It is never too soon for you to start making plans for your funeral. As you begin to plan, you will notice you have many options for paying for services and planning. Prepaid funeral plans are one common planning option.

However, they have pros and cons, and you need to understand what you are getting into before you buy one. Taking time to research and understand all of the options is a great start to funeral planning. If you haven’t heard of prepaid funeral plans, then you can learn more about them in this article.

What are Prepaid Funeral Plans?

Prepaid funeral plans are not the same as life insurance. Prepaid funeral plans are when you make funeral arrangements and pay for services before death. This allows you to choose services and products that you want. By choosing a prepaid funeral plan, your family does not have the burden and stress of funeral planning.

What is Included in Prepaid Funeral Plans?

You can choose to plan and pay for as much as you want. Most funeral homes offer prepaid planning, which allows you to make the plans and pay ahead of your death. 

The first thing you choose when you are pre-planning your funeral, is a funeral home. You should search for funeral homes in the area you would like to have your funeral and review their website and call them to learn more about their services and prices.

Note, it is important to find a funeral home that makes you feel comfortable with your post-life plans. The funeral home will walk you through the funeral planning process.

Planning Questions:

Some things you might want to think about to prepare yourself for the funeral planning process include:

• What do you want done with your body? Cremation? Burial? At sea burial? Body donation? If you have an idea about what you want done with your body, it will be much easier to make decisions about the funeral arrangements.

• Will you want to be embalmed? Embalming expenses can be a large portion of funeral costs. You can find out more about funeral costs here.

• If you want to be buried, do you have a location in mind or a prepaid plot?

• Are you religious or do you have a type of service in mind, such as a military service?

• If you want people to make donations in your name, make a list of organizations you would want people to donate to.

• What is your budget for a casket/urn?

You have the power to make all of the choices for your funeral. You can write your own obituary, make a playlist of songs, have specific poems read, and even decide what flowers you want. The funeral home you choose will help guide you through the planning process.

Related Reading:

• What Flowers are Best for Funerals

• Funeral Rituals and Traditions

• Funeral Prayers and Poems

Prepaid Burial Plans

Prepaid burial plans are the same as prepaid funeral plans, but they’re specific to burials. The term “Prepaid Funeral Plans” encompasses all funeral plans, such as cremation or body donation where as the term “Prepaid Burial Plan” refers to funerals that include burial of the body.

Pre Arranged Funeral Plans

Making arrangements before the funeral does not always have to include prepaying for the funeral. You may decide to arrange many aspects of your funeral ahead of time, and you may decide to set money aside and pay at a later date, or leave that money to someone else who will fulfill your funeral arrangements. If you have life insurance, it will be helpful to your family, or whoever will be left to handle your post-life care, if you have pre-arranged funeral plans.

Are Prepaid Funeral Plans Safe?

It is difficult to answer this question because every state has different laws regarding whether funds are protected, or if they have to be managed in a certain way. Some questions you can ask when researching funeral include:

• Is the money I pay put in a trust fund account?
• Can I transfer my prepaid funeral arrangement to a different funeral home if I choose?
• What is your policy on refunds?
• What is your policy if your business closes before my services are conducted?

You may also want to hire a lawyer to review the contract with you. A lawyer can help you understand the terms of the contract so you can make an informed decision. If the funeral home cannot guarantee that your money will be returned to you if the business closes, it may not be the best decision to agree to a prepaid plan.

How Much are Prepaid Funeral Plans?

The cost of a prepaid funeral plan varies based on what you include in your plan. The benefit to prepaying for a funeral is you pay the current market value price for the services and products. This means you will pay less for the funeral services because the services will increase overtime due to inflation. The average cost of a burial funeral exceeds $10,000 when you include the services, casket, burial plot, and vault. Of course, this price is expected to continue to rise with inflation just like all other goods and services.  

Can I Cancel a Prepaid Funeral Plan?

This is largely dependent on your state’s laws and the funeral home’s policies. In some cases, you cannot get your money back if you decide you want to cancel the plan. In other cases, you may be able to get back most of your money if you cancel your plan. Also, you might be able to transfer your plan to another funeral home. Additionally, there may be the option to change or alter your plan if you find you have changed your mind about what you want your funeral entail.

Pros and Cons of Prepaid Funeral Plans

PROS

• Locks in market prices of today to avoid paying the cost of inflation down the road.
• Allows you to have control over the planning of your funeral.
• The burden and stress of funeral planning is removed from family or friends after your passing.

CONS

• If the funeral home closes, you could lose all the money you paid. It’s important to make sure you ask questions and thoroughly understand what will happen to your money in all possible situations.
• If you move later in your life and decide you no longer want your funeral done in your previous location, you may have difficulty transferring or canceling your plan.
• There is a risk of losing money if the funeral home mishandles your money and cannot provide you with the services you paid for.

Alternatives to Prepaid Funeral Plans

Prepaid funeral plans are not the only way to be proactive about your post-life care.

Whole Life Insurance

There are different types of life insurance policies. Whole life policies are typically referred to as funeral insurance because it does not expire. Most people use part of the burial insurance policy payout to help cover costs of the funeral.

Term Insurance

Term insurance rarely pays out and is rarely used for funerals. This is because term life insurance expires and the money the person paid into it is not returned. Unless you die during the term of the policy, it won’t cover your funeral expenses.

• Related Reading: Do I need Life Insurance in Retirement?

Cash

Cash a popular way to cover funeral expenses, but because funerals can be very expensive, the average American does not have enough in savings to cover the cost of a funeral. However, cash is a great option if you are wanting to arrange a low-cost funeral.

For example, if you are wanting your body donated to science, many times cremation is free when the organization is done with your body. In this instance you may only have the expense of an Urn and a small gathering for loved ones.

Another example would be if you are an avid investor, cash might be a wise option for you. Investing cash and allowing it to grow at a higher rate than inflation can allow you to cover the cost of a funeral down the road, while also making money on your investment for the present time.

Payable Upon Death

A payable upon death, or POD, is an agreement with your financial institution to transfer your assets to designated beneficiaries.

In this arrangement you can leave a specific amount of money to any beneficiary of your choosing. That means you can leave the money to a specific person you trust to carry out your funeral arrangements.

You can also designate a funeral service provider as the beneficiary which ensures the funeral service is paid for upon your death.

Prepaid Funeral Plans vs Funeral Insurance

Prepaid funeral plans allow you to lock in current market rates and you don’t have to worry about the plan lapsing and not having a way to pay for your funeral. However, prepaid funerals are a little more risky than funeral insurance.

Funeral insurance (also known as Final Expense Insurance) is paid on monthly and upon death will give your next of kin a certain amount of money that was established when you started the plan. Funeral insurance gives you more flexibility, allowing the money to be spent at any funeral home or on any services you or your loved ones want.

In addition, with funeral insurance, there is a much lower risk of your money not being paid out. Unlike prepaid funeral plans, life insurance policies have a lot more federal regulations to protect your money in the event the insurance company shuts down or fails.

Are Prepaid Funeral Plans a Good Idea?

Now, this really comes down to what is best for you and your situation. A prepaid funeral plan might be a good investment for someone who lives in a small town with little competition for funeral homes. Moreover, they need to have full intentions of having their funeral in that town.

For others that want more flexibility, a different option, such as life insurance, payable upon death accounts, or even just setting aside cash, can be a better option.

One thing that is a good idea no matter who you are though, is making arrangements and plans now. Even if you don’t pay for those arrangements now, preparing your funeral and being financially prepared for it, will be the greatest gift you can leave with your loved ones.

