

Pros:

• The policy is guaranteed to last until you reach age 120! (guaranteed age varies based on contract)
• The premium you agree to at the age of issue is locked in for the entire contract
• Non-cancellable!  No matter what changes in health you have over time, the policy cannot be cancelled. (unless you fail to pay your premiums)
• A cash value component is accumulating within the policy.  In most cases, this will allow you to miss payments or stop paying at a future date.  You may even have the options to withdraw these cash values if you need them. (before skipping a payment, check with the carrier to ensure you have the funds to cover the payment)

When it comes time to name the beneficiary for your life insurance and retirement accounts, there are a few factors that should definitely be considered.  If these forms are not filled out correctly, your wishes may not be carried out, or your heirs may be left with a significant and avoidable tax consequence. Here are a few tips on how to choose your beneficiary.

1.) Retirement Accounts- If you are married and have taken the steps to put a Living Trust in place, DO NOT name your trust as the primary beneficiary on your retirement accounts.  This is a costly mistake that is made time and time again.  If your trust is the primary beneficiary, rather than your spouse, 100% of your retirement account will need to be liquidated to fund the trust. This means you will be forced to pay income taxes on 100% of the retirement account all in one year rather than taking distributions as you need them.

2.) Directly Appoint Your Beneficiary- Many don’t realize that both your Life Insurance and Retirement Accounts require you to appoint your beneficiary directly. While you may have a will or a trust in place leaving all of your assets to person A, if your retirement account lists person B as the beneficiary, person B will receive the assets.  Be sure you check your beneficiary paperwork regularly to ensure your assets are set up to go where you want them.

3.) Minors Should Not Be Beneficiaries- Most custodians will not distribute assets to a minor.  Since this is the case, you may want to set up a trust naming your children a the beneficiary, and list the trust as the beneficiary on your account.  Another option is to name the person you have listed as caregiver to your children.  Whatever approach you choose, be sure to name a non-minor beneficiary.

4.) Name Contingent Beneficiaries-  A contingent beneficiary is the person who will be named as beneficiary if the primary beneficiary predeceases you.

Each of these tips should be carefully considered to ensure your assets are distributed as you see fit.

Most self-employed individuals in California assume they are covered by the California State Disability Program (SDI).  Unfortunately, this is not the case.  Each quarter, when you write a check to the IRS for your self employment taxes, you are making a contribution to your Social Security (12.4%) and to Medicare (2.9%).   SDI is not part of this equation!  In order to enroll in the SDI program, you must have your accountant elect for you to be enrolled.  Before calling and signing up, there are a few factors you should consider.

COST – The cost of enrolling in SDI is based on a percentage of your income, currently 1.1%.* So, if you make $75,000 this year, you will need to pay $825 per year ($68.75 per month).  This percentage is subject to change and often does depending on the amount California is paying out.

SDI vs Private Plan –

Disability insurance is a very necessary component to your financial plan.  Your most valuable asset during your working years is your income.  By not protecting this income, you could find your self in a less than desirable situation.  To discuss your options for disability insurance in more detail, give Guide My Finances a call. For more information about enrolling in the SDI program, visit Click Here.

* The maximum income level for SDI is $90,699 for 2009.  This is the limit on which you will be charged 1.1%

It is no secret that health care costs are on the rise. Each year, we receive that dreaded letter in the mail letting us know that are monthly premiums are going up.  If you are one of the lucky ones who has health insurance offered and paid for by your company, CONGRATULATIONS! Although you so not have much flexibility in your plan options, you often have more extensive coverage at a comparable cost to those who are in need of individual health plans. If you are self employed, or not covered by your employer, here are a few tips to help reduce the cost of your overall health expense.

• Increase your annual deductible – We are programed to think that the lower the annual deductible, the better the plan and the less money we will have to lay out.  This is not necessarily the case. If you currently have a $500 annual deductible, you are likely paying anywhere between $50 and $400 more than a plan with a $1500 deductible. Even on the low end of the spectrum, you are paying an additional $600 per year to pay less out of pocket in the event that something happens.In most cases, it makes more sense to increase your annual deductible and decrease your monthly payments

• Look at an HSA plan- HSA plans are high deductible PPO plans that allow you to set up a tax deductible health account to pay for the cost of your health care. These plans can often reduce the cost of your monthly premiums by 50% or more! HSA plans have a few features that set them apart from traditional PPO plans.
  
  • Higher deductibles- Typically, HSA plans have deductibles ranging from $1,800 – $10,000
  • This deductible usually must be met before any services are covered.
  • In some cases, preventative care visits are covered at 100% prior to meeting the deductible
  • A health savings account can be established allowing you to save up to $3,050 as an individual, or $6,150 as a family to a tax deductible savings account.  This account can be used to pay for services during the deductible period, over the counter medicines, prescriptions, and even vision and dental costs.  In addition, this account is rolled over from year to year so you never loose your contributions.

In order to ensure you are not paying too much for your health insurance, Guide My Finances offers a no-cost health insurance comparison where we look side by side at your existing policy and other options.  Give us a call today!

With long-term care (LTC) costs growing exponentially, the need for long-term care insurance is growing as well. Advances in bio-science have lead to longer life expectancy, and, with older age comes the need for assistance.  As baby boomers continue to reach retirement, the need, and ultimately the cost, of long term care will continue to grow.  So what can you do to protect yourself from the costs associated with long-term care?

Long-term care insurance can help you reduce the potential exposure related to long-term care costs.  When buying long-term care insurance, there are a few things you should consider.

·Daily/Monthly Benefit Amount –This is the amount, per day, or per month, the policy is scheduled to pay out. If your daily benefit amount is $200 per day, your policy will pay up to $6,200 per month. If your monthly benefit amount is $6,200, you will also receive up to $6,200 per month.

·Elimination Period – This is the period of time you must wait before your benefits begin to pay.  This period typically ranges from 0 – 180 days.  The longer the waiting period the lower the cost of the policy. (This is similar to the deductible on a PPO plan)

·Benefit Period – This is used to determine the total benefit amount.

These are a few of the key factors you should understand when purchasing LTC insurance. When purchasing LTC insurance for yourself or your parents, be sure to read the policy carefully.  It is important to understand how much coverage you have and under what circumstances you will receive benefit.  For a no-cost review of your LTC policy, give Guide My Finances a call today.