Some people plan for a lifetime to fulfill their retirement dreams. They work hard to accumulate assets year after year and know exactly how much money may be required to maintain a comfortable lifestyle in later years. But even with such careful planning, many fail to fully protect those assets once they are in place.
Life insurance can help protect assets when a person dies suddenly, but what will protect those assets if a person needs long-term care services due to a chronic illness or disability? Advances in medical technology and healthier lifestyles mean greater life expectancy. Yet many Americans today may have overlooked the possibility that increased longevity may increase the need for long-term care services.
You may believe that you already have protection. However, health plans rarely cover long-term care services, and Medicare limits benefits for ongoing long-term care services. Medicaid will pay for long-term care but only for individuals who meet strict asset and income eligibility requirements.
You may think you have sufficient income and assets to self-insure this risk. But even if you could afford to pay long-term care expenses out of pocket, why would you? Is that the purpose you had in mind when you worked so hard to accumulate those assets?
Perhaps your children have promised to care for you in later years. However, when the time comes, they may not have the time, strength, or emotional ability to care for you. And you may not wish to burden your children with this financial responsibility.
The choices you make now could affect your qualify of life well into the future. Insuring against the risk of needing long-term care services may preserve your choice in the quality of care and where that care will be provided. And while the need for help may seem to be years away, you need to make this important decision today while you are in good health and before you suffer from a serious medical condition (i.e., diabetes, stroke, Alzheimers or dementia, cancer, etc.).
II. Selecting a Long-Term Care Insurance Policy to Meet Your NeedsThe better policies include:
Most long term care insurance carriers offer coverage that is intended to be tax-qualified to individuals from ages 18 to 85. Premiums are based on your age at the time of purchase, so the younger you are when you purchase long-term care insurance, the lower your premiums will be for the lifetime of your policy. Your policy should be guaranteed renewable, so your policy cannot be cancelled as long as premiums are paid on time. You cannot be singled out for a rate increase.
III. Additional Benefits to Consider in a Long Term Care Policy
IV. Optional Riders Which Offer Inflation Protection, Non-Forfeiture Benefits, and Special Benefits for Couples
The CPI-U option rider is designed to work with your long-term care insurance to keep pace with inflation and it usually incorporates the following features:
The Social Security and Supplemental Security Income (SSI) programs are the nation's income "safety nets" for people whose earnings have either stopped or been reduced through retirement, disability, or the death of a parent or spouse. The programs are administered by the Social Security Administration, a federal agency. The Social Security programs are financed through taxes paid by employers and workers. SSI is financed separately.
The vast majority of retired people are eligible for Social Security retirement benefits. In fact, nine out of every 10 Americans who are 65 or older receive Social Security benefits. But the programs are designed to help people who have not reached retirement age, too. One out of every three Social Security beneficiaries is not a retiree.
Credits determine whether you are eligible for these Social Security benefits. The amount of money needed to earn one credit is adjusted each year for inflation.
The amount of money you receive is determined by your lifetime earnings, not by the number of credits earned. In general, the more you pay in Social Security taxes during your working years, the higher your benefits. Social Security payments will not replace all of your earnings when you retire. Nor will they fully replace your earnings if you become terminally ill or have a long-term disability. People who rely solely on their Social Security income usually find it quite difficult to live on the money they receive each month. And because Social Security benefits - and possibly eligibility requirements - are expected to change in the future, it's a good idea to plan to supplement your Social Security income with pensions, investments, savings, or insurance plans.
To qualify for Social Security retirement benefits, you or your spouse must be over 62 and have earned sufficient "credits" by working at a job covered by Social Security. Or, if you are self-employed, you must have accrued credits by paying estimated quarterly income taxes. To qualify for retirement benefits, most people need 40 credits, which is usually 10 years' worth of work.
