Money in the Middle

Sandwich Generation Talking About Money Up, Down and Across Generations

Archive for August 2009

Shop for the Best Insurance Deal

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Working or retired, one of the best things you can do for your pocketbook is to shop and compare when you purchase insurance or before you renew an insurance policy. It’s a lesson worth teaching your young adult or new driver as well.  Inertia may be costing you hundreds of dollars a year

 So can you really save a bundle like it says on the TV ads?  Maybe.  But you need to make sure you are comparing apples to apples, and consider benefits beyond price.

 The one insurance it may not be worth shopping for is health insurance if you have access to a good group plan at work.  But for auto/home, life and long-term care –and if you are buying health insurance or Medicare health plans it is worth taking the time to shop and compare.  Prices are often dramatically different between companies – just make sure you dig into the differences and understand the tradeoffs.

 Here are some tips on what to look for when you shop for insurance:

 1.  Look for a highly rated company.  You want an insurance company that will stand behind you when you file a claim.  Some lower rated companies offer lower rates, but is it worth the risk?  Here information on what the insurance ratings mean.

 2.  Special group rates may not be the best deal.  You’ll find insurance plans through a variety of groups and associations such as AARP, AAA, alumni associations, and professional associations.  Sometimes it is a set discount off of a standard policy (like 5%) or it may be a special policy designed just for the group (not necessarily a discount).  This is where it is really important to compare benefits and rates.  If you are looking at AARP programs, take a look at the series CBS is doing on AARP’s programs.

 3.  Online or local agent.  Decide what’s important to you and how you think you’ll want to interact with the company in the case of a claim.  Some companies offer their program both through a local agent and online or by phone.  It’s a personal preference and the rate may or may not be different. 

4.  Health conditions may limit your options. For life insurance, health and Medicare plans and long-term care insurance, your health is an important factor in the price of the policy.  For example, some term life policies require limited underwriting but cost more than a term life policy with full underwriting.  So when you speak with an agent, make sure you mention any chronic or serious health conditions upfront.  You’ll save time and frustration.  Group policies, like life insurance you buy through an employer, are usually more expensive, but if you have a health condition may be a good buy.  Same for long-term care insurance.

 5.  Loyalty discounts.  If you are dealing with an insurance company that has multiple types of products, you may be eligible for a discount because you own one of their other products.  For example, many of the long-term care insurance companies offer loyalty discounts on their policies if you have another type of policy with the company.

 Don’t let inertia stop you from saving on your insurance costs.  and never cancel a policy until you are sure the new one is in place.

Written by Laura Rossman

August 27, 2009 at 2:26 pm

Finding the Right Home As We Age

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Making the decision, or helping an aging parent make the decision, to move to an assisted living facility or nursing home is never easy.  It’s essential that the facility has the right kind of care and support and track record.  But it’s also nice to be able to find a place where your loved one can feel at home.  That often means sharing cultural traditions and language preferences.

 More facilities catering to seniors – from senior centers to assisted living facilities –now meet the needs of a diverse aging population by providing multi-cultural offerings.  This article from the Washington Post provides some great examples of facilities in the Washington, DC area that cater to specific ethnic groups.   You’ll find similar programs throughout the country.

 Online directories will frequently list languages spoken at a facility but may not give you a sense of the breadth and depth of programs available.  It’s worth asking and seeking a place that makes it a bit easier to find new friends who share interests and make it feel a bit more like home.

Written by Laura Rossman

August 27, 2009 at 2:13 pm

Aging Parents and Money: Starting the Talk

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Are  your aging parents okay financially?  Really okay or just afraid to talk about their concerns?

 That’s the question many of us ask ourselves about our parents, but we just don’t know how to get the conversation started.  Talking about money, especially for the generation now in their 80s and 90s, is just not something that was done.

 I’ve provided some tips before and there is new article from Money Magazine’s September issue that might give you some new ideas.

 Here are three issues and how to tackle them.

