Handling Guilt When Moving Loved One to Assisted Living Versus Nursing Home

Just 5% said they wanted to be cared for in an assisted living community, and only about 13% actually moved into a community.

McKnight’s Senior Living’s recent article entitled “Family feels less guilt when loved one moves to assisted living versus nursing home: study” says that a family that moved an older adult into assisted living reported having greater feelings of guilt related to that move due to limits in their ability to provide assistance (35%) compared with providing care at home (22%), moving an older adult into a caregiver’s home (15%), or moving an older adult to an adult day facility (9%). However, the feelings of guilt were more for families with loved ones that moved into nursing homes(40%).

The pandemic increased the belief in the importance of early planning. About a third (29%) of respondents in 2021 said they believed in long-term care insurance, compared with 15% in 2018. However, the number of people who actually bought long-term care insurance hasn’t changed significantly (14% as in 2018). The study points out that insurance impacts where care is delivered. Owners of long-term care insurance (25%) were significantly more likely than non-owners (11%) to receive care in an assisted living community, where, researchers said, residents may have more space and better accommodations than what typically is provided in nursing homes.

Compared with 2018, family caregivers were more likely to use professionals when looking for support and knowledge about caregiving options. This included social workers (23% of respondents said they used them in 2021; compared to just 18% in 2018), financial professionals (20% from 17%), and attorneys or elder law specialists (11% up from 7%). The primary “helpful” resources for family caregivers in 2021 were television programs (70%), internet-based social networks (68%), attorneys or elder law specialists (66%), financial advisers (65%) and nonprofit groups (61%).

However, the average time families spent researching professional caregivers dropped from 7.6 hours in 2018 to 6.8 hours in 2021. Overall, the study found longer lifespans and more demand for complex care are complicating caregiving. Care needs are more severe and longer lasting compared with 2018 study results, the researchers found.

According to the most recent research, about half (49%) of care recipients need assistance with all activities of daily living. That’s an increase from 39% in 2018. And the average duration of care needed rose from 3 years to 3½ years.

Seniors also have more age-related limitations (47% had such limitations in 2021, up from 44% in 2018), cognitive impairments (32%, up from 26%) and accidents requiring rehabilitation (23%, up from 21%).

Reference: McKnight’s Senior Living (Nov. 2, 2021) “Family feels less guilt when loved one moves to assisted living versus nursing home: study”

 

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How Can I Conduct a Family Meeting about Family Wealth Planning?

Kiplinger’s recent article entitled “It’s Never Too Late for a Family Meeting – Here’s How to Do Them Well” emphasizes that no matter the amount of wealth that a family has, wealth education is crucial to overall financial education, preparing for the future and to becoming a good steward of an inheritance.

Family meetings are a great way of bringing members of a family together with a goal of facilitating communication and education. This allows for sharing family stories, communicating values, setting goals to help ensure transparency and helping members across generations understand their roles around stewardship and wealth.

Here are some ideas on how to have an effective family meeting:

Prepare. The host of the meeting should spend time with each participating family member to help them understand the reason for the meeting and learn more about their expectations. There should be a desire and commitment from the participants to invest time and effort to make family meetings a success.

Plan. Create a clear agenda that defines the purpose and goals of each meeting. Share this agenda with participants before the meeting. Select a neutral location that makes everyone comfortable and encourages participation.

Have time for learning. Include an educational component in the agenda, such as an introduction to investing, estate planning, budgeting and saving, or philanthropy.

Have a “parking lot.” Note any topics raised that might need to be addressed in a future meeting.

Use a facilitator. Perhaps have a trusted adviser facilitate the meeting. This can help with managing the agenda, offering a different perspective, calming emotions and making certain that everyone is heard and understood.

Follow up. Include some to-do’s and schedule the next meeting to set expectations about continuing to bring the family together.

