Little-Known Homeowners Insurance Facts

You may be surprised to learn what is and is not covered.

If you have a homeowners insurance policy, you should be aware of what the insurance does and does not cover. These policies have their limitations as well as their underrecognized perks.

Some policies insure actual cash value (ACV). ACV factors depreciation into an item’s worth. If someone makes off with your expensive camera that you bought five years ago, a homeowners policy that reimburses you for ACV would only pay for part of the cost of an equivalent camera bought new today.1 

Other policies insure replacement cash value (RCV). That means 100% of the cost of an equivalent item today, at least in the insurer’s view.1  

Insurers cap losses on certain types of items. If you lose an insured 42” flat-screen TV to a burglar, the insurer could reimburse you for the RCV, which is probably around $300. An insurance carrier can handle a loss like that. If a thief takes an official American League baseball from the 1930s signed by Babe Ruth out of your home, the insurer would probably not reimburse you for 100% of its ACV. It might only pay out $2,000 or so, nowhere near what such a piece of sports memorabilia would be worth. Because of these coverage caps, some homeowners opt for personal floaters – additional riders on their policies to appropriately insure collectibles and other big-ticket items.1 

Did you know that losses away from home may be covered? Say you have your PC with you on a business trip. Your rental car is broken into and your PC is taken. In such an instance, a homeowners policy frequently will cover a percentage of the loss above the deductible – perhaps closer to 10% or 20% of the value above the deductible rather than 100%, but still something. An insurance company might put a $200 or $250 limit on cash stolen away from home.1

Where you live can affect coverage as well as rates. If you reside in a community with rampant property crime, your insurance carrier might cap its reimbursements on some forms of personal property losses lower than you would like. (The insurer might even refrain from covering certain types of losses in your geographic area.)1

Now, do you have a home-based business? If you do, you should know that homeowners insurance will not cover damage and losses to your residence resulting from or linked to business activity. (The same holds true for a personal umbrella liability policy.)2 

Having a separate, discrete business insurance policy to protect your home-based company is important. Without such a policy, you have inadequate coverage for your business – and could you imagine losing your home from being uninsured against a visiting client’s bodily injury claim or a workers’ comp claim if employees work at your residence and hurt themselves?2

Reading the fine print on your homeowners insurance policy can be worthwhile. Recognizing the basic limitations of homeowners insurance coverage is critical. You should know what is and is not covered – and if you see any weak spots, you should address them.

Mike Moffitt may be reached at ph#641-782-5577 or email: mikem@cfgiowa.com

Website: www.cfgiowa.com           

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Michael Moffitt is a Registered Representative with and Securities are offered through LPL Financial, Member FINRA/SIPC. Investments advice offered through Advantage Investment Management (AIM), a registered investment advisor. Cornerstone Financial Group and AIM are separate entities from LPL Financial.

Citations.

1 – nasdaq.com/article/3-caveats-about-your-homeowners-insurance-cm771517 [4/10/17]

2 – washingtonpost.com/lifestyle/home/if-you-work-from-home-and-dont-have-this-insurance-you-could-be-at-risk/2018/02/23/23a4a42a-1754-11e8-92c9-376b4fe57ff7_story.html [2/23/18]

How Much Do You Really Know About Long-Term Care?

Separating some eldercare facts from some eldercare myths.

 

How much does eldercare cost, and how do you arrange it when it is needed? The average person might have difficulty answering those two questions, for the answers are not widely known. For clarification, here are some facts to dispel some myths.

True or false: Medicare will pay for your mom or dad’s nursing home care.

FALSE, because Medicare is not long-term care insurance.1

Part A of Medicare will pay the bill for up to 20 days of skilled nursing facility care – but after that, you or your parents may have to pay some costs out-of-pocket. After 100 days, Medicare will not pay a penny of nursing home costs – it will all have to be paid out-of-pocket, unless the patient can somehow go without skilled nursing care for 60 days or 30 days including a 3-day hospital stay. In those instances, Medicare’s “clock” resets.2

True or false: a semi-private room in a nursing home costs about $35,000 a year.

FALSE. According to Genworth Financial’s most recent Cost of Care Survey, the median cost is now $85,775. A semi-private room in an assisted living facility has a median annual cost of $45,000 annually. A home health aide? $49,192 yearly. Even if you just need someone to help mom or dad with eating, bathing, or getting dressed, the median hourly expense is not cheap: non-medical home aides, according to Genworth, run about $21 per hour, which at 10 hours a week means nearly $11,000 a year.3,4

True or false: about 40% of today’s 65-year-olds will eventually need long-term care.

FALSE. The Department of Health and Human Services estimates that close to 70% will. About a third of 65-year-olds may never need such care, but one-fifth are projected to require it for more than five years.5 

True or false: the earlier you buy long-term care insurance, the less expensive it is.

