January 2012 Personal Finance Newsletter
January 17, 2012 by Jean Keener, CFP, CRPC, CFDS · Leave a Comment
The January 2012 personal finance newsletter is now available. It includes a 2011 investment market recap from Dimensional Fund Advisors with data on all the major indices and a summary of the major investing themes of 2011. In addition, there’s a comparison between the dividend rates of the S&P 500 and interest rate on treasuries and commentary of what this means to your portfolio. Plus, the newsletter announces the first half of 2012 schedule for Keller Financial Planning Workshops at the Keller Public Library. To read the newsletter, click here.
FAQ on the Federal Financial Aid Application
December 30, 2011 by Jean Keener, CFP, CRPC, CFDS · Leave a Comment
If you have a child who’s attending college in the fall, it’s time fill out the federal government’s Free Application for Federal Student Aid, the FAFSA. The FAFSA, should be filed as soon after January 1 as possible in the year your child will be attending college. The reason is that some federal aid programs operate on a first-come, first-served basis, so filing the application early ensures your child has the best chance of receiving the most favorable aid package.
Even if you don’t expect your child to qualify for federal aid, you should still consider filing the FAFSA because colleges often require it as a prerequisite for students to be eligible for the college’s own institutional aid.
Here are some common questions and answers regarding the application process.
What documents will I need to fill out the FAFSA?
The FAFSA relies on financial information from your previous year’s federal income tax return; for example, a FAFSA completed in 2012 will rely on information contained in your 2011 return. So the papers and statements you use to file your tax return are generally the same ones you would need to fill out the FAFSA, such as Social Security numbers, W-2 information, and information on savings, investments, and business assets. Your child will also need to have this information.
But here’s a dilemma: since most parents probably won’t complete their federal income tax return in January, how can they fill out the FAFSA, which relies on figures from their tax return? There are two possible solutions. The first is to prepare your tax return earlier. The second is to prepare (or hire a tax professional to prepare) an estimated tax return, which can then be used to complete the FAFSA–a practice the federal government deems acceptable. If you use an estimated tax return, keep in mind that you will need to provide a final tax return later on.
How do I file the FAFSA?
You can complete a paper FAFSA or file it electronically. The way you submit the FAFSA does not affect your child’s eligibility for aid.
You can get a paper FAFSA at your child’s high school or your local library. Once it’s complete, you should make a copy for your records and mail it in the preaddressed envelope that comes with the form.
You can file an electronic FAFSA at www.fafsa.ed.gov. You’ll need to apply for a PIN before you can actually start filling out the online application. Electronic FAFSAs offer several advantages over paper FAFSAs: detailed online help screens, an online chat option with a customer service representative, built-in error detectors, confirmation that the application was transmitted successfully, and faster processing–one week as opposed to two to four weeks for paper FAFSAs.
If you’ve previously filled out the FAFSA4caster, the federal government’s online financial aid forecasting tool, the online FAFSA will be automatically populated with your data.
What happens after I file the FAFSA?
After your FAFSA is processed, you will receive a Student Aid Report (SAR) either in the mail or electronically (depending on how you filed the FAFSA). This document summarizes data from your FAFSA and indicates your official expected family contribution (EFC), which is the amount of money the government expects your family to contribute to college costs for the current year to be eligible for financial aid. For example, “EFC25000″ means that your expected family contribution is $25,000.
You should review the SAR carefully to make sure it contains your correct income and asset information. Any corrections should be made immediately and sent back for reprocessing. If you have questions, you can contact the Federal Student Aid Information Center at 1-800-433-3243.
If there is an asterisk (*) next to your EFC figure, you have been selected for verification. FAFSAs are selected for verification randomly, or because the FAFSA is incomplete or contains estimated tax information. If you are selected for verification, you will need to provide additional documentation that might include a final tax return, household information, or appraisals for certain assets listed on the FAFSA. Not all families selected for verification will need to submit the same documents.
