Experts advise planning to have 80 to 90

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1 Life & Health Insurance Advisor MRCT Benefits Plus is a comprehensive employee benefits, wellness and Human Resources consulting firm offering a variety of financial services to businesses and individuals Retirement Planning January 2011 Volume 5 Number 1 New Year s Resolution #1: Save for Retirement! A new year is the perfect time to fine-tune your personal financial plan. Some of the important retirement plan information you ll need for 2011 follows. Experts advise planning to have 80 to 90 percent of your annual pre-retirement income available during your retirement years. How much do you really need to save? The most recent figures from the U.S. Centers for Disease Control (CDC) estimate life expectancy at 77.9 years (75.4 years for males; 80.4 for females). However, if you re using this figure to calculate your income needs in retirement, you could find yourself seriously underfunded. The 77.9 figure is life expectancy at birth, which includes those who die in infancy, childhood and young adulthood. But if you survive to age 65, males can expect to survive another 17.0 years (to age 82), while females can expect another 19.7 years (to age 84.7). If you re still working, now is the time to step 230 S. Bemiston; Suite 900 Clayton, MO (314) FAX (314) up your savings! Following are contribution limits for (k)s: If your employer has a 401(k) or 403(b) plan, you can contribute up to $16,500 in If you are 50 or older, you can make an additional catch-up contribution of $5,500. Taking full advantage of your employer s plan makes good economic sense, particularly if your employer makes matching contributions. However, 401(k)sand 403(b)s cannot discriminate in favor of highly compensated employees. During 2010, some higher-income individuals found they could not contribute the maximum to their employer s 401(k) because not enough lower-income employees participated to meet the legal nondiscrimination rules. Consider having a back-up strat- This Just In Better transitional care could prevent about 4.5 unnecessary rehospitalizations, at a savings of about $44 billion per year, according to an editorial published in the Annals of Internal Medicine. The author, Stephen F. Jencks, MD, MPH, reported approximately 2.5 million Medicare beneficiaries and 2 million other patients are re-admitted to the hospital within 30 days of discharge. Studies have found that improving the transition from hospital to posthospital care has reduced rehospitalizations by 30 to 50 percent. A survey of published studies by the Institute for Healthcare Improvement considered four types of interventions to reduce rehospitalizations: 1) enhanced care and support during transitions; 2) improved patient education and self-management support; 3) multidisciplinary team management;

2 Retirement Planning egy if your employer s plan was forced to return some contributions made for 2010 or if weak economic conditions discourage lowerpaid workers at your organization from participating in your company s 401(k) or 403(b) plan. For suggestions, please contact us. Traditional and Roth IRA Contribution and Deductibility Limits: You can contribute up to $5,000 or the amount of your taxable compensation for the year to a traditional IRA and/or Roth IRA, for a maximum combined limit of $5,000. If you are 50 or older before the end of 2011, you can contribute up to $6,000 or the amount of your taxable compensation for Again, this limit can be split between a traditional IRA and a Roth IRA. Please note, the ability to contribute to a Roth IRA depends on your modified adjusted gross income (AGI). If you are filing as single, head of household or married filing separately and you did not live with your spouse at any time during the year, the maximum contribution begins dropping once your income reaches $107,000 and is eliminated at incomes of $122,000 or more. Those married filing separately who lived with their spouse at any time during the year can contribute up to $5,000 if they had no income. If their income ranged from $1=$9,999, their maximum contribution is reduced. Those married filing jointly or qualifying widow(er)s can contribute up to the limit if their modified AGI is less than $169,000. At modified AGIs of at least $169,000 but less than $179,000, they can make a reduced contribution. Once modified AGI reaches $179,000 or more, they cannot contribute to a Roth IRA. No income limits apply to a traditional IRA. However, your modified AGI affects how much of your contribution you can deduct from taxable income. For those covered by a retirement plan at work, the deduction begins phasing out once your modified A G I e x - c e e d s $ 5 6, for single or headof-household filers and at $90,001 for married filing jointly or qualifying widow(er)s. Those not covered by a retirement plan at work can deduct the full amount of the maximum contribution unless you are married filing jointly with a spouse who is covered by a plan at work. In that case, you can take a full This Just In and 4) patient-centered care planning at the end of life. The survey s authors found promise in a variety of approaches, including close coordination of care in the post-acute period, early post-discharge follow-up, enhanced patient education and self-management training, proactive end-of-life counseling, and extending resources and clinical expertise available to patients over time via multidisciplinary team management. For information on disease management and other services covered by your health insurance policy, please contact us. deduction for modified AGIs of $169,000 or less, a partial deduction if your modified AGI is between $169,001 and $178,999, and no deduction once your modified AGI reaches $179,000 or more. Social Security: Individuals who are already retired might have to do some belttightening this year. For only the second year since 1975, Social Security benefits will not increase due to inflation, meaning your monthly benefit will remain the same. For more information on fine-tuning your retirement savings plan, please contact us.

