What Everyone Ought to Know About Long Term Care Insurance

What Everyone Ought to Know About Long Term Care Insurance

You’ve seen the stats.  Long term care is expensive, and we’re all likely to need it at some point in our lives.  The cost of spending time in a nursing home or assisted living facility adds up quickly, which is why many retirees choose to insure against it through a long term care insurance policy.

Problem is, since there’s a high likelihood of requiring long term care, insurance is an expensive proposition in its own right.

Are you better off crossing your fingers and hoping you don’t need expensive care for a long period of time?  Or is it better to cover this risk through an insurance policy that will cost you an arm and a leg anyway?

This post will cover the essentials of long term care insurance, including exactly how to decide whether picking up a policy is a good decision for you and your family.

 

Long Term Care: The Stats

So here’s the big question.  What are the chances you’ll ever need long term care?  According to longtermcare.gov, about 70% of people turning 65 will need long term care services at some point in their lives.  With the average annual cost of a nursing home totaling about $96,000 these days, this can be a scary proposition.

The stats can be misleading, though.  Many people who need long term care services only need them for short periods of time.  And since most long term care policies have elimination periods (the period before the policy starts paying out) of around 90 days, many people won’t even need care long enough for their coverage to kick in.

What Everyone Ought to Know About Long Term Care Insurance

What Everyone Ought to Know About Long Term Care Insurance

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You’ve Inherited an IRA. Now What?

You've Inherited an IRA. Now What?

Inheriting an IRA is quite a bit different than inheriting any other asset.  Unlike cash or investments in a traditional investment account, if you inherit an IRA you’ll need to start withdrawing from the account in order to avoid hefty penalties.  In this post we’ll cover what your options are when you inherit an IRA, and how you can best manage it for you & your family.

 

How IRAs are Passed After Death

Whereas many of your assets will be distributed to heirs according to your will, IRAs are instead distributed by contract. Your custodian (the brokerage firm that holds your account, like Vanguard or TD Ameritrade) lets you designate as many beneficiaries and contingent beneficiaries as you like.  Once you die, your account bypasses your will, the probate process, and is distributed according to this beneficiary designation.

When account holders don’t designate any beneficiaries things get a little murkier.  When the account holder dies, their account is distributed according to their custodian’s default policy.  At most custodians this default policy diverts the IRA back to their estate (and goes through probate) but at some it’s diverted to their spouse first.  Unfortunately, if the account holder didn’t designate a beneficiary while they were alive, you’re at the mercy of your custodian’s policy.

If the account is indeed diverted back to their estate, it’ll be distributed according to your state’s interpretation of their will.  And if they didn’t have one (meaning they died intestate), the state will make its own decision on who should inherit the asset.

The moral of the story?  Take advantage of the opportunity to bypass probate, and designate your beneficiaries formally while you’re still alive.

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Essential Financial Moves for New Parents

Essential Financial Moves for New Parents

You’ve heard it before: life changes once you have kids.  As the proud parent to a six month old baby boy, I can attest that the rumors are true.

Having kids brings a quite a bit of chaos to your life.  And to try to get a handle on things we’ve read several of the popular contemporary baby books.  In most of them the message is the same: apply a consistent routine.  When your baby knows when to expect sleep time, feeding time, or play time, they gain confidence and often start to excel.  In other words, routine = fewer moving parts, less chaos, and more confidence.

I think our personal finances have a lot do with this as well.  When you have a kid your financial picture changes.  You have different and greater obligations, and need to start thinking about college costs.  The fewer “loose ends” you have with family finances, the less chaotic your family life will be and more you’ll thrive.

So to help us get a feel for the financial side of parenting, I’d like to welcome my guest Josh Brein to the blog.  Josh is a Seattle financial advisor and president of Brein Wealth Management, LLC.  He’s also a proud dad to his daughter Erin.

Today, Josh will share with us how your finances change once you become a parent, as well as essential financial moves new parents should make.

Welcome, Josh!  Let’s get to it:

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Entrepreneurship as a Means to Financial Independence

Using Entrepreneurship as a Means to Financial Independence

Today’s post is another on the topic of financial independence.  We’ve had several of these recently, but since that’s the focus of this blog I guess that’s not surprising.