The post Are Prepaid Funeral Plans a Good Idea? appeared first on Medicare Life Health.

One very common question we hear at Medicare Life Health Co. is “Is assisted living tax deductible?” There are two answers:

• Yes, if the reason for living in an assisted care facility is primarily medical, then all the expenses for the facility, which includes meals and lodging, is deductible.

• No, if there is no medical reason for residing in assisted living, as defined by the government, then your expenses are not tax deductible.
• In this case, only medical services are considered deductible. However, only if they add up to a certain amount.

In addition, in most cases that are defined as “medically necessary”, the resident is living at a nursing home, not in assisted living.

So, let’s take a look at both your assisted living and long term care options and their tax implications.

Whether you are trying to plan for long term care for yourself or for a loved one, there are important financial questions you should be asking yourself. One of these questions is how expenses associated with long term care can affect your taxes. Moreover, what are the tax benefits to opting for long term care facilities.

Are Nursing Homes Tax Deductible?

Long term care facilities such as assisted living facilities and nursing homes can incur a lot of expenses. Some of the expenses associated with long term care facilities include:

• Lodging
• Meals
• Transportation
• Assistance with Personal Care (ie. Bathing, dressing, and eating)
• Medication Administration
• Medical Care
• Physical therapy
• Health Monitoring

Typically, by the time a person moves into a long-term care facility, they need a lot of help. Moreover, there are many aspects of daily life that require the help of a medical professional. These professional include nurses or certified nurse assistants (CPAs). As a result, there are a few different situations in which these expenses can be used for tax credits and tax deductions.

• Related Reading: How Long Does Medicare Pay for Rehab?

Tax Deductions and Credits Related to Nursing Homes

If the individual in the nursing home is financially independent, then that person can claim the Medical Expense Tax Deduction. (Additionally, they cannot be considered another person’s dependent.) Also, they may qualify for the “Credit for Elderly or Disabled.”

If the individual will be claimed as a dependent on another person’s taxes, the person filing taxes can qualify for the Medical Expense Tax Deduction based on the medical expenses for their dependent.

Medical Expense Tax Deduction

Medicare Expense Tax Deductions are one of the most common tax deductions. You can use this deduction if your medical expenses exceed 7.5% of your individual’s income.

According to the IRS, medical care expenses included care given for diagnosis, cure, mitigation, treatment, or prevention. In addition, you can often deduct transportation to medical appointments. This is because it is a necessary cost for the medical care to be received.  

Your care in an assisted living facility is deductible if your care is primarily medical. Then, all the expenses for the facility, which includes meals and lodging, is deductible.

If the reason for living in an assisted care facility is not medical, then only medical related expenses are deductible. In this case, deductible medical expenses might include a medical exam prior to entering the care facility. Also included: medical appointments, transportation to medical appointments, medical devices, medications, and payments for such care.

Long-Term Care Facilities and Nursing Homes

When prescribed by a doctor, living in a long-term care facility is considered medically necessary. First, talk to a doctor when you are deciding if it is time for assisted living. This will make sure you understand whether or not you can deduct costs.

Also, the care facility may be able to help you develop a health care plan. They are skilled at developing plans that include medically necessary care when it is truly needed.

• Related Reading: Alternative Ways to Paying for Long-Term Care

Credit for Elderly or Disabled

This tax credit is for those 65 years or older, or those that are permanently and totally disabled with a taxable income. This tax credit is not specific to nursing homes or assisted living facilities. Instead, it is for those that are living off limited or fixed incomes due to their age or disability. To find out more about this tax credit and if you or a loved one qualify, visit the IRS website.

Aging Expenses

It is expensive to get old. There is no doubt that as we age, life gets more expensive. The need for medical care goes up, there are more frequent doctors’ visits, need for medication, and sometimes there are needs to adjust our living situation. Growing old in own home can be expensive.

Aging Expenses at Home

Some things you may need to consider when you or your loved one is getting older, is making changes to your home to make it safer and easier to live in for a longer period of time.

• Add railings in your bathroom near the toilet and in the shower.
• Put a seat in the shower.
• Ensure the shower and bathroom floors are non-slip or have non-slip mats.
• Add dim lighting with motion sensor for ease of seeing at night when going to the bathroom.
• Make sure there is sufficient railing on any stairways.
• Switch out round door handles for lever door handles.
• Equipment that makes accessing the home easier for those that are disabled. This includes a wheelchair ramp, stair life, and extra wide doorways for wheelchair access.

Acknowledging that aging comes with extra expenses can be helpful when saving and planning for the future. What if you don’t want to move to an assisted living facility or nursing home in old age?

Then, as one option, a nurse can come to your home to help with daily care. They can also help you run errands.

Transportation is another expense to consider. As you age, you may not be able to drive. Or, you may not want to drive, which means you will need to pay for a transportation service.

Expenses Associated with Long-Term Care Facilities

While nursing homes and assisted living facilities tend to have flat fees for lodging, meals, and medical care, other expenses may not be included.

Things like transportation, or activities that are outside of the nursing home, may incur additional costs. The nursing home may also charge fees for holding your bed until you return.

So, if you are considering a long-term care facility, make sure you ask about the costs that are not covered in the plan. Planning ahead will help you budget accordingly.

• Related Reading: What is Long-Term Care Insurance?

Conclusions on Tax Deductible Assisted Living

To start, the government considers medically necessary expenses are tax deductible. Next, the expenses must add up to over 7.5% of your income for the year. Then, if your stay in an assisted living facility or nursing home is “medically necessary”, then it too is deductible. Finally, talking to your doctor is a good place to begin the process.

The post Is Assisted Living Tax Deductible appeared first on Medicare Life Health.

The average retirement income in the United States varies by your region and age. However, understanding your number in relation to the “Average American” can be very helpful in planning.

Deciding how much money you need to retire comfortably is a big decision. Sometimes people underestimate the amount of their after-retirement expenses. Then, they are stuck in a position of having to find another job to supplement their income or live less comfortably than planned.

Looking at the average retirement income can help you get a good idea on what your needs will be in retirement.

Average Retirement Income 2019

The US Census Bureau states that the average retirement income for Americans over the age of 65 was a median of $47,357 and a mean of $73,288. Interestingly, those two numbers are drastically different when looking at these same group of data. This is because median and mean are calculated differently and each of those have advantages and disadvantages.

Median Retirement Income

The median retirement income represents the middle ground of everyone. By taking everybody’s retirement income and figuring out what number is in the middle of all of those. This can be a better way to evaluate how much most people have in retirement because it isn’t skewed by extreme high numbers.

Mean or Average Retirement Income in the US

The average or mean takes all of the retirement incomes, adds them together, and then divides them by the total number of retired people evaluated. This is not always the most accurate because extremely high numbers will pull the median above what the majority of the population actually makes.

So, when looking at the statistics generated by the US Census Bureau the median of $47,357 is likely a more representative picture of the average retirement income.

Trends in Average Retirement Income

Looking at the average retirement income based on age groups reveals more interesting factors to consider. As you look at older groups of Americans in retirement, their average cash flow in retirement is significantly lower than that of their younger retired peers. For instance, in households aged 55 to 59 the median income is $73,711 while those aged 75 and above have a median income of just $34,925.

This is likely due to the increased inflation overtime and what someone needed to retire 20 years ago was significantly less than is required today for the baby boomer generation. Keep that in mind when planning your own retirement income; as time goes on money is likely to be worth less and will not go as far.

