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Author: crawf One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75335  
Subject: Senior Financial Workshop Date: 8/9/2005 3:52 PM
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Just attened the above. Info. presented in a very broad fashion. Can some one refer me to good site to help me understand:
1. Asset Protection from Nursing Homes
---Long Term Care Insurance or Modified Endowment Contract
2. Multi-generatonal IRA's
3. Equity Index Annuity
Thanks, Mike
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Author: ziggy29 Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 47178 of 75335
Subject: Re: Senior Financial Workshop Date: 8/9/2005 3:56 PM
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>> 1. Asset Protection from Nursing Homes <<

I can help you with this one. Call it "Helping wealthy older folks hide their assets by giving everything away to their kids, so they can soak the taxpayer for their care when they're perfectly capable of affording it."

#29

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Author: rkmacdonald Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 47179 of 75335
Subject: Re: Senior Financial Workshop Date: 8/9/2005 4:24 PM
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Author: ziggy29 | Date: 8/9/05 3:56 PM | Number: 47178
>> 1. Asset Protection from Nursing Homes <<

I can help you with this one. Call it "Helping wealthy older folks hide their assets by giving everything away to their kids, so they can soak the taxpayer for their care when they're perfectly capable of affording it."


Ziggy, I get your point, but I don't think you're giving this person a fair shake. It is illegal to give away assets to your kids to avoid future nursing home costs, unless it is done strictly per the gift tax laws (in which case taxes are collected). I don't think the poster is asking about any illegal means to accomplish his goal.

I am all for each person paying his own way, but I think that everyone also has the right to take advantage of any and all legal methods to minimize their taxes and expenses.

Russ

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Author: crawf One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 47180 of 75335
Subject: Re: Senior Financial Workshop Date: 8/9/2005 4:55 PM
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Yea, I was inquiring about Long term care insurance and /or Modified Endowment Contract------not how not to pay the bill. Mike

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Author: ResNullius Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 47181 of 75335
Subject: Re: Senior Financial Workshop Date: 8/9/2005 5:12 PM
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Yea, I was inquiring about Long term care insurance and /or Modified Endowment Contract------not how not to pay the bill. Mike

I don't claim to be an expert on long term care insurance, but I've yet to see a policy where the fine print doesn't take away most (sometimes all) of the benefits that are supposedly offered by the policy. If you find one that actually justifies the premiums, please let me know.



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Author: rkmacdonald Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 47182 of 75335
Subject: Re: Senior Financial Workshop Date: 8/9/2005 5:44 PM
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Author: crawf | Date: 8/9/05 3:52 PM | Number: 47177
Just attened the above. Info. presented in a very broad fashion. Can some one refer me to good site to help me understand:
1. Asset Protection from Nursing Homes
---Long Term Care Insurance or Modified Endowment Contract


Long term care is insurance for protecting your assets from a long terminal stay in a nursing home, but you have to be very careful when buying it to know exactly what you are getting. These contracts are very complex, and you should never sign one without getting an independent retirement expert to review them. One of the big problems with long term care that most people don't know about is that your premium can rise. They often gloss over that fact when they hype their products. Also, they don't always include enough inflation protection, in case you live longer than you expect, and nursing home costs go up faster than average.

Most independent planners will tell you that if you have sufficient funds, say $2M or above in liquid assets, you should consider self-insuring. From about $300K up to $2M, you really need to consider long term care. Below, $300K, LTC is probably too expensive for you, and you should just take the chance that your money will run out, in which case Medicaid will pick up the tab.

Of course these dollar figures are just guidelines, and, by no means does everyone agree on them, so I just am giving you food for thought. You definitely should talk with a retirement expert on this so your personal situation can be fully evaluated.

2. Multi-generatonal IRA's

I think this IRA is also called a 'Stretch' IRA. It allows many different levels of contingent beneficiaries, but is only available at selected firms. If your firm happens to offer this service, it may be worth doing, but I'm not sure I would switch firms just to get it.

Here is an article that addresses this:
http://www.complianceheadquarters.com/IRA/IRA_Articles/stretch_ira.html

Excerpt:
-quote-
You may have heard the term “stretch IRA” being used in the financial services industry along with “multi-generational IRA” and “perpetual IRA.” What is a stretch IRA? Does it last forever? Can any financial organization offer stretch IRAs? Is a special IRA agreement necessary to establish a stretch IRA?

