Which is Worse, Living Too Long or Dying Too Soon?

Either way you cut it, living too long or dying too soon is a bummer for all of us. Either option has the potential for financial devastation. Dying too soon is the easy part for you. You’re gone…no more worries for you. However, your family is left holding the bag, and without your help to pay the bills your family’s future will be perilous. If you own a business your too soon death causes even more issues. Think about it.

Living too long is another issue. Better healthcare and lifestyle allows us to live longer, much longer on average, than our parents and grandparents. A new retiree can look forward to thirty or more remaining years, good news for many of us. Potentially running out of cash to pay the bills in our later years is the bad news. (If you don’t own one already set up an IRA now.) Compounding the issue is the possibility of declining health leading to the need for at home care or care in an assisted living facility.

The good news for you is that you may employ insurance to guarantee cash flow when it’s needed the most…life insurance to hedge dying too soon…long term care insurance to pay the bills for at home care or care in an assisted living facility later. Premiums for both are less when you buy it now, currently and over your lifetime, rather than putting it off until later.

On the living too long side of the question, whole life insurance provides instant cash as its death benefit plus it can provide needed cash to you after it has been in force for a number of years via its cash value, thus augmenting your retirement income stream.

Carpe Diem

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Don’t Buy Insurance over the Phone!

Several days ago I received an irate call from a gentleman calling my office in Florida from Pennsylvania. It appears he bought health insurance over the phone back in February 2014, from a scammer using my name indicating scammer was calling from Florida. My irate caller, who sounded as if he were in his 40′s, said he had been paying $250.00 per month premiums via automatic checking account drafts since February. When he recently tried to use his over-the-phone health insurance …guess what? You are correct…his insurance is bogus.

Here’s a little tutorial: The several states regulate insurance, issue licenses to insurance companies and their agents to sell insurance products which must have been approved by the state in question prior to the sale. Should an insurance agent wish to sell insurance in every state he/she must apply to every state and meet their education/training and other requirements. Qualifying to sell insurance in every state means owning and qualifying for fifty (50) insurance agent licenses. A health insurance agent licensed in Florida must obtain a Pennsylvania non-resident agent’s license before attempting to sell health insurance in PA…and that agent may sell only insurance plans approved for sale in PA. If an insurance agent fails to act within a state’s insurance laws and their regulations, that agent will receive a visit from a guy carrying a badge and a gun…may be fined, lose his/her license, and may face jail time. Robbing banks is much more efficient than scamming people with phoney insurance schemes…but the low-lifes are always out there somewhere.

I fear my Pennsylvania caller will never recover his cash wasted on bogus insurance premiums…and will be forced to pay his medical bills out of pocket…PLUS, the Affordable Care Act (ACA) is lurking in the shadows. Should my called not be able to prove to the IRS that he owned credible health insurance this year he may be hit with the ACA penalty “Tax”. ( Tax is in quotes because it was originally an Un-Constutional fee before Chief Justice John Roberts turned into a tax in order to make it fit the Constution, thus ensuring he would continue to be invited to Washington, DC’s insider cocktail parties.)

But I digress…Long story short, don’t buy insurance, and most anything else, over the phone from someone you have never met and whom you cannot vet…and do not hesitate to ask to see an insurance agent’s license. He/she will carry it with them just as a driver’s license.

Carpe Diem

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How Affordable is the Affordable Care Act?

Ah yes, the Affordable Care Act of 2010, still kicking into gear in early summer 2014. Did you miss the ACA application cut off date on March 31, 2014? If so you are SOL until January 1, 2015. 2015 ACA open enrollment starts in November of this year, so get ready.

How about those ACA plan calendar year deductibles? If you have trouble scratching together several hundred dollars to pay ACA policy monthly premiums, then paying out-of-pocket several thousand dollars before your insurance kicks in must really be fun for you. Did you buy one of ACA’s “Catastrophic” policies?….you pay out $6,350.00 in cash, plus your monthly premiums, before your policy pays anything at all…and that means no outpatient prescription drug coverage until you have forked over $6,350.00 from your pocket, which is hanging inside out by then. (One insurance company took pity on you, and only makes you pay $6,250.00 out of pocket first…big whoop!)

Some Catastrophic plans “allow” you to visit a doc in exchange for a $20.00 co-payment for two or three office visits per year, without making you pony up the full annual deductible first…BUT, you must see one of their In-Network physicians…so go see the lowest bid-winner doc of your choice just as long as that doc is “in-network”. Do you have a family doctor whom you have relied on for several years…one you have confidence in, one you trust? Well, get ready…He or she will not be in your insurance company’s network! Murphy’s Law rules.

I keep reading that a vast majority of voters are unhappy with the Affordable Care Act and its impact on them and their families. Why then did those same voters send the same administration which brough you ACA back to Washington in 2012? You must really like the idea of having your neighbors pay your bills for you…but what happens when your neighbors get tapped out? Yep, “Change you can believe in”, don’t leave home without it.