Rather than discuss the fundamental components of financial planning like insurance or investing, today’s focus is entrepreneurship.  Specifically, how entrepreneurship can be a wonderful way to align your career with your lifestyle and become financially independent on your own terms.

Forewarning: today’s post is another that falls on the philosophical side of the spectrum.  I normally don’t write too many of these posts, and realize there’s already been several to start the year.  Read on if you’re OK indulging my abstract (and possibly poor quality) musings.

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How the Trump Presidency Could Affect Your Finances

How the Trump Presidency Could Affect Your Finances

Recently I’ve had a few questions from clients and readers about what they should be looking out for now that we have a new president in office.  As you know, Mr. Trump has had a pretty eventful first few weeks in office.  In fact, as I write this protests are underway at no less than 15 major airports across the country.

In this post I’m going to share some of the trends and data points that I’m keeping an eye on, and on some discuss how they might affect your financial situation.  This post is in no way political.  This isn’t an endorsement or criticism of president Trump or his policies.  My objective here is simply to share some thoughts about how our new president might impact our finances and what you might want to look out for.

As one of my clients phrased it recently, we’re all in this boat together.  Like or not we just have a new captain at the helm.

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The Role of Insurance in the Pursuit of Financial Independence

The Role of Insurance in the Pursuit of Financial Independence

Executive Summary:

There are many unfortunate things that can happen to us that risk our pursuit of financial independence.  Some of them we can manage & control, others we can’t.  For the “stuff” out there we can’t control, insurance allows us to transfer risk to an insurance company in exchange for a nominal premium.

This post covers the role of insurance along your pursuit toward financial independence.  It’ll also cover a prudent risk management framework.  If used correctly, financial independence no longer becomes an aspiration that may happen – it becomes an inevitability.


Financial independence is a goal many of us share here in the America.  It’s also, of course, the focus of this blog.

For the baby boomer generation, financial independence lines up very closely to the traditional American career path: enter the workforce in your 20s, put in 40-45 years, and fully retire sometime around age 65.

Younger generations are starting to explore more creative paths to financial independence, like extreme budgeting and newfangled forms of entrepreneurship.

Whatever your route to financial independence, risk is an important part of the equation.  There are many unfortunate things that sometimes happen in this world that might drag us off course, or even be catastrophic:

  • We could die or become disabled unexpectedly
  • We could wreck our car
  • We could get sick
  • We could get sued
  • Our house could burn down

These are risks that we face every single day. They jeopardize our assets, our ability to earn income or both.

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Social Security Reform Under a Trump Presidency

What's on the Table

Social Security Reform Under Trump: What's on the Table

With Donald Trump now in office, there are a lot of people approaching retirement who are concerned about the state of Social Security.  With Mr. Trump initiating drastic reforms in other areas of the government, the fact that Social Security is underfunded has many current and future retirees concerned their benefits might be reduced at some point.

Social Security is a huge component of most Americans’ retirement plans.  And while I consider myself pretty well versed in the system, I decided to bring in a subject matter expert for this post.  Ben Brandt, of Capital City Wealth Management, was kind enough to share his time and shed some light on the matter.  This post is a quick update of the current status of the Social Security fund, as well as Ben’s insight on what reforms are currently on the table.

 

The Current State of Social Security

We’ll get to my interview with Ben shortly.  For some context, let’s take a look at the current state of Social Security.  Every year, the Social Security fund’s trustees are required to issue a report on the fund’s financial status.  Each report includes data on the fund’s current assets (cash) and liabilities (retirement benefits payable).  They also include long term projections based on demographic data and a bunch of other variables.

The most recent report claims that the Social Security trust is currently taking in more revenue through payroll taxes than it’s paying out in benefits.  It projects this to be the case through 2019.

Social Security Reform Under Trump: What's on the Table

Some key assumptions from the trustees’ most recent report.

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Savvy Social Security Planning: Making the Most of Your Benefits

 

Good Afternoon!

