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Should I Buy or Lease a New Car?

Should I Buy or Lease a New Car?

May 2021

Your once reliable set of wheels is getting less reliable lately, and you’re longing for that new car smell once again. You meander through the local dealership lot trying to avoid the salesperson because you know the very first question that they’re going to ask you is, “Do you want to lease — or buy?”

 

What’s the better choice?

 

The short answer is … it really depends. The longer answer depends on your particular circumstances and priorities. Let’s drill down and look under the hood (so to speak) of each option.

 

Leasing

 

Pros: With a lease, you generally can drive a new car at a lower monthly cost. The leasing process is perhaps less onerous than buying, and you can get into a new car every few years. With a lease, you can score some deductions if the vehicle is used for business. So, the bottom line is that you often get more new car for a lower initial cash outlay by leasing, and you can enjoy that new car smell every couple of years.

 

Cons: When you lease, you aren’t building any equity toward your next vehicle. So you’re starting from scratch each time. Additionally, you may have to contend with costly end-of-lease charges, mileage overage costs and incidental damage charges. You may even have to pay for new tires for a car you turn in.

 

Buying

 

Pros: When you purchase a car, you know for certain the price you’ll pay without having to wonder about unexpected fees down the road. You can also build equity in the vehicle over time, which can be particularly beneficial if you intend to keep the car and drive it long after the loan period. Plus, since it’s yours, you can customize your rims, your stereo or anything else you want as you wish (as long as its street legal). And you can sell or trade in your vehicle whenever it suits you rather than at a predetermined end-of-lease date. 

 

Cons: Buying is usually more expensive than leasing at the outset. And you can’t just turn it back in and walk away — you eventually will have to sell or trade in the car. Finally, if you buy new, you’ll take a big depreciation hit as soon as you drive off the dealer lot.

 

Your Ride, Your Reasons

 

Getting back to the original question, if the goal is to spend as little as possible to get into that new car, and you think you’ll be ready for another vehicle in a few years, then leasing likely makes the most sense. However, if you can’t wait to rebuild your engine and add a mega-sized subwoofer in your trunk — and you want more control over when your next purchase may be, than buying new might be right for you.

 

But remember that the real cost of a car is not only the price tag, it’s how much it costs you during the entire time you own it, including maintenance, gas, repairs and insurance. When analyzing the per-month cost of leasing vs. owning, remember to amortize the equity you have in the car over the entire period of ownership.

 

If you’re still confused, ask your financial advisor to help you run the numbers.

How to Save Money on the Car You Already Have

How to Save Money on the Car You Already Have

Apr 2021

Transportation is probably one of the largest line items in your monthly budget. Gas, insurance, maintenance, repairs and even car washes can add up quickly. But there are ways to save on the ride you already own.


1. Gas. Use an app like GasBuddy or Gas Guru to find the lowest price to fill your tank. Maintain proper tire inflation and plan your errands to avoid backtracking for maximum fuel efficiency. Especially as the temperature heats up, running the A/C can lower gas mileage, so roll down the windows when possible and enjoy some fresh air to save money. Driving fast on highways and carting around a lot of extra weight in the trunk will end up costing you more at the pump. Also, with most modern vehicles, there’s no need to “warm up” the engine before driving.


2. Insurance. Call around to find the best price for the coverage you need. You can raise your deductible to lower monthly premiums, but be sure you can afford that higher upfront cost in the event of an accident. Right now, many insurers are offering rebates, so call your provider to see if you qualify. Bundling auto and homeowners coverage may score you a discount — as can a safe driving record. If you’re putting fewer miles on your car by working from home, tell your agent. That may save you some money too. And ask if signing up for an online automatic payment can shave a few dollars off your premium. If your car is older, dropping collision coverage may make sense, but make sure that’s a good idea in your particular situation.


3. Maintenance. Change your oil regularly and perform all maintenance services as your owner’s manual recommends to avoid unnecessary repair bills. Don’t stretch the interval of these important services to save money or else you may regret it down the line. Shopping around and using a reputable, independent mechanic may save you money if you still visit the dealership. And NEVER ignore a warning indicator light.