Carpe Diem

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Is Long Term Care Insurance for You?

When an accident or illness lays you low for months at a time, owning Long Term Care Insurance (LTCI) provides the cash to allow you to remain at home during your recovery. If recovering at home is not an option, LTCI pays the rent required by an assisted care facility. LTCI is not just for older folk. Owning it would be good for you too. As is true for most life/health insurance, younger people pay lower LTCI premiums both at the beginning and in the long run.

As a nation we are living longer than our parents and grand parents. That is good news/bad news for most of us. Now we are concerned about outliving our retirement dollars. Long run, Social Secuity and Medicare are paying out more than they take in. How much will be left for you in the future? Washington could tax everybody at 100% of income, and that still would not be enough, long term, to keep up Social Security and Medicare, as they exist today. When and if ever Washington begins to address those issues you can expect program cuts and “means testing” to reduce your Medicare and Social Security benefits.

Medicare does not pay a dime toward your long term care expenses. Owning LTCI today makes good business sense. Rely on yourself and your insurance company to provide long term care dollars when needed. That beats depending upon some government agency by a long shot.

Talk to your insurance broker about LTCI today. It will be time well spent.

Carpe Diem

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Who Pays the Bills When You Can’t?

Your assignment today is to pull out your check book, or go to your debit account’s auto-pay screen. Then list your regular monthly bills…the ones recurring every month: rent or mortgage payment, utility bills, cable/phone bills, car insurance, homowners/renters insurance, groceries, car/automobile lease payments, health insurance, gasoline, oil, maintenance…these support your life style. Okay, add ‘em up. The total is what you need, every month, to float your boat…and those are net-after tax numbers.

Now, imagine your income, investnments and savings drying up over the next several weeks. How do you pay the bills then? You could start robbing banks…but after the law grabs you, your life will become a worn cot behind steel bars and bologna sandwiches every day, plus a three hundred pound room-mate with a digestive problem and bad breath…all courtesy of the tax payors.

A sudden accident or lingering illness could rob you of your ability to generate income for yourself and your family…and take away your ability to pay those critical bills every month. If you think it won’t happen to you, don’t be so sure. The odds of your becoming disabled and staying that way for many months or years is much greater than that of your dying before age 70.

For many years businesses have hedged their bets by obtaining Income Replacement Insurance on the lives of key employees as a way to shift the disability risk to insurance companies. Thus, when a key employee is disabled and no longer able to perform, the insurance company provides income in the form of disability payments to the employee, freeing up salary dollars to allow the business to bring on a replacement…just makes good business sense.

It follows that you too should apply that good business sense to your life. In your household, you are the “Key Employee”…if you are married, and you both work, your household contains two “Key Employees”. Who brings in the money when you can’t? Who pays the bills when you can’t? Unless you hit the Lotto in the past few weeks, you do not control enough cash to carry you through an extended time of no income.

Look into Disability Income Insurance today. Talk to your insurance agent or broker about it. As a rule of thumb, figure on paying an Annualized premium equal to about month’s benefit pay-out…hedging eleven months with one month’s benefit amount. As the premium payor, your Disability Income Insurance benefits are income tax free, and that also helps with the bills.

Carpe Deim

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Last Minute Alternatives to Keep You in ACA Compliance

Affordable Care Act (ACA) “Obamacare” Open Enrollment Period ends March 31, 2014. If you are not enrolled in a health insurance plan by March 31,2014, you will be forced to wait until November of this year before you may enroll in new health insurance.

The tax penalty for failing to enroll in a health insurance plan in tax year 2014 is the greater of $95.00, or 1% of your adjusted gross income in 2014. (i.e., If your income from all sources should be $35,000.00, your tax penalty would be $350.00.) That tax penalty will increase substantially in 2015 and in the following years.

If you are one of the many earning too many dollars to qualify for a tax credit but not enough to cover Obamacare’s bloated insurance premiums without straining your budget there is a possible shelter for you…not a long term answer but enough to see you through 2014, in the hope that ACA may be changed or replaced with a more workable law within the next couple years.

Designed for those between jobs needing health insurance to cover the gap between employer provided group health insurance plans is a product referred to as Temporary Health Insurance, or Short Term Health Insurance. Such plans provide traditional major medical insurance benefits during the gap between group insurance coverage…can last anywhere from thirty (30) days up to ,usually, eleven months.

For now Short Term Health Insurance plans have escaped the clutches of Obamacare, and work just like traditional health insurance: You must satisfy a deductible which you select…any amount from less than a thousand dollars up to five thousand dollars or more. After your deductible has been satisfied, you and your insurance company share in claims above the deductible…typically 80% is paid by the insurance company and you pay the remaining 20%, ( could also be 70%/30% or 50%/50%)…until you reach a cut-off point. At that point, the insurance company starts paying 100% of the bill.

