I figured that you all may be a bit sick of hearing the news lately which is why this week’s episode will focus only on listener questions without the Retirement Headlines segment. I’ve got 2 listener questions that will pique your interest.
Chris asks about long term care insurance. What is the difference between hybrid and traditional policies and when can someone self insure? And Janet wants to know about the tax benefits of life insurance to fund your retirement. Don’t miss the answers to these complex questions, press play now!
The question of how to pay for long term care comes up when creating every retirement plan. It is extremely difficult to plan for long-term care due to the myriad unknowns. Will you even need coverage? This question can be difficult to answer since the duration and level of long-term care varies from person to person. This is why we look at the statistics. A person turning 65 today has a 70% chance of needing some sort of long-term care service in their life. And 20% of people will need it for longer than 5 years.
Since 70% of people end up needing long-term care service, it is prudent to be prepared. But how much money will you need? The average stay for a nursing home resident is 28 months and the average stay for assisted living is 27 months. When you consider that nursing homes cost $225 per day for a semi-private room and assisted living costs half that, and you take the average length of stay you can round the total cost to $200,000.
Now that we have analyzed the 3 parameters surrounding the issue of long-term care -- the likelihood of needing long-term care, the length of stay, and the cost -- we can analyze how to cover this cost. There are a couple of different ways to tackle this problem. You could self insure or purchase one of the many types of long-term care insurance policies. Long-term care insurance may give you peace of mind, but is it worth the cost? Self-insuring may be easier than you think if you can handle the market risk. Listen in to hear an option for self-insuring that you may not have thought of before.
The shakier the stock market feels, the more we’ll hear about alternative investing strategies. Janet was curious about how life insurance could be used as a tax-saving strategy since all of her assets are in tax-deferred accounts. What she is referring to is overfunding a life insurance policy and living off the proceeds tax-free for decades. Does that sound too good to be true? If so, it probably is. Listen in to hear why life insurance is not as special as it sounds, you’ll want to hear how this strategy could backfire on you and ruin your retirement.
If you have a question that you’d like answered on the show you can ask in one of two ways. The easiest way to ask me a question is to simply reply to the Every Day Is Saturday newsletter. The second way is to visit the Retirement Starts Today website and click the Ask a Question tab.
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I’m feeling optimistic this year and I want to continue to spread that optimism. That’s why I want to focus several shows on travel. Most people’s travel plans were foiled by covid in 2020, so 2021 will be the year of the vacation! We’ll be interviewing experts and discussing the mental and physical health benefits of travel. We get started on that road today with a Retirement Headline from Harvard Business Review.
You have probably heard that without recovery periods, your ability to perform tasks effectively diminishes significantly. However, this is in direct conflict with the common practice of powering through work without a break.
The Harvard Business Review performed a study with the US Travel Association to help understand the relationship between wellbeing and taking time away from work.
They discovered that there has been a significant decline in vacation days over the past 2 decades. In 1996, Americans averaged 21.1 vacation days per year and in 2016 that number fell to 16.1 vacation days per year.
Although productivity has increased due to technology, our inability to unplug has offset those gains. In fact, our inability to step away from technology has even led to bad vacations. According to the article, poorly planned vacations do not improve energy levels or reduce stress, effectively eliminating the time away. Learn what you can do to make the most of your vacation time by listening to this episode of Retirement Starts Today.
People who took fewer than 10 of their vacation days per year had a 34.6% likelihood of receiving a raise or bonus over a three-year period of time. Whereas, people who took more than 10 of their vacation days had a 65.4% chance of receiving a raise or bonus. So, double your chances for a raise and take a vacation!
Seth’s mom insists that she doesn’t need the money in her $500,000 401K until it’s time to start taking RMDs. He wants to help her understand what she should do with the money.
My first question is why doesn’t she need it? Many people are worried about having enough money to last the rest of their lives. Is she underspending to make her money last longer? After understanding her reasons, there are a few things she can do.
Long term tax planning is key here. You may be surprised to learn that sometimes it is better to pay more in taxes now to help save on your lifetime tax bill. Listen in to learn how long-term tax planning can affect retirement planning.
