Ray Dalio: 3 pieces of advice for how to manage your savings in a coronavirus recession

Ray Dalio: 3 pieces of advice for how to manage your savings in a coronavirus recession.

By Tom Huddleston Jr.

Though the stock market is on the rebound of late as more and more states reopen, hedge fund billionaire Ray Dalio has made it clear that he expects the ongoing coronavirus pandemic to leave behind an economic downturn that could be the worst since the Great Depression.

“We’re not going to go back to normal” once the pandemic subsides, Dalio previously told CNBC Make It, arguing against the idea of a “v-shaped recovery” where the economy would rebound quickly once the country fully reopens.

“Think of the virus as like a tsunami that comes in,” Dalio said. “And if it goes away completely and we never see it again, it still will produce damage, the financial damage ... incomes that are lost, balance sheets that are hurt, restructurings that need to take place. So that will impede the recovery.”

With that in mind, Dalio has advice for Americans worrying about whether or not their savings will keep them afloat should the economy truly take a historic turn for the worse that lasts well beyond 2020.

Though 21% of Americans do not save any of their annual income, according to a 2019 Bankrate survey, for those who do, Dalio offers up three pieces of advice on relatively safe investment strategies to carry you through.

Determine how far your savings will go
First, you need to take a hard look at your savings and calculate how much you need to be “safe and free,” Dalio says.

″[Determine] how many months or years can you get by” based on your current savings and what it would take to ensure you can still have the type of life you’re comfortable leading, he says.

In other words, you should calculate your average, basic expenses — from rent or mortgage payments to food costs and other essential bills that cannot be trimmed or cut out completely — in order to figure out how much money you would need to survive losing a major source of income.

Dalio suggests saving enough to make sure “you’re okay for ‘X’ amount of time,” he says, whether that’s several months, or even a year.

Remember, “you don’t have to have a world of luxury to cover the basics,” he says.

And “when you’ve [calculated] that savings ... cut it in half, just to be conservative,” Dalio says. “Because between taxes, inflation and possible losses in your portfolio, maybe they can add up to half.”

“That’s No. 1. Do those calculations so that you know, if everything is bad, you and your family [are] still good,” Dalio says.

Once you have that amount of your portfolio set aside to feel safe, Dalio says you can start planning how to put the rest of your money to work for you by investing any money that is not part of what you’ve set aside from your expenses.

“I want you to visualize your acceptable worst case scenario and secure that, because once you do, everything else changes and you can have peace of mind that you can take more risk,” Dalio says. “But if you haven’t secured that acceptable picture, you have to make doing that your top priority.”

Diversify your investments
Which brings on Dalio’s second piece of money advice, which is to take the money that you feel comfortable building on and “diversify that portfolio well.” That means spreading your money across different asset classes that can typically be counted on to perform relatively well no matter the economic environment.

“You need to diversify by holding assets that will do well in either a rising or a falling growth environment, or a rising or falling inflation environment, and [you] should diversify by holding international as well as domestic asset classes,” Dalio says.

For instance, the billionaire has been adamant that investors should back “both horses in the race” in terms of the U.S.-China trade war and the two superpowers’ increasing competition for economic growth in recent years.

“I believe Chinese businesses are competitors of American businesses or other business around the world, and that therefore you want to be, if you’re diversified, having bets on both horses in the race,” Dalio said in 2019.

Dalio has also argued against holding onto cash or government bonds at the moment, due to fears that currency inflation could hurt their value over time. “Cash is not going to be a good investment,” he says, adding: “In relation to inflation, it’ll probably lose 2% a year and maybe more.”

Dalio does see gold as a more attractive asset, he says, echoing his sentiments from January, when he said: “I think you have to have a little bit of gold in your portfolio.” Many investors, including billionaire Warren Buffett, tend to look at gold as a relatively safe and steady investment in times of crisis.

Don’t try to time the market
Lastly, Dalio says never try to time the market.

That is “going to be really important.”

In the past, Dalio has said that the “biggest mistake that most people make is to judge what will be good by what has been good lately” in terms of looking at how the stock market has performed recently and when is the best time to buy.

Trying to perfectly time the market is something that even professionals can’t always manage, and the average person will find it extremely difficult to do successfully, Dalio says.

“To do that well you have to beat the pros, who themselves typically can’t do that well.”

Instead, it’s probably a better idea for non-professional investors to take long-term positions in a diversified portfolio that can pay off over time. Otherwise, all investors need to keep in mind the historical cycles and patterns of the economy and stock market.

From bubbles leading into busts, and vice versa, Dalio has always been adamant that those economic cycles tend to repeat themselves and that investors need to learn to avoid thinking along the lines of: ”‘That’s a bad market, and I don’t want any of it,’” Dalio previously told CNBC Make It. That’s because a bear market might actually be the best time to get bargain prices on certain stocks.

After all, a company like Amazon once saw its stock price lost most of its value after the tech bubble burst in the early 2000s, but many of the company’s long-term investors (those who held onto the stock through rough times, or bought it at a nadir) have seen huge gains because they ignored the most recent market trends at the time and took a long-term approach that’s paid off as Amazon is now worth several times what it was even just a decade ago.

August 11, 2020

How to Get Immediate Cash for Your Annuity

How to Get Immediate Cash for Your Annuity.

An annuity is a type of investment that is usually handled by an insurance company. An investor will invest her money in an annuity fund in exchange for periodic payouts over a predetermined interval (such as for the next ten years) or indefinitely (for the rest of your life). Some annuities provide the option of getting immediate payment. However, if you are in a financial emergency and require immediate cash, you might have to cash out an annuity early. While there may be hefty fees involved, particularly if your annuity is held within a retirement account like an IRA or 401k, it is possible to get immediate cash from your annuity investment.

