Should Older Millennials Buy Life Insurance?

We’re all going to die someday. That’s one of the only certainties in life, along with taxes. However, a recent study by Budget Insurance found that 82% of millennials don’t know the purpose of life insurance—despite the fact they’re aging, starting families and dealing with more complex financial situations.

Forbes’ article, “Why Older Millennials Need To Start Taking Life Insurance Seriously,” notes that, although most millennials may not have given life insurance much thought before, it’s now time to begin taking life insurance and other estate planning more seriously. To help with this, more companies are starting to take millennials seriously, when it comes to financial matters. The result? It’s getting easier than ever before to get life insurance.

Life insurance is used to protect your family financially, in case of your death. That is important for millennials who are starting families that depend on them financially.

According to Pew Research, 60% of families depend on dual incomes and just 31% of families rely on a single income.  A total of 91% of families in the U.S. require the income of at least one spouse to survive. However, what happens if one (or both) die? That’s where life insurance comes into play.

Because millennials are still relatively young, getting life insurance is very cost effective. In addition, for the vast majority of millennials, a simple term life insurance policy will do the job.

Term life policies are very inexpensive and can be a financial relief, if they’re ever actually needed.

It’s possible to get a $1,000,000 term life insurance policy for about $40 per month, depending on your age and health. That is quite a bit of insurance for little expense.

With the increase in millennials who require life insurance, many insurance companies are making buying life insurance very easy.

These companies have online or app-based solutions that focus on speed and ease of use. These companies leverage technology and keep human interaction to a level that most millennials like.

Reference: Forbes (January 26, 2019) “Why Older Millennials Need To Start Taking Life Insurance Seriously”

Suggested Key Terms: Estate Planning, Life Insurance, Millennials

What Doesn’t Medicare Cover?

Medicare Part A and Part B are also known as Original Medicare or Traditional Medicare. These two parts cover a large portion of your medical expenses, after you turn age 65. Part A is hospital insurance that helps pay for inpatient hospital stays, stays in skilled nursing facilities, surgery, hospice care and even some home health care.

Part B is your medical insurance that helps pay for doctors’ visits, outpatient care, some preventive services and some medical equipment and supplies. Most seniors can enroll in Medicare three months before the month they turn 65.

Kiplinger’s article, “7 Things Medicare Doesn’t Cover,” takes a closer look at what isn’t covered by Medicare, plus information about supplemental insurance policies and strategies that can help cover the additional costs, so you don’t wind up with unanticipated medical bills in retirement.

Prescription Drugs. Medicare doesn’t provide coverage for outpatient prescription drugs. However, you can purchase a separate Part D prescription-drug policy for that or a Medicare Advantage plan that covers both medical and drug costs. You can sign up for Part D or Medicare Advantage coverage, when you enroll in Medicare or when you lose other drug coverage. You can switch policies during open enrollment each fall.

Long-Term Care. Medicare provides coverage for some skilled nursing services but not for custodial care. That includes things like help with bathing, dressing and other activities of daily living. However, you can purchase LTC insurance or a combination long-term-care and life insurance policy to cover these costs.

Deductibles and Co-Pays. Part A covers hospital stays and Part B covers doctors’ services and outpatient care. Nonetheless, you have to pay out-of-pocket for deductibles and co-payments. Note that over your lifetime, Medicare will only help pay for a total of 60 days beyond the 90-day limit (“lifetime reserve days”). After that, you’ll pay the full hospital cost. Part B typically covers 80% of doctors’ services, lab tests and x-rays. However, you must pay 20% of the costs, after a $183 deductible (in 2018). A Medigap (Medicare supplement) policy or Medicare Advantage plan can fill in the gaps, if you don’t have the supplemental coverage from a retiree health insurance policy. If you purchase a Medigap policy within six months of signing up for Medicare Part B, insurers can’t reject you or charge more because of preexisting conditions. Medicare Advantage plans have medical and drug coverage through a private insurer. They also may also provide additional coverage, like vision and dental care. You can switch Medicare Advantage plans annually in open enrollment.

Most Dental Care. Medicare will not provide coverage for routine dental visits, teeth cleanings, fillings, dentures or most tooth extractions. There are Medicare Advantage plans that cover basic cleanings and x-rays, but they usually have an annual coverage cap of about $1,500. You could also get coverage from a separate dental insurance policy or a dental discount plan.

Routine Vision Care.  Medicare doesn’t cover routine eye exams or glasses (exceptions include an annual eye exam, if you have diabetes or eyeglasses after certain kinds of cataract surgery). However, some Medicare Advantage plans give you vision coverage, or you may be able to purchase a separate supplemental policy that provides vision care alone or includes both dental and vision care. If you saved money in a health savings account before you enroll in Medicare, you can use the money tax-free at any point for glasses, contact lenses, prescription sunglasses, and other vision care out-of-pocket expenses.

