Long Term Care Insurance - Required in Florida Some Day Soon?

Could you be forced to buy Long-Term Care Insurance in Florida soon? Is there any precedent for this? Is Medicaid slowly going broke with little money to fund Long-Term Care?

America’s Entitement programs are out of control in this author’s opinion. Federal spending for Social Security, Medicare and Medicaid are enormous drags on our fiscal health. The programs have promised a lot more than they can deliver, as each legislative decision seems to liberalize the benefits even more.

The 2023 Social Security Trustees Report shows the program being able to pay just 77% of scheduled benefits starting in 2033, one year earlier than the last report. Medicare will run short in its funding also in just 4-5 years.

There are many myths out there regarding LTC; what it covers, and what Medicare does not cover. Virtually no long term care services are covered by Medicare. Nursing and Custodial care is provided after hospital stays covered by Medicare Insurance for a limited time, but not on-going care in your home or a non-hospital facility.

Who Qualifies for Medicaid?

Basically, if you can’t afford to take care of yourself health-wise, and have little money to hire others to do so, you become a ward of the State and could qualify for Medicaid, the jointly funded program between the states and Federal Government. Once certified, you will normally go to a ‘facility’ that can feed you, house you, and medicate you. Medicaid will use your Social Security benefits to pay your costs, and then use the program funds to pay the difference. Long Term Care insurance planning helps you pay for those expenses – partially or fully – so you don’t use all your estate assets, and/or go bankrupt and be forced to go on Medicaid after that.

Long Term Care is an EVENT, not a PLACE. Not being able to dress, bathe, eat, walk, transfer or use the bathroom usually qualifies you for LTC benefits  (2 or more of the above activities minimum). Cognitive diseases such as Alzheimers, Dementia, or Parkinson’s also would give you the green light to qualify. LTC insurance enables you to stay in your home while receiving skilled care -or even family care - also.

Many of the State budgets are in much better shape than the U.S. Federal budget. To get a ‘data-rush’ on all this, head over to https://USDebtClock.org  Use the link at the upper left to find your state’s data.

I live in Florida, so I’m using that as my example. Plus, Florida is a large state, with 22 million residents, many of them retired and likely to use Medicare or Medicaid services. About 1 in 6 American’s live in either California or Florida; that’s 62 million people. The U.S. Debt Clock shows 64 million social security recipients and 85 million people on Medicaid in America…HUH? Eighty-Five million! One in every 4 American’s are on the dole in the Medicaid program!

             WASHINGTON’S LONG TERM CARE PROGRAM

The Washington State plan, enacted in 2021, set forth a maximum $36,500 lifetime LTC benefit, with other stipulations on age and residency. Their thinking; $100/day benefit for one year. A $100,000 wage earner without a LTC plan in force pays $580/year in taxes to support those collecting LTC. A small dollar amount, but a smallish benefit. Eight million people reside in Washington State.

Last year, California started the ball rolling and established the Long Term Care Insurance Task Force to formulate a worker-funded LTC plan of their own. Here is an excerpt from their Department of Insurance:

Long Term Care Insurance Task Force: The passage of AB 567 (Calderon) established the Long Term Care Insurance Task Force (Task Force) in the California Department of Insurance to explore the feasibility of developing and implementing a culturally competent statewide insurance program for long-term care services and supports.

They want to learn and improve on the Washington State plan for their 40 million citizenry. Insurance insiders tell me the California plan may have up to a 1% payroll tax, with a 2024 launch date. Washington State’s rate was set up at 0.58% of taxable payroll. Pensions, capital gains and other income is not included, just earned income.

Florida is run pretty well under our current legislature. Debt to GDP is about 11%, about the same as Washington State. But Florida is still running a deficit of about $77 Billion a year – last report. Florida's Medicaid budget is $28 Billion, and going into the red this next fiscal year.
Are you starting to see the possibility of some type of Florida LTC plan getting traction?

Tax More or Spend Less

A State managed Long Term Care insurance plan would also give the states much more control over their money since the Federal Government – I assume – would have little say in how to allocate the money to those in need. They could then also share the costs of the current Medicaid program with the Feds, as they now do.

