Category Archives: Insurance Planning

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Is this a new normal?

Do you call the time BC (before Covid-19) normal? Do you join me in hoping that life can get back to normal soon, but have serious doubts about that? What if this is normal? I believe we need to talk about what we have learned and how we might think about going forward.

7 Things to think about now

  • Ordinarily we financial planners are demonstrating the value of working longer, i.e. postponing retirement. But this month, we have been more engaged with evaluating those clients who are thinking of retiring earlier than originally planned. If you are eligible and have the assets or guaranteed income to retire now, this could be an attractive scenario. Of course, an early retirement nearly always results in less to spend for the rest of one’s life. I know that it might feel scary to even think about, but now would be a great time to determine the true cost of retiring now. Social security benefits factor into that and a Social Security Timing Analysis would be great place to start.
  • Do you find one of the benefits of being quarantined is that you are spending less and saving more? If you are like many we have talked with, your expenses have dropped a lot over the past three months. (I have bought one tank of gas since February and I still have a fair amount of it left.) Perhaps you have some pent up demand to get back out to restaurants or to travel, but several people tell me that they have been surprised to learn what they can do without. That doesn’t bode well for our consumption and debt-based economy, but it could truly be our new normal. Could these past couple of months be a good representation of what retirement spending looks like? You should add in some fun however, just to be safe.
  • Do you need a vacation? Like many of you, I still don’t feel safe getting on an airplane or cruise ship. The opening up of various countries is going to likely be pretty chaotic. Leaving the U.S. might be easy, but getting back in from some of the hot spots around the world could be harder in the coming months. We’ve heard more than one person plot their vacation with a plan to stay within a comfortable drive from home. Popular U.S. destinations could even get to be crowded, so if this is in the cards for you, plan early.
  • Of course, it’s never fun to think about updating your estate plan, but we are in the middle of a life-threatening pandemic. If not now, when? We can help you review your existing plan by mapping the current estate structure into a flowchart. We would then make suggestions for you to discuss with your lawyer if you don’t like the results. That’s all I will say about that.
  • I think you will agree that insurance of various types represents protection. It would be a good idea to review your current policies and to determine if you have the right type and the right amount. I was able to get my auto insurance premium reduced considerably with a revised estimate of how much I think I will drive in the next twelve months. It took about 15 minutes to save 15% and I didn’t have to switch to that popular company to do so.
  • Is it time to re-finance? Consider how much debt is appropriate for your current circumstance. And while you are at it, consider the kind of debt and the interest rate on any debt that you carry. We heard about sub-3% interest rates on home mortgages this week. Prime is 3.25%. Refinancing current debt loads should probably be high on your list. You are going to hear a lot about personal de-leveraging (paying down debt) as we move into the new normal. We see a lot of people switching from 30 year mortgages to 15 year.
  • Tax laws have changed a lot this year as a result of stimulus measures. Required minimum distributions from retirement plans have been waived entirely. If you have already taken your RMD, you can roll it back into the IRA and avoid paying the tax. You should likely consider a ROTH conversion this year. The first two estimated payments for 2020 have been delayed until July 15th, along with the filing deadline of 2019 returns. Student loan payments and interest have been deferred. The treatment of charitable contributions has changed. If any of these provisions could benefit you, a revised tax projection for 2020 and 2021 is in order.

It is so easy to let inertia set in and avoid any consideration of money issues. But as I’ve often said, “Better decisions today yield better outcomes tomorrow.” Your financial plan is your road map and it should be dynamic enough to handle multiple scenarios for casting a best-case, worst-case, and somewhere in the middle. If nothing else, these last three months should have been instructive in thinking about risk tolerance. We are here to help you with any of these things. Reach out with any questions. We are a phone call or ZOOM meeting away.

June 29, 2020

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COVID-19 and your money

On February 5, 2020, Americans’ views on their personal financial situation were at record highs according to Gallup. 59% said that they were better off financially than a year earlier and 74% anticipated that they will be better off in a year.

Fast forward to March 26, Gallup reports “In a little less than two weeks, the percentage of Americans who believe an economic recession is very likely to occur in the U.S. because of the COVID-19 virus has increased from 38% to 61%. . . just 8% think it will not happen.”

3 Steps to take now

Cash management becomes crucial during a recession. In fact, cash flow has dried up for many. It is important to establish a means to stay on top of your account balances. The Federal government is working hard to come up with a relief bill that will rescue some and hopefully stimulate the economy at the same time.

