As I outlined in an earlier post, I disagree with Dave Ramsey (and a lot of other people) when it comes to long term care insurance. Many people debate with their family, with "experts" and/or with themselves regarding whether or not to buy long term care insurance. However, I rarely hear anyone talk about a long term care PLAN, unless they are using it as a synonym for LTC insurance. Having no plan is a bad plan, no matter how good of insurance that someone might have, and some times having no insurance is the right plan.
So what's the difference between LTC insurance and a LTC plan? Maybe it will help to plug in "fire" for LTC to understand it better.
If your house is burning down, the most important thing is to have a plan of action, so everyone gets out safely. If everyone's dead, there's not point in having the insurance to replace your stuff that burns up. Even better than an escape plan, is a fire prevention plan. Almost all fires are preventable. If you never have a fire, your never hurt by not having fire insurance or having bad insurance. Also, once a fire starts, a good plan and things like fire extinguishers can minimize the damage, again making much less important to have good fire insurance.
Having a long term care PLAN starts with prevention. Many of the things that result in someone needing long term care are preventable. Most physical problems that result in people being unable to live on their own are caused by poor lifestyle choices. Heart attacks, strokes, broken hips, lung problems, etc. are mostly preventable. Making healthy choices dramatically reduces the odds of needing long term care. Insurance companies know that, so if you decide to buy LTC insurance, it will cost a lot less and be easier to get if you are healthy.
The next part of making a plan is to assess your current status and figure out what would happen if right now you were suddenly unable to care for yourself with little or no chance of recovery. What would happen? I always recommend taking a lot of time writing out the answer to this question. It's going to vary a lot from one person to another. For example, if a person were a grain farmer, someone would have to take over planting, harvesting, etc. pretty much immediately, but if someone is retired or one of many people performing the same basic job as several others within a company, the situation isn't as urgent. It would also look different for someone running a company where others were dependent on him or her for their employment. Family situations are another variable affecting things dramatically.
If you haven't already, now is the time to really think about this possibility, and get it down in black and white what you think would happen. That is the foundation of a long term care plan. We'll work on putting the rest of the building up soon.
Tuesday, December 15, 2015
Tuesday, December 8, 2015
Self-ful, Health-ful AEP
On paper, 2014 was my least successful Medicare Annual Election Period (AEP). The AEP, which now runs from October 15 through December 7, is akin to tax time for accountants or harvest time for farmers. It is during this time that people on Medicare can change their prescription coverage and/or enroll in a Medicare Advantage plan.
Overall, the chaos has been great for my business. When I went on my own in 2006, very few people knew how the new prescription drug coverage worked, only that they needed to sign up for something. Once people found out that I understood it and could explain so that most people could understand it, they told their friends and family about me. It wasn't unusual for me to show up at an appointment I had scheduled at the home of a couple and have a half dozen other people there too. I very quickly went from having a handful of customers to having hundreds. Without that chaos, I probably would have failed quickly.
Instead, my business took off. I helped a lot of people, and I've won a couple of trips and trophies for my number of sales.
But it hasn't been all sunshine and tuna and pelicans. I've had some rough times and close calls. The standard has been that I would run like crazy, sucking down pots of coffee to wake up in the morning, run all day from appointment to appointment, and then pound drinks when I got home in order to be able to finally go to sleep and do it again the next day.
I've been trying to back it off for several years, but 2013 made me realize I HAD to slow down during AEP. Literally. Right at the end of AEP two years ago I had worked myself into such an exhaustion that my brain was pretty much shut down, even though my eyes were open. I was driving to an appointment and couldn't figure out why the guy coming the other way was turning left directly across my path. It wasn't until after I had clipped his back quarter panel that I realized that he turned in front of me because he had the green arrow and I had a red light that I had just run right through. My truck was damaged, but his car was much worse. He was mad, but luckily didn't punch me. I probably deserved it.
I did better in 2014, but still ran myself down, got sick for the 9th straight year, and took almost no time at all for myself, my family, friends, or anything else but work. In 2015 I got it right, I think.
This year, my new sales were about 1/10 of what they have been in past years during this time, but I did a pretty good job of focusing on taking care of my existing customers, and more importantly, taking care of myself. I got good sleep when I needed to. I cut back some on exercise, but kept it going, and even did a "50k" race. I didn't take complete days off, but I took some time to bow hunt during the rut, something I haven't done for the past 10 years. I took a class. I spent more time with my family. I even took advantage of some beautiful weather and camped out a couple of nights when I was on the road instead of driving home tired or staying in a questionable hotel room.