A stretch IRA is not a special type of IRA created by Congress. There are no special IRA agreements that establish stretch IRAs but a financial organization may want to add language to its current IRA agreements to enable stretching.

The term “stretch” here refers to a method for extending the duration of traditional and Roth IRA beneficiary distributions to certain successor beneficiaries, beyond the death of an original designated beneficiary—a method especially valuable to a nonspouse beneficiary.<<
-unquote-

3. Equity Index Annuity

An EIA is a product only sold by insurance companies, and as such, it is a actually a complex insurance policy. Here is a Buyer's Guide that describes Deferred EIAs (the most common kind): http://www.ins.state.il.us/Life_Annuities/equityindex.htm

Here is an excerpt:
-quote
An equity-indexed annuity is a fixed annuity, either immediate or deferred, that earns interest or provides benefits that are linked to an external equity reference or an equity index. The value of the index might be tied to a stock or other equity index. One of the most commonly used indices is Standard & Poor's 500 Composite Stock Price Index (the S&P 500), which is an equity index. The value of any index varies from day to day and is not predictable.

When you buy an equity-indexed annuity you own an insurance contract. You are not buying shares of any stock of index.

While immediate equity-indexed annuities may be available, this Buyer's Guide will focus on deferred equity-indexed annuities.

An equity-indexed annuity is different from other fixed annuities because of the way it credits interest to your annuity's value. Some fixed annuities only credit interest calculated at a rate set in the contract. Other fixed annuities also credit interest at rates set from time to time by the insurance company. Equity-indexed annuities credit interest using a formula based on changes in the index to which the annuity is linked. The formula decides how the additional interest, if any, is calculated and credited. How much additional interest you get and when you get it depends on the features of your particular annuity.

Your equity-indexed annuity, like other fixed annuities, also promises to pay a minimum interest rate. The rate that will be applied will not be less than this minimum guaranteed rate even if the index-linked interest rate is lower. The value of your annuity also will not drop below a guaranteed minimum. For example, many single premium annuity contracts guarantee the minimum value will never be less than 90 percent of the premium paid, plus at least 3% in annual interest (less any partial withdrawals). The guaranteed value is the minimum amount available during a term for withdrawals, as well as for some annuitizations (see "Annuity Income Payments") and death benefits. The insurance company will adjust the value of the annuity at the end of each term to reflect any index increases.
-unquote

EIAs may be appropriate for some very risk averse people, but I don't think it is right for most people. They have been very popular over the last couple years, because interest rates have been at historical lows. However, the insurance companies know that rates won't stay low forever, and when rates return to normal levels, the insurance companies will clean up with these EIAs. Of course, when the rates do increase, it is too late for the person who bought the EIA. Most people will do better over the long term by investing in a properly diversified portfolio of bonds and equities.

Russ

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Author: jrr7 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 47183 of 75335
Subject: Re: Senior Financial Workshop Date: 8/9/2005 6:29 PM
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3. Equity Index Annuity

I call this "a product sold to risk-averse suckers who think they're getting the return of the stock market without the risk, but most of the return of the stock market somehow ends up in the pocket of the salesman and the insurance company, while the contract holder usually ends up with less money than if he'd bought a CD."

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Author: ziggy29 Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 47184 of 75335
Subject: Re: Senior Financial Workshop Date: 8/9/2005 7:35 PM
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>> Yea, I was inquiring about Long term care insurance and /or Modified Endowment Contract------not how not to pay the bill. Mike <<

My apologies if it sounded like I was attacking you -- I didn't assume you had any specific motives, but this topic hits a hot button of mine, because I know of plenty of elderly millionaires who shifted assets to kids and to trusts specifically to qualify for government aid which shifts the burden on people who can afford it even less.

I should have made that more clear when I first responded.

#29

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Author: ziggy29 Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 47185 of 75335
Subject: Re: Senior Financial Workshop Date: 8/9/2005 7:39 PM
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>> I call this "a product sold to risk-averse suckers who think they're getting the return of the stock market without the risk, but most of the return of the stock market somehow ends up in the pocket of the salesman and the insurance company, while the contract holder usually ends up with less money than if he'd bought a CD." <<

Even that would be tolerable if the annuity really did track the stock market.