TRUE. As with life insurance, younger policyholders pay lower premiums. Premiums climb notably for those who wait until their mid-sixties to buy coverage. The American Association for Long-Term Care Insurance’s 2018 price index notes that a 60-year-old couple will pay an average of $3,490 a year for a policy with an initial daily benefit of $150 for up to three years and a 90-day elimination period. A 65-year-old couple pays an average of $4,675 annually for the same coverage. This is a 34% difference.6

True or false: Medicaid can pay nursing home costs.

TRUE. The question is, do you really want that to happen? While Medicaid rules vary per state, in most instances a person may only qualify for Medicaid if they have no more than $2,000 in “countable” assets ($3,000 for a couple). Countable assets include bank accounts, equity investments, certificates of deposit, rental or vacation homes, investment real estate, and even second cars owned by a household (assets held within certain trusts may be exempt). A homeowner can even be disqualified from Medicaid for having too much home equity. A primary residence, a primary motor vehicle, personal property and household items, burial funds of less than $1,500, and tiny life insurance policies with face value of less than $1,500 are not countable. So yes, at the brink of poverty, Medicaid may end up paying long-term care expenses.4,7

Sadly, many Americans seem to think that the government will ride to the rescue when they or their loved ones need nursing home care or assisted living. Two-thirds of people polled in another Genworth Financial survey about eldercare held this expectation.4

In reality, government programs do not help the average household pay for any sustained eldercare expenses. The financial responsibility largely falls on you.

A little planning now could make a big difference in the years to come. Call or email an insurance professional today to learn more about ways to pay for long-term care and to discuss your options. You may want to find a way to address this concern, as it could seriously threaten your net worth and your retirement savings.

Mike Moffitt may be reached at ph#641-782-5577 or email: mikem@cfgiowa.com.

Website: www.cfgiowa.com

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Michael Moffitt is a Registered Representative with and Securities are offered through LPL Financial, Member FINRA/SIPC. Investments advice offered through Advantage Investment Management (AIM), a registered investment advisor. Cornerstone Financial Group and AIM are separate entities from LPL Financial.

Citations.

1 – medicare.gov/coverage/long-term-care.html [6/5/18]

2 – medicare.gov/coverage/long-term-care.html [6/5/18]

3 – fool.com/retirement/2018/05/24/the-1-retirement-expense-were-still-not-preparing.aspx [5/24/18]

4 – forbes.com/sites/nextavenue/2017/09/26/the-staggering-prices-of-long-term-care-2017/ [9/26/17]

5 – longtermcare.acl.gov/the-basics/how-much-care-will-you-need.html [10/10/17]

6 – fool.com/retirement/2018/02/02/your-2018-guide-to-long-term-care-insurance.aspx [2/2/18]

7 – longtermcare.acl.gov/medicare-medicaid-more/medicaid/medicaid-eligibility/financial-requirements-assets.html [10/10/17]

 

Keep Your Life Insurance When You Retire

Some good reasons to retain it. 

Do you need a life insurance policy in retirement? One school of thought says no. The kids are grown, and the need to financially insulate the household against the loss of a breadwinner has passed.

If you are thinking about dropping your coverage for either or both of those reasons, you may also want to consider some reasons to retain, obtain, or convert a life insurance policy after you retire. It may be a prudent decision once you take these factors into account.

Could you make use of your policy’s cash value? If you have a whole life policy, you might want to utilize that cash in response to certain retirement needs. Long-term care, for example: you could explore converting the cash in your whole life policy into a new policy with a long-term care rider, which might even be doable without tax consequences. If you have income needs, many insurers will let you surrender a whole life policy you have held for some years and arrange an income contract with the cash value. You can pull out the cash, tax-free, as long as the amount withdrawn is less than the amount paid into the policy. Remember, though, that withdrawing (or taking a loan against) a policy’s cash value naturally reduces the policy’s death benefit.1

Do you receive a “single life” pension? Maybe a pension-like income comes your way each month or quarter, from a former employer or through a private income contract with an insurer. If you are married and there is no joint-and-survivor option on your pension, that income stream will dry up if you die before your spouse dies. If you pass away early in your retirement, this could present your spouse with a serious financial dilemma. If your spouse risks finding themselves in such a situation, think about trying to find a life insurance policy with a monthly premium equivalent to the difference in the amount of income your household would get from a joint-and-survivor pension as opposed to a single life pension.2

Will your estate be taxed? Should the value of your estate end up surpassing federal or state estate tax thresholds, then life insurance proceeds may help to pay the resulting taxes and help your heirs avoid liquidating some assets.

