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Posts from the ‘Insurance & Annuities’ Category

23
Oct

November 1 Begins Open Enrollment for Health Insurance Marketplaces

Beginning on November 1, 2019, individuals (including families) may apply for new health insurance, switch to a different health-care plan, or re-enroll in their current plan through a Health Insurance Marketplace under the Affordable Care Act (ACA). The open enrollment period for 2020 health coverage ends on December 15, 2019.

Individuals can use Health Insurance Marketplaces to compare health plans for benefits and prices and to select a plan that fits their needs. December 15 is the deadline to enroll in or change plans for new coverage to start January 1, 2020. For those who fail to meet the December 15 deadline, the only way to enroll in a Marketplace health plan is during a special enrollment period. To qualify for special enrollment,  an individual must have a qualifying life event such as a change in  family status (for example, marriage, divorce, birth, or adoption  of a child), change in residence, or loss of other health coverage (e.g., loss of employer-based coverage, loss of eligibility for Medicare or Medicaid).   Also, only plans sold through a Health Insurance Marketplace qualify for cost assistance.

Additional information about Obamacare

While the ACA (commonly referred to as Obamacare) has not been repealed or replaced, there have been changes to the law.   The biggest change is the repeal of the tax penalty for failure to have qualifying health insurance. Though the individual mandate requiring that most people have minimum essential health insurance coverage still exists (unless an exception applies), the tax penalty for failure to have insurance has been reduced to $0, effectively repealing that penalty.

In addition, states have additional flexibility in how they select their essential health benefits. In effect, states may elect to sell short-term health insurance policies with coverage terms of up to one year. These plans may offer fewer benefits compared with the 10 Essential Health Benefits covered under the ACA. Also, California, Colorado, Massachusetts, Minnesota, New York, Rhode Island, and Washington, DC have extended open enrollment dates beyond December 15. Check with the state’s department of insurance for specific open enrollment dates.

The federal government no longer runs the marketplace for the Small Business Health Options Program (SHOP). As an alternative, small business employers may be able to contact insurance companies directly or work with a broker who is certified to sell SHOP policies.

The fate of Obamacare

Currently, the fate of the ACA is somewhat uncertain. At the end of 2018, a Texas federal judge ruled the Affordable Care Act unconstitutional. However, the judge ordered a stay pending appeals, so the ACA remains in place for the time being.

22
Sep

Medicare Open Enrollment Period Begins October 15

What is the Medicare open enrollment period?
The Medicare open enrollment period is the time during which people with Medicare can make new choices and pick plans that work best for them. Each year, Medicare plans typically change what they cost and cover. In addition, your health-care needs may have changed over the past year. The open enrollment period is your opportunity to switch Medicare health and prescription drug plans to better suit your needs.

When does the open enrollment period start?
The Medicare open enrollment period begins on October 15 and runs through December 7. Any changes made during open enrollment are effective as of January 1, 2016.

During the open enrollment period, you can:

  • Join a Medicare Prescription Drug (Part D) Plan
  • Switch from one Part D plan to another Part D plan
  • Drop your Part D coverage altogether
  • Switch from Original Medicare to a Medicare Advantage Plan
  • Switch from a Medicare Advantage Plan to Original Medicare
  • Change from one Medicare Advantage Plan to a different Medicare Advantage Plan
  • Change from a Medicare Advantage Plan that offers prescription drug coverage to a Medicare Advantage Plan that doesn’t offer prescription drug coverage
  • Switch from a Medicare Advantage Plan that doesn’t offer prescription drug coverage to a Medicare Advantage Plan that does offer prescription drug coverage

What should you do?
Now is a good time to review your current Medicare plan. As part of the evaluation, you may want to consider several factors. For instance, are you satisfied with the coverage and level of care you’re receiving with your current plan? Are your premium costs or out-of-pocket expenses too high? Has your health changed, or do you anticipate needing medical care or treatment?

Open enrollment period is the time to determine whether your current plan will cover your treatment and what your potential out-of-pocket costs may be. If your current plan doesn’t meet your health-care needs or fit within your budget, you can switch to a plan that may work better for you.

What’s new in 2016?
The initial deductible for Part D prescription drug plans increases by $40 to $360 in 2016. Also, most Part D plans have a temporary limit on what a particular plan will cover for prescription drugs. In 2016, this gap in coverage (also called the “donut hole”) begins after you and your drug plan have spent $3,310 on covered drugs. It ends after you have spent $4,850 out-of-pocket, after which catastrophic coverage begins. However, part of the Affordable Care Act  gradually closes this gap by reducing your out-of-pocket costs for prescriptions purchased in the coverage gap. In 2016, you’ll pay 40% of the cost for brand-name drugs in the coverage gap and 58% of the cost for generic drugs in the coverage gap. Each succeeding year, out-of-pocket prescription drug costs in the coverage gap continue to decrease until 2020, when you’ll pay 25% for covered brand-name and generic drugs in the gap.

