Latest / Money In Motion with Klaas Financial / Long-Term Care Planning

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Long-Term Care Planning · Money In Motion with Klaas Financial

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Speaker 1: In the full lines. They are open to you right now.
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Speaker 1: If you've got questions for our retirement planning professionals from
0:06
Speaker 1: Class Financial, we would love to have you join us
0:08
Speaker 1: this morning. All I gotta do is pick up phone
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Speaker 1: dial in telephone number six oh eight three two one
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Speaker 1: thirteen ten. That's six oh eight three two one thirteen ten.
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Speaker 1: We'll get you on the air with CJ. Closs and
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Speaker 1: Eric Schwartz. As mentioned, they are from Class Financial. You
0:21
Speaker 1: can learn more about Coss Financial on their website. It's
0:24
Speaker 1: Clossfinancial dot com. That's Coss k l Aasfinancial dot com.
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Speaker 1: Not only can get to know Eric and CJ and
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Speaker 1: the whole team at Coss Financial, you can learn about
0:34
Speaker 1: their separate divisions. You can schedule a complimentary chat right online.
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Speaker 1: Also sign up for the weekly Market Pulse newsletter. That
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Speaker 1: all available to you at Cossfinancial dot com. Their telephone
0:44
Speaker 1: number six oh eight four four two five six three seven.
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Speaker 1: No charge for that initial gets to know you appointment
0:50
Speaker 1: at Loss Financial. It will be complementary to you again
0:52
Speaker 1: their number six oh eight four four two five six
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Speaker 1: three seven. As mentioned, joining us this morning, our CJ.
0:58
Speaker 1: Closs and Eric Schwartz of coss Financial Cejay, how are
1:01
Speaker 1: you doing this morning?
1:03
Speaker 2: I'm doing great, Sean. How are you?
1:04
Speaker 1: I'm doing really well. Great to chat with you and Eric?
1:07
Speaker 1: How have you been?
1:09
Speaker 3: I'm doing great, Sean, glad to be here.
1:10
Speaker 1: It's exciting to talk with both of you. And just
1:13
Speaker 1: a little programming note for folks that probably figure this
1:17
Speaker 1: one out, is next week being Thanksgiving. As much as
1:20
Speaker 1: we all love hanging out together, we do like spending
1:23
Speaker 1: time with our family. We will not have a show
1:24
Speaker 1: next week, which means it's a good week to listen
1:28
Speaker 1: back to the podcast and other things so you can
1:30
Speaker 1: still get your fix of Money in Motion. We just
1:32
Speaker 1: won't be in studio next week. We've got a lot
1:35
Speaker 1: of stuff to talk about this week. Something that's really
1:39
Speaker 1: important and long term planning. May not be the most
1:42
Speaker 1: glamorous of conversations, but it is a very very important
1:45
Speaker 1: one and we'll get to the details on that in
1:48
Speaker 1: just a moment. Before we get rolling on this week's topic,
1:50
Speaker 1: let's actually look back at last week's show. Of course,
1:53
Speaker 1: with the class quiz luestion week. We do that each
1:54
Speaker 1: and every week right here on Money in Motion with
1:57
Speaker 1: Costs Financial. This week, no exception, our friends from Class
1:59
Speaker 1: Finance provided a twenty five dollars gift card to Best Buy.
2:02
Speaker 1: Tell you a little bit later on the program how
2:04
Speaker 1: you can win that twenty five dollar gift card. A
2:07
Speaker 1: little tip, don't listen close to the program because just
2:09
Speaker 1: about every show, the question and answer comes up during
2:12
Speaker 1: the program, and before we start talking about this week's topic,
2:14
Speaker 1: let's actually look back at last week's topic and the
2:17
Speaker 1: class quiz question. We can get the question and answer
2:19
Speaker 1: there as well.
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Speaker 3: Eric, absolutely so thank you to everybody as always for
2:24
Speaker 3: listening and bake. Congratulations goes out to our winner from
2:27
Speaker 3: last week, and that was Tracy from Madison and our
2:31
Speaker 3: question last week was true or false. According to the
2:35
Speaker 3: US Department of Health and Human Services and its agencies,
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Speaker 3: approximately seventy percent of people turning age sixty five today
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Speaker 3: will need some form of long term care during their lifetime.
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Speaker 3: And Tracy knew that the correct answer to that was true.