Are you carrying a mortgage? If you have refinanced your home or borrowed to buy a home, a life insurance payout could potentially relieve your heirs from shouldering some or all of that debt if you die with the mortgage still outstanding.2

Do you have burial insurance? The death benefit of your life insurance policy could partly or fully pay for the costs linked to your funeral or memorial service. In fact, some people buy small life insurance policies later in life in preparation for this need.2

Keeping your permanent life policy may allow you to address these issues. Alternately, you may seek to renew or upgrade your existing term coverage. Consult an insurance professional you know and trust for insight.

Mike Moffitt may be reached at ph# 641-782-5577 or email: mikem@cfgiowa.com.

Website: www.cfgiowa.com

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Michael Moffitt is a Registered Representative with and Securities are offered through LPL Financial, Member FINRA/SIPC. Investments advice offered through Advantage Investment Management (AIM), a registered investment advisor. Cornerstone Financial Group and AIM are separate entities from LPL Financial.

Citations.

1 – forbes.com/sites/forbesfinancecouncil/2018/03/06/using-life-insurance-for-retirement-purposes/ [3/6/18]

2 – nasdaq.com/article/4-reasons-to-carry-life-insurance-in-retirement-cm946820 [4/12/18]

 

Legislative Insider – Summer 2018

Tracking legislation that may impact your business, your estate, your retirement, or your wallet.

Recent Developments

Tariffs on imported metals from European Union, Mexico, and Canada now in effect. On June 1, the U.S. applied 25% excise taxes on steel imported from these trading partners and 10% tariffs on imported aluminum from these three sources. In response, Canada will impose tariffs on $12.8 billion of American goods effective July 1. The E.U. and Mexico also announced retaliatory tariffs on crops, metals, and cosmetics coming from the U.S.1,2

The “fiduciary rule” may be history. Vacated by a federal appeals court in March, the 2016 Department of Labor rule demanding that retirement advisors place client best interests ahead of their own was never fully implemented and may now be dead. No effort to challenge the appeals court ruling has emerged from the Trump administration. The Securities and Exchange Commission did offer a plan this spring – hundreds of pages thick – intended to preserve the spirit, if not the letter, of the rule. The SEC plan lists obligations for investment professionals regarding the integrity of advisor-client relationships, but does not define the term “best interest.”3

Federal Tax Law Adjustments

SALT deduction cap workarounds are being questioned. New York, Connecticut, and New Jersey have created legislative responses to offset the lowered $10,000 annual federal deduction limit for state and local taxes (SALT). These three states are permitting cities and towns to create charitable funds, and homeowners can contribute to these local funds and still receive a federal tax break. In notices issued in May, the Internal Revenue Service and Department of the Treasury said that they would propose new rules to address the emergence of these plans. I.R.S. Notice 2018-54 cautions that “despite these state efforts to circumvent the new statutory limitation on state and local tax deductions, taxpayers should be mindful that federal law controls the proper characterization of payments for federal income tax purposes.”4,5

Additional I.R.S. guidance on vehicle expenses and unreimbursed worker expenses. In June, the agency updated standard mileage rates for 2018: $0.545 per mile of business travel, $0.18 per mile for medical purposes, and an unchanged $0.14 per mile for miles driven in service to charities and non-profit groups. It notified taxpayers that in accordance with the 2017 Tax Cuts and Jobs Act, the $0.545 standard mileage rate cannot be used for itemized deductions for unreimbursed employee travel expenses this year and in all years through 2025. Also, that standard mileage rate cannot factor into itemized deductions for moving-related expenses, except in the case of active-duty service members moving in response to a relocation order.6

A bit of federal tax relief may be ahead for some college endowments. I.R.S. Notice 2018-55 states that the agency is working on regulations to restrict the impact of the new 1.4% excise tax on private college and university endowments. In its notice, the I.R.S. says that such endowments can likely use an asset’s fair market value at the end of 2017 as a basis for calculating tax on any resulting gain stemming from the sale of the asset. While normal basis rules will apply for calculating a loss, the new step-up in basis could lessen the amount of capital gain exposed to the new tax.7

Looking Ahead

The Volcker rule may soon be revised. In June, the Securities and Exchange Commission joined the Federal Reserve, the Office of the Comptroller of the Currency, the Commodity Futures Trading Commission, and the Federal Deposit Insurance Corporation in agreeing to amend this key regulation within the Dodd-Frank Act. The Volcker rule, finalized five years ago, prohibits banks from proprietary trading: selling or buying investments expressly for the bank’s potential benefit, rather than the potential benefit to customers. In its current form, the Volcker rule presumes that any positions held by banks for less than 60 days are proprietary. The proposed amendment would do away with that conclusion and allow lenders added possibilities to hedge market risk. A 60-day, public comment on the proposed amendment ends in early August.8

