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Retired couples may need $250k for health care

Posted on March 26, 2010 by Jason

Yahoo Finance, March 25th, 2010

Relief to seniors facing high prescription drug costs is one of the
first changes to come under the new health care overhaul. But ultimately
that won’t offset the relentless increase in retirees’ medical
expenses.

A couple retiring this year will need a
quarter of a million dollars, on average, to cover medical expenses in
retirement, according to a study to be released Thursday by Fidelity Investments.

The
estimate is up 4.2 percent from Fidelity’s projection last year. The
Boston-based financial services company has updated its estimate
annually since 2002 as part of its business helping employers design
workplace benefits programs.

The study is based on projections for
a couple of 65-year-olds retiring this year with Medicare coverage. The
estimate factors in the federal program’s premiums, co-payments and
deductibles, as well as out-of-pocket prescription costs. The study
assumes no employer provided insurance in retirement, and a life
expectancy of 85 for women and 82 for men.

The estimate has risen
56 percent from Fidelity’s initial $160,000 projection in 2002. The
average annual increase has been 5.7 percent, so this year’s 4.2 percent
rise — from $240,000 last year to $250,000 — is modest.

But
with broader inflation now near zero amid a recession, health care costs
continue to rise faster than other expenses, said Sunit Patel, a senior
vice president at Fidelity.

The findings illustrate the
importance of factoring in health care alongside housing, food and other
expenses in retirement planning.

“It turns out to be a surprise
for many, and one of the largest expenses in retirement,” Patel said.

The
increase in this year’s estimate was relatively small because a surge
in patent expirations for brand-name drugs meant many cheaper generic
versions reached the market, Patel said. That helped limit out-of-pocket
prescription costs.

Fidelity’s estimate doesn’t factor in most
dental services, or long-term care, such as costs from living in a
nursing home. A 2008 study by Fidelity estimated a 65-year-old couple
would need $85,000 on average to cover insurance costs for long-term
care in retirement.

Thursday’s study also didn’t account for the
health care overhaul that President Barack Obama signed
into law Tuesday. Fidelity was updating its 2010 estimate before
legislative details were clear, Patel said.

The law’s focus is
expanding access to people under age 65. But it also would benefit many
retirees by gradually closing what’s known as the “doughnut hole”
coverage gap in the Medicare drug benefit. Seniors fall into that hole
once they spend $2,830 per year. The legislation would begin narrowing
the gap by providing a $250 rebate this year. The gap would be fully
closed by 2020, when seniors would still be responsible for 25 percent
of the cost of their medications until Medicare’s catastrophic coverage
kicks in.

Read more of this article.

NewRetirement Retirement Calculator:   Can your retirement finances sustain a quarter-million dollar health care tab?  Consider looking at the overall state of your retirement using the NewRetirement Retirement Calculator.

Insecurities Surface in Social Security

Posted on March 26, 2010 by Jason

Smart Money, March 26th, 2010

This week’s news that the Social Security
system will pay out more in benefits than it receives in payroll tax
receipts gave a jolt to some retirees. By contrast, earlier reports
from the nonpartisan Congressional Budget Office (CBO) projected that
outlays would eclipse tax receipts in 2016.

Although the imbalance isn’t expected to change
the benefits levels of current retirees or those nearing retirement, it
does bolster long-running fears about the health of the Social Security
system. Some analysts say that younger generations of workers could
face benefit cuts of 20% to 25% by 2037 if Congress does nothing to
reform the system.

The reason? Social
Security maintains two trust funds — the Old-Age and Survivors
Insurance fund and Disability Insurance fund — which are both running a
surplus and expanding. Combined, both trust funds are projected to grow
from $2.5 trillion in 2009 to $3.8 trillion in 2020, according to the
CBO. What’s more, Social Security’s “primary” deficit — that is, a
measure of the program’s revenues excluding interest on those trust
funds’ assets — should only last until 2014, when the CBO projects
employment to fully recover.

Still,
the downturn has taken its toll on Social Security’s revenues.
Perpetually high unemployment — plus, a subsequent drop in paychecks to
tax — and an increase in the number of seniors applying for benefits
earlier than they planned have depleted the program’s revenues.