Method 1 Getting Cash from an Immediate Annuity.
1. Consider carefully whether you need immediate cash. Investments work best when they are allowed to grow over the long term. Withdrawing cash early from an annuity brings with it a risk of fees and will significantly harm the long-term potential of your investment. Consider very carefully whether you are in a true financial emergency before taking steps to sell an annuity, and be sure to use early withdrawal options only as a last resort.
2. Think about other options for immediate cash. Because of the potential penalties of getting cash from an annuity, consider other options for getting cash during a financial emergency. Many of these options come with lower risks and few to no financial penalties. These include:
Take out a short-term, unsecured loan (a loan without collateral) from your bank or a local credit union.
Renting out a room via AirBNB or another website.
Sell unwanted items online.
Take on an additional part-time job or side gig, such as babysitting, dogsitting, or working retail.
Get a Home Equity Loan. These loans will require interest payments, but they might be lower than the penalties you would pay for cashing in an annuity.
3. Determine exactly how much money you need. In some cases, you might be able to receive small, immediate cash payouts from your annuity without too many penalties and fees. However, if you need to cash in your entire annuity, you will likely pay some hefty fines. Therefore, it is important that you know exactly how much cash you need to get through your financial emergency. By only taking out the money you absolutely need, you might be able to be more financially stable in the long run.
4. Determine whether you have an immediate or deferred annuity. An immediate annuity will provide monthly, quarterly, or annual cash payments to the investor immediately after the investment is purchased. A deferred annuity, however, allows the investment to grow for a period of some years before the payouts begin.
If you have an immediate annuity already, you can simply collect your cash installments at the appropriate intervals. Depending on how much cash you require, these installments might be sufficient for your needs.
When payments are made, annuities are taxed on the earning portion of the asset, not a return of principal.
Additionally, an immediate annuity within a retirement account, like a Roth IRA, can provide penalty-free payments to persons under 59.5 years of age.
5. Convert a deferred annuity to an immediate annuity. This option is one that many investors consider as they transition into retirement. They use the deferred annuity to grow their money over the long-term and then convert into an immediate annuity to guarantee an income stream during their retirement. If you convert your deferred annuity to an immediate annuity, you might have the best of both worlds: immediate access to some cash while still allowing your investment portfolio to grow.
Depending on when you purchased your deferred annuity, however, it might be costly for you to pursue the conversion option. Make sure you discuss fees and penalties carefully with your insurance company and your financial advisor before undertaking a conversion.
6. Collect your cash payments without penalty. If you have an immediate annuity, you will receive several small payments each year. This option is a good one for those who are in immediate need of cash (such as those who are on a fixed income). And as long as you only collect the amount specified in your contract, you can do so without paying extra fees.
You will still likely have to pay income tax on a portion or all of the amount you collect.
While immediate annuities provide an immediate cash flow, they generally pay out less total money than deferred annuities, which have more of an opportunity to grow.
7. Determine your surrender period. A surrender period is the period of time after the initial purchase of the annuity where you will be charged hefty fees for cashing out your plan. A surrender period can be anywhere from 5-10 years after purchase, depending on your contract, though it is usually between 6-8 years.
If your surrender period has passed, you might be able to cash out your annuity without paying too many fees.
If your surrender period has not yet passed, you might want to consider the expenses involved before continuing the early withdrawal process.
8. Decide to sell your immediate annuity. Unlike deferred annuities, most immediate annuities do not provide an option for small-sum early withdrawals or partial sales. You will likely have the opportunity, however, to sell the entire immediate annuity for a lump-sum. Again, reserve this option as a last resort given the hassle and fees involved in cashing out your immediate annuity early.
9. Be aware of possible financial penalties. Withdrawing cash from your annuity early can lead to hefty penalties, taxes, and fines. Be sure that you take these penalties into account before making your decision to withdraw your cash.
If your annuity is part of a retirement account and you withdraw your money before you are 59.5 years old, you will have to pay a 10% early withdrawal fee to the federal government.
If you withdraw your money within the first 5-8 years of purchase, you will likely have to pay a "surrender fee" to your insurance company. The exact fee amount depends on your contract. Many surrender fees begin at about a 7% penalty for the first year after purchase and decrease over time from there. However, some companies might charge a fee as high as 20%.
Cash you receive from annuities counts as income. You will likely have to pay income taxes in addition to the early withdrawal fees and surrender fees. The one exception is that payments from an annuity as part of a Roth IRA are not taxable.
10. Research companies that offer cash in exchange for annuity payments. None will give you the full value of your future payments. They might offer anywhere from 60% to 85% of the value of your annuity. Getting 85% of your annuity’s value would be considered a fairly good offer. Since you are legally transferring your rights, you want a company that follows standard procedures and will prepare you for any required court proceedings.
Understand that you are not getting a good deal here because the company you are selling to has to make a profit. Annuity sale prices are reached by discounting a series of future cash flows by some interest rate. Typically, a buyer will use a lower rate than is earned in the annuity to make a profit themselves. This results in a lower sale price for you.
11. Consult your tax attorney or financial advisor. Before agreeing to sell your annuity to a third party, consult a trusted legal or financial expert. They will help you determine your financial liability and help you navigate through the complicated contracts you might have to sign. This will help to ensure that you understand what is happening and that it is done correctly. They might also be able to help guide you to the most reputable companies that purchase annuities.
12. Collect your documents. Documents required for the sale of an annuity include two forms of identification, your initial annuity policy, and an application to sell your annuity to a third party. You might have to contact your insurance company in order to receive correct, up-to-date copies of your paperwork.
13. Complete the transaction. Upon submitting your paperwork and paying your fees and penalties, you will be able to receive your cash payout. Make sure that you report this income correctly during tax time and that you pay all the extra taxes on this money to avoid future penalties.
You might want to consider discussing your finances with a financial advisor to ensure that you will use and invest the cash payout properly.