Reference: Kiplinger (Sep. 1, 2021) “It’s Never Too Late for a Family Meeting – Here’s How to Do Them Well”

 

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How to Make a Few Bucks after Retirement

When you retire, it can be hard to generate extra income. However, if you can lower your spending, you won’t need to dip into your retirement funds as much. Money Talks News’ recent article entitled “7 Unusual Ways to Cut the Cost of Living in Retirement” gives us some atypical ways to lower your expenses in retirement:

  1. Move in with the children. Children these days often live at home until they’re in their 20s. They can return the favor by letting their retired parents live with them after they’ve formed their own households. However, prior to moving in with Junior, make sure that you reach an agreement about whether you’ll help out with household expenses.
  2. Rent out a room in your home. If you have empty bedrooms in your house because your children have grown up and moved away, consider renting one out. Companies such as Roommates4Boomers and Silvernest help seniors rent out extra space in their homes or find an older roommate with whom to reside. However, being a landlord requires some effort. You’ll need to screen tenants, collect damage deposits and collect the rent, unless you use a company that handles that for you.
  3. Get your green thumb going. You can max out your savings if you grow vegetables that can be easily stored or preserved, such as potatoes, onions and winter squash. Beans, tomatoes, cucumbers, beets and sweet corn can be preserved by freezing or canning.
  4. Downsize your fleet. When you retire, you may be able to share a single vehicle with your spouse. That would eliminate the expenses associated with owning and operating a second car. Transportation-related costs are the second-largest type of expense for the average household led by someone who is 65 or older, after housing.
  5. Drop unhealthy habits. You can reduce your medical costs in retirement, if you make a greater effort to stay healthy. One way to do this is to avoid unhealthy habits, such as smoking or drinking alcohol to excess.
  6. Canceling your life insurance. The purpose of life insurance is to replace the income of household earners, providing for dependents in the event of a breadwinner’s untimely death. However, when you’re retired, odds are that your kids are grown and supporting themselves. If you no longer have dependents, the money you’re spending on life insurance might be better spent on your daily needs.
  7. Plan to age in place. If you take action now to make your home safe and accessible as you age, you may increase your chances of staying in your home longer. If you’re able to “age in place,” rather than moving into an assisted-living facility or nursing home, you’ll likely also save money.

Reference: Money Talks News (Sep. 3, 2021) “7 Unusual Ways to Cut the Cost of Living in Retirement”

 

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Should I Keep My Life Insurance Policy?

About half of adult Americans have a life insurance policy, and more say they’re interested in purchasing one. But needs can change later in life when children grow up, and a retirement nest egg seems big enough to absorb financial shocks. Those nearing and in retirement may see less need for their life insurance policy than when they first bought it and may see the premiums they pay as burdensome.

Kiplinger’s recent article entitled “Other Uses for Life Insurance You May Not Know About” says that the tax benefits of a life insurance policy are potentially even more valuable now that the “stretch IRA” is no longer available to most of us. In 2019, the SECURE Act eliminated the stretch for most non-spouse beneficiaries. With limited exceptions, non-spouse beneficiaries can no longer “stretch” out RMDs (required minimum distributions) over the course of their lifetimes. Now, most non-spouse beneficiaries must withdraw their inherited tax-deferred retirement accounts within 10 years of the original owner’s death. This may result in an increased tax burden and a faster end to the tax benefits of the inherited account.

However, life insurance proceeds paid to beneficiaries are generally income tax-free, and some use life insurance to help transfer wealth to the next generation. Life insurance policies can provide business owners additional opportunities, such as paying off business debt, funding buy-sell agreements related to someone’s business or estate, or funding retirement plans.

It’s also estimated that 70% of Americans 65 today will need long-term care at some point, but many Americans nearing and in retirement don’t have long-term care insurance. Many people who do want to plan for long-term care costs may not want to invest in traditional long-term care insurance, because premiums can rise a lot, and there are typically no benefits if the owner ends up never needing long-term care.

An alternative option to long-term care insurance is to use a life insurance policy with long term care benefits. These combine the benefits of long-term care insurance with those of permanent life insurance through the purchase of an optional rider. They can still provide a death benefit if the owner passes away without having needed long-term care. If the owner does need long-term care, a certain amount of money or time is allotted to cover costs. If this amount isn’t used, some policies can offer a “return of premium” guarantee upon death or termination of the policy. If a remaining amount is passed on, beneficiaries may be able to enjoy it tax-free.