3 Medical Plans Your Medical Financial Plan for 2011 No financial plan is complete without considering your medical needs. Having enough medical insurance can make the difference between meeting your medical bills and financial ruin if you or a family member experiences a serious illness or injury. Taking advantage of tax-advantaged savings accounts can provide a further financial cushion. A study of bankruptcies published in the American Journal of Medicine found that medical bills caused 62 percent of bankruptcies in 2007 (before the worst of the financial meltdown hit), up from 46 percent in The study reported, Most medical debtors were well educated, owned homes, and had middle-class occupations. Three quarters had health insurance. The study defined a medical bankruptcy as 1) medical debts of more than $5,000, or 10 percent of pretax family income, or 2) losing significant income due to illness, or 3) mortgaging a home to pay medical bills. When you consider your family s financial needs, don t forget to include insurance and medical costs in the equation! Here are some important facts to consider as you plan your 2011 expenditures. Archer Medical Savings Accounts (MSAs): If you have an Archer Medical Savings Account, your costs will increase. The minimum annual deductible for an MSAlinked qualifying high-deductible health plan increases to $2,050 ($4,100 for family coverage), and the maximum annual deductible increases to $3,050 ($6,150 for family coverage). Maximum out-of-pocket expenses increase to $4,100 ($7,500 for family coverage), up from $4,050 ($7,400 for family coverage) in In addition, you can no longer use an Archer MSA to pay for nonprescription medicines, unless they are prescribed. Health Savings Accounts (HSAs): For 2011, the maximum you can contribute to an HSA remains at $3,050 for self-only coverage and $6,150 for family coverage. The good news is the minimum deductible under your high-deductible health plan linked to the HSA won t change either holding steady at $1,200 for single coverage and $2,400 for family coverage for this year. Your maximum out-of-pocket expense, including deductibles, will also stay the same $5,950 for single coverage and $11,900 for family coverage. Starting this year, HSA account holders can no longer use HSA funds to pay for nonprescription medicines, except insulin, unless they are prescribed. Flexible Savings Accounts (FSAs): Currently, individuals whose employer offers an FSA can take as much as they want out of their pre-tax salary or as much as their employer allows and deposit it into a FSA each year. The catch, of course, is they must use it or lose it by the end of the year. Most employers who limit FSA contributions have capped them at $5,000. Starting in 2013, the PPACA healthcare reform legislation will put a cap of $2,500 on FSA contributions, with increases in subsequent years indexed to inflation. Individuals who are considering a major elective procedure that might not be fully covered by insurance, such as orthodonture, LASIK or lap-band surgery, might want to take advantage of the higher FSA contributions available in 2011 and As with MSAs and HSAs, FSAs can no longer cover nonprescription medicines starting in 2011, unless a healthcare provider prescribes them.

4 Life Insurance Life Insurance Benefits for the Living For many people, a chronic condition such as heart disease or cancer starts a downward spiral of declining health and rising bills. A life insurance policy can help you improve end-of-life quality here s how. In a viatical settlement, a terminally ill policyholder sells his/her life insurance policy to investors through a viatical broker. Once investors purchase the policy, the insured (now the viator ) names them as beneficiaries and owners. The investors pay premiums and receive the death benefit when the viator dies. In return, the viator receives a lump sum payment ranging from 60 to 80 percent of the death benefit. This varies with the profit the investors think they can make. The longer a viator lives, the more premium payments they will have to make and the lower their profit. When entering into negotiations for a viatical settlement, the potential viator must be prepared to answer detailed questions about his/her medical condition. In a life settlement, those seeking to sell their life insurance policies are not necessarily ill; they are long-term policyholders who either cannot afford premium payments or think they don t need coverage anymore. Many are seniors who want to access the cash value built up in their policies. In a life settlement, an insured can expect to receive more Medicare: If you have (or will qualify for) Medicare this year and opt for Original Medicare, you probably will not pay a premium for Part A (hospital insurance). Most people over age 65 qualify for premium-free because they or a spouse had 40 or more quarters of Medicarecovered employment. For people with quarters of Medicare-covered employment, Part A premium will be $248 per month; for those with less than 30 quarters of Medicare-covered employment who are not otherwise eligible for premium free hospital insurance, premiums will be $450 per month. Part B (medical insurance) premiums will remain at the same level for people with incomes of $85,000 or less ($170,000 or less for joint filers). Higher-income individuals will pay more, mostly to offset the increased cost of providing more services. Social Security will use the income reported on your 2009 tax return to determine your monthly Part B premium in 2011, as listed in the chart on P. 2. Starting in 2011, Medicare will cover most preventive services with no deductible or coinsurance. Preventive services include services to prevent or detect illness at an early stage, such as Pap tests, flu shots, and screening mammograms. You pay the first $162 yearly for Part B-covered services or items (up from $155 in 2010). Open enrollment periods for Medicare Part C (Medicare Advantage) and Part D (prescription drug) for 2011 are past. However, if you will qualify for Medicare for the first time in 2011, please contact us for more information. Medicare Advantage and prescription drug plan premiums and benefits vary by plan and by region. We can help you compare the plans available to you.