Overall, the chaos has been great for my business. When I went on my own in 2006, very few people knew how the new prescription drug coverage worked, only that they needed to sign up for something. Once people found out that I understood it and could explain so that most people could understand it, they told their friends and family about me. It wasn't unusual for me to show up at an appointment I had scheduled at the home of a couple and have a half dozen other people there too. I very quickly went from having a handful of customers to having hundreds. Without that chaos, I probably would have failed quickly.
Instead, my business took off. I helped a lot of people, and I've won a couple of trips and trophies for my number of sales.
But it hasn't been all sunshine and tuna and pelicans. I've had some rough times and close calls. The standard has been that I would run like crazy, sucking down pots of coffee to wake up in the morning, run all day from appointment to appointment, and then pound drinks when I got home in order to be able to finally go to sleep and do it again the next day.
I've been trying to back it off for several years, but 2013 made me realize I HAD to slow down during AEP. Literally. Right at the end of AEP two years ago I had worked myself into such an exhaustion that my brain was pretty much shut down, even though my eyes were open. I was driving to an appointment and couldn't figure out why the guy coming the other way was turning left directly across my path. It wasn't until after I had clipped his back quarter panel that I realized that he turned in front of me because he had the green arrow and I had a red light that I had just run right through. My truck was damaged, but his car was much worse. He was mad, but luckily didn't punch me. I probably deserved it.
I did better in 2014, but still ran myself down, got sick for the 9th straight year, and took almost no time at all for myself, my family, friends, or anything else but work. In 2015 I got it right, I think.
This year, my new sales were about 1/10 of what they have been in past years during this time, but I did a pretty good job of focusing on taking care of my existing customers, and more importantly, taking care of myself. I got good sleep when I needed to. I cut back some on exercise, but kept it going, and even did a "50k" race. I didn't take complete days off, but I took some time to bow hunt during the rut, something I haven't done for the past 10 years. I took a class. I spent more time with my family. I even took advantage of some beautiful weather and camped out a couple of nights when I was on the road instead of driving home tired or staying in a questionable hotel room.
 |
| Poe Hollow, Mount Ayr, Iowa
I wrote fifteen new blog posts during AEP, which is fifteen more than the prior nine years combined, and also wrote 2 new songs. Instead of gaining 10 or 15 pounds and feeling completely wiped out at the end of AEP, I'm .2 pounds lighter and feeling great. That's success in my book.
|
Thursday, December 3, 2015
New Strategy For "Bridge" Health Insurance
Before Affordable Care Act (AKA "Obamacare") I often was asked to help find health insurance for people who were a couple of years from Medicare eligibility. Most often it happened when a husband retired at age 65 and his wife was younger, usually by a few years. Health insurance was easy for him because he was new to Medicare, and they could both collect Social Security if they wanted. It made sense of both of them to retire while they were healthy enough to travel extensively if they wanted to. Getting health insurance for the non-Medicare spouse required answering some health questions, but I could usually get her a decent rate by selling her a policy that excluded maternity and mental health coverage. It was a safe bet that she wouldn't get pregnant, and if she hadn't had mental health issues by her early 60's, the odds were against her developing them suddenly. I could get her a decent health insurance policy for around $200-300 per month. That was affordable and reasonable. Those days are gone.
Now for someone in the last few years before being eligible for Medicare, that "bridge" coverage costs two to three times as much because everyone is accepted regardless of health, and the policy has to cover maternity and mental health. That drives up the cost, making doing the things people want to do in retirement less affordable.
As much as I dislike it, I'm wondering if the best solution is to manipulate income in order to qualify for a tax subsidy to cover health insurance cost.
For example, an Iowa couple with an income of $50,000 with him on Medicare could get a monthly tax subsidy in the neighborhood of $150 per month for her health coverage (per this calculator, at least). If income is $40,000 instead of $50,000, the subsidy increases to just under $280. That doesn't mean the couple has to have $10,000 less to spend, it just means that they need to decrease INCOME by $10,000. There are lots of ways to do it. For example, take $10,000 more out of a savings account and take $10,000 less from his 401K. One of the screwy things about the ACA is that the subsidy doesn't care what you have for assets. You can be a billionaire in term of assets but still qualify for a subsidy if your "income" is low.