All told, payroll tax receipts were down 2.5% in
2008 compared to pre-recession estimates for the year, according to
calculations from Monique Morrissey, an economist at the Economic Policy
Institute, a Washington-based research organization. She expects 2009
receipts may be as much as 8% to 9% below what they projected in 2007,
before the recession hit. Fewer tax receipts, combined with the fact
that millions of baby boomers are expected to file for
benefits at some point in the near future, the CBO estimates that the
system’s reserves will be depleted by 2037. (Note that this trust fund
depletion date and some estimates may change in a few weeks, as the Social Security Administration’s
board of trustees may pose differing numbers when it issues its annual
report.)

Read more of this article.

Landmarks on the Road to Retirement

Posted on March 25, 2010 by Jason

Kiplinger.com, March 4th, 2010

Get the skinny on these four age milestones in retirement — and what
they mean for you and your financial security.

You may have thought the big milestone birthdays were behind you.
After becoming a teenager at 13, it only got better. As the years
passed, you could legally drive, vote and hail in each New Year with a
glass of bubbly.

The road to retirement has its own milestones,
starting at age 59 1/2, when you can take penalty-free withdrawals from
your retirement plans. Although these landmarks are not as thrilling as
those earlier ones, they’re just as important. Your financial security
could depend on watching out for these signposts.

Penalty-Free
Withdrawals at 59 1/2

On the day you turn 59 1/2, you can tap a
traditional IRA without incurring a 10% early-distribution penalty. You
will still owe income tax on any distribution.

Roth IRA owners
who are 59 1/2 are free of the 10% penalty on withdrawn earnings (those
earnings are also tax-free as long as owners have held at least one Roth
for five years). Converted amounts held for less than five years are
freed, too, from the penalty when an account owner reaches 59 1/2.

Owners
of Roth and traditional 401(k) accounts who are 59 1/2 don’t pay the
penalty, either. But not all companies allow withdrawals if you’re still
working. If you leave your employer at age 55 or older, you can
withdraw money from your employer plan without paying the
early-distribution penalty.

Even though you can dip into your
accounts penalty-free doesn’t mean you should. The longer the money can
stay in a tax shelter, the more it can grow. You won’t be subject to any
other penalties until you’re required to take minimum distributions in
11 years. “The IRS doesn’t care what you do with your money from 59 1/2
to 70 1/2,” says Larry Rosenthal, president of Financial Planning
Services, in Manassas, Va.

Read more of this article

NewRetirement Retirement Calculator:   Evaluate how well you are doing relative to these milestones with NewRetirement’s Retirement Calculator.

Withdrawal Strategies That Break the Rules

Posted on March 25, 2010 by Jason

Kipplinger, March 9th, 2010

In some cases, it might be better to tap your tax–advantaged
accounts first to help your money last longer.

As a rule of thumb, retirees should withdraw assets from taxable
accounts first, tax–deferred accounts such as traditional IRAs next, and
tax–free accounts such as Roth IRAs last. Typically, you spend your
after–tax money first because you want your retirement assets to
compound tax–free for as long as possible.

But rules are made to be broken. There may be times when tapping your
tax–advantaged accounts first will help your money last longer, says
William Reichenstein, a professor of investment at Baylor University, in
Waco, Tex.

One category of rule breaker may be retirees who are
younger than 70 1/2 and not yet subject to taking required minimum
distributions from their IRAs, says Reichenstein. These retirees may be
in a low tax bracket for several years until it’s time to take RMDs.

Consider
a retiree who is in his mid sixties. He has taxable accounts with
bonds, stocks and certificates of deposit. When he turns 70 1/2, he’ll
need to take RMDs of more than $80,000 from his IRA, which will place
him in the 25% tax bracket.

For now, he needs about $45,000 a year
for expenses. If he takes money from his taxable accounts, such as the
CDs or even some stock sales, most of the withdrawals will not be
taxable income.

Reichenstein says this retiree should consider
withdrawing enough from his traditional IRA to take him to the top of
the 10% or 15% bracket. He could use the money to live on or convert it
to a Roth IRA. “If he waits a few years, he will be paying $25 in taxes
for every $100 he takes out instead of perhaps $15,” he says. “If you’re
in a very low tax rate now, you can minimize what the government gets.”

