Most retirees will spend an average $250,000 in out-of-pocket health costs during their retirement years, seriously cutting into their nest egg. The flexibility of HSAs and the tax advantages they offer may afford many workers the ability to contribute to their future health needs over their working careers and amass enough wealth to help chip away at their out-of-pocket expenditures. This may be particularly important when workers begin paying Medicare premiums, which are likely to rise when retirees are required to take minimum distributions from tax-advantaged retirement accounts, according to Investment News. Required minimum distributions from tax-qualified retirement plans, pensions and Social Security can trigger an increase in income that results in permanent Medicare premium hikes. As HSAs are tax-free income sources when distributions are used to cover qualified medical expenses, the use of them may help workers cover their costs and premium payments according to a recent report at www.algeus.com.
Do I Really Need Travel Insurance?
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Do I Really Need Travel Insurance?
In many cases, vacations can involve thousands of dollars and months of advanced planning, organizing, and saving. So if you’re wondering if you need travel insurance, the answer is often yes. Like any other investment of this magnitude, it’s important to make sure you have adequate insurance to protect yourself should the tour operation or cruise line you’ve booked with go bankrupt, you or a family member becomes ill, or some other unforeseen event upsets your vacation plans. Travel insurance can be purchased as a packaged plan with several different options, including travel delay, trip cancellation, baggage, accidental death, auto, 24 hour traveler assistance, dental, emergency medical, emergency medical evacuation, and so forth. The five main types of travel insurance, which are trip cancellation, baggage, emergency medical, auto, and accidental death, can each also usually be purchased as an individual policy. 1. Trip Cancellation This insurance policy protects you should certain factors prevent you from taking the trip. Look to the specific policy to determine what factors will be covered, but most will include circumstances like a tour operator or cruise line going out of business, personal or family illnesses, and the death of a family member. The policy may also reimburse you for any unused portion of your vacation should you become seriously ill or injured once on the trip. The cost of trip cancellation insurance is usually equivalent to between five and seven percent of what the vacation costs, meaning a policy for a $2,500 dollar trip would be around $125-$175 dollars. Keep in mind that trip cancellation insurance isn’t the same as the cancellation wavier your tour operator or cruise line may offer you. While the waiver is relatively less expensive, at around $40 to $60 dollars, it must be purchased when you book your vacation. These waivers also are usually accompanied by multiple restrictions, such as not covering a cancellation occurring near the date of departure or once the trip has begun. It’s important to remember that a cancellation waiver isn’t insurance and isn’t regulated by any agency, which means it might not be worth the paper it’s printed on if the business goes bankrupt or closes. 2. Emergency Medical Assistance Ask your health insurance carrier what type and degree of coverage you’ll have on a trip to a foreign country. If your health insurance policy doesn’t cover you at all or leaves you under-insured while visiting a foreign country, then you might consider an emergency medical assistance policy to cover any emergency medical assistance that you might need during your vacation following an injury or illness. The policy would cover medical transportation to a hospital capable of treating your illness or injury; foreign hospital stays; and, should you be seriously ill or injured, transportation home. 3. Baggage Insurance/Personal Effects Coverage This policy covers you should your personal belongings get damaged, stolen, or lost during the vacation. It’s usually about $50 to cover $1,000 dollars worth of personal belongings for a seven day trip. Depending on if and how much insurance is provided by your trip operator and/or airline, you may or may not need this coverage. You’ll also want to determine if your homeowner’s or renter’s insurance covers off-premise thefts before you purchase this coverage. You might consider an endorsement or floater to your homeowner’s/renter’s insurance instead of personal effects coverage if you’re traveling with high-value items like electronic equipment, sports equipment, or jewelry. Such an endorsement to cover a $1,000 necklace for a year would be about $10 to $40. Additionally, you may want to contact your credit card company to determine what, if any, travel-related coverage or services they provide. 4. Auto Coverage A typical auto insurance policy only covers your vehicle within U.S. states and territories and Canada. You can check with your auto insurance carrier to determine how your auto insurance will apply to your vacation destination and mode of transportation – rental or personal vehicle. Should your trip include carrying your personal or rented vehicle outside the areas specified in your personal auto insurance policy, then you’ll need to purchase coverage applicable to your destination through either an insurance agent, car rental agency, or travel agency. Don’t forget to obtain both liability and physical damage if you’ve chosen to rent a car. 5. Accidental Death An accidental death policy usually isn’t necessary if you already have an appropriate life insurance plan. Much like a typical accidental death policy, this policy provides a benefit should the insured party die on the vacation. |
CDs vs. Annuities: Where Should You Invest Your Money?