We have always advised to have a an emergency fund of 3 to 6 months of living expenses. These are the times for that to be used if needed. You probably downloaded the eBook on this site, but if you haven’t now would be the time to put such a system in place. We also have a website that will capture spending by category if you need help with that. A good spending plan that can be updated quickly is critical in these times.

A less obvious benefit of a cash management system is the sense of control that it gives you when everything seems out of control around you.

Know what’s going on with your savings and investments. Now is not the time to be burying your head and avoiding the mail. We heard two big questions throughout the market decline in March. 1) Is it time to buy now that stocks are on sale? Or 2) Is it time to turn everything into cash and wait this out? Those are two sides of the same “uncertainty” coin. These questions demonstrate our brain’s tendency to help us survive. Survival probably isn’t in question right now if you have some savings and investments. Protecting what you have is likely a concern and that is okay. Build in some risk controls that go beyond simply re-balancing your portfolio.

Insurance and benefits may be the last thing on your mind right now, but after cash flow and investments, knowing exactly what you have and whether you need more insurance leads to more peace of mind, especially in times like these.

Obviously, having a plan in place before a crisis hits doesn’t take away the crisis, but it certainly reduces the stress caused by the uncertainty of it all. If you have a plan in place, it should be flexible enough to adjust the parameters for the new reality that this crisis has ushered in.

We are here to help you. If you would like to book an appointment, we can meet on ZOOM while we are practicing safe social distancing.

Leave a comment and let us know how you are handling the crisis.

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Time to Choose a Different Medicare Plan?

5 questions to ask yourself

It’s that time of year again. And no, we aren’t talking about Black Friday or Cyber Monday? It’s the Annual Election Period (AEP) for Medicare which runs until December 7. I know, reviewing your coverage probably isn’t on your to-do list for the holidays. Just think of it as a special gift you get to pick out yourself. The open enrollment period is a chance for a do-over if you don’t like the plan you have or if it no longer fits. What changes you can or decide to make will depend on the type of Supplement coverage you have, whether it’s Original Medicare (Part A and B) or a Medicare Advantage Plan (Part C) from a private insurer. Here are 5 things to consider to help you decide if your current Medicare Supplement coverage is right for you (or a loved one).

1. What are my true medical needs?

This might seem like an obvious question, but how’s your health? It is important to review any plan details to find out what you’re actually getting, or perhaps more importantly aren’t getting, compared to your medical needs. Someone who is fairly healthy and mostly engaged in preventive care practices is in a different situation than someone who might have a serious on-going medical condition requiring more intensive treatment. Your situation can change over time; plan benefits can change from year to year as well.

2. Does my doctor or hospital accept my plan?

It is important to know if the doctor you would like to see will accept your coverage. But also just as important is knowing that you will be able to get the care you need at a hospital or other treatment facility. Basic Medicare only covers certain procedures or may pay only a portion of a medical procedure, and this can affect the treatments and procedures that medical professionals may recommend. You also may not need extra coverage for certain medical procedures.

3. Do  I need drug coverage?

If you have a private health policy, or carry other prescription drug coverage, you may not need a Medicare prescription drug plan (Part D). If you do decide you need the coverage, look at the options in light of what you need. What are your current out-of-pocket costs for prescriptions? Do you take expensive medications?

4. Do I really need coverage for some things?

Have you dreamed of the day you could take off to see the world? If so, you may consider travel coverage. Medicare supplement plans (Part F, G, etc.) sold by private insurance companies can help cover costs Original Medicare doesn’t, but the costs for these plans vary widely and it pays to shop around. Depending on your circumstances, you may be over-insuring by choosing this type of coverage. It may be more cost effective to simply set that money aside.

5. How much premium can I afford?

How much are you currently paying for plan premiums, out-of-pocket expenses and copays? Every insurance company has to offer similar benefits for Medigap insurance, but they can, and do, charge different premiums for the same coverage. Some Medicare Advantage plans may not be much more costly than the premium for Original Medicare, and may cover some additional routine care expenses (like vision, dental or wellness programs). Many include prescription drug coverage. On the other hand, such plans can also have higher premiums, different provider networks, and out-of-pocket limits. Consider the long term; what’s your tolerance and capacity for financial risk and how does that fit with your Medicare plan?

You only have until December 7th to review the coverage you have and elect something different, if what you have isn’t working for you.  If you don’t have the time to review it now, the good news is that you will only have to live with it for one more year before you have another opportunity.