Month: February 2023

Many people consider long-term care insurance helpful planning tools to pay for senior care. A long-term care annuity is another financial tool for planning to pay for senior care. While these products share similarities, they differ in a few key ways. To help you make a more informed decision on how you will finance long-term care for yourself or a loved one, we outline what you need to know about long-term care annuities and insurance policies.  

What is long-term care insurance?

Long-term care insurance is a form of health insurance that helps people cover the cost of personal care that regular medical insurance does not cover. Long-term care insurance will typically reimburse the cost of care associated with nursing homes, in-home care, assisted living facilities, and adult day care centers.  

Typically, long-term care insurance is purchased when a person is in their 50s or 60s when they are getting close to the age that they will need some form of long-term care. As the name would suggest, it is a type of insurance, so you will have to go through the claims process to be reimbursed for the costs associated with long-term care.  

What is a long-term care annuity?

A long-term care annuity is a special type of annuity designed to help people pay for the costs associated with long-term care. People typically buy long-term care annuities to protect their retirement savings since long-term care can be costly. Long-term care annuities can work in various ways, but most commonly, the insurer will pay a fixed amount to the insured each month.  

Unfortunately, though, the amount the insured is paid each month is based on how much money they paid into the annuity. This means depending on how much care you require, your long-term care annuity may not be able to cover the full cost of your care.  

Long-term care insurance vs. long-term care annuities

Long-term care insurance and long-term care annuities differ in a few key ways. One of the most prominent differences is how they are paid to the policyholder. A long-term care annuity is paid monthly when it begins the payback period.  Long-term care insurance, on the other hand, is paid only when the policyholder incurs a long-term care-related expense.

They also differ in how the insured pays the policy. With a long-term care annuity, the policyholder pays either a lump sum payment upfront or a series of monthly payments until the annuity begins to pay out. Once the annuity begins to pay out, the holder no longer has to make payments. With long-term care insurance, the insured must pay their premium in perpetuity. 

Pros and cons of long-term care insurance and annuities

When making an important purchase like this, it’s important to weigh the pros and cons of both options. Both have benefits and drawbacks, so because neither option is perfect, you must choose the option that works better for you.

Long-term care insurance benefits

• You can rest easy knowing your long-term care needs are covered by insurance.
• There are a variety of policies for you to choose from, making it easy to tailor a policy for your specific needs.

Long-term care insurance drawbacks

• If you have a pre-existing condition, you may be denied coverage.
• Premiums become more expensive if you try to buy a policy after the ideal age range.
• Long-term care insurance can be costly and must be paid monthly.
• If you never require long-term care, you’re paying for insurance you will never use.

Long-term care annuity benefits

• It may be easier to get approved for a long-term care annuity than long-term care insurance if you have an existing health issue.
• Long-term care annuities can be much more cost-effective than long-term care insurance.
• You can lean on your long-term care annuity to cover other unexpected costs in a pinch.

Long-term care annuity drawbacks

• They may require a large upfront payment that many people can’t afford.
• Annuity payments are considered taxable income if they aren’t used to pay for costs associated with long-term care

Long-term care insurance and long-term care annuities are great ways to help finance the cost of long-term care. Having one of these instruments is key to a happy and successful retirement because you don’t want to pay all the costs of long-term care out of pocket.

As people age, financial planning for the future becomes increasingly important. Many older adults focus on paying for living arrangements, senior care services, medication, and hospital stays, but they don’t know how to pay for it all. Applying for health care coverage through Medicaid seems like a solution to the problem, as Medicaid can help pay for long-term care. However, many Medicaid applicants fall into common pitfalls that cause their applications to be denied. With the help of a Medicaid planner, seniors can have the necessary assistance to increase their odds of application approval. Here, we explain what Medicaid planners do to help you through the process and what to look for in one of these specialized professionals.

What is the purpose of Medicaid planning?

Proper planning makes for better long-term results. Managing a health care budget, securing housing, and allotting money for personal care, transportation, food, and other needs are a part of proper Medicaid planning. 

Medicaid planning aims to allow seniors to retire with a plan and dignity. Proper Medicaid planning can protect an applicant’s assets, including their homes, from inclusion in their asset count for Medicaid qualification.