Hearing Aids. Medicare doesn’t cover routine hearing exams or hearing aids, but some Medicare Advantage plans cover hearing aids and fitting exams, and some discount programs provide lower-cost hearing aids.

Medical Care Overseas. Medicare usually doesn’t cover care you receive while traveling outside of the U.S., except for very limited situations (like on a cruise ship within six hours of a U.S. port). However, Medigap plans C through G, M, and N cover 80% of the cost of emergency care abroad with a lifetime limit of $50,000. There are some Medicare Advantage plans that cover emergency care abroad. Another option is to purchase a travel insurance policy that covers some medical expenses, while you’re outside of the U.S.

Reference: Kiplinger (May 23, 2019) “7 Things Medicare Doesn’t Cover”

Suggested Key Terms: Medicare, Retirement Planning, Long-Term-Care, Life Insurance, Medigap, Health Savings Account (HSA)

How Can I Goof Up My Estate Plan?

There are several critical errors you can make that will render an estate plan invalid. Many of these can be easily avoided, by examining your plan periodically and keeping it up to date.

Investopedia’s article, “5 Ways to Mess Up Estate Planning” gives us a list of these common issues.

Not Updating Beneficiary Designations. Be certain those to whom you intend to leave your assets are clearly named on the proper forms. Whenever there’s a life change, update your financial, retirement, and insurance accounts and policies, as well as your estate planning documents.

Forgetting Key Legal Documents. Revocable living trusts are the primary vehicle used to keep some assets from probate. However, having only trusts without a will can be a mistake—the will is the document where you designate the guardian of your minor children, if something should happen to you and/or your spouse.

Bad Recordkeeping. Leaving a mess is a headache. Your family won’t like having to spend time and effort finding, organizing and locating your assets. Draft a letter of instruction that tells your executor where everything is located, the names and contact information of your banker, broker, insurance agent, financial planner, attorney etc.. Make a list of the financial websites you use with their login information, so your accounts can be accessed.

Faulty Communication. Telling your heirs about your plans can be made easier with a simple letter of explanation that states your intentions, or even tells them why you changed your mind about something. This could help give them some closure or peace of mind, even though it has no legal authority.

Not Creating a Plan. This last one is one of the most common. There are plenty of stories of extremely wealthy people who lose most, if not all, of their estate to court fees and legal costs, because they didn’t have an estate plan.

These are just a few of the common estate planning errors that happen. For more information on how to be certain your assets will be dispersed according to your wishes, talk with a qualified estate planning attorney.

Reference: Investopedia (September 30, 2018) “5 Ways to Mess Up Estate Planning”

Suggested Key Terms: Estate Planning Lawyer, Wills, Guardianship, Revocable Living Trust, Probate Court, Inheritance, Beneficiary Designations, Transfer on Death (TOD) Accounts, Letter of Instruction, Executor

When Do I Need a Power of Attorney?

Estate planning is important. Signing a power of attorney can be essential for those seeking to safeguard their financial resources and other assets.

The Tri-County Times explains in its article, “Power of attorney protects loved ones,” that a POA is granted to an “attorney-in-fact” or “agent.” It gives that individual the legal authority to make decisions for an incapacitated “principal.” The laws for creating a power of attorney vary based on the state.  However, there are some general similarities.

Many people think their families will be able to intercede, if an event occurs that leaves them incapacitated and unable to make decisions for themselves. That’s not always true. If a person isn’t named as an agent or granted legal access to financial, medica, and other information, family members may be left out. Further, the government may appoint someone to make certain decisions for an individual, if no POA is named.

Almost everyone can benefit from establishing a power of attorney.

A signed power of attorney will remove the legal obstacles that may arise in the event that a person is no longer physically or mentally capable of managing certain tasks.

A power of attorney is a broad term that covers a wide range of decision-making. The main types of POA are a general power of attorney, health care power of attorney, durable power of attorney and special power of attorney.

The responsibilities of some of these overlap, but there are some legal differences. For instance, a durable power of attorney relates to all the appointments involved in general, special and health care powers of attorney being made “durable”—meaning that the document will remain in effect or take effect if a person becomes mentally incompetent.

Certain powers of attorney may expire within a certain time period.

An agent appointed through POA may be able to handle many tasks, depending on what powers are granted in the document. They include banking transactions, filing tax returns, managing government-supplied benefits, deciding on medical treatments and executing advanced health care directives.

Although a power of attorney document can be completed on your own, sitting down with an experienced estate planning attorney is preferred to better understand the intricacies of this vital document and ensuring that it will be legally binding and properly prepared.

Reference: Tri-County (MI) Times (January 24, 2019) “Power of attorney protects loved ones”

Suggested Key Terms: Estate Planning, Power of Attorney, Healthcare Directive