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Would you want to raise your standard of living for half of what you live on now? Tim Leffel did, which is why he chose to uproot his family from their life in Nashville to move to a small city in Mexico. Tim is the author of the book A Better Life for Half the Price and he joins me today to discuss the pros and cons of living abroad.
Don’t miss the opportunity to learn how you can save money by living abroad. Tim is an expert in the subject and has written extensively about this topic. Listen in to hear this interview.
Tim and his wife have traveled extensively and even lived in Seoul, Korea, and Istanbul, Turkey when they were young. When they had their daughter they knew that they didn’t want to live in the far flung reaches of the world but they still wanted the experience of living abroad.
Mexico was close by and easy to travel to, plus they liked the culture and the food which made it an easy choice to settle on. They chose to live in the central Mexican town of Guanajuato which is a mid-sized city of 200,000 with pleasant weather all year round.
Tim chose to rent for a year first before taking the plunge and purchasing a home. He remarks that buying a house abroad is not like it seems on those popular house hunting TV shows.
There is a lot you need to think about when buying a home abroad. The zoning laws aren’t the same as in the U.S. and it can be hard for a foreigner to understand what things are worth without living there first. Tim recommends putting in the time and effort to truly understand the market value before purchasing a home.
It’s no secret that living in Mexico is less expensive than living in the U.S. Rent in the United States can easily cost $2000. In Mexico, you can find a house to rent for a fraction of that.
Healthcare expenses are notoriously high in the U.S. and in Mexico, Americans are shocked to find how easy it is to pay for those expenses out of pocket.
Tim finds that his total monthly expenses in Mexico are roughly equivalent to what he paid in rent in the U.S. Not everything is cheaper in Mexico though, listen in to hear about what costs more in Mexico.
You would think that you need to be fluent in the language before moving abroad, but there are some places in Mexico where you can get by being monolingual.
Tim still doesn’t consider himself fluent, although he is learning the language. Since his daughter went to school in Mexico, she had the opportunity to become fluent. Would you want to learn the language before moving abroad?
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I’m thrilled to be back sharing the latest retirement headlines with you after my short holiday break. The biggest news on the retirement radar this week is that the 2nd Coronavirus stimulus package has passed. Together, we’ll take a look at the most relevant parts. Then I’ll answer the question: do you need a Roth IRA even if you make more than the income limits allow for? Let’s start preparing for tomorrow by learning today. Press play now.
The 2nd Coronavirus stimulus package has recently been passed and rather than have you read this 5500 page piece of legislation, I’ll cover the highlights that most pertain to you. Jeff Levine, @CPAPlanner on Twitter was a great source to help me understand the most important information in this bill.
Perhaps the biggest news out of the stimulus package is that new stimulus checks are heading our way. These checks aren’t structured exactly the same as the last ones. The checks are $600 for each person in your household if your income falls under a certain amount. Find out the income limitations by listening to the details here.
If you subscribe to the Every Day is Saturday newsletter this week, we’ll have a link to a calculator that can help you calculate the amount you’ll receive.
Another change brought about by the Coronavirus stimulus package is that healthcare expenses are deductible after 7.5% of your income. This number often bounces back and forth between 10% and 7.5% of your adjusted gross income (AGI). This means that your healthcare expenses must be 7.5% of your income to be deductible and even then it only counts for the amount that is over 7.5% of your income.
If you found yourself unemployed, like many this year, there’s good news. The stimulus package added federal unemployment benefits for another 11 weeks. This means that $300 per week will be added to your state’s traditional unemployment benefit.
These weren’t the only changes in the bill. You can learn more about how the latest Coronavirus stimulus bill could affect you by listening to this episode of Retirement Starts Today Radio.
Janet’s financial advisor told her that since she is over the income limitations to save in a Roth IRA that she doesn’t need to open one. However, Janet is a few years away from retiring and she is worried about retiring without one.
In my opinion, everyone could use a Roth IRA eventually. If your current income doesn’t allow for it, you can always fund a Roth IRA with a Roth conversion. Listen in to hear how you can fund your Roth most effectively while filling up your tax bracket.
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