Method 2 Getting Cash from a Deferred Annuity.
1. Determine what kind of annuity you hold. There are three kinds of annuity, each one of which pays out money slightly differently. The U.S. Securities and Exchange Commission (SEC) regulates all variable annuities and some index annuities. The SEC does not regulate fixed annuities.
A fixed annuity pays out a predetermined amount at specific intervals over a period of time. This amount is usually based on a specific interest rate applied to your initial investment.
An indexed annuity provides payment to the investor based on the performance of a stock market index fund (or, a fund that tracks the entire stock market performance). Most indexed annuities, however, have a set minimum for payments even if the index fund performs poorly.
A variable annuity allows the investor to choose amongst various investment vehicles, usually mutual funds. Your periodic payment will depend upon the performance of these investments.
2. Determine the type of account your annuity is held in. In addition to the different types of annuity payments, annuities can be held in various types of accounts for certain purposes. These typically include investment and retirement accounts. Both types operate generally the same way, however, they may differ in early withdrawal and tax penalties charged. Check your investment documents or retirement plan agreement to see what type of penalties and restrictions there are on your annuity.
3. Consider penalty-free early withdrawal options. Some deferred annuity policies provide an option for small cash withdrawals without extra penalties. For example, a withdrawal of 5-10% of your initial investment might be accomplished without paying a "surrender fee" to your insurance company. While taking an early withdrawal will diminish your investment's ability to grow, you might be able to get the cash you need without completely emptying your annuity.
If your annuity is part of a retirement account and you are under 59.5 years old, you might still have to pay a 10% tax to the federal government, even if you don't have to pay a penalty to your insurance company.
4. Determine your surrender period. A surrender period is the period of time after the initial purchase of the annuity where you will be charged hefty fees for cashing out your plan. A surrender period can be anywhere from 5-10 years after purchase, depending on your contract, though it is usually between 6-8 years.
If your surrender period has passed, you might be able to cash out your annuity without paying too many fees.
If your surrender period has not yet passed, you might want to consider the expenses involved before continuing the early withdrawal process.
5. Reread your annuity contract. Review the details of your annuity contract. Pay attention to the full-disclosure clause of your agreement. It’s important that you understand what portion of your annuity payments you are exchanging for a lump-sum cash payment.
6. Understand the process. If you are seeking a lump sum of cash in lieu of structured payments, you are in effect signing over to someone else all your rights to receive future annuity payments. That "someone else" is the entity giving you the lump-sum cash.
Be aware that in the long term your annuity is worth much more if you receive structured payments according to the original contract. Talk to your insurance agent to determine the exact worth of your annuity. You may decide to ride out your immediate cash-flow crisis instead of cashing in.
7. Be aware of possible financial penalties. Withdrawing cash from your annuity early can lead to hefty penalties, taxes, and fines. Be sure that you take these penalties into account before making your decision to withdraw your cash.
If your annuity is part of a retirement account and you withdraw your money before you are 59.5 years old, you will have to pay a 10% early withdrawal fee to the federal government.
If you withdraw your money within the first 5-8 years of purchase, you will likely have to pay a "surrender fee" to your insurance company. The exact fee amount depends on your contract. Many surrender fees begin at about a 7% penalty for the first year after purchase and decrease over time from there. However, some companies might charge a fee as high as 20%.
8. Research companies that offer cash in exchange for annuity payments. None will give you the full value of your future payments. They might offer anywhere from 60% to 85% of the value of your annuity. Getting 85% of your annuity’s value would be considered a fairly good offer. Since you are legally transferring your rights, you want a company that follows standard procedures and will prepare you for any required court proceedings.
9. Consult your tax attorney or financial advisor. Before agreeing to sell your annuity to a third party, consult a trusted legal or financial expert. They will help you determine your financial liability and help you navigate through the complicated contracts you might have to sign. This will help to ensure that you understand what is happening and that it is done correctly. They might also be able to help guide you to the most reputable companies that purchase annuities.
10. Collect your documents. Documents required for the sale of an annuity include two forms of identification, your initial annuity policy, and an application to sell your annuity to a third party. You might have to contact your insurance company in order to receive correct, up-to-date copies of your paperwork.
11. Complete the transaction. Upon submitting your paperwork and paying your fees and penalties, you will be able to receive your cash payout. Make sure that you report this income correctly during tax time and that you pay all the extra taxes on this money to avoid future penalties.
You might want to consider discussing your finances with a financial advisor to ensure that you will use and invest the cash payout properly.

Community Q&A.
Question : How can I get money from a union annuity?
Answer : Start by contacting your union steward.
Question : Can I cash out a fixed annuity early?
Answer : What you'll typically lose by cashing out early is a 10% penalty on the taxable portion of your annuity, forfeited to the IRS if you're under age 59½. That's in addition to the 10% federal tax penalty you'll pay on earnings if you're under age 59½.

Tips.

If you aren’t comfortable with the idea of cashing in part or all of your annuity, explore other ways you can raise cash, such as taking out a second mortgage or selling other assets. Downsizing is another way to cover a tight financial spot in your life.
Use the formulas in Discount Cash Flow to find the value of your annuity. You won't be able to sell it for full value, but you need to know what the contract is worth so that you'll know if you're getting a fair offer.