 Where can you get more information?
Determining what coverage you have now and comparing it to other Medicare plans can be confusing and complicated. Pay attention to notices you receive from Medicare and from your plan, and take advantage of help available by calling 1-800-633-4273 (MEDICARE) or by visiting the Medicare website,  www.medicare.gov.

Part D late enrollment penalty
Generally, if you did not sign up for Part D coverage during your initial enrollment period, and you didn’t have other creditable drug coverage (at least comparable to Medicare’s standard prescription drug coverage) for at least 63 days in a row after your initial enrollment period, you may have to pay a late enrollment penalty. The late enrollment penalty is added to your monthly Part D premium. Your initial enrollment period is the 7-month period that starts 3 months before you turn age 65 (including the month you turn age 65) and ends 3 months after the month you turn 65.

The foregoing is provided for information purposes only.  It is not intended or designed to provide legal, accounting, tax, investment or other professional advice.  Such advice requires consideration of individual circumstances.  Before any action is taken based upon this information, it is essential that competent, individual, professional advice be obtained.  JAS Financial Services, LLC is not responsible for any modifications made to this material, or for the accuracy of information provided by other sources.
26
Jun

Supreme Court Upholds Health Insurance Subsidies

The case of “King v. Burwell” challenged the interpretation of a portion of  the Affordable Care Act (ACA).  The ACA provided health insurance subsidies for quailed persons.  One requirement was that the insurance be purchased through state-based exchanges (marketplaces).  Only 16 states and the District of Columbia operated their own state-based exchanges.  Most consumers purchased insurance through federal exchanges through the federal government websites.  June 25, 2015 the U.S. Supreme held that insurance subsidies were available to those that qualified for subsidies purchased insurance through the federal exchange.

5
Jan

A helpful list for investors

It seems that everyone has a list on almost every topic, especially at year-end and the start of a new year.   I sometimes wonder what to do with this information.  Anna Prior’s Jan. 2, 2015 New York Times article, “The 15 Numbers Every Investor Needs to Know” is an exception.  It provides an approach to planning.  Following is a condensed discussion of the article:

  • Know what allocation of stocks, bonds and cash is appropriate for you.  Among the many factors to consider are: your financial goals, the value of your current investments, your health, your age, and your ability to withstand a drop in the value of your investments.
  • Take advantage of your ability to contribute to your employers’ 401(k) retirement plan, if applicable, for your situation.  The 2015 maximum contribution is $18,000 for a pretax traditional 401(k) plan and after-tax Roth 401(k) plan.  Those 50 or older can contribute an additional $6,000.  Understand the requirements and impact of taking distributions from your retirement plans.
  • Be familiar with the general valuations of stocks.  This will help you gage your investment risk.  Compare the average price/earnings (PE) ratio of stocks to the current PE.  The S&P 500 is commonly used as a proxy for the stock market.
  • Some consider bonds as a source of safety for investors.  It is difficult to predict how bonds will perform in the short-term.  The yield on the 10-year Treasury note will give you an indication of what the yield on bonds will be in the next 10 years or so.
  • High investment costs will reduce your returns  The expense ratios of your funds can be found in the fund prospectus, the website of the fund company and other media sources.
  • Be aware of your adjusted gross income (AGI).  This is the amount at the bottom of page one of you individual U.S income tax return.  The AGI will determine if other taxes or limitations will apply to you.  Examples are the 3.8% surtax on investment income, Medicare Part B & D premiums, deduction of some retirement plans, and some itemized deductions.
  • Estate-tax exemption of the states are often lower than the U.S. estate exemption.  This must be considered  in your planing for your family, heirs and charitable entities.
  • The amount of your essential and discretionary costs should be reviewed periodically.  This is important for: retirement planning, insurance planning and maintaining an adequate reserve fund for the unexpected and untimely expenditures.
  • Understand your health-care expenses.  This is need for; insurance planning, retirement planning and maintaining an adequate reserve fund.
  • Be aware of the difference between replacement cost and fair market value.  The difference to rebuilding a home can vary from what the home would sell for.  Replacing the contents of you home may be more than the fair market of the items.
  • The difference between owning and renting a home can have a major impact on your cash flow and quality of life.  The impact maybe more significant  when buying a first home and when retiring.
  • How long you are likely to live has a significant impact on your investment planning and cash flow planning.
  • Your approach to borrowing and repaying loans impacts your cash flow planning, investment planning and retirement planning.
  • Be aware of current and anticipated mortgage rates.  These impact planning relating to refinancing and debt repayment (cash flow planning).