State Average Retirement Income

Of course, these average retirement incomes are based off of the entire country as a whole. Consequently, they are vastly affected by the different expenses of each state. So, let’s look at the most expensive state and the cheapest state to retire in based on average retirement income.

Unsurprisingly, Hawaii comes in at the most expensive state to retire in. The average savings required to retire comfortably in Hawaii is $1.84 million. Considering that Hawaii also has the highest life expectancy out of all the states at 81.5 years old, this money needs to last a long time.

Mississippi, on the other hand, comes in at the lowest average savings required of just $617,661 Mississippi also has the lowest life expectancy of all the US states at 74.5 years. This means that the retirement savings don’t typically need to last as long.

Where does Retirement Income come from?

You may be wondering where people are getting an annual retirement income from. There are several different sources but some of the most common will be listed below.

Social Security Income

85% of people aged 65 and above receive social security. In 2020, the average monthly Social Security payment was $1,503. The US government created Social Security as a supplement to retirement income. Not a primary source of it. However, many people rely heavily upon the income received from it.

Related Reading: Social Security Lump Sum Death Benefit

Assets

Another large group of retirement income is going to come from people’s assets. This is the accounts that they have invested in throughout their careers, such as 401K’s, IRA’s, and other savings accounts. While many Americans expect their asset accounts to be their main source of income during retirement, studies have shown that most people do not have enough saved to live off of. In fact, half of those receiving income from assets receive less than $1,754 every year.

Working

Looking at some of the numbers above, it’s not surprising that many retired Americans find that they need to go back to work in order to make ends meet. According to the Bureau of Labor Statistics 32% of those aged 65 to 70 and 11% of those aged 75 and above are expected to rejoin the workforce by 2022. Transamerica also estimates that over half of those above the age of 65 will continue to work or don’t plan on retiring. The reason for this is mainly due to financial reasons. For example, being unable to retire based off of their current savings.

Related Reading: Jobs for Retired People

How to Increase Retirement Income

Looking at some of these numbers may make you a little worried about your retirement. However, there are several things that you can do to help increase your retirement income before you get there.

Delay Social Security Income

For those who are already in retirement, delaying Social Security Income can be a great option. It can boost your income down the line. If you wait to start benefits you could earn an additional $300 or more every month.

Increase contributions to asset accounts

Before your retirement, you should be contributing to an asset account or multiple if you can. During your younger years, focus on maxing out contributions, especially if your company offers matching benefits. As you age, focus on decreasing spending and increasing your average savings.

Once you’ve retired, unfortunately it’s difficult to increase your asset accounts enough to make a significant difference. At this point, you will have to focus more on reducing your average spending to make your money go further.

Delay Retirement

If you enjoy the work that you’re doing, delaying your retirement may not seem like a bad option. By increasing the number of years you work, you increase the amount that you can save. As a result, you can put that towards a comfortable retirement. This could be one of the best ways to boost your retirement income going forward.

Conclusions on Average Retirement Incomes

Retiring comfortably takes a lot of planning and saving throughout your life. It’s easiest if you start planning for retirement as soon as you begin working. This allows for the compounding of your assets. However, as we age and look at retirement approaching sooner, we can still do some of these things to help create the future that we want.

Further Reading:

• How to Apply for Medicare

• Is Medicare Supplement Plan F Going Away?

• Things to Do in Retirement

The post What is Average Retirement Income in America? appeared first on Medicare Life Health.

In retirement, you need a plan that will keep you healthy and happy for many years, but what happens when those years run out? Well, you need a plan for that too. Life insurance in retirement is one solution.

We all will end up in different financial places in retirement, and our cash flow and savings will dictate how our “final expenses” play out after we pass. Not everyone needs life insurance in retirement, but even if you don’t “need” it, you still may want it.

How Much Life Insurance Do I Need in Retirement? Plus, What Kind?

Let’s break down some of the reasons for having life insurance in retirement in both the need and want categories. Then, let’s look at the life insurance recommendations for each of these unique needs on what type of insurance fits best and how much life insurance you will need.

Reason One: No Savings

You may need life insurance if your saving plan didn’t quite pan out like you thought it would. According to a study done by Northwestern Mutual, 1 in 3 Americans have less than $5,000 saved for retirement. The average funeral costs between $7,000 and $9,000, and many people have large medical bills from their last days, so you can see how that math does not add up.

You might have Social Security coming in monthly or even a pension. However, you typically need that money for retirement living expenses. Unless you think you can save a little of that money each month in retirement, life insurance is a good idea. (Be honest with yourself. If you could not save it before retirement, you probably will not save it now.)

Life Insurance Recommendations for No Savings

Your options will depend on your cash flow situation.

• First, you need to decide how much insurance you need. Making sure you provide for at least end of life funeral costs.
• Second, you will need to see what you can afford to pay each a month in premium.

Final Expense

Term life and traditional whole life insurance is usually too expensive when you are older, and your social security death payment is only $255.

We recommend Final Expense Insurance. Also called, Funeral Insurance or Burial Insurance, Final Expense will give you a smaller face value ($10,000 to $20,000 is very common) but it is priced accordingly. This amount will help your loved ones cover your end of life costs.

If you are close to or already in your retirement years, I recommend getting this insurance sooner rather than later, as the premiums will go up every year you get older.

Life Insurance for your final expenses has a bonus when it comes to cash flow – it is paid to the beneficiary directly and is not subject to federal income tax which can save hundreds/thousands. Moreover, because it does not have to go through probate delays, your family gets the money faster.

Finally, here is one last benefit: You can assign funds from the life insurance to be paid directly to your funeral home. This little convenience can be a big deal to your loved ones.

Reason 2. Market Volatility Concerns

Another type of retiree may want life insurance because they are concerned about their savings being affected by market losses. Maybe you are like “most Americans” who have an average of $84,821 saved for retirement. However, $85k well below what experts consider enough for living expenses. Think of what one bad market year could do to your nest egg.

Even if you had a couple million in retirement, there are reasons for life insurance in relation to market losses. It just depends on how much you are intending to leave behind and for what reasons.

Example

For example, one spouse dies right after a large market crash (hopefully unrelated). The crash leaves the other spouse with half their portfolio assets and the same amount of living costs. The surviving spouse can use the life insurance money to fill in the holes from the lost income and catch up in the market.

You could use this money to pay off a mortgage. Similarly, you could use it to handle any issues with the estate. In addition, it is always good to know that your loved ones will have cash to bury you, no matter what the market conditions.

Life Insurance Recommendations

• IUL – For those that have cash to pay premiums and market assets to protect, I recommend you talk to a licensed agent about an IUL – Indexed Universal Life Insurance. These policies offer flexibility for your particular phase in life. However, they are complex, so please talk to a professional about your options.

• Final Expense – For those that are mostly concerned about final expense costs (i.e. funeral, medical bills, credit card/loan balances, etc.), a small final expense policy might be your best bet.

3. Long-Term Care Considerations

As an alternative to Long Term Care Insurance, some retirees consider Life Insurance Policies that have LTC riders or a Chronic Illness Rider. For example, an insurance carrier might offer a product (like an IUL policy) with an option to purchase up-front a rider that will cover long term care events. You can pay qualified long-term care expenses with the death benefit, naturally, before death. Then, when you pass, the insurance company pays what is left to your beneficiaries.

Can Life Insurance be Used for Retirement?

On the other hand, there is life insurance for retirement savings. This is a totally different ballgame than buying life insurance for death benefit needs. Many people will buy a whole life or traditional life insurance policy that has a cash value with the purpose of using this cash value as a source of income in retirement. Let’s look at how to do this.