There are a number of potential benefits to life insurance beyond its traditional use when creating a retirement or estate plan.

Reference: Kiplinger (July 21, 2021) “Other Uses for Life Insurance You May Not Know About”

 

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Can You Have Bitcoin in IRA?

Experts on both sides of the cryptocurrency world agree on one thing: it’s still early to put investments like bitcoin into retirement accounts, especially IRAs. A recent article from CNBC, “Want to put bitcoin in your IRA? Why experts say you may want to rethink that, explains why this temptation should be put on pause for a while.

Investors who have remained on the sidelines on cryptocurrency are taking a second look as this new asset class surpassed the $2 trillion mark in late August. Looking at retirement accounts flush with positive growth from stocks, it seems like a good time to take some gains and test the crypto waters.

However, the pros warn against using cryptocurrency in retirement accounts. “Not just yet” is the message from both bulls and bears. One expert says using cryptocurrency in a retirement account is like taking a delicate and exotic animal out of its natural element and putting it in a concrete zoo. Cryptocurrency is not like “regular” money.

The accounts are structured differently The average investor also won’t be able to hold the keys to their own cryptocurrency investment. It’s a buy and hold, with no individual ability to move the assets around. While there are some investment platforms working to change that, an inability to move assets, especially such volatile assets, is not for everyone.

Cryptocurrency is a much riskier investment. A quarterly look at account updates would be like only checking your retirement accounts every five years. Cryptocurrency values are volatile, and an account balance can change dramatically from one week, one day or even one hour to the next one. Crypto is a 24/7/365-day market.

Self-directed IRAs are allowed to have crypto assets, but just because you can doesn’t mean you should. Another reason: stocks, bonds and real estate have a stated market value, which means they are taxed when withdrawals are taken. However, the expected value of cryptocurrencies is not clear. They are not regulated, while IRAs are among the most highly regulated accounts. This is a big reason as to why most IRA account administrators don’t permit cryptocurrencies in their accounts.

Investment decisions are based on the eventual use of the funds. For IRAs, the intention is not to lose money, and ideally for it to grow, so there is more money for your retirement, not less. Separate margin or trading accounts are typically used for riskier investments.

One expert advised limiting cryptocurrency investments to 5% of your total retirement accounts. If money is lost, it won’t destroy your retirement, and any wins are extra money. Another expert says investing such a small amount won’t be worth the time or effort, so don’t even bother.

For those who are determined to get in the game, a Roth IRA may be preferable if you have an extended time horizon and can stand the ups and downs of cryptocurrency investments. The appreciation in a Roth IRA will be tax-free.

Reference: CNBC (Aug. 17, 2021) “Want to put bitcoin in your IRA? Why experts say you may want to rethink that

 

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How Do You Survive Financially after Death of a Spouse ?

The financial issues that arise following the death of a spouse range from the simple—figuring out how to access online bill payment for utilities—to the complex—understanding estate and inheritance taxes. The first year after the death of a spouse is a time when surviving spouses are often fragile and vulnerable. It’s not the time to make any major financial or life decisions, says the article “The Financial Effects of Losing a Spouse” from Yahoo! Finance.

Tax implications following the death of a spouse. A drop in household income often means the surviving spouse needs to withdraw money from retirement accounts. While taxes may be lowered because of the drop in income, withdrawals from IRAs and 401(k)s that are not Roth accounts are taxable. However, less income might mean that the surviving spouse’s income is low enough to qualify for certain tax deductions or credits that otherwise they would not be eligible for.

Surviving spouses eventually have a different filing status. As long as the surviving spouse has not remarried in the year of death of their spouse, they are permitted to file a federal joint tax return. This may be an option for two more years, if there is a dependent child. However, after that, taxes must be filed as a single taxpayer, which means tax rates are not as favorable as they are for a couple filing jointly. The standard deduction is also lowered for a single person.

If the spouse inherits a traditional IRA, the surviving spouse may elect to be designated as the account owner, roll funds into their own retirement account, or be treated as a beneficiary. Which option is chosen will impact both the required minimum distribution (RMD) and the surviving spouse’s taxable income. If the spouse decides to become the designated owner of the original account or rolls the account into their own IRA, they may take RMDs based on their own life expectancy. If they chose the beneficiary route, RMDs are based on the life expectancy of the deceased spouse. Most people opt to roll the IRA into their own IRA or transfer it into an account in their own name.