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Speaker 1: That's fantastic and as mentioned, we'll do another another prize
2:53
Speaker 1: this week. Great prize from our friends a Class Financial. Also,
2:56
Speaker 1: if you missed any part of that program, or miss
2:58
Speaker 1: any part of the day show, you can always and
3:00
Speaker 1: back at Colssfinancial dot com. That's cost k l a
3:03
Speaker 1: a sfinancial dot com. We're talking today about a topic
3:07
Speaker 1: that not the most exciting but super duper important, and
3:10
Speaker 1: that's long term care planning. And of course, as we
3:13
Speaker 1: get older, we start thinking about potential care needs and
3:16
Speaker 1: how to become more and more essential. The folks at
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Speaker 1: Coss Financial are going to guide us through some of it.
3:21
Speaker 1: And let's start off CJ with with kind of under
3:25
Speaker 1: kind of a just a ground understanding, kind of lay
3:27
Speaker 1: the groundwork for the scope of long term care and
3:30
Speaker 1: how exactly is it funded.
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Speaker 2: Yeah, that's a great place to start, Sean. So at
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Speaker 2: Coss Financial, we view long term care as a key
3:39
Speaker 2: element in your overall retirement planning strategy. Now, as we
3:43
Speaker 2: discuss this today, I will disclose while some of us
3:46
Speaker 2: on the team are insurance licensed, we don't actually sell
3:51
Speaker 2: any insurance products. So as we discussed this, we can
3:56
Speaker 2: speak to it from an authoritative place in terms of
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Speaker 2: the licensing that we but we are not the organization
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Speaker 2: that's going to fulfill any sort of long term care
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Speaker 2: insurance or any sort of insurance based products for our listeners.
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Speaker 2: So let's begin with there's a common misconception as it
4:13
Speaker 2: relates to long term care, that Medicare will fully cover
4:16
Speaker 2: long term care costs, and this simply is not the case.
4:21
Speaker 2: In reality, Medicare provides limited assistance. For example, if you're
4:26
Speaker 2: required skilled nursing or if you sorry, if you require
4:29
Speaker 2: skilled nursing after a hospital stay, Medicare may cover the
4:33
Speaker 2: first twenty days. However, from days twenty one to one hundred,
4:37
Speaker 2: you'll likely be responsible for something called a co payment
4:40
Speaker 2: of about two hundred and nine dollars per day as
4:44
Speaker 2: of twenty twenty five. Beyond that, so imagine that again
4:47
Speaker 2: you kind of need skilled nursing care beyond one hundred days, Well,
4:51
Speaker 2: that's all on your own, so you get the idea.
4:54
Speaker 2: Do not be confused that Medicare will cover this. Now Here,
4:59
Speaker 2: of course, is the second part of this. Somebody goes no, no, no, no,
5:01
Speaker 2: I know Medicare won't cover it, Medicaid will cover it,
5:05
Speaker 2: and we go, oh, that may be true, but in
5:07
Speaker 2: order to qualify for Medicaid, that means you've substantially exhausted
5:12
Speaker 2: all of your resources. Typically, the individual receiving care must
5:17
Speaker 2: have reduced their assets to around two thousand dollars before
5:20
Speaker 2: Medicaid will kick in. Now if you have a spouse,
5:23
Speaker 2: so think one spouse is unhealthy, there's another spouse who
5:27
Speaker 2: is still healthy not needing assistance. So there is something
5:30
Speaker 2: called it like a spousal allowance, depending upon the state
5:33
Speaker 2: that you live in. So for example, in Illinois, the
5:35
Speaker 2: community spouse resource allowance is approximately one hundred and thirty
5:39
Speaker 2: five thousand, whereas in Wisconsin it's about one hundred and
5:42
Speaker 2: fifty eight thousand, plus one vehicle, a home, and some
5:46
Speaker 2: prepaid funeral expenses. So think of it this way. If
5:50
Speaker 2: it's just you, you're gonna have to spend down your
5:53
Speaker 2: assets to about two grand before medicaid will kick in.
5:56
Speaker 2: If it's you and a spouse and you go into
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Speaker 2: a nursing home together, you will need to spend down
6:02
Speaker 2: your resources to those numbers I mentioned previously before medicaid
6:06
Speaker 2: will kick in for the one who's in the nursing home. Now,
6:10
Speaker 2: to be quite frank, everybody, we're overly simplifying this. There
6:13
Speaker 2: are some elements of like some income that the spouse
6:15
Speaker 2: can keep that's outside of the nursing home. There's some
6:19
Speaker 2: rules around qualified retirement accounts. But the point of this
6:22
Speaker 2: is to say, don't think of Medicaid as a get
6:25
Speaker 2: to get out of jail free card here, because ultimately
6:28
Speaker 2: you're going to have to spend down your estate significantly
6:31
Speaker 2: before that would kick in.
