What to do before helping an elderly loved one

Do you have a parent or in-law whose health has changed and now needs someone to watch over them everyday? A generation ago relying on family and friends for was the norm for people needing long-term care. Perhaps your parents lived close to your grandparents when you were a kid. When one grandparent died, the survivor might have moved in with you and your folks. And continuing to live at home could cost less than paying for care in a nursing home or an assisted living facility. But the out-of-pocket cost to the caregiver can be high … $5,500 according to the MetLife Mature Market Institute, and more than $8,700 if they live a long-distance away. As you can imagine then, care giving can have a big impact on your savings. So before you take the big leap and offer to help an elderly loved one, get a grip on your own finances. For example: Do you still work? When do you hope to retire? Are you helping adult children get on their feet? Also learn about any government programs that are available. Be sure to check out Medicare and Medicaid. Both provide limited long-term care benefits. Your state or county might have programs for the elderly who are getting care at home. So it’s important to understand your loved one’s finances to determine if he or she qualifies. Taking care of an elderly loved one is a noble deed. However, get all your ducks lined up before you commit. That way you’re not sacrificing your family’s financial future and your own plans for retirement. Best wishes, George I just finished updating and expanding A Boomer’s Guide to Long-term Care. Inside, I give you the bottom line on what Medicare and Medicaid will pay and what your loved ones have to do qualify. Plus I show you other available options when planning for your own care. Order your copy direct from my publisher, TODAY.

Happy Memorial Day

This Memorial Day weekend, please say “thanks” any veterans you know and remember the sacrifices our men and women have made in the armed forces. Have a safe and happy holiday! George

Ax Ronald?

Some sharp editor at The Wall Street Journal must have read my post from yesterday. Because in today’s issue it was announced that more than 550 health professionals and organizations have signed a letter going to McDonald’s Corporation. These do-gooders are asking the company to dump Ronald McDonald. They claim the contributors [Ronald] in today’s health epidemic are manifold and a broad societal response is required. In other words, consumers aren’t bright enough to make smart decisions. So self-appointed busybodies, like Andrew Weil who has his own profit agenda, have taken upon themselves to decide for us. Good grief, is nothing sacred? What’s next? I say it should be Mickey and Minnie Mouse … they entice kids to go to Disney World where parents empty their wallets on junk food and over-prices souvenirs. Then it should be the Oscar Mayer Wienermobile. That giant hotdog in a bun on wheels travels the country getting kids to wolf down one of America’s classic foods. And the singing Kool-Aid pitcher ... that has to go. The jingle is harmful to kids. I normally write about financial topics. But as you can tell, I’m pretty riled up about this kind of claptrap! It costs American companies million of dollars and does nothing to help us compete in the global marketplace. And as a stockholder I’ll throw my two cents if they send Ronald packing. Best wishes, George

Common sense and personal responsibility

Have you caught wind of the Happy Meal laws floating around the country? They’ve been around awhile. Last year, San Francisco became the first major city to require that McDonald's Happy Meals and other restaurants' meals for children meet certain nutritional standards before they can be sold with toys. Now it looks like fast-food companies are fighting back by asking state legislators to remove restaurant marketing from local governments’ regulatory menu. As a McDonald’s shareholder, I say, “It’s about time!” I can remember when I was a kid going to the grocery store with my folks. The big treat: Picking out which cereal to buy. I’d walk up and down the aisle checking them all out. I didn’t give a hoot about the cereal; I only wanted the toy inside. How about Cracker Jacks? Yeah, the caramel popcorn and peanuts was good. The truth is, though, the toy prize at the bottom of the box was the big deal. But did my parents buy me a case of cereal or crate popcorn to pig out on? No way. One box that had to last two weeks. First we were too poor. And second my parents knew darn well that too much of that stuff wasn’t good for me. They’d didn’t have any government-sponsored studies telling them that pigging out on anything can make you fat. They just knew … I guess it was something called common sense and personal responsibility. So now we have wimpy legislators who are getting pressured by blocks of voters who don’t have the backbone to tell their kids that they can’t stop for a Big Mac, large fries and gallon of soda every time they hop in the car! What’s really sad is that all the laws in the land won’t help these kids one bit. They’re still going to overeat and sit on their butts too much. And the lawyers and politicians who want to control every aspect of our lives will continue to fatten their wallets on the backs of shareholders and ultimately the taxpayers. Best wishes, George P.S. I’m now on Twitter. Follow me at http://twitter.com/efinancialwrite for frequent updates, personal insights and observations on how to have a healthly retirement. If you don’t have a Twitter account, sign up today at http://www.twitter.com/signup and then click on the ‘Follow’ button from http://twitter.com/efinancialwrite to receive updates on either your cell phone or Twitter page.

