Life Events Guides - Retirement and Elderly Care

Making Retirement Last
All the financial planning you've done throughout your life comes to fruition when you retire. But planning and budgeting don't end at retirement. Now that you've retired, you likely have a fixed amount of money to work with. And since people are living longer than ever, retirement savings need to last longer and work harder. It's more important than ever to make smart financial decisions.

Financial plan
It's time to take a financial inventory and figure out exactly what you have and how you're going to make that last as long as you do. Assess your income, assets and liabilities along with your assumptions and predictions of interest and inflation rates. This is your financial scenario. This is the basis for creating a new retirement budget and making decisions on whether to sell certain assets.

Your financial scenario will also help you decide what types of investments you want to make. Financial experts often suggest that retirement savings should be invested in more conservative funds. Younger investors have more time to recover from stock market losses and rebuild savings. If you lose a large portion of your investments in the stock market, that will have an immediate and detrimental effect on your financial well being.

A financial planner can be very helpful in determining what investments are right for your financial situation. But be careful whom you trust with your money. There are financial planners who work on a fee basis, not commission, so they won't be tempted to steer you into investments that make them a profit but may not be in your best interest.

Estate plan
Your estate plan is basically an exit strategy. It organizes your assets in such a way as to leave as much to your loved ones as possible. Estate taxes can be as high as 50% if your estate is valued at more than $1 million. If your estate is valued less than that, you can pass your assets to your loved ones without an estate tax. An estate planning attorney can help guide you through the complex laws regarding estate taxes.

Other aspects of estate plans deal with the creation of legal documents such as a will, power of attorney, testamentary letter and more, which are explained further in the legalities of elder care.

Relocation plan
Where will you live after retirement? This decision will be based on many factors including your financial situation, your physical abilities and your emotional attachments.

Financial concerns may influence you to sell your home and relocate. The sale of a home may provide extra income to increase your retirement budget. You may want to live in an area with lower living expenses or lower income taxes. Or, if you are in good financial shape, you may want to move into a nicer home.

You will also need to consider how long you will be able to physically maintain your home - keep it clean, maintain the yard and keep up with the repairs of the home.

How do you feel about where you live? Is it close enough to your family and loved ones? Think about what makes you feel comfortable, how your neighborhood is changing, how the weather affects you and other factors that you can't put into a calculator.

Social Security

The United States Social Security Program, started in 1935, is meant to provide supplemental support for retired or disabled persons in the United States.

How it works
Unless you were employed by an agency that opted out of the Social Security system, every paycheck you've earned throughout your life has had Social Security tax taken out of it. This money isn't reserved for you when you retire. It's put into a large fund from which current Social Security benefits are paid. But your tax isn't being taken in vain. You receive Social Security credit for your tax. You need to have been employed for at least 40 quarters under Social Security to be eligible for Social Security benefits when you retire.

Social Security updates
All workers who are over the age of 25 who are not yet receiving Social Security benefits receive yearly statements from the Social Security Administration. These statements contain your earnings over the years as well as estimates for your Social Security retirement, disability and survivor's benefits. Check these statements carefully to make sure you are getting credit for all of your earnings. Errors could affect your benefits.

When you are eligible
The soonest you can receive Social Security retirement benefits is at age 62. But if you delay receiving benefits until a few years later, your benefit amount will be greater. This decision should be based on your financial position - do you need the money or can you wait until your benefits reach their full potential? No matter when you choose to start collecting benefits, you must sign up three months in advance of when you actually want to receive your first check.

The Social Security crisis
One in six Americans now collects Social Security benefits. That's more than 45 million people. For now, there is more money going into the Social Security fund than is being paid out. But as the baby boomer population gets older, there will be many more people eligible for Social Security benefits. The money going into the fund will not be enough to cover all the benefits being paid out.

Medicare
Medicare is health and hospitalization insurance for people older than 65 or for those who are disabled. Some portions of Medicare are not free, however, and premiums are deducted from your Social Security benefit checks. Even if you have private insurance you should apply for Medicare. If you don't you may end up paying higher premiums later.