6:32
Speaker 1: Are you saying, CJ, that a government program might be complicated.
6:36
Speaker 2: Yes, not only complicated, But here's what we would say.
6:39
Speaker 2: Often people will say to us, well, how terrible is
6:43
Speaker 2: that that the government requires you to use your own money?
6:46
Speaker 2: And I go, no, no, no, no, no no no.
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Speaker 2: Remember taxpayers fund medicaid. The last thing I would want
6:52
Speaker 2: to come to find out is that some you multimillionaire
6:56
Speaker 2: gives his money away to his children and then says
6:58
Speaker 2: taxpayers ban for timber heard to be in a facility.
7:01
Speaker 2: You get the idea. These rules are actually good to
7:04
Speaker 2: make sure that people don't take advantage of the government
7:07
Speaker 2: or the sorry taxpayer funded care.
7:09
Speaker 1: Really good perspective there. As we talked this morning with CJ.
7:11
Speaker 1: Closs and Eric Schwartz. They are our retirement planning professionals
7:14
Speaker 1: from Clause Financial. We do have a phone line open
7:16
Speaker 1: for you if you've got a question, love to have
7:18
Speaker 1: you join us this morning. Six oh eight three two
7:20
Speaker 1: one thirteen ten. That's six oh eight three two one
7:22
Speaker 1: thirteen ten. You can learn more about class Financial on
7:25
Speaker 1: their website class financial dot com. That's coss Klaas Financial
7:29
Speaker 1: dot com and their telephone number six oh eight four
7:31
Speaker 1: four two five six three seven. No charge for that
7:34
Speaker 1: initial get to know your appointment at Colss Financial. It
7:36
Speaker 1: will be complementary to you again their number six oh
7:39
Speaker 1: eight four four two five six three seven. I think
7:42
Speaker 1: those numbers for a lot of folks pretty sobering. Let's
7:45
Speaker 1: talk then about the actual cost of care and how
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Speaker 1: long term care insurance plays into this picture.
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Speaker 3: Eric, absolutely, and this is certainly a key part of
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Speaker 3: the conversation. And the best summary is it's it's pretty
8:00
Speaker 3: but we're going to get into some of the details
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Speaker 3: of that here in a moment. Largely the best source
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Speaker 3: of data related to cost of long term care insurance
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Speaker 3: without going directly to these facilities and figuring it, out
8:16
Speaker 3: comes from jen Worth, which is a big insurance company,
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Speaker 3: and they do something called the Cost of Care Study,
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Speaker 3: and it gives you a really good summary of kind
8:25
Speaker 3: of what to expected terms of cost. So that's what
8:27
Speaker 3: we're going to be referencing today. Starting with home care,
8:32
Speaker 3: which this is definitely one of the most popular choices
8:35
Speaker 3: for older adults, they'd rather stay in their home and
8:38
Speaker 3: just sort of receive the care they need. There the
8:41
Speaker 3: media and annual cost for a home health aid, so
8:43
Speaker 3: someone who comes in and helps with personal tasks like
8:47
Speaker 3: bathing and dressing. That rose by about three percent this
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Speaker 3: year to about seventy seven seven and ninety two dollars
8:54
Speaker 3: per year. Meanwhile, if you just need like homemaker services,
8:59
Speaker 3: which includes like think of this, like help with non
9:02
Speaker 3: medical tasks like cooking and errands, this jumped about ten
9:06
Speaker 3: percent over year over year, and that's up to about
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Speaker 3: seventy five four dollars per year. And that increases largely
9:14
Speaker 3: because many agencies now charge the same rate for both
9:17
Speaker 3: types of services, which is kind of interesting if you
9:19
Speaker 3: think about, like, hey, I need help with with more
9:22
Speaker 3: medical base things versus just kind of help around the house.
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Speaker 3: But that's that's essentially the way the system is set up.
9:29
Speaker 1: I'm not great with math, Eric, but seem like things
9:33
Speaker 1: are adding up pretty quick here. What about what about
9:36
Speaker 1: them like outside the home care, like you know, adult
9:39
Speaker 1: adult programs and assisted living. As we're kind of tallying
9:43
Speaker 1: some of this up, goodness, this is this is really
9:45
Speaker 1: adding up.
9:47
Speaker 3: Yeah, don't don't sell yourself short. You've been doing the
9:49
Speaker 3: show for a while. I think you picked up some
9:52
Speaker 3: good math skills along the way.
