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Liz Weston

Q&A: Rising insurance premiums

December 16, 2019 By Liz Weston

Dear Liz: I’m an insurance agent specializing in long-term-care policies and just read your advice to the woman who was upset about how much her premiums had risen. Her premiums were $2,400 annually starting when she was 55 but are $4,470 now that she’s 77. First, thank you for noting that these premium increases are because insurance companies didn’t expect people to live so long and nursing home rates to increase so much. Please also tell your reader that, at her age, her premium for the coverage she has now would be well over $12,000! She bought early and she’s definitely getting a ridiculously low premium for the coverage she has. I’m sorry that she’s on a fixed income, but ask her how she’ll pay for a $60,000-per-year stay in a nursing home. If she can’t afford her premium, she should reduce her amount of time covered, not the amount of dollars covered.

Answer: Let’s be clear about who’s at fault here. It’s not the people who bought long-term-care insurance policies and expected them to remain affordable.

Insurers are supposed to be experts at predicting risk, but they made incorrect assumptions about how many people would drop their policies (known as the lapse rate), how many would file claims and how long those claims would last. Insurers also overestimated the returns they could get on their bond investments, which also help determine premiums.

All these stumbles have led to repeated premium increases that have threatened to make coverage unaffordable right when people need their coverage the most.

This woman is well aware of the high costs of long-term care; that’s why she bought the policy in the first place and kept paying it all these years. Her premium might seem “ridiculously low” to you, but anyone with an ounce of empathy could understand that $4,470 is a huge chunk of change for most seniors.

Keeping her coverage means giving up some of the benefits she was promised and had been counting on. Reducing the number of years the policy protects her, for example, could make her premium more affordable but leave her exposed to devastating costs if she needs many years of care.

This is a crappy situation for people who were trying to do the right thing. They don’t deserve to be sneered at for being upset about it.

Filed Under: Insurance, Q&A Tagged With: Insurance, insurance premiums, long-term care insurance, q&a

Q&A: When savings are meager, it might be time to unretire

December 16, 2019 By Liz Weston

Dear Liz: I’m 67, retired and have $83,000 in a 401(k) that I left with my employer. Should I see a certified financial planner? Based on my current income, I either need a job, or I have to start pulling $10,000 from my 401(k) each year, which will clean out my account in eight years.

Answer: You definitely need a job.

You could burn through your nest egg even faster than you expect if the stock market drops or an unexpected expense crops up. And retirement is loaded with surprise expenses, from healthcare bills to home repairs to long-term care. Even in a best-case scenario, you’re likely to run short of money long before you run out of breath.

A planner could have warned you about this and suggested that a few more years of working, saving and delaying Social Security could have given you a far more comfortable retirement.

It may not be too late.

If you can return to work full-time, you could suspend your Social Security benefit. That would allow it to grow by 8% each year until you turn 70. If you’re married and the higher earner, that also would increase the survivor benefit that one of you will have to live on once the other dies.

Even if you can’t work full time, a part-time job could ease the drain on your 401(k). If you’re a homeowner, you also could consider a reverse mortgage that would allow you to turn your home equity into a lifetime stream of monthly checks, a line of credit or a lump sum.

A fee-only advisor — one who is paid only by clients’ fees, rather than by commission — could help you review your options. The Garrett Planning Network offers referrals to fee-only planners who charge by the hour.

Another option for people on a budget: accredited financial counselors or financial fitness coaches. These folks aren’t certified financial planners, but they can help with budgeting, debt management and retirement planning. You can get referrals from the Assn. for Financial Counseling & Planning Education.

Filed Under: Q&A, Retirement Tagged With: 401(k), q&a, Retirement, retirement savings

Thursday’s need-to-know money news

December 12, 2019 By Liz Weston

Today’s top story: How your employer can help you save for emergencies. Also in the news: Tips and traps when buying a used car at auction, 4 questions to consider before opening a new credit card, and how to actually read your retirement account statements.

How Your Employer Can Help You Save for Emergencies
Employer-supported emergency funds are on the rise.

Tips and Traps When Buying a Used Car at Auction
Don’t get stuck with a lemon.

4 Questions to Consider Before Opening a New Credit Card
Think before you apply.

How to Actually Read Your Retirement Account Statements
Deciphering the tiny print.

Filed Under: Liz's Blog Tagged With: Credit Cards, employer-backed emergency funds, new credit cards, retirement statements, tips, used car auctions

Wednesday’s need-to-know money news

December 11, 2019 By Liz Weston

Today’s top story: Make sure a new holiday credit card plays well with others. Also in the news: How one couple paid off over $200K of debt in six years, how to tell if consolidating your student loans would actually save you money, and the 10 best finance movies of the decade.

Make Sure a New Holiday Credit Card Plays Well With the Others
1 in 4 consumers will open a new credit card over the holidays.

How I Ditched Debt: ‘Happiness Journey’ Fueled Payoff
How one couple paid off over $200K in six years.

Here’s how to tell if consolidating your student loans would actually save you money
Not all loan consolidations are equal.

The 10 Best Finance Movies of the Decade
Financial lessons on the big screen.

Filed Under: Liz's Blog Tagged With: Credit Cards, debt diary, finance movies, holiday spending, student loan consolidation, Student Loans, tips

How employers help workers save for rainy days

December 11, 2019 By Liz Weston

Everyone needs a rainy-day fund — your financial health depends on it. Your employer could help you build one.

Many companies offer 401(k)s and other retirement plans, but until recently few had programs to promote short-term savings. That’s starting to change, as employers experiment with matching funds, payroll deductions and other methods to encourage workers to build emergency funds.

In my latest for the Associated Press, see why employer-sponsored emergency savings accounts are beginning to gain traction.

Filed Under: Liz's Blog Tagged With: emergency fund, employer-sponsored emergency savings accounts, Savings

Tuesday’s need-to-know money news

December 10, 2019 By Liz Weston

Today’s top story: Don’t let holiday shopping sink your credit score. Also in the news: 10 housing and mortgage trends or 2020, money habits that are doing you more harm than good, and the No. 1 job of 2019 pays $140,000 – and its hiring growth has exploded.

Don’t Let Holiday Shopping Sink Your Credit Score
Not the kind of gift you should give yourself.

10 Housing and Mortgage Trends for 2020
What to watch for in the new year.

These money habits in your ‘financial junk drawer’ are probably doing you more harm than good
New year, better habits.

The No. 1 job of 2019 pays $140,000 — and its hiring growth has exploded 74%
The robots are coming.

Filed Under: Liz's Blog Tagged With: 2019's #1 job, Credit Score, holiday shopping, housing and mortgage trends, money habits

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