Monthly Archives: May 2015

Do Women Need Long-term Care Insurance More than Men?

According to the U.S. Department of Health and Human Services, 70 percent of people turning age 65 can expect to use some form of long-term care during their lives.*

In the U.S., the average life expectancy for men is 76.4 years, and for women it is 81.2 years, per the Centers for Disease Control and Prevention’s National Center for Health Statistics.**

Knowing this, it is relatively safe to assume that both men and women can benefit from long-term care insurance, since the average life expectancies are longer than 65 years.

But with women living nearly five years longer than men on average, are they better candidates for long-term care?

Men Need It, Women Need It for Longer

The U.S. Administration on Aging issued a report in 2012 that states, “Some type of disability (i.e., difficulty in hearing, vision, cognition, ambulation, self-care, or independent living) was reported by 35% of men and 38% of women aged 65+.” ***

While the majority of the population may not need long-term care right as they turn age 65, limitations in activities because of chronic conditions increase with age, per the same AOA report.

By the time individuals approach age 75 and beyond, it is much more likely that they are experiencing limitations in activities and will need long-term care insurance.

Women and Men - Activities Age and LTC

Limitations in activities increase as people age. (U.S. Administration on Aging)

So while men may want to consider insurance for long-term care, it is the women who may need to purchase a larger policy to carry them into their 80s and beyond.

 

*http://longtermcare.gov/the-basics/who-needs-care/

** http://www.usatoday.com/story/news/nation/2014/10/08/us-life-expectancy-hits-record-high/16874039/

*** http://www.aoa.gov/Aging_Statistics/Profile/2012/docs/2012profile.pdf

 

Understanding 529 College Savings Plans

The keys to understanding 529 education savings plans are location, tax benefits, and the types of plans that are available.

529 Education Savings Plan – Guidant Wealth Advisors

What is a 529 Plan?

The 529 Plan is an investment account that helps families save money for future college costs. Some families start saving as soon as children are born, but you can enroll in a plan at any time with a 529 Plan Manager or a financial advisor.

Location

The 529 Plan is available in nearly every U.S. state, but these plans can differ from one state to the next. The good news is that the plans are usually flexible: you can live in Arizona, enroll in a plan from New York, and use the funds at a college or university in Texas (as long as the plan allows it).

In other words, just because you enroll in a plan in one state does not mean you have to live there or use the funds there. You should check the provisions and restrictions of a 529 Plan before you enroll, but a Plan Manager or financial advisor should be able to match your preferences with the right program.

Tax Benefits

The money that you set aside in a 529 college savings plan grows federal tax-free and will not be taxed or penalized when taken out, as long as the funds are used for plan-approved college costs. Contributions are not deductible on federal income taxes, they may need to be reported as a gift.

Some states offer tax deductions or credits for 529 plan contributions. If your state does not, then you may want to check into another state’s plan.

Contributions may qualify for the gift tax exclusion or reduce estate sales tax, but you should speak with the Plan Manager or financial advisor to be sure.

Types of Plans

With 529 education savings plans, you typically have two choices: savings plans and prepaid plans.

Savings plans invest your contributions in an investment account, so they are similar to a 401k or IRA account.

Prepaid plans are for families who want to pre-pay all or part of the education costs. Some higher education institutions now offer their own 529 prepaid programs, which means your funds are intended for that particular institution.

Conclusion

No matter which plan you choose, there are no limits on income, age, or annual contribution (although there are lifetime contribution limits). The benefits of a 529 college savings plan are the flexibility to choose where you want to use the funds (in many cases), the federal and state tax benefits, and the freedom to enroll in a plan that suits your particular financial situation and ambitions.

 

Prior to investing in a 529 Plan investors should consider whether the investor’s or designated beneficiary’s home state offers any state tax or other benefits that are only available for investments in such state’s qualified tuition program. Withdrawals used for qualified expenses are federally tax free. Tax treatment at the state level may vary. Please consult with your tax advisor before investing

 

Financial Planning by Decades: What to Expect in Your 40s

By the time you reach your 40s, you may have put more thought than money into savings and retirement. Here are a few reasons why it may be time to switch gears.

 Financial Checklist for 40-Year-Olds

For some people, the fourth decade can be the most challenging one yet. With simultaneous responsibilities of a home, family and aging parents, the idea of putting money away can seem next to impossible.

Yet according to the Federal Reserve, the average amount of retirement savings for this age group is $42,700-$87,200 – so this is good news.

Financial Planning - Median Retirement Savings

The next step for 40-somethings is to plan for the rest of the time, from now until retirement (you have a good 20-25 years).

Here are five areas where you may want to focus your attention:

  •      Life Insurance: If you put off life insurance in your 30s, then the buck really does stop at 40. Now is the time to make sure that your family will be taken care of if something should happen to you. This is especially true if you have children. The good news is that term life insurance is relatively inexpensive for 40-year-olds in good health. Consider applying for a plan for yourself – and your spouse, if applicable – so that the household finances are protected.
  •      Estate Plan: Similar to life insurance, an estate plan that was not established in the previous decade should be prioritized in your 40s. An estate plan will detail who is to become the guardian of your children and how funds are to be used, should something happen to you and/or your spouse. Both the life insurance and estate plan should be established before anything else at this point.
  •      Emergency Fund: With all of the extra responsibilities that tend to define this decade, an emergency fund could not be more important. A good rule of thumb is to have three to six months of cash that is liquid and accessible. If you lose a job or have a large expense that you didn’t anticipate, then the emergency fund will enable you to get by and pay your bills.
  •      Eliminate Debt: If you have not paid off credit card debt at this point, you need to focus on this immediately. The longer you wait to pay off this kind of debt, the more money you lose to interest that could be used to save for retirement. One suggestion is to pay off the loan with the highest interest rate first.
  •      Finally, Retirement: Once you have your affairs in order and you have zero credit card debt, then it’s time to start directing the majority of your savings to retirement accounts. This can include an employee-provided 401(k) plan, an individual retirement account, or both of these. This is also a good time to consider how much money you may need to live on, once you retire. To figure this out, it could be helpful to speak with a financial planner who can look at the whole picture.

When you are in your 40s, retirement can seem like a long way off. You most likely have about 20-25 years to save and plan for your later years, but you will also need at least this much time to do just that. If you can start putting away money now, then you can lessen the amount of painful adjustments you have to make to retire, when and where you please.