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Planning Your Financial Future

Posted January 23, 2013 in Advice Column

I found an interesting article in the current January 2013 issue of O magazine. The article, by CNBC’s Suze Orman, was a “decade-by-decade plan for securing your financial future.”

Of particular interest was the information for those in their 50s and 60s and the information it gave about saving for retirement and whether or not to look into long-term-care insurance.

•    In your 50s. You must explore long-term-care insurance. Chances are you will live a very long time and may need LTC insurance. This type of coverage applies to ongoing medical costs including physical therapy, extended nursing home stays and home healthcare visits. Why now? If you wait, you may find that annual premiums are too high or that you’ve now got a preexisting condition that makes you ineligible for coverage.

Don’t assume you can afford to retire early. If you stop working early your pension, savings and Social Security may have to last you 25 to 30 years.

•    In your 60s. You must look into Social Security options. If you choose to retire at 62 you will probably take a 25 to 30 percent pay cut as compared to what you would receive if you wanted until full retirement age (66 – 67 years old). If you can manage to hold off retirement until you’re about 70 years old, you’ll receive a check that’s about 75 percent more than if you had retired at 62. Higher payouts, which are adjusted for inflation, can really improve your income later in life when you really need it.

Absolutely don’t rely on a reverse mortgage to solve money problems. With a reverse mortgage you’re still liable for property taxes and the cost of maintenance for your home. If those numbers start looking scary, don’t be afraid to downsize.

Long term care insurance offers multigenerational benefits: the policy holder is covered, his or her adult children are free to spend more of their income on their own kids. Here’s what to consider when choosing coverage:

•    Medicare is not a solution. If you need skilled care, the government only picks up the tab for the first 20 days. Days 21 – 100 you’ll be responsible for a co-pay. After your 100th day the bill is all yours.

•    An inflation rider is a must. LTC experts stress the importance of having a policy that includes an annual inflation increase. In 20 years when you go to use the policy you’ll want it to reflect the rising cost of care.

• Count on a premium increase of at least 30 percent. Insurers are still learning the ins and outs of this relatively-new type of coverage. So far they’ve paid out more benefits than they estimated and must increase premiums to compensate. Look for a policy you’ll still be able to afford if the premium were to go up in the coming decades. The last thing you’ll want to do is drop your policy just when you need it most.

With that being said, it’s never to early to start planning for retirement and the costs associated with those golden years. Of course, you can’t do it all at once; that’s why it’s wise to tackle financial security goals one decade at a time.

Information provided by Kristen Sheston, assistant manager/activity director, The Continental at St. Joseph’s, 19999 St. Joseph Drive, Centerville, (641) 437-1999.

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