As you may recall, we hosted a live webinar back in December about top retirement planning mistakes.  Based on your feedback, I put together a 60 minute presentation that covered some of the major retirement “red flags” I see in my financial planning practice.

It was a big success.  I got some great feedback from the attendees, and although it wasn’t completely perfect I was pretty happy with the result.

Building from this experience, I’d like to announce that I’ll be hosting another webinar on Tuesday, January 24th, from 10am-11am PST.

The official title is Savvy Social Security Planning: Making the Most of Your Benefits, and the video above covers the who/what/where/why.  It’s an especially interesting topic right now with everything going on in Washington.  Make sure to register by clicking here.

Even if you can’t make it on Tuesday, be sure to register anyway and I’ll send you a replay link you can watch after it’s over.

Click here to register.

Date: January 24, 2017
Time: 10:00-11:00AM
Event: Savvy Social Security Planning: Making the Most of Your Benefits
Topic: Social Security Planning
Sponsor: Three Oaks Capital Management
503-726-1071
Public: Public
Registration: Click here to register.

Money-Centered vs. Happiness-Centered Living

Money-Centered vs. Happiness-Centered Living

Today’s post is going to fall a little more on the abstract side of the spectrum.  To date, most of the posts you’ll find on Above the Canopy are somewhat technical, and oriented toward achieving financial independence.

But for many thousands of people in America, the traditional career trajectory (working for 30-40 years until fully retiring around age 65) is a poor fit for their values.  The pursuit of financial independence often compromises the important parts of our lives, leaving us overworked and unhappy.

So in today’s post I’ll examine the difference between money-centered and happiness-centered living.  We’ll cover what we actually need to be happy, and the role money plays in fostering a happy life.  Finally, we’ll cover how you can arrange your finances to support a life focused on happiness & fulfillment.  If you’re up for a “deeper” post and don’t mind me waxing philosophical, read on!

 

Traditional Financial Independence

Usually when we hear about financial independence, it’s used in the context of having enough assets to live off of comfortably.  Whether they produce enough income to fully cover our living expenses, or the withdrawals from principal are small enough that we’re confident we’ll never run out of money, the idea is the same.  Financial independence means we’re no longer beholden to employment, since we could live off our own assets if we wanted to.

This idea of financial independence also fits pretty nicely with our traditional view of retirement here in America, where there’s a stark contrast between “working” and “being retired”.  Our working years start when we first enter adulthood.  While we usually don’t have much to our name, we do have (hopefully) some ambition and a few skills we can use to earn a living.  We go out and market these skills to potential employers and eventually get a job.  If we’re lucky, it’s work that’s interesting to us and pays a decent wage.

Once we start our working years we begin to collect paychecks every other week, which we use to pay taxes, rent, and other living expenses.  After the bills are paid we use anything left over to pad our retirement accounts, bank accounts or both.

At this point we’re in the phase of life affectionately known as the accumulation phase.  We earn an income, use it to pay our living expenses, and save whatever is left over.  Our savings grow with each paycheck, and our net worth accumulates over time.

We invest our savings in order to accelerate growth, and sooner or later we reach the holy grail – financial independence.  If we wanted to, we could discontinue our employment and use income and withdrawals from our savings to pay our living expenses.  We’re no longer reliant on our job for income.  We can do whatever we want.  We’re financially independent.

Money-Centered vs. Happiness-Centered Living

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What Will Healthcare Cost in Retirement?

What Will Healthcare Cost In Retirement?

 

What Will Healthcare Cost in Retirement?

 

Planning for retirement takes careful preparation and a decent idea of what your budget will be once you stop working.  This can be a pretty scary process with so many unknown variables.  How much will groceries, travel, and utilities cost in 15-20 years?  How long will you live, exactly?  What if you get hurt or need help with everyday activities like getting dressed or paying the bills?

Arguably the biggest variable when we talk about retirement is the cost of healthcare.  It’s no secret that the cost of coverage and prescription drugs is increasing at an uncomfortable pace.  This post will cover the current research on what healthcare will cost in retirement, as well as the best way to put money aside for it now.

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