9:54
Speaker 1: But trust my calculator, that's for sure. There you go,
9:59
Speaker 1: There you go.
10:00
Speaker 2: Yeah.
10:01
Speaker 3: So, as we kind of look closer at this, another
10:03
Speaker 3: service that folks will use as what we would call
10:06
Speaker 3: adult day care services, and that saw about a five
10:09
Speaker 3: percent increase, and that brought the national median cost up
10:13
Speaker 3: to about twenty six thousand dollars a year. These are
10:16
Speaker 3: programs that provide supervision and support during the day, something
10:20
Speaker 3: we would call more like respite care for family members
10:23
Speaker 3: who are providing care or maybe folks just need part
10:27
Speaker 3: time care. And then assisted living communities these saw a
10:31
Speaker 3: more significant increase. So we saw about a ten percent
10:34
Speaker 3: year over year increase with the national media and now
10:38
Speaker 3: reaching about seventy dollars. Higher occupancy rates rising from about
10:43
Speaker 3: seventy seven percent to eighty four percent. That's likely contributing
10:47
Speaker 3: to these rising costs because demand is just starting to
10:51
Speaker 3: outpace the supply in some parts of the country.
10:54
Speaker 1: That is fascinating stuff. And we'll talk a little bit
10:56
Speaker 1: too about nursing home care as well, which we talk
11:00
Speaker 1: about some big numbers we'll get into that in just
11:02
Speaker 1: a moment. In the meantime, if you haven't had a
11:04
Speaker 1: chance to check out the website Coss Financial dot com,
11:07
Speaker 1: I implore you to do that now. COSS that's k
11:10
Speaker 1: l aas Financial dot com. Great website and resource against
11:13
Speaker 1: class financial dot com. Telephon number six oh eight four
11:16
Speaker 1: four two five six three seven. No charge for that
11:19
Speaker 1: initial get to know you appointment dech claws Financial. It
11:21
Speaker 1: will be complementary to you. We'll continue our conversation with
11:24
Speaker 1: CJ and Eric. We will do that next as Money
11:26
Speaker 1: in Motion with Coss Financial continues right here on thirteen ten.
11:30
Speaker 1: WIWA talking with our retirement planning professionals Eric Schwartz and CJ. Closs.
11:34
Speaker 1: Of course they come to us from Clause Financial the
11:36
Speaker 1: website class financial dot com. That's class k l aas
11:41
Speaker 1: Financial dot com. You can learn more about Coss Financial
11:43
Speaker 1: right on the website. You can also schedule a complementary
11:46
Speaker 1: chat right from the website. Speaking of complementary conversations, telephone
11:51
Speaker 1: number six oh eight four four two five six three
11:53
Speaker 1: seven to make an appointment declass Financial. Don't forget that
11:56
Speaker 1: initial get to know you conversation at COSS financial it
11:59
Speaker 1: will be COMPLI metry to you again their number six
12:01
Speaker 1: oh eight four four two five, six three seven. Talking
12:05
Speaker 1: this week about a really important topic, long term care planning,
12:09
Speaker 1: and before the break we talked a little bit about
12:12
Speaker 1: some of the numbers and got some information when it
12:15
Speaker 1: comes to when it comes to adult programs and assisted living,
12:20
Speaker 1: and then of course brings us then to nursing home care,
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Speaker 1: which I do know this is one that I'm quite
12:26
Speaker 1: aware of. Quite expensive, actually, I thought I saw one
12:29
Speaker 1: of the notes say it can be one of the
12:31
Speaker 1: largest expenses of them all, can't it CJ.
12:34
Speaker 2: Yeah, absolutely, Sean. So, the annual median costs for a
12:38
Speaker 2: semi private room is now one hundred and eleven one
12:41
Speaker 2: hundred and eleven thousand dollars approximately, and this is up
12:45
Speaker 2: seven percent from last year. And now if you prefer
12:48
Speaker 2: a fully private room, expect to pay closer to about
12:51
Speaker 2: one hundred and twenty eight thousand dollars, which is a
12:54
Speaker 2: nine percent increase from the prior year. So you know,
12:57
Speaker 2: these are significant numbers and they certainly highlight why it's
13:00
Speaker 2: so important to include long term care planning in your
13:03
Speaker 2: retirement strategy, whether that means considering long term care insurance
13:07
Speaker 2: or self funding options, or relying on a combination of
13:10
Speaker 2: different resources. It just really drives home that while we
13:14
Speaker 2: plan for things like homes and colleges and retirement, long
13:18
Speaker 2: term care insurance or long term care coverage or long
13:21
Speaker 2: term care planning should be another major component to plan
13:24
Speaker 2: for in retirement. This is why it may be prudent
13:28
Speaker 2: to look at how insurance could play a role in
13:31
Speaker 2: your planning. Now, before we mention insurance, I just again
13:35
Speaker 2: want to reiterate we do not sell this stuff, so
13:38
Speaker 2: we have no kind of conflict of interest on whether
13:41
Speaker 2: or not you obtain a long term care insurance policy.