What is a Medicaid planner?

A Medicaid planner is a professional who works closely with older adults and their families as they apply for coverage. Medicaid planners help seniors restructure their finances to maximize their chances of coverage approval. The program limits an applicant’s income and resources while maintaining eligibility. This means that Medicaid coverage is not available to them if their resources exceed the limit set by state law. 

With Medicaid spenddown, planners can distribute an applicant’s resources to get approved for coverage. This strategy helps protect the family home and allows the non-applicant spouse to remain in the home with the money they need to support themselves while their spouse receives care.

Do I need a Medicaid planner?

You may wonder if hiring a Medicaid planner is your best next step. Some seniors benefit more from this service than others. If you believe that having a Medicaid planner could help you as you apply for coverage, consider the following:

The spousal impoverishment rule applies if you are married and only one spouse is seeking coverage. This rule allows the non-applicant spouse to keep a larger portion of the spouse’s combined income to help the applicant spouse qualify for Medicaid. This rule is complex; a Medicaid planner can help you and your spouse comply.

If both spouses need care, the price of maintaining both individuals can be very high. A Medicaid denial can make paying for care very difficult. If both spouses need care, they should consider working with a Medicaid planner.

A low-income single person should easily qualify for Medicaid coverage, assuming their total assets are beneath the cap set by Medicaid. If the person knows they have assets below the limit, they may not need Medicaid planning services because they can more easily qualify.

How much does Medicaid planning cost?

The cost of Medicaid planning varies depending on the situation and the type of care the client requires. If a senior decides to get help from an elder law attorney, they may be looking at a bill ranging from around $3,000 to $10,000, depending on the state and the typical cost of elder law services in the area.

What qualifies a Medicaid planner?

Before a person begins assisting seniors and their families with applying for Medicaid coverage, they should be well informed on the subject. Ask the person you are considering working with whether they completed the Medicaid Planning Course available at medicaidplanning.org. Medicaid planning is highly technical and should not be attempted by someone without any qualifications. After all, this will help you get the senior care services you need, so you want to make sure you trust the right person.

What should I look for in a Medicaid planner?

When choosing a Medicaid planner, trying to avoid making a hasty decision is important. Even though you may need to pay for care soon, it’s best to put in the effort to find someone you trust to help you take care of your affairs. When looking for a Medicaid planner, you should choose someone with some of the following qualifications:

• • Trustworthiness. The person should be honest about the complexities of applying for Medicaid and the risks of denial.
• • Knowledge. Your Medicaid planner should stay current on the changing Medicaid standards. They should be able to answer your questions about your application. Your application must be complete and without error, as even the slightest error can cause your application to be denied.
• • Someone who will act with urgency. You want to make sure your Medicaid planner treats your claim with a sense of urgency. You must comply with strict deadlines to ensure your application is properly processed.

[Last updated February 29, 2024]

The U.S. Federal Trade Commission (FTC) reported that in 2023, consumers lost $10 billion to financial fraud, a 14% increase over 2022. It’s safe to say that financial fraud is on the rise and affects many people each year. Unfortunately, older adults are vulnerable to financial fraud, as scammers often target them as victims. Keeping your older loved ones updated with useful preventative measures is important. Here are six easy ways to help protect your parent from becoming a victim of financial fraud.

Secure their internet-connected devices

Phones, laptops, and tablets are easy for fraudsters to steal, especially in public. One of the best ways to prevent financial fraud is to secure your parent’s internet-connected devices. Ensure that their phones, computers, tablets, and other electronics with sensitive information have password protection. If their device is stolen, the thief won’t be able to access the data without unlocking it. Several options, such as PINs, passwords, patterns, and biometric (fingerprint/face) recognition, can secure your parent’s device. Any of these protection features can help secure your loved one’s data and prevent financial fraud.

Create strong, unique passwords

Many people, regardless of age, have formed the habit of using variations of the same password for many websites and online accounts. The repeated use of the same password compromises the safety of all their accounts’ information and can result in falling prey to financial fraud. While using different variations of the same password for every login (or worse, the same password for every login) may seem convenient, it’s quite dangerous. Here’s why:

Businesses can fall victim to data breaches when hackers steal clients’ usernames and passwords to access sensitive information. If you have the same username and password for your account at your favorite grocery store and your bank account, and the grocery store is hacked, the hackers now also have the username and password for your bank account. Having different passwords for each website is key.  