There are three levels of Medicare coverage available.

Medicare Part A - hospital insurance
Part A Medicare is provided at no charge to anyone disabled or over the age of 65 who has paid Medicare taxes for at least 10 years. It covers the hospitalization costs, over and above your deductible, for the first 60 days of your hospital stay. From there, Medicare pays all costs above your co-pay until the 90th day in the hospital.

If you were in the hospital for at least three days, Medicare Part A will cover the approved costs of your stay in a nursing home for the first 20 days of care. After that, it pays for all costs over your co-insurance payments up to the 100th day. Blood transfusions are also covered by Medicare, after the first three pints of blood.

If it is determined that your condition is incurable and you would prefer not to stay in a hospital, Medicare will pay for hospice care, with limits on outpatient drugs and inpatient respite care. Hospice care provides a more comfort-based approach, preferring support, therapy and pain-killing drugs to surgery, hospitalization and traditional medicine.

Home health care as well as 80 percent of medical equipment costs are also covered by Medicare.

Medicare Part B - doctor, outpatient and clinical services
To obtain Medicare Part B coverage, you must pay a premium of about $54 a month. This coverage pays for 80% of approved doctor and outpatient services. You will be responsible for the remaining 20%. Be aware, however, that not all doctors accept Medicare. Check with your doctor before you receive services. Medicare Part B also covers medical tests, lab work, biopsies, and blood work as well as blood transfusions after the first three pints, home medical care and 80% of the cost of home medical equipment. If you don't enroll in Part B at the time you turn 65, you can enroll later, but for each year you put it off the premium will increase 10%.

Medigap is supplemental private insurance that will pay for any costs not covered by Medicare Plan B. If you don't sign up for Medigap at age 65, you can enroll later, but you will be subject to underwriting, which may be a problem if you are in poor health or have chronic conditions. Signing up at age 65 is your best bet. That way, you are guaranteed to get the insurance at the lowest cost, and no one can take it away.

Medicare Part C - Medicare Plus Choice
Medicare Part C is the newest offering from Medicare. It's a private plan under which plan members receive all the benefits of Medicare Part A and B as well as their choice of the following: an HMO (Health Maintenance Organization), a PPO (Preferred Provider Organization), a PSO (Provider Sponsored Organization), a MSA (Medical Savings Account) or another private fee-for-service plan.

What's not covered by Medicare?
While Medicare does cover a substantial amount of healthcare costs, there are quite a few things that is does not cover. For these costs, private insurance can pick up where Medicare leaves off.

Examples of unpaid costs:

• Nursing Care beyond 100 days
• Medical Services in foreign countries
• Doctors who have not joined the Medicare plan
• Prescription drugs outside a hospital
• Regular check-ups
• Cosmetic surgery
• Immunizations

Medicaid
For people living in poverty, Medicaid will assist with medical and health care bills. Medicaid is administered by the states, and in many states it is called something other than Medicaid. To qualify for Medicaid, household income must be less than a certain low amount with an additional allowance for each additional family member. Medicaid support is meant to be a last resort for those who can't afford health care.

The Legalities of Elder Care
When you assume care of an elderly relative, there are many legal documents and formalities that may need to be completed. These should be taken care of as soon as possible and, if the person you are taking into your care can help you, it will make the process go more smoothly. Keep in mind that when someone completes these documents, they are, in fact, giving up some control of their own lives. Only a very close friend or family member with no conflicting motives should be given these powers.

Letter of instruction
A letter of instruction provides important information and instructions a caretaker may need. It includes the contact information for close family and friends, a list of assets and liabilities, a list of insurance policies and information on all financial accounts.

Will
A will designates who will receive major assets after a person dies. It also includes guardianship of any children under the age of 18. Smaller items such as heirlooms, furniture and other household goods, should be addressed in a separate testamentary letter. This letter should be referenced in the will.

Powers of attorney
If the people under your care are unable to make decisions for themselves because they are somehow incapacitated, you will need to have power of attorney to make these decisions for them. Of course, they will need to create powers of attorney before they are actually needed.

