Tax planning is the topic du jour for this week, as Wade and Alex discuss a recent article from Advisor Perspectives that Wade wrote with Joe Elsasser from Covisum. Wade describes the effective marginal tax rate approach for managing Roth conversions and taxable distributions in retirement. This matters because of the nonlinearities facing retirees with their taxes, which include the Social Security tax torpedo, Medicare IRMAA surcharges, preferential income stacking, and the surprises created by RMDs. Tune in and uncover how to navigate the many pitfalls and traps facing retirees in the US federal tax code. Listen now to learn more!


Links

The article discussed is available at:
https://www.advisorperspectives.com/articles/2023/11/13/managing-taxes-retirement-effective-marginal-rate

Registration is open for the Consumer Retirement Income Challenge hosted by the team at Retirement Researcher! Join us December 4th-7th for this FREE 4-Day event by visiting: https://risaprofile.com/podcast 


This episode is sponsored by Retirement Researcher https://retirementresearcher.com/. Download their free eBook, 8 Tips to Becoming A Retirement Income Investor at retirementresearcher.com/8tips

Episode 105: Managing Taxes in Retirement using the Effective Marginal Tax Rate

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In this conversation, Alex and Wade discuss traditional long-term care insurance policies. They address the declining popularity of these policies and the shift towards hybrid policies. They also cover topics such as premium payments, care coordinators, and the importance of starting early with long-term care planning. Wade emphasizes the need to read the specific details of the policy and the potential for premium hikes. They also mention the option of Medicaid for those with limited assets. Overall, the conversation highlights the considerations and factors involved in choosing a long-term care insurance policy. In this conversation, Wade Pfau and Alex Murguia discuss the different types of long-term care insurance policies, focusing on traditional policies and hybrid policies. They cover the key features and considerations of each type, including coverage options, premium hikes, and the use-it-or-lose-it aspect. They also highlight the advantages of hybrid policies, such as level premiums, relaxed underwriting, and the ability to tap into the death benefit for long-term care expenses. The conversation concludes with a discussion on the perceived disadvantages of traditional policies and how hybrid policies aim to address them.

Takeaways

Traditional long-term care insurance policies are becoming less popular, with less than 6% of Americans age 50 and older having these policies.
The direction is shifting towards hybrid policies, which combine life insurance with long-term care benefits.
Premium payments for traditional long-term care insurance can increase over time, and it’s important to budget for potential premium hikes.
Care coordinators can be valuable in helping individuals find the right care options.
For those with limited assets, Medicaid may be a viable option for long-term care coverage.
Starting early with long-term care planning is recommended, as waiting too long can lead to health issues that may disqualify individuals from coverage.
Traditional long-term care insurance policies have coverage options for nursing home care, assisted living, at-home care, and other services, but they may not cover in-home care or respite care.
Hybrid long-term care insurance policies, which combine life insurance or annuities with long-term care benefits, have become more popular due to their level premiums, relaxed underwriting, and the ability to tap into the death benefit for long-term care expenses.
Hybrid policies offer more flexibility and liquidity compared to traditional policies, and they eliminate the risk of accidental lapses or premium hikes.
While traditional policies may have lifetime benefits, hybrid policies typically have finite benefit periods, but they may offer continuation of care riders that provide additional long-term care benefits beyond the death benefit.
Reviewing the language and features of your existing life insurance policy may reveal that you already have a long-term care benefit through an acceleration of death benefit rider.
Hybrid policies can be a better use of assets, as they reduce the need for a large cash reserve and provide the potential for higher returns on invested assets.
Hybrid policies have different names in the insurance industry, such as asset-based long-term care insurance or life insurance with a long-term care overlay.

Chapters
00:00 Introduction and Overview
03:03 The Decline of Traditional Long-Term Care Insurance
04:23 The Rise of Hybrid Policies
06:20 Understanding Premium Payments
08:00 The Role of Care Coordinators
09:30 Considering Medicaid for Limited Assets
10:22 The Importance of Starting Early
26:45 Understanding Level Premiums
28:37 Hybrid Policies: The Darling of Long-Term Care Insurance
37:05 Different Approaches to Hybrid Policies
41:02 Advantages of Hybrid Policies
44:05 Flexibility and Liquidity of Hybrid Policies
45:08 Eliminating Disadvantages of Traditional Policies

Episode 127: Long-Term Care Planning (Part 11): Traditional Long-Term Care Insurance Policies

In this episode, Wade and Alex discuss Medicaid as a funding source for long-term care. They touch on the importance of Medicaid planning and the different rules and qualifications that vary from state to state. They also highlight the need for specialized elder law attorneys to navigate the complexities of Medicaid. Wade shares his personal experience with his parents’ Medicaid coverage and the benefits it provides. The episode concludes with a reminder to consider Medicaid as an option for parents who may not have sufficient savings for long-term care. Listen now to learn more!