When you have unique passwords for every website, remembering them can be tough, so finding a way to store them safely can be helpful. Some people keep a pen and pad with all their passwords at their desks. Others prefer to store them electronically using their browser. Both options are safer than using the same password (or slightly different variations), so it all comes down to your parent’s preference. If they use a physical list of passwords, ensure it is secure.

Turn on two-factor authentication for sites with sensitive information

Two-factor authentication (2FA) is a security measure that ensures that the person logging into an account is the account holder. When you log into an online account, you might also receive a code via text, email, or phone call, which you enter to access your account. While using two-factor authentication may take longer, it’s an effective way to secure your personal information. If a thief wants to access websites with your financial data, they’ll need your login credentials and phone or email address. It’s less likely a thief will have access to both simultaneously, so 2FA increases your chances of keeping your information safe.

If your parent pushes back against using 2FA, it may be because they feel it takes too long or they are less tech-savvy and find using multiple pieces of technology confusing. You can compromise by reserving 2FA for sites containing only the most sensitive data, like email, bank or brokerage accounts, and credit card accounts.

Add your parent’s phone number to the Do Not Call List

Spam calls are not just annoying; they also have the chance to be financially ruinous if your parent gives the caller any personal information and falls victim to a scam. The FTC has created the National Do Not Call Registry to combat the plague of spam calls. You can add their phone number to the Do Not Call Registry so legitimate companies cannot call them.

The key word here is “legitimate.” While the Do Not Call List should keep your parent from being called by salespeople and other telemarketers, it won’t protect them from scammers who have no concern for the law. Since their number has been added to the Do Not Call Registry, they’ll know that any unsolicited calls they receive are more likely to be scams. 

When in doubt, call the institution directly

Most people have received a call from someone who may be a customer service representative from a bank or government office. Sometimes they are who they say they are; however, it’s important to be sure. Your parent should hang up and call the official customer service line of the institution directly, even if the call seems legitimate. Real customer service representatives will understand your concern and encourage you to do so, whereas fraudsters will try to keep you on the phone to get the information they’re looking for.  

Whenever your parent receives one of these calls, they should call the phone number on the back of their bank or credit card (if it’s a bank) or search for the customer service phone number online. It could be helpful for you to search for these numbers beforehand and write them in an easy-to-find location so you know your parent will call the right number. These steps can help ensure that your parent’s data won’t be compromised over the phone.

Avoid using public Wi-Fi

Public Wi-Fi may seem convenient, but it’s unsafe for personal information. Using public Wi-Fi makes it easy for hackers to steal your data. Discourage your parents or older loved ones from using public Wi-Fi, especially when accessing their bank’s online portal. Using your phone plan’s data instead of Wi-Fi is a small inconvenience compared to being a victim of financial fraud. 

If your parent needs to access sites with sensitive information, show them how to turn off their Wi-Fi and use mobile data instead. You can type the steps into a notes application on their phone or jot them down on a notepad. While they may find it undesirable to use some mobile data, they’ll be much less susceptible to fraud.

Older adults are often targeted by scammers looking to defraud them of their money, but with the tips above, you can help keep their information and finances safe. Talk with your parent about common scams directed at older adults to keep them from becoming a victim of fraud. Ensure they monitor their accounts regularly, and have them name a trusted person as power of attorney. If your parent falls victim to fraud, don’t shame them, and walk them through the steps to take after being scammed. With these tools, you can help protect your parent from financial fraud.

[Last updated December 14, 2023]

Tax season can be a confusing time for many. Keeping up with various changes to the tax code is tough, especially if you aren’t using an accountant to prepare your taxes. Unfortunately, you may be audited or owe back taxes if you don’t keep up with the latest regulations. To help keep this from happening to you, we’ve compiled a list of some of the most common tax mistakes seniors make when filing their returns and how to avoid them.