White House considers altering retirement benefits for federal employees. An Office of Personnel Management proposal recently sent to House Speaker Paul Ryan recommended changes to the Civil Service Retirement System (CSRS) and Federal Employees Retirement System (FERS) for federal government workers, with the goal of reducing budget shortfalls. The proposal, which Capitol Hill legislators could consider in the near term, suggests four notable modifications. One, cost-of-living adjustments to FERS pensions would be eliminated and COLAs for CSRS pensions would be cut. Two, the highest yearly pay over a consecutive, 5-year period, rather than a 3-year period, would be used in the calculation formula for CSRS and FERS pension benefits. Three, salary deferral rates into the FERS program would gradually rise to a maximum of 7.25% of pay. Four, most of the supplemental benefit payments given to FERS participants who retire from their jobs before age 62 would be eliminated.9

More states may lower corporate tax rates. As Dow Jones Newswires reports, the gap between the 21% federal corporate tax rate and higher state taxes on corporate business entities may slim in the coming years. A bill in Missouri would cut that state’s corporate rate from 6.25% to 4.0%. Georgia just reduced its corporate rate 0.25% to 5.75%. In related news, Tennessee’s legislature rejected a federal provision limiting interest deductibility for businesses, which could save companies based in that state a total of $1.2 billion through 2028.10

Investment funds can go paperless starting in 2021. In early June, the Securities and Exchange Commission adopted Rule 30e-3, which will give funds three options to fulfill their reporting duties to shareholders. Beginning in 2021, funds can satisfy this obligation by a) notifying shareholders that reports are online at their websites, and offering a link to access them; b) sending shareholder reports electronically to investors who opt for this delivery method; c) sending hard-copy reports through the mail. Funds may also use two or three of these delivery methods in combination.11

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate, and is provided for general purposes only. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and is not intended to be used for, and cannot be used for, the purpose of avoiding US, federal, state or local tax penalties.

Mike Moffitt may be reached at 641-782-557 or email: mikem@cfgiowa.com

Website: www.cfgiowa.coom

Michael Moffitt is a Registered Representative with and Securities are offered through LPL Financial, Member FINRA/SIPC. Investments advice offered through Advantage Investment Management (AIM), a registered investment advisor. Cornerstone Financial Group and AIM are separate entities from LPL Financial.

CITATIONS:

1 – nytimes.com/2018/05/31/us/politics/trump-aluminum-steel-tariffs.html [5/31/18]

2 – businessinsider.com/trump-tariff-trade-fight-european-union-mexico-tariffs-list-2018-6 [6/6/18]

3 – bloomberg.com/news/articles/2018-06-08/the-fiduciary-rule-may-sound-boring-but-its-collapse-threatens-your-retirement [6/8/18]

4 – cnbc.com/2018/05/23/irs-treasury-have-set-their-sights-on-blue-states-tax-workarounds.html [5/23/18]
5 – irs.gov/pub/irs-drop/n-18-54.pdf [5/23/18]
6 – accountingweb.com/tax/irs/irs-offers-guidance-on-vehicle-expenses [6/8/18]

7 – accountingtoday.com/news/irs-plans-regulations-to-ease-taxes-on-college-endowments [6/8/18]

8 – bloomberg.com/news/articles/2018-06-05/volcker-rule-changes-move-forward-after-sec-votes-on-overhaul [6/5/18]

9 – fool.com/retirement/2018/06/10/these-retirement-cuts-threaten-millions-of-workers.aspx [6/10/18]

10 – tinyurl.com/yblgrr85 [6/11/18]
11 – tinyurl.com/ya4wszz5 [6/5/18]

Young Children are Targets for Identity Theft

We’re becoming savvier to identity theft and taking care of our personal information, both online and in the physical world. Perhaps it is this sophistication that has criminals turning to stealing the identity of children. Over 66% of such thefts are against children under the age of 8. Scammers practicing child I.D. theft made $2.6 Billion in 2017. The theft can often take years, even decades, to detect. Imagine leaving home for college and being unable to rent your first apartment because of thousands of dollars in previously unknown debt. Or, being unable to get that first “for emergencies only” credit card because some criminal has already obtained cards using your name and Social Security number.

Making this problem even worse? Sixty percent of the fraudsters have some relation to the child. Carefully secure your children’s personal information, such as their Social Security number as well as important documents like their birth certificate. If fraud is detected, contact the major credit bureaus (Equifax, Experian, TransUnion) to examine the credit file and place a security freeze if you are in a state that allows this. This should only be done in cases of fraud, though. If your state does not allow freezing, monitor your children’s credit reports, contact companies involved with these debts, and file a complaint with police.1

Mike Moffit may be reached at ph# 641-782-5577 or email: mikem@cfgiowa.com

Website: www.cfgiowa.com

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Michael Moffitt is a Registered Representative with and Securities are offered through LPL Financial, Member FINRA/SIPC. Investments advice offered through Advantage Investment Management (AIM), a registered investment advisor. Cornerstone Financial Group and AIM are separate entities from LPL Financial.

Citations.