Takeaways

Medicaid is a state-based funding source for long-term care that is generally considered a last resort option.
Medicaid planning involves shifting assets from countable to non-countable categories to qualify for Medicaid benefits.
Every state has different rules and qualifications for Medicaid, so it’s important to consult with a specialized elder law attorney.
Medicaid reimbursements may be less than the actual cost of care, so it’s beneficial to enter long-term care facilities before needing Medicaid.
Consider Medicaid as an option for parents who may not have sufficient savings for long-term care.

Chapters

00:00 Introduction and Personal Updates
10:56 Discussing Films and Personal Interests
13:33 Transition to Discussing Medicaid
19:14 Qualifications and Asset Limits for Medicaid
23:01 Medicaid Planning and Non-Countable Assets
26:55 Personal Experiences with Medicaid Coverage
28:25 Importance of Medicaid Transition and Considerations
29:22 Conclusion and Preview of Future Episodes





Links

The Retirement Planning Guidebook: 2nd Edition has just been updated for 2024! Visit your preferred book retailer or simply click here to order your copy today: https://www.wadepfau.com/books/ 

This episode is sponsored by McLean Asset Management. Visit https://www.mcleanam.com/roth/ to download McLean’s free eBook, “Is a Roth Conversion Right For You?”

Episode 126: Long- Term Care Planning (Part 10): Medicaid as A Funding Source

In this conversation, Alex, Wade, and Jason discuss the importance of incorporating long-term care into financial planning. They share a real-life example of a client who unexpectedly needed long-term care earlier than anticipated and how having a long-term care policy helped preserve their assets. They also discuss the different types of long-term care insurance policies, such as hybrid policies, and the factors to consider when deciding whether to self-insure or purchase insurance. The conversation highlights the need to stress test financial plans for long-term care events and the value of care coordinator benefits in insurance policies. In this conversation, Jason Rizkallah discusses the process of obtaining long-term care insurance. He explains that the decision between insurance and self-insurance varies and is often influenced by factors such as cost, eligibility, and pre-existing conditions. Rizkallah also outlines the steps involved in signing up for a long-term care policy, including determining coverage amounts, obtaining quotes from providers, and going through the underwriting process. He emphasizes the importance of working with a knowledgeable long-term care specialist to navigate the complexities of the insurance market. The conversation concludes with a discussion on the need for early planning and the availability of options for long-term care coverage.

Takeaways

Incorporating long-term care into financial planning is crucial due to the high probability and cost of long-term care events.
Stress testing financial plans for long-term care events helps clients understand the potential impact on their financial situation.
Hybrid policies, which combine life insurance and long-term care coverage, can provide both a death benefit and long-term care benefits.
The cost of long-term care insurance should be compared to the potential out-of-pocket expenses to determine the value of the coverage.
Care coordinator benefits in insurance policies can be valuable for individuals who may have difficulty finding appropriate care on their own. The decision between long-term care insurance and self-insurance depends on factors such as cost, eligibility, and pre-existing conditions.
The process of obtaining long-term care insurance involves determining coverage amounts, obtaining quotes from providers, and going through the underwriting process.
Working with a knowledgeable long-term care specialist can help navigate the complexities of the insurance market and increase the chances of approval.
Early planning is crucial for long-term care, as the probability of needing care increases with age.
There are options available for long-term care coverage, including hybrid policies that offer flexibility and known benefits.

Chapters

00:00 Introduction and Guest Introduction
07:26 Benefits of Hybrid Policies
23:02 Factors to Consider in Long-Term Care Planning
32:16 Options for Long-Term Care Coverage





Links

The Retirement Planning Guidebook: 2nd Edition has just been updated for 2024! Visit your preferred book retailer or simply click here to order your copy today: https://www.wadepfau.com/books/ 

This episode is sponsored by Retirement Researcher https://retirementresearcher.com/. Download their free eBook, 8 Tips to Becoming A Retirement Income Investor at retirementresearcher.com/8tips

Episode 125: The Importance of Incorporating Long-Term Care Into Financial Planning with Jason Rizkallah

In this episode, Wade Pfau and Alex Murguia are joined by Rob Cordeau to discuss Continuing Care Retirement Communities (CCRCs). They provide an overview of what CCRCs are and how they relate to long-term care planning. They also explore how CCRCs can be an alternative to long-term care insurance and the different financing models for CCRCs. The conversation covers topics such as the large upfront costs of CCRCs, the benefits of living in a CCRC, and the options for refundable entrance fees. Rob Cordeau provides insights into continuing care retirement communities (CCRCs). He clarifies that purchasing a CCRC is not a real estate purchase but rather a contract to live in the community throughout one’s life. The entrance fee varies based on the size and features of the apartment, and there are different types of contracts, including non-refundable and refundable options. Rob also discusses the financial aspects of CCRCs, such as the relationship between entrance fees and ongoing cash flow, the potential tax deductibility of entrance fees, and the importance of financial due diligence when choosing a CCRC.