Just one more reason to have some assets (Roth IRA, life insurance cash value, etc.) that can be used without increasing "income".
Now for someone in the last few years before being eligible for Medicare, that "bridge" coverage costs two to three times as much because everyone is accepted regardless of health, and the policy has to cover maternity and mental health. That drives up the cost, making doing the things people want to do in retirement less affordable.
As much as I dislike it, I'm wondering if the best solution is to manipulate income in order to qualify for a tax subsidy to cover health insurance cost.
For example, an Iowa couple with an income of $50,000 with him on Medicare could get a monthly tax subsidy in the neighborhood of $150 per month for her health coverage (per this calculator, at least). If income is $40,000 instead of $50,000, the subsidy increases to just under $280. That doesn't mean the couple has to have $10,000 less to spend, it just means that they need to decrease INCOME by $10,000. There are lots of ways to do it. For example, take $10,000 more out of a savings account and take $10,000 less from his 401K. One of the screwy things about the ACA is that the subsidy doesn't care what you have for assets. You can be a billionaire in term of assets but still qualify for a subsidy if your "income" is low.
Just one more reason to have some assets (Roth IRA, life insurance cash value, etc.) that can be used without increasing "income".
Wednesday, December 2, 2015
Why Not Self-Directed Roth IRA?
Usually when I'm writing here, it's more to share my wisdom (just lobbing that one up there for you to take a swing at) than it is to ask for advice. This time I'm asking. I'd love to hear what others have experienced or considered, what holes you see in what I'm thinking, etc. You could email me at or better yet, I'd love to discuss face to face.
My older son recently started working at Hy Vee, so he'll be able to start an IRA, most likely a Roth. I've been thinking about how cool it would be if he maxed out his contributions every year, how well off he would be with all those years of contributing and growing it. But what's a good way to grow it? I love fixed indexed annuities for conservative growth and/or income in retirement, but he's not even out of his teens.
Here's what I'm thinking I would do if I were in his shoes. I would max my contributions until I had enough saved to buy a piece of investment real estate (or rather a significant enough down payment that the rent would cover the payments). Or one of the many other options available for a self-directed IRA. I'm especially intrigued by the idea of investing in "intellectual property". The way I'm looking at things, he could be an entrepreneur who never pays taxes on what he makes from his investments, just keeps reinvesting them. And then passes them on tax-free if set up as a Roth. Seems like a heck of a deal. With a lot of work involved to figure it out.
I'd love to hear your perspective on it.
My older son recently started working at Hy Vee, so he'll be able to start an IRA, most likely a Roth. I've been thinking about how cool it would be if he maxed out his contributions every year, how well off he would be with all those years of contributing and growing it. But what's a good way to grow it? I love fixed indexed annuities for conservative growth and/or income in retirement, but he's not even out of his teens.
Here's what I'm thinking I would do if I were in his shoes. I would max my contributions until I had enough saved to buy a piece of investment real estate (or rather a significant enough down payment that the rent would cover the payments). Or one of the many other options available for a self-directed IRA. I'm especially intrigued by the idea of investing in "intellectual property". The way I'm looking at things, he could be an entrepreneur who never pays taxes on what he makes from his investments, just keeps reinvesting them. And then passes them on tax-free if set up as a Roth. Seems like a heck of a deal. With a lot of work involved to figure it out.
I'd love to hear your perspective on it.
Saturday, November 28, 2015
Sycamore 8--Friday Favorite
Sycamore 8 is my favorite local race. About the only thing I don't like about it is that it's the first weekend in December, which means it is also on opening day of the shotgun deer season and the last weekend of Medicare Annual Election Period. The stars have to align perfectly for me to be able to squeeze it in. Unfortunately, they aren't lined up for next weekend. But YOU can still register here.
The race director, Brad Dains, is top notch. He's pretty impressive as a runner, but even better as a race director and all around good guy. Here's what makes it my favorite local race. In no particular order.
The race director, Brad Dains, is top notch. He's pretty impressive as a runner, but even better as a race director and all around good guy. Here's what makes it my favorite local race. In no particular order.
- It's close to home for me. Which means I don't need to drive there if I want to run or walk there.
- The weather both times that I've done it has not been above 80 degrees (I'm not much of a warm weather runner). In fact, I don't think it's even been above zero.
- The race finishes in a parking lot, so I can get warm, dry clothes right after the race instead of having to walk several blocks to my vehicle.