Mistake 1: You didn’t track senior care expenses

Medical and other senior care-related bills can be difficult to track. Unfortunately, this means that many people have a hard time tracking or don’t track them, which can be a mistake when tax season comes. The cost of these expenses has the potential to be a tax write-off for you or your caregiver. If you’re not tracking the costs of senior care, there’s a good chance that you or a loved one is paying too much in taxes.

To help you understand which senior care expenses can be a write-off for your caregiver, we’ve compiled a helpful article on caregiver expenses that can be tax deductible. If you don’t qualify as a dependent, we also have an article on tax deductions for seniors.

Mistake 2: Not knowing if you have to file a tax return

One of the most common mistakes that older adults make is assuming they don’t have to file taxes. Since most retirees don’t have W-2 income, they think they aren’t required to file. The reality is that depending on your total income and the sources of that income, there’s a chance you’ll still have to file a tax return, even if you’re retired.

There are some marital status, age, income, and adjusted gross income (AGI) factors that help determine whether or not you have to file. You should consult a tax professional or the IRS Publication 554 for specific guidelines on your situation. Generally speaking, an individual will not have to file a federal tax return under these circumstances:

• •Unmarried adult over 65 who makes less than $14,700 in nonexempt income (excluding Social Security benefits). 
• •Married adult over 65 with a spouse under 65 who makes less than $27,300 in nonexempt income (excluding Social Security benefits). 
• •Married adult over 65 with a spouse also over 65 who makes less than $28,700 in nonexempt income (excluding Social Security benefits).  

There is an added stipulation about AGI as well. If the total of half the person’s Social Security benefit plus their AGI and tax-exempt interest/dividends amounts to more than $25,000 (single filers) or $32,000 (married filing jointly), then some of their Social Security benefits will be taxable. This rule is a bit complex, so it is important to review the IRS Publication 554 or consult a trusted tax professional.

Mistake 3: You didn’t take your required minimum distributions

A required minimum distribution, also known as an RMD, is a mandatory distribution from a retirement account for people 73 and older. Once you reach 73, taking your RMD is critical, even if you’re still working. Not withdrawing money from a retirement account might not seem like a big deal, but it actually is.  

If you don’t take your required minimum distribution by December 31 of a given year, you will incur penalties on the money you were required to withdraw but chose not to. As of 2023, the penalty is 25% of the amount not withdrawn, which can be an incredible sum.

To avoid paying the penalty for not taking your RMD, you’ll first have to calculate how much your RMD is. Unfortunately, this isn’t as easy as it sounds. If you would like to do so yourself, the IRS has literature regarding RMDs and how to calculate them here. If you don’t want to do this yourself, you can always enlist the help of your accountant.

Mistake 4: You didn’t know about important tax law changes

It’s not expected that everyone will become an expert in tax laws, but if you can stay abreast of key changes that impact you, you can avoid making errors on your tax return and maybe even save some money.

For example, rules about the standard deduction for some demographics, including those 65 and over, changed for tax year 2023. Stay current on the latest tax law changes that affect seniors and their caregivers so you don’t miss a beat. You can also talk with a trusted tax professional. Try to give the most comprehensive picture about your situation so they can inform you about tax changes and any available tax deductions or credits or important changes that affect you.

Mistake 5: You didn’t get help filing your taxes

This is a common problem that many of us have. Every year, countless people do not seek help when tax time rolls around, which can be costly. Often, when people try to do their taxes themselves, they can miss something important. Perhaps you missed a deduction you didn’t know about or completed your tax return incorrectly. Making a mistake on your taxes can lead to something as simple as paying too much in taxes to as serious as an audit from the IRS.

Regardless, you don’t want to find yourself in either situation. This is why it’s often best to seek help when filing your tax return. Help can manifest itself in several ways, whether it’s a trusted friend or relative, a great CPA, or a free government program. If a family member wants to help you file taxes, we provide tips on what the person can do to increase the likelihood that they don’t miss anything in our article about how to file a parent’s tax return.

Bottom line

At the end of the day, the most common tax mistakes are often the simplest ones to avoid. As long as you remember the common mistakes and work to avoid making them, tax season should go off without a hitch. Remember, you should never be afraid to enlist help when preparing your taxes because a tax professional can help you sidestep these errors before they happen.