Warnings.
Consult your tax attorney or accountant before selling. If you sell too early, you may be liable for a hefty surrender charge, and if you sell before you have reached the age of 59-and-a-half, you will probably be faced with federal taxes and penalties.
Thoroughly research any company offering to purchase your annuity. You can research any formal complaints filed against a company by contacting the Better Business Bureau.[21] It’s a good idea to ask your tax accountant for recommendations as well.
Do not purchase an annuity unless you have a decent emergency savings account that you can access easily and without penalty. An annuity is not a suitable emergency fund because of the fees, delays, and hassles in receiving quick cash.
To avoid fraud, make sure you purchase an annuity from a reputable, licensed company.

May 04, 2020

How to Finance Nursing Home Care

How to Finance Nursing Home Care.

As more and more Americans require nursing home care, their families are struggling to find ways to pay for, or at least reduce, the immense cost of care. In 2012, the average cost of a private room was over $90,000 a year and a semi-private room cost $81,000 a year. For most people, paying for a loved one’s nursing home care presents an almost insurmountable financial obstacle. However, there are ways to finance and reduce the cost of a nursing home so that a loved one can get the type of long-term care that they require.

Method 1 Reducing Costs and Using Personal Assets.

1. Consider in-home care. Long-term nursing home care costs between $6,000 and 9,000 a month and many people cannot afford this option. To save money, you may want to consider in-home care, which costs approximately $21 an hour for a care assistant. This option is not only less expensive but it allows your elderly or disabled family member to reside in his or her home for as long as possible.

2. Negotiate long-term care costs. If you are paying out-of-pocket for long-term nursing care, you should negotiate the overall cost with the nursing home. While some nursing homes may refuse to negotiate, others would prefer to take a lower private care rate because it still pays more than state-sponsored Medicaid programs.

3. Relocate your loved one. The cost of nursing home care varies greatly from state to state and even from locality to locality. If your loved one has family members who live in different states, you should determine which state has the lowest cost for nursing home care. Nursing home care in Texas, Utah and Alabama can cost less than half of nursing home care in states in the Northeast.

4. Qualify for a Reverse Mortgage. A reverse mortgage is a loan that a homeowner gets from a bank against the value of their home. The loan converts the home's equity into cash and the homeowner receives either a cash sum, regular payments, or a line of credit equal to the equity in the home. After the owner's death, the bank may foreclose on the home (get ownership without further liability to the home owner) or members of the estate may sell the home and pay off the loan.

In order to qualify for a reverse mortgage, each homeowner must be at least 62 years old and live in the home where the reverse mortgage was taken.

A reverse mortgage may be a good solution if you are in good health. You can use the proceeds from the reverse mortgage to pay for long-term care insurance or to make your home more accessible so that you can remain in the house as long as possible.

If you are in need of care but do not require nursing home care yet, you can use a reverse mortgage to pay for in-home caregiver services. This provides seniors with the ability to stay in their home for a fraction of the cost of a nursing home.

If you are a married couple and one of you need nursing home care, a reverse mortgage can pay for nursing home care and allow the healthy spouse to remain in the family home. If the spouse needing care dies, the surviving spouse can stay in the home so long as they can continue to pay for property taxes and insurance.

Method 2 Qualifying for Medicaid.

1. Determine whether you qualify for Medicaid. Medicaid is a state and federal government program that assists low-income individuals with a variety of medical care, including nursing home care. You can only qualify for Medicaid if you fall below the monthly income and asset limits set by your state.

You can determine whether you meet the eligibility requirements for your state at: https://www.healthcare.gov/medicaid-chip/getting-medicaid-chip/

If you qualify for Medicaid, you can apply online at https://www.healthcare.gov/medicaid-chip/getting-medicaid-chip/ or check the website for the address of your state Medicaid office and apply in person.

2. Qualify for Medicaid. If your assets are currently too high to qualify for Medicaid and you want to protect your personal assets from nursing home expenses, you can consider legally reducing your assets in order to qualify for Medicaid.

Before attempting to reduce or transfer your assets, you should speak with an elder law attorney. Medicaid has very strict rules about what assets can be transferred and what purchases are allowable to reduce your income. If you improperly reduce your assets, Medicaid can penalize you for months to years and prohibit your qualification for the program.

The National Association of Elder Law Attorneys has information about elder law specialists on its website at: https://www.naela.org. The American Bar Association also provides attorney referral information at: http://apps.americanbar.org/legalservices/findlegalhelp/home.cfm.

3. Reduce your assets. In order to qualify for Medicaid, you can reduce your assets by:

Paying off debt, such as a mortgage, student loans or credit cards.

Paying for in-home medical care.

Paying for necessary home repairs, such as a new roof or furnace.

Transfer funds to your spouse for his or her benefit.

Transfer funds or set up a trust for your blind or disabled child or for a disabled person under the age of 65.

4. Set up a Medicaid Asset Trust. With a Medicaid Asset Trust, you transfer all of your assets into a trust and give up control over those assets. Any funds placed in the trust do not count towards the Medicaid asset limits. However, if you transfer funds into the trust within 5 years of applying for Medicaid, you may be subject to Medicaid’s “lookback provision.” Under this provision, Medicaid may penalize any person that it determines conducted a non-exempt transfer under the Medicaid regulations. If you are penalized, you may not be able to qualify for Medicaid for months or even years.

Method 3 Using Insurance Options.

1. Purchase long-term health insurance. Unlike regular health insurance, long-term health insurance is designed to pay for long-term care, which may include nursing home care, in-home care or medical equipment. When evaluating long-term health insurance polices, you should carefully select a policy that covers nursing home care if you reasonably believe that you will not have someone to care for you at home should you fall ill and become unable to care for yourself.

It is best to acquire long-term health insurance when you are younger and in good health. As you get older, long-term health insurance becomes much more expensive and many seniors are either unable to afford or qualify for a policy.