How to Use Life Insurance for Retirement

To start, using life insurance retirement means planning ahead – usually before you retire. Whole life insurance policies, such as traditional and Indexed Universal Life policies have a cash value component built into them.

In addition, you can structure them to build more or extra cash in them by lowering their death benefit and contributing more premium. (There are rules to how to structure these policies to be tax preferred and legal, so working with an independent insurance agent or financial advisor is the best way to build a policy for you.)

The purpose of structuring a whole life policy in this way (with more cash value building up) is to be able to access this cash in retirement. Policy owners can take out “loans” against their policy’s cash to use for retirement funds.

Often times, this money is removed (all or partially) from the volatility of the stock market. As a result, this cash provides a “bucket” of money that could be accessed during down times in the market. Alternatively, you could use it for one time purchases in retirement, (for example: cars, vacations, down payments, etc.)

So, What’s the Best Insurance Policy for Retirement?

Of course, this answer depends on your personal needs and wants. However, I would recommend some form of life insurance to all retirees.

• If you can afford to be responsible for your funeral and burial expenses, do it. Your family will appreciate it.
• If you can afford to make sure your spouse can continue to enjoy retirement when you are gone, hop to it.
• If you are looking for an alternative to Long Term Care Insurance, call an agent and learn your options. Medical expenses are not getting cheaper. In addition, Medicare does not cover these.

My Personal Experience

I’ll leave you with my own family’s relevant story. Last year, when my father-in-law unexpectedly passed away, his Final Expense policy saved everyone time and from stress. This left my mother-in-law well taken care of financially, but a lot of her assets were not in cash at the moment.

It was a great relief for all of us not to have to jump through a bunch of hoops to get the bills all taken care of. The policy paid money directly to the funeral home and then sent my mother-in-law the rest in a check. All of that without a tax event. It made me grateful to have a family that planned for each other and made the last year a little less stressful for all.

The post Life Insurance in Retirement, Do You Really Need it? appeared first on Medicare Life Health.

First of all, we hear it both ways. “Help, my wife won’t stop spending money,” AND “Help! My husband has a spending problem!”

Here’s what you can do to address a bad spending habit in your family.

How to Get Your Husband or Wife to Stop Spending Money

Money and communication are the most common causes of divorce. When there is a lack of communication, and a lack of agreement on how finances should be handled, there is a perfect storm for conflict.

Is your spouse an over spender?

Are you ready to get them on the path to financial success?

If so, there are a few key things you can do to start the conversation – without starting an argument. 

Understand the Extent of the Spending First 

To start, before bringing up the conversation, check the bank statements and evaluate how much is actually being spent every month. Then, compare it to your own spending.

When you’re in a relationship, especially one where finances are conjoined, it can be easy to point fingers instead of acknowledging your own contribution to the situation.

Is your spouse the only one spending frivolous amounts of money or do you contribute to the frivolous spending as well? It’s also important to understand whether your spouse considers the spending necessary. Understanding the details of the spending can make the difference between starting a conversation and starting an argument. 

Print Out the Bank Statements 

Next, know that some people are visual learners. Your spouse may not realize they’re spending too much money until they can see the proof on paper.

• First, highlight the spending you would consider frivolous and then add it up.
• Next, write the total in bold marker at the bottom.
• Then, before you bring out the papers, reassure your spouse you aren’t mad. You are just wanting to discuss how you guys can cut back on spending.

Using “I Statements” to Talk to a Spending Spouse.

This can be a very sensitive topic, and it’s important to use “I statements” when bringing up spending. Instead of “we need to talk about your spending” try “I feel concerned about our finances and I would feel better if we could discuss them.”

Moreover, once the conversation begins, try not to blame the over spending on your spouse. Take responsibility for your feelings on the matter. Instead of “look at the bank statements, you spend too much” try saying “I went over the bank statements and I would feel better if we could break down what the money was spent on specifically.”

“I statements” are commonly used in psychology to help people effectively communicate, and they are especially common in marriage counseling. Having a healthy conversation about a stressful topic can help you both move forward as a team. 

Build a Budget Together

Budgets are the key to developing financial stability. Taking control of where your money goes can make a huge difference in your finances.

• To start, sit down and review your household spending over the last couple of months.

• Then, write down your bills and expenses that are necessary, such as rent and groceries.

• Next, add up the things that weren’t necessary, like eating take out, or subscription services.

• In addition, ask your spouse what they think a reasonable budget for the non-necessities would be.

Learn How to Compromise

Marriage is about compromise and when it comes to finances, this is no different. Talk about why you both feel differently. Lashing out at your spouse and telling them it’s ridiculous to spend so much on coffee will turn the conversation into an argument.

Arguments won’t change any habits. Instead, ask them what they think could take the place of a coffee every day? Maybe investing in an at home espresso machine or asking if they could get a small instead of a large. Small changes can have the biggest impact when it comes to finances. 

Make a Rule for Discussing Large Purchases

Set a dollar amount that you both agree to discuss before spending. For example, if you notice a lot of your spouses spending is on items that cost $50 or more, set the rule for discussion at $50. Agree that you will both talk it over that evening and decide together whether the purchase is necessary or not.

This not only encourages good communication, but it allows your partner time to change their mind on the purchase. Don’t rush to say “no” to every purchase. Listen to your partner and discuss the pros and cons of the purchase. What your dollar amount for discussion is should be based on what your budget can handle.

If your spouse has $200 of personal spending money in a month, then a purchase for a $50 item wouldn’t need to be discussed unless they already spent their $200.  

Use Cash

Using cash is known to decrease spending because the person is forced to acknowledge and see that their money is spent. Consumerreports.org states that several studies show using a credit or debit card increases spending.

This is because people are attached to the cash and having to physically give it up for their purchase makes them think about the purchase a little longer. Whereas using a credit or debit card is easy and quick, and you get to keep both your purchase and the card so there is not sense of giving up anything for the purchase.

Using only cash can be difficult though and depending on what kind of over spender you are with it may not be effective at getting them to stop spending. If your spouse needs to keep a card for gas purchases and has access to the card once the cash runs out, it is going to be difficult to keep them from using it. 

Set Up a Second Bank Account

Having a separate bank account for your spouse to use can prevent them from overspending out of the main bank account. Discuss how much money should go into the account every month and then agree to them not having access to the other account. This will allow them to use a card for purchases they may not want to use cash for.

The only downside to this is that it won’t make a huge difference if your spouse isn’t learning to budget their money. It may also create conflict if your spouse spends the allotted amount and needs money for gas but doesn’t have access to the main bank account. 

Cut Up the Credit Cards

If most of your spouse’s spending is on store credit cards, it might be time to cut them up. A shopping addiction is made so much easier with store credit cards. As discussed above, the psychology of spending shows that using a credit card makes it easier to spend more without thinking about it.

Talk to your spouse about closing the credit card accounts. They might not want to do this because they may not see it as an issue, especially if they aren’t the one paying the bill every month. If they don’t see the true extent of the money they’ve spent, they are less likely to agree to a solution.

Print out the statements and highlight the total amount spent as well as the total balance still left on the account. Being faced with the reality of their spending is more likely to result in change. 

Make Your Spouse Pay the Bill

If you are the spouse that handles all of the bills, then your partner may not be realizing how much they’re spending. If your spouse has sent you guys into debt with their spending, have them sit down and pay the bill with you every month so they see what their spending costs. 

Discuss the Possibility of Counseling

If your spouse’s spending has resulted in a financial hardship for your family it might be time to discuss counseling or therapy. Overspending can be a compulsive act that is linked to a mental illness. Depression, anxiety, and even ADHD can be tied to compulsive spending.