Read more of this article.

Professional Financial Advisers:  Are these ideas ones that you might want to consider?   Consider making an appointment with a professional financial adviser through NewRetirement.com.

Will Boomers Be Any Different?

Posted on March 22, 2010 by Jason

The New York Times, March 4th, 2010

Raise your hand if your elderly parents issue one of the following
proclamations whenever you try to persuade them to accept some sort of
assistance — wearing an emergency-response pendant, say, or hiring a
home care aide, or moving into assisted living when remaining at home
becomes too difficult to manage.

1) “It’s too expensive” — though you know they could afford it.

2) “I can manage on my own” — though a history of falls, missed
medications and poor nutrition suggests otherwise.

3) “I don’t want a stranger in my house.”

4) “The only way I’m leaving here is feet first.”

Not every elderly person needs help, and not every elderly person who
needs it resists it. But the No. 1 question I encounter when I speak
to family caregivers is how to cajole old people into adapting to
increasing disability when they are, to be a tad euphemistic, “fiercely
independent.” (Insert that line about the river in Egypt here.)

It makes me wonder how much of this apparently widespread
intransigence has to do with a particular cohort — anyone over 80 was
shaped by the Depression, whether they were old enough to remember it or
not — and how much of it is intrinsic to aging itself.

In 20 or so years, when we baby boomers enter the ranks of the
“old-old” ourselves, will we be any different?

I vote yes, in certain important ways. We are, for example, much
more accustomed to paying people — from house cleaners to personal
trainers — to help in all sorts of ways, so I doubt we’ll suffer as much
angst about hiring home care aides or geriatric care managers or
drivers. (How we’ll pay for it is another matter.)

“We’ll see more seniors coming directly to us for help in the next 10
years, versus the past 10 when it was a daughter or son calling us and
tearing their hair out,” predicted Paul Hogan, who as chief executive of
Home Instead Senior Care, the
country’s largest network of home care franchises, has a major stake in
this matter.

With the Depression generation, Mr. Hogan told me, agreeing to home
care “takes a doctor’s ultimatum: ‘You’re not going home from the
hospital unless you get help, because you’ll break that other hip.’”
But Mr. Hogan’s own mother, a businesswoman in her 70s, has long paid
financial advisers, child care workers and housekeepers. “She sees
getting help when she’s older as just another in the long line of
services she’s taken advantage of throughout her career,” Mr. Hogan
reported.

Read more of this article.

Stressful but Vital: Picking a Nursing Home

Posted on March 22, 2010 by Jason

The New York Times, March 18th, 2010

The decision is one of the hardest you will ever make. Your spouse,
parent or another loved one needs care that assisted living or
home health care simply cannot provide. You need to choose a nursing
home.

It’s a difficult and emotional task. The horror stories are well
documented, and even in the best nursing homes the transition can be
wrenching for the entire family.

Finding a good nursing home takes research and perseverance. You want a
safe, engaging and pleasant environment with caring staff and solid
medical practices.

“You can actually get all of that in a nursing home — if you know what
to look for and how to search,” said Larry Minnix, chief executive of
the American Association of Homes and Services for the Aging, a trade
group for nonprofit nursing homes and other organizations for the
elderly.

Unfortunately, the typical search for a nursing home is made under
duress. More than 60 percent of admissions come from hospitals. The patient may have broken a hip
or had a stroke and now needs rehabilitative care. The hospital is in a
hurry to discharge and may move quickly to get the patient moved to an
available nursing home bed, regardless of the operator’s quality or
reputation.

“Hospitals ought to be more aware, but it often is just not on their
radar screen whether they are sending a patient to a good nursing home
or a bad one,” said Janet Wells, director of public policy at the National
Consumer Voice for Quality Long-Term Care, an advocacy group.

In such situations, you have precious little time to do your research.
What is more, these temporary stays often become permanent, depending on
the individual case and sometimes on the quality of the temporary care
received.

Paying for a nursing home is another huge source of stress. Medicare pays only for medically necessary
care in a skilled nursing home, like physical therapy or intravenous medicine. It
does not pay for what is called custodial care — help with walking,
eating, bathing and other daily tasks. Instead, the majority of nursing
home residents pay from personal money, long-term care insurance
policies or, if they qualify, through Medicaid.