1 – washingtonpost.com/news/get-there/wp/2018/04/24/why-does-a-2-year-old-have-a-credit-card-how-to-protect-your-children-from-identity-theft [4/24/18]

 

 

Why Medicare Should Be Part of Your Retirement Planning

The premiums and coverages vary, and you must realize the differences. 

Medicare takes a little time to understand. As you approach age 65, familiarize yourself with its coverage options and their costs and limitations.

Certain features of Medicare can affect health care costs and coverage. Some retirees may do okay with original Medicare (Parts A and B), others might find it lacking and decide to supplement original Medicare with Part C, Part D, or Medigap coverage. In some cases, that may mean paying more for senior health care per month than you initially figured.

How much do Medicare Part A and Part B cost, and what do they cover? Part A is usually free; Part B is not. Part A is hospital insurance and covers up to 100 days of hospital care, home health care, nursing home care, and hospice care. Part B covers doctor visits, outpatient procedures, and lab work. You pay for Part B with monthly premiums, and your Part B premium is based on your income. In 2018, the basic monthly Part B premium is $134; higher-earning Medicare recipients pay more per month. You also typically shoulder 20% of Part B costs after paying the yearly deductible, which is $183 in 2018.1

The copays and deductibles linked to original Medicare can take a bite out of retirement income. In addition, original Medicare does not cover dental, vision, or hearing care, or prescription medicines, or health care services outside the U.S. It pays for no more than 100 consecutive days of skilled nursing home care. These out-of-pocket costs may lead you to look for supplemental Medicare coverage and to plan other ways of paying for long-term care.1,2 

Medigap policies help Medicare recipients with some of these copays and deductibles. Sold by private companies, these health care policies will pay a share of certain out-of-pocket medical costs (i.e., costs greater than what original Medicare covers for you). You must have original Medicare coverage in place to purchase one. The Medigap policies being sold today do not offer prescription drug coverage. A monthly premium on a Medigap policy for a 65-year-old man may run from $150-250, so keep that cost range in mind if you are considering Medigap coverage.2,3

In 2020, the two most popular kinds of Medigap plans – Medigap C and Medigap F – will vanish. These plans pay the Medicare Part B deductible, and Medigap policies of that type are being phased out due to the Medicare Access and CHIP Reauthorization Act. Come 2019, you will no longer be able to enroll in them.4

Part D plans cover some (certainly not all) prescription drug expenses. Monthly premiums are averaging $33.50 this year for these standalone plans, which are offered by private insurers. Part D plans currently have yearly deductibles of less than $500.2,5

Some people choose a Part C (Medicare Advantage) plan over original Medicare. These plans, offered by private insurers and approved by Medicare, combine Part A, Part B, and usually Part D coverage and often some vision, dental, and hearing benefits. You pay an additional, minor monthly premium besides your standard Medicare premium for Part C coverage. Some Medicare Advantage plans are health maintenance organizations (HMOs); others, preferred provider organizations (PPOs).6

If you want a Part C plan, should you select an HMO or PPO? About two-thirds of Part C plan enrollees choose HMOs. There is a cost difference. In 2017, the average HMO monthly premium was $29. The average regional PPO monthly premium was $35, while the mean premium for a local PPO was $62.6

HMO plans usually restrict you to doctors within the plan network. If you are a snowbird who travels frequently, you may be out of the Part C plan’s network area for weeks or months and risk paying out-of-network medical expenses from your savings. With PPO plans, you can see out-of-network providers and see specialists without referrals from primary care physicians.6

Now, what if you retire before age 65? COBRA aside, you are looking at either arranging private health insurance coverage or going uninsured until you become eligible for Medicare. You must also factor this possible cost into your retirement planning. The earliest possible date you can arrange Medicare coverage is the first day of the month in which your birthday occurs.5

Medicare planning is integral to your retirement planning. Should you try original Medicare for a while? Should you enroll in a Part C HMO with the goal of keeping your overall out-of-pocket health care expenses lower? There is also the matter of eldercare and the potential need for interim coverage (which will not be cheap) if you retire prior to 65. Discuss these matters with the financial professional you know and trust in your next conversation.

Mike Moffitt may be reached at ph#641-782-5577 or email: mikem@cfgiowa.com

Website: www.cfgiowa.com

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Michael Moffitt is a Registered Representative with and Securities are offered through LPL Financial, Member FINRA/SIPC. Investments advice offered through Advantage Investment Management (AIM), a registered investment advisor. Cornerstone Financial Group and AIM are separate entities from LPL Financial.

Citations.