The SAR is also sent to each college you listed on your FAFSA. Once the college receives your child’s SAR, the financial aid administrator at each school that has accepted your child will craft an aid package that tries to meet your child’s financial need (remember, colleges aren’t obligated to meet all of it). To determine your child’s need, the administrator subtracts your EFC from the cost of attendance at that particular college. Your child will then be notified of the college’s aid package in an award letter sent out in the spring. The package typically includes various combinations of federal and college loans, grants, scholarships, and work-study jobs.
Plan now for a successful 2012
November 29, 2011 by Jean Keener, CFP, CRPC, CFDS · Leave a Comment
Taking a few moments now to assess your financial situation can go a long way toward positioning you for success next year. Some items to consider:
If Retired
- Have you taken any required minimum distributions from your IRAs for this year?
- Even if no IRA distributions are required, have you taken out at least enough to use up all of your deductions and exemptions or fill up the lower tax brackets? If uncertain, a tax projection before year-end can be an excellent investment.
- Social security benefits increase by 3.6%. Making a conscious decision on how to utilize these funds can help you get the most out of them.
If Still Working
- The 2% payroll tax reduction expires at the end of 2011 unless it’s renewed (had not been renewed as of this writing on Nov. 29), so plan for a 2% reduction in your take-home pay beginning the first paycheck of the year.
- The social security tax earning caps for next year is $110,100. If you normally exceed this maximum, make plans for how to allocate this additional income when you exceed it next year.
- You can contribute a maximum of $17,000 to a 401(k) or 403(b) next year, plus a $5,500 catch-up if you turn 50 or older anytime in 2012. Review your contribution rates to save as much as possible. Consider Roth contributions if an option for you.
For everyone
- Review taxable investment accounts for opportunities to harvest losses if appropriate. This can reduce your tax bill due in April.
- Review your broker’s default cost basis reporting method. Brokers will be reporting more cost basis information to the IRS beginning next year, and you can elect which cost basis reporting method is used if you act before any investment sale settles. You won’t be able to wait until to file your tax return to make this decision in many situations.
- Last, but definitely not least: if you do not have estate planning documents in place, no matter what your age, please take the time to do so now before the end of the year. None of us know how many days we have on this earth, and having these documents in place can help make a difficult time a little bit easier for our loved ones.
Best Financial Planner Award 2009 – 2011
October 7, 2011 by Jean Keener, CFP, CRPC, CFDS · Leave a Comment
Thank you to the readers of the Keller Citizen for voting Keener Financial Planning Keller’s Best Financial Planner again for 2011! We greatly appreciate your support, and enjoy providing financial planning and investment advice for our clients in Keller and greater North Texas.
Jean with Thank You Sign
Keener Financial Planning’s mission is to provide objective, expert financial advice tailored to your unique situation on a fee-only basis. Your concerns may be retirement, college, rebuilding after divorce, changing careers, getting control of your finances, investing more effectively– or likely some combination of those and others. We take your goals, work with you to discover the best path to reach them, and define clear action steps to get you there.
Look for the “Best of” special section in the Keller Citizen on Wednesday, October 26 to see all of the winners. Thanks again for your support!
Coordinating Spousal Benefits for Social Security
October 3, 2011 by Jean Keener, CFP, CRPC, CFDS · Leave a Comment
Coordinating spousal benefits in filing for social security can make a big difference in your retirement income. Contrary to popular practice, it’s not automatic that each spouse should just file for social security benefits as soon as he or she retires. As a couple, you have the potential to increase your income over your whole retirement and maximize security for the surviving spouse through effective planning.
Social security offers some surprising options to help couples (including divorced couples married for at least 10 years) take full advantage of all benefits available to them.
Did you know that spousal benefits are not restricted to the low-earning spouse and can be claimed by the husband or wife?
A high-earning spouse who wants to wait until age 70 to file on his or her own record to receive maximum delayed retirement credits, can file for spousal benefits on the lower earning spouse’s record at full retirement age. This allows the high earning spouse to receive at least some social security without reducing his or her own maximum delayed retirement benefit.
Did you know that the primary worker has the option to file and suspend his or her own benefit and still allow the spouse to start receiving benefits?
This option allows the primary worker to continue earning delayed retirement credits while the lower earning spouse starts to receive a spousal benefit on the worker’s record.