There are many moving factors in planning.  An understanding of the parts and the alternatives are essential to a successful plan.

 

 

16
Jul

Reaching Your Goals

Gregory Karp, in his “Spending Smart” column “Money maxims: What dads can tell grads”, June 1, 2014 Chicago Tribune is the incentive for this blog.
Money can be saved or spent. How you handle money will have a significant impact on happiness and future financial well being. Studies relating to finances have increased in the last 15 years. Each year there seem to be more studies. Studies on happiness conclude that people are happier when they spend money on experiences rather than things. Other studies find that most people’s happiness increase as their income increases, up to about $70,000. Studies about retirement have found that the most important thing that anyone can do to reach their retirement living expenses is to save.
Saving is hard to do. Spending must be limited to available income. For most people, living within their income does not mean complete denial. It does require selectivity in the timing and amount of splurges.

Good daily spending habits are important. We have more control over daily spending habits than large items. Minimizing unnecessary and/or unwise expenditures will reduce many items that reduce the amount that can be saved on a regular basis. Most people give larger expenditures, such as homes and cars, significant thought and deliberation. They should also do the same for daily expenditures.

There are also studies that show that we should imagine ourselves in retirement. Aging Booth is an app that will show what you might look like when you age. You may have more incentive to save for that person. Contributing to a 401(k) plans and capturing any employer match may seem more important. Having part of your pay direct deposited to an investment account may also seem like a good way to be kind to the older you.
Necessities and a reserve fund come first. The reserve fund provides a cushion for the frequent unexpected expenditures. Preretirement six months of living expenses is generally recommended. After retirement, a minimum of living expenses after reoccurring income (like social security) for a year is recommended.

The sooner a saving program is started the less required on a periodic basis. To determine how much to save, you need to set financial goals. Your progress should be monitored, at least monthly; more frequently is better. Without knowing the future, your circumstance will change from what you originally projected.

11
Mar

A financial plan is essential for you to know how to invest your money.

To over simplify, financial planning is how you manage your finances and establish a path to reaching your goals.  Investment management is one part of managing your finances.  It is the part that determines how your savings will be invested.

Financial planning starts with your goals.  The amount and timing are critical.  Prioritizing your financial goals is necessary.   You can assign a priority of 1 to 10 or categorize your goals by what is needed, what is wanted and what is wished for.  This will be essential as you monitor your progress.  Life and unanticipated events are not controllable and may require adjustments.  Adjustments may result in changes to your goals, the timing of your goals, or your spending.

A reserve fund is needed to absorb unexpected events.   Reserves should be held so that they are quickly assessable, that is, liquid.   Six months of reserve are generally recommended.   As you approach each goal, the reserve fund should be increased.  This will avoid the impact of fluctuating investment values when the funds are needed.   The amount of liquid assets should be increased as you near retirement.  This minimizes the need to sell investments when the market is depressed.  Two years of liquid funds are generally recommended for retirees.  A portion of the funds for living expenses in retirement might be held in short-term bond funds or bonds.

Investments are purchased with the amount of your savings that exceed your reserves.  The amount that is used for investments must be sufficient to reach your goals.  Education expenses and health care are two categories of expenses that have exceeded what people anticipated.  Many people underestimate the amount they will need in retirement.  Because life expectancy has increased and people have retired early, many people will not be able meet their retirement goals.

The planning process needs to consider the above events and your ability to withstand losses.

The above has touched on cash planning, investment planning, education planning, risk assessment and retirement planning.  All the planning areas need to fit together.  How you manage your investments is dependent on the other areas of your financial plan.
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4
Dec

Are there better uses for cash values within a life insurance policy or if the policy is no longer need?

There seem to be an increasing number of articles about these issues relating to cash value insurance policies.  This discussion is not applicable to term insurance.  Cash value life insurance policies have a cash value in addition to its death benefit.  The amount of the cash value is funded by a portion of the premiums and the earnings net of expenses over the period that the policy is in force.

Over a long period the cash values within a life insurance policy may be significant.  You can access the cash by taking withdrawals some of all of the funds.   If the amount withdrawn is less than the premiums you paid, less any prior withdrawals, there are not any tax consequences from the withdrawals.  Otherwise the excess amounts will be taxed at ordinary tax rates.

An alternative would be to borrow some or all of the cash values.  Life insurance coverage is reduced by the amount borrowed and interest on the amount borrowed.

The earning on the cash values can also be used to pay premiums.