1 – medicare.gov/your-medicare-costs/costs-at-a-glance/costs-at-glance.html [5/21/18]

2 – cnbc.com/2018/05/03/medicare-doesnt-cover-everything-heres-how-to-avoid-surprises.html [5/3/18]

3 – medicare.gov/supplement-other-insurance/medigap/whats-medigap.html [5/21/18]

4 – fool.com/retirement/2018/02/05/heads-up-the-most-popular-medigap-plans-are-disapp.aspx [2/5/18]

5 – money.usnews.com/money/retirement/medicare/articles/your-guide-to-medicare-coverage [5/2/18]

6 – cnbc.com/2017/10/18/heres-how-to-snag-the-best-medicare-advantage-plan.html [10/18/17]

Wealth Management with Memory Disorders

What steps can a family take?

Besides impacting lives and relationships, dementia can also impact family finances. It may call for another family member to assume money management responsibilities for a parent, grandparent, or sibling. It may increase the risk of financial exploitation, even as we do our best to guard against it.

Just how many older adults have memory disorders? Well, here are two recent estimates. The Chicago Health and Aging Project figures that nearly a third of Americans 85 and older have Alzheimer’s disease. The National Institute on Aging sponsored a study, which concluded that 14% of Americans age 71 and older have dementia to some degree.1

Older women may be the most vulnerable to all this. A new Merrill Lynch and Age Wave study notes that after age 65, women have twice the projected risk of Alzheimer’s that men do.2  

In the best-case scenario, parents or grandparents acknowledge the risk. They lay out financial maps and instructions, telling adult children or grandchildren who love them dearly about the details of their finances. They involve the financial professional they have long known and trusted and introduce them to the next generation. All this communication occurs while the elder still has a sound mind.

Absent that kind of communication and foresight, some catching up will be in order. The kids will have two learning curves in front of them: one to understand the finances of their elders and another one in which they discover the degree of care they can capably provide. The stress of these two learning curves can be overwhelming. Asking professionals for help is only reasonable.

The earlier the basic estate planning elements are in place, the better. This means a will, a durable power of attorney, a health care proxy, and possibly a revocable living trust. In cases of significant wealth or a complex personal history, more sophisticated estate planning vehicles may be needed. If a durable power of attorney is in place, another person has the ability to act financially in the best interest of the person with dementia.1

Children and grandchildren must also confer about major decisions. What kind of assisted living facility would be best for dad? How much of mom’s retirement savings should be used for her eldercare? How do we convince dad that he should not manage his investments day-to-day anymore? What do we do now that mom seems totally unaware she has to make an IRA withdrawal? These will be hard conversations, trying decisions. If they never occur, however, the household financial damage may grow worse.1,3

Financial inattention or incompetence may be one of the first signals of Alzheimer’s disease or another form of dementia. The National Institute on Aging explains that difficulty paying for an item in a store or figuring out a tip at a restaurant could amount to early warning signs; trouble counting change or reading a bank or investment statement may also reflect cognitive impairment. These instances may be harbingers of problems to come – unpaid bills, impulsive and questionable investment decisions, and unwise credit card purchases.4 

Should a household sign up for Social Security’s representative payee program? This may be a good idea. Many retirees have never heard of this option, which lets a designated, approved second party receive and manage monthly Social Security benefits on their behalf. The monthly benefit is sent to that representative, who must document to Social Security that the money was spent in the senior’s best interest. According to the Center for Retirement Research at Boston College, just 9% of Social Security recipients older than 70 with dementia were enrolled in this program in 2017.2,3

Elders suffering from such disorders often resist relinquishing financial control. Allowing limited financial independence (credit cards with lower limits, access to some cash for discretionary spending) may make the transition easier. Loved ones can also emphasize that seniors are so often victims of fraud and other forms of financial elder abuse.

The time to think about these things is now. We have all read horror stories of elders owing years of back taxes, facing lawsuits from creditors, or falling prey to investment scams. Your parents, grandparents, or siblings should not be left to experience such crises.

Mike Moffit may be reached at ph# 641-782-5577 or email: mikem@cfgiowa.com

Website: www.cfgiowa.com

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Michael Moffitt is a Registered Representative with and Securities are offered through LPL Financial, Member FINRA/SIPC. Investments advice offered through Advantage Investment Management (AIM), a registered investment advisor. Cornerstone Financial Group and AIM are separate entities from LPL Financial.

Citations.

1 – forbes.com/sites/nextavenue/2017/10/31/managing-finances-for-a-loved-one-with-dementia [10/31/18]

2 – barrons.com/articles/the-stubborn-wealth-gap-between-men-and-women-1524099601 [4/18/18]

3 – usatoday.com/story/money/columnist/powell/2017/09/16/financial-help-retirees-cognitive-impairment-dementia/627326001/ [9/16/17]

4 – nia.nih.gov/health/managing-money-problems-alzheimers-disease [5/18/17]

 

 

Beware of Lifestyle Creep

Sometimes more money can mean more problems.

“Lifestyle creep” is an unusual phrase describing an all-too-common problem: the more money people earn, the more money they tend to spend.