4. Repairs. If, despite all your preventive maintenance efforts, you find yourself in need of a major (or minor) repair, make sure you don’t overpay by doing a little homework. AAA’s website lets you research specific repairs by make, model and location so you can find out about how much to expect to pay.


5. Cleaning. There’s no need to take your vehicle to a pricey car wash if you’re willing to put in a little DIY effort. With a small investment in the right cleaning supplies and tools, you can keep your ride shining bright — and more money in your pocket.


6. Trip prep. If you’re hitting the road for a major trip, consider having a mechanic perform a pre-trip checkup to decrease your chance of breaking down far from home. This may be even more important if you don’t use your car as much lately. Signing up for AAA or another roadside assistance program can cover minor repairs and towing as well as give you discounts for meals and lodging on the road.


7. Drive for dollars. If you’re comfortable with the increased risk during the pandemic, you can not only save money on your car, but also make money with it. Generate extra income by signing up for a ride-sharing platform like Uber or Lyft. Just be sure to set aside part of your earnings to cover the extra wear and tear you’ll incur as a result of the extra mileage.

With a little effort and planning, you can save money and still enjoy the ride!

 

Sources:

https://www.aaa.com/autorepair/estimate

https://www.consumerreports.org/fuel-economy-efficiency/how-to-get-the-best-fuel-economy-now/

Understanding Long-Term Care Insurance

Understanding Long-Term Care Insurance

Sep 2021

The phrase long-term care refers to the help that people with chronic illnesses, disabilities or other conditions need on a daily basis over an extended period of time. The type of help needed can range from assistance with simple activities (such as bathing, dressing and eating) to skilled care that's provided by nurses, therapists or other professionals.

Employer-based health coverage will not pay for daily, extended care services. Medicare will cover a short stay in a nursing home, or a limited amount of at-home care, but only under very strict conditions. To help cover potential long-term care expenses, some people choose to buy long-term care insurance.

Policies offer many different coverage options. Since you can't predict what your future longterm care needs will be, you may want to buy a policy with flexible options. Depending on the policy options you select, long-term care insurance can help you pay for the care you need, whether you are living at home or in an assisted living facility or nursing home. The insurance might also pay expenses for adult day care, care coordination and other services. Some policies will even help pay costs associated with modifying your home so you can keep living in it safely.

Factors to consider

Your age and health:Policies cost less if purchased when you're younger and in good health. If you're older or have a serious health condition, you may not be able to get coverage — and if you do, you may have to spend considerably more.

The premiums:Will you be able to pay the policy's premiums — now and in the future — without breaking your budget? Premiums often increase over time, and your income may go down. If you find yourself unable to afford the premiums, you could lose all the money you've invested in a policy.

Your income:If you have difficulty paying your bills now or are concerned about paying them in the years ahead, when you may have fewer assets, spending thousands of dollars a year for a long-term care policy might not make sense. If your income is low and you have few assets when you need care, you might quickly qualify for Medicaid. (Medicaid pays for nursing home care; in most states it will also cover a limited amount of at-home care.) Unfortunately, in order to qualify for Medicaid, you must first exhaust almost all your resources and meet Medicaid's other eligibility requirements.

Your support system: You may have family and friends who can provide some of your longterm care should you need it. Think about whether or not you would want their help and how much you can reasonably expect from them

Your savings and investments:A financial adviser — or a lawyer who specializes in elder law or estate planning — can advise you about ways to save for future long-term care expenses and the pros and cons of purchasing long-term care insurance.

Your taxes: The benefits paid out through a long-term care policy are generally not taxed as income. Also, most policies sold today are "tax-qualified" by federal standards. This means if you itemize deductions and have medical costs in excess of 7.5 percent of your adjusted gross income you can deduct the value of the premiums from your federal income taxes. The amount of the federal deduction depends on your age. Many states also offer limited tax deductions or credits.

