Earlier, we wrote about the need for long term care insurance. The likelyhood of needing to pay for long term care in some form is nearly HALF for those 65 and older. We are simply living longer and our bodies are more likely to break down the longer we live.

The primary reason that people don’t get long term care coverage is of course – COST. So let’s look at some ways which can help someone to control the cost on a policy. Keep in mind also that the cost of the premium is still FAR LESS than the cost of coverage if the entire amount is coming out of your pocket when you have a need. Again, the reasons to own a policy are to protect your savings from having to be spent down, and also to have choices over the type of care you would be able to receive when the need arises.

1. Buy the policy between age 55 aand 65.

This should be obvious. Yet most people don’t think of it, or they put it off and want to look at it later, after age 65. Premiums are much higher  at this age, than for someone in their late 50’s. Also you would like to be able to pay for the premium out of savings or dividends from an investment. Lets say your premium is $4000/year.  If you have assets of at least $150,000 or more, you should be able to generate enough dividends to pay the premium from that without depleting your nestegg.

2. Meet with your representative to determine the proper per day amount of coverage.

In the previous article, we talked about the IN Partnership.  If you looked at a policy with $5000/month coverage that would also work out to $167/day. You can select the amount of years you’d like to be covered for. 4 years at this rate would give you a total policy value of $240,000, which would easily satisfy the requirements for total asset protection in Indiana. You could also opt for less years (2 years or 3 years), which would lower your cost.

3. Look at a longer elimination period.

The elimination period is like the deductible on auto or health insurance. The longer you are able to pay for care out of pocket yourself, the lower the premium will be. Of course, just like the deductible, you need to have the savings to back it up, when you have a need. Look at your savings and determine what is a realistic “out of pocket” amount you can handle, and relate that information to your agent.

4. Use a representative who represents a variety of insurers to get the best rate.

Be careful though. You don’t want “cheap” when it comes to insurance. I work primarily with 3 providers – John Hancock, Met Life, and Genworth. These are all major firms with solid reputations who are the leaders in Long Term Care. Of course we can look at all 3 and find which one may provide the best fit (and best value) for the client. 

For more information on long term care, please visit my website http://www.deanvoelker.com. You may also follow me on Twitter, http://www.twitter.com/deanvoelker. I also host a weekly internet radio program, “Improving Your Financial Health” at http://www.blogtalkradio.com/401kcoach.

You wouldn’t think of owning a home without insurance to replace it in case of fire or disaster, would you? Of course not. In fact, its required by law when you take out a mortgage. But the chances of losing your home in a fire or disaster are very slim.

Also, car insurance is required by law in case of an accident. You want to be able to cover the cost of replacing the car if something happened. Seat belt laws are also there for our safety. But the chances of being in a car accident and totalling the car are also very slim.

Did you know that there is a much greater risk which could drastically affect your retirement nest egg? And it doesn’t matter how you may be invested?

In fact, the wealthier you are, the more risk you may have. And the chance of “something happening” is much much greater than replacing your house or your car, yet most people aren’t covered at all, or even given it much thought.

What might this be, you ask?

According to John Hancock, 49% of all people turning 65 will need Long Term Care at some point and 72% will use Home Care Services. 49% – that is HALF!!

There are several myths on Long Term Care which should be cleared up. First, most Long Term Care is NOT provided in nursing homes. In fact, also according to John Hancock, 80% of older adults who receive long term care services do so in their own homes.

Another myth is on Medicaid. Medicaid will only cover LTC in nursing homes – and they choose which one you can use. (i.e. “cheap”) Also, before you can qualify for Medicaid you savings MUST be spent down significantly to poverty level. (The actual amount varies from state to state.) Also the government can (and will) look back over your records for the past 5 years before letting you qualify for benefits.

The real risk if you don’t have insurance coverage is how it can wipe out your savings. (Remember earlier how we said that your investment portfolio didn’t matter?) According to Met Life, the annual cost for nursing home stay averaged $75,190 in 2006. And inflation normally grows in healthcare much faster than in other areas. Assisted living facilties, which are more like apartments, averaged $35,616 in 2006. And without coverage – that is 100% out-of-pocket.