13:44
Speaker 2: As a matter of fact, Eric and I love nothing
13:46
Speaker 2: more than to look at a client's overall financial picture
13:49
Speaker 2: and say, hey, you're mostly self funded against this cost,
13:53
Speaker 2: and therefore you know insurance is optional. We love that conversation.
13:59
Speaker 2: But that's a big number. Everybody to be self funded
14:01
Speaker 2: against one hundred and thirty thousand dollars a year and
14:04
Speaker 2: a potential nursing home cost for up to two people
14:08
Speaker 2: in a household for some unknown period of time. Those
14:12
Speaker 2: self funded individuals often have significant pension, social security and portfolios.
14:17
Speaker 2: To be self funded, Okay, So with that being said,
14:20
Speaker 2: how do you quote unquote like offset this risk of
14:26
Speaker 2: potential cost spikes at the end of your life due
14:30
Speaker 2: to due to aging. And the answer would be when
14:34
Speaker 2: there's traditional long term care insurance. These are often policies
14:37
Speaker 2: that we call user or lose at policies. So, for example,
14:40
Speaker 2: a sixty year old male might pay about twelve hundred
14:43
Speaker 2: dollars per year for a policy offering about one hundred
14:46
Speaker 2: and sixty five thousand dollars in coverage. For women, it's
14:49
Speaker 2: typically higher around one nine hundred and sixty dollars per
14:53
Speaker 2: year for that same one hundred and sixty five thousand
14:55
Speaker 2: dollars in coverage. Now, couples may have access to joint
14:59
Speaker 2: policy with shared benefits. You can also choose things called
15:03
Speaker 2: inflation protections, which can drive up premiums. But you get
15:06
Speaker 2: the idea that's traditional long term care use it or
15:09
Speaker 2: lose it. I pay if I pay, and if I
15:12
Speaker 2: don't use it, what I lose it. There's also things
15:15
Speaker 2: called hybrid policies. These combine life insurance or annuities with
15:20
Speaker 2: long term care benefits. So if you don't end up
15:22
Speaker 2: needing care, your beneficiaries then just receive a death benefit,
15:26
Speaker 2: so hybrid policies are not use it or lose it. However,
15:30
Speaker 2: as great as these are, hybrid policies are typically more
15:32
Speaker 2: expensive because you're just basically buying a life insurance policy
15:36
Speaker 2: that prepays the death benefit if you need it for
15:39
Speaker 2: long term care, and then, as any good insurance agent
15:42
Speaker 2: would tell you, they're keeping that cost up with purchasing
15:46
Speaker 2: power is one of the challenges. So having these what
15:49
Speaker 2: are called insurance writers can be a tricky thing. It
15:53
Speaker 2: keeps your your benefit up with present purchasing power, but
15:56
Speaker 2: it also can be the thing that drives up the
15:59
Speaker 2: cost of your PA. So what we would say is,
16:02
Speaker 2: sit down with a good advisor, sit down with your
16:05
Speaker 2: whoever you trust to review your overall financial picture and
16:09
Speaker 2: just assess whether or not you need to try and
16:13
Speaker 2: ensure against this risk. We're not again, we're not at
16:16
Speaker 2: necessarily four or against that. We're just saying it is
16:19
Speaker 2: something you need to consider.
16:20
Speaker 1: Really important stuff and a lot of CJ mentions to
16:23
Speaker 1: consider and really important stuff, says we go through this conversation.
16:28
Speaker 1: This week, I'm talking with our retirement planning professionals from
16:31
Speaker 1: Class Financial online Cossfinancial dot com. That's coss k l
16:34
Speaker 1: a as financial dot Com. There're tell for number six
16:37
Speaker 1: so eight four four two five six three seven, no
16:39
Speaker 1: charge for that initial get to know you appointment at
16:41
Speaker 1: costs financial. It will be complimentary to you. So what
16:45
Speaker 1: about the folks who got I think this way, I'll
16:48
Speaker 1: never need this, or you know, maybe you've got some
16:50
Speaker 1: of these older policies that only cover nursing homes. What
16:54
Speaker 1: will people need to know there?