Currently, those born before 1938 are eligible for full retirement benefits at age 65. Reduced benefits become available at age 62. The eligibility age for full benefits will increase gradually over the next 20 years to age 67. The age at which you will be eligible for full retirement benefits is shown below:
Year of Birth | Year of 62nd Birthday | Age for Full Benefits |
---|---|---|
1937 or earlier | 1999 or earlier | 65 years |
1938 | 2000 | 65 years, 2 months |
1939 | 2001 | 65 years, 4 months |
1940 | 2002 | 65 years, 6 months |
1941 | 2003 | 65 years, 8 months |
1942 | 2004 | 65 years, 10 months |
1943-1954 | 2005-2016 | 66 years |
1955 | 2017 | 66 years, 2 months |
1956 | 2018 | 66 years, 4 months |
1957 | 2019 | 66 years, 6 months |
1958 | 2020 | 66 years, 8 months |
1959 | 2021 | 66 years, 10 months |
1960 or later | 2022 or later | 67 years |
If you retire at 62, you will be eligible for Social Security benefits (this minimum age will not change), but you will be paid at a lower rate than you would be if you waited until full retirement age to apply for benefits - and you will be paid at that lower rate throughout your retirement. The amount is permanently reduced by five-ninths of one percent for each month you receive benefits before your full retirement age. For example, if you were born in 1938 and begin receiving benefits at age 62 - 38 months before your full retirement age of 65 years, 2 months - you will receive 78.9 percent of your full benefits (5/9 X 1% X 38 months = 21.1% reduction from full rate)
Because the age for full retirement varies for those born after 1937, the percentage by which benefits are reduced for retirement at age 62 will also vary by your year of birth. This is simply because the number of months between your 62nd birthday and your full retirement age will be higher or lower depending on the year in which you were born.
Benefits are increased for each month you delay retirement after your full retirement age. The amount of increase depends on the year in which you were born. The increase ranges from 1% per year for people born before 1917 up to 8% per year for those born in 1943 or later.
When you begin collecting Social Security retirement or disability benefits, other members of your family might also be eligible for payments based on your earnings. Benefits might be paid to:
Your ex-spouse will also be eligible for the same Social Security benefits as your current spouse (50% of your benefits) if he or she had been married to you for at least 10 years, has been divorced from you for at least two years, is at least 62 years old and unmarried, and is not eligible for equal or higher benefits based on his or her own work record or anyone else's. The two-year waiting period is waived if your ex-spouse had been receiving benefits before the divorce. Also, an ex-spouse's benefits do not affect your own benefits or those of your current spouse or of anyone else in your family. Your ex-spouse can begin receiving benefits when you become eligible, even if you are not yet receiving benefits.
If you are a widowed spouse of an insured worker you are eligible for benefits if you are 60 or older, or at least 50 years old and disabled. If you are a widowed spouse and have children at home, you can receive benefits for the children if they qualified under the criteria listed in subsection D. above. Widows or widowers of people who were eligible for Social Security benefits are also eligible for an additional one-time lump sum of $255, intended to help defray funeral expenses.
If you are an ex-spouse of an insured worker who dies, you may also be eligible for survivor's benefits if you fit the criteria listed in subsection D. above for a current spouse and are unmarried.
Dependent parents may also be eligible if they relied on the insured person for at least half their support.
You are eligible for Social Security disability benefits if you:
Payments begin after the sixth full month of eligibility. Social Security's definitions of disability differ from those applied by private insurance companies and even by other government agencies.
Supplemental Security Income (SSI), the other main program run by the Social Security Administration, provides support to disabled and elderly people who have low incomes. To be eligible, you must:
Children as well as young adults may be eligible if they are blind or disabled; however, their family's total income and assets are considered. Some non-citizens may also be eligible.
SSI is a separate program from the Social Security programs. The application process is similar to that for Social Security disability benefits, in that it usually involves proving disability as well as meeting other eligibility criteria. You can find out more about these benefits by calling or visiting your local Social Security office. Eligibility for SSI is complicated, and people applying for it must be prepared to document their income and expenses. SSI payments vary from state to state and from year to year. In most states, people who receive SSI payments are automatically eligible for medical assistance (Medicaid) to help cover their medical expenses.
Questions
If you or anyone in your family has questions about eligibility, contact your local Social Security office or get in-depth information on the Social Security Administration's Web site at www.ssa.gov, especially if any of the following conditions exist: