American individuals are known as one of the worst savers in the developing world with only saving approximately 6 percent of their income compared to the recommended 20 percent. Furthermore, when your clients have a desire to raise a child, saving becomes more challenging. When your clients are expecting a child, it is important that their financial plan is updated as well. With the expansion of your clients’ family, a new arrangement must be made so that several expenses can be put into consideration.
Updating The Budget
A crucial part of expanding the family involves incorporating new expenses into their budget. How much money do they expect to spend on baby formula, diapers, clothing, or childcare? On top of these factors, one-time purchases such as strollers and carriers should be considered, as well. As the child grows older, expenses like baby formulas and diapers can be replaced with other expenses like extracurricular activities.
Although college may seem far away, it is critical you discuss with your clients the significance of college savings at an early start. Too often parents set aside their retirement savings in order to pay for their child’s expenses. In fact, most American adults continue to pay for their child’s loans well into older age, which impacts their ability to plan for retirement. Providing options for future parents at an early start can prevent placing significance one over the other.
Along with these factors, advise your clients’ to add their children to their insurance policy. If their insurance policy does not cover all medical expenses for their child, consider updating their financial plan to include those costs. This will become another area that would require saving.
Once these factors have been considered, make sure that your clients are aware of applicable tax breaks. There are exemptions your clients’ can apply for simply because they have a child. Advise them to contact a tax professional before they file.
Updating your clients’ plans allow for appropriate planning for future expenses such as children’s college savings and retirement. It is important that these factors are considered in the early stages of planning to allow for adequate preparation for the future. These next-generation family members have the potential to become your next clients and you should plan for their arrival just as well as their parents’ retirement.
Genivity is here to help. We place emphasis on helping advisors with goal-based financial planning that incorporates health wealth factors to provide personalized reporting. Genivity can assist in helping your clients’ understand the health factors that should be considered in terms of financial planning. This service lays the information in an easy-to-read manner. Once your client determines what factors impact their retirement planning, they will place further emphasis on their children’s health. This can prevent future health expenses for future next-generation family members.
Many Americans ask themselves several questions when planning for retirement. One of them is: Will the benefits of Social Security be enough to retire comfortably? The simple answer is no. If the structure of the Social Security system is not improved, we could see Social Security being depleted by the year 2034. However, there are a few elements of Social Security benefits that you should be aware of that can assist you in your retirement.
How Social Security Works
Social Security benefits are paid monthly to individuals who are retired and their spouses. These benefits also apply to individuals with complete or partial disability. The amount of benefit you receive is based on the number of years that an individual has worked, which is typically around 35 years.
To apply for these benefits, the minimum age that you can apply is at 62 years of age and the maximum age is 70. Although you may think ‘the sooner the better’, you actually receive larger amounts of benefits the longer you wait. In fact, those who wait to retire until 70 receive 76 percent more income compared to those who retire at 62. Essentially, the waiting game is beneficial.
Social Security Benefits are Taxable
Although you may think you will receive an adequate amount of benefits per month, it is important to remember that Social Security benefits are taxable. As of 2016, individuals who are single taxpayers and receive more than $25,000 of income annually will be taxed for the use of their benefits. Couples who file jointly and receive more than $32,000 will also expect to pay taxes on their benefits. Individuals with complete or partial disabilities typically are tax-free. However, this heavily depends on their living situation and the severity of their disability. It is important to consider the tax on these benefits when determining how Social Security benefits will fit into your retirement plan. Every dime counts!
Although Social Security is not the most reliable source for retirement, it is still useful! Alone it will not be enough, but alongside other strategies, it will be a good source of income. While we provide a brief overview of Social Security benefits, if you would like to learn more, the official Social Security website is a great resource. We also recommend scheduling time with your clients to discuss how Social Security fits within their retirement plan.
Genivity is here to help. We place emphasis on helping advisors with goal-based financial planning that incorporates health wealth factors to provide personalized reporting. Genivity can assist you in determining the future cost of your care. It provides you with more information needed to plan for your future retirement. Your health will greatly impact how you plan for retirement, and it is important you get that information in an easy to read manner! If you are interested in understanding your health wealth factors, ask your advisor for an assessment with Genivity’s HALO.
Planning for retirement requires planning for many scenarios and options. One element to consider is Medicare. In a survey by Forbes, 30 percent of Americans believed that home health care expenses were less than $417 monthly when in reality, the cost is closer to $4,000 a month, or $45,000 annually. To put this into perspective, a 65-year-old in 2016 expected to need approximately $270,000 in savings to cover at least 90 percent of their health care costs in retirement. While this may seem like a cost that will be impossible to cover, Medicare can be very useful in this case.
Apply for Medicare
Medicare is a federal program for U.S. citizens and legal residents of five years. Individuals who are over 65 years of age can apply to this program. Individuals who are under 65 years of age can also apply if they receive disability benefits from Social Security, are members of the Railroad Retirement Board, or who have medical conditions such as Amyotrophic Lateral Sclerosis (ALS) or End-Stage Renal Disease (ESRD).
To apply for Medicare, you have a seven month period. You have three months prior to turning 65 and three months after turning 65. You may also apply during the general enrollment period from January 1 through March 31. If you are accepted, coverage will begin July 1.