16:55
Speaker 3: Eric, Yeah, we hear this a lot, Sean, we hear
16:58
Speaker 3: you know, Oh I'll be fine or well that's for
17:02
Speaker 3: later me to worry about. But unfortunately, statistically that confidence
17:08
Speaker 3: can be misplaced. And like CJ said, you know, he
17:11
Speaker 3: and I love nothing more than to look at a plan,
17:14
Speaker 3: run the numbers for folks and tell them that you know, yeah,
17:17
Speaker 3: you're in good shape. You don't you don't need to
17:19
Speaker 3: be thinking about purchasing a long term care policy. But realistically,
17:24
Speaker 3: for a lot of people, that's that's just not the case.
17:27
Speaker 3: The US Department of Health and Human Services reports that
17:29
Speaker 3: about seventy percent of Americans turning sixty five will need
17:33
Speaker 3: some form of long term care. About twenty percent of
17:36
Speaker 3: them will need it for five years or more. Women
17:39
Speaker 3: tend to require care for a longer period than men,
17:43
Speaker 3: often because they just tend to live longer. But if
17:46
Speaker 3: you think about that, that one statistic there that twenty
17:49
Speaker 3: percent will meet it for five years or more, that's
17:52
Speaker 3: really I think for CJ and I that that really
17:55
Speaker 3: is kind of an eye popping number because you know,
17:58
Speaker 3: the averages is shorter than that, and most folks will
18:02
Speaker 3: actually plan for, you know, if they need care a
18:05
Speaker 3: shorter timeframe than that five years or more. So that's
18:08
Speaker 3: really something to be thinking about and making sure that
18:11
Speaker 3: you're taking this issue seriously. Really, older policies that you
18:17
Speaker 3: might find in your parents your parents paperwork, they often
18:20
Speaker 3: only cover care in a facility, and like I was
18:23
Speaker 3: saying earlier, a lot of folks prefer, understandably to actually
18:26
Speaker 3: get care in their home, and today's policies typically include
18:30
Speaker 3: a range of services, but some of those older policies
18:34
Speaker 3: won't give you that same type of type of flexibility.
18:37
Speaker 3: And timing is everything on this stuff. So the best
18:39
Speaker 3: time to explore coverage options is in your fifties or
18:42
Speaker 3: your early sixties, before you have health issues arise, especially
18:47
Speaker 3: cognitive decline, So don't wait too long to look into
18:51
Speaker 3: this because your options could become more limited as you
18:55
Speaker 3: age and your health potentially declines.
18:57
Speaker 1: Really a lot of stuff to take again this week,
19:00
Speaker 1: that is for sure, really some great information, important information
19:03
Speaker 1: as well as we talk with Eric and CJ. Our
19:06
Speaker 1: retirement planning professionals from Class Financial learn More Online, COSS
19:09
Speaker 1: Financial dot Com. That's Coss k l a A S
19:12
Speaker 1: Financial dot Com. Telphon number six soh eight four four
19:14
Speaker 1: two five six three seven. No charge for that initial
19:17
Speaker 1: get to know you appointment tech Loss Financial. It will
19:19
Speaker 1: be complementary to you again their number six oh eight
19:22
Speaker 1: four four two five six three seven. You heard CJ
19:25
Speaker 1: mentioned self funded. We'll get to some of the details
19:28
Speaker 1: on that. We'll also do the listener question corner as
19:30
Speaker 1: well as the clas quiz question week. It's going to
19:32
Speaker 1: be an action packed final segment of Money in Motion
19:35
Speaker 1: with COSS Financial and we'll do that next right here
19:37
Speaker 1: on thirteen ten wiv I. We're talking with our retirement
19:40
Speaker 1: planning professionals CJ. Closs and Eric Schwartz of Class Financial Online,
19:44
Speaker 1: COSS Financial dot Com that's Class k l a A
19:47
Speaker 1: S Financial dot Com and CJ uh. In the last
19:50
Speaker 1: segment you mentioned Uh self funded instead of buying insurance.
19:55
Speaker 1: Let's talk about folks in that position and what folks
19:58
Speaker 1: need to know when it comes to self funding these
20:00
Speaker 1: type of things.
20:02
Speaker 2: Yeah, good point, Sean. You know, some people will call
20:05
Speaker 2: it being self insured, and we would say no, insurance
20:09
Speaker 2: is about is about a group of people de risking themselves.
20:13
Speaker 2: It's the rule of large numbers. So you can't really
20:15
Speaker 2: self insure this. You can self fund it. But anyway,
20:19
Speaker 2: that's me getting into into the weeds on the definitions
20:21
Speaker 2: of words. But yes, self funding is definitely an option.