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CDs vs. Annuities: Where Should You Invest Your Money?
If you’re quickly approaching retirement, you’re probably asking yourself an all-too-common question: should I invest in a bank CD or an annuity? You’re not alone. Consumers across the nation are struggling with the same dilemma. The first step in making this important decision is to understand the differences between these two products. Annuities and CDs (short for bank certificates of deposit) might appear to be very similar at first glance. Both are secure, low risk investments that are designed to help you accumulate wealth. However, these two types of investments are actually very different products. First of all, CDs are generally issued by banks while annuities are offered by insurance companies. Secondly, a CD is typically a better investment for short-term goals, such as a down payment on a new home or car, while an annuity is a better choice for longer term goals, like generating a lifetime stream of retirement income. Here are a few things to keep in mind as you weigh the differences between CDs and annuities: CD interest rates are uncertain Interest rates have plummeted in recent months. While that’s a great thing for homebuyers, it translates into lower returns on bank savings. Right now, one-year CDs often pay 1.5 percent or less—a huge drop from a couple of years ago when CDs paid more than 3 percent. The future is uncertain for CD interest rates. Your rate on a CD may be higher or lower a year from now—it’s too hard to predict. So, if you’re looking to maintain a certain retirement income level, a CD may not be the best bet. Guaranteed rates with fixed annuities
Fixed annuities offer a guaranteed minimum. This ensures that your investment will not drop below the minimum performance. When interest rates drop, so do returns on CDs. But fixed annuity returns never fall below a certain point. Therefore, if you hold a fixed annuity until maturity, you are guaranteed to earn a minimum stated rate of interest regardless of what happens to interest rates or stock market indexes. Because fixed annuities are lower risk, conservative investments, they are often ideal for retirees or soon-to-be retires. Fixed annuities offer incredible tax advantages With CDs, you must pay taxes annually on the interest earned even if you haven’t withdrawn any money. Alternatively, fixed annuity earnings are tax-deferred. You only pay taxes on interest earned when you withdraw money from the annuity. This means that you end up earning an increasing amount of money with fixed annuities because the deferred tax on your interest remains in the investment instead of being paid out to state and federal taxes each year. CDs aren’t as flexible Fixed annuities also offer more flexibility than CDs. With a CD, you cannot remove any money before the term is over without incurring an early withdrawal penalty. Although fixed annuities also have early withdrawal penalties known as surrender charges, they include provisions that typically allow you to withdraw 10% of your investment value each year without penalties. Additionally, with many fixed annuities, you can withdraw the earned interest on your investment each month. Some fixed annuities offer you access to the sum total of your investment funds in the event of a financial hardship. For example, you may be allowed to withdraw from your fixed annuity penalty free if you are hospitalized, develop a life-threatening illness or are forced to live in a nursing home for an extended length of time. With a fixed annuity, you can also choose an option to receive a predetermined amount of income from the investment over a fixed time period, such as five or ten years. This option offers enhanced income security while spreading out any taxes that your earnings might incur over many years. Annuities are extremely safe While CDs are issued by banks, annuities are issued by insurance companies. As compared to banks and brokerage firms, insurance companies have a historical record of stability. This is largely because insurance companies offer conservative investment options that carry very little risk. Just think: insurance companies have survived times of war, global depressions, government failures, industry scandals and disastrous stock market plunges. However, in even the worst of times, Americans have been able to safely insure their homes, health, life, cars and businesses. Survey says… All things considered, fixed annuities are a solid option for retirement-focused investors. These superior, reliable investments can provide higher returns, tax advantages and enhanced flexibility, all while providing safety and security. Not to mention that fixed annuities can generate a guaranteed stream of income. Talk to your financial advisor or insurance agent today about whether a fixed annuity is right for you. Liquidated earnings are subject to ordinary income tax, may be subject to surrender charges and, if taken prior to age 59 1⁄2, may be subject to a 10% federal income tax penalty. Guarantees and payment of lifetime income are contingent on the claims paying ability of the issuing insurance company. |
Individual Health Care Mandate Q&A
Beginning in 2014, the Affordable Care Act includes a mandate for most individuals to have health insurance or potentially pay a penalty for noncompliance. Individuals will be required to maintain minimum essential coverage for themselves and their dependents. Some individuals will be exempt from the mandate or the penalty, while others may be given financial assistance to help them pay for the cost of health insurance.