- The proceeds go to a good cause (Central Iowa Trail Association)
- A bus is available to take participants from the finish line to the start.
- I am very familiar with the trail since I run and bike it often because of its convenient location.
- Warm, tasty soup at the finish
- Eight miles is enough of a distance to be a challenge, but not so long that it gets boring or I'm overly sore the next day.
- (saving the best for last?) Great swag. I have plenty of t-shirts already. From this race I've received a stainles steel pint "glass", a very nice bottle opener/key ring that I have attached to my computer bag, and an orange Buff that I use often. This year there will be a small bag f "Sycamore Single Track" coffee. Trail running and coffee. Can't go wrong there.
Thank you, Brad, for directing my favorite race. Someday I'll do it again.
Thursday, November 26, 2015
Thanks, Mom
Thanksgiving has been a hard day for me since my mom passed away. Today I'm thankful for the last lesson she taught me: life is short, and every day matters.
As a kid, Thanksgiving was "our" holiday, the one where we were the hosts for Mom's family. This is what it looked like.
As a kid, Thanksgiving was "our" holiday, the one where we were the hosts for Mom's family. This is what it looked like.
(Got my best side)
I have a lot of great memories of Mom and I having rare one-on-one time every year on Thanksgiving morning, the two of us working together after my paper route was finished and everyone else was still sleeping. With six kids in the family, there wasn't much time that it was just the two of us.
Every year on Thanksgiving I find myself irritable, usually getting into arguments over stupid stuff with my wife, etc. I'm getting better at focusing on enjoying the good memories instead of thinking about the loss, but it's still a tough day.
It's a tough day, but it's one day closer to the end of my life, so I'm going to keep making the most of every one. Happy Thanksgiving!
Friday, November 20, 2015
Dave Ramsey is Wrong--Part 2: Long Term Care Insurance
If you missed Part 1 regarding determining the right amount of life insurance to purchase, it gives a little background to this post.
Dave Ramsey's is wrong with many of his comments regarding long term care insurance. Not completely wrong, but kind of like those true/false test questions, it only needs to have one little bit wrong to be "false". And that one little false bit can really screw up a person's life. Here's what he says on page 160 of Dave Ramsey's Complete Guide to Money. "Statistically speaking, long-term care coverage is pretty much a complete waste of money--until you turn 60. Then, something dramatic happens. Long-term care coverage goes from being a waste to being an essential part of your insurance plan. You don't need it when you're fifty-nine, but you need to be on the phone setting it up the day you turn sixty". Huh? The other things I disagree with him on, I can at least see why he thinks the way he does, even if I disagree with it. But this is completely illogical. At 59 and 364 days LTC insurance is a waste of money, but the next day I absolutely have to have it? But what if I was born 2 months premature? What if they had to induce labor because I was 2 weeks overdue? Do I adjust accordingly? Why isn't he recommending that I buy it to be effective the day before I turn sixty and "waste" the premium on one day of coverage so that I pay a 59 year old rate instead of a 60 year old rate for the next 20 years or so? That argument would at least make some sense to me. It would at least be a "smart" financial move.
His first mistake is his first word: "statistically". Statistics are extremely important when it comes to insurance. To the insurance company. But they are absolutely meaningless to you as an individual. It doesn't matter what the average length of time needing long term care is. It doesn't matter what the average age of a person needing long term care is. All that matters to YOU is when YOU need it, how long YOU need it, and when or if it happens to YOU.
You don't buy insurance to protect you and your family from something that happens when and how you expect it to, you buy the insurance to protect you in cases where you are NOT average. For example, no one in their right mind says, "I'm not going to buy home insurance because most people's houses don't burn down. It's a complete waste of money. If it looks like my house is going to burn, then I'll buy home insurance." We all know what would happen if a person did that, even if you aren't like me where every time there's a forest fire I get a barrage of emails saying that no one in that area can buy a new home insurance policy. That's almost what he's saying to do when he says that you should wait until your 60th birthday to by LTC coverage because younger people rarely (according to statistics) need LTC coverage, but after 60 they are likely to have a claim. Does he think the insurance companies are not aware of these statistics? And that they don't factor that into their underwriting and rates? They don't issue a single policy that the statistics tell them they will lose money on.