Long-term care policy sources

Individual plans:

Most people buy long-term care policies through an insurance agent or broker. If you go this route, make sure the person you're working with has had additional training in long-term care insurance (many states require it) and check with your state's insurance department to confirm that the person is licensed to sell insurance in your state

Employer-sponsored plans

Some employers offer group long-term care policies or make individual policies available at discounted group rates. A number of group plans don't include underwriting, which means you may not have to meet medical requirements to qualify, at least initially. Benefits may also be available to family members, who must pay premiums and might need to pass medical screenings. In most cases, if you leave the employer or the employer stops providing the benefit, you'll be able to retain the policy or receive a similar offering if you continue to pay the premiums.

Plans offered by organizations:

A professional or service organization you belong to might offer group-rate long-term care insurance policies to its members. Just as with employersponsored coverage, study your options so you'll know what would happen if coverage were terminated or if you were to leave the organization.

State partnership programs:

If you purchase a long-term care insurance policy that qualifies for the State Partnership Program you can keep a specified amount of assets and still qualify for Medicaid. Most states have a State Partnership Program. Be sure to ask your insurance agent whether the policy you're considering qualifies under the State Partnership Program, how it works with Medicaid, and when and how you would qualify for Medicaid. If you have more questions about Medicaid and the partnership program in your state, check with your State Health Insurance Assistance Program.

Joint policies:

These plans let you buy a single policy that covers more than one person. The policy can be used by a husband and wife, two partners, or two related adults. However, there is usually a total or maximum benefit that applies to everyone insured under the policy. For instance, if a couple has a policy with a $100,000 maximum benefit and one person uses $40,000, the other person would have $60,000 left for his or her own services. With such a joint policy you run the risk of one person depleting funds that the other partner might need.

Long-term care policies and preexisting conditions

Insurers often turn down applicants due to preexisting conditions. If a company does sell a policy to someone with preexisting conditions, it often withholds payment for care related to those conditions for a specified period of time after the policy is sold. Make sure this period of withheld payments is reasonable for you. If you fail to notify a company of a previous condition, the company may not pay for care related to that condition.

Most companies will provide an informal review to determine whether you are eligible for the policy. This is helpful if you're likely to be denied coverage since another company may ask whether you've ever been turned down for coverage.

Covered services

Some insurance companies require you to use services from a certified home care agency or a licensed professional, while others allow you to hire independent or non-licensed providers or family members. Companies may place certain qualifications — such as licensure, if available in your state — or restrictions on facilities or programs used. Make sure you buy a policy that covers the types of facilities, programs and services you'll want and that are available where you live. (Moving to another area might make a difference in your coverage and the types of services available.)

Policies may cover the following care arrangements:

Nursing home:

A facility that provides a full range of skilled health care, rehabilitation care, personal care and daily activities in a 24/7 setting. Find out whether the policy covers more than room-and-board.

Assisted living:

A residence with apartment-style units that makes personal care and other individualized services (such as meal delivery) available when needed.

Adult day care services:

A program outside the home that provides health, social and other support services in a supervised setting for adults who need some degree of help during the day

Home care:

An agency or individual who performs services, such as bathing, grooming and help with chores and housework.

Home modification:

Adaptations, such as installing ramps or grab bars to make your home safer and more accessible.

Care coordination:

Services provided by a trained or licensed professional who assists with determining needs, locating services and arranging for care. The policy may also cover the monitoring of care providers.

Future service options:

If a new type of long-term care service is developed after you purchase the insurance, some policies have the flexibility to cover the new services. The 'future service' option may be available if the policy contains specific language about alternative options.

Policy coverage amounts and limits

Long-term care policies can pay different amounts for different services (such as $50 a day for home care and $100 a day for nursing home care), or they may pay one rate for any service. Most policies have some type of limit to the amount of benefits you can receive, such as a specific number of years or a total-dollar amount. When purchasing a policy you select the benefit amount and duration to fit your budget and anticipated needs.

'Pooled benefits' allow you to use a total-dollar amount of benefits for different types of services. With this coverage option you can combine services that meet your particular needs.

To determine how useful a policy will be to you, compare the amount of your policy's daily benefits with the average cost of care in your area and remember that you'll have to pay the difference. As the price of care increases over time, your benefit will start to erode unless you select inflation protection in your policy.

Qualifying for benefits

'Benefit triggers' are the conditions that must occur before you start receiving your benefits. Most companies look to your inability to perform certain 'activities of daily living' (ADLs) to figure out when you can start to receive benefits.