To re-apply for Medicare, make sure to do so before your policy expires. If you are uninsured for a 12-month period and re-apply for Medicare part B, you will be charged a 10 percent increase in your premium. In other words, if you re-apply five years later, you will witness a 50 percent increase in your monthly premiums.
For more guidelines, read more at Medicare.gov.
Medicare Part A
Medicare part A is also known as hospital insurance. This insurance covers inpatient care such as those in hospitals, skilled nursing care, or hospice services. This service does not typically require a monthly premium. However, this will depend on your circumstances. If you receive part A, it is very likely that Medicare part B will also be required.
Medicare Part B
This insurance is also called medical insurance and covers medical care that is necessary in outpatient settings such as doctor’s offices. It also covers ambulance fees and durable medical equipment such as wheelchairs. It is aimed at diagnosing, treating, and preventing healthcare conditions. A part of the preventative services includes lab testing and the influenza vaccine. This insurance policy requires a monthly premium, which in 2017 was approximately $134 a month. However, if you also receive Social Security benefits, this premium is deducted from your income.
Medicare Part C
Part C is also called Medicare Advantage. Private insurance companies run your insurance policy and determine the amount of money you will receive to cover your health expenses monthly, regardless of whether it meets the cost of your services. In other words, your policy can determine you will only receive $200 a month for your health care, even if your health care is $500 a month. To apply for this insurance, you will need to be enrolled in part A and part C. You get several options, however. Your policy can be a Health Maintenance Organization (HMO), Preferred Provider Organization (PPO), or a Medical Savings Account (MSA).
Medicare Part D
Medicare part D covers prescription drugs and also have a monthly premium like part B. However, there is a limited amount of money given to you for your prescription drugs. For example, in 2017 the limit was $3,700. If you reach that limit, you are required to cover the cost of your medication. If you have name-brand prescriptions, you are required to pay at most 40 percent of the plan’s cost. If you have generic prescriptions, you are required to pay 51 percent of the cost. However, it is important to note the coverage gap is expected to be phased out by 2020.
Retirement is a difficult topic to discuss when there are so many factors. However, with a basic understanding of how Medicare can help you with retirement, we hope this has given you a starting point. Medicare is important in maintaining your health in your older years. Your financial advisors can assist you in determining how Medicare fits into a retirement plan, which can ease your transition into retirement. Talk to your financial advisor today to determine which Medicare parts apply to you.
Genivity is here to help. We place emphasis on helping advisors with goal-based financial planning that incorporates health wealth factors to provide personalized reporting. Your health will greatly impact how you plan for retirement, and it is important you get that information in an easy to read manner! If you are interested in understanding how your health influences your retirement, ask your advisor for an assessment with Genivity’s HALO.
Caring for your growing elders can be stressful yet rewarding. You help maintain their health and bring a smile to their face. However, as they grow older, it is important that you consider more drastic situations in your care plan. An advanced care plan must be created for the benefit of your elders, yourself, and your family. An advanced care plan includes a living will, power of attorney, health care proxy, and a do not resuscitate order (DNR). This care plan is made to determine treatment directives and should be updated as health care related events occur.
It is crucial that there is communication when you construct an advanced care plan. You must consider your elder’s values. What are your loved one’s personal values and beliefs? Do they value religious practices or want family members to be present during their passing? These are personal beliefs that should be addressed and considered when creating a care plan.
Also consider your loved one’s preferences. Do they wish medication to be withheld? Do they wish to have CPR performed in an event of a medical emergency? Although this may be a difficult conversation to have, it is important that it is discussed. This will prevent a future conflict with your family.
Remember that you also have resources. There are professionals such as lawyers, social workers, clergy members, counselors, and more that are available to assist you. Constructing an advanced care plan is difficult to do. Do not feel that you are alone in the process.
What to Include in an Advanced Care Plan
Living Wills. Livings wills are also called medical directives. They are written instructions that determine what medical decisions will be made in case of an event. They are written by your the individual in this situation. 47 states and the District of Columbia have laws that authorize and legalize living wills. However, each state has different requirement and regulations, so it is crucial you research you state.
Power of Attorney. A power of attorney is the same as durable power of attorney. These documents determine the person that your elder will appoint to make medical decisions on their behalf. If your elder is unable to make a health care decision, the power of attorney will determine the next step. They will be able to make decisions even if your elder does not have a terminal illness.
Health Care Proxy. These individuals are also substitute decision makers for your elders. These individuals are similar to a power of attorney. However, some states regulate the decisions the proxy can make. All 50 states and the District of Columbia recognize this individual as an adequate decision maker.
Do Not Resuscitate (DNR) Order. This is a physician’s written order on behalf of your elder. It is attached to your elder’s medical record. DNRs will indicate whether your health care provider should attempt to perform life-saving measures such as CPR in events of heart attacks and cardiac or respiratory arrest. If your elder is able to make this decision, the physician will approve and carry out this order.
This is not an easy conversation to have. However, it is a conversation that must happen in order to maintain your elders wishes. Furthermore, it prevents future conflict between your elder, yourself, and your family and friends.
Genivity is here to help. We place emphasis on helping advisors with goal-based financial planning that incorporates health wealth factors to provide personalized reporting. Genivity can assist you in determining how your family members health impacts their future care planning. To determine how their health impacts their care plan, advise your family members to ask for an assessment with Genivity’s HALO to their financial advisors.