The Florida legislature would have to determine the rules, the potential future claims, and the funding necessary to make it viable and fair for both taxpayers and beneficiaries.

Perhaps Florida brings back the state “intangibles tax”, or some other tax to fund the program. It won't likely have juicy benefits that a private insurer would offer for more money, but it's a start to help those chronically ill get some assistance and have many taxpayers as stakeholders in this important and costly event most of us will someday use.

With the aging of America from the Baby Boomer’s retiring at about 10,000 folks a day, this Medicaid mess in unlikely to get better anytime soon. I look for more states to take LTC matters into their own hands as the Federal Medicaid Program may not be able to stay alive much longer funding millions of residents for years in assisted-living and nursing home facilities. See the current status of state's legislation at the end.

The Hazards of Waiting

The sooner you get LTC coverage, the cheaper it is, like most types of insurance. Plus, you never know when you will need it; age 55, 60, 82?

The Washington State LTC plan, when announced in 2021 resulted in tens of thousands of applications to life insurance companies that write LTC policies,  that they had to stop accepting new business for 6-7 months!

For a quick comparison quote, I ran a $3,000 a month benefit for a healthy 55 year old male, with a $108,000 pool of money lasting 3 years. The cost is $221/month.
The Death Benefit to his heirs if no LTC used; $72,000, with a 3% compound inflation on the initial $3,000 benefit built in.  Refund of premium can be added at no cost if you wish to cancel the policy.

A 50 year-old woman would pay $181/month. Surf over to this link for an interactive LTC quote for your area of the country: https://tinyurl.com/5n7xktn3

Do you have life insurance that no longer suits its initial goal? Exchange it for an LTC policy.

I believe in this type of coverage for you or your loved ones. I’ve owned my hybrid policy for 2.5 years now, and see the cash value growing each month and can rest assured with every medical report / check-up that should I need my LTC money, it will be there for me each month.

Forward this to those who may benefit from this retirement planning advice, please.
For a more accurate quote for yourself, contact me.

I'll circle back when I hear more news on the California and potential Florida LTC plans.

~Barry
(954) 560-3622

UPDATE from my 9/14/23 Post: Here is list of states that are in the process of LTC discussion or legislation: Discussion: AK, NC, IL, ME, MA, MI, NH, OR, VT.  Progressing legislation: CA, MN, NY. In-force now: WA

I am licensed to provide LTC insurance to my clients using stand-alone and hybrid LTC insurance solutions. I have been full-time active and licensed in the retirement planning field since 1993.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial Market's - 2023 Performance

The second quarter of 2023 continued to build upon the 1^st quarter’s gains in stocks. The broad market’s Dow Jones Industrial stocks rose +4%, while the S&P 500 Index rose +8.7% for the three months.

The performance out of the gate in January surprised many, in that the economy, inflation and interest rate worries were still important drivers of a potentially slowing economy.

The S&P 500 rose more than the Dow Industrials due to the heavy concentration of technology stocks performing very well. Think Apple, Nvidia, Microsoft.  

The stock Sectors that performed well the first 6 months included Information Technology, +35%, Consumer Discretionary, +30% and Communication Services, +30%. With the S&P 500 up near 16%, no other Sectors of the 10 beat the S&P 500! Energy lost 10%. Health Care was down 4%, Utility stocks lost 6%, Financials (banks) and Real Estate* lost 2% each. Consumer Staples was even. So you can see, the gains were quite narrow-based sector-wise.

The Federal Reserve increased interest rates three times in the first half of 2023 also, to try to soften demand for both money and goods – hoping to tame inflation. It’s been working fairly well thus far, as prices overall are dropping year-over-year. The Feds target is 2% inflation; we’re at 3% year-over-year now. But many areas are well above 3% in the last (June) report. 

Rents are up 8%, hotels +5%. The bean counters call these Shelter Costs, and they are a big component to the prices used to calculate inflation. Also, food prices are up 5.7% year-over-year. One relief is energy prices; gas, oil; down about 16%. It doesn’t feel that way at my gas station, though. 