Fortunately, there is hope. Since 1993, Indiana has offered a Partnership Program, which can help you to protect your nestegg. What that means is, if you purchase a Long Term Care Insurance policy which meets the program guidelines, you can protect the same amount of assets as the amount of coverage in your policy. Buy a $100,000 policy – protect $100,000 in assets. And if your policy provides at least $228,045 in coverage (2008), you will be able to protect ALL of your assets.

It doesn’t take long to figure that $228,000 is a good benchmark either. Figure 4 years (48 months) at $5000/month and you get $240,000.

Another huge benefit is that premium payments for Indiana Partnership Long Term Care Policies may be deductable on Indiana state tax returns. In a future article, we will look at ways to control costs. But I certainly hope that this at least makes you think. My job as an advisor is to help you “protect” your nestegg.

You can contact me through my website http://www.helpmy401k.us and follow me on Twitter at http://www.twitter.com/deanvoelker. I also host a weekly internet radio program “Improving Your Financial Health” at http://www.blogtalkradio.com/401kcoach.

Last week, we asked “Where’s the Beef?”  Today, we ask “Where’s the Fat?”

Its very important to trim the ‘fat’ in your 401(k) plan – or fund expenses. Today on my Blog Talk Radio program, I had a listener ask about fund expenses. These can really affect your long term return on your retirement savings.

Expenses come from managing the mutual fund. The fund family charges a percentage of the assets invested to manage the fund – deciding what to buy, what to sell, and how much to buy or sell and when to do it. Less trading = lower expenses. Also the advisor on the plan may be paid  from these expenses.

Knowing this, it would make sense to look for funds in your plan which have a lower expense rate. If its about 1%, that isn’t too bad, much more than that can negatively affect your returns over time.

To give you an example, I did some figuring on my financial calculator . Let’s look at a 22 year old college graduate, starting their 401(k) plan. Of course you would expect them to bump up their contributions over time, but lets say they put in $300/month with an 8% average return until age 66. They would have saved $1,340,048 in 44 years.  

What if they were using a fund with expenses that were 1% more? In other words, the fund may have averaged 8%, but the real return was 7% due to higher expenses. With all the other factors being the same, we now have a total savings of $993,985, which is a difference of $346,063.  OUCH! If you figure on taking 4%/year of the nest egg at retirement for income, that means we would need to live on less income -$13842 per year less.  See where 1% can make a big difference?

So look carefully at your statement. Don’t just look at ‘performance’ but also fund expenses, which do affect long term performance. Have an advisor help you with this and also help you determine how much to save, so you can have the type of retirement you want.  

You may contact me through my website at http://www.helpmy401k.us. You can also follow me on Twitter at http://www.twitter.com/deanvoelker. I also host a Weekly Internet Radio Broadcast “Improving Your Financial Health on Blog Talk Radio http://www.blogtalkradio.com/401kcoach

During the 1980’s there was a very popular commercial by Wendy’s. An elderly lady ordered a burger at a generic fast food counter. Upon seeing how puny and pathetic her tiny burger was, she grilled the sales clerk repeatedly – “Where’s the beef?” The commercial was a huge hit and “Where’s the beef?” was a well known catch phrase.

These days “Where’s the beef?” could easily be applied to the 401(k)s & IRAs of many people. In Daniel R. Solin’s book, “The Smartest 401(k) Book You’ll Ever Read”, he points out that “the typical twenty-something only invests 50.4% of his or her account in stock mutual funds.” You can’t keep up with inflation that way! Mr. Solin goes on to say that as we get older, that figure is also pretty timid. “The typical worker in their forties invests only 54.3% in stock funds.”It doesn’t matter how old you are. Even people on the verge of retirement should be invested in stock mutual funds with a good part of their long term savings. After all, you could be retired for 20-30 years.

Stocks have been the only investment which has beaten inflation over the long term. And we NEED to prepare for inflation! Did you know that in 1989 (20 years ago), a loaf of bread costs an average of 0.67? And a postage stamp was just 0.25?

Mr. Solin also points out that “If you invested $1.00 in blue chip stocks in 1926, it would be worth $3077.33 today. That pencils out to a 10.42 average yearly return.” Don’t be too fancy trying to pick the “right” fund. Look for mutual funds with long histories (10 years or longer) and low expenses. High management fees can really affect the return on your investment.