Are there 60 year-olds who are able to qualify for coverage? Sure there are. Also from page 160: "According to the American Assciation Homes and Services for the Aging (AAHSA), 69 percent of those turning age sixty-five today will need some form of long-term care". Translation: 31 percent of those turning age sixty-five today will NOT need some form of long-term care. Who do you think the insurance companies want to sell their policies to? The 31% or the 69%? They aren't 100% right all the time, but they do a pretty good job of avoiding selling policies to 69%.
As I said, there are 60 year-olds who qualify for LTC insurance, but there are quite a few who don't. People who would have qualified at age 50 or 55 or 59. You can't just buy long term care insurance with money. You have to be healthy. If you've ever had a heart attack or stroke or cancer, you've got an uphill battle. If it's been within the last few years, it's next to impossible to qualify. Or if you've had back or joint surgery. Or missed work because of a bad auto accident. Or any other health issues. Have you ever heard of anyone having any problems like that before they were 60? Especially between 50 and 60? If you haven't, then you haven't been paying attention.
That's only a small part of what's wrong with his views on long-term care insurance. Looks like I'm going to have to have a Part 2-B at least.
Dave Ramsey's is wrong with many of his comments regarding long term care insurance. Not completely wrong, but kind of like those true/false test questions, it only needs to have one little bit wrong to be "false". And that one little false bit can really screw up a person's life. Here's what he says on page 160 of Dave Ramsey's Complete Guide to Money. "Statistically speaking, long-term care coverage is pretty much a complete waste of money--until you turn 60. Then, something dramatic happens. Long-term care coverage goes from being a waste to being an essential part of your insurance plan. You don't need it when you're fifty-nine, but you need to be on the phone setting it up the day you turn sixty". Huh? The other things I disagree with him on, I can at least see why he thinks the way he does, even if I disagree with it. But this is completely illogical. At 59 and 364 days LTC insurance is a waste of money, but the next day I absolutely have to have it? But what if I was born 2 months premature? What if they had to induce labor because I was 2 weeks overdue? Do I adjust accordingly? Why isn't he recommending that I buy it to be effective the day before I turn sixty and "waste" the premium on one day of coverage so that I pay a 59 year old rate instead of a 60 year old rate for the next 20 years or so? That argument would at least make some sense to me. It would at least be a "smart" financial move.
His first mistake is his first word: "statistically". Statistics are extremely important when it comes to insurance. To the insurance company. But they are absolutely meaningless to you as an individual. It doesn't matter what the average length of time needing long term care is. It doesn't matter what the average age of a person needing long term care is. All that matters to YOU is when YOU need it, how long YOU need it, and when or if it happens to YOU.
You don't buy insurance to protect you and your family from something that happens when and how you expect it to, you buy the insurance to protect you in cases where you are NOT average. For example, no one in their right mind says, "I'm not going to buy home insurance because most people's houses don't burn down. It's a complete waste of money. If it looks like my house is going to burn, then I'll buy home insurance." We all know what would happen if a person did that, even if you aren't like me where every time there's a forest fire I get a barrage of emails saying that no one in that area can buy a new home insurance policy. That's almost what he's saying to do when he says that you should wait until your 60th birthday to by LTC coverage because younger people rarely (according to statistics) need LTC coverage, but after 60 they are likely to have a claim. Does he think the insurance companies are not aware of these statistics? And that they don't factor that into their underwriting and rates? They don't issue a single policy that the statistics tell them they will lose money on.
Are there 60 year-olds who are able to qualify for coverage? Sure there are. Also from page 160: "According to the American Assciation Homes and Services for the Aging (AAHSA), 69 percent of those turning age sixty-five today will need some form of long-term care". Translation: 31 percent of those turning age sixty-five today will NOT need some form of long-term care. Who do you think the insurance companies want to sell their policies to? The 31% or the 69%? They aren't 100% right all the time, but they do a pretty good job of avoiding selling policies to 69%.
As I said, there are 60 year-olds who qualify for LTC insurance, but there are quite a few who don't. People who would have qualified at age 50 or 55 or 59. You can't just buy long term care insurance with money. You have to be healthy. If you've ever had a heart attack or stroke or cancer, you've got an uphill battle. If it's been within the last few years, it's next to impossible to qualify. Or if you've had back or joint surgery. Or missed work because of a bad auto accident. Or any other health issues. Have you ever heard of anyone having any problems like that before they were 60? Especially between 50 and 60? If you haven't, then you haven't been paying attention.
That's only a small part of what's wrong with his views on long-term care insurance. Looks like I'm going to have to have a Part 2-B at least.
Subscribe to:
Posts (Atom)