There are two main types of powers of attorney. A durable power of attorney gives a person, or people, authority to manage finances and other legal affairs if the person needing care is not capable of managing these. It can be long-term or short-term and allows the party that has power of attorney to use money to provide care, sign tax returns, handle investments and other important matters.

A healthcare power of attorney allows the person designated to make healthcare decisions if the person being cared for is unable to make these himself or herself. For example, someone holding power of attorney may be able to decide against dangerous surgery if he or she feels that is in the patient's best interest.

Living will
A living will is a clear statement about wishes regarding artificial life support. If a person's brain is dead yet the body remains functioning only with the help of life support, a living will directs attendants in what choice to make - to keep the machines functioning or turn them off.

Long-term care
For those who can no longer take care of themselves, long-term care is a broad term for many different options including nursing homes and in-home care. Long-term care insurance is becoming increasingly popular as a way of easing the financial strain that long-term care can impose. Shopping around for long-term care insurance is important because all policies are different and you will need to find a policy that will fit your particular needs and budget.

The costs of long-term care
The reason long-term care insurance is becoming so popular is that long-term care can be incredibly expensive - $40,000 per year or more. Prescription drugs, legal fees and other costs can creep up quickly as well. But insurance premiums can also be fairly expensive - up to $6,000 per year. Decide what type of care you want, find out the uninsured cost for it and compare it to the insurance premium that would cover it. This will help you determine what coverage is right for you.

Services covered by long-term care
Long-term care usually consists of some combination of skilled care, intermediate care and custodial care. Skilled care is the most expensive service involving round-the-clock care by a registered nurse under the close supervision of a physician. Intermediate care is less intense and includes occasional nursing and rehabilitative care under the supervision of medical personnel. Custodial care is home care. It provides for the basic, non-medical needs of a patient such as cooking, bathing and other day-to-day needs.

Selecting an insurance provider
With the wide variety of services that are available, choosing the right insurance provider can be difficult. There are a few questions, however, that will help you decide.

• How are the benefits paid? Are they sent directly to the provider or do you have to pay the charges and receive reimbursement?
• Who determines if the patient needs home health or nursing home care?
• What level of care does the policy provide?
• What is the waiting period from when the service begins to when benefits are paid?
• Does the policy cover Alzheimer's disease and related disorders?

Financing Elder Care
Elder care can be an expensive undertaking and you should plan for it financially in order to avoid unnecessary tax burdens.

First steps
Assess the annual income of the person you will be caring for, including pensions and Social Security benefits. Subtract this income from $40,000 to find out approximately how much of annual elder care costs will need to be met from other sources. Then add up the person's investments and savings. Divide this number by the annual elder care costs that must be met from other sources to get a rough estimate of how many years of care this money will provide.

Gifts
You are allowed to give someone up to $11,000 a year without having to file a gift tax return. If you are married, you and your spouse together can give a $22,000 gift. Medical expenses you pay on someone's behalf do not count as a gift, however, and you can give the full amount we have discussed in addition to paying those medical expenses. You should check with an accountant or financial adviser for specific requirements.

Loans
If you loan money to the person you are caring for, that money is not taxable to them. But for the loan to be valid, it must be payable with interest, if the loan amount is greater than $10,000. The interest rate for family loans is specified by the IRS.

Tax deductions
If you provide more than 50% of the financial support for someone, including one for whom you are providing care, you may count that person as a dependent on your tax return as long as his or her income is under $3,000 a year. You can also claim as a deduction any of that person's medical expenses that you have paid.

Reverse annuity mortgage
If an elderly person has a home with no (or a low) mortgage, he or she may borrow against the home through a reverse annuity mortgage. The lender pays the homeowner a monthly payment based on the value of the home. These payments reduce the equity of the home. The bank is then repaid, with interest, when the home is sold.