If the life insurance is no longer needed there are various alternatives.  It is possible to exchange a life insurance policy for an annuity or a long-term care policy.  This can be done without recognizing taxes on your gains.  If the value is more than the premiums paid less any prior withdrawals.

The issues are different if the premiums paid, less prior withdrawals, are more than the cash values.   The loss on surrender or sale of the policy would not be tax deductible.  Alternatively the policy could be exchanged for an annuity.  The loss in the policy would still not be deductible.  However, the loss would reduce future gains in the annuity.  Ellen E. Schultz’s November 3oth article in The Wall Street Journal, “Insurance Can cut Your Taxes” discusses this issue in more detail.

These alternatives must be considered in relation to you complete financial plan.  No one approach applies to every situation.  Among the factors to consider are: the amount of coverage needed, the returns within the policy compared to alternative returns available and the tax consequences.   An understanding of the alternatives and related consequences must be understood.
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14
Dec

Should you buy life insurance because of the promised guarantees?

A December 6th article in the Wall Street Journal reported that a growing number of investors are buying whole life insurance.  Increasingly I hear of situations when people have purchased the wrong insurance product or more than can be justified by their individual circumstances.  Often the the policy purchases is different from the operation of the policy purchased. 
Many of these people have a heard mentality.  They feel they should purchase what they are told others are purchasing.  Some think everyone else is in the same situation they are and in.  They also assume that everyone else did the research.
The first rule is to determine your own situation.  This includes knowing what risk you are trying to insure against.   Another aspect is knowing what assets you have available to cover that risk.  Naturally, you should consider alternatives. 
Whole life insurance combines insurance with investments.  The policy will pay a death benefit regardless of how long the policy owner lives, assuming the premiums have been paid timely.  Term life insurance does not have an investment element.  It will only pay a death benefit for a specified period. 
Many of the whole life policies will invest the investment portion of the premium in excess of insurance costs and fees.  Typically they are primarily invested in bonds.  There are policies that will allow the insured to assume the investment risk.  These policies allow the investor to pick from a fixed menu of investments.  The discussion of other types of life insurance is beyond the scope of this discussion.  
Policy holders are typically told they can have access to the investments.  Unfortunately “…typically they need to hold the policy for at least 15 or 20 years to get the kind of returns they expect.” 
Some “…say the primary negative for whole life remains in place:  It is expensive, in part because of high commissions…”
Life settlements is a vehicle many people are becoming aware of to sell life insurance policies they no longer need.  In many cases the policies did not fit their situation when they were purchased.  
There are circumstances where whole life insurance is more appropriate than term life insurance.  The point is know know what you are trying to achieve and what the alternatives are.    
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24
Mar

Finding a qualified independent financial advisor

There are many people who look for a financial planner when they have a specific question or problem.  Too often the person they contact concentrates on the question or problem presented without really looking for the cause of the problem or question. 

I believe that is why the solutions do not always work out.  Without trying to identify the problem and identify the consequence the solutions do not provide adequate flexibility.  Sometime they result in worse problems or not enough time to overcome the problem.  We have seen evidence of this in the headlines since 2007.

Fear is often used to create action.  Humans tend to do the wrong thing financially when they are reacting to fear.  This is evident when so many are buying investments when prices are high and selling investments when prices are low. 

The National Association of Personal Financial Advisors (NAPFA) recently released “Pursuit of a Financial Advisor – Field Guide.  It provides advice on how to find a qualified independent financial advisor.  
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8
Mar

Planning requires allowing for flexibility

The March 8th issue of “The Wall Street Journal” contained articles that discussed, strategies for retirees, making a case for annuities and ultra short funds.  A reader of these articles will realize that there are numerous approaches and variables to having enough for retirement.  The approach to take depends on many factors including how you want to live in the future, life expectancy, risk tolerance and an infinite number of other factors. 

The need for flexibility appears throughout all the articles.  The need to periodically review what has occurred is implied. There is not one strategy or product that fits every situation all the time.  Circumstances change, health changes, financial markets change, business cycles occur, life events occur, geopolitical events occur, etc.

None of the articles discuss when the planning should begin.  Planning should start early.  Choices made in selecting a career impact your human capital.  That is, how much you can earn in a lifetime.  The stability of a career will impact a person’s tolerance for investment risk.  Risk includes not only incurring a loss, but also seeing investment values fluctuate. 

Generally rates of returns increase as risk increases.  The amount of risk that can be tolerated changes with time and experience.  Having a plan early in life, will aid in adjusting to the unlimited factors that impact how much someone has and how long it will last.  The plan provides a way to identify what needs to be changed.  That is, an effective approach will be flexible and need to be reviewed periodically.     

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