There isn’t much you can do to correct compulsive spending if it’s tied to an untreated mental illness. You can budget and try to control the money, but a compulsive spender will find a way to open up new credit accounts and destroy your finances as well as your marriage.

Be kind and understanding that your spouse may feel offended or embarrassed, and let them know you’re there to help improve your marriage. Talk positively about the importance of caring for your mental health so your spouse feels supported. Treating the mental illness the same as if it was a physical illness can help your spouse feel less hesitant and hurt when seeking help for their mental health. 

“My wife won’t stop spending money!” Conclusions

For those with spend-y spouses / partners, there is hope. With a little work and a lot of communication, you can get through the monetary and emotional damage. In the end, your relationship with be stronger and your pocketbook bigger.

The post My Wife Won’t Stop Spending Money appeared first on Medicare Life Health.

Do you feel like it might be too late to start saving for retirement at 50 years old or older?

Debt expert Valentina Wilson is here to get you started with saving and investing, no matter what your age, situation or even your gender.

Calculate how much you need after retirement

The baby step to save and invest in your retirement is to find out how much you might need after retirement.

And therein lies the importance of the safe withdrawal rate! It implies the percentage of your accumulated wealth you can withdraw every year without running out of funds. Financial experts usually consider 4% as the safe withdrawal rate after retirement.

So, you can use a retirement calculator to get an idea about how much money you need after retirement!

Take Advantage of New Retirement Rules for Saving For Retirement At 50 +

Well, you might know that President Trump signed a new law on December 20, 2019. It’s known as SECURE (Setting Every Community Up for Retirement Enhancement) Act. There are a few changes with the retirement rules which can help you, like:

1. You can get an extra 1 ½ years to grow your money in a traditional IRA or 401k without being depleted by distributions and taxes. The Act pushes the age at which you need to take Required Minimum Distributions (RMD) from 70 ½ to 72.
   
2. Previously, contributions to a traditional IRA couldn’t be made after attaining the age of 70 ½. But now, you CAN contribute to your IRA even if you hit the age of 70 ½.
   

So, don’t wait, take advantage of more time you are getting to save for your golden years!

Make up your Time with the Help of Catch-up Contributions

Do you know about catch-up contributions?

Well, if you are 50 or above, you can make additional contributions to your 401k or IRA, known as catch-up contributions.

In 2020, you can contribute $19,500 ($500 more than the limit of 2019) to your 401k. And as you are 50 and above, you can stash $6,500 more as your catch-up contributions. So, in total, you can contribute $26,000 for your 401k.

In the case of an IRA, you can contribute a maximum amount of $6,000 in 2020. And for your catch-up contributions, you can contribute $1,000 more. That means you can contribute a maximum of $7,000 in total for the year 2020.

I would suggest you max up your contributions to your retirement account. This way, you can make up the time to some extent you have lost.

Get Rid of Debts Early

Do you have any outstanding debt?

If yes, then saving for retirement can be a distant dream for you!

Yes, you heard it right! Most likely, a substantial amount of your paycheck gets deducted to pay off your debts. As a result, you won’t be able to save that much for your retirement. So, find the best way to pay off your debts and live a debt-free life ahead! This way, you can live your life stress-free and save a substantial amount for your golden years!

Opt for a Health Savings Account (HSA)

Day by day, health care costs are rising in our country! A 2019 Fidelity report reveals that the average couple in our country will need almost $285,000 for health care costs!

To qualify for an HSA, you need to enroll in a high-deductible health insurance plan (HDHP). Every year, the IRS (Internal Revenue Service) reviews these plans and defines the minimum deductible and the maximum amount for your out-of-pocket expenses.

According to HealthCare.gov, in 2020, the IRS defines a high deductible which has:

• A deductible of at least $1,400 for an individual
  
• A deductible of a minimum of $2,800 for family
  
• Total annual out-of-pocket expenses of not more than $6,900 for an individual and $13,800 for a family.
  

How to use an HSA

So, once you are qualified for an HSA, find out how it works:

• Perhaps the best way to stash your money into your retirement account (other than 401k or IRA) and that’s too tax-free is by opting for an HSA!
  
  Use your money for qualified medical expenses so that you don’t need to pay any taxes. But always remember that once you turn 65, you can take out your money from HSA for any reason. But you will have to pay taxes on it.
  
  
• If your employer offers you an HSA, your contributions are deducted from your paycheck through a pretax payroll deduction. Otherwise, you can deposit into your HSA on your own. But you have to claim them as tax deductions while filing your income tax returns.
  
  
• Your health plan provider will give you a debit card or checks linked to your HSA account. So, you can use the balance for eligible medical expenses.
  
  
• Unused funds in your HSA roll over into next year. Your balance remains the same even if you retire or change your health plan provider.

Conclusions on How to Start Saving For Retirement At 50

The bottom line is, always remember that it’s always better late than never! So, don’t think that you can’t save for your retirement as you have already turned 50!

Follow the above tips to save and invest in your retirement at the earliest. And live happily during your golden years! Happy Women’s Day once again!

The post How To Start Saving For Retirement at 50 + appeared first on Medicare Life Health.

Today, we are talking about the cash budget / envelope method strategy as an easy way to save money.

However, first, we need to address: credit cards.  We love them.  First, we love the ease of quickly swiping your card at checkout and moving on with your day.  We also love the rewards we get with them and the simplicity of having one consolidated bill to pay. 

In addition, we love the quick checkout of online shopping when our credit card number is on file and we just have one button to click and voila – a package arrives at our doorstep.  And, at least subconsciously, we love not having the stress of whether or not there is money in our checking account today to pay for the purchase…that can get sorted out next month.

The Price of Paying with Ease

But that ease comes with a price.  A pretty steep one in fact, according to Forbes.  Research shows that consumers are willing to pay up to DOUBLE the price if paying with a credit card than with cash.  That’s a lot of extra spending that dwarfs even the best rewards program!  Additionally, for the majority of Americans who don’t pay off their credit cards each month, interest rates can be 20% or more.  Between excess purchases and interest fees, that adds up very quickly!

The Benefits of Paying with Cash

• Paying with cash, on the other hand, drastically reduces how much you spend, making it easier to save. 
• When you pay with cash, you actually see how much you are paying and feel the pain of handing over a large sum of money.  However, with credit cards, you can walk out of the store on a spending high with little thought to the consequences. 
• In addition, with a cash budget, you live with the immediate reality of the money you are handing over, making you less likely to spend more than you really want to.  And then there is the obvious – with cash, once you are out you are out.

A Cash Budget Case Study

To illustrate our point, let’s do some simple math.  Say a person intends to spend around $1,500 a month on groceries, eating out, household items, clothing, and miscellaneous items.  With cash spending, you can limit yourself to that $1,500.  But with credit cards, you could easily spend an additional $180 each month or more. 

Even with some of the best rewards programs, you will only get back around $35.  In a year, the person using the cash budget will have spent over $1,700 less than the credit card spender.  In addition, that person using the cash budget is no longer paying interest fees for credit cards. As a result, they will have saved $200-300 a month – adding up to around $2,000 for the year.  The cash budget will have saved this person thousands!

3 Easy Steps to Start a Cash Budget

Considering a change but not sure how to start?  Let’s talk about The Envelope Method – a system that uses envelopes to allocate the cash for exactly how much money you want to spend.  When you leave home, you grab the money from the envelope and do not allow yourself to spend more than what you have cash for.

So let’s get started.