Did you know that by the higher earning spouse delaying benefits to age 70, both husband and wife enjoy longevity protection?
When the first spouse passes away, the surviving spouse gets to keep the higher of their two benefits – including delayed retirement credits. These benefits are indexed for inflation, so even if the surviving spouse lives another 20 years after the first spouse’s death, he or she will benefit from the delayed retirement credits growing with inflation over that entire time.
These considerations are just the tip of the iceberg in planning for social security! For couples nearing age 62, the pay-off on the effort to fully analyze this decision is enormous.
Remodels and Renovations that Pay Off Financially
September 19, 2011 by Jean Keener, CFP, CRPC, CFDS · Leave a Comment
Special Guest Post by North Texas Home Designer Lisa Baer
Move or remodel? Given the current condition of the housing market in North Texas and elsewhere in the country, many homeowners are finding remodeling a better option than moving. A strong housing market may be some months away, and many homeowners are considering investing in their current homes and foregoing the move. If you are contemplating an update, a remodel or are just making some basic improvements, it’s important to understand which renovation are coveted by potential purchasers and which investments in your home actually provide a return on investment.
One benefit of renovating in the current economic environment is potentially greater value for your remodeling dollar. Some new home builders have turned their focus to remodeling because of the slowdown in the new home market. At least in part, the abundance of contracting options has made remodeling bids competitive. Homeowners always have to do their homework – perhaps even more so – but when it comes to evaluating contractor pricing, competition can mean high quality work at a good price.
In my own design practice, the economy is a contributing factor in homeowners’ approach their remodeling plans. Homeowners’ will more often scale back their plans or implement them in phases over time. In my view, this thoughtful, deliberate approach often results in better long term decisions. Using an experienced contractor, designer and consulting with a local real estate professional can all contribute to a remodeling plan that will maximize your investment in terms of enjoyment and livability and also provide the best potential return.
In thinking through your remodeling options, there are typically two approaches to take. You may decide to splurge just for the pleasure of having something that you’ve always dreamed about – the steam shower, the Italian marble master bath or the professional grade stove. The other approach is the pragmatic one – replacement windows or a higher efficiency air conditioning unit. There is a great deal of middle ground between these two approaches and the middle ground is where most homeowners find themselves in prioritizing their remodeling to-do lists.
So how do you “value” a remodeling project? Value can be determined by both the enjoyment that a homeowner derives from the improvement as well as the likely return on your investment at resale. There are a lot of other factors that come into play as well. Regional differences in homeowner and buyer preferences are a large consideration. For example, a deck addition in San Francisco will recoup more that 100% of the investment, but the same deck in Columbus, Ohio is likely to recoup less than two thirds of its cost.
Before
After
A deck addition in North Texas? Don’t bother. A flagstone patio on the other hand – especially with space to eat and lounge – that is a coveted improvement. We recently removed an old, high maintenance wood deck in Keller, Texas and reworked the area with flagstone and updated the landscaping plantings. The update opened up the entire rear of the house and completely transformed how the homeowner’s use the space. By using high quality materials that have impact and longevity, this project will almost certainly add value if (when) the homeowners sell the home. (All Photos Courtesy of Baer Home Design.)
Add even a basic outdoor cooking area or a fireplace and you are talking about serious value add. Other hot buttons in North Texas and throughout the country include (not unexpectedly) kitchens and baths. We see higher end finishes – stone counter tops and stainless appliances for example – turning up in the kitchens of moderately priced homes. Baths too are becoming more luxurious with the addition of stone floors and counter tops, soaking or jetted tubs and interesting lighting.
There is one other important consideration in your remodeling plans – what will the impact of your project be on the rest of the home? A super high end kitchen may have a different perceived value if it accompanied by a master bath that hasn’t been updated in 25 years. Depending on your budget, you may choose to spread your remodeling dollars around the high impact areas.
What remodeling projects provide that combination of enjoyment and return?
