Financial Life Notes #9

From Martin Wealth Management, LLC
For Your Financial Independence and Peace of Mind

10 January 2008

Welcome to 2008! The beginning of the New Year is a great time to reset and think about the future. This issue includes an exercise based on a set of “New Year’s Questions.” I suggest you set aside a little time to go through this exercise. Following the set of New Year’s questions I’ve included information about a new series of Saturday morning classes and FREE Wednesday night workshops. Finally, you’ll find an interesting article on Long-Term Care, written by a Kathleen Rehl, a fellow Cambridge Advisor.

New Year's Questions

I picked these questions up at a wonderful workshop a couple of years ago. I have found them to be very useful. If you would like a Microsoft Word version, just let me know.

Before beginning a new year in full force, it can be supportive to complete and acknowledge the previous year. I hope that spending a few minutes with the following questions will help you complete 2007 and start 2008 on a strong note!

Completing and Remembering 2007

· What was your biggest triumph in 2007?

· What was the smartest decision you made in 2007?

· What one word best sums up and describes your 2007 experience?

· What was the greatest lesson you learned in 2007?

· What was the most loving service you performed in 2007?

· What is your biggest piece of unfinished business in 2007?

· What are you most happy about completing in 2007?

· Who were the three people that had the greatest impact on your life in 2007?

· What was the biggest risk you took in 2007?

· What was the biggest surprise in 2007?

· What important relationship improved the most in 2007?

· What compliment would you liked to have received in 2007?

· What compliment would you liked to have given in 2007?

· What else do you need to do or say to be complete with 2007?

Creating 2008

· How will you acknowledge those who most impacted your life last year?

· What would you like to be your biggest triumph in 2008?

· What advice would you like to give yourself in 2008?

· What is the major effort you are planning to improve your financial results in 2008?

· What would you be most happy about completing in 2008?

· What major indulgence are you willing to experience in 2008?

· What would you most like to change about yourself in 2008?

· What are you looking forward to learning in 2008?

· What do you think your biggest risk will be in 2008?

· What about your work are you most committed to changing and improving in 2008?

· What is one as yet undeveloped talent you are willing to explore in 2008?

· What brings you the most joy and how are you going to do or have more of that in 2008?

· Who or what, other than yourself, are you most committed to loving and serving in 2008?

· What one word would you like to have as your theme in 2008?

Saturday Morning Classes Offered

We are pleased to announce that we will be offering classes one Saturday morning each month. The class descriptions follow:

Class: Creating a Great Financial Life

This three-hour workshop will help young adults from 15 years old to their mid-twenties understand the fundamentals of fiscal fitness and establish habits that will lead them to successful financial lives. It addresses most of the issues that adults just starting their careers face and includes a session on the fundamentals of good investing. The workshop also includes one individual appointment to help address issues specific to each participant.

Class: Financial Life Planning Fundamentals

This four-hour workshop is targeted for adults of all ages. It addresses the nine fundamentals of fiscal fitness and helps participants establish habits that will allow them to lead successful financial lives. It covers creating a vision for your life, basic investing strategies, debt management, the law of risk and return, and buying or refinancing a house. The workshop also includes one individual appointment to help address issues specific to each participant

Click here for full descriptions, schedules and registration materials

Free Wednesday Night Workshops

Martin Wealth Management, LLC, will present free one-hour workshops one Wednesday night each month. Workshops are limited to eight attendees.

The workshops will be held at the MWM Office at 3400 Rosestone Court, Fort Collins.

Send an email to steve.martin@mwm3.com to reserve your spot.

Beverages and refreshments will be provided. The presentations will start right at 7:00. Come a few minutes early for refreshments.

Upcoming Schedule:

Jan 23 - Getting Off On The Right Foot in 2008: Steve will present a list of eight actions that will ensure you are getting 2008 off on the right foot.

Feb 27 - Donor Advised Funds: Come learn how Donor Advised Funds can allow you to meet your philanthropic and charitable goals, pass on your personal values and involve your children in a way that provides you with the greatest tax benefit.

Mar 12 - Investing 101: Learn the basics of investing - how to maximize your return and minimize your risk.

Apr 23 - The Power of Diversification: Most have heard that we should diversify our portfolios. This session will explain the why and how of diversification.

How to Pay for Your Long-Term Care

Kathleen M. Rehl, Ph.D., CFP^® Land O’Lakes, FL

Nobody gets excited about the idea of spending his or her final years in a nursing home. Nevertheless, it's something we need to consider in a comprehensive financial plan. The fact is long-term care (LTC)—whether it's in a nursing home, assisted living facility, or even in our own home—can be breathtakingly expensive. Without careful planning, you may exhaust your assets trying to pay the bills. According to the Metlife Mature Market Institute, the average cost these days for one year's stay in a nursing home is $66,153 ($181 per day). These figures are expected to almost triple over the next 20 years (assuming a 5% rate of inflation in LTC costs).

For some, the financial solution lies in LTC insurance. LTC insurance policies charge a fixed monthly or yearly premium, based (in part) on your age when you sign up. As long as you keep paying the premiums, you're covered — regardless of changes in your health and advancing age.

But not everyone should buy LTC insurance. You’ll need to decide whether to get the insurance or simply plan to pay future long-term care costs yourself. This decision should be based on how much you already have set aside for future care and how you think that stash of cash will grow — as well as when you believe you may need LTC, and for how long. It's impossible to predict if and when you may need coverage, but by crunching the numbers you'll get a sense of just how much money you would have available in the future.

