<p>Finally met with a CFP to verify DH and I are on the right track for retirement. She didn’t have a sophisticated strategic investment plan for us, but recommended some defensive tactics that hadn’t occurred to me:</p>
<p>1) Add umbrella liability coverage to existing homeowners and auto policies. Not only will it increase coverage in the event of a catastrophic accident, but according to her the insurance companies will send in their best attorneys to defend against the liability if they are on the hook for millions vs. the limit of the individual policy. Also, it’s surprisingly cheap coverage, around $100/year per million in coverage.</p>
<p>2) Keep funds in a 401K or 403B to protect them from creditors or lawsuits. Some states provide this protection for IRA’s, but others do not.</p>
<p>3) Put a freeze on credit reports. For $10 per person per credit reporting agency you can freeze your information to prevent would be identity thieves from taking out credit in your name. You need to pay $10/person/agency to have the accounts unlocked, but if you don’t plan on opening new cards or seeking loans it’s a good strategy.</p>
<p>4) Reconsider long term care insurance. Most people do not need nursing home care for more than 3 years. Rather than pay premiums for many years, set up a balanced fund account earmarked for long term care needs. Of course this is only advisable if there are no known risk factors such as early Alzheimer’s, MS etc. </p>
<p>5) Keep your kids well insured. Even if you expect them to fend for themselves in the job market and find their own housing, make sure their liability and health coverage is up to par. </p>
<p>6) Don’t get lazy tracking management fees for mutual funds. Even index fund fees vary depending on the brokerage. Vanguard appears to come out on top by every comparison. They have several funds, Wellesley and Wellington, that provide a balanced portfolio for long term investments.</p>
<p>I disagree about the 401K and 403B. If you change jobs, you’re banking on your old employer still being around. And in any event, those plans usually have the worst, limited, investment options, and investment advisors are forbidden by ERISA from making recommendations about them.</p>
<p>If your insurance (including the umbrella) is paid up, and you don’t have major indebtedness, there’s no need to worry about creditors or lawsuits.</p>
I meant that you would be banking on your old employer IF you listen to the financial advisor and leave the money in the 401K or 403B, as advised by the financial advisor.</p>
<p>I agree that the prudent plan is to roll over that money to Fidelity or Vanguard (or Scwab, or TDAmeritrade, or whomever). But you then lose whatever “protections” are available for a 401K or 403B, as recommended.</p>
<p>I TOTALLY disagree with her about the Long Term Care Insurance. LTC insurance is so people can stay in their HOMES and not have to improvish themselves and go on Medicaid to pay for a nursing home some day. The average length of a LTC claim is 15 YEARS, the last 3 of which are typically in a nursing home. Think about someone that has Alzheimer’s, they start out needing care for a few hours/week, then need some care every day, then need care all day, then need 24 hour care.</p>
<p>A “fund” for those 3 years in a nursing home alone will have to be about $300,000, minimum. Your premiums over the life of your policies won’t add up to a fraction of that. I just added up what our premiums will be for the next 30 years and it works out to about $40,000, or about 4 months in a nursing home…it’s the “unknown’s” you need to plan for–what about that ski accident that makes you a quadriplegic or that head injury you get falling down the stairs…</p>
<p>I would talk to someone that actually understands LTC insurance before you make that decision because her “3 years in a nursing home” tells me she doesn’t know how these polices work.</p>
<p>I would also find someone that realizes that sometimes higher fees outweigh poor fund performance…</p>
<p>I also have to disagree with the 401K advice…</p>
<p>In fairness to our advisor, she didn’t actually recommend to keep assets in the 403B once sufficient liability insurance was in place, but the topic came up in discussions of liability and lawsuits and the protections offered by retirement accounts. We are fortunate that our 403Bs offer the full range of Fidelity investment products. </p>
<p>An article on the topic, old but still relevant:</p>
<p>3 years is for the 25ish percent that don’t die or leave the nursing home, right?</p>
<p>So if you multiply the percentage of people that enter a nursing home and vs the percentage that stay at least 3 years… The percentage left is under 10 percent? Right?</p>