According to the Remodeling Magazine’s Cost v. Value Report 2010-2011, the number one overall project was entry door replacement at over 100% of costs recouped. This small investment (an average of $1200 according to the survey) can add tremendous curb appeal to a home which translates into higher resale and reduced time on the market. From a homeowners’ perspective the front door may see a little ho hum, but never underestimate the impact of a small improvement. Pulling up to a beautiful front door or opening that door repeatedly for guests (who will naturally comment on the beautiful, new door), can provide a great deal of pleasure and pride that can be hard to assign a dollar value to.
New front doors aside, there are some home improvements that generally add value to a home and some that rarely make a difference when it comes to eventual buyer appeal and consequently, provide little return.
Paint and Wallpaper
There is no other home improvement that can change the appearance of a home as much as paint. Some estimates indicate that painting the interior of your home can return 90%, other estimates are even higher. Fresh paint can instantly update a space and can provide a clean backdrop – critical in home sale preparation. If you intend to stay in your home, paint is a great way to add personality – color can be a wonderful design tool. Explore your preferences and style as paint is inexpensive and easy to change. If you intend to sell at some point in the not too distant future, keep your color selections neutral.
Wallpaper too can be a great way to inject style into your home but today, the use of wallpaper is a slightly different story than paint. Wall coverings of any kind make a strong personal statement so use it sparingly – even if you are staying in your home for the foreseeable future. A powder room or an accent wall in a bedroom can be a high impact, low cost way to utilize wallpaper that you love and it can be easily changed if you tire of it. If you are selling, avoid wallpaper altogether. In fact, strongly consider removing any wallpaper that you currently have. Today’s buyer generally wants nothing to do with wallpaper and it only adds another chore on a purchaser’s to-do list and a long list can cause a buyer to move on to the next wallpaper-less property.
Wallpaper Before
New Look After
We removed wallpaper and did a few more updates – granite counter tops and stainless appliances – in the Colleyville kitchen pictured prior to it going on the market. Just the removal of the wallpaper changed the entire feel of the critically important kitchen and breakfast area. Buyers were wowed and the home sold quickly – even in a challenging real estate market.
Kitchens
Kitchens are the focus of most remodelers’ dreams and most well thought out kitchen improvements provide at least some return on the investment – most estimates range between 70-80%. We’ve all heard that kitchens are the “heart of the home.” Often that translates into the room that experiences the most wear and tear. Kitchens also have a lot of elements – cabinetry, hardware, flooring, etc. and those elements tend to follow style and color trends. This means that your kitchen can appear dated before almost any other room in the house.
A complete kitchen remodel may not be necessary. Sanding, painting or staining tired cabinets and replacing old cabinet hardware can make a tremendous difference in the appearance of a kitchen. If your remodel involves new cabinets and other surfaces, keep your selections simple and classic. Overly designed details not only add cost, but they run the risk of quickly dating a design.
Quality appliances and updated flooring counter tops and backsplashes are hot buttons for home purchasers. By budgeting carefully and making trades offs of some lower cost items, you may be able to afford higher priced items that are more desirable to home buyers.
Before
Updated Look After
The Keller, Texas kitchen pictured was already efficient (for the most part) but even the most well chosen kitchen elements grow tired after 20 plus years. We embarked on a total remodel – from new cabinets to cabinet hardware. By adding classic details and keeping the overall design simple, these homeowners should be able to enjoy this kitchen for years and years.
Bathrooms
Bathrooms are very similar to kitchens in that the return on improvements can be high – around 78%. If kitchens are the heart of the home, baths run a close second – especially master baths. Depending on your region of the country, a master bedroom with an adjoining bath is almost expected, even in modest price ranges. In higher end homes, separate tub and shower, double vanities and high end finishes – travertine, marble, granite – could well provide a solid return.
Solid upgrades in modest price ranges include fresh tile, paint, fixtures and lighting. Those elements can be purchased in a wide range of prices. Selecting carefully and utilizing more neutral colors and designs for the fixed elements (flooring, tile, sinks) and injecting interest and texture with the less expensive more easily changed items (lighting, shower curtains, accessories) is the best way to balance your style and maximize your potential resale.
Before
After
The master bath update pictured illustrates the power of wallpaper removal, neutral paint selection, updated cabinet paint and hardware, and how lighting and mirror selection can transform a space. Other updates in that remodel included granite countertops, updated sinks and faucets.