The problem is that there are monthly caps. The reason that's a problem is that when the market rises, it's usually in spurts. If the market rises 12% in a year, it probably didn't rise 1% in each month. Chances are there were some months when the market was up 4%, 5%, even 6% or more. But you'd probably have your upside limited to 2-3% in those months, and while you can't "lose" principal in these investments, you could lose 10% in a single month if the market crashed and you managed to gain 10% or more in the year so far.

These are products that sound great in theory. It's actually possible for individuals of sufficient means to approximate these investments without the huge commissions and ongoing loads.

#29

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Author: crawf One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 47186 of 75335
Subject: Re: Senior Financial Workshop Date: 8/9/2005 8:31 PM
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no problem on my part. Mike

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Author: TwoCybers Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 47187 of 75335
Subject: Re: Senior Financial Workshop Date: 8/9/2005 9:19 PM
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Russ generally speaking there is a 3 year (or longer lookback). So if assets are given away, sold at low price, placed in trusts, etc. the person owning the assest can not get medicade until they have paid to government (generally the state) an amount equal to the value of the assests disposed of during the lookback period. This is not easy since money is often spent. This look back feature is a federal requirement.

Gordon
Atlanta

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Author: rkmacdonald Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 47188 of 75335
Subject: Re: Senior Financial Workshop Date: 8/9/2005 9:35 PM
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Author: TwoCybers | Date: 8/9/05 9:19 PM | Number: 47187
Russ generally speaking there is a 3 year (or longer lookback). So if assets are given away, sold at low price, placed in trusts, etc. the person owning the assest can not get medicade until they have paid to government (generally the state) an amount equal to the value of the assests disposed of during the lookback period. This is not easy since money is often spent. This look back feature is a federal requirement.


Yes, I agree. This is what I was referring to in my previous reply.

If the laws are followed, gifting is not a good way for you to achieve poverty. A wealthy person would end up paying more taxes than the cost of the nursing care they were trying to avoid.

Russ

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Author: PolymerMom Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 47189 of 75335
Subject: Re: Senior Financial Workshop Date: 8/9/2005 9:40 PM
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re Long Term Care Insurance

Does your family have a history of disabling physical problems, such as strokes or Alzheimer's? If so, it might be worth looking into.

Both conditions are extremely expensive to deal with and the family is unlikely to have the resources to deal with it over many years.

However, be careful as to terms and the insurer.

Luckily, MIL chose a GE policy for long-term care that pays out for 4 years. Given she's in early-mid Alzheimer's this covers enough time before our retirement that one of us doesn't have to quit work to constantly monitor her activities. (She wanders and has forgotten how to cook.) It will also stretch the life of her savings.

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Author: foolazis Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 47190 of 75335
Subject: Re: Senior Financial Workshop Date: 8/9/2005 9:40 PM
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...generally speaking there is a 3 year (or longer lookback). So if assets are given away, sold at low price, placed in trusts, etc. the person owning the assest can not get medicade until they have paid to government (generally the state) an amount equal to the value of the assests disposed of during the lookback period. This is not easy since money is often spent. This look back feature is a federal requirement.

Thank you very much for this post. I just found out that my mom (age 77) is considering giving myself and my siblings $10K each. She told us that we should invest it only in a way that would preserve principal. I wondered if this was because of the lookback rules. She said that Ohio had a 5 year lookback - just changed this year. If she does this, I think that I will just stick it in a money market fund until the 5 years are up.

foolazis


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Author: FAEZ Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 47191 of 75335
Subject: Re: Senior Financial Workshop Date: 8/9/2005 11:06 PM
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I think that I will just stick it in a money market fund until the 5 years are up

If you're into preserving principal and want a little more return, look into Series I bonds.

They're presently paying 4.8%. That changes every 6 months and you can't cash them in for the first 12 months. And if you cash them in before 5 years, there's a 3 month penalty. Still better return than a money market. Also your principal is guaranteed by the U.S. of A.

Go to: http://www.publicdebt.treas.gov/sav/sbiinvst.htm

Also, series EE bonds have similar rules. They presently pay 3.5%.
Also very safe.