Generally, benefits begin when you need help with two or three ADLs. Requiring assistance with bathing, eating, dressing, using the toilet, walking and remaining continent are the most common ADLs used. You should be sure your policy includes bathing in the list of benefit triggers because this is often the first task that becomes impossible to do alone.

Pay close attention to what the policy uses as a trigger for paying benefits if you develop a cognitive impairment, such as Alzheimer's disease. This is because a person with Alzheimer's may be physically able to perform activities but is no longer capable of doing them without help. Mental-function tests are commonly substituted as benefit triggers for cognitive impairments. Ask whether you must require someone to perform the activity for you, rather than just stand by and supervise you, in order to trigger benefits.

Coverage exclusions

Pay close attention to what the policy uses as a trigger for paying benefits if you develop a cognitive impairment, such as Alzheimer's disease. This is because a person with Alzheimer's may be physically able to perform activities but is no longer capable of doing them without help. Mental-function tests are commonly substituted as benefit triggers for cognitive impairments. Ask whether you must require someone to perform the activity for you, rather than just stand by and supervise you, in order to trigger benefits.

Coverage exclusions for drug and alcohol abuse, mental disorders and self-inflicted injuries are common. Be sure that Alzheimer's disease and other common illnesses, such as heart disease, diabetes or certain forms of cancer, aren't mentioned as reasons not to pay benefits.

Waiting and elimination periods

Most policies include a waiting or elimination period before the insurance company begins to pay. This period is expressed in the number of days after you are certified as 'eligible for benefits,' once you can no longer perform the required number of ADLs. You can typically choose from zero up to 100 days. Carefully calculate how many days you can afford to pay on your own before coverage kicks in. (The shorter the period, the higher the price of the policy.)

Choose a policy that requires you to satisfy your elimination period only once during the life of the policy rather than a policy that makes you wait after each new illness or need for care.

Many policies allow you to stop paying your premium after you've started receiving benefits. Some companies waive premiums immediately while others waive them after a certain number of days.

Long-term care benefits and inflation

Since many people purchase long-term care insurance 10, 20 or 30 years before receiving benefits, inflation protection is an important option to consider. Indexing to inflation allows the daily benefit you choose to keep up with the rising cost of care.

You can increase your benefit by a given percent (5 percent is often recommended) with either compound or simple inflation protection. If you're under age 70 when you buy long-term care insurance, it's probably better to have automatic 'compound' inflation protection. This means that the amount of your daily benefit increase will be based on the higher amount of coverage at each anniversary date of the policy. 'Simple' inflation protection increases your daily benefit by a fixed percentage of the original benefit amount. Typically, the simple option won't keep pace with the price of services.

In lieu of automatic increases, some policies offer 'future-purchase options' or 'guaranteedpurchase options.' These policies often start out with more limited coverage and a corresponding lower premium. At a later, designated time, you have the option of increasing your coverage — albeit at a substantially increased premium.

If you turn down the option several times, you may lose the ability to increase the benefit in the future. Without increasing your coverage this option may leave you with a policy that covers only a fraction of your cost of care. The younger you are when you buy long-term care insurance, the more important it is to buy a policy with inflation protection.

Premium increases and policy cancellations

Companies can't single you out for a rate increase. However, they can increase rates on a class of similar policies in your state. Most premiums do increase over the life of the policy. The National Association of State Insurance Commissioners has established rate-setting standards and about half of the states, along with several of the large insurance companies, have adopted these measures.

Long-term care policies are 'guaranteed renewable,' which means that they cannot be canceled or terminated because of the policyholder's age, physical condition or mental health. This guarantee ensures that your policy won't expire unless you've used up your benefits or haven't made your premium payments.

Problems paying the premiums

If you stop paying your premium or drop your benefit, a 'nonforfeiture option' will allow you to receive a reduced amount of benefit based on the amount of money you've already paid. Some states require policies to offer nonforfeiture benefits, including benefit options with different premiums.

Since nonforfeiture provisions vary by location, check with your state's insurance department or your state's listing at the National State Health Insurance Assistance Program (SHIP)before dropping your policy. If your policy doesn't have a nonforfeiture option and you stop paying the premiums, you'll lose all the benefits for which you have paid.

