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Tag: Retirement

Understanding Long-Term Care

 

Addressing the potential threat of long-term care expenses may be one of the biggest financial challenges for individuals who are developing a retirement strategy.

 

The U.S. Department of Health and Human Services estimates that 69% of people over age 65 can expect to need extended care services at some point in their lives. So, understanding the various types of long-term care services – and what those services may cost – is critical as you consider your retirement approach.[i]

 

What Is Long-Term Care? Long-term care is not a single activity. It refers to a variety of medical and non-medical services needed by those who have a chronic illness or disability that is most commonly associated with aging.

 

Long-term care can include everything from assistance with activities of daily living – help dressing, bathing, using the bathroom, or even driving to the store – to more intensive therapeutic and medical care requiring the services of skilled medical personnel.

 

Long-term care may be provided at home, at a community center, in an assisted living facility, or in a skilled nursing home. And long-term care is not exclusively for the elderly; it is possible to need long-term care at any age.

 

How Much Does Long-Term Care Cost? Long-term care costs vary state by state and region by region. The national average for care in a skilled care facility (semi-private in a nursing home) is $85,775 a year. The national average for care in an assisted living center is $45,000 a year. Home health aides cost a median $18,200 per year, but that rate may increase when a licensed nurse is required.1

 

Individuals who would rather not burden their family and friends have two main options for covering the cost of long-term care: they can choose to self-insure or they can purchase long-term care insurance.

 

Many self-insure by default – simply because they haven’t made other arrangements. Those who self-insure may depend on personal savings and investments to fund any long-term care needs. The other approach is to consider purchasing long-term care insurance, which can cover all levels of care, from skilled care to custodial care to in-home assistance.

 

When it comes to addressing your long-term care needs, many look to select a strategy that may help them protect assets, preserve dignity, and maintain independence. If those concepts are important to you, consider your approach for long-term care.  To discuss long-term care with a CapSouth advisor, contact our office at 800.929.1001 or visit our website at www.capsouthwm.com to request a meeting.

 

To talk to a CapSouth advisor about a strategy for long-term care, please call 800.929.1001 or visit our website at www.capsouthwm.com

 

Investment advisory services are offered through CapSouth Partners, Inc., dba CapSouth Wealth Management, an independent registered Investment Advisory firm. Information provided by sources deemed to be reliable.  CapSouth does not guarantee the accuracy or completeness of the information.  This material has been prepared for planning purposes only and is not intended as specific tax or legal advice.  Tax and legal laws are often complex and frequently change.  Please consult your tax or legal advisor to discuss your specific situation before making any decisions that may have tax or legal consequences.

 

This article contains external links to third party content (content hosted on sites unaffiliated with CapSouth Partners). The policies and procedures governing these third-party sites may differ from those effective on the CapSouth company website, as outlined in these Disclaimers. As such, CapSouth makes no representations whatsoever regarding any third-party content/sites that may be accessible directly or indirectly from the CapSouth website. Linking to these third-party sites in no way implies an endorsement or affiliation of any kind between CapSouth and any third party, including legal authorization to use any trademark, trade name, logo, or copyrighted materials belonging to either entity.

[i] https://www.fool.com/retirement/2018/09/02/5-long-term-care-stats-that-will-blow-you-away.aspx

Key Questions to Answer Before Taking Social Security

Social Security may be a critical component of your financial strategy in retirement, so before you begin taking it, you should consider three important questions. The answers may affect whether you make the most of this retirement income source.

 

When to Start? The Social Security Administration gives people a choice on when they start receiving their Social Security benefit. You can:

  1. Start benefits at age 62 or later.
  2. Claim them at your full retirement age.
  3. Delay payments until after full retirement age.

 

If you claim early, you can expect to receive a monthly benefit that will be lower than what you would have earned at full retirement. If you wait until age 70, you can expect to receive an even higher monthly benefit than you would have received if you had begun taking payments at your full retirement age.

 

When researching what timing is best for you, it’s important to remember that many of the calculations the Social Security Administration uses are based on average life expectancy. If you live to the average life expectancy, you’ll eventually receive your full lifetime benefits. In actual practice, it’s not quite that straightforward. If you happen to live beyond the average life expectancy, and you delay taking benefits, you could end up receiving more money. The decision of when to begin taking benefits may hinge on whether you need the income now or if you can wait, and additionally, whether you think your lifespan will be shorter or longer than the average American.[i],[ii]

 