The most powerful income tool you’ll find

We’re living longer. In fact according to the Centers for Disease Control if you are a 65-year-old male, you can expect to live another 17 years … 19 more if you are a female. That’s the good news. The not-so-good news is that your retirement next egg might not last as long as you do. There are several theories on how much you could safely withdraw from your investments and have a decent chance of not running out of money during retirement. Probably the most common is the 4 percent rule. This assumes your portfolio is split 60/40 among stocks and bonds with annual returns of 7-8 percent. It also assumes your portfolio will fluctuate 10 percent a year and we’ll have 3 percent inflation. Although this may sound logical, there are a few potential flaws … First, is the 7-8 percent return. Since 12/30/27, the S&P 500 has averaged a 5.35 percent return. For the past 10 years, it’s only 2.66 percent. Five years is 2.95 percent. Bonds? Well, the Barclays Capital Aggregate Bond Index, which is often used to represent investment grade bonds trading in the U.S., averaged 6.44 percent over the last 5 years. You might happen to hitch onto a hot-shot fund manager, or you might be lucky enough to pick a few good stocks or bonds on your own. But again, that would be an exception, which brings me to the second flaw … Hoping the markets will go up and down by only 10 percent is a pretty rosy prediction. The Dow dropped 22.6 percent on "Black Monday" October 19, 1987. And the Nasdaq was down over 60 percent after the tech blow up in 2000 followed by the September 11 terrorist attacks. Then look at 2008 after the housing bubble exploded ... For the year, the Dow fell 33.8 percent, its worst drubbing since 1931 and its third-worst year ever. The S&P 500 fell 38.6 percent, its worst performance since 1937 and third-worst loss. The Nasdaq lost 40.5 percent, its worst year ever. Granted, many investors who hung in there have recovered their losses. Some are substantially ahead, particularly those who continued to invest month after month while prices tumbled. But there lies the problem … Most people panicked. They bought high and sold low. I’ve seen this first hand with clients who when they’re initially making an investment say they can handle losses. Yet when they’re looking at their statements and see a 20 or 30 percent loss, they don’t have the stomach for it. They want out. Now for my final point … the 3 percent inflation. Since 1913, inflation has run about 3.4 percent a year. However, our country is facing much different challenges than in the past. Out of control government spending, non-stop entitlement programs and a money printing machine that is running 24/7. Just to name a few. This tells me that inflation is bound to go up significantly over the foreseeable future. And counting on a meager 3 percent rate is just plain dangerous. Therefore, I suggest you take a look at an income annuity as part of your retirement planning. Of course, there are tradeoffs. For instance, you give up control of your money. And to get the maximum income, your survivors are left with nothing. What’s more the income generally does not go up each year. But no other tool provides a similar guarantee of income for as long as you live. Now I’m not saying you should put all of your next egg in an income annuity, especially now with interest rates so low. Yet you might consider staggering multiple smaller buys over several years in case rates go up. That way you would always have money coming in each month to help pay ongoing expenses, such as a mortgage, rent or even to help fund your travel plans. The alternative? Roll the dice and take your chances. You might win, or you might end up broke and dependent on others for your survival. Best wishes, George P.S. I’m now on Twitter. Follow me at http://twitter.com/efinancialwrite for frequent updates, personal insights and observations on how to have a healthly retirement. If you don’t have a Twitter account, sign up today at http://www.twitter.com/signup and then click on the ‘Follow’ button from http://twitter.com/efinancialwrite to receive updates on either your cell phone or Twitter page.

Use IRAs for college ... but only as a last resort

Spring is in the air. Many families are preparing to send a child or grandchild off to college. But the average cost for tuition and fees can easily run $35,000 or more. And the cost is rising faster than medical care and as much as three times consumer prices. Therefore, students borrow because they see no other way. The problem is Americans now owe close to $1 trillion on their student loans — more than on their credit cards! When they leave college, the majority of student loan borrowers struggle to repay their debts. So it’s no wonder parents and grandparents often raid their IRAs instead of letting the kids take out student loans. But that helping hand can be a huge blunder. You would be correct in saying that money you take from a traditional IRA to pay college expenses won’t get hit with the under 59½, 10% penalty. You’ll still owe income tax though. See IRS Publication 590, page 53 for the details. However, there is a pitfall … you can’t put the money back. That means the only way to replace the funds is with your ongoing contributions. Plus every dollar you take out of your IRA is one less dollar you have building up tax-deferred to fund your retirement. So by all means, only use your IRAs to help with college expenses as a last resort. And if your loved one is years away from heading off to college, there are other alternatives, such as 529 savings plans that are meant for college savings. 529 plans offer a lot of flexibility in the amount of money you put away, it builds up tax-deferred and you maintain control over the account. Many of the major mutual fund companies offer good information on their 529 plans. Or you could check out what the IRS has to say, just click here. Learn the ins and outs of the loans and saving programs available to help college-bound kids. You’ll stand a much better chance of having they finish their education with as little debt as possible, without jeopardizing your retirement nest egg. Best wishes, George

Workers losing confidence

According to the Employee Benefit Research Institute's annual survey on retirement, 27% of respondents said they are “not at all” confident about having enough to retire comfortably, up from 22% last year. Workers are bumping up the age at which they plan to retire and continuing to work during retirement. The percentage who expect to work past 65: 36% this year, from 11% in 1991. There are many reasons why workers are delaying retirement, including:

Poor economy

Lack of faith in Social Security

Change in employment situation

Can’t afford to retire

Cost of living in retirement will be higher than expected

Want to be sure they have enough money to retire comfortably

Click here to read the complete survey. So what can you do to give yourself a better chance of retiring when you had hoped? You might consider a tax-deferred annuity … A report by The Insured Retirement Institute found that the tax deferral of annuity earnings is of greatest benefit to middle income Americans, who comprise the largest segment of annuity owners. Also with 80 percent of annuity buyers having incomes less than $100,000 and 64 percent earning less than $75,000, insured retirement strategies clearly play a significant role in the retirement income planning of middle class Americans. To learn more about annuities and The Insured Retirement Institute, click here. Best wishes, George