Takeaways

CCRCs are retirement communities that offer various levels of care on one campus, including independent living, assisted living, and skilled nursing care.
CCRCs can be an alternative to long-term care insurance, especially for those who want to downsize and plan for their long-term care needs.
There are different financing models for CCRCs, including large upfront costs with lower ongoing monthly costs or lower upfront costs with higher ongoing monthly costs.
Some CCRCs offer refundable entrance fees, where a portion of the fee is returned to the resident or their heirs upon moving out or passing away.
CCRCs are not real estate purchases but contracts to live in a community throughout one’s life.
The entrance fee varies based on the size and features of the apartment.
CCRCs offer different types of contracts, including non-refundable and refundable options.
Financial planning is crucial when considering a CCRC, including modeling the affordability of entrance fees and monthly service fees.
Some entrance fees may be tax deductible, depending on the contract.
Due diligence is essential to assess the financial stability and reputation of a CCRC.
CCRCs may not be suitable for individuals who prefer independent living in their own homes.
Buyer’s remorse is rare among individuals who have thoroughly considered and chosen a CCRC.

Chapters

1. Introduction and Overview of CCRCs
2. Exploring Different Financing Models for CCRCs
3. Understanding Refundable Entrance Fees in CCRCs

4. Understanding the Dynamics of CCRCs
5. Financial Underwriting and Considerations for CCRCs
6. Different Types of Contracts Offered by CCRCs
7. Financial Planning for CCRCs
8. CCRCs vs. Independent Living: Choosing the Right Option

Links

The Retirement Planning Guidebook: 2nd Edition has just been updated for 2024! Visit your preferred book retailer or simply click here to order your copy today: https://www.wadepfau.com/books/ 

This episode is sponsored by McLean Asset Management. Visit https://www.mcleanam.com/roth/ to download McLean’s free eBook, “Is a Roth Conversion Right For You?”

Episode 124: Insights into Continuing Care Retirement Communities with Rob Cordeau

In this conversation, Alex, Wade, and Neal discuss the importance of long-term care planning in retirement. They highlight the emotional aspect of planning for long-term care and the challenges of getting people to think about and prepare for it. They also discuss the demographic changes that will impact long-term care, such as the decreasing ratio of family members available to provide care and the potential shortage of caregivers in the future. The conversation touches on the different types of long-term care insurance policies and the need for open and meaningful discussions about healthcare and planning for the future. Neal shares examples of clients who have had personal experiences with long-term care and emphasizes the need for estate planning and power of attorney documents. The conversation then transitions to a discussion about long-term care insurance, with Neal explaining the challenges of traditional policies and the availability of guaranteed policies with reputable insurance companies. These policies address the issues of premium hikes and the ’use it or lose it’ nature of traditional policies. The conversation explores different types of hybrid policies, including those built on a whole life or universal life chassis. The benefits of these policies include leverage, tax-free long-term care benefits, protection against sequence of returns, and potential wealth transfer. The decision-making process for choosing a policy involves considering the individual’s needs, net worth, and risk tolerance. Listen now to learn more!

Takeaways

Long-term care planning is a crucial aspect of retirement planning.
Planning for long-term care involves emotional considerations and difficult discussions.
Demographic changes, such as a decreasing ratio of family caregivers and potential caregiver shortages, will impact long-term care.
There are different types of long-term care insurance policies to consider.
Open and meaningful discussions about healthcare and planning for the future are essential.
Estate planning and power of attorney documents are essential for ensuring that clients’ wishes are carried out and that their loved ones are not burdened with difficult decisions.
Traditional long-term care insurance policies have had challenges in the past, but there are now guaranteed policies available from reputable insurance companies.
Inflation riders on long-term care insurance policies are recommended to ensure coverage against future costs.
Hybrid long-term care insurance policies address the issues of premium hikes and the ’use it or lose it’ nature of traditional policies.
Different types of hybrid policies include those built on a whole life or universal life chassis.
Benefits of hybrid policies include leverage, tax-free long-term care benefits, protection against sequence of returns, and potential wealth transfer.
The decision-making process for choosing a policy involves considering the individual’s needs, net worth, and risk tolerance.


Links

Register for the webinar with Retirement Researcher and Kenneth French! ‘Five Things I Know About Investing’ Wed 4/24 at 2 EST www.risaprofile.com/podcast

The Retirement Planning Guidebook: 2nd Edition has just been updated for 2024! Visit your preferred book retailer or simply click here to order your copy today: https://www.wadepfau.com/books/ 

This episode is sponsored by Retirement Researcher https://retirementresearcher.com/. Download their free eBook, 8 Tips to Becoming A Retirement Income Investor at retirementresearcher.com/8tips

Episode 105: Managing Taxes in Retirement using the Effective Marginal Tax Rate

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