Flooring
After
Before
In our kitchen remodel project below, we painted the existing golden oak cabinets and added new stone counter tops and back splash. One of the biggest elements that dated the original space was the 8”x8” glossy white tile. A 16”x16” porcelain tile laid in a brick pattern is a classic, durable and beautiful addition to this hard working part of the home.
Landscaping
Landscaping is another area of home improvement that provides a solid return on investment even though the actual numbers can vary by region and often fall within the range of 60 – 75%. Curb appeal is absolutely critical if you are anticipating selling your home. At a minimum invest in clean up, trimming shrubs and adding seasonal color.
If you are staying put, there are other considerations. Outdoor living areas are all the rage and they are certainly the least expensive way to add living area to your home. Keep useable space in mind when contemplating an outdoor living area. Waterfalls and ponds are beautiful yes; useful, no. Seating areas, fireplaces and outdoor kitchens fall into the useful category. Consider the flow and style of your home. Linking your interior and exterior spaces visually and with regard to style provides continuity – and enjoyment. Lastly, choose quality materials. Stone, locally adapted plants, interesting accents and durable, comfortable furniture provide both real return and a great deal of pleasure.
Final Thoughts
In spite of recent declines in the housing market and the challenging economy in general, our homes often remain our largest investment and the place where we relax, unwind and enjoy our friends and family. If you make remodeling decisions deliberately while balancing your enjoyment with the potential return on your investment, your home will provide returns every day in the enjoyment and comfort that your home provides. If you eventually sell, you will probably see another type of return ($$$!) as well.
About the Author
Lisa Baer
Lisa Baer brings broad real estate, design and business experience to Baer Home Design. Lisa is an Interior Design Society Member (IDS), Real Estate Staging Association Member (RESA), and an Accredited Home Staging Specialist (AHS). She is a Texas Real Estate Licensee Certified by the Graduate Realtors Institute (GRI) and an Accredited Buyers Representative (ABR). Lisa is a multi-state transferee and has designed and built multiple homes. Lisa’s business experience has honed her strong project management skills and her sensitivity to budget and time frame. For more information, please visit www.baerhomedesign.com or contact Lisa directly at 817.657.0185 or via email at lbaer@baerhomedesign.com .
Should you pay off the mortgage?
May 18, 2010 by Jean Keener, CFP, CRPC, CFDS · 1 Comment
One of the best financially freeing moments in life is the day you compare your savings and mortgage principal balances and realize that you could pay off your mortgage if you wanted to. If you’re at that point, congratulations! If you’re not there yet, keep saving; it can come sooner than you think.
Of course, immediately following the discovery of being able to pay off the mortgage comes a question: should I? Here’s how you decide:
First, consider what you would do with the money if you didn’t pay off the mortgage.
Would it sit in savings, be invested for long-term retirement goals, or something else? Based on your plans if you didn’t pay off the mortgage, you can estimate a rate of return you expect to receive. From this rate of return, you’ll need to subtract taxes paid on the earnings (15% if capital gains, your income tax rate if regular interest).
Second, figure out what your mortgage is costing you.
Look at your interest rate, calculate the annual interest expense, and subtract any income tax savings you’re receiving. Be sure to avoid over-estimating the benefits of tax savings. For example, if your mortgage interest is $5,000 and you have another $8,000 of itemized deductions, your total itemized deductions are $13,000. If you’re married filing jointly, the standard deduction is $11,400 this year. So the mortgage interest is only increasing your deductions by $1,600. If you’re in the 28% tax bracket, this equates to a $448 tax savings.
Third, compare your answer in step 1 with your answer in step 2.
If it’s costing you more to keep your mortgage than you would earn with the money invested or in the bank, then you should generally pay off the mortgage. If you can get a greater return on your investments than what your mortgage is costing you, then you should generally keep the money invested and wait to pay off the mortgage.
Of course there are exceptions and other considerations including:
If you would be taking the pay-off money out of a pre-tax IRA or deferred compensation in a lump sum, take a really close look at the tax consequences of that lump sum withdrawal! They can often totally cancel out any savings on the mortgage interest.