2. Cash in your life insurance. Another way to pay for nursing home care is to cash in your whole life insurance policy. Certain policies allow policyholders to cash in their insurance policy for 50 to 75 percent of the face value of the policy.

Keep in mind that this is only an option for whole life policies, not term life policies where there is no cash value.

Depending on your individual life insurance policy, there are two ways that you can cash in your policy: accelerated benefit or life settlement.

If you qualify for an accelerated benefit, the insurance company will pay between 60 and 80 percent of the face value of the policy. Under certain policies, you may have to be suffering from a terminal illness in order to qualify for an accelerated benefit.

A life settlement is a policy payout that you negotiate with an outside company not the insurance company that issued the policy. These settlement companies look at the value of your policy, your age, and your health and pay you between 40 and 75 percent of the face value of the policy. Depending on the health and age of an individual, it may be possible to sell some term policies.

Before negotiating a life settlement, you should speak with an elder law attorney as there may be tax and Medicaid implications from receiving the proceeds of the policy through a settlement company.

3. Check Medicare benefits. While Medicare does not pay the cost of long-term nursing home care, you may qualify for a certain portion of the stay if you were transferred to a nursing home within several days of a hospital stay and you require skilled nursing or rehabilitative care. If you go to a Medicare-approved facility, your stay may be covered for up to 100 days.

Medicare will also pay for in-home care for a certain period as well. This coverage may help if you are trying to reduce assets or do not physically require full nursing-home care.

Question : Should I keep $200,000 available to get into a nicer nursing home before qualifying for Medicaid?
Answer : If you have that kind of money and that is something you are interested in doing, then yes, you can do it.

Tips.

Do not try to transfer or reduce assets before speaking with an experienced elder law attorney.

Be wary of advisers who are not attorneys. Throughout the country, there are people and companies who exploit the elderly and their caregivers by inducements of Medicaid qualification.

This article is not providing legal advice and should not be relied on as legal advice.

January 22, 2020

how to finance nursing home care

How to Finance Nursing Home Care.

As more and more Americans require nursing home care, their families are struggling to find ways to pay for, or at least reduce, the immense cost of care. In 2012, the average cost of a private room was over $90,000 a year and a semi-private room cost $81,000 a year. For most people, paying for a loved one’s nursing home care presents an almost insurmountable financial obstacle. However, there are ways to finance and reduce the cost of a nursing home so that a loved one can get the type of long-term care that they require.

Method 1 Reducing Costs and Using Personal Assets.

1. Consider in-home care. Long-term nursing home care costs between $6,000 and 9,000 a month and many people cannot afford this option. To save money, you may want to consider in-home care, which costs approximately $21 an hour for a care assistant. This option is not only less expensive but it allows your elderly or disabled family member to reside in his or her home for as long as possible.

2. Negotiate long-term care costs. If you are paying out-of-pocket for long-term nursing care, you should negotiate the overall cost with the nursing home. While some nursing homes may refuse to negotiate, others would prefer to take a lower private care rate because it still pays more than state-sponsored Medicaid programs.

3. Relocate your loved one. The cost of nursing home care varies greatly from state to state and even from locality to locality. If your loved one has family members who live in different states, you should determine which state has the lowest cost for nursing home care. Nursing home care in Texas, Utah and Alabama can cost less than half of nursing home care in states in the Northeast.

4. Qualify for a Reverse Mortgage. A reverse mortgage is a loan that a homeowner gets from a bank against the value of their home. The loan converts the home's equity into cash and the homeowner receives either a cash sum, regular payments, or a line of credit equal to the equity in the home. After the owner's death, the bank may foreclose on the home (get ownership without further liability to the home owner) or members of the estate may sell the home and pay off the loan.

In order to qualify for a reverse mortgage, each homeowner must be at least 62 years old and live in the home where the reverse mortgage was taken.

A reverse mortgage may be a good solution if you are in good health. You can use the proceeds from the reverse mortgage to pay for long-term care insurance or to make your home more accessible so that you can remain in the house as long as possible.

If you are in need of care but do not require nursing home care yet, you can use a reverse mortgage to pay for in-home caregiver services. This provides seniors with the ability to stay in their home for a fraction of the cost of a nursing home.

If you are a married couple and one of you need nursing home care, a reverse mortgage can pay for nursing home care and allow the healthy spouse to remain in the family home. If the spouse needing care dies, the surviving spouse can stay in the home so long as they can continue to pay for property taxes and insurance.

Method 2 Qualifying for Medicaid.

1. Determine whether you qualify for Medicaid. Medicaid is a state and federal government program that assists low-income individuals with a variety of medical care, including nursing home care. You can only qualify for Medicaid if you fall below the monthly income and asset limits set by your state.

You can determine whether you meet the eligibility requirements for your state at: https://www.healthcare.gov/medicaid-chip/getting-medicaid-chip/

If you qualify for Medicaid, you can apply online at https://www.healthcare.gov/medicaid-chip/getting-medicaid-chip/ or check the website for the address of your state Medicaid office and apply in person.

2. Qualify for Medicaid. If your assets are currently too high to qualify for Medicaid and you want to protect your personal assets from nursing home expenses, you can consider legally reducing your assets in order to qualify for Medicaid.

Before attempting to reduce or transfer your assets, you should speak with an elder law attorney. Medicaid has very strict rules about what assets can be transferred and what purchases are allowable to reduce your income. If you improperly reduce your assets, Medicaid can penalize you for months to years and prohibit your qualification for the program.

The National Association of Elder Law Attorneys has information about elder law specialists on its website at: https://www.naela.org. The American Bar Association also provides attorney referral information at: http://apps.americanbar.org/legalservices/findlegalhelp/home.cfm.