<p>Our big worry with LTC insurance is that we really don’t have any idea if the insurance company holding the policy will actually pay out. Many people end up dropping LTC because the premiums keep rising and the benefits drop. Unlike life insurance, the underwriting models aren’t as mature. </p>
<p>403b’s are for educational institutions, aren’t they? Which dramatically decreases the odds of the “company” going out of business.</p>
<p>I would also use caution in regard to the Long Term Care coverage planning. Part of that planning is the shielding of assets before someone becomes medicaid eligible. The financial look back period I believe is five years for the transferrence of assets. 3 Years isn’t going to cut it, unless assets had previously been transferred. I also believe the average stay in a Nursing Home is much shorter than 15 years. Could there be an extended stay in a LTC facility, absolutely, but it would be way more the exception than the rule.</p>
<p>The LTC decision is going to have so many variables that it’s hard to generalize recommendations. I’m hoping the whole nursing home model changes significantly in the next 20 to 30 years to offer today’s retirees more options. I like the idea of the continuing care community, where you buy in with a large cash payment and then pay manageable monthly fees for the guarantee of care until death. The key is to get in while you’re still healthy to make the most of the carefree independent lifestyle and develop social connections. Long term care costs vary considerably depending on needs. Highest costs are associated with skilled nursing, and those are usually only needed ‘toward the end’. Non medical assistance is fairly easy to find through home health care agencies and the costs are within budget for those with a healthy pension. People with few assets don’t need to worry as much because much of their care would be covered by government assistance, while those with high net worth are essentially self-insured. It’s a gray area in between, with a lot of gambling involved in the decision process.</p>
<p>We are guessing, but are we going to guess based on data and experience or fear?</p>
<p>$1333 a year for 30 years is 40,000. After 30 years at a 5 percent rate, the average increase in nursing costs lately, that $40,000 is worth about $88,000.</p>
<p>So? Is that a good deal? What kind of coverage do you get for $40,000 in payments?
Are you inflation protected? How long are you covered? What happens if you cant make payments? How much is peace of mind worth?</p>
<p>The median nursing care stay is about 6 months, isn’t it?
I believe my inlaws ltc insurance covers 6 months of nursing care…</p>
<p>About 401ks, are you saying that an old 401k is in danger if the company goes under? I thought they were run by independent mgmt companies. We’ve got a few small, old 401ks we haven’t moved to an IRA because their returns have been pretty good.</p>
<p>LTC insurance is there to keep you OUT of a nursing home. The 15 years includes IN HOME care before you go to a nursing home–most people start out needing help a few days/week, then more help those days, then help every day, then help all day, then a nursing home. It’s usually progressive. Medicare and Medicaid have little to no in-home care coverage. That “fund” your “financial planner” is calling for would be the first thing attacked in a law suit too.</p>
<p>I think you need to talk to someone that understands how these policies work before you make any decisions. The 3 years in a nursing home signals she has no idea what she is talking about because that is the last resort for these policies, not the front line of why you buy.</p>
<p>dstark–our policies are well researched and fit our needs and provide more than adequate coverage. Our coverage levels are equal to the average cost for in-home care, and the money pools so if we start out needing just a few hours/day, the rest is banked for later use. Our break even point is 3 years–if we are on claim for less than 3 years and have to move into a nursing home, we will have to pay some of that cost out of pocket for about 3 years, roughly $50/day in today’s dollars. Way better than the $330/day that is average around here. We have unlimited coverage under our plan-meaning we keep our coverage for as long as we need it, at minimum you should have 5 years of coverage so you can protect assets. We have a family history of needing care longer than that so we got the unlimited coverage.</p>
<p>We pay those premiums, that is not how much “coverage” we have. We have about $280/day right now, goes up each year with inflation. That is about average in our area for in-home care for 24 hours, nursing home care is about $330/day. That gives us about $102,000/year for nursing home care or in-home care, which is pretty average here–higher elsewhere, lower in some areas.</p>