The average cost of nursing home care is $200 a day, and that does not
include additional fees for specialized services like care for patients
with Alzheimer’s or dementia.

To find a nursing home you can really feel good about, consider these
important steps.

Read more of this article.

Long Term Care Insurance:   Long Term Care is an extremely expensive proposition, as this article makes clear.  Before you wind up needing to make decisions of this sort, you should consider Long Term Care Insurance.

Deciding on Care for Elderly Parents in Declining Health

Posted on March 22, 2010 by Jason

The New York Times, March 12th, 2010

TWO years ago my father, then 83, became very ill. Until then, he had
been living alone in a pleasant one-bedroom apartment on the Hudson
River, an hour’s drive from my home in Brooklyn.

After a couple of months in the hospital it became clear that my dad,
Harvey Alderman, could not return to solo living. He was fragile and
forgetful, and there was no way he could keep track of the 14 or so
pills he had to take each day.

But where would he go — and how would we pay for it? Could he stay in
his apartment if he had regular visits from an aide? Or should he go to
an assisted-living facility where there would be more services available
for him?

So began my family’s crash course in caring for an aging parent in
declining health.

If you’re in this predicament, you know already there is no simple
answer. Older people each have unique medical and emotional needs. And
finances often dictate how far you can go in creating the ideal
situation for them.

That is what Linda Chase, a lawyer in Reston, Va., realized after
running the numbers on what it would cost for home care for her mother,
who has dementia and needs round-the-clock
attention.

“We couldn’t afford private home-health care, so the only option for us
was assisted living in a facility with dementia care,” Ms. Chase said.

Below, I offer guidelines and considerations that can help you make an
informed — if not always easy — decision about what type of housing
will support your parent’s needs, without bankrupting the family in the
process.

And note: While the following discussion refers to a single parent who
lives alone, many of the considerations would also apply to an elderly
couple who are each in declining health.

Read more of this article.

Long Term Care Insurance:   Assisted living facilities, and other elder-care programs can be prohibitively expensive, even for those who plan ahead.  Consider the benefits and drawbacks to Long Term Care insurance at NewRetirement.com.

When Life Insurance Is More Valuable as Cash

Posted on March 19, 2010 by Jason

The New York Times, March 3rd, 2010

The children are grown. Each spouse — or a surviving spouse — has
enough assets to last a lifetime. Yet a life insurance policy is still
in force. It could be used to make gifts to those children now, a down
payment on an inheritance, in effect.

Or, in another case, an older person with such a policy needs the money
it represents not for heirs but for personal needs — perhaps to pay for
long-term health care, to travel or just to make ends meet.

A life insurance policy is a financial instrument, an asset. Like all
other assets, it has a value. There is not just the face value — what it
will pay at the owner’s death — but some lesser amount that a buyer may
pay in order to collect the face value when the insured person dies.

The concept of selling rights to life insurance policies first appeared
in the late 1980s, as the AIDS epidemic mushroomed. Some patients lost
their jobs; others needed extra funds for medical treatment. Selling a
life insurance policy could give someone with AIDS cash quickly.

Buyers of such policies sprang up, attracted because they believed most
of the sellers had short life expectancies.

As AIDS was transformed from an almost-certain death sentence to a
chronic disease, at least for many people in the United States, the need
for such patients to raise cash for medical treatment subsided. And the
market for such policies shrank as life expectancy rose.

But another category of people were willing to sell, those approaching
their 70s, and there remains a pool of buyers. The sale of a life
insurance policy is known as either a viatical settlement, if the holder
is not expected to live more than two years, or a life settlement. They
have different tax consequences, but the concept behind the two is
similar, according to Gloria Grening Wolk, who has written three books
on the subject, including “Cash for the Final Days” (Bialkin Books,
1997).

“Don’t go with the first one that makes you an offer,” Ms. Wolk said,
likening that to accepting the first offer for a house. A successful
sale is “like a traditional auction if people do it right,” she said.

Jonathan D. Pond, a financial planner in Newton, Mass., said selling a
life insurance policy before death can sometimes make sense. “If you
really need the cash, it’s certainly worthwhile to consider,” he said.