So, the Federal Reserve’s interpretation of which inflation time-frame to look at can result in how they adjust interest rates. July 26^th – this week – is their next interest rate decision; look for some fireworks perhaps in the stock and bond markets starting Wednesday.

Bonds and Gold could not keep up with the price rises in stocks, however.

Gold increased just $87 for the six months, after surrendering some of the $155 gain through March 31^st. Still, that was good enough for a +4.8% gain in the first half, so it did contribute to performance. Gold traded at its yearly high in early May near $2,050 an ounce, settling at $1,912 end of June. Today the yellow metal is near $1,960.

Bonds, also commonly referred to as Fixed Income, traded mostly flat for the quarter. A bond’s total return consists of its interest payments + its capital appreciation or depreciation. Corporate and Treasury debt reported small losses of ¼% to ¾% for the three months. A one-year U.S. Treasury Note now pays 5.35% vs. 4.75% at year-end. That’s 12% more interest earned as a saver, OR 12% more costly as a borrower.

In sum, the stock market is having a good year through June 30^th, and maybe is looking forward to 2024 with no recession forming. Looking at just July thus far, stocks are UP 2.5% to 3%, while Gold added 2%. The short term trend is indeed favorable.

Still, stock prices are essentially even over the two year stretch ending June 30^th. Reported inflation is up +12.3% during that time. $112.30 needed now to buy $100 of the same stuff in June 2021, showing that most investors are behind after factoring inflation into their total return.

Here's hoping Summer is unfolding spectacularly for all.
Thanks for reading.

~Barry

* The Real estate sector is fairly broad, covering commercial, residential and Real Estate Investment Trusts (REIT's) and Real Estate operators that buy and develop land. It does not include Residential Home Builders. That industry group has been a very strong performer in 2023. Think Lennar, KB Homes, Pulte Homes, D.R. Horton, Toll Brothers. These stocks have averaged about a +45% gain this year, far surpassing the average stock price gains noted in my article.

Financial Planning Mistakes to Learn From

Major Financial Planning Mistakes
... how to learn from them and plan optimally

Dear Clients and Friends,

First off, where did 2023 go thus far? It’s half over and
I’m surely behind in many areas of my life! Hope you're ahead of the game so to speak in your neck of the woods.

We learn from our mistakes – hopefully. But it’s wiser to
learn from other people's mistakes - agree?

If you’ve read my blog posts over the years, you know that I
emphasize the pitfalls of many investments and savings products and I think tell a ‘well-balanced’ story to help you decide if you have enough information to make good decisions. If you can avoid the 'high risk' dumb decisions, what's left probably is a candidate for a higher success rate I say.

It’s an important topic, folks. Your money and health care are at stake here.
So, now that you’ve got your thinking caps on, let’s dive into
what I feel are 4 of the most important personal finance mistakes using real life examples from family and clients / friends.

1. Mistake – Keeping too much of your assets in retirement accounts. Funding your retirement account is a good thing generally. You defer taxes on those earnings, and can then time when you take the money out in later years when you need it; and hopefully pay less tax than when you were working.

But, that retirement money is tied up until you are 59-1/2 years or older usually. And if you need it before then, penalties apply.

Life Example: A friend lost his job at age 53 and then became sick and unable to work for over a year. He had very little money outside of retirement accounts (just enough to live month-to-month), and was faced with both TAXES and a 10% penalty on his pre 59-1/2 IRA withdrawals. Guidelines here are to have 6 months of living expenses set aside outside retirement accounts. Keep it accessible in a bank or brokerage money market / or savings account that’s easily convertible to cash on a few days notice.