Because such health insurance is designed to cover you for a relatively short period of time, does not cover “pre-existing”conditions, and ends when paid claims total, usually, $1,000,000.00, or sometimes $1,500,000.00, its premiums are lower than those demanded by Obamacare plans. If one has owned Short Term health insurance for a full eleven months, and still needs health insurance, that person may apply for a second such plan to last up to another eleven months.

Caveat: If our insured person, above, collected on a claim during the period he/she was covered by the first Short Term policy, the second short term policy may not cover the condition causing the claim, as such would now become a “Pre-Existing” condition. However, if you need affordable health insurance now, and Obamacare plans cost more than your budget allows, look into owning a Short Term Health Insurance plan. Just Google Temporary Health Insurance, or see the link on my web-site.

Carpe Diem

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The ACA Mandate Clock is Ticking

You have until Match 31, 2014 to enroll and pay for health insurance meeting requirements of the Affordable Care Act (ACA), nee Obamacare.

If your household income is low you may qualify for healthcare provided by your state…Medicaid. However, if you are not a head of household, or single with very low income you may fall through the cracks…no Medicaid and no tax credit help to pay health insurance premiums. But because our Federal government is benevolent you will not be forced to pay a penalty tax for not owning health insurance in that circumstance.

In 2014, the penalty tax for an individual is the greater of $95.00 or 1% of income above the income tax filing threshold. Starting in 2015 the penalty tax shoots up like a rocket.

Take heart. You may be exempt from paying the penalty tax if:

You earn too little to even file an income tax return…
You qualify for a hardship exemption…
You belong to a qualifing religious group…
You are a member of a health care sharing ministry,,,
You are presently in prison…
You work/live full time in a qualifying foreign country…
Plus several additional catagories

What does ACA mean when it refers to “household income”? My reading of that is all wages, salaries, tips and other income from ALL sources, less qualified expenses, generated by everybody living in a household…..On an income tax return form 1040, see line 37, “Adjusted Gross Income”…that’s your household income.

If you miss the 3/31/2014 enrollment cut-off, you must wait for the next enrollment period, starting in November 15, 2014, until you can apply for ACA health insurance. There are circumstances allowing you to enroll after the 3/31/2014 cut-off, so talk to your health insurance broker/agent if you need more information.

Carpe Diem

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The Law of Unintended Consequences Never Goes Away

Ever try to save a few bucks by attempting your own plumbing repair? Real qualified repair guys just love you to pieces, because that $75.00 repair job usually grows to $300.00, by the time the week-end amateur finally cries Uncle, breaks down and calls Joe the Plumber.

It isn’t that you weekend do-it-yourselfers don’t have a lot on the ball. It’s because you just don’t know what you don’t know when it comes to plumbing, then plunge into the project failing to remember to first turn off the water supply,or really leaning on a pipe wrench and end up twisting a copper pipe into a crumpled mess…you know, we’ve all been there.

Politicians shoot themselves in the foot too…by passing poorly construced laws, with good intentions, but sometimes harming more people that those the law intended to help.

House Democrats and their colleagues in the Senate launched the Patient Protection and Affordable Care Acts of 2010 at the behest of the President without first stepping back to consider its unintended consequences. Now we find ourselves in a quagmire of unintended consequences.

After a raft of presidental edicts(by-passing congress along the way), attempting to repair the damage done by the law’s unintended consequences, our country is no closer to closing the uninsured gap. In fact, the consequences of the Affordable Care Act have caused millions to lose their health insurance.

In December 2013, by edict, the President floated still another “fix” to allow those who lost health insurance due to the Affordable Care Act to apply for Obamacare Catastrophic Care health insurance plans and relieved them of any tax penalty for not being insured by January 1, 2014. However, such Catastrophic Plans contain a $6,350.00 per person calendar year deductible…OOPS!

Do you mean the insured person must pay his/her premiums each month plus $6,350.00 out-of-pocket before the insurance pays one cent? Absolutely!

Is it time to call the plumber yet?

Carpe Diem

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A Light at the End of the Tunnel

October 1st arrived with great fanfare as the new “Marketplaces” (nee Exchanges) launched. At last, a light at the end of the health insurance tunnel.

Have you tried to log on to your state’s “Affordable Care Act” website?If you were successful, take a giant step to the front of the class to receive your gold star. But for the rest of us, that light at the end of the tunnel is attached to a big locomotive and it is quickly bearing down on us. If you are not covered by “Minimum Essential” health insurance coverage on January 1, 2014, you may be subject to a fine (or as Justice Roberts decreed, a “tax”).

