I went to the gym this morning (like I do almost every morning) expecting to see it packed.  It is, after all, the fourth of January.  I was surprised that there weren't that many people there.  Maybe it is because folks have given up on the "I'm going to get fit" resolution.  It is tough to keep resolutions.  But here are a few related to your financial life that you might want to consider

Increase your contributions to your retirement plans.  The limits for contributions to 401(k) plans (and its cousins 403(b) and TSP) have increased.  So you can put more away for retirement.  This will lower your taxes now or in the future (if you select Roth options) and also set you up for a more comfortable retirement.  You can increase your 401(k) contributions by $500 to $17,500 and your IRA contributions by $500 to $5,500.  If you have the good fortune of turning 50 in 2013 (or have already turned 50) you can increase your 401(k) contributions by an additional $5,500 and IRA contributions by $1,000.

Check Beneficiaries.  Has anything changed in your life?  You might want to change the beneficiaries for insurance policies and retirement accounts.  This makes sure the money goes where you want it to and can reduce probate costs and hassles.

Check Withholding.  Is your child no longer a full-time student or will turn 24 this year?  If this, or a similar change, has occurred with regards to your tax picture you might want to increase your withholding.  It is easier to swallow if you do it earlier in the year than later.

Store Documents Off-Site.  You might want to consider storing copies of important documents off-site.  If something happens to your primary home (where most of us store things like insurance policies) the documents you need to settle everything may have been destroyed or damaged along with the home.  You can store physical copies somewhere else or you could consider storing copies in the "Cloud".  Those of you who are clients can do this securely at Virtual Vault.  Just do it a little at a time. For example, when the new insurance policy comes in, scan it and load it up on the Vault.

Get a Credit Report.  Checking your credit report is important to confirm there are no mistakes and prevent identity theft.  You can get a free credit report through www.freecreditreport.gov .  There are also commercial agencies with similar names that do the same thing.

There is a good possibility that you or your spouse will eventually require some form of long-term care. According to the U.S. Department of Health and Human Services, about 70% of people aged 65 or older will enter a nursing home for some period of time during their lifetimes.¹

Whether you or your spouse will be among this group is impossible to predict. But it is wise to consider how you might pay for long-term care and whether long-term care insurance (LTC) is a good idea for you.

Long-term care policies are complex and vary widely. But in general, LTC insurance typically covers the following:

·         Nursing home care

·         Adult day care

·         Visiting nurses

·         Assisted living

·         In-home assistance with daily activities 

LTC includes a range of nursing, social, and rehabilitative services for people who need ongoing assistance due to a chronic illness or disability. LTC insurance can be used by anyone at any age who suffers an accident or debilitating illness, but it most frequently is used by older adults who need assistance with essential physical needs, such as bathing, dressing, or eating.

 
Cost of Care

Perhaps the first consideration is determining the potential cost of long-term care. Below is a summary of average current costs.²

·         $200/day for a semi-private room in a nursing home

·         $222/day for a private room in a nursing home

·         $3,300/month for care in an assisted living facility (for a one-bedroom unit)

·         $19/hour for a home health aide

·         $18/hour for homemaker services

·         $61/day for care in an adult day health care center 

With health care costs rising every year, these expenses can be expected to grow substantially over time. Furthermore, neither Medicare nor Medicare supplemental coverage, also known as Medigap insurance, typically cover long-term care. Medicaid will cover a large share of such services but only if you meet stringent financial and functional criteria. What's more, most employer-sponsored or private health insurance plans follow the same general rules as Medicare. Therefore, most people who need long-term care must pay for some or all of it on their own.

Cost of Insurance

Like life insurance, LTC insurance policy premiums largely depend on your age and health. If you take out a policy when you are young, you can expect to pay comparatively low premiums during the life of the plan, while starting a new policy when you are older will entail significantly higher monthly premiums. A 65-year-old in good health can expect to pay between $2,000 and $3,000 a year for a policy that covers nursing home care and home care, with premiums adjusted for inflation.³

Most long-term care policies sold today are federally tax qualified, which means the premiums paid and out-of-pocket expenses for long-term care may be applied to the medical expense deduction of the federal tax code. (Typically, taxpayers may deduct the portion of medical and dental expenses that exceed 10% of adjusted gross income.) Additionally, long-term care benefits received are not taxed as income up to certain limits. Consult with a tax advisor to learn more about the tax implications of LTC insurance.

Source/Disclaimer:

¹Source: U.S. Department of Health and Human Services, National Clearinghouse for Long-Term Care.

²Source: Genworth Financial, Cost of Care Survey 2012, March 2012.

³Source: AARP.org, 2011.

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