If you would be using “retirement” savings funds to pay off the mortgage, you really need to look at your retirement projections and ensure that they still work with the funds withdrawn. If your projections rely on you beginning to save what you’re currently paying on the mortgage, know yourself. Will you stick with this savings program? If not, probably best to just keep your retirement funds intact and continue paying the mortgage.
If paying off the mortgage would take your emergency funds dangerously low or short-change funds for other important goals, it’s likely not a good idea.
Making your decision
While it seems like a fairly straight-forward question, when you think about the whole picture, you realize there are lots of what-ifs and options to consider. The important thing is to take time to do your homework, complete the analysis, and seek professional assistance if needed.
Even if the process reveals you’re better off with the mortgage, you might still want to go ahead and pay it off because of the peace-of-mind benefit that comes from not having any debt. If that’s the case, by going through the process thoughtfully and thoroughly, you will know what you’re giving up financially for that peace of mind so you can make an informed decision about whether it’s worth it to you.
And if the process does show that you would be better off getting rid of that mortgage, you can move forward with confidence.
Of course, everyone’s situation is different. While the process described above addresses many considerations, you may have some issues not addressed here or that are unique to you. Make sure you fully consider your own situation before making any decision.
Roth IRA Conversion Overview
September 14, 2009 by Jean Keener, CFP, CRPC, CFDS · 2 Comments
Through 2009, converting an IRA from a traditional IRA to Roth is only available for those with household incomes under $100,000. Beginning next year, that changes. However, a lot of people aren’t aware of the upcoming changes — according to Financial Planning magazine, only 42% of advisor clients were aware of the new Roth IRA conversion opportunity. I will be doing a series of blog posts over the next couple of weeks giving you the details on this opportunity and some examples of who should consider this strategy. Of course, everyone’s situation is unique and these posts are for informational purposes only, so you should only make the decision after consulting with your own financial advisor.
First, why would you want to convert?
Funds withdrawn from a traditional IRA are subject to regular income tax. Funds withdrawn from a Roth IRA (both contributions and earnings) after age 59 1/2 and after you’ve owned the IRA for 5 years are federal income tax-free. By converting from a traditional to Roth IRA, you are paying taxes sooner rather than later on your IRA balance. This strategy allows your post-conversion earnings to avoid taxation altogether and to have potential tax savings on the contributions if your tax rate goes is higher in the future. It also gives you greater flexibility on when you use the funds because Roth IRAs do not have required minimum distributions. For some people, using this strategy can create a larger pool of after-tax retirement income and help with estate planning.
If you’d rather watch a video than read about the Roth IRA changes, this video comes from a service I subscribe to and provides a good overview of the conversion opportunity. Let me know what you think!
Roth IRA Conversion VideoFree Financial Advice in Keller
September 8, 2009 by Jean Keener, CFP, CRPC, CFDS · 1 Comment
Free financial advice will be available to residents of Keller, TX for Financial Planning Week October 5-12, 2009. Many individuals and families are facing financial challenges or uncertainty right now. Retirement plans are shifting. Investments are volatile. Jobs are less secure. And debt is a bigger issue than ever. In this environment, people are hungry for reliable, objective financial advice.
Keener Financial Planning has partnered with the Greater Keller Chamber of Commerce to provide two informational
financial workshops at Keller Town Hall on Tuesday and Thursday evening, October 6 and 8 from 5 to 6:30 pm. Both workshops are free and open to the public. Tuesday evening’s topic is Financial Tranquility: Get Back to the Basics for a Stress-Free Financial Life. Thursday’s topic is 7 Mistakes Smart Investors Make and How to Avoid Them. There is limited space available, so attendees are encouraged to RSVP to info@keenerfinancial.com to reserve their seat. Light refreshments and door prizes will be provided.
Keener Financial Planning will also be offering Free Financial Advice Friday on October 9. I will be providing pro bono financial advice and coaching sessions all day at my office in Keller. Times will be by appointment on a first-come, first-serve basis. To participate in Free Financial Advice Friday, email info@keenerfinancial.com to request a time.