We will be looking at a few other ways to put some “Beef” back into your 401(k) in a future article.

. You can also follow me on Twitter at . I also host a Weekly Internet Radio Broadcast “Improving Your Financial Health on Blog Talk Radio  

You may contact me through my website at

Do People still invest in CDs anymore? (Don’t answer that.) I know that they are the “investment” of choice for a number of folks and for banks. Let’s be honest though – Rates are TERRIBLE!! As of today, Oct. 2, 2009, according to bankrate.com, the best rate on a 12 month CD in the USA is 2.05 at India Bank.  For a 3 Year CD, the best available rate is 2.97 at Flagstar Bank.  When I called banks in the area, I actually had to keep a straight face when Diana told me about their “Special Rate” of 1.5% on a 13 month CD – only for current customers, though.  Woo-Hoo!!

CDs do appeal to those who want “safety”, which means the FDIC Guarantee. That means your money is guaranteed by the Federal Deposit Insurance Corporation (i.e. the U.S. Government) OK, I feel MUCH BETTER about THAT!!

About a year ago, as part of the new financial legislation, the FDIC raised its limit on the maximum amount guaranteed from $100,000 to $250,000. I’m not sure exactly how that helps Joe Lunchbucket, but there was quite a bit of fuss made about it last October.

Dave Ramsey has often referred to CDs as “Certificates of Depression” and with good reason. Did you know that for 11 of the past 20 years, CDs actually have a “Real Return” that is Less Than 1%? Once you consider inflation and taxes on the interest, it is really about the same as burying your savings in the backyard.  

As a retiree, wouldn’t you like to get a better return on your savings? What if you could have your nestegg generate income for you of at least 5% of the principal – and have that income paid to you for the rest of your life? Often when I meet with clients, I learn about their situation and their goals and suggest an appropriate solution which will help them with their long term savings. Clients normally can see the value, but may get hung up on time frames with CD money.  A common response may be “That sounds great.  I’ve got a CD due in a couple of months. Call me back then, and we will get back together. I can’t touch it until then.” (The Early Withdrawal Penalty looms overhead like the ‘Grim Reaper’.)

So, being a good guy (I don’t want to see anyone lose money.) I mark the date on my calendar and follow up with them as they asked me to. Except now the situation has changed. The CD was renewed. OR the due date was different from what they thought. OR the dog needs braces. OR….. Bottom Line - EVERYONE (most of all the client) LOSES.

Soooo, this being October, I called 3 leading banks in South Bend to see just how “scary” the Early Withdrawal Penalty is. At Wells Fargo , I was told that the penalty would be forfeiting 6 months of interest on a 16 month CD and 3 months of interest on a 12 month. First Source Bank had the best rate locally on a CD – 1.5% on a 13 month CD, which also came with a penalty of 6 months of interest for early withdrawal. National City Bank (soon to be PNC) told me that you could lose 1/2 of your interest for the remainder of your term or 3 months of interest, whichever is greater.

OK, lets do the math. Let’s say you have a CD of $10,000. You have about 3 months left on the term. Let’s give you the BEST rate (a whopping 1.5%) and the stiffest penalty for taking it out early (6 months interest). $10,000 x .015 x .5 (6 months is 1/2 of a year) = a loss of $75.

But what do you gain? There are only 2 types of money – liquid cash (you need it NOW) and investment savings (you need it LATER). What if you invested it into something that gave you an average return of 5% or more? $10,000 x .05 = $500 after 1 year. Last time I checked, $500 – $75 = a GAIN of $425.  And I want the best for my clients. So let’s leave the “scariness” to the little ghouls and goblins on Halloween.

Remember to invest for the long term!

You can always contact me through my website, http://www.helpmy401k.us. You can also follow me on Twitter at www.twitter.com/deanvoelker My weekly Internet Radio Program is “Improving Your Financial Health” on Blog Talk Radio at http://www.blogtalkradio.com/401kcoach

Last time we looked at some solutions for college savings such as a regular savings plan and also working part time during High School.

What if you do those things, but it still isn´t enough to cover college costs? Or perhaps you are getting started late in the game?