Policy shopping

If you've determined which long-term care insurance options best meet your needs and you're ready to buy a policy, do the following:

  • Ask your state insurance department for a list of companies approved to sell long-term care insurance policies in your state. Find out whether there were complaints about any of the companies that sold them.
  • Check the stability of the company and be sure it has a long history with this type of insurance. You can check this information at websites for companies including Moody's Investors Service, Standard and Poor's and A.M. Best.
  • Compare information and costs from at least three major insurance companies. Find out how often and by how much the companies have increased their premiums.
  • Get a written copy of any policy you're considering. Review it carefully, perhaps with the assistance of your attorney or financial adviser. Write out your questions, and have a representative of the insurance company respond to your questions in writing.
  • Never pay any insurance premium in cash, and always make your check payable to the company and not an individual.
  • Nearly all states require insurance companies to give you 30 days to review your signed policy. During this time, you can return a policy for a full refund if you change your mind.
  • Still have questions or concerns? Contact the agency listed for your state at the State Health Insurance Assistance Program (SHIP).

Deciding whether long-term care insurance is right for you can take a significant amount of time and research, but making the effort will be time well spent.

https://www.aarp.org/health/health-insurance/info-06-2012/understanding-long-term-care-insurance.html

Tags: long term care, long term options

NFPR-2019-76 ACR#324829 08/19

Making the Long Term Care Decision That’s Right for You

Making the Long Term Care Decision That’s Right for You

Sep 2021

For most of us the conversation isn’t whether or not we’ll need long term care, but rather when. According to the U. S. Department of Health and Human Services as many as 70% of those turning 65 years of age are likely to require long-term care, meaning that it probably makes sense to start planning for this as an eventuality rather than a possibility.* Professional help with daily tasks like bathing and eating doesn’t come free, and knowing we are likely to need this level of assistance at some point in our lives doesn’t make it any easier to plan for

Paying for such ongoing medical and personal care out of pocket is often prohibitively expensive and current laws are written so that the state will usually only step in once you’ve exhausted the bulk of your assets. With no long-term care bailout on the horizon now is the time to make a plan for this important reality.

Can Long Term Care coverage wait until I retire?

Deciding that long term care coverage is necessary is an important first step, but it’s just as important to make sure to get the right amount of coverage at the right time.

Your personal characteristics, such as age, health and gender can influence available policies and premiums.

As a rule of thumb, buying when you are younger tends to result in much lower costs, both due to better overall health and a lower starting point for any future premium increases by insurers. It’s easy to imagine that a 65 year old in poor health will pay much higher premiums at the outset than a 50 year old with a clean bill of health.

How much coverage should I get?

This insurance is much like health insurance in that the benefit levels and policy costs can vary widely depending on the level of protection you are looking for.

Paying for such ongoing medical and personal care out of pocket is often prohibitively expensive and current laws are written so that the state will usually only step in once you’ve exhausted the bulk of your assets. With no long-term care bailout on the horizon now is the time to make a plan for this important reality

Can Long Term Care coverage wait until I retire?

Deciding that long term care coverage is necessary is an important first step, but it’s just as important to make sure to get the right amount of coverage at the right time.

Your personal characteristics, such as age, health and gender can influence available policies and premiums

As a rule of thumb, buying when you are younger tends to result in much lower costs, both due to better overall health and a lower starting point for any future premium increases by insurers. It’s easy to imagine that a 65 year old in poor health will pay much higher premiums at the outset than a 50 year old with a clean bill of health.

How much coverage should I get?

This insurance is much like health insurance in that the benefit levels and policy costs can vary widely depending on the level of protection you are looking for.

Desired benefit levels also make a significant difference on costs, meaning that high levels of coverage with generous daily payout levels don’t always come cheap. Other policy choices, such as provisions that help coverage levels keep up with inflation, are optional extras that oftentimes can be necessary to achieve protection for decades to come. Again, these options can add to the cost of the policy.