What type of coverage satisfies the individual mandate?
“Minimum essential coverage”
What is minimum essential coverage?
Minimum essential coverage is defined as:
- Coverage under certain government-sponsored plans
- Employer-sponsored plans, with respect to any employee
- Plans in the individual market,
- Grandfathered health plans; and
- Any other health benefits coverage, such as a state health benefits risk pool, as recognized by the HHS Secretary.
Minimum essential coverage does not include health insurance coverage consisting of excepted benefits, such as dental-only coverage.
How does “Minimum Essential Coverage” differ from “Essential Health Benefits”?
Essential health benefits are required to be offered by certain plans starting in 2014 as a component of the essential health benefit package. They are also the benefits that are subject to the annual and lifetime dollar limit requirements.
This is different than minimum essential coverage, which refers to the coverage needed to avoid the individual mandate penalty. Coverage does not have to include essential benefits to be minimum essential coverage.
What is the penalty for noncompliance?
The penalty is the greater of:
- For 2014, $95 per uninsured person or 1 percent of household income over the filing threshold,
- For 2015, $325 per uninsured person or 2 percent of household income over the filing threshold, and
- For 2016 and beyond, $695 per uninsured person or 2.5 percent of household income over the filing threshold.
There is a family cap on the flat dollar amount (but not the percentage of income test) of 300 percent, and the overall penalty is capped at the national average premium of a bronze level plan purchases through an exchange. For individuals under 18 years old, the applicable per person penalty is one-half of the amounts listed above.
Beginning in 2017, the penalties will be increased by the cost-of-living adjustment.
Who will be exempt from the mandate?
Individuals who have a religious exemption, those not lawfully present in the United States, and incarcerated individuals are exempt from the minimum essential coverage requirement.
Are there other exceptions to when the penalty may apply?
Yes. A penalty will not be assessed on individuals who:
- cannot afford coverage based on formulas contained in the law,
- have income below the federal income tax filing threshold,
- are members of Indian tribes,
- were uninsured for short coverage gaps of less than three months;
- have received a hardship waiver from the Secretary, or are residing outside of the United States, or are bona fide residents of any possession of the United States.
Health Care Reform: What is a health insurance exchange?
In case you haven’t heard, big changes are coming in October 2013. Big changes for a lot of people. The Affordable Care Act is expected to help increase access to health care. Health insurance exchanges will be an important part of that.
Most people get health insurance through their employers. But people without this option will now be able to shop for health insurance on exchanges, as an alternative to buying coverage directly from individual health insurers. Exchanges are new and easy to use. And they’ll be open for business in October 2013, allowing consumers to shop for health plans that will begin on January 1st.
Experts predict that by 2016, more than 25 million people will use exchanges to buy health insurance.
So what are exchanges? How do they work? How will things change? And why is this important?
Let’s talk about it!
Think of an exchange as an online marketplace. It’s a website where shoppers can research all their options and then buy health insurance.
There are different types of exchanges… first let’s talk about a public exchange.
The Affordable Care Act requires every state to offer an exchange to its residents. States have a few options:
- A state can choose to create and run its own exchange.