2. Mistake – Not updating or changing ownership of important assets like real estate and financial accounts.

One never knows when injury, sickness or death will occur, so it’s best not to postpone financial decsions in this area. Optimally, do this when you are healthy.  Two friends, Bob and Paula (not real names), lived together 10+ years and were a committed unmarried-couple. Paula, being 10+ years older became ill; in-n-out of hospitals. Their intention was for Bob to own the townhouse property (in her name) after her death. The title change never occurred! I remember my heart-felt conversation with Bob after Paula’s passing. “Barry, we were planning to get that done, but it was always something; a medical appointment, we were tired, it was raining the day on our appointment”. After Paula’s passing, at a young 73, Bob had no legal claim to the property, and it became part of Paula’s estate to be sold by her family. 

Lesson: Get your intentions written down and filed with the appropriate jurisdiction.

#2 above would also apply to your naming beneficiaries on your financial accounts also. Think IRA’s, 401(k), non-retirement brokerage accounts. Get the forms from your financial institution and record them with the institution.

3. Mistake – Mortgage mayhem.  A real estate friend shared this story with me a few months ago. A man, who was well-versed in financial matters, acquired a condominium with his family’s support. They together were on the deed; they all owned a percentage of the property and paid the mortgage, insurance and maintenance fees. It carried a 30 year-mortgage that was refinanced at 4.25% about 10 years ago. So, no worries, right? 4.25% for 20 more years, fixed rate – that would be competitive in today’s rate market where 15 and 30 year mortgages are 6.6% to 7.2% respectively. Table source: BankRate.com

Mayhem: the borrowers get a letter this Spring from the lender, a Florida Bank, stating that their ADJUSTABLE rate mortgage (ARM) will ‘adjust’ this October based upon the Secured Overnight Financing Rate and the bank’s formulae used with that. “WHAT?, the man’s son shared with me. Dad said it was a fixed-rate loan. The family thought it was a fixed rate loan”.

What to do now? Pay down the loan by assessing more to each owner? Accept the higher interest rate? Sell the condo? Lesson: Read your documents carefully before and after your property closing if you are the BUYER. Read every page of your documents; read them more than once. Ask questions early when you may have time to correct them. Did the bank make a document mistake; intentionally? Doesn’t matter, the borrowers signed it!

4.  Mistake – Get your legal documents in place concerning your money and your health. The BIG 4 I call them: Health-Care surrogate, Durable Power-of-Attorney, Living Will, and Last Will and Testament. These give your trusted family and friends authority to handle your affairs (financial and medical) when you are alive and unable to communicate your wishes. Your Last Will and Testament gives instructions to the court who will administer your estate and inherit your assets after your death. The Living Will expresses your wishes regarding terminal health conditions and do not resuscitate orders.

This one hits home quite personally for me. My single friend of 30+ years was battling an incurable disease and I was doing what I could to comfort him the past couple years; help with his medical appointments and some bill-paying. Turns out, he didn’t have any legal documents completed as listed above, but he told me he had them 'handled' with his sibling.

With no documents directing his affairs, I enlisted a sharp notary public who helped me personalize the forms. We met at his living facility, had them signed, witnessed, and notarized.

Ready for this? Later that day, after I left, he was admitted to the hospital, and they called me as his contact, stating that he had been admitted and he could not communicate his wishes; and DID I HAVE AUTHORITY TO ACT ON HIS BEHALF with Medical and Financial matters? A few taps on my smart-phone with his information in a cloud-file, and the hospital had the Health Care Surrogate and Living Will documents signed, notarized and delivered to them. 

So there you are: my list of 4 important financial planning mistakes that can have a significant impact on both your health and wealth. I'm sure I'll think of a few more. It's easy to put these off, being optimistic that tomorrow will be pretty much like today. As actress and Poet Maya Angelou (1928-2014) quoted "hope for the best, plan for the worst".

I'll 'hope' this helped you understand this topic better. Now you and I best get movin' and get our houses in order!

~Barry
(954) 560-3622

P.S. This blog is not to be construed as tax or legal advice. Please consult a legal or tax professional with your particular situation. If you don't know where to start, give me a call. I can offer some ideas or a referral.

  

Quick Review of 2022 Market Performance

 Dear Clients and Friends-

Here's my 'back of the envelope' figures for the financial markets for the year ended 2022 (last year !) What will 2023 bring investors?