Mr. Pond counsels clients in need of money to first “look for other
sources of cash,” like home equity loans,
reverse mortgages and the surrender or loan value of whole-life
insurance policies. But the typical policy, he said, reserves a
substantial amount as a death benefit, even after a surrender, so the
holder may not be able to get as much cash as a buyer would pay.

Read more of this article.

Life Settlement Programs:  Investigate whether a Life Settlement is the right decision for you by researching on NewRetirement.com.

Alternative to Statins Shows Promise

Posted on March 19, 2010 by Jason

Health Day News, March 10th, 2010

A thyroid-derived
cholesterol-lowering drug that could be an alternative to the widely
used
statin medications has done well in a small, early trial, Swedish and
American researchers report.

In the trial, various doses of the drug, eprotirome, a

laboratory-engineered version of thyroid hormone, were added to statin
treatment for 168 people whose high levels of LDL cholesterol had not
been
lowered by previous use of statins. The combination did lower
cholesterol
levels in the 12-week trial and, most importantly, did not cause the
feared side effects on the heart and other organs that have plagued
similar thyroid-based treatments.

“There was no doubt that eprotirome would lower LDL
cholesterol.
Thyroid hormone is nature’s own statin,” said Dr. Paul W. Ladenson, a
professor of endocrinology and metabolism at the Johns Hopkins University
School of Medicine and lead author of a report on the trial,
published in
the March 11 issue of the New England Journal of Medicine. “But
this is a demonstration of lipid-lowering effect without thyroid
toxicity.”

Dr. Bo Angelin, a professor of clinical metabolic research at the

Karolinska
Institute in Stockholm, where the drug was developed, said that
the trial demonstrated that careful targeting of the drug’s effect
within
the body could obtain the benefits of thyroid hormone on blood cholesterol
levels, without causing damaging side effects. The trial was
funded in
part by Karo Bio, a small commercial spinoff of the institute.

“We knew that thyroid hormone could lower lipid
[cholesterol] levels
but would have side effects on the circulation and bones and cause
diarrhea,” Angelin said. “Even if the lipid levels were OK, it would be
overall negative for patients.”

However, he added, “if we can get the thyroid effect
in the liver
[where cholesterol is metabolized] but not in other organs, we would be
OK.”

Read more of this article.

Gene test ‘helps pinpoint right dose of heart drug’

Posted on March 18, 2010 by Jason

Yahoo News, March 15th, 2010

A simple genetic
test can help pinpoint the precise dose of a potentially
life-saving medication taken by millions to ward off blood clotting
after heart surgery, a study published Tuesday found.

The clinical study led by two leading medical researchers — Medco Research
Institute specializing in pharmacy care, and the Mayo Clinic
in Rochester, Minnesota — found that hospital stays can be reduced by
one-third by undertaking genetic testing to determine the sensitivity
of patients to the widely-used drug warfarin.

Warfarin, the world’s most widely-prescribed blood thinner and which has been in use for
half a century, is used to reduce the risk of heart attack or stroke after a patient has
had a heart attack.

It also is used to prevent blood clots, pulmonary embolism, and other complications
following atrial
fibrillation or heart
valve replacement surgery. About two million people begin
warfarin therapy every year in the United States.

But there are significant risks associated with the use of the drug if
the proper dose is not determined.

Warfarin therapy requires doctors to closely monitor patients because
the dose needed to obtain a therapeutic effect is very close to the dose
that can cause negative medical reactions.

Some 20 percent or more of patients are hospitalized for bleeding within
six months of the drug, and warfarin is the leading cause of
drug-related emergency room visits among the elderly.

Doctors say it can take weeks or even months of repeated blood tests and dose
adjustments to determine the right dose for each patient.

During that time, patients run an increased risk of thrombosis, a
potentially serious condition brought about by the formation of a blood clot in a vein if
too little warfarin is administered. But if given too much warfarin,
patients face a risk of hemorrhaging.

Researchers in the study presented at the 59th annual conference of the American College
of Cardiology in Atlanta, Georgia, said genetic testing offers a
better way to help clinicians determine the optimum dose of the drug for
each individual patient.

Read more of this article.

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