Just a thought. I love series I bonds (at least today).

Andy



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Author: ResNullius Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 47192 of 75335
Subject: Re: Senior Financial Workshop Date: 8/10/2005 7:30 AM
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Given she's in early-mid Alzheimer's this covers enough time before our retirement that one of us doesn't have to quit work to constantly monitor her activities. (She wanders and has forgotten how to cook.) It will also stretch the life of her savings.

My mom had Alzheimer's. My mom was lucky, she died from cancer just before she was about to step into the final stage. We decided not to treat her cancer, because prolonging her life made no sense at all. It wasn't easy, but it's what she would have wanted if she had been able to understand what was going on. While death from cancer is bad, it's nowhere near as horrible as the final two stages of Alzheimer's.


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Author: TwoCybers Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 47193 of 75335
Subject: Re: Senior Financial Workshop Date: 8/10/2005 9:45 AM
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This is only an issue if your mother attempts to get welfare (aka medicade) to pay her medical/nursing home bills. If she is independent does not matter. Additionally if your mother does seek medicade, all the siblings will need to have to come up the money.

Gordon
Atlanta

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Author: jrr7 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 47194 of 75335
Subject: Re: Senior Financial Workshop Date: 8/10/2005 11:03 AM
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And if you cash them in before 5 years, there's a 3 month penalty.

If you buy them late in the month, and cash them early in the month, you get credit for the full month's interest, and so you can mitigate approximately 2 months' worth of the penalty.

As a result, I-bonds can beat 18-24 month CDs if you time your buys and sells properly (assuming inflation rates don't change).

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Author: 2old4bs Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 47195 of 75335
Subject: Re: Senior Financial Workshop Date: 8/10/2005 12:08 PM
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Here's a link to a previous thread on Equity Index Annuities:

http://boards.fool.com/Message.asp?mid=22809548&sort=whole

Consumers Union did a general analysis of Long Term Care Insurance about 2 years ago, IIRC. After evaluating your own situation and likelihood of using the benefits, along with the stability of the issuing company, and the cost vs: value considerations, if you decide that it's a good thing for you, CU advised that no one should buy it before the age of 60. Perhaps you can find CU's analysis on their website.

2old


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Author: Donna405 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 47196 of 75335
Subject: Re: Senior Financial Workshop Date: 8/10/2005 8:54 PM
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I purchased my long-term care at the age of 52, and received quite a discount from the cost now of those who are my peers (age 60). They are paying $75.00+ for the same benefits through the same company I am paying $43.60 monthly.

Donna

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Author: reallyalldone Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 47197 of 75335
Subject: Re: Senior Financial Workshop Date: 8/10/2005 9:18 PM
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I purchased my long-term care at the age of 52, and received quite a discount from the cost now of those who are my peers (age 60). They are paying $75.00+ for the same benefits through the same company I am paying $43.60 monthly.

But how long will it take before they have paid in the same amount as you ?

rad


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Author: reallyalldone Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 47198 of 75335
Subject: Re: Senior Financial Workshop Date: 8/10/2005 9:20 PM
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But how long will it take before they have paid in the same amount as you ?

Looks like about 4.5 years - so you aren't ahead of them for awhile.

rad


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Author: FAEZ Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 47199 of 75335
Subject: Re: Senior Financial Workshop Date: 8/10/2005 10:09 PM
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Long term care is insurance for protecting your assets from a long terminal stay in a nursing home, but you have to be very careful when buying it to know exactly what you are getting. These contracts are very complex, and you should never sign one without getting an independent retirement expert to review them

Good idea! I recommended your post.

Now just where would I find an independent retirement expert?

Certainly not down at the State Farm Insurance office in town. ;-)

Are there such things? I.R.E.'s??

Andy


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Author: Donna405 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 47201 of 75335
Subject: Re: Senior Financial Workshop Date: 8/10/2005 11:33 PM
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Not long, considering as they increase their coverage for inflation protection, their premiums will be more than double that of mine (even with my increasing my protection every two years). At the time my friends purchased their coverage, I was 59, as were they, and I had just increased my protection. This year, I will not increase, but they will, therefore, making their premiums double that of mine in 2005. We are all 60.

