Welcome to the latest issue from Northeast Ohio Boomer & Beyond!
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January/February 2017
January/February 2017
At the beginning of each year, many of us create resolutions for saving and spending.
This year it is especially vital to understand a crucial policy change MMthat Congress passed late last year as part of a budget deal. In it, Congress phased out a Social Security claiming strategy called “File & Suspend/Restricted Spousal Application.”
This news caused quite a stir, particularly because there has been much concern over the viability of the Social Security program. As pensions become less common, Social Security is quickly becoming the backbone of retirement for many.
Strategies vary based on marital status, earnings and disability history. Social Security benefits can be con- fusing and policy changes may seem alarming. Between the various claiming options, updates to the program and misinformation available, exactly how should you decide on a strategy?
To start, when reviewing your Social Security benefits, it’s best to do so within the context of a full financial plan. Each individual’s tax situation and spending goals, marital history, health status and retirement date varies.
Keep these key point in mind: The soonest you may apply for benefits (which varies, but is generally 62), the age you may collect “full,” unreduced benefits called “Full Retirement Age” (FRA) and the latest you may collect benefits, which is age 70 for everyone.
TAKE CHARGE OF YOUR SOCIAL SECURITY
Because the Social Security Administration is no longer regularly mailing statements, it’s best to visit the Social Security website www.ssa.gov to determine your benefits. On the site, create a login to your personal record and find your “Full Retirement Age.” This is the age any American who has worked long enough at a job where they paid into the Social Security system (at least 40 calendar quarters total) may claim the “full” benefit.
If you fall into this category and are married or divorced but previously married for more than 10 years, the recent legislative changes may apply to you.
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My wife and co-author, Janice, and I are always chasing down our pop culture history; we usually don’t have to look very far. A few weeks back we headed to the state capital for a visit to the Ohio History Connection. We’ve seen a lot of famous firsts in Northeast Ohio that are documented at the center.
WE’RE NO. 1
Some of those firsts are cultural (the first rock and roll concert — the Moondog Ball — in 1952), traditional (the first U.S.Christmas tree on Public Square), convenience (home mail delivery), medical (the first blood transfusion) and technical (the first use of a gas mask).
Some are annoying, like the world’s first automatic traffic signal at University Circle. And some were the result of necessity; Cleveland’s Crane Candy Company needed a product that wouldn’t melt in the summer heat and came up with Life Savers.
Now, here’s the comparison between Cleveland and Columbus. When you go to a supermarket down south you see a lot of stuff on the shelves we don’t have here because Columbus is considered one of the nation’s best test markets. Even so, Cleveland has bragging rights for introducing some-
thing that is often maligned but has been used by just about everyone.
I tip my hat to one of my public speaking students, Haley Held, for bringing this to my attention. In 1964, Cleveland was the test city for Pop-Tarts.
That’s right. Kellogg’s Pop-Tarts were introduced in Cleveland before anywhere else. The Huffington Post reports the original name for the product was the Fruit Scone, but Andy Warhol was making “pop art” an everyday word. Add a “T” and Pop-Tarts were born. As soon as they hit the shelves, people went batty for the new toaster pastry, and within two weeks the company ran out of product.
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Is retirement still part of the American Dream?
Thankfully, the answer is yes for most of us. But it will require some planning on your part.
A study by the Economic Policy Institute showed that half the people on the cusp of retirement (ages 56 to 61) had a retirement account balance of less than $91,000. At a typical draw-down rate of about 4 percent per year, that equals around $303 a month in retirement income. That probably won’t get you where you want to go.
Slow, Steady Growth
To plan for a comfortable, successful retirement, follow a couple of ground rules. The first is that financial literacy is a lifelong pursuit. Do it right, and financial planning will be downright boring. Plain-vanilla strategies such as regular contributions, slow-and-steady growth and diversification are often most effective over the long term. It’s also important to get advice from trusted, neutral sources.
The second is to understand your future medical expenses. People often assume that Medicare covers everything, but it doesn’t. After the age of 65, the average couple will spend about $260,000 out of pocket on health care — including insurance and nursing home care. The problem is most households don’t have $260,000. That means that many households face the risk of impoverishment or ending up on Medicaid.
Retirement is changing, and planning for it is changing as well. This is no longer your grandparents’ retirement. Life expectancy is changing, and many people go back to work shortly after retiring. They realize that they retired from something, but not to something. Clients should think about what comes next for them.
If you’re wondering about what a comfortable retirement looks like for you, the right financial consultant can help. Specialized software takes into account inflation, taxes and other variables out of your control, and helps optimize retirement planning.
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As you plan for retirement, it just might be the time to try to realize your lifelong dreams. You’ve put them off long enough; now you actually have the time. Great idea. But please be sure to follow the law when you do. There are some crazy laws on the books that just might put a damper on your plans.
BINGO, RABBITS AND A MUSTACHE PROBLEM
For example, if you love to play bingo, and just never had time before, don’t retire to North Carolina. It’s illegal to play bingo there for more than five hours in a row. Or, if you would rather sing when you move there, you’d better be really good. Singing off-key also is prohibited.
If you vacation in Wyoming, and like to take pictures, remember that it’s illegal to take a picture of a rabbit from January to April without a permit. In Idaho, you can eat all the potatoes you want, but never wear a fake mustache in a church.