Here are some ways to help pay for college even if you haven’t saved much. (Besides winning the lottery or robbing a bank.) The first way is actually pretty obvious – although families don´t utilize it as much as they should. Contact the Financial Aid department from your college and make sure you have applied for any and all scholarship money that you have a chance to qualify for. Don´t leave any “free” money on the table.

Going along with this scholarship idea, does Johnny (or Jill) play any sports? Recently, on my Blog Talk Radio program, http://www.blogtalkradio.com/401kCoach/2009/09/02/Improving-Your-Financial-Health
I visited with Charlie Adams, the Senior National Speaker for the National Collegiate Scouting Assocaiation of Chicago. Charlie helps many high school athletes get scholarships to play various sports in college. Normally when I think of athletic scholarships, I would think of football and basketball at large universities.

However, Charlie points out that there are plenty of scholarships given to students who are decent athletes and good students. Colleges offer a wide range of athletic opportunities such as golf, lacrosse, cross country, and rowing. In fact, Charlie´s son Jack earned a scholarship to Millsaps College in Mississippi for cross country.

Charlie also talks about a book, “Athletes Wanted” by Chris Krause. http://www.ncsasports.org/about-ncsa/about-chris-krause The book points out that employers have a growing need to ¨hire quality people for their companies. Recruiters love interviewing candidates who have played collegiate sports. They have learned the value of goal setting, teamwork, time management, and motivation. So if Johnny or Jill have some athletic skills, look into this as an option.

One thing to keep in mind – Johnny and Jill need to keep their grades up. To qualify for scholarships at smaller schools in sports, there is more of an emphasis on the “Student” part of student-athlete. You may contact Charlie Adams at www.stokethefirewithin.com.

What if your child doesn’t play sports? Could they be entreprenuers? There are several examples of students who saw a need and figured out a way to fill the need and profit from it. They learn (on their own) valuable skills in sales, marketing, and business management. This would also set them apart from other candidates when its time to leave college and interview for work. Here is an article on “Teen Money Making Ideas”. http://teenmoneymakingideas.com/how-college-students-can-make-money-in-the-summer-in-12-of-the-top-home-based-businesses/

If Johnny starts a business and it really takes off, he may find his career in the process. There was once a college student named Bill Gates who actually dropped out of Harvard to focus on his Microsoft business full time. (Of course the reason was that he felt he wasn´t learning anything new about computers.)

If you like this option, you may want to look at books about young men and women who have started successful businesses. A great website for information is http://www.quintcareers.com/college_entrepreneur_resources.html

“OK” you think. “But I´m not Bill Gates or Shaquille O´ Neal.What else can I do?”
There are other ways to learn entrprenuerial skills in organizations which are already established. Looking back on my college years, I had an opportunity to work with the Southwestern Company. www.southwestern.com. Southwestern has been around since 1855. They have a long history of helping college students to earn money for college. Students also learn some valuable lessons in the process – motivation, goal setting, business management, how to sell, and how to deal with all types of people.

Southwestern works with over 3000 students per year in the US and the UK, and the average First Year student earns $2733/mo during the summer months. Like many other opportunities, as a student gains experience, they may become more proficient.
http://www.southwesterninfo.com/FAQ.aspx Please contact Southwestern for more information.

If none of these really work for you, there is one more idea on paying for college, and its also a great one. Talk to a local recruiter about military service. For the student who hasn’t yet figured out what they want from college or what they want to do in life (and at 18, who really has it figured out?), the military gives you time to figure things out. Military service also teaches skills such as teamwork, goal setting, perseverance, and time management. And they can help you to pay for school. http://www.military.com/money-for-school/tuition-assistance/army-tuition-assistance

I’ve met a number of people who have served for 4 years, then went to college with money from the government. As I mentioned in my last article, a 20 year old freshman has a good chance of being more mature than an 18 year old. Wouldn’t you agree then that a 22 year old freshman with skills learned in the military would be even more mature and ready to learn? It certainly adds to a resume, and can lead to all types of career choices later.

I hope these have been helpful ideas. None of them involve taking out a loan, and if we can avoid that, we’d all be better off. You can contact me at my website, www.helpmy401k.us or follow me on Twitter at www.twitter.com/deanvoelker. My Blog Talk Radio program airs weekly and the archives may be heard at www.blogtalkradio.com/401kcoach.