funding extended care - optimal age question

last column piece, we touched on extended care implications on your family and you.  this piece shall concern the optimal age when you should begin consider funding your own private extended care plan.  next piece shall concern the various financing strategies towards maximizing your dollars.

our conversation becomes more relevant in the context of the national debt crisis.  even though both political parties posture grandiosely, you can count on disruption to the medicare, social security, and medicaid entitlement programs.  we can reasonably assume that you will have undependable future federal government pension and social safety net benefits.

within the national debt crisis context, you may ask what can i do about the future problem.  you can do nothing, and someone will have to pay, more than likely your own future kin; or, you can put your foot down by putting your own extended care plans in your own hands.

so, the question becomes, where to begin?  consider beginning your core extended care coverage funding in your early 40's, when most insurance carriers consider underwriting extended care plans:

a) your health and age in your early 40's may stack the odds that you can obtain coverage at a discounted rate.  although carriers can change future premium rates based on experience across a group, they generally do not require future medical underwriting.  the health and age rate factor remains substantially relevant when you consider postponing similar coverage to your 50's or 60's.

b) your employer and/or you can completely pay-up a premium based policy beginning in your 40's and ending at your retirement age.  this policy could serve as your extended care core coverage, avoiding any potential future rate increases with a paid-up structure.  the investment remains more palatable starting at age 40 to age 65, rather than age 50 or 60 to age 65.

c)  your employer and/or you can begin layering coverage across your cash flow and asset wealth age spectrum throughout peak earning years.  with core coverage obtained earlier, you can allocate peak earning cash flow towards additional coverage through a single premium plan.  these plans may provide more flexibility but generally require upfront investments exceeding $50,000 and prior forethought.

some financial advisory professionals may consider obtaining core extended care coverage in your early 40's overkill.  overkill depends on the particular situation, but why wait to buy something tomorrow when you may get a bargain today?  pushing that decision off may also prevent you from getting coverage, period, even if you could afford it several times over.

consider beginning the conversation with your financial professional early in your prime earning, healthy years.

blake mendez

www.menco-finco.com

the sandwich generation's legacy challenges

sandwich generation members generically comprise those baby boomers caring not only for their grown children but also their aging parents.  although the grown children conversation has its place, we can focus our conversation on aging parents and caregivers.  the sandwich generation may ultimately find themselves in their parents' shoes in the next 30 years, after caring for their parents.

the center for medicare and medicaid services estimates that more than 70% of americans over age 65 will require custodial care.  custodial care becomes necessary when you cannot manage two out of your six activities of daily living (adl).  your adl's comprise bathing, continence, dressing, eating, toileting, and transferring.

many hope that either government entitlement programs, friends, relatives, and/or their own financial wherewithal can provide or pay for the care; however, the february 2011 medicare guide specifically notes within section 5 that it does not cover custodial care costs.  with that entitlement program nixed, you can consider medicaid, but why choose poverty when you can create options earlier in life?

industry experts wisely recommend that consumers consider other options towards financing your future custodial care costs other than entitlement care.  my professional opinion gravitates towards estimating future custodial care costs without governmental entitlement programs.  prudence demands that you estimate the worst case scenario as a starting point.

imagine building a million dollar legacy, and an unplanned and protracted custodial care situation reduces 75% of your wealth; or, imagine a loved one slipping into poverty without medicaid services, potentially creating your own financial bankruptcy providing that backstop.

preserving your family's financial legacy starts with understanding that unmanaged custodial care risk can potentially compromise intergenerational wealth transfer desires.  custodial care requires financial resources, whether personal, familial, non-profit charity, or government entitlement.  the various financial resources listed vary based on flexibility, control, and customization, with personally owned vehicles affording the most options.

consider custodial care insurance options or setting aside funds specifically earmarked towards satisfying future custodial care costs or insurance premiums.  most custodial care insurance carriers will consider applications for consumers over the age of 40 with varying medical underwriting methodologies.  premiums will increase year by year becoming more expensive as you age with medical underwriting becoming potentially dicier.

for clients with complex legacy needs, the conversation takes on a more pressing dimension, potentially benefiting or inhibiting intergenerational wealth transfer.  without proper guidance and strategic foresight, you may find that a lifetime(s) of financial asset accumulation may wither under a protracted custodial care situation.  most people generally do not want that situation.

we can save the optimal age to buy custodial care insurance and its financing strategy discussion for another time.  until that time, consider discussing your concerns with an adviser laser focused on meeting your legacy needs.  your adviser should coordinate your custodial care solution within an overall strategy context, such as addressing alzheimer's disease and legal competency.

blake mendez owns and operates mendez & co. financial counselors, an independent human capital practice specializing in intergenerational wealth transfer and pension development.  you can reach him directly at 00 + 1.432.288.3243 or via email at blakemendez-mendezco@clear.net.

blueprinting human capital

good afternoon clients + prospective clients + partners.  working with clients on intergenerational wealth transfer and pension development needs has shown that human capital matters tremendously.

you can find my posts on other sites, such as www.businessinsider.com and www.entrepreneur.com, as well as here at the www.menco-finco.com blueprinting human capital site.

we will enjoy our journey together as a new civilization dawns with the rise of the positive collective consciousness social-psychology within the information age.  thank you for joining up.

you can count on my professional judgment, my resource access, and my practical counsel.

blake mendez
www.menco-finco.com