The surviving spouse receives a stepped-up basis in other inherited property. If the assets are held jointly between spouses, there’s a step up in one half of the basis. However, if the asset was owned solely by the deceased spouse, the step up is 100%. In community property states, the total fair market value of property, including the portion that belongs to the surviving spouse, becomes the basis for the entire property, if at least half of its value is included in the deceased spouse’s gross estate. Your estate planning attorney will help prepare for this beforehand, or help you navigate this issue after the death of a spouse.

It should be noted there is a special rule that helps surviving spouses who wish to sell their home. Up to $250,000 of gain from the sale of a principal residence is tax-free, if certain conditions are met. The exemption increases to $500,000 for married couples filing a joint return, but a surviving spouse who has not remarried may still claim the $500,000 exemption, if the home is sold within two years of the spouses’ passing.

There is an unlimited marital deduction in addition to the current $11.7 million estate tax exemption. If the deceased’s estate is not near that amount, the surviving spouse should file form 706 to elect portability of their deceased spouse’s unused exemption. This protects the surviving spouse if the exemption is lowered, which may happen in the near future. If you don’t file in a timely manner, you’ll lose this exemption, so don’t neglect this task.

Reference: Yahoo! Finance (July 16, 2021) “The Financial Effects of Losing a Spouse”

 

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What are the 411 on 529 College Savings Plans?

There are two basic types of 529 plans, says Texas News Today’s recent article entitled “What you need to know about the “529” Education Savings Account.” The more common type is the 529 College Savings Plan. This allows parents, grandparents and others to invest money to cover eligible education for beneficiaries. The less common type is the 529 prepaid tuition program, in which tuition is paid at a set price.

Contributions to the 529 Plan aren’t tax deductible at the federal level. However, many states offer state income tax deductions or credits. Your money grows tax-free and withdrawals to pay tuition and other eligible expenses are free of federal taxes and, in many instances, state income taxes.

529 plans can be used to pay for various college fees like tuition, room, food, books, and technology. You can pay up to $10,000 a year for K-12 tuition. You can also transfer the money in your account to other recipients. There are more pluses than minuses. However, you should note that you may face tax impacts and penalties for withdrawals that aren’t considered eligible costs. Your child’s college needs financial assistance may also be reduced, and you cannot purchase individual stocks within the 529 plan. However, you can select a number of investment options. Even so, you have fewer options than if you were designing your own portfolio.

You can transfer some or all of the existing funds in your account to another investment option twice in a calendar year or after changing beneficiaries. You can also select a different investment option whenever you join the plan. You can switch to another state’s plan once every 12 months. However, there are a few states that exclude such shifts from their plans.

Each state has set a total contribution limit of $235,000 to $542,000 per beneficiary. When an account hits the limit, you will not be able to make any more donations. However, revenue will continue to accumulate. There’s no annual donation limit, but donations are considered gifts for federal tax purposes. Therefore, this year, you could donate $15,000 per donor and per recipient with no federal gift tax. You can also make a $75,000 tax-exempt 529 plan donation and evenly distribute it to your tax return for the next five years, which is an option that some grandparents use as a tool for real estate planning.

The benefits of saving for college through the 529 plan are likely to outweigh the potential impact on financial assistance. Assets in an account owned by either a student or their parents are considered parental assets for federal financial assistance purposes, and typically only 5.64% of accounts are considered annually in the FAFSA (Federal Student Assistance Free Application) calculation. This is an advantage over being counted as a student asset because distribution under this ownership structure doesn’t disqualify the university for financial assistance. The assets of the grandparents’ account don’t impact the student’s FAFSA, but the distribution counts as the student’s income and affects aid.

Reference: Texas News Today (June 8, 2021) “What you need to know about the “529” Education Savings Account”

 

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What Is the Required Minimum Distribution for 2021?