Frequently, the newly affluent are the most susceptible. As people establish themselves as doctors and lawyers, executives, and successful entrepreneurs, they see living well as a reward. Outstanding education, home, and business loans may not alter this viewpoint. Lifestyle creep can happen to successful individuals of any age. How do you guard against it?

Keep one financial principle in mind: spend less than you make. If you get a promotion, if your business takes off, if you make partner, the additional income you receive can go toward your retirement savings, your investment accounts, or your debts.

See a promotion, a bonus, or a raise as an opportunity to save more. Do you have a household budget? Then the amount of saving that the extra income comfortably permits will be clear. Even if you do not closely track your expenses, you can probably still save (and invest) to a greater degree without imperiling your current lifestyle.

Avoid taking on new fixed expenses that may not lead to positive outcomes. Shouldering a fixed mortgage payment as a condition of home ownership? Good potential outcome. Assuming an auto loan so you can drive a luxury SUV? Maybe not such a good idea. While the home may appreciate, the SUV will almost certainly not.    

Resist the temptation to rent a fancier apartment or home. Few things scream “lifestyle creep” like higher rent does. A pricier apartment may convey an impressive image to your friends and associates, but it will not make you wealthier.

Keep the big goals in mind and fight off distractions. When you earn more, it is easy to act on your wants and buy things impulsively. Your typical day starts costing you more money.

To prevent this subtle, daily lifestyle creep, live your days the same way you always have – with the same kind of financial mindfulness. Watch out for new daily costs inspired by wants rather than needs.

Live well, but not extravagantly. After years of law school or time toiling at start-ups, getting hired by the right firm and making that career leap can be exhilarating – but it should not be a gateway to runaway debt. According to the Federal Reserve’s latest Survey of Consumer Finances, the average American head of household aged 35-44 carries slightly more than $100,000 of non-housing debt. This is one area of life where you want to be below average.1

Mike Moffitt may be reached at ph#641-782-5577 or email: mikem@cfgiowa.com

Website: www.cfgiowa.com           

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Michael Moffitt is a Registered Representative with and Securities are offered through LPL Financial, Member FINRA/SIPC. Investments advice offered through Advantage Investment Management (AIM), a registered investment advisor. Cornerstone Financial Group and AIM are separate entities from LPL Financial.

Citations.

1 – time.com/money/5233033/average-debt-every-age/ [4/13/18]

 

The Backdoor Roth IRA

A move that high earners can make in pursuit of tax-free retirement income. 

Does your high income stop you from contributing to a Roth IRA? It does not necessarily prohibit you from having one. You may be able to create a backdoor Roth IRA and give yourself the potential for a tax-free income stream in retirement.

If you think you will be in a high tax bracket when you retire, a tax-free income stream may be just what you want. The backdoor Roth IRA is a maneuver you can make in pursuit of that goal – a perfectly legal workaround, its legitimacy further affirmed by language in the Tax Cuts & Jobs Act of 2017.1

You establish a backdoor Roth IRA in two steps. The first step: make a non-deductible contribution to a traditional IRA. (In other words, you contribute after-tax dollars to it, as you would to a Roth retirement account.)1

The second step: convert that traditional IRA to a Roth IRA or transfer the traditional IRA balance to a Roth. A trustee-to-trustee transfer may be the easiest way to do this – the funds simply move from the financial institution serving as custodian of the traditional IRA to the one serving as custodian of the Roth IRA. (The destination Roth IRA can even be a Roth IRA you used to contribute to when your income was lower.) Subsequently, you report the conversion to the Internal Revenue Service using Form 8606.1,2

When you have owned your Roth IRA for five years and are 59½ or older, you can withdraw its earnings, tax free. You may not be able to make contributions to your Roth IRA because of your income level, but you will never have to draw the account down because original owners of Roth IRAs never have to make mandatory withdrawals from their accounts by a certain age (unlike original owners of traditional IRAs).1,3

You may be wondering: why would any pre-retiree dismiss this chance to go Roth? It comes down to one word: taxes.

The amount of the conversion is subject to income tax. If you are funding a brand-new traditional IRA with several thousand dollars and converting that relatively small balance to a Roth, the tax hit may be minor, even non-existent (as you will soon see). If you have a large traditional IRA and convert that account to a Roth, the increase in your taxable income may send you into a higher tax bracket in the year of the conversion.2

From a pure tax standpoint, it may make sense to start small when you create a backdoor IRA and begin the process with a new traditional IRA funded entirely with non-deductible contributions. If you go that route, the Roth conversion is tax free, because you have already paid taxes on the money involved.1

The takeaway in all this? When considering a backdoor IRA, evaluate the taxes you might pay today versus the tax benefits you might realize tomorrow.