- If a state decides not to run its own exchange, residents of that state can shop on an exchange that will be run by the federal government.
- Or a state can partner with the federal government. In a partnership model, the state and federal government share responsibility for operating that state’s exchange.
No matter what each state decides to do, an Exchange will be available to residents in every state.
Public exchanges will exist for both individuals, who are buying insurance for themselves, and for small group employers, who can buy insurance to offer to their employees. The small group exchange is called SHOP – short for Small Business Health Options Program.
Why are exchanges expected to be so popular? There are a few reasons:
- The Affordable Care Act no longer allows insurers to deny coverage or charge people more based on their health status or pre-existing conditions. So, many people who were unable to buy coverage in the past will now start shopping for a health plan.
- Starting in 2014, individuals are required to buy health insurance or face penalties. This is called the “individual mandate.” Although the penalty for not buying coverage is initially low, it will grow over time. As the penalty goes up, so will participation on exchanges.
- The Affordable Care Act will provide tax credits and subsidies for individuals who qualify, to help make insurance more affordable, when they shop on a public exchange.
Many individuals who shop on exchanges will be new to health insurance. To help make shopping easier, health plans on a public exchange will be labeled platinum, gold, silver or bronze. The metallic level helps shoppers understand the level of coverage a plan offers – how much they will need to pay and what the plan pays.
Platinum plans will have the lowest out of pocket cost for members but the monthly premiums will generally be higher. Bronze plans, on the other hand, will have the highest out of pocket costs for members, but will typically feature lower monthly premiums.
All plans on an exchange have to offer some core benefits – called “essential health benefits” – like preventive and wellness services, prescription drugs, and coverage for hospital stays.
Public exchanges are designed to help shoppers choose a plan that fits their needs and their budget.
So that’s the public exchange – offered by the government – either state or federal, or both.
There are also private exchanges. Private exchanges are not part of the Affordable Care Act. They are created by private sector companies – for example, by a health insurance company or a brokerage or consulting firm. A few private exchanges exist today, but they are becoming increasingly popular.
Like public exchanges, private exchanges can sell to both individuals and employer groups.
Unlike public exchanges, private exchanges are already open for business.
For employers who are trying to keep the cost of offering health benefits manageable, private exchanges offer an interesting solution. Employers can give their employees a set amount of money and then direct them to a private exchange. There, they can shop for a health plan and other benefits, like dental, based on what the employer has selected as options.
Public and private exchanges are likely to appeal to different audiences. Individuals who do not have access to affordable health insurance today are more likely to shop on a public exchange because of the subsidies, which are not available through private exchanges. Employers are more likely to send their employees to a private exchange. And both individuals and small employers will still be able to shop for coverage as they do today, directly from health insurers.
So to highlight a few key messages about exchanges:
- Exchanges give people additional access and more opportunity to buy insurance.
- A public exchange may be run by the state or federal government, or by the state and federal government working together.
- Every state will have a public exchange available to its residents.
- Subsidies and tax credits will help make insurance affordable for many individuals who shop on the public exchanges.
- Small group employers can buy and offer insurance through an exchange, as well.
- Private exchanges are not run by the government but by a private sector company, like a health plan or a consulting firm.
- These exist today, but they will become more popular as employers look for new ways to offer affordable benefits to their employees.
One thing is certain: Exchanges are going to change the way millions of Americans view their health insurance – whether it’s how they shop for a plan, what plan they decide to buy or how they use their benefits.
Here at Aetna, we’re ready to do our part to help make health care easy to shop for, easy to understand and easy to use.
Some Employees Plan to Work Longer in Hopes of Enjoying Workplace Health Benefits.
Some Employees Plan to Work Longer in Hopes of Enjoying Workplace Health Benefits
About 50 percent of American workers say they plan to work more years than they originally planned to work to maintain their employer-provided health insurance. This finding was the result of a recent study about workers and health insurance. However, their wishes to work longer may not be in line with reality in all cases. Research shows that only about 20 percent of retirees said they were able to remain in the workplace longer to keep their coverage.According to the 2012 study that yielded these findings, a large number of Americans who are older planned to retire earlier if they knew they could count on health coverage. In a similar study conducted in 2003, only about 15 percent of workers said they would consider retiring early as long as they could count on health coverage. By 2012, that number had nearly doubled.