There have been a number of changes to the requirements for RMDs—Required Minimum Distributions—from traditional retirement accounts, says a recent article titled “2 Essential Strategies for Taking Your RMDs” from Kiplinger. In 2019, the age for RMDs was raised from 70½ to 72. In 2020, they were waived altogether because of the pandemic. Now they’re back, and you want to know how to make good decisions about them.

Most people take the default approach, taking a lump sum of cash at the start or the end of the year. This is not the best approach. Investment markets and your own need for income are better indicators for how and when to take your RMD. If you can at all avoid it, never take an RMD from a declining market.

You can take your Required Minimum Distributions anytime during the calendar year, from January 1 to December 31. If it’s the first time you’ve taken an RMD, you get a bonus: you can wait until April 1 of the year after your 72nd birthday. The RMD is calculated, by dividing the account balance on December 31 of the preceding year by your life expectancy factor, based on your age. You can find it in the IRS’s Uniform Lifetime Table.

2021 distributions will be bigger, and not just because of the market’s 2020 performance. Instead, distributions will be bigger because of how the accounts are designed, with RMDs becoming a larger percentage over time. It starts as a small percentage and eventually becomes the entire account, which is then depleted. Remember, the sole purpose of the RMD is to force retirees to take money out of their retirement accounts and pay taxes on the money.

Many retirees take Required Minimum Distributions because they need the money to live on. Here’s where money management gets tricky. It’s far easier to take smaller amounts of money at regular intervals, kind of like a paycheck, than taking a big amount once a year. We’re creatures of habit and are used to receiving income and managing it that way.

Distributions on a regular basis also fosters a better sense of how much money you have to live on, encouraging you to create and adhere to a budget.

If you don’t need the income, taking money through regular installments also has an advantage. It’s like the opposite of dollar-cost averaging. Instead of putting money into the market in small increments over time to even out market ups and downs, you’re taking money out of the market at regular intervals. You’re not cashing out at the market’s lowest point, or at the highest. And if you’re reinvesting RMDs in a taxable account, this strategy works especially well.

Reference: Kiplinger (June 10, 2021) “2 Essential Strategies for Taking Your RMDs”

 

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Prescription Medications – How Do Seniors Get a Huge Discount?

Seniors can now join Walmart+ with a paid membership to receive a selection of free medications, plus thousands of other prescription medications at a discount of up to 85%.

Money Talk News’ recent article entitled “New Walmart+ Perk Can Save You Up to 85% on Drugs” explains that the prescription medications savings program — Walmart+ Rx for less — can save you money on “the most commonly prescribed medications across a variety of health needs, including heart health, mental health, antibiotics, allergies and diabetes management,” Walmart says.

Walmart says that free and discounted prescriptions are available at over 4,000 participating Walmart pharmacies around the country. However, they caution that the program isn’t insurance and isn’t available in all states.

Walmart+ Rx for less can’t be combined with insurance.

Seniors can sign up for a free trial. When it ends, as a Walmart+ member they can access their digital pharmacy savings card in their Walmart+ account on the Walmart website or app.

Next time a senior needs a prescription filled they can share the info on their digital pharmacy savings card with the pharmacist.

The new program is not the first time the nation’s largest retailer has tried to cut prescription drug costs.

Since 2006, Walmart has offered a $4 generics program that charges $4 for a 30-day supply of many generic drugs, or $10 for a 90-day supply. That program is still available to all Walmart shoppers, even those who are not Walmart+ members.

Walmart+ Rx for less is the latest perk added to the Walmart+ program

In December, the program rolled out free next-day and two-day shipping for members with no minimum purchase requirement, similar to Amazon’s Prime membership.

In a press release, Janey Whiteside, executive vice president and chief customer officer for Walmart U.S., says the newest prescription medications perks are part of an effort to make Walmart+ the “ultimate life hack” for customers:

“We know we can use our size and scale to help simplify things for our customers in a way only we can.”

Walmart ranks fifth in the top U.S. pharmacies ranked by prescription drugs market share in 2020 at 4.7%. CVS is first at 24.8%, and Walgreens is second at 19.1%.

Reference: Money Talk News (June 14, 2021) “New Walmart+ Perk Can Save You Up to 85% on Drugs”

 

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