Personal vs. Professional Care
The choice between personal care and professional care can be very difficult. The time and responsibility involved with providing care yourself can be overwhelming. But the familiarity, comfort and personal interaction with someone close can be invaluable for an aging dependent. Professional care provides much more comprehensive service and won't require you to give up as much of your life. But professional care is a large financial burden and doesn't offer the same familiarity and trust between patient and caregiver.

Case manager
A case manager can help you make decisions concerning what type of care is right for your financial, emotional and medical situation. The case manager is a referral service that, for an hourly fee, will help you develop a care plan. They can also manage the financial affairs of elder care, paying medical bills and insurance premiums, filing tax returns and other financial organization.

Personal care
If the person in your care is in fairly good health and would feel more comfortable at home, personal care may be the right option for you. There are some support organizations available to make this task easier to handle.

Local support groups can help provide services such as home maintenance, adult day care centers, senior social centers, friend and pet visitation and meal delivery. Your employer may offer elder care benefits as a part of its total benefits package. Ask your Human Resource Manager about the availability of elder care benefits at your place of employment.

To help cope with the emotional strain home care can produce, seek a support group in your area. Often support groups can send a volunteer to give you a break from your care duties. They may also offer counseling or just someone to listen when you need to talk.

Nursing homes
If the person under your care is unable to perform daily functions and needs more intense care, a nursing home may be a better option. But choosing a nursing home can be a difficult decision. First, prices average $40,000 a year. But cost isn't the most important issue. You want to get the highest quality care you can afford. State certification is an important qualification for a nursing home. Certification is based on level of training, health code compliance, and safety. Most insurance companies won't pay for services rendered at uncertified facilities.

Beyond monetary and regulatory aspects, how can you judge the quality of care a nursing home gives? Start by touring the facilities. Is maintenance a high priority? If the staff isn't attentive to taking care of the grounds and maintenance, they may not be attentive to the residents either. Look into the rooms to check for neatness, overcrowding, cleanliness and comfort. Does the building have an overall uplifting feeling to it?

Talk to some of the current residents of the nursing home to see what life there is really like. Most residents will have some complaints, but if all the residents you talk to have similar complaints, there might be a problem.

The staff members will have the biggest impact on the happiness of the residents, so make sure you interact with them. Are they energetic, interested and compassionate? How quickly do they respond to patient needs? Do they complain about their jobs?

Not a one-time decision
The most important thing to remember if you have a relative or friend living in a nursing home is to stay interested and involved in his or her life. Visit frequently. Get to know the people that are regular care givers. Be attentive to changes in behavior, habits or mood. If you think there may be a problem, talk to a supervisor or facility director. Keep a journal of any problems you encounter and the steps taken to solve the problems.

Retirement communities
Retirement communities offer more independence than a nursing home but still provide the care needed. The downside to a retirement home is the high price tag.

Congregate care housing
Between in-home care and a nursing home, congregate care housing allows residents to live in their own home while providing home maintenance and cleaning as well as group meals. There is a staff to look after residents and make sure they are getting the care they need.

End of Life Concerns

Planning for death makes us confront our fears of losing loved ones and also our fears concerning our own death.

Hospice
The purpose of hospice is to bring the highest quality of life to someone's last days. Those with terminal illnesses can live as comfortably as possible in hospice care, instead of living in a hospital and undergoing constant procedures and tests. Hospice workers have a different approach to medical care. They focus more on pain management and the emotional aspects of dying, not only for the patient but for the family as well.

Burial decisions
Advance planning is becoming more and more popular as people realize how comforting it can be to have tough decisions already made. The death of a loved one is never easy. But trying to make decisions during such an emotionally challenging time can be extremely difficult.

You can interview different funeral homes in advance, inquiring about services and prices and deciding which options are right for you and your loved one. Writing specific burial instructions into a will or a testamentary letter ensures that no one has to guess what the deceased would have wanted.

If you are faced with making decisions immediately after a loved one's death, there are steps you can take to reduce some of the stress. First, if decisions don't need to be made right away, don't make them. Wait until you've had some time to grieve. If decisions do need to be made immediately, ask some trusted friends to help. They may not be as emotionally distracted as you are, and they will be able to help you make objective decisions.