5 Life Insurance than the policy s cash surrender value (or the amount the insurer would pay if the policy simply lapsed) and less than the death benefit (or face value). As with a viatical settlement, a specialized broker handles the transaction, and takes a commission from the amount an investor pays for your policy. Many policies include accelerated death benefits (or living benefits ) provisions that allow a policyholder to receive a significant portion of the death benefit before death. To qualify for accelerated death benefits, the insured must: Y Have a terminal illness, with death expected within 24 months. Y Have an acute illness that would result in a drastically reduced life span without extensive treatment. Y Have a catastrophic illness requiring extraordinary treatment, such as an organ transplant. Y Need long-term care due to being unable to perform a number of daily living activities, such as bathing, dressing or eating. Y Be permanently confined to a nursing home. (Source: American Council of Life Insurers, Many life insurance policies include accelerated death benefits or living benefits provisions at no additional charge. If your policy does not include this provision, you may be able to add it in a policy rider. A policyholder can expect to receive from 25 to 95 percent of the policy s death benefit as accelerated benefits. The payment you actually receive will vary according to policy terms, the policy s face value and the laws of your state. Some states limit the percentage of the death benefit that you can accelerate. You might have to pay the insurer a small service charge. One of the benefits of accelerated death benefits over viatical settlements or life settlements is that you will be dealing with an insurer you already know and trust, an organization subject to rigorous regulation and consumer protection laws in all 50 states. Policy loans offer another option to the owner of a permanent life insurance policy. If your policy has built any cash value, you can borrow up to that amount from the insurer at the interest rate specified in the policy. If you die before repaying the loan, the insurer will subtract the loan amount, plus accumulated interest, from the benefit payable to your beneficiaries. A policy loan offers the further advantage of letting you keep your policy in force. For more information, please contact us.

6 Life Insurance The Consequences of Cashing Out a Life Insurance Policy Early Before negotiating either a viatical or life settlement or taking accelerated death benefits from a life insurance policy, consider the financial consequences carefully. The passage of the Health Insurance Portability and Accountability Act of 1996 made proceeds from viatical settlements or accelerated death benefits fully excludable from income under certain circumstances. First, a physician must certify the insured is terminally ill or has a condition reasonably be expected to result in death in 24 months or less. Accelerated death benefits paid on behalf of individuals who are certified as chronically ill are also excludable from income to the same extent they would be if paid under a qualified long-term care insurance contract. However, life settlement payments may be counted as taxable income. Although amounts you receive from viatical settlements or accelerated death benefits don t count toward your taxable income, they could be considered income when determining your Medicaid eligibility. For someone needing nursing home or hospice care, that could be an important point. Second, certain circumstances may prevent you from accelerating benefits or changing the beneficiary of your policy as required in a viatical or life settlement. For instance, a divorce decree or court-approved property settlement could prevent you from changing your policy beneficiary. Finally, although you might be able to use your life insurance policy to enhance end-of-life quality, don t rely on your life insurance policy to take the place of a good long-term care policy. Long-term care insurance is specifically designed to help insureds pay for end-of-life care when needed. Life & Health Insurance Advisor The information presented and conclusions within are based solely upon our best judgment and analysis. It is not guaranteed information and does not necessarily reflect all available data. Web addresses are current at time of publication but subject to change. This material may not be quoted or reproduced in any form without publisher s permission. All rights reserved Smart s Publishing. tel