Experts believe that the federal health care reform law may alter the dynamics of the labor market for older workers. According the PPACA, all retired individuals will be permitted to buy health coverage from insurance exchanges. In addition to this, they will receive other insurance market reforms that are blended with exchanges. Some of these benefits include modified community rating, guaranteed issue, more health plan choices and cost sharing subsidies for anyone who is under 400 percent of the poverty line. With these options available, employers currently offering retiree health benefits may start considering dropping their own benefits. Experts believe that this will lessen the enthusiasm of workers to remain at their current jobs.
When it comes to retirement spending, health care expenses are important components. According to a study conducted in 2009, health care comprised 18 percent of expenses for people aged 85 or older. For those between the ages of 75 and 84, health care comprised about 15 percent of expenses. This number was only about 12 percent for those between the ages of 65 and 74. People receiving Medicare who were 65 years of age or older paid more than 10 percent of the cost of their own health care charges during that same year. On average, private insurance paid slightly less than 15 percent, and Medicare covered about 60 percent of the bill. However, experts note that the Medicare program designed for the elderly was not originally intended to pay for medical expenses in full.
Experts estimated that the average 65-year-old married couple with average drug expenses may need more than $160,000 saved in 2012 to even have a 50 percent chance of possessing enough money to pay for their own health expenses. This number excludes the cost of long-term care during retirement years. To enjoy a 90 percent chance of paying health expenses, a couple in 2012 would have needed $283,000 saved. It is important to understand how much money should be saved for a comfortable retirement. With the future still uncertain about health coverage, it is in every employer’s and employee’s best interest to discuss concerns with an agent.
Finding Money Safe Havens in the Present Economic Environment.
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Finding Money Safe Havens in the Present Economic Environment There is an unbendable and unbreakable law of economics that states that wealth is created in one of only two ways: people working or money working. Many have attempted to break this law, and usually the results have violated both civil and criminal laws. These days, everyone is anxious to put their money in a safe place. This “safe place” would also preferably have low risk, high returns and tax advantages as well as be ready and waiting for them when they retire. Does such a “safe place” exist? A respected commentator in the sports world says, “Let’s take a look.” It was not too long ago that investors were looking for returns in the 5 – 12% range. Today, those return expectations are greatly diminished, even if the willingness to take on risk has begun to come back. As of this article, the current interest rate on a ten-year United States Treasury bond is 3.24%. High-quality ten-year municipal bonds are only paying 2.99%. Ten-year corporate bonds at the highest rating level are paying 3.60%. Keep in mind that these variables can change on a daily basis as investors vote their bond holdings up or down in response to political and economic developments, both foreign and domestic. Meanwhile, certificates of deposit, which were once considered to be the safest of all investments among the older generations, have now sunk considerably in terms of interest payouts. One-year CDs these days are paying roughly 1.50% and five-year CDs maybe 3%. Previously CD investors could expect to see interest rates as high as 4-6% or even higher. What’s more, even to get the highest rates, investors need to park their money for a long time, as one can see in the case of the five-year CD. So, the basic concerns have really not changed. They are, in no particular order: – Principal safety – Return rate – Liquidity, or access to funds on short notice – Flexible term, which depends on when the investor wants the money – Tax-free – Reliability and trustworthiness Taking all of these factors into account, is there an investment that can satisfy all of them? Surprisingly, the answer is yes. It is an instrument known as a fixed annuity. An annuity can guarantee the safety of both the payments and the principal by contract to the policyholder, in addition to guaranteeing that the owner will not outlive his money if he chooses to annuitize the contract. Annuities, in this respect, are unique as financial instruments. Currently, credited interest paid on an annuity is not taxable until distributed. Unlike CDs, this allows the capital to grow through compound interest without any interference. There are many annuity programs, such as equity-index annuities, that provide even more benefits like interest rates that are double-tiered, which means that the owner has a guaranteed minimum rate while also being allowed to participate in the stock market’s returns, if any. In the final analysis, annuities can offer investors a better return than most instruments today. While annuities have always been attractive vehicles since their introduction, in an economic climate such as this, they are even more attractive. (* Interest data from the WSJ 6/18/2010) Liquidated earnings are subject to ordinary income tax, may be subject to surrender charges and, if taken prior to age 59 1⁄2, may be subject to a 10% federal income tax penalty. Guarantees and payment of lifetime income are contingent on the claims paying ability of the issuing insurance company. |
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HHS Resurrects ‘ACORN’ Through ObamaCare.