20:25
Speaker 2: And research does show that that while most people over
20:28
Speaker 2: age sixty five spend less than twenty five thousand dollars
20:31
Speaker 2: on long term care, about fifteen percent will spend more
20:35
Speaker 2: than two hundred and fifty thousand dollars. And again, depending
20:38
Speaker 2: upon where you're at with your portfolio, that could pose
20:41
Speaker 2: a significant financial risk to kind of your goals. So
20:47
Speaker 2: let's break down your choices. There's family caregivers, so roughly
20:51
Speaker 2: sixty five percent of long term care is provided by
20:54
Speaker 2: family members. However, this can place a heavy burden on
20:58
Speaker 2: adult children, especially the so called Sandwich generation, who are
21:02
Speaker 2: balancing careers in their own families. The other option is
21:06
Speaker 2: self funding. So if you go this route, make sure
21:08
Speaker 2: you've saved enough to both support your lifestyle and cover
21:11
Speaker 2: future care expenses if you end up needing like a
21:13
Speaker 2: private room like we talked about previously. And then finally,
21:17
Speaker 2: insurance with this is whether it's a traditional or a
21:20
Speaker 2: hybrid policy, insurance could offer peace of mind and help
21:24
Speaker 2: preserve your assets. And of course the right choice depends
21:27
Speaker 2: upon your age, health, income, family situation. But you get
21:30
Speaker 2: the idea here, everybody. So, yes, self funding is an option,
21:34
Speaker 2: but it doesn't mean it's optimal. Let me actually put
21:37
Speaker 2: this a different way. If you end up needing care
21:41
Speaker 2: for a let's just say three to four year period
21:44
Speaker 2: of time in and let's just call it like private
21:47
Speaker 2: room or semi private room in a nursing home, you
21:51
Speaker 2: will more than likely have been best off to have
21:53
Speaker 2: bought an insurance policy period. End of story. Right, So
21:59
Speaker 2: what is the best choe And it's like, well, I
22:00
Speaker 2: don't know. If I knew the future, I would tell
22:02
Speaker 2: you what the best choice is. So just because you
22:04
Speaker 2: can self fund doesn't mean that you should or that
22:08
Speaker 2: you want to. Because maybe one of your goals is
22:11
Speaker 2: to leave X number of dollars to your estate or
22:14
Speaker 2: your children and your charities. Well, if that's your goal,
22:18
Speaker 2: you're going to have to de risk yourself against spending
22:21
Speaker 2: it down at the end of life. So I'm kind
22:24
Speaker 2: of getting into the weeds here, but what we're getting
22:26
Speaker 2: at is there are multiple options. You just need to
22:28
Speaker 2: decide what matters to you.
22:30
Speaker 1: Really great conversation this week. Don't forget you can always
22:32
Speaker 1: listen back subscribe to the podcast at cossfinancial dot com.
22:35
Speaker 1: That's Cossfinancial dot com. Speaking of getting to the website.
22:37
Speaker 1: Another great opportunity to submit a question to be answered
22:40
Speaker 1: in the listener question corner, and today's question comes to
22:42
Speaker 1: us from Aiden, who wrote in with a very timely
22:45
Speaker 1: retirement question. Aiden says, I'm turning fifty five this year
22:49
Speaker 1: and thinking about retiring soon. I've heard there's a way
22:51
Speaker 1: I can take money out of my four oh one
22:54
Speaker 1: K without paying the ten percent early withdrawal penalty. Can
22:58
Speaker 1: you explain how this works? And CJ will let you
23:01
Speaker 1: answer Aiden's question?
23:04
Speaker 2: Yeah, great question, Aiden, And this one comes up quite
23:07
Speaker 2: often so what you're referring to is commonly called the
23:10
Speaker 2: separation from service rule, which is actually if you google
23:14
Speaker 2: it everybody. It's separation from service after the age of
23:18
Speaker 2: fifty five or at the age of fifty five. And
23:20
Speaker 2: here's how it works. If you separate from your employer
23:23
Speaker 2: in the year you turn fifty five or later, or
23:27
Speaker 2: age fifty if you're in in public safety, the IRS
23:32
Speaker 2: allows you to withdraw funds from your four oh one
23:35
Speaker 2: K or four h three B plan tied to that employer.
23:38
Speaker 2: That's key, without paying the usual ten percent early withdrawal penalty.