Step One: Create and record a budget

I like to keep my monthly budget in a spreadsheet (like from Excel), but you can keep it anywhere you like – a piece of paper, a sophisticated financial software program, or anything in between. 

How to Determine Your Budget

• Every month you will have fixed expenses (like your mortgage or rent payment) and variable expenses (like groceries). 

• Start by taking your net income each month and subtracting out the fixed expenses that you know you will have – like your mortgage or rent, car payment, insurance payment, cell phone bill, utilities, etc. 

• Then, you need to determine how much you want to spend on variable expenses. 
  • List out each category of spending – groceries, supplies, dining out, entertainment, gas, clothing, donations, etc. 
  • Take a look at the last several months of your bank or credit card statements to see how much money you are actually spending in each of these areas.  This is not necessarily a pleasant task, but if you don’t know where you are overspending, you can’t correct it. 
  • Determine how much you actually want or need to spend in each area and deduct that from your income. 

Consider a Slush Fund

Unless your budget is extremely tight, you may also want to consider a small slush fund category.  This money can be used for fun or spontaneous purchases, or saved for a larger fun or spontaneous purchase later. 

If you are not naturally a very disciplined person, The Envelope Method could seem a bit constricting.  Having a little, even if it’s just $20 a month, in a slush fund to spend on whatever you desire can help ease the pain of the transition. 

Determine Your Savings or Deficit

The amount remaining is how much you have to save each month.  Hopefully you have a pleasant surprise at this point, realizing that yes, you really can save that much!  However, you might also have a not so pleasant surprise – like discovering that your eating out and entertainment expenses are putting you in the negative each month.  That’s a tough realization, but it empowers you to make different choices to meet your savings goals.

If you are in a deficit, check out our tips on frugal living and saving money here.

An Example of a Monthly Cash Budget

Below is an example of a very simple budget, for illustration purposes.  This example is a monthly budget, but you could also consider doing a weekly or biweekly budget depending on how often you are paid.

Step Two – Prepare the Envelopes

• First, determine a safe place to keep your envelopes of cash.  This could be a drawer or a filing cabinet or someplace else. 
• Next, list out the spending category for each of your variable expense types – groceries, clothing, gas, eating out, etc., each on an individual envelope. 
• Then, determine how you best want to organize them so that you can quickly find the envelope you need.

Next, Prepare the Cash for the Envelopes

• After each paycheck, assuming it is electronically deposited, withdraw the amount of money you have budgeted for cash spending.  Be sure to ask the teller for bills that are small enough you can divide the money up correctly. 
• Then pull out your budget and put the correct amount of money into each envelope.  In the example above, you would need to withdraw $675 from the bank and divide it up correctly over the 5 envelopes.

Extra Cash for Unexpected Needs

Depending on how often you need to spend money, you may wish to keep some extra cash in your wallet.  For example, take an extra $50 out the first month only to put in your wallet.  Then if you happen to be out and need to spend money unexpectedly, you can simply pay for the purchase with the money in your wallet and immediately reimburse yourself from the correct envelope when you get home. 

It’s important to immediately reimburse yourself so that you aren’t overspending and needing to pull out that extra $50 each month.

Step Three – Use the Envelopes

Perhaps the most challenging part of this process is remembering to get the cash out of the envelope before leaving the house.  That’s why keeping a cushion in your wallet is helpful.  Additionally, you could keep your checkbook and/or debit card with you at all times.  However, you should always have a backup plan to avoid using your credit card!

Tips for Success

• Before leaving the house, grab the cash that you intend to spend.  Going back to the example budget, if you budget $400/month for groceries and go shopping once a week, you may always pull out $100 before heading to the store. 

• Or perhaps you shop for different items at different stores and you know one week is more expensive than the next based on what you are buying – adjust accordingly.  Maybe you need $80 this week and $120 the next.  It’s fine to vary how much you pull out of the envelope each time, but make sure that you stick within the cash you have for the month.

• Of course, real life is difficult to balance down to the penny.  There may be times when you have to spend more in one category than you were expecting.  For example, perhaps you are hosting Thanksgiving and you are going to blow past your set amount for groceries.  When that happens, you can turn to your slush fund (if you have one) or reallocate money from a different envelope – perhaps you choose to not eat out this month and pull it from the entertainment envelope. 

What to Do with Extra Money

On the flip side, you may find that at the end of the month you have some money left in an envelope.  You could put it into your savings account, keep it in the envelope for next month, or reallocate the money to a different expense.  In all of these situations, the great news is that YOU are in control of your spending and you are staying within your budget.

Imagine going to the store with $50 in cash from your clothing envelope to buy a new pair of shoes.  At the store you find the dress shoes you need to replace the ones you have that are worn out – great!  But then you notice another pair that you like that are on sale. 

In the past, it would have been easy to just put both pair on your credit card and not given it a second thought…until the bill came.  But now you are on the cash only method. 

You have two choices:

• You can either forgo the second pair knowing that, while the shoes are nice, you have worked hard to get on this savings plan and you don’t want to feel the physical pain of having to hand over the extra cash and cut spending elsewhere. 
• Or you can decide you really like that second pair and pull the money from your slush fund envelope for this month.  Guilt free spending.

The Cash Budget / Envelope Method Applied to Savings

You probably have a checking account to handle short term expenses, as well as long-term savings accounts like a 401(k).  But if you don’t already have one, I recommend that you have a savings account for medium-term expenses – like vacations, gift giving, house expenses, etc. 

When you are in a position to save money each month instead of living paycheck to paycheck, you will need to save for larger expenses that the envelope funds won’t cover.  Perhaps you are planning a vacation or your house needs a new furnace.  If you are proactively saving, you can avoid putting these items on credit cards.

How to Keep Track of Goals

Having a savings account for each thing you want to save money for could be a bit cumbersome.  But it’s very easy to keep an Excel file, or use a notebook, and list out exactly what the money in the account is for. 

For example, you want to go on a trip next summer and your dishwasher is on its last leg so you know you will need to replace it soon.  You are sticking with your cash budget and able to save $400/month.  Each month you intend for $200 to go toward your vacation, $100 to go toward your dishwasher, and $100 to go toward building your emergency fund.  Your savings account tracker would look something like this:

Each month you add to whatever category you are saving for.  If you need to take money out of that category, then update your tracker accordingly.  Money can sit in there as long as you like – in this example the “Gift Fund” wasn’t accumulating any more money but $250 was available at any time to purchase gifts.

Cash Budget Conclusions

Credit cards make it easy to overspend without even realizing it.  If you don’t know where you are spending your money, you are likely overspending. 

The good news is that with some simple organization and discipline, you can make sure you are spending your money intentionally.  Cash budgeting using the “envelope method” is a great way to keep yourself from overspending and make it much easier to save money.

The post Cash Budget and The Envelope Method appeared first on Medicare Life Health.

As you begin to think about retirement, you’ve probably thought about things like draw-down strategies and the amount you will need for yearly expenses. And, as you probably know, the lower your yearly expenses, the less you will need in your retirement nest egg.

So, if you’re finding that you can’t quite make the numbers work between what you have set aside for retirement and what you need to live, you may want to consider the goal of becoming debt free before you retire.

The following are a few tips to help you pay off your debt before you retire.

Create a Budget

The first and most important step you’ll want to take to become debt free is to set up a budget. If you’ve never created one before, it may seem daunting at first – but it doesn’t have to be.

A budget can be as simple as a record of expenses compared to your income. You may use a spreadsheet to manually track these items, write them down with pen and paper, or you may review your bank statements.

