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Financial Symmetry: Balancing Today with Retirement

When considering retirement, do you wonder what financial opportunities you may be missing? Busy lives take over and years pass without taking advantage. In this retirement podcast, the Financial Symmetry advisors unveil financial opportunities, to help you balance enjoying today so you are ready to retire later. By day, they are fiduciary fee-only financial advisors who answer questions about tax savings, investment decisions, and how to save more. If you’ve been putting off your financial to-do list or are just not sure what you’ve been missing, subscribe to the show and learn more at www.financialsymmetry.com. Financial Symmetry is a Raleigh Financial Advisor. Proudly serving clients in the Triangle of North Carolina for over 20 years.
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Now displaying: November, 2019
Nov 18, 2019

How do you know if long term care insurance is worth it?

Short Youtube video here: https://bit.ly/3akBTVZ

This is a topic we discuss with our clients regularly.  With an aging population comes increased options for retirement living, assisted living and nursing care options.  Along with increased options come increased costs as well which can be exorbitant in some cases. If long-term care insurance has been on your mind, you’ll want to have a listen to our objective viewpoints as we consider if long-term care insurance is really worth it. 

Why do people consider long-term care insurance?

There are 3 different ways that people may fund their long-term care needs. They may self-insure, or use their savings. They buy long-term care insurance, or they may rely on government funding. Many of our listeners are in the sandwich generation, where they are both helping their kids and helping their parents at the same time. As they watch their parents age they begin to see the emotional and financial stress that can arise and it affects the way they think about aging. 70% of people will need some sort of long-term care. Usually, a stay in long-term care is only a couple of years but 1 in 10 men will require a stay of more than 5 years and 2 out of 10 women will stay more than 5 years in long-term care. 

At what age should you buy long-term care insurance? 

As you probably know, long-term care insurance only gets more expensive as you age. But you probably don’t want to buy into it too early, what if the insurance company goes out of business? We think the best time to buy long-term care insurance is in your mid-50s. Costs tend to jump about 6-8% each year that you wait. But even if you do buy early the premiums could increase. Often times the actuaries don’t fully understand the risk and end up raising premiums for current policyholders. 

What does long-term care insurance cover?

Generally speaking, people go into long-term care when they can no longer perform the activities of daily living or ADL. This includes going to the bathroom alone, eating, moving about the home, or they experience a decline in mental state. Often the long-term care insurance covers a maximum period of 6 years or less. There is a daily benefit amount that you can choose from. Often that benefit is between $100-$200 per day. Many long-term care insurance packages come with an inflation rider. Your premiums will be related to the variables that you choose. 

So, how much does it cost?

Long-term care is not cheap. A private room with skilled nursing can cost $100K per year. Going down the scale, assisted living averages about $75K per year. And home health can be about $50K per year, but you do have to factor in household expenses as well. 

A 65-year-old couple can buy a long-term care insurance policy for $4800 per year with basic benefits totaling $180K. If that same couple waits until 75 to purchase a policy that amount will increase to $8700. You also need to consider the fact that not everyone gets approved. The longer you wait to buy a policy the harder it is to get approved. 

It’s important to have as much information as possible before making costly decisions. You need to understand all of the factors before you commit. We’re here to help you make informed choices. Listen in to hear all of the factors that you should examine when considering whether to buy long-term care insurance.

Outline of This Episode

  • [4:27] Why do people consider long-term care insurance?
  • [6:57] At what age should you buy long-term care insurance?
  • [10:14] Won’t Medicare cover this?
  • [10:50] What am I paying for?
  • [13:47] How much does it cost?
  • [16:46] A case study about self-insuring
  • [20:07] What types of policies are there?
  • [23:25] What questions should you be asking yourself?

Resources & People Mentioned

Connect With Chad and Mike

Subscribe To This Podcast

Apple Podcasts <> Stitcher <> Google Play

Nov 4, 2019

Does your place of employment offer an equity compensation plan? Are you one of the 76% of people who have not exercised their stock options or sold shares of their company stocks? Mike Eklund is back after a hiatus and he is jumping in with both feet. He dives deep into the nitty-gritty of equity compensation plans. Since this can be a complicated subject you may want to consult a financial professional before making any big decisions about what to do with your company stock options. 

Watch corresponding Youtube video here.

Why do companies offer equity compensation plans? 

Many companies offer equity compensation plans as a part of an overall hiring package. The main reason is to align the company and employees. If the stock price goes up then you make more money. These compensation plans can be a big draw when you are trying to decide where to work. There are 4 main types of plans offered by companies. 

  1. Employee stock purchase plans (ESPP)
  2. Owning stocks directly
  3. Restricted stock
  4. Incentive stock options (ISO). These are non-qualified stock options. 

It is important to know how these types of plans differ and what their advantages are. What kind of equity compensation plan does your company offer?

Don’t let taxes wag the dog

The biggest question of owning stocks is when to sell. Don’t let the taxes wag the dog means don’t let taxes impact your investment decisions. So many people choose not to sell a position simply because they don’t want to pay taxes on it. It helps if you understand how the taxes work in each situation. 

If you own stocks outright for over a year and sell then that is a long term gain and you will be subject to capital gains tax at the rate of 20% at most. If you own for less than a year then it is considered a short term stock and is subject to a higher tax rate of 37%. In this case, you’ll want to own for over a year for the best result. 

If you own ESPP stocks then it is important to know whether you hold a qualifying or disqualifying disposition. A qualifying disposition is better. It is tied to how long you own the stock. You’ll want to own for at least a year before you sell. 

Restricted stock is taxable when it is vested. Although restricted stocks are pretty straight forward your financial advisor can really help you with saving money in taxes. 

ISOs can provide significant tax savings but they have many requirements. They are more tax advantageous than nonqualified stock options. You have more control over when the tax event occurs.

Ask these questions of yourself to discover how much company stock you are comfortable owning

  • What percentage of my net worth is tied to the company stock today?
  • How secure is the company?
  • How long do you plan to stay with the company?
  • Are you willing to wait it out?
  • Am I comfortable with the risk of owning a large share of company stock?
  • Think about your limits. How will you feel when the stock rises or falls? 

What can you do if you own a lot in company stock?

If you own a lot in company stocks you’ll want to lower your risk and make sure that you are protecting yourself from a potential downturn. You can use these tools to think about how to create a framework for making better investing decisions. 

  1. Purchase a put option. This will ensure the stock sells at an agreed-upon price.
  2. Trading plans allow corporate insiders to diversify stocks through prearranged stock selling plans.
  3. Gift it to a donor-advised fund
  4. Gift the stock to family or friends. 

Listen in to hear how you can use a combination of these strategies to help you decide what to do when you own company stock. 

Outline of This Episode

  • [4:17] Why do companies offer equity compensation plans?
  • [7:25] Don’t let taxes wag the dog
  • [14:26] What can you do if you own a lot in company stock?
  • [19:51] Some important questions to consider

Resources & People Mentioned

Connect With Chad and Mike

Subscribe To This Podcast

Apple Podcasts <> Stitcher <> Google Play

 

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