ObamaCare provides millions of dollars in grants to hire community activists and others as “navigators” to assist individuals enroll in health insurance provided by state or federal exchanges and, according to recent reports, register people to vote. In a new rule proposed Wednesday, HHS lays out numerous guidelines for these “navigators”, including paying them up to $48/hour for their work. The rule, guidelines and voter registration effort are a potential vehicle to resurrect ACORN or an ACORN-like entity.
One organization expected to take a lead role in distributing the funds and overseeing hiring is Enroll America, a new non-profit headed by Anne Filipic, a former Obama White House official under Valerie Jarrett. Filipic was also a senior staff member at OFA director and a former Obama campaign director. The organization was founded, in part, by Families USA, a far-left advocacy organization that lobbied aggressively for ObamaCare, a source at HHS told Breitbart News. Filipic has said she expects. Enroll America to spend $100 million on the enrollment effort. A large percentage of this is likely to come from federal funds.
Affordable Care Act—Whose train wreck is it anyway?
Whose train wreck is it anyway? Opinion By Kathryn Mayer May 1, 2013 •
By now, I’m sure you’ve heard about top Democratic senator Max Baucus predicting a “train wreck” coming for PPACA. In a budget hearing nearly two weeks ago, Baucus expressed his concern that the exchanges for consumers and small businesses wouldn’t open on time in every state. He also said the “administration’s public information campaign on the benefits of the Affordable Care Act deserves a failing grade.”
People worried about Obamacare’s implementation? Not a big surprise. But a key author of the health legislation screaming about it in a budget meeting? Not great for morale.
Recently, both HHS Secretary Kathleen Sebelius and President Obama admitted some flaws in the whole thing — Sebelius admitted the law would cause higher premiums for some, while Obama just this week said there will be “glitches and bumps” in the rollout of his health care law.
This isn’t news, but just how much higher premiums will be and just how bumpy this ride will end up — those are the questions.
One thing’s for sure: the law is losing steam. Public opinion is no longer on Obama’s side: The latest Kaiser Family Foundation poll found that a majority of Americans have a negative perception of the law. In the latest tracking poll, 40 percent said they have an unfavorable view of the law, compared with 35 percent who have a favorable view.
Oh, but here’s the worst (I mean scariest) part about all of it: Consumers still don’t get it. Like, they really, really don’t get it.
A staggering number of Americans — 42 percent — apparently didn’t realize that the Supreme Court held a huge case on the constitutionality of the law — and voted to keep it. Four in 10 Americans are unaware that the PPACA is still law and is being implemented. Among them, 12 percent believe the law has been repealed by Congress, 7 percent believe it’s been overturned by the Supreme Court and 23 percent say they don’t know enough to say what the status of the law is.
There’s not much else to say besides that’s not OK.
It makes me ask: whose train wreck is this, really? Is it the fault of the administration who passed and praised and pressed this law, but haven’t been able to successfully control its implementation? Is it Republicans who are too prideful for this to work, doing everything they can to prevent the success of the law?
Or is the trainwreck due to the ignorance of Americans, who apparently really need to pick up a newspaper or put on C-SPAN for a few minutes?
It’s a little bit of everyone. But without being embraced by each of these groups, the PPACA won’t just be off to an imperfect beginning; it will be a hot failure.