You’ll also want to compare the cost of the LTC insurance coverage with the value of the insurance benefits you expect to receive in the future. Your Cambridge Advisor can help you with these calculations.

Your situation will be unique depending on your age, health, financial resources, goals, and whether or not there are family members able and willing to provide help when you need it. You might consider choosing one of the following five strategies to pay for your long-term care:

Self-fund
Self-fund plus buy life insurance to replace assets used for LTC
Self-fund plus buy basic short-benefit-period LTC insurance
Self-fund plus buy LTC with long elimination period
Buy LTC insurance to cover most or all LTC costs

v The self-funders don't buy LTC insurance. These individuals have plenty of money or other assets to pay for their LTC expenses. These folks say, “We’re ready to pay for whatever it takes for our future care.”

v The second group includes self-funders who buy life insurance. These folks have assets, though not as much as the first group, and are willing to spend this money on their own LTC needs. At the same time, they also want to pass on an inheritance to the surviving spouse or children. They buy life insurance so that if they spend all of their savings paying for LTC, the life insurance policy replenishes their nest egg for their survivors. This group wants to leave a legacy for heirs and/or charities. They say, “We don't know if we’ll need LTC, but we do know we’re going to die.”

These first two groups don't buy LTC insurance. The next three groups purchase LTC insurance, but they choose very different strategies.

v The third group is made up of self -funders who buy basic LTC insurance. They say, "Ease into it,” or “Help me take that first step." Most people want to stay in their own home as long as possible. In many cases professional assistance is not needed 24 hours of every day—at least not in the beginning. One spouse or partner who is willing and able could manage caring for a loved one for some time, perhaps with the assistance of other family members. But these caregivers eventually wear out. These individuals might be able to afford help, but they hate to start spending money for caregivers since this could be a long and expensive process.

In this situation, consider basic LTC insurance to help during this early time—not to take care of everything, nor long term. This approach makes it easier for a caregiver to decide that help is needed and to bring in some professional assistance sooner rather than later. It makes the burden of caregiving much easier both financially and emotionally.

Often these clients buy LTC insurance with a 90-day elimination period, but they add the wavier that eliminates the waiting period for home care, so home care assistance can begin right away. They choose a basic $100 per day benefit for a 2-year period. For a couple (both age 60) applying for coverage, the total annual premium combined may be less than $900.

v The fourth group says, "We're willing to pay the early costs of LTC ourselves, but we want some help if care is needed for a long time.” These are the folks who can pay for the early costs of needing LTC by self-funding from their assets and using family assistance. They will pay some of the long-term costs but do not want to totally self-insure.

In this situation we recommend a LTC insurance policy with a longer elimination period of 365 days (not available in all states), a $100 per day benefit, 5% compound inflation protection, and a 4- or 5-year benefit period. The $100 per day won't cover all the expenses. But with the inflation protection compounding the benefit at 5%, the amount of asset reduction is kept more reasonable. This coverage for two 60-year-olds may be below $1,900 per year.

v The fifth group wants their LTC insurance to pay for as much as possible, and these individuals are willing to pay a higher premium for the maximum benefits available. They don't want to deplete their savings and investments to pay for their LTC. They say, “We don’t want any family members to worry about where the money will come from to pay for care we might need.”

In this situation, we may recommend a 90-day elimination period and considering the waiver of that elimination period for home care, a daily benefit based on the current top-quality care costs in one’s geographic area, 5% compound inflation protection, and a lifetime benefit period.

Premiums will vary depending on the cost of the care that’s being covered. For example, in New Jersey, where the current daily average cost of care is $250, a 60-year-old couple would pay up to $12,000 per year for the most comprehensive total coverage policy with lifetime benefits. But in New Mexico, where the current daily average is $150, the premium may be about $7,200.

This article was based on information provided by Low Load Insurance Services of Tampa, FL (www.llis.com).

I hope you enjoy this issue. If you have any questions or comments, please send me an email at steve.martin@mwm3.com.
Steve

Does your group need a speaker?

If your group needs a speaker, please contact Steve at Steve.martin@mwm3.com. Topics include – “Your Money and Your Life”, “Passing on Your Values”, “The Five Fundamentals of a Successful Financial Life”, “Raising Money-Wise Kids”, and “Grand-parenting for Money-Wise Grandchildren”.

I hope you enjoy this issue and find some of these tools useful. If you have any questions or comments, please send me an email at steve.martin@mwm3.com.

Available on The MWM Website

- Class Schedule

- Past newsletters

- Arrange for Steve to speak to your group

- Arrange for a free consultation

Martin Wealth Management, LLC, is a Fee-Only Financial Planning firm located in Fort Collins, Colorado, and is a Registered Investment Advisor with the State of Colorado.

Martin Wealth Management was founded on the belief that people should use their money to create a fulfilling life – rather than using their life just to create money. Financial Life Planning from Martin Wealth Management begins with this assumption and focuses on your values and dreams. We utilize concepts and processes developed by George Kinder – known as the “Father of Financial Life Planning.”

Please call for a free initial consultation or to arrange for a speaking engagement for your organization.
Steve Martin – MBA, Fee Only Advisor, DFA Funds Approved Advisor, Member of the Alliance of Cambridge Advisor and the FPA.