While the cost of a policy takes a few dollars per day out of the budget today it can be a financial parachute in the event of a catastrophic or ongoing infirmity. The specific dollar level of coverage that’s right for you will vary depending on your net worth, your long term goals, and other details like your health history and where you live.

Can I put something in place then change coverage later?

Maybe, but it’s probably best not to count on it. Unlike auto or homeowners insurance the ability to easily switch from one long term care coverage provider to another is usually limited. Most of these companies price new policies higher than older ones and price older clients higher than younger ones. This double-whammy means that switching to a new policy when we are older tends to be very costly. It can pay to take the time and consult with a long term care insurance professional today so that you end up with the right level of coverage and peace of mind to carry you forward for years to come.

*2015 Department of Health and human services

Long-term care insurance policies contain exclusions, limitations, reductions of benefits, and terms for keeping them in force. Your financial professional can provide you with costs and complete details.

All policy guarantees are based upon the claims paying ability of the issuer.

Tags: long term insurance, long term care, insurance

In the Long Term, Medicare Falls Short

In the Long Term, Medicare Falls Short

Sep 2021

Americans turning 65 now have about a 70% chance of needing long-term care in the future. You might assume that Medicare will pay for all your long-term care needs, but you’d be wrong. Medicare does provide some benefits, but only under very specific conditions.

So What Does Medicare Cover?

Medicare does cover some long-term care if you meet the following criteria:

  • You have had a hospital admission with an inpatient stay of at least three days

  • You are admitted to a Medicare-certified nursing facility within 30 days of that inpatient hospital stay

  • You need skilled care, such as skilled nursing services, physical therapy, or other types of therapy

If you meet all their conditions, Medicare pays a portion of the costs for up to 100 days for each benefit period. After day 100, Medicare typically does not pay anything.

If your doctor prescribes it to help treat an illness or injury, Medicare can also cover physical, occupational or speech therapy as well as durable medical supplies such as walkers, wheelchairs and oxygen — typically, Medicare pays 80% with you responsible for 20%.However, a Medicare supplement plan could pay some or all of that difference.

The assistance is good for 60 days, but your doctor may reauthorize it. If you’re otherwise pretty healthy but need a home care aide to help with meals and take you for a walk, that form of support is typically not covered even though it’s the type of help that seniors commonly benefit from.

The Alternatives

Family Assistance.Many older Americans get through this period with help from friends and family. Unfortunately, this trend creates a period of “sandwich” years for middle-aged people as they juggle helping parents while raising their own children and managing a career. And sadly, some seniors have no family willing or able to help out.

Private Insurance. Others may have invested in long-term care insurance, paying premiums over a number of years in order to receive payments to help with their long-term care. However, the high price tag associated with such policies can make them cost prohibitive for many.

Medicaid. For some, their only resort is Medicaid, the medical assistance program run jointly by the federal government and the states. Rules vary by state, and some states are more generous in who they cover and how much they pay. Check your state’s Medicaid website to find out what the rules are where you live or where you’ll be when you retire.

In many cases, single applicants can have no more than $2,000 in assets to qualify for Medicaid. These typically don’t include your primary residence or one car, but they generally include bank accounts, large insurance policies and the like. There are also certain kinds of trusts that can protect assets that would otherwise disqualify you, but the rules are very specific, and it’s advisable to seek out counsel from an elder law attorney before going down that route.

Be aware that Medicaid also has what’s known as a “look back” period: Any assets you transfer to someone else within a certain number of years (depending on the state) prior to your Medicaid application will create a “penalty period,” a number of months in which you cannot receive Medicaid even if you would otherwise qualify.

The Importance of Planning Ahead

The cost of long-term care can be considerable; it can deplete your hard-earned nest egg and wipe out assets you may have hoped to give to your children. Take the time to have an in-depth discussion with your financial advisor, as early as possible, to sort out what kinds of care you may require, how much it could cost and how you could afford it. Your options will become decidedly more limited once you actually have a medical need. As Ben Franklin reminded us, an ounce of prevention is worth a pound of cure. This is the time to expend the effort to prevent an old-age calamity.

#estateplanning #estate #retirement #planning #wellcents #medicare

Source:
https://longtermcare.acl.gov/medicare-medicaid-more/medicare.html


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