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Which entitlement will sink Illinois ? April 19, 2013

Posted by forwardfinancialplanning1 in Long Term Care Insurance.
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Many of our readers are Illinois residents and as such, are intimately (and financially) familiar with the fiscal disaster known as the state of illinois. After all, we Illinois residents have watched as our state income taxes were raised 67%. yet no progress has been reported since then in regards to reducing the nearly $5 billion in delinquent payments owed by the state. And of course, we top that off by having the greatest underfunding liability of any state’s pension obligations and a lowest in the nation bond credit rating. So while we read news reports daily about the inability of our politicos in Springfield to fix the mess they’ve created, one has to wonder which financial responsibility of the state will push it over the edge?

Well, like many things in life, the issues that nobody is talking about may turn out to be the most deadly. While we are constantly being reminded of the pension fund quandry created by a state constitution which gives state pensioners a legal right to their benefits, a more devastating circumstance may be developing.

The US population is aging quickly and while collectively poorly prepared for retirement, it is even more poorly prepared for long term care costs. While it’s estimated that roughly 70% of the US population over 65 will require some form of long term care, only 8% have purchased any form of long term care insurance. And, if we’re collectively unprepared to fund retirement, we’re surely in a worse position to “self-insure” for the cost of long term care.

Since Medicare does not cover long term care needs, many aging individuals/couples quickly deplete their remaining assets and become wards of Medicaid. Medicaid is a federal program administered by the states, who nearly universally report that it’s already severely straining state budgets. How will this circumstance affect Illinois’ financial predicament? Well, if the state doesn’t first become insolvent by one of its other fiscal imbalances, this Medicaid situation will most likely finish the job. It’s projected that by 2030, there wil be an additional 1 million Illinois residents over the age of 65 or about 23% of the state’s population. And, if they’re as unprepared for long term care costs as the typical American, the state will be on the hook.

This is going to make the 67% state income tax increase look like a “warmup pitch.”


Who’s going to take care of us? June 25, 2011

Posted by forwardfinancialplanning1 in Long Term Care Insurance.
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A recent study conducted by Met Life, The National Alliance for Caregivers and New York Medical College revealed some sobering facts about caring for the elderly.  The study combined survey results of 1,112 Americans over the age of 50 with some government data from 2008 to determine that over 10 million adult children over the age of 50 are providing assistance to their parents in one form or another.  In some instances, it could be as simple as providing some financial assistance but for many, it consists of extensive caregiving.

While caring for aging parents is clearly a labor of love, the price of this labor is startling.  The survey estimated an average cost of $324,044 for a female caregiver and $283,716 for male caregiver.  The “cost” referenced here is in the form of lost wages due to the caregiving situation and emanates from missed promtions, reduced hours and the inability to take a better job requiring relocation.

The study concluded that a greater percentage of this group is caring for mothers (26%) than caring for their children (14%).  The percentage caring for their father is slightly lower at 10%.  This latest statistic is to be expected given the shorter actuarial life expectancy of  males.

If anything should give us “50-somethings” a reason to consider long term care insurance, it’s clearly data such as this.  Failure to heed this circumstance will result in the next generations being confronted with an even more demanding caregiver requirement.

How’s your financial literacy?? April 25, 2011

Posted by forwardfinancialplanning1 in Annuities, Financial Planning, Life Insurance, Long Term Care Insurance.
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Here’s yet another on-line survey to test the nation’s financial literacy.  Sponsored by Northwestern Mutual Insurance, it can be found at:  http://financialmattersquiz.com.  As always, they reveal some serious gaps in our population’s general knowledge of financial concepts.  Nonetheless, it’s fun to see how you stack up against the country as a whole.  This one appears to be a bit skewed towards insurance products—not surprising since it’s sponsored by an insurer.  However, it does give us another good opportunity to benchmark our financial savvy.