3. Reduce your assets. In order to qualify for Medicaid, you can reduce your assets by:

Paying off debt, such as a mortgage, student loans or credit cards.

Paying for in-home medical care.

Paying for necessary home repairs, such as a new roof or furnace.

Transfer funds to your spouse for his or her benefit.

Transfer funds or set up a trust for your blind or disabled child or for a disabled person under the age of 65.

4. Set up a Medicaid Asset Trust. With a Medicaid Asset Trust, you transfer all of your assets into a trust and give up control over those assets. Any funds placed in the trust do not count towards the Medicaid asset limits. However, if you transfer funds into the trust within 5 years of applying for Medicaid, you may be subject to Medicaid’s “lookback provision.” Under this provision, Medicaid may penalize any person that it determines conducted a non-exempt transfer under the Medicaid regulations. If you are penalized, you may not be able to qualify for Medicaid for months or even years.

Method 3 Using Insurance Options.

1. Purchase long-term health insurance. Unlike regular health insurance, long-term health insurance is designed to pay for long-term care, which may include nursing home care, in-home care or medical equipment. When evaluating long-term health insurance polices, you should carefully select a policy that covers nursing home care if you reasonably believe that you will not have someone to care for you at home should you fall ill and become unable to care for yourself.

It is best to acquire long-term health insurance when you are younger and in good health. As you get older, long-term health insurance becomes much more expensive and many seniors are either unable to afford or qualify for a policy.

2. Cash in your life insurance. Another way to pay for nursing home care is to cash in your whole life insurance policy. Certain policies allow policyholders to cash in their insurance policy for 50 to 75 percent of the face value of the policy.

Keep in mind that this is only an option for whole life policies, not term life policies where there is no cash value.

Depending on your individual life insurance policy, there are two ways that you can cash in your policy: accelerated benefit or life settlement.

If you qualify for an accelerated benefit, the insurance company will pay between 60 and 80 percent of the face value of the policy. Under certain policies, you may have to be suffering from a terminal illness in order to qualify for an accelerated benefit.

A life settlement is a policy payout that you negotiate with an outside company not the insurance company that issued the policy. These settlement companies look at the value of your policy, your age, and your health and pay you between 40 and 75 percent of the face value of the policy. Depending on the health and age of an individual, it may be possible to sell some term policies.

Before negotiating a life settlement, you should speak with an elder law attorney as there may be tax and Medicaid implications from receiving the proceeds of the policy through a settlement company.

3. Check Medicare benefits. While Medicare does not pay the cost of long-term nursing home care, you may qualify for a certain portion of the stay if you were transferred to a nursing home within several days of a hospital stay and you require skilled nursing or rehabilitative care. If you go to a Medicare-approved facility, your stay may be covered for up to 100 days.

Medicare will also pay for in-home care for a certain period as well. This coverage may help if you are trying to reduce assets or do not physically require full nursing-home care.

Question : Should I keep $200,000 available to get into a nicer nursing home before qualifying for Medicaid?
Answer : If you have that kind of money and that is something you are interested in doing, then yes, you can do it.

Tips.

Do not try to transfer or reduce assets before speaking with an experienced elder law attorney.

Be wary of advisers who are not attorneys. Throughout the country, there are people and companies who exploit the elderly and their caregivers by inducements of Medicaid qualification.

This article is not providing legal advice and should not be relied on as legal advice.

January 20, 2020

How to Finance Nursing Home Care

How to Finance Nursing Home Care.

As more and more Americans require nursing home care, their families are struggling to find ways to pay for, or at least reduce, the immense cost of care. In 2012, the average cost of a private room was over $90,000 a year and a semi-private room cost $81,000 a year. For most people, paying for a loved one’s nursing home care presents an almost insurmountable financial obstacle. However, there are ways to finance and reduce the cost of a nursing home so that a loved one can get the type of long-term care that they require.

Method 1 Reducing Costs and Using Personal Assets.

1. Consider in-home care. Long-term nursing home care costs between $6,000 and 9,000 a month and many people cannot afford this option. To save money, you may want to consider in-home care, which costs approximately $21 an hour for a care assistant. This option is not only less expensive but it allows your elderly or disabled family member to reside in his or her home for as long as possible.

2. Negotiate long-term care costs. If you are paying out-of-pocket for long-term nursing care, you should negotiate the overall cost with the nursing home. While some nursing homes may refuse to negotiate, others would prefer to take a lower private care rate because it still pays more than state-sponsored Medicaid programs.

3. Relocate your loved one. The cost of nursing home care varies greatly from state to state and even from locality to locality. If your loved one has family members who live in different states, you should determine which state has the lowest cost for nursing home care. Nursing home care in Texas, Utah and Alabama can cost less than half of nursing home care in states in the Northeast.

4. Qualify for a Reverse Mortgage. A reverse mortgage is a loan that a homeowner gets from a bank against the value of their home. The loan converts the home's equity into cash and the homeowner receives either a cash sum, regular payments, or a line of credit equal to the equity in the home. After the owner's death, the bank may foreclose on the home (get ownership without further liability to the home owner) or members of the estate may sell the home and pay off the loan.

In order to qualify for a reverse mortgage, each homeowner must be at least 62 years old and live in the home where the reverse mortgage was taken.

A reverse mortgage may be a good solution if you are in good health. You can use the proceeds from the reverse mortgage to pay for long-term care insurance or to make your home more accessible so that you can remain in the house as long as possible.

If you are in need of care but do not require nursing home care yet, you can use a reverse mortgage to pay for in-home caregiver services. This provides seniors with the ability to stay in their home for a fraction of the cost of a nursing home.