The purpose of Financial Planning Week is to raise awareness of the importance of financial planning in all of our lives and the value of getting objective advice to help you achieve your financial goals and dreams. Please join me for one of these events and help spread the word about how a solid financial plan helps create a secure future. Thank you!
New Texas Teacher Long-Term Care Insurance Option
September 4, 2009 by Jean Keener, CFP, CRPC, CFDS · 1 Comment
Beginning on September 1 this year, the new long-term care insurance provider for the Texas Teacher Retirement System (TRS) switched from Aetna to Genworth. During open enrollment from September 15 – November 15 this year, teachers will have the option to sign up for this insurance. If you’re thinking about getting long-term care insurance anytime soon, now is the time to take action while you have the greatest number of options.
How do you know if the TRS Genworth group option is right for you?
The first thing to do is to get a quote for the TRS group policy through the Genworth website. To do this, go to www.genworth.com/groupltc For active employees, the group ID is TRS. For retirees, the group ID is TRSRetiree. The access code for both is groupltc.
After you’ve received your quote, you’ll want to go out and shop for individual quotes. Some of the companies in addition to Genworth offering long-term care insurance are John Hancock, MetLife, Prudential, Mass Mutual, Berkshire, and New York Life. You’ll want to make sure you’re comparing apples to apples, so print out the options you selected for the Genworth TRS policy to show to your insurance agent.
If you want an objective second opinion on when you should get long-term care insurance or the “right” amount of long-term care coverage to purchase for your situation, that’s something an independent financial planner like myself can help with.
If you find that the Genworth group TRS program is providing the best pricing and benefits for you, then it’s easy. You’ll want to go ahead and sign up if you’ve decided now is the right time for you to get long-term care insurance.
If you find an individual option could provide superior benefits at the same cost or comparable benefits at a lower cost, you’ll have some additional work to do. You need to go through under-writing and make sure you qualify. You will need to answer some health questions and possibly have an exam. This process can take some time, so you should start now. Only after you’ve been offered coverage through the other company can you really make a decision about which option to choose.
If you’re declined by the other company — good news — you still have the TRS group option. During the initial enrollment period, Genworth is providing a coverage guarantee to active employees. The coverage guarantee is why it’s so important to investigate this group option now if you have any health issues that may prevent coverage on an individual policy. According to the Genworth website, “During your enrollment period, if you are an actively at work employee on the day you apply, and on the day your coverage becomes effective, your coverage is guaranteed without answering any health questions. Also, during this time your spouse will have streamlined underwriting which limits the health questions they´ll have to answer. If you decide to apply after the enrollment period, you will be required to complete a full health questionnaire and go through underwriting. There is a chance that a health condition may prevent you from qualifying for coverage.”
Just to give you one example of this process, I compared the TRS group option for one couple. In this couple’s particular situation, the couple’s group coverage through TRS was going to cost slightly more than purchasing a comparable individual policy through Genworth directly, about the same as through MetLife, and a little less than through John Hancock.
Also of note, in the 3 individual quotes received, the prices were based on 100% of the maximum daily benefit being available for home healthcare vs. 75% for the Genworth group policy. 75% may be enough because home healthcare can be less costly than skilled nursing care. But if you can get 100% for the same or less premium — all other things being equal – it’s definitely the smart move.
In addition to price and features, it’s important to look at the ratings of the insurer, claims-paying experience of policyholders, and length of time the company has been in the long-term care arena. For this couple, it made more sense to go with one of the individual options. However, if they had health issues that would have kept them from qualifying for the individual policy, taking advantage of the TRS group policy during this initial enrollment period would have been a wonderful opportunity. It’s also important to note that everyone’s situation is different, so you need to complete this process for yourself.
Bottom line: if you’re thinking about getting long-term care insurance anytime soon, now is the time to take action while you have the greatest number of options.
For more information on making this decision, you can visit these links:
TRS long-term care information
U.S. Department of Health and Human Services site on long-term care information
Medicare’s site on long-term care
My blog post on 5 claims to watch out for in Long Term Care Insurance
My blog post Long Term Care is a Women’s Issue