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options about where to get his/her care (nursing home, assisted living, or homehealth care) and who will provide the care.b. Long-term care insurance benefits are triggered if a client is unable to performtwo or more activities of daily living and the need for help is expected to last 90days or more, or if the client is cognitively impaired.c. Long-term care insurance policies include:(1) An elimination period—a deductible usually stated in terms of days. Thissets the amount of time the client needs to pay out of pocket.(2) Daily premium payments—the client will pay a higher premium for largeramounts and vice-versa.(3) Benefit lengths—determines how long a policy will pay for benefits. Theclient will pay a higher premium for longer payout periods and vice-versa.(4) There are many other decisions that the planner and client must make todesign the policy. There is no one-size fits all “off the shelf” policy.d. Planners must address the following assumptions in order to deal with long-termcare risk:(1) The impact of the need for long-term care on the client’s legacy or bequestmotives(2) The financial impact on the uninsured client(3) The benefits, premiums and co-pays that will be requirede. Choosing a long-term care policy means dealing with some known factors:(1) The current cost of health care in the area(2) Personal and family health history(3) Current and forecasted assets and income(4) The possibility of family supportf. Choosing a long-term care policy means dealing with some unknown factors:(1) Will the client need care?(2) When will the care begin?(3) How long will the client need care?(4) What type of care will be needed?(5) What will be the cost of the care?g. Planning Point: A compounding inflation rider will protect the client againstinflation risk as well as long-term care risk. In other words, a policy without thisrider may be ineffective.h. Planning Point: Clients without long-term care insurance may have to liquidatethe portfolio to pay for long-term care services. However, it is not just the moneyfrom the portfolio, but also the taxes and the foregone interest that factor into theexpense of not having insurance coverage.i. Example: In the 3 years prior to his death, Tony experiences the need for caregiving because frailty caused by Parkinson’s disease makes it impossible for himto bathe, feed, and dress himself. His wife Maria, who is also elderly, cannottake care of him without home health care services. In the area where Tonyand Maria live, home health care costs run $36,500 per year ($100 per day).Fortunately, Tony had long-term care insurance with a $100 per diem that lasted5.16
for the duration of the three years. Without the long-term care insurance, Mariawould lose $109,500 from the funds plus taxes and lost interest. She needs thismoney to sustain her after Tony’s death.j. Disadvantages of long-term care insurance:(1) Long-term care premiums may be spent on a benefit that is never used.(2) Long-term care insurance will not help for mild frailty risk (the client is onlyslightly confused, but not cognitively impaired or is limited but cannot meetthe 2 activities of daily living requirement).2. Capitalize on the house. Institute a reverse mortgage program, downsize to a retirementcommunity, choose to reside in a continuing care retirement community (CCRC), ortake a home equity loan.a. The reverse mortgage (described briefly earlier and in greater detail in a latersection of the curriculum) can be an effective way to pay for a home health carelong-term care need.b. Example: Lou Anne and Jose have reached the later years of retirement whenLou Anne falls and breaks her hip and is no longer able to bathe or dress herselfand has limited mobility. The funds from a reverse mortgage could provideadequate income to pay for home health and custodial care, which will supplementJose’s contribution to the caregiving event.c. The reverse mortgage can provide the funds necessary to offset some of theexpenses of incapacity risk.d. Example: Kerri is a widow who has lost the ability to perform functions of homemaintenance and needs help paying the bills. She can use part of the money fromthe reverse mortgage to pay workers to keep up the home maintenance and theother part to pay a daily money manager to help pay bills.e. The reverse mortgage can provide a pool of funds from which to pay for uninsuredmedical bills.f. Example: Kathy has to have a major medical procedure and a large amount of thecost for it is not covered by her Medicare and Medicare supplement insurance.She can take out a reverse mortgage line of credit to pay the bills when theycome due.g. Disadvantages of using a reverse mortgage to pay for long-term care risk, frailtyrisk, or health care expense risk:(1) The funds available may not meet the cost of the risk.(2) The use of a reverse mortgage may undermine the desire to leave thehouse as a legacy to an heir.h. If the client plans ahead, they could have downsized to a retirement communityor a continuing care retirement community (CCRC). The act of downsizing is tosell the family home to gain assets for retirement by moving into a less expensiveretirement home. This can be done regardless of the client’s health.i. A CCRC will require the client to be in good health to be admitted. However, if theclient wants to minimize the risks of long-term care and frailty, this is an excellentoption for the following reasons:(1) CCRC’s provide a variety of levels of living experiences ranging fromindependent living in a private structure (house or apartment) to assistedliving, to nursing home care.5.17
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Huebner School SeriesHS 353 STUDY O
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THEAMERICANCOLLEGE.EDUThrough The A
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c. But it is more comprehensive bec
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(3) Work part-time during retiremen
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SECTION 2: UNDERSTANDING RETIREMENT
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d. Solutions(1) The model considers
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. Other sources of retirement incom
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c. Another option for solving cash
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(b) Net worth statements that ident
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d. Be ready to reengage with the cl
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(b) In financial planning(c) In inv
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j. Planning Point: Planners can use
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e. We also need them to have a bett
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Assignment 2IDENTIFY RETIREMENT INC
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(2) Income4. Determining risk toler
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collaborative experience which focu
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6. Asset allocation and risk tolera
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c. How long will the income last?d.