It was the worst year for stocks and bonds since 2008. But there is good news ahead too! Read on.

$100,000 invested in .... 

 STOCKS, S&P 500 Index,  now        $ 80,560
                   Dow Jones Industrials     $ 91,220
                   Nasdaq Composites)        $ 67,000

BONDS, 10 year U.S. Treasury Note  $ 84,850
                 Corporate Bonds, AGG         $ 87,170

GOLD,  Gold Bullion, Gold Coins      $ 96,660
SILVER, Silver Bullion, Coins           $ 103,725

TOP SECTOR, Energy (XLE)            $ 158,320

                                                          BOTTOM DWELLERS,
        Technology .....    $70,000
        Real Estate .....    $ 74,000

OTHER: industry groups of note:
                       ~ Aerospace and Defense     $113,780
                       ~ Food Producers                   $107,680
                       ~ Life Insurance                     $ 106,700

The good news!

Market history favors 2023 to be a positive year.

Stocks (S&P 500) have fallen two consecutive years or more  just twice since 1958; in 1973-74 and in 2000-2002. The near 20% loss last year has been matched or exceeeded just 3 times; it's fallen 20% or more in 1974, 2002 and 2008. So is it a 'no brainer"? Maybe. Stocks could end 2023 just up slightly, and not make up the losses. Or stocks could recover and just trade in a range that's difficult to make money without a clear trend up.

Note that Energy and Gold/Silver did very well last year comparatively to offset the general market losses in stocks and bonds. Will that trend help investors again in 2023?

Stay tuned!

Stocks, Bonds, Gold All Fly Higher

Almost anything investable Thursday was much higher by the end of trading.
Stocks, Bonds, Gold - all added to morning gains after the Government reported more favorable consumer prices for October.

Inflation added 0.4% for October, while year-over-year backed down to +7.7% from the prior months +8.2%. "Core inflation" which does not include food and energy, was +6.3%, also lower than +6.6% prior. 

It's all about the direction of inflation now, and expectations going forward. As the table shows, consensus was higher than what was reported ... a win for inflation, at least this one report.

This is important because investors are handicapping when inflation will 'peak' and not go higher. That gives some confidence that interest rates may stop rising, or rise slower.
With that backdrop, investors went on a feeding frenzy, with gains of 3.7% to 7.3% Thursday in the popular benchmarks S&P 500, Dow Industrials, and Nasdaq Composite. The tote board at the close.

The widely quoted Dow added 1,201 points, or +3.7% and S&P 500 +5.5%. It was the best day since early 2020!

Bond prices rallied and interest rates fell fast in the day's trading. Investors want to lock in the recent high rates anticipating rates won't go noticably higher. When bond prices rise, interest rates fall. The 10-year US Treasury Note fell from 4.15% to 3.83%, a big one day move.

Gold, which had been stuck in the mud below $1,700 for most of October, shot up $30 and ounce Thursday, and has added $100 in the last 7 trading days to $1,745. 

Could this price action be signalling that a bottom is in for stock prices, and it's a smaller risk to own stocks and bonds now?

Perhaps, but it seldom works exactly this way, and one month of inflation data probably is not enough to convince the Fed to stop raising rates. Could the election results; where it looks like a divided Congress now have played into traders actions?
The House controls spending proposals, so maybe no more trillions of spending being dolled out will help ease inflation?

The Fed desires a +2% year-over-year inflation number, and that is miles away from this months +7.7%.

Still, stock prices are now up 11% on the S&P 500 and 17% ahead on the Dow Jones since the end of September. That's just 3,000 points lower on the Dow than the all-time high for the Dow back in January at 36,800. That's just a 9% run from here. That could be made up rather quickly, so pay attention to your portfolios.

We continue to favor the energy stocks, along with industrials and health-care, with 10-15% in Gold and 20% or so in short term bond funds and Treasury bills for our fixed income portion.

With two hurricane's criss-crossing Central Florida the past 6 weeks, I'm ready for some weather-stability. Hopefully financial markets will co-operate in the same fashion.

Thanks for reading!