Should I Continue to Work? Besides providing you with income and personal satisfaction, spending a few more years in the workforce may help you to increase your retirement benefits. How? Social Security calculates your benefits using a formula based on your 35 highest-earning years. As your highest-earning years may come later in life, spending a few more years at the apex of your career might be a plus in the calculation. If you begin taking benefits prior to your full retirement age and continue to work, however, your benefits will be reduced by $1 for every $2 in earnings above the prevailing annual limit ($17,640 in 2019). If you work during the year in which you attain full retirement age, your benefits will be reduced by $1 for every $3 in earnings over a different annual limit ($46,920 in 2019) until the month you reach full retirement age. After you attain your full retirement age, earned income no longer reduces benefit payments.2,[iii]

 

How Can I Maximize My Monthly Benefit? The easiest way to maximize your monthly Social Security is to simply wait until you turn age 70 before claiming your benefits.1,2

 

To learn more about CapSouth and the services we provide, please call 800.929.1001 or visit our website at www.capsouthwm.com

 

Investment advisory services are offered through CapSouth Partners, Inc., dba CapSouth Wealth Management, an independent registered Investment Advisory firm. Information provided by sources deemed to be reliable.  CapSouth does not guarantee the accuracy or completeness of the information.  This material has been prepared for planning purposes only and is not intended as specific tax or legal advice.  Tax and legal laws are often complex and frequently change.  Please consult your tax or legal advisor to discuss your specific situation before making any decisions that may have tax or legal consequences.

 

This article contains external links to third party content (content hosted on sites unaffiliated with CapSouth Partners). The policies and procedures governing these third-party sites may differ from those effective on the CapSouth company website, as outlined in these Disclaimers. As such, CapSouth makes no representations whatsoever regarding any third-party content/sites that may be accessible directly or indirectly from the CapSouth website. Linking to these third-party sites in no way implies an endorsement or affiliation of any kind between CapSouth and any third party, including legal authorization to use any trademark, trade name, logo, or copyrighted materials belonging to either entity.

[i] https://www.nerdwallet.com/blog/investing/take-social-security-benefits/

 

[ii] https://www.thestreet.com/retirement/social-security/maximum-social-security-benefit-14786537

 

[iii] https://www.fool.com/retirement/2018/12/01/4-things-you-need-to-know-about-filing-for-social.aspx

 

Life Insurance as an Asset Class

By J. Scott Fain

July 2019

Viewing life insurance as an asset class provides an additional benefit to consider when evaluating the purchase or continuation of an insurance policy.

 

What do I mean by asset class?  Traditional asset classes might include equities, fixed-income securities, cash equivalents, and real estate.  These categories organize various financial tools into groups that have similar characteristics, primarily in terms of risk.  Equities are generally considered to provide the greatest return over time, but also can carry the greatest amount of risk and volatility.  Advisors and portfolio managers typically strive to diversify clients’ portfolios to manage the amount of risk taken while still achieving acceptable rates of return over time.

 

Through the types of investments referenced above, what circumstances are needed for you to make money?  (Hint:  We’ve mentioned two big factors twice already…)  That’s right, you need returns and time.  We all hope for long, prosperous lives, but what if death occurs prematurely?  Now we have removed the element of time.  Though our money may have been invested well, those investments may not have had time to perform.

 

So what options do we have available to provide a greater return in the short-run?  You guessed it:  Life Insurance.  What if we had sufficient liquidity for our lifetime needs, and took one portion of our assets and invested in a life insurance policy?  Let’s look at an example:

 

Charlie is a 42 year-old male in good health.  Charlie is married to Sara, and they have two children, Larry and Mary.  Charlie and Sara currently have $750,000 in assets, and Charlie has an annual income of $85,000.  We will utilize sample average rates of return for the typical asset classes, and guaranteed internal rates of return for the life insurance death benefit based on a sample Nationwide illustration.

 

Charlie plans to contribute an additional $7,500 per year to his investments.  Using a $1,904 annual premium for a $250,000 permanent life insurance policy guaranteed to Age 121, let’s look at potential outcomes:

 

 

 

 

Under this simplified example, if all typical investments average the assumed rates of return, the portfolio diversified with insurance is more favorable if death occurs any year through age 76.  Following that age, investing the full $7,500 annually in equities would’ve generated a higher asset value.  Note:  These figures do not provide an adjustment for the tax savings.  The $250,000 death benefit generated by the life insurance policy pays to Charlie’s heirs income tax free under current law.  It is also important to note that the return generated by the life insurance policy is guaranteed, subject to the claims paying ability of the insurance company.

 

Might it be time for you to consider insurance as an asset class?

 

Contact CapSouth at 800.929.1001 for more information on this concept and how it might apply to your particular situation.  Also visit our website at www.capsouthwm.com 

 

CapSouth Partners, Inc., dba CapSouth Wealth Management, is an independent registered Investment Advisory firm.  CapSouth does not offer tax, accounting or legal advice. Consult your tax or legal advisors for all issues that may have tax or legal consequences.

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