Or, you can use tools to help automate this for you. Mint is one of my favorite tools for budgeting because it does all the work for me. After connecting my accounts, it tracks both my expenses and my income in real-time. I can set expense categories and monthly limits. If I go over in a category, Mint notifies me.

Whichever method you use, a budget is pivotal for you as you prepare for retirement. Once you’ve set one up, look at your categories. Start to consider which areas are negotiables (in case you need to remove them or reduce them later) and which aren’t negotiable.

Most of all, take a look at your expenses that go toward debt. Review how much of an impact this has on your budget and consider if reducing debt is the right plan for you.

If it is, consider the following tips to tackle your debt by category.

RELATED READING: How to Set up a Cash Budget and using the Envelope Method

Student Loans Hindering you From a Debt Free Retirement

Pay the loans off

The easiest way to get these off your mind and out of your debts is to pay them off.

If the loans are for you, consider any additional room you may have in your budget to put a little extra money toward your student loans. Every little extra bit helps.

If these student loans aren’t for your education, you may want to work with the student to get a plan in place for quick payoff. You may not be interested in paying them off yourself, and that’s absolutely fine. Help the student understand the impact of a few extra dollars each payment to expedite the payoff process.

Refinance the student loans

One of the reasons a co-signer is needed on student loans is because of the lack of credit history of many entering college students. However, once the student is out of college and has a career, that student may have established credit. Encouraging the student to refinance loans under his or her own name will free your role of this debt being yours, and may help the student get better rates.

We refinanced my husband’s graduate school student loans recently and saw a significant reduction in his interest rates. Changing nothing else about our payments, that would have allowed us to pay off the loans almost a year sooner.

Pay Off Your Mortgage

A recent study found that 44% of people in their 60s and 70s in retirement still have mortgages on their homes. While some do plan to pay the mortgage off within a few years, roughly 17% of them say they may never pay it off.

If you are at all able, try to pay off your mortgage before you retire. As you think about your monthly required expenses in retirement, housing costs could add a significant amount to those expenses. And, greater housing expenses add to the amount of money you’ll need in your nest egg to retire.

If you feel that you’ll be downsizing your home when you retire, consider your options for finding a place where the sale of your larger home could cover the entirety of the expenses of your new home. You’ll have a place to live and no mortgage payment.

Slash Credit Card and Consumer Debt

As you get closer to living on a fixed income, ensuring that you can afford what you spend is of utmost priority. This means that you’ll want to steer clear of racking up credit card debt and consumer debt that you may not be able to afford in retirement.

This is where the budget you set up can really come into play. Understand what your income is each month and how you can pay for your expenses without taking on more debt.

If you already have credit card debt, this is a good time to pay it off. Whether you were using credit cards for medical bills, vacations, or large purchases – the balance can follow you for years if you don’t make it a priority.

This is likely the first debt of all debts you’d want to pay off because the interest rates can be astronomical. Paying down the minimum balance won’t be enough to make a sizable impact.

Considering a Debt Free Retirement

If you’re hoping to have a debt free retirement, know it’s possible to achieve. Whether you have credit card debt, a car loan, a mortgage, student loans, or any other debt – you can pay it off before retiring. Use budgeting tools to get you where you want to be so that you don’t have money stress while in retirement.

Related Reading:

• Frugal Living
• New Rules of Retirement
• Side Jobs for Retired People
• Cash Budgeting / The Envelope Method

The post Easy Ways to Become Debt Free Before Retirement appeared first on Medicare Life Health.

Long Term Care Insurance Polices provide cash to cover the cost of your care when you cannot take care of yourself.

At some point, you may need help to get through each day. Hopefully, you have family and friends to help you, but even they can only help you to a point.

Many people find maintaining their independence and dignity an important value. Consequently, these people find Long Term Care (LTC) Insurance is an important part of their financial planning.

Defining Your Needs

You need to start thinking now about how you will plan for your own care down the road. “Long-Term Care” as a plan has many parts including:

• Where you will live
• What services you will need
• What people you can depend on
• How you will pay for everything
• What legal considerations you need to address

Additionally, part of your plan might also include insurance.

What Can Long Term Care Insurance Help You Pay for?

Long Term Care Insurance can help you pay for:

• Nursing homes & LTC facilities
• In home daily living services
• In home personal services

Who Needs Long Term Care Insurance?

According to New York Life Insurance Company, 70% of people age 65 and older will need help with daily living at some point. Moreover, almost 50% of these people will end up spending more than $107,000 on Long Term Care costs.

Reasons People Get LTC Insurance

Here are a few types of people that need Long-Term Care Insurance:

• Independent people who do not want to rely on their family to take care of them or pay for their care.
• Prepared people that do not have reliable support they can trust to help with their care.
• Determined people that want enough money to cover in home services so they don’t have to go to a nursing home.
• Planning people that do not want to drain their retirement accounts with LTC expenses.
• Finally, people that do not want to end up on Medicaid at any point in their lives.

Does Medicare Cover Long-Term Care?

Many of my clients have asked me if Medicare covers Long-Term Care costs and services. It is a good question, but perhaps not a good answer. The answer is no. Medicare does not cover LTC costs.

Why Doesn’t Medicare Cover LTC?

To start, long-term care has mostly to do with the support and services you will need for daily living and personal care activities. These are not medical services. Consequently, they are not covered by Medicare.

• For example, if you need to see a doctor or medical provider, that is a medical expense.
• In contrast, if you need help using the toilet, that is a long-term care expense.

What About Medicaid?

Medicaid will eventually help you pay for LTC expenses. However, you must be considered below the poverty level before the Medicaid program kicks in.

As an example, my grandparents both lived to be about 87 years old. (Married 67 years!) They had enough money to cover their assisted living expenses for a while, but the last 6 months or so of their lives were spent on Medicaid. They had to do a “spend down” of all of their assets to cover LTC expenses. Once their funds were exhausted, Medicaid kicked in.

In their case, while they had money to spend, they had choices on where they lived and what services they used. However, as soon as the money was gone, they had to move to a place that had “beds” available for Medicaid recipients. As a result, they were moved around a lot in their last year.

On the much brighter side, they were together until the end and passed months apart. They were also happy and loved. So, even though the journey was difficult, we were all in it together. You can read a little more about my care-giving story here.

If you do not want to “spend down” your assets on LTC costs, you will need to have insurance to cover your care costs.

How Does LTC Insurance Work?

LTC is an insurance policy. Consequently, you take it out now to pay for a future event that may or may-not occur.

• First, you pick a plan with an insurance carrier and structure it to fit your needs. This includes deciding how large of a benefit you want.
• In addition, your decision will also depend on how much premium you can afford to pay a month for your policy.
• Premium cost is based on age, and availability of policies are dependent on health underwriting. As a result, not everyone will be able to afford a plan, and not everyone will be able to get a plan. As with most insurance, the younger and the healthier, the better. So, start soon.
• Then, you keep paying premiums until you need the policy. (Or you cancel the policy because you ended up not needing it. For example, you die before you needed it.)

When Do Long-Term Care Insurance Benefits Begin?

First, in order to start using your LTC policy’s benefits, a licensed medical practitioner will need to certify you chronically ill.

According to Mutual of Omaha, being chronically ill means, “You need help with at least two of the six activities of daily living for at least 90 consecutive days or you need continual supervision due to a severe cognitive impairment.”

The government defines Activities of Daily Living (ADLs), as “basic actions that independently functioning individuals perform on a daily basis.”

