Thursday, September 23, 2010
Tuesday, September 14, 2010
- Fifty-seven percent say they could not afford more than three months of in-home care. One in three say they could not afford even one month of in-home care.
- Sixty-six percent say they could not afford more than three months of nursing home care, while 42 percent say they could not afford even one month of care.
- Thirty-five percent of Republicans, 38 percent of Democrats and 26 percent of independents say they would not be able to pay for even one month of in-home personal care; 43 percent of Republicans, 48 percent of Democrats and 33 percent of independents say they could not afford even one month of nursing home care.
- Only 15 percent report having long-term care insurance.
- Just 20 percent were aware that Medicare does not cover ongoing in-home personal care; similarly, only 30 percent knew that Medicare does not cover prolonged nursing home care.
- Ninety-five percent say they prefer having affordable care options in the community in order to avoid going to a nursing home.
You can click here to read the complete findings. So what should all this mean to other Boomers? You need to ask yourself: Are you as ill-prepared as these Californians, but you stick your head in the sand? You better have a plan of action in case your health changes during retirement, which it almost certainly will. Otherwise you could end up somewhere you don’t like and be flat broke, too. Best wishes, George P.S. To understand your options, check out my book A Boomer’s Guide to Long-Term Care.
Monday, September 6, 2010
- The Minimum Distribution Method is calculated the same way as required minimum distributions when account owners reach their required beginning distribution date. This method will generally produce the lowest annual 72(t) payments since it is based on the longest life expectancy.
- The Fixed Amortization Method consists of an account balance amortized over your life expectancy. Once an annual distribution amount is calculated under this fixed method, the same dollar amount must be distributed in subsequent years. This produces higher payments than the Minimum Distribution Method and gives some security in that the payments are fixed. But the calculation is complicated and there is the risk that the payments will not keep pace with inflation.
- The Fixed Annuitization Method consists of an account balance, an annuity factor, and an annual payment. Once an annual distribution amount is calculated under this fixed method, the same dollar amount must be distributed under this method in subsequent years. This method may at times provide the largest payments, depending on the size of the account and interest rates used. And like amortization method, the payments are fixed.
Is taking advantage of Rule 72(t) a good idea? It could be. After all, it gets you out of paying the 10% penalty. But remember: You’ll still have to pay ordinary income taxes on the distributions, and money you withdrawal from your IRA means that much less for your future needs. And in case you don’t stay with the plan, or modify the payments in any way, you will no longer qualify for the exemption from the 10% penalty. Furthermore, the 10% penalty will be reinstated retroactively, to all prior years.
So before you take advantage of Rule 72(t), I suggest you get a second or even third opinion before signing on the dotted line. Best wishes, George