Alaskan cruises are beautiful, and you may dream of a long vacation by sea and by land. However, if the weather proves to be a bit too cold for you, be careful if you stop at a bar for some warming spirits. You are not allowed to be drunk in a bar. And right here in Ohio, it’s illegal to get a fish drunk.
AND THERE’S MORE, OF COURSE
If you enjoy the holidays and wish they could last forever, don’t move to Maine. Decorations have to be removed and stored by Jan. 14. On the other side of the country, they don’t like folks with a sweet tooth; lollipops are banned in Washington.
Florida women might have their dreams dashed because unmarried females cannot parachute on Sundays. The need to protect women is somewhat understandable.
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Each year when “life happens,” we’re reminded of the importance of life insurance.
You may recall the story of former NFL quarterback and now radio and TV sports broadcaster Boomer Esiason and the effects of having no life insurance.
Boomer was 7 when his mother died of cancer. She had no life insurance. His father was left to raise him and his two sisters alone.
Boomer related, “We lived paycheck to paycheck, but my dad did an incredible job taking care of our family. He taught me the true meaning of what it means to be a responsible dad.”
It was his father’s sacrifice that motivated Boomer to protect his family with life insurance. Boomer explained to an interviewer, “Life insurance is about protecting the future and the people you love, which is especially the case when you are caring for someone with special needs.”
Boomer’s oldest son, Gunnar, was diagnosed with cystic fibrosis at age 2.
DO YOU HAVE WHAT YOU NEED?
Life insurance can do some pretty amazing things for loved ones. It can buy time to grieve when clients utilize Final Expense Life Insurance, which takes care of funeral, burial and other end-of-life expenses. Life insurance also reduces stress on surviving family members and may provide financial security.
If you own an old policy, it may be time to review it for expiration dates, named beneficiaries and death benefits. Any policy written before 2006 needs reviewed. Those in the retirement planning business see policies every day that are underfunded, which means the policy is not going to be considered valid.
Do you remember the beneficiaries in all of your policies? With an out- dated policy, a beneficiary you want now might not be who is listed. That can cause strain for family members left behind.
After you review your life insurance policies, encourage your children and loved ones to get life insurance.
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Visualization, done right, can be extremely powerful in achieving any goal. As you think about your goals for the New Year, consider using your imagination to see yourself already in possession of your goal.
Picture yourself with the healthy and fit body you desire, and literally feel what it is like to have it. You cannot achieve anything in your “outer world” until you first see it in your “inner world.”
IS VISUALIZATION REAL?
In one of the most well-known studies on creative visualization in sports, Russian scientists compared four groups of Olympic athletes in terms of their training schedules:
GROUP 1 had 100 percent physical training
GROUP 2 had 75 percent physical training with 25 percent mental training
GROUP 3 had 50 percent physical training with 50 percent mental training
GROUP 4 had 25 percent physical training with 75 percent mental training
The results showed that Group 4, with 75 percent of their time devoted to mental training, performed the best. The study showed that using mindfulness — actually focusing on mental images — can boost physical achievement.
Creative visualization is distinguished from normal daydreaming in a key manner. Visualization is done in the first person and the present tense, as if the visualized scene were unfolding all around you. Typical daydreaming is done in the third person and the future tense.
Using affirmations that begin with “I am so happy and grateful now that …” is an excellent way to begin programming your subconscious mind to move toward your goal.
Visualization is another tool that Olympic athletes use to get their minds in shape for competition. In this technique, athletes mentally rehearse exactly what they have to do to win. Sports psychologists say that visualization boosts athletes’ confidence by forcing them to picture themselves winning. It also helps them concentrate on their physical moves, rather than on distractions around them.
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Ohio has made a significant change regarding homeowners who apply for Medicaid benefits for nursing home or assisted living care.
Until July 31, 2016, an unmarried homeowner who wanted Medicaid to pay for long-term care costs had 13 months to put his home up for sale. If the Medicaid applicant was married and the spouse still lived in the home, there was no obligation to sell.
That 13-month time period is gone. As part of the Aug. 1, 2016 change in rules, Ohio Medicaid rescinded the 13-month rule. Now, the unmarried applicant must decide to keep the house or to sell before applying for Medicaid.
THE RULES
If the person decides not to sell, he can choose to invoke Medicaid’s “intent to return home” condition. That means he is not required to sell the house before getting Medicaid coverage. The intent must be expressed in a written, signed statement. This exemption ends if he later establishes a “principal place of residence” elsewhere.
This new “principal place of residence” condition can jeopardize Medicaid coverage.
If someone has been in a nursing home or assisted living community for many months (not for rehabilitation purposes) it’s unlikely his home can still be called his principal place of residence.
If the person’s health isn’t likely to improve, the principal place of residence has probably become the nursing home or assisted liv- ing community. Even if the intent to return home is real, it may not be realistic. As a result, Ohio Medicaid may stop paying expenses for someone whose intent to return home is not realistic.
For now, it’s uncertain if Medicaid will challenge an applicant’s written statement of intent to return home. Upon renewal of Medicaid benefits, however, if he remains in the nursing home or assisted living community, Medicaid officials may rule the person’s house is no longer his “principal place of residence” because, by the time of the first renewal, he will have lived out of the house for at least a year.
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