The taxes on the conversion amount, incidentally, are calculated pro rata – proportionately in respect to the original, traditional IRA’s percentage of pre-tax contributions and earnings. If you are converting multiple traditional IRA balances into a backdoor Roth – which you can do – you must take these percentages into account.1

Three footnotes are worth remembering. One, a backdoor Roth IRA must be created before you reach age 70½ (the age of mandatory traditional IRA withdrawals). Two, you cannot make a backdoor IRA move without earned income because you need to earn income to make a non-deductible contribution to a traditional IRA. Three, joint filers can each make non-deductible contributions to a traditional IRA pursuant to a Roth conversion, even if one spouse does not work; in that case, the working spouse can cover the non-deductible traditional IRA contribution for the non-working spouse (who has to be younger than age 70½).1

A backdoor Roth IRA might be a real plus for your retirement. If it frustrates you that you cannot contribute to a Roth IRA because of your income, explore this possibility with insight from your financial or tax professional.

Mike Moffitt may be reached at ph# 641-782-5577 or email: mikem@cfgiowa.com

Website: www.cfgiowa.com           

Traditional IRA account owners should consider the tax ramifications, age and income restrictions in regards to executing a conversion from a Traditional IRA to a Roth IRA. The converted amount is generally subject to income taxation. The

Roth IRA offers tax deferral on any earnings in the account. Withdrawals from the account may be tax free, as long as they are

considered qualified. Limitations and restrictions may apply. Withdrawals prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Future tax laws can change at any time and may impact the benefits of Roth IRAs. Their tax treatment may change.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Michael Moffitt is a Registered Representative with and Securities are offered through LPL Financial, Member FINRA/SIPC. Investments advice offered through Advantage Investment Management (AIM), a registered investment advisor. Cornerstone Financial Group and AIM are separate entities from LPL Financial.

Citations.

1 – investors.com/etfs-and-funds/retirement/backdoor-roth-ira-tax-free-retirement-income-legal-loophole/ [4/19/18]

2 – investopedia.com/retirement/too-rich-roth-do/ [1/29/18]

3 – irs.gov/retirement-plans/retirement-plans-faqs-regarding-required-minimum-distributions [11/16/17]

Retirement Planning Weak Spots

They are all too common.

Many households think they are planning carefully for retirement. In many cases, they are not. Weak spots in their retirement planning and saving may go unnoticed.

Couples should recognize that they may face major medical expenses. Each year, Fidelity Investments estimates how much a pair of newly retired 65-year-olds will spend on health care throughout the rest of their lives. Fidelity says that on average, retiring men will need $133,000 to fund health care in retirement; retiring women, $147,000. Even baby boomers in outstanding health should accept the possibility that serious health conditions could increase their out-of-pocket hospital, prescription drug, and eldercare costs.1

Retirement savers will want to diversify their invested assets. An analysis from StreetAuthority, a financial research and publishing company, demonstrates how dramatic the shift has been for some investors. A hypothetical portfolio split evenly between equities and fixed-income investments at the end of February 2009 would have been weighted 74/26 in favor of equities exactly nine years later. If a bear market arrives, that lack of diversification could spell trouble. Another weak spot: some investors just fall in love with two or three companies. If they only buy shares in those companies, their retirement prospects will become tied up with the future of those firms, which could lead to problems.2

The usefulness of dollar cost averaging. Recurring, automatic monthly contributions to retirement accounts allow a pre-retiree to save consistently for them. Contrast that with pre-retirees who never arrange monthly salary deferrals into their retirement accounts; they hunt for investment money each month, and it becomes an item on their to-do list. Who knows whether it will be crossed off regularly or not?

Big debts can put a drag on a retirement saving strategy. Some financial professionals urge their clients to retire debt free or with as little debt as possible; others think carrying a mortgage in retirement can work out. This difference of opinion aside, the less debt a pre-retiree has, the more cash he or she can free up for investment or put into savings.

The biggest weakness is not having a plan at all. How many households save for retirement with a number in mind – the dollar figure their retirement fund needs to meet? How many approach their retirements with an idea of the income they will require? A conversation with a financial professional may help to clear up any ambiguities – and lead to a strategy that puts new focus into retirement planning.

Mike Moffitt may be reached at ph# 641-782-5577 or email: mikem@cfgiowa.com

Website: www.cfgiowa.com           

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

*No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.

Michael Moffitt is a Registered Representative with and Securities are offered through LPL Financial, Member FINRA/SIPC. Investments advice offered through Advantage Investment Management (AIM), a registered investment advisor. Cornerstone Financial Group and AIM are separate entities from LPL Financial.

Citations.

1 – marketwatch.com/story/youre-probably-going-to-live-longer-what-if-you-cant-afford-it-2018-04-23 [4/23/18]

2 – nasdaq.com/article/how-to-prepare-your-income-portfolio-for-volatility-cm939499 [3/26/18]