If you are a younger person, not insured now, not planning to enroll, but intending to just pay the tax because it is less than $100.00 during 2014 tax year, think again. The initial tax penalty is equal to the higher of 1% of your prior year’s income or $95.00 per adult plus $45.00 for each child, up to $285.00 per family.

Starting in 2015 the penalty tax goes up to $325.00 per adult plus $162.50 per child up to the higher of $975.00 or 2% of your 2014 family income. After that the tax increases again to the higher of 2.5% of prior year’s family income or $695.00 per adult and $347.50 per child, up to $2,085.00 per family.

The penalty kicks in on Janaury 1, 2014. So, if you change your mind and then enroll in March 2014, you may be accessed a penalty tax for the portion of 2014 while you were uninsured. Also, keep in mind that 2014 enrollment period for Obamacare ends March 31, 2014.

Projected monthly premiums for the Affordable Care Act’s Bronze, Silver,Gold,and Platinum plans are considerably outside most people’s comfort zones. Your decision is whether to take food off the table to pay health insurance premiums, or skip the insurance and take food off the table to pay the penalty tax. “Change you can believe in” can get to be pretty darn expensive.

Carpe Deim

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Getting Ready for theTrain Wreck

October 1, 2013 is opening day for you to enroll in your choice of four (4) health insurance policies demanded by the Federal Government, whether you want it or not. Once you enroll, your new health insurance goes into effect on January 1, 2014…and you must want it as a majority of you voted to keep the Federal mandate back in November 2012.

If you already own individual(or one covering you and your family) health insurance now, meaning you are not covered by health insurance provided by your employer AND if that health insurance policy went into effect before March 23, 2010 AND if you have made no changes to your policy since then, your insurance policy is “Grandfathered”. If you own a grandfathered policy, you may keep it, and you can skip enrolling in one of the Federal Government mandated plans.

If you already own individual(or one covering you and your family) health insurance now, meaning you are not covered by health insurance provided by your employer but such health insurance was effective AFTER March 23, 2010, your health insurance policy is NOT grandfathered, and you are required by the Federal Government to replace your present health insurance, on or before it reaches its anniversary date in 2014, with new government mandated coverage.

All is not lost, however, and there is a way to postpone being forced to buy Federal Government health insurance if you now own non-grandfathered individual health insurance which you wish to keep for a bit longer.

Contact your present health insurance company and ask them if they would be willing to renew you current policy in December 2013 to December 2014. Assuming your present health insurance company is willing to grant your request, expect your premium to increase some, as it does every year as your age advances. That gives you all of next year to keep the health insurance you like and to settle on which of the forced Federal health insurance plans you must purchase for 2015.

The four new Federal Government mandated health insurance policies will be provided by commercial health insurance companies; however, age, the area you live in, number of people in your family and whether or not you smoke, are the only factors which may be used to calculate the premiums starting January 1, 2014. As a person’s health history is no longer a factor in setting premiums, expect premiums over-all to Increase. As we age, statistically, healthcare costs rise…because older age generally means more trips to the doc. (Healthy older folk keep the statistics in balance.) I expect premiums will increase sharply for younger adults but may not rise as much for those fifty and older.

Until now, if you were in poor health your premiums were higher, to recognize the extra claims risk being assumed by your insurance company…or you may have been unable to qualify for health insurance at all. Health insurance companies, as any other business enterprise, must operate at or above break-even level or go out of business. They could have offered health insurance to everybody, regardless of health history, all along but premiums would have been over the roof and nobody would have bought their product. Now the Federal Government demands that health insurance companies cover everybody, and it forces you to buy a product or pay a cash penalty at a cost you would have rejected in a free market.

To partly offset the Federal Government mandated health insurance premium costs, those of you earning less than four times the federal poverty income level*, will qualify for a partial premium reduction in the form of a tax credit…meaning part of your premium will be paid by you and the remainder (the tax credit) will be paid directly to the health insurance company by the federal government…read, your neighbors down the street.

The amount of the tax credit will depend upon the actual premium required by the health insurance policy selected, amount of household income, and other factors. Starting October 1, 2013, to determine if you qualify for a premium tax credit (the part of your premium to be paid by your neighbors down the street), you must apply for Federal Government mandated health insurance through a “Marketplace”…originally called an Exchange. These are web-sites and phone numbers….or you can contact your present health insurance agent and access the Marketplace via your agent.

Washington, D.C. claims to be on schedule to launch its Federal Government mandate on 10/01/2013, but when you start fiddling with one sixth of the US economy it can bite you in the behind…big time. So, I expect the roll out to hit some spectacular bumps in the road.

Carpe Diem

* In 2013, the federal poverty lever is $11,490.00 in annual income for a single person, and $23,550.00 for a family of four (4). Four times these poverty levels equals $45,960.00 for a single person and $92,200.00 for a family of four. (These are slightly higher amounts in Alaska and Hawaii)

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