If you are a married couple and one of you need nursing home care, a reverse mortgage can pay for nursing home care and allow the healthy spouse to remain in the family home. If the spouse needing care dies, the surviving spouse can stay in the home so long as they can continue to pay for property taxes and insurance.

Method 2 Qualifying for Medicaid.

1. Determine whether you qualify for Medicaid. Medicaid is a state and federal government program that assists low-income individuals with a variety of medical care, including nursing home care. You can only qualify for Medicaid if you fall below the monthly income and asset limits set by your state.

You can determine whether you meet the eligibility requirements for your state at: https://www.healthcare.gov/medicaid-chip/getting-medicaid-chip/

If you qualify for Medicaid, you can apply online at https://www.healthcare.gov/medicaid-chip/getting-medicaid-chip/ or check the website for the address of your state Medicaid office and apply in person.

2. Qualify for Medicaid. If your assets are currently too high to qualify for Medicaid and you want to protect your personal assets from nursing home expenses, you can consider legally reducing your assets in order to qualify for Medicaid.

Before attempting to reduce or transfer your assets, you should speak with an elder law attorney. Medicaid has very strict rules about what assets can be transferred and what purchases are allowable to reduce your income. If you improperly reduce your assets, Medicaid can penalize you for months to years and prohibit your qualification for the program.

The National Association of Elder Law Attorneys has information about elder law specialists on its website at: https://www.naela.org. The American Bar Association also provides attorney referral information at: http://apps.americanbar.org/legalservices/findlegalhelp/home.cfm.

3. Reduce your assets. In order to qualify for Medicaid, you can reduce your assets by.

Paying off debt, such as a mortgage, student loans or credit cards.

Paying for in-home medical care, Paying for necessary home repairs, such as a new roof or furnace.

Transfer funds to your spouse for his or her benefit, Transfer funds or set up a trust for your blind or disabled child or for a disabled person under the age of 65.

4. Set up a Medicaid Asset Trust. With a Medicaid Asset Trust, you transfer all of your assets into a trust and give up control over those assets. Any funds placed in the trust do not count towards the Medicaid asset limits. However, if you transfer funds into the trust within 5 years of applying for Medicaid, you may be subject to Medicaid’s “lookback provision.” Under this provision, Medicaid may penalize any person that it determines conducted a non-exempt transfer under the Medicaid regulations. If you are penalized, you may not be able to qualify for Medicaid for months or even years.

Method 3 Using Insurance Options.

1. Purchase long-term health insurance. Unlike regular health insurance, long-term health insurance is designed to pay for long-term care, which may include nursing home care, in-home care or medical equipment. When evaluating long-term health insurance polices, you should carefully select a policy that covers nursing home care if you reasonably believe that you will not have someone to care for you at home should you fall ill and become unable to care for yourself.

It is best to acquire long-term health insurance when you are younger and in good health. As you get older, long-term health insurance becomes much more expensive and many seniors are either unable to afford or qualify for a policy.

2. Cash in your life insurance. Another way to pay for nursing home care is to cash in your whole life insurance policy. Certain policies allow policyholders to cash in their insurance policy for 50 to 75 percent of the face value of the policy.

Keep in mind that this is only an option for whole life policies, not term life policies where there is no cash value.

Depending on your individual life insurance policy, there are two ways that you can cash in your policy: accelerated benefit or life settlement.

If you qualify for an accelerated benefit, the insurance company will pay between 60 and 80 percent of the face value of the policy. Under certain policies, you may have to be suffering from a terminal illness in order to qualify for an accelerated benefit.

A life settlement is a policy payout that you negotiate with an outside company not the insurance company that issued the policy. These settlement companies look at the value of your policy, your age, and your health and pay you between 40 and 75 percent of the face value of the policy. Depending on the health and age of an individual, it may be possible to sell some term policies.

Before negotiating a life settlement, you should speak with an elder law attorney as there may be tax and Medicaid implications from receiving the proceeds of the policy through a settlement company.

3. Check Medicare benefits. While Medicare does not pay the cost of long-term nursing home care, you may qualify for a certain portion of the stay if you were transferred to a nursing home within several days of a hospital stay and you require skilled nursing or rehabilitative care. If you go to a Medicare-approved facility, your stay may be covered for up to 100 days.

Medicare will also pay for in-home care for a certain period as well. This coverage may help if you are trying to reduce assets or do not physically require full nursing-home care.

Tips.

Do not try to transfer or reduce assets before speaking with an experienced elder law attorney.

Be wary of advisers who are not attorneys. Throughout the country, there are people and companies who exploit the elderly and their caregivers by inducements of Medicaid qualification.

December 15, 2019

how to finance nursing home care

How to Finance Nursing Home Care.

As more and more Americans require nursing home care, their families are struggling to find ways to pay for, or at least reduce, the immense cost of care. In 2012, the average cost of a private room was over $90,000 a year and a semi-private room cost $81,000 a year. For most people, paying for a loved one’s nursing home care presents an almost insurmountable financial obstacle. However, there are ways to finance and reduce the cost of a nursing home so that a loved one can get the type of long-term care that they require.

Method 1 Reducing Costs and Using Personal Assets.

1. Consider in-home care. Long-term nursing home care costs between $6,000 and 9,000 a month and many people cannot afford this option. To save money, you may want to consider in-home care, which costs approximately $21 an hour for a care assistant. This option is not only less expensive but it allows your elderly or disabled family member to reside in his or her home for as long as possible.

2. Negotiate long-term care costs. If you are paying out-of-pocket for long-term nursing care, you should negotiate the overall cost with the nursing home. While some nursing homes may refuse to negotiate, others would prefer to take a lower private care rate because it still pays more than state-sponsored Medicaid programs.

