Remember your parents constantly telling you to “be careful?” I’m sure that most of us hear that reminder in our minds all the time. But sometimes, no matter how careful you are, events unfold that can have a devastating effect on you and your family. But, don’t worry – you aren’t totally powerless – and many risks can be mitigated through insurance!
First, start by reviewing your Life Insurance. Unfortunately, none of us are going to live forever. If you or your spouse were to pass away, consider - what would the ongoing financial impact be on your family? We recommend reviewing the reasons, necessity, and beneficiaries of life insurance policies as circumstances and objectives may have changed since the original purchase.
Second, consider Long Term Care Insurance (LTC). Long term care is another topic no one wants to discuss. This alone could be the biggest financial risk you face, and is the most likely to be uninsured.
There are several studies on the incidence of nursing home care, and they arrive at similar estimates. For example, a study conducted by the Alliance Of Health Policy and Systems Research estimated that 58% of men and 79% of women aged 65 and older would need long-term care at some point, and those average lengths for care were 2.2 years for men and 3.7 years for women.
In Northeast Ohio, what does that care cost? The Genworth 2016 Cost of Care Survey for the Cleveland-area average cost for a semi-private room was $6,996, and $7,604 for a private room. Multiply those monthly rates for a couple of years and you begin to see the risk.
It may be advantageous to start the conversation at age 50, review by age 60 but likely no later than age 70. Keep in mind that Ohio long-term care insurance companies can now offer policies that qualify under the state's Long-term Care Partnership Insurance Program. Partnership insurance offers a way for people to buy Long-Term Care Insurance, receive policy benefits and protect a matching amount of assets if they need to apply for Medicaid. With any insurance policy, it is important for the consumer to choose the type of coverage that fits their needs. Only you can decide if Long Term Care Insurance is right for you. Your decision should depend on personal health and wealth matters.
You may be able to deduct your LTC insurance premiums on your Federal tax return. First and foremost, the standard rule for medical expenses still applies – that in order to claim a deduction (for both LTC insurance premiums, and all other medical expenses, added together), the taxpayer must itemize deductions on Schedule A, and only the portion in excess of 10% of Adjusted Gross Income (AGI) is actually deductible.
In addition to the limitation on (total) medical expense deductions (including LTC insurance premiums), there is a further limitation on the amount of LTC premiums that can be counted as a medical expense in the first place. Under IRC Section 213(d)(10), premiums can only be deducted up to a specific maximum annual dollar amount (which itself is annually indexed for inflation). The LTC insurance premium deductibility limits for 2017 are shown below, with age thresholds evaluated based on the taxpayer’s age at the end of the tax year.
Likewise, you may be able to deduct your LTC insurance premiums on your Ohio tax return for your spouse and dependents to the extent that deduction is not allowed in computing federal adjusted gross income.
Third, review your Health Insurance. If you have money and a house, you cannot afford to go without coverage. With medical costs as high as they are, even an outpatient procedure could bankrupt someone who wasn’t properly prepared.
It’s important to review coverage options, particularly for those who are retiring early. Insurance options are available on health care exchanges while eligibility for Medicare begins at age 65. While Medicare provides basic medical coverage, purchasing additional coverage such as a Medigap or a supplemental policy may make sense.
Finally, think about your Property & Casualty Insurance. It’s important to review your Auto and Homeowners policies to ensure you are adequately covered. Purchasing an umbrella liability policy to augment your existing home and auto policies may be beneficial. Umbrella insurance can help protect against major claims and lawsuits – we suggest purchasing an amount that equals your total assets.
As we always say at Lineweaver Financial Group, one size does not fit all. You and your family have unique risk management and insurance needs based on your specific situation. If you’re wondering how well prepared you and your family are, we offer a no-obligation risk analysis, to help give you peace of mind. To schedule time with an advisor, you can call us at 216.520.1711, email us at quarterback@Lineweaver.net, or click here.
Lineweaver.net. Securities offered through Triad Advisors. Member FINRA/SIPC. Advisory services offered through Lineweaver Wealth Advisors, LLC. Lineweaver Wealth Advisors is not affiliated with Triad Advisors. Information contained herein is not tax advice and should not be considered as such. Each individual’s tax situation is unique and different. For advice related to your specific tax situation, please contact your personal tax professional.