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. Durationc. Reliabilityd. Other6.
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c. Supplemental Security Income (SS
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. An unused emergency fund can supp
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5. Inflation(2) The expense method
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Assignment 3CHOOSE APPROPRIATE STRA
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. Save as a percentage of income an
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(1) Note that 38% of second income
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(4) The AARP website has a national
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4. Contributions to IRAs and Roth I
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carve out the nondeductible contrib
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(2) Plus salary deferrals (for an i
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a. Example:(1) Save $10,000 in 25%
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(a) This requires knowing four fact
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. Solution(1) Li and Lin Lin are bo
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(1) The increase in dollar amounts
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9. In some circumstances, an indivi
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2. Reverse mortgage basicsa. Almost
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5. Planning considerations(b) Keep
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(2) Some funds that are promoted as
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(1) Berstresser, Chalmers, and Tufa
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RESOURCES FOR COMPETENCY 3: CHOOSE
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(2) From the previous employer(s) p
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8. IRA funded plans (IRAs, SEPs, SI
Page 89 and 90: . Does the distribution election fi
Page 91 and 92: 6. Net unrealized appreciation rule
Page 93 and 94: a. Tax-exempt plans include Roth IR
Page 96 and 97: 8. Calculating required distributio
Page 98 and 99: (2) Exception: If there are separat
Page 100 and 101: 5. Impactc. Tax rates are low in ea
Page 102 and 103: (7) Based on ordering rules, identi
Page 104 and 105: 7. A married couple who file jointl
Page 106 and 107: (1) Needed to provide the appropria
Page 108 and 109: 13. Transfers at deatha. Wills(2) A
Page 110 and 111: (1) The Retirement Equity Act manda
Page 112 and 113: (2) Beneficiary designation of bene
Page 114 and 115: 13. Overview14. Types(2) The donor
Page 116 and 117: (1) Charity needs only to payout in
Page 118 and 119: c. Access should be granted to an a
Page 120 and 121: nightmare of living probate might h
Page 122 and 123: (6) Powers to represent their princ
Page 124 and 125: c. If the policy is term coverage w
Page 126 and 127: e. Factoring personal and family he
Page 128 and 129: problem. On the other hand, we can
Page 130 and 131: d. Adding a cost of living adjustme
Page 132 and 133: g. Planning Point: Sometimes a high
Page 134 and 135: (2) Clients may not be able to “a
Page 136 and 137: c. Ensure that the client is receiv
Page 138 and 139: a. Example: Because of physical and
Page 142 and 143: (2) Facilities, monthly fees, and s
Page 144 and 145: 8. Other strategies that help to co
Page 146 and 147: standard deviations of the returns
Page 148 and 149: a collapse in the real estate marke
Page 150 and 151: a. In a later competency we will di
Page 152 and 153: years of service with the employer)
Page 154 and 155: a. Planning Point: Planners should
Page 156 and 157: (2) If you have locked in food, ren
Page 158 and 159: (4) Loss-of-spouse risk—Deferred
Page 160 and 161: (1) Excess withdrawal risk—The us
Page 162 and 163: (5) Frailty risk—Managing assets
Page 164 and 165: 7. Practice good career management:
Page 166 and 167: Assignment 6CHOOSE APPROPRIATE STRA
Page 168 and 169: c. Example: Chuck and Sarah divide
Page 170 and 171: e. The bucket approach can be thoug
Page 172 and 173: 3. Understanding systematic withdra
Page 174 and 175: (1) The time horizon used in the ca
Page 176 and 177: 12. Four percent is not the number.
Page 178 and 179: markets have declined by a specifie
Page 180 and 181: (2) Annuities and long-term care an
Page 182 and 183: anticipates ramping down her activi
Page 184 and 185: c. Each of the three portfolios wil
Page 186 and 187: SECTION 4: THE ESSENTIAL VERSUS DIS
Page 188 and 189: d. Clients give up investment contr
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geared toward long-term growth. Thi
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. Trade-offs involve:(1) Irrevocabl
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(1) Rate at which banks lend to the
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. Dollar-denominated liabilities of
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(a) Dividend taxed in year paid out
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4. Taxationtheir return generating
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. Close ended(1) IPO style launch(2
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(3) Tax control17. Conversations in
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(3) Mutual funds provide lower cost
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way to obtain increasing payments t
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protection from the downside risk w
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6. Today’s annuitization rates ar
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h. Planning Point: Markets are very
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a. The client may not be clear abou
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a. Problems with implementation are
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c. Product solutions work together
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(1) A problem is that if the client
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(b) A traditional fund company(c) A
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d. Evelyn is in great health and he
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RESOURCES FOR COMPETENCY 7: INTEGRA
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