3. Relocate your loved one. The cost of nursing home care varies greatly from state to state and even from locality to locality. If your loved one has family members who live in different states, you should determine which state has the lowest cost for nursing home care. Nursing home care in Texas, Utah and Alabama can cost less than half of nursing home care in states in the Northeast.

4. Qualify for a Reverse Mortgage. A reverse mortgage is a loan that a homeowner gets from a bank against the value of their home. The loan converts the home's equity into cash and the homeowner receives either a cash sum, regular payments, or a line of credit equal to the equity in the home. After the owner's death, the bank may foreclose on the home (get ownership without further liability to the home owner) or members of the estate may sell the home and pay off the loan.

In order to qualify for a reverse mortgage, each homeowner must be at least 62 years old and live in the home where the reverse mortgage was taken.

A reverse mortgage may be a good solution if you are in good health. You can use the proceeds from the reverse mortgage to pay for long-term care insurance or to make your home more accessible so that you can remain in the house as long as possible.

If you are in need of care but do not require nursing home care yet, you can use a reverse mortgage to pay for in-home caregiver services. This provides seniors with the ability to stay in their home for a fraction of the cost of a nursing home.

If you are a married couple and one of you need nursing home care, a reverse mortgage can pay for nursing home care and allow the healthy spouse to remain in the family home. If the spouse needing care dies, the surviving spouse can stay in the home so long as they can continue to pay for property taxes and insurance.

Method 2 Qualifying for Medicaid.

1. Determine whether you qualify for Medicaid. Medicaid is a state and federal government program that assists low-income individuals with a variety of medical care, including nursing home care. You can only qualify for Medicaid if you fall below the monthly income and asset limits set by your state.

You can determine whether you meet the eligibility requirements for your state at: https://www.healthcare.gov/medicaid-chip/getting-medicaid-chip/

If you qualify for Medicaid, you can apply online at https://www.healthcare.gov/medicaid-chip/getting-medicaid-chip/ or check the website for the address of your state Medicaid office and apply in person.

2. Qualify for Medicaid. If your assets are currently too high to qualify for Medicaid and you want to protect your personal assets from nursing home expenses, you can consider legally reducing your assets in order to qualify for Medicaid.

Before attempting to reduce or transfer your assets, you should speak with an elder law attorney. Medicaid has very strict rules about what assets can be transferred and what purchases are allowable to reduce your income. If you improperly reduce your assets, Medicaid can penalize you for months to years and prohibit your qualification for the program.

The National Association of Elder Law Attorneys has information about elder law specialists on its website at: https://www.naela.org. The American Bar Association also provides attorney referral information at: http://apps.americanbar.org/legalservices/findlegalhelp/home.cfm.

3. Reduce your assets. In order to qualify for Medicaid, you can reduce your assets by.

Paying off debt, such as a mortgage, student loans or credit cards.

Paying for in-home medical care, Paying for necessary home repairs, such as a new roof or furnace.

Transfer funds to your spouse for his or her benefit, Transfer funds or set up a trust for your blind or disabled child or for a disabled person under the age of 65.

4. Set up a Medicaid Asset Trust. With a Medicaid Asset Trust, you transfer all of your assets into a trust and give up control over those assets. Any funds placed in the trust do not count towards the Medicaid asset limits. However, if you transfer funds into the trust within 5 years of applying for Medicaid, you may be subject to Medicaid’s “lookback provision.” Under this provision, Medicaid may penalize any person that it determines conducted a non-exempt transfer under the Medicaid regulations. If you are penalized, you may not be able to qualify for Medicaid for months or even years.

Method 3 Using Insurance Options.

1. Purchase long-term health insurance. Unlike regular health insurance, long-term health insurance is designed to pay for long-term care, which may include nursing home care, in-home care or medical equipment. When evaluating long-term health insurance polices, you should carefully select a policy that covers nursing home care if you reasonably believe that you will not have someone to care for you at home should you fall ill and become unable to care for yourself.

It is best to acquire long-term health insurance when you are younger and in good health. As you get older, long-term health insurance becomes much more expensive and many seniors are either unable to afford or qualify for a policy.

2. Cash in your life insurance. Another way to pay for nursing home care is to cash in your whole life insurance policy. Certain policies allow policyholders to cash in their insurance policy for 50 to 75 percent of the face value of the policy.

Keep in mind that this is only an option for whole life policies, not term life policies where there is no cash value.

Depending on your individual life insurance policy, there are two ways that you can cash in your policy: accelerated benefit or life settlement.

If you qualify for an accelerated benefit, the insurance company will pay between 60 and 80 percent of the face value of the policy. Under certain policies, you may have to be suffering from a terminal illness in order to qualify for an accelerated benefit.

A life settlement is a policy payout that you negotiate with an outside company not the insurance company that issued the policy. These settlement companies look at the value of your policy, your age, and your health and pay you between 40 and 75 percent of the face value of the policy. Depending on the health and age of an individual, it may be possible to sell some term policies.

Before negotiating a life settlement, you should speak with an elder law attorney as there may be tax and Medicaid implications from receiving the proceeds of the policy through a settlement company.

3. Check Medicare benefits. While Medicare does not pay the cost of long-term nursing home care, you may qualify for a certain portion of the stay if you were transferred to a nursing home within several days of a hospital stay and you require skilled nursing or rehabilitative care. If you go to a Medicare-approved facility, your stay may be covered for up to 100 days.

Medicare will also pay for in-home care for a certain period as well. This coverage may help if you are trying to reduce assets or do not physically require full nursing-home care.

Tips.

Do not try to transfer or reduce assets before speaking with an experienced elder law attorney.

Be wary of advisers who are not attorneys. Throughout the country, there are people and companies who exploit the elderly and their caregivers by inducements of Medicaid qualification.

December 15, 2019