23:44
Speaker 2: This is sometimes called the age fifty five exception. Now
23:48
Speaker 2: here's the key. This only applies to employer sponsored plans
23:54
Speaker 2: you're leaving. It doesn't apply to iras or to four
23:57
Speaker 2: oh one ks from past employer lawyers. Now, when I
24:01
Speaker 2: say from past employers, if you separate from service at
24:05
Speaker 2: say fifty six, and that's your past employer, it applies
24:08
Speaker 2: to that. But what we're saying is it doesn't apply
24:11
Speaker 2: if you were fifty three and left a past employer
24:14
Speaker 2: and left money at that past employer, and now you're
24:17
Speaker 2: fifty six years old. You get the idea that doesn't
24:20
Speaker 2: apply because you didn't separate from service at fifty five
24:24
Speaker 2: or later. So another thing to remember, just because you're
24:29
Speaker 2: avoiding the penalty, you still owe regular income tax on
24:32
Speaker 2: the distributions. Again, avoiding the penalty is a pretty big deal,
24:35
Speaker 2: but you'll still have the taxes. And if you're considering
24:38
Speaker 2: retiring at fifty five, this strategy could help you bridge
24:42
Speaker 2: the gap until you reach age fifty nine, or say
24:45
Speaker 2: sixty two when Social Security first becomes available, or sixty
24:49
Speaker 2: five when Medicare kicks on. You get the idea. So
24:52
Speaker 2: here's what we'd say, if you see anybody listening out there.
24:56
Speaker 2: If you separate from an employer with an employer spot
25:00
Speaker 2: answered retirement plan like a four oh one K or
25:02
Speaker 2: four h three B at fifty five, fifty six, fifty seven,
25:06
Speaker 2: fifty eight or fifty nine, okay, so think of it
25:08
Speaker 2: as those years. So you're not yet fifty nine and
25:12
Speaker 2: a half, that's the key, but you are at least
25:15
Speaker 2: fifty five. If you separate from service from an employer
25:18
Speaker 2: and that window of time, caution, caution, caution, Probably don't
25:23
Speaker 2: roll that over to an IRA, because as soon as
25:26
Speaker 2: you roll that money over to in IRA, then you
25:28
Speaker 2: have to wait till fifty nine and a half to
25:29
Speaker 2: pull it out without a penalty. But if you leave
25:32
Speaker 2: it in that old employer in that window of time.
25:35
Speaker 2: Now you have access to funds without a penalty. So
25:38
Speaker 2: that's that's kind of the idea here and Aiden, thanks
25:41
Speaker 2: so much for asking the question.
25:42
Speaker 1: Great question. Of course, you can smit those right online
25:44
Speaker 1: COSS Financial dot com. That's Coss Klaas Financial dot com.
25:48
Speaker 1: They're telephone number six oh eight four four two five
25:52
Speaker 1: six three seven. No charge for that initial gets to
25:54
Speaker 1: know you appointment tech Lost Financial h will be complimentary
25:56
Speaker 1: to you again. They're number six oh eight four four
25:59
Speaker 1: two five six three seven. Want to hold on to
26:01
Speaker 1: that telephone number now because it's time for the Class
26:04
Speaker 1: Quiz question of the week. It works like this. In
26:06
Speaker 1: just a moment, I'll ask you the class quiz question
26:08
Speaker 1: of the week. You will then have thirty minutes from
26:09
Speaker 1: the end today's program to call the Class Financial office
26:11
Speaker 1: right here in Madison at six oh eight four four
26:14
Speaker 1: two five six three seven. If you are the first
26:17
Speaker 1: call with correct answer, win this week's prize, which is
26:19
Speaker 1: a twenty five dollars gift card to best buy this
26:22
Speaker 1: week's Closs Quiz question week. Is this true or false?
26:26
Speaker 1: Medicare will cover all associated expenses with long term care?
26:32
Speaker 1: Is that true? Or is that false telephone number six
26:35
Speaker 1: oh eight four four two five six three seven, first
26:38
Speaker 1: call with correct answer when this week's prize at twenty
26:40
Speaker 1: five dollars gift card to Best Buy. Don't forget that's
26:42
Speaker 1: Class Financial's office, their telephone number right here in Madison
26:44
Speaker 1: as well. Six oh eight four four two five six
26:47
Speaker 1: three seven CJ. Eric. It's always great chatting with both
26:50
Speaker 1: of you guys. Have a happy Thanksgiving and we'll talk
26:52
Speaker 1: real soon.
26:53
Speaker 2: Thanks Sean. Thanks Sean.
26:54
Speaker 1: News comes your way next year at thirteen ten w
26:56
Speaker 1: IBI