Donna

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Author: rkmacdonald Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 47202 of 75335
Subject: Re: Senior Financial Workshop Date: 8/11/2005 12:34 AM
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Author: FAEZ | Date: 8/10/05 10:09 PM | Number: 47199
Now just where would I find an independent retirement expert?


One place to start would be NAPFA. They are the largest organization of fee-only planners. Here's a link:

http://www.napfa.org/About/about_napfa.html

A form to find a fee-only planner near you is:

http://www.napfa.org/ConsumerServices/find_a_planner.htm

To belong to NAPFA, a planner is not allowed to sell any financial products, including annuities and LTC. They work only for a fee. They're not cheap, but they can often be worth the money, because you know there are no conflicts of interest.

Not all of these planners are experts on LTC, however, so you need to screen them to find one who is.

Another source of expert guidance is an elder law or estate attorney. They are all well qualified to review a an LTC contract for legal nuances and help you understand what you're getting into.

Russ

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Author: reallyalldone Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 47203 of 75335
Subject: Re: Senior Financial Workshop Date: 8/11/2005 7:08 AM
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I purchased my long-term care at the age of 52, and received quite a discount from the cost now of those who are my peers (age 60). They are paying $75.00+ for the same benefits through the same company I am paying $43.60 monthly.

Not long, considering as they increase their coverage for inflation protection, their premiums will be more than double that of mine (even with my increasing my protection every two years). At the time my friends purchased their coverage, I was 59, as were they, and I had just increased my protection. This year, I will not increase, but they will, therefore, making their premiums double that of mine in 2005. We are all 60.


It's been a long time since I took the SAT so please correct my math. 8 years ago you purchased your policy for an unknown amount and for which you now pay 43.60 a month. My calculations wrongly assumed the (43.60 * 12)*8 = 4185.6. I also wrongly assumed your friends just bought their policy so you were $4185.60 in the hole. The right numbers are unknown. If you both needed coverage right now, you have paid more for it. Comparing monthly costs is only a piece of it.

My husband and I have discussed this particular concept because we are in the land close to self-insure and far from medicaid coverage. We are both in the first half of our 50s and our 3 surviving parents are all close to or over 80 with no need for nursing care(my father died of cancer at 59). How do you compare paying 30 years of lower premiums to 10 years of higher ones ? Use the social security calculator for a similar comparison of benefits ?

rad


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Author: 2old4bs Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 47204 of 75335
Subject: Re: Senior Financial Workshop Date: 8/11/2005 8:00 AM
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The right numbers are unknown. If you both needed coverage right now, you have paid more for it. Comparing monthly costs is only a piece of it...How do you compare paying 30 years of lower premiums to 10 years of higher ones ?

Exactly right. I can only assume that CU did perform such an analysis and came to the conclusion that buying before age 60 is a waste of money in all but the smallest percentage of cases.

After all, how many folks in their 50's need nursing home care?

In addition, there's no 'guarantee' that the younger purchaser will continue to pay much lower premiums that the older purchasers--IIRC, most of the contracts state that the insurance company can raise premiums at any time.

2old


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Author: Donna405 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 47205 of 75335
Subject: Re: Senior Financial Workshop Date: 8/11/2005 11:31 PM
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My beginning premiums for long-term care were $32.80 per month for 2 years.

Donna

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Author: Fletch52 One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 47213 of 75335
Subject: Re: Senior Financial Workshop Date: 8/13/2005 10:50 PM
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Mike: In response to your first question about protecting assets I would recommend the book "The Nursing Home Crunch (A legal and financial guide to surviving a long-term Nursing Home stay without losing your life savings)". Written by Beasley and Ferber who are Elder Attornies in New Hampshire.

It gets into various techniques to try and shelter assets so that a long term illness will not take everything that you have saved your entire life for.

Fletch52

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Author: buzman Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 47308 of 75335
Subject: Re: Senior Financial Workshop Date: 8/19/2005 7:37 PM
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Sorry for the late post, but these workshops are TOTALLY designed to see who has money to "invest".

You should see someone who can provide an unbiased, educated opinion.

What you get on internet message boards maybe sufficient, if you have a complex situation you should consult a professional.

Buz Livingston
Registered Investment Advisor

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