  1.  Is their money secure?  Not only to know how it is invested, but also to make sure your parent doesn’t fall for an investment scam.  You can talk about all the email you get that are scams and see if they’ll open up about any they may be getting and responding too. Research shows that we become more optimistic as we age – we want to believe others have our best interest at hear.  The Internet makes that all too easy. 
  2. Are you concerned about whether their bills are being paid?  Offer to help set up automatic payment for routine bills so they are not forgotten.  One good way is to talk about how you use auto bill pay to make sure your own bills are paid on time.  Start with one or two important bills so they can get comfortable with the process.
  3.  Talk about long-term care.  What would they like to have happen if they find themselves in the situation of needing care?  I’ve found one way to approach this is to talk about what is happening with others – and it seems there is always a friend or family member with long-term care needs.  You can then begin to get a sense of preferences and work into a more personal discussion

Written by Laura Rossman

August 25, 2009 at 3:56 pm

A New Financial Reality in the Workplace and Retirement

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Some good news from the work place.  Employers are beginning to talk about restoring 401(k) matches and reverse hiring freezes within the next six months.  A bit of optimism sure sounds good after so much negative news.  

 However, there is some not so good news for deductions from those paychecks:  Many of the companies surveyed expect health care costs paid by the employee to increase in 2010, according to the Watson Wyatt survey of large companies.

  • 40 percent of respondents are planning to shift more health care benefit costs to workers by increasing the percentage of premiums they pay.
  • Another 41 percent of companies expect to increase the deductibles, copays or out-of-pocket maximums for their 2010 health care plans.

 Looks like there is a new reality in both the workplace and retirement as we begin (hopefully) to come out of the recession.  

 “Some employers are seeing the light at the end of tunnel and feeling optimistic about the prospect of improved business results,” said Laura Sejen, global director of strategic rewards consulting at Watson Wyatt. “However, even as some of the program cuts are rolled back, many employees are facing smaller raises, lower bonuses and higher health care costs.”

 What To Do Now?

If you’re working, you’ll start seeing open enrollment information soon.  So, this is a good time to take a look at the health care plan you have, how you have used it in the past year and what you’ll want to look for if you change plans. If you have appointments to schedule, do it now in case your co-pay goes up.  

Also if you’ve met your deductible and you have elective procedures yet to be done, try to schedule them this year so you can get them in under this year’s deductible.

 The same goes for those retired and on Medicare.  The open enrollment period begins Nov. 15 for Part D and Medicare Advantage plans.  Part D premiums are expected to rise slightly.  But, if you have a Medicare Advantage plan you may see significant increases in premiums or changes in benefits.

Written by Laura Rossman

August 20, 2009 at 6:37 pm

Silver Lining in Low IRA Values- 2010 Roth Conversion

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There’s a change coming in 2010 that could mean more tax free retirement income for you in the future.  In 2010, the income cap on converting traditional IRAs to Roth IRAs is eliminated opening up this investment to more people.  Yet, new research from USAA finds many baby boomers are sticking with traditional IRAs rather than converting them to Roth IRA.

 Whether it’s a lack of awareness or understanding of Roth IRAs or fear of the tax bill due now, the survey found that the majority (73%) of baby boomers who own an IRA aren’t planning to convert to a Roth IRA.  That’s too bad because this is a unique opportunity.  so it’s worth getting up to speed on the change in rules if you have a traditional IRA.

 What’s the change all about?  In 2010 the income cap on Roth IRAs expires (it is currently not available to those with a modified adjusted gross income of $100,000).  If you are in that category, you should take a look at the change in the rules and see whether converting to a Roth in 2010 makes sense. 

What may be stopping some people is that the tax payment is due on the converted funds. But, any investor who converts can pay the tax bill over a two year period. 

“There may never be a better time than in 2010 to create a tax-free stream for retirement, according to USAA senior vice President Terri Kallsen.  “The combination of lower account values, historically low income-tax rates, conversion income limits lifting and the ability to pay the tax bill over two years provides a rare opportunity to potentially increase you income in retirement …”

 If most of your answers to the following questions are “yes”, a Roth IRA conversion may be worth considering:

  1. Is your traditional IRA account value down?
  2. Do you want to leave IRA assets to children/heirs?
  3. Do you anticipate tax rates will rise in the future?
  4. Do you want to have tax free income in retirement?
  5. Do you want to have the flexibility to control when you pay taxes on retirement income?