ADLs Include:

• Bathing
• Dressing
• Using the toilet
• Transferring (to or from bed or chair)
• Caring for incontinence
• Eating

So, you typically need to not be able to do at least two of these to start your benefits.

Do Benefits Start Right Away?

To start, it takes a bit of time to get the right paperwork completed by your doctor, sent in and then certified by the insurance company. Even then, your policy might not kick-in right away.

To keep the cost of LTC insurance lower, many insurance companies will build-in an elimination period. Often, you can decide how long this waiting period will be before benefits begin. Naturally, the longer the waiting period, the less expensive the policy.

Will My Policy Last Until I Die?

Typically, your policy has a set payout rate. This means that it will pay out up to a specific dollar amount. If you outlive this amount, then you will have to use other resources to pay for your care.

How Much will my LTC Policy Cost?

The cost of your policy will depend on your needs, cost of living in your area, your age, your health, and many other factors. To find out an exact cost, you will need to work with an agent to discuss your unique situation.

How Much Long-Term Care Benefit Do I Need?

This is also a question we can’t answer without knowing your needs and situation. If you are wanting a rough idea of what you may need, try out this Long-Term Care Insurance Calculator from Mutual of Omaha.

What are the Alternatives to Purchasing a Long-Term Care Plan?

Long-Term Care Policies are expensive. Additionally, if you wait too long they might not be available to you. One alternative is to spend down your assets until you qualify for Medicaid. If you do not have a lot of assets left by the time you need Long-Term Care, then this may be an option for you.

However, if you have saved money and do not want to drain it all away in medical costs, then you may have another option: Life Insurance.

“As an alternative to Long Term Care Insurance, some retirees consider Life Insurance Policies that have LTC riders or a Chronic Illness Rider. For example, an insurance carrier might offer a product (like an IUL policy) with an option to purchase up-front a rider that will cover long term care events. You can pay qualified long-term care expenses with the death benefit, naturally, before death. Then, when you pass, the insurance company pays what is left to your beneficiaries.”

From Our Article: Do I Need Life Insurance In Retirement.

Conclusions

In summary, long-term care insurance can protect you and your family against the rising costs of assisted living and nursing home care. However, it is expensive. You need to plan ahead to either secure LTC insurance early on, or find another option like life insurance with LTC riders.

• To discuss your options with a licensed agent, you can call me, Carly Cummings – the author, if you live in Nebraska or Iowa.

• If you live in any of our other fine states, please see this page to find an agent near you.

The post What is Long Term Care Insurance? appeared first on Medicare Life Health.

During various points in our lives frugal living is bound to have a different meaning.  While we are young, or have small children, frugal living may include things like couponing or discounts on things for ourselves or our children.  As we age though, frugal living tips for seniors takes on a whole new meaning.

Tip #1: Frugal Living Benefits Come with Age

Aging comes with benefits when it comes to the frugal mindset. Correspondingly, there are so many programs for seniors to take advantage of, you just have to ask about them and then do them. 

To start, here are a few frugal living senior discount programs:   

• Discounts:  Think of AAA or AARP.  You can find so many places that accept these cards and you can get automatic discounts.  Don’t be afraid (or embarrassed) to ask!
• Senior Discounts:  Many restaurants offer senior discounts (55+ or 60+) where you can get 10% – 20% off your meal.  Many grocery stores also have a senior day where you can get a percent off of your total grocery bill on certain days.  Many retail stores also offer a senior day for a percent off.
• Travel:  Same applies for airline, car and hotel stays.  Senior discount!  See our article on frugal travel / slow travel.
• Free activities:  Many city’s offer free activities such as concerts in the park and museum visits. 
• Medicare Perks: Oftentimes Medicare Advantage Plans (and some supplements / Medigap Plans) have free or discounted gym benefits you can take advantage of. Two of the biggest programs are Renew Active and Silver Sneakers. You can learn more about them here.

Tip #2: Be Frugal, But Not Cheap

Frugal vs. Cheap.  Where is the Line? 

One of the key takeaways I got when talking to people is that in order to be frugal successfully, you cannot be cheap or stingy.  Is it better to buy something more than once because it’s cheaper? Or, is it better to buy the more expensive, but quality, item that could last a lifetime? Stingy living or being cheap is different than being frugal.

When adding up the numbers, it would make sense to purchase the more expensive, but quality item. However, it may cause a little bit of sticker shock at first. 

Frugal Living Tips for Seniors #3: Increase Cash Flow by Paying off Debt

To start, pay off your mortgage/debt before retiring whenever possible. In most cases, your mortgage/debt payment is your largest expense.  Consequently, by having no mortgage payment you have the option to downsize. Moreover, you can use the equity to purchase something smaller with the proceeds to help fund your retirement. 

Not having a mortgage payment is a huge weight lifted when it comes to retirement planning and frugal living for seniors.  However, don’t forget about your property taxes and insurance!  Those still need to be paid.  Therefore, put them into your monthly budget so you are not shocked when bills come due. 

Click here to read our article on easy ways to make things to sell for fast money.

Tip #4: Budgeting on a Fixed Income

Next, be intentional in how you spend your money.  Budgeting is a helpful tool in determining how much you can spend.  There is only a finite amount of money to be spent before it is gone.  Using the 4% rule for example; if you have one million dollars, you can only withdraw $40k a year in order to not run out of money. 

Be intentional about how much and how often funds are pulled from retirement savings.  By keeping track of every dollar you spend you should be able to forecast how much you will need later in life. 

This doesn’t have to be a cumbersome activity.  You could simply use pen and paper, excel or if you are savvy you can use online tools such as Mint or Personal Capital. Over time you will have a good understanding of your spending habits and will be able to better forecast the upcoming years of spending and adjust accordingly.  

Related Reading: Cash Budgeting & The Envelope Method

Frugal Living Tips for Seniors #5: Embrace the DIY Mentality

Things you can do yourself, do them!  YouTube has a plethora of information on how to fix literally anything.  Why pay someone to do something that you can do yourself.  Perhaps not the big jobs, like a kitchen remodel, but those pesky small jobs that you may hire a professional for, learn to do them yourself. 

There are also plenty of people to ask if you’re not a YouTube fan. For example, going to the hardware store and simply asking the expert in the department.  Who knows, you may even find that you enjoy doing odd jobs around the house.  

Frugal Living Tip #6: Going Green

There are other ways to be frugal that could require money up front but will save money in the long run.  Electric vehicles for example.  The reality is that they usually do not cost more than a standard gas run vehicle.  But, you do save on the expense of gas and much of the maintenance.  To power an electric vehicle is pennies on the dollar compared to a gas powered vehicle. 

As another example, solar panels and solar water heaters can save you money.  While expensive to install, over time (usually a set number of years), the cost savings outweighs the cost expense. (That is, if you are in a sunny area). Also, don’t forget about the tax advantages of going electric or solar.  You can receive a tax credit, in most cases, both federally and by the state you are living in.  

Tip #7: Prioritize What Makes You the Happiest

Finally, and I think most importantly, you need to figure out what you enjoy doing and make that your priority.  The last thing you want in retirement is the feeling of being left out because you fear you don’t have enough money to do those things that you want to do, that you enjoy.  Just make sure to get the biggest bang out of your dollars.  Simple things like going out for lunch rather than dinner can help.

Conclusions

In summary, you want to make sure that you are happy in retirement and not just counting your pennies.  If you have a frugal mindset but are also doing things you enjoy, retirement will be much more enjoyable. 

Further Reading

Want even more Frugal Fun? Click here to read our article on the number one thing you can do to save money on healthcare.

Or need to save more, even late in the game? Start here.

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