You should check with a financial or tax advisor before you make the decision.  But now is the time to start thinking about whether converting your traditional IRA to a Roth IRA in 2010 makes sense.   If you can afford to pay the taxes now, tax free income in retirement is a pretty attractive reason to consider it.

Here’s an article  from mint.com that tells you more about Roth conversions and another one that explains the rules.  The time to start planning is now.

Written by Laura Rossman

August 18, 2009 at 3:29 pm

Boomers and Seniors Face Credit and Drinking Problems Too

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 We tend to think of credit card debt and binge drinking as “youthful” problems, not issues for large numbers of baby boomers or seniors.  But, two separate studies say that’s not the case: For many, these are problems that carry into our senior years.

 Credit Card Debt 

Consumers 65 plus and older carried $10,235 in average credit card debt in 2008, up 26% from 2005, according to Demos, a public policy group.  They say the increased debt is generally to pay for everyday living costs, not luxuries.  

 The culprit that sent many of the 65 plus into debt was medical expenses.  

 A Few Too Many

Binge drinking (five or more drinks per day) among baby boomers 50-64 was reported by 22% of men and 9% of women.  And this study was done in 2005 and 2006 before the economic downturn.

 Two drinks or more per day (consider heavy or at risk drinking for older persons) were reported by 19% of the men and 13% of the women. Among those 65 and over, 14% of men and 3% of women reported levels of drinking considered “binge drinking.”

 The head of the study, Dan Blazer, professor of psychiatry and behavioral science at Duke told USA Today   that older binge drinkers are more at risk than they younger counterparts.

 “They don’t metabolize alcohol as quickly, they may be on medications, or they may have some health problems that alcohol may contribute to.”

 He also noted that people don’t tend to change these behaviors as they get older.

 What can we take away from these two studies?

  •   Rather than kidding about “Aunt Mary” seeming a bit tipsy at the next family gathering,  you should find out if the drinking issue is more serious than it appears. For her safety and others.
  •  Planning for the cost of health care in retirement is really important.  Medicare isn’t free and employee retiree benefits can change at a moments notice.  Making sure you have good coverage is important at any age.  Medicare Advantage plans have higher out of pocket expenses, medicare supplement plan may cost more but generally pay most of the cost of care.  Long-term care (help with daily living activities) is expensive so make have a plan for how you will cover long-term care if you need it.
  • The habits and attitudes we establish in our youth about money and health really does matter for a lifetime. It’s worth helping that young adult get on the right track with both.

Written by Laura Rossman

August 17, 2009 at 3:58 pm

Posted in aging

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Getting Smarter About Money — The Younger the Better

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 We know conversations about money between adult children and aging parents is difficult.  But it seems many of us find talking with our children about money is difficult, too.

 Three in four parents say it is more important than it was 12 months ago to talk about money with their kids, according to a survey conducted by Kmart.  But, more than half of parents say they have a hard time broaching the subject, especially as their children get older. 

 That’s unfortunate since we know that many money habits are established in our early years.  Kmart announced its Kmart Money Smart curriculum which is targeted to teachers and parents www.kmart.com/teachers and http://www.timeforkids.com.  It’s targeted at elementary school children.  

  “The Kmart survey found that nearly seven in 10 American parents are worried that they won’t be able to instill proper financial knowledge in their children,” says Mark Snyder of Kmart.

  If that’s you, then check out the worksheets and – whether for your children or grandchildren – every little bit of knowledge you can impart about money will help them in the future. Maybe some of us baby boomers can share our own financial missteps as a way of helping the next generation do a bit better financially.

Unfortunately financial literacy has not become a mainstream educational requirement.  While cash cards and EFT has made handling money easier, it has also removed some of the automatic discipline that comes with having to actually hand over the cash at the moment you buy. So the more we can do at home to help build a foundation for basic money management, the better.   Why not start today?

Written by Laura Rossman

August 12, 2009 at 2:55 pm