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Financial Literacy - Insurance
MONEY MAKEOVER
Filling the health insurance gap
Many couples in their 50s and early 60s must get health insurance coverage until Medicare kicks in.
Understanding insurance needs
 
Profile: Jim Miller
The problem:
COBRA coverage is due to expire; the Millers' portfolio is too conservative.
The plan:
Work part time to get insurance benefit; reposition portfolio for some growth.
 
  Profile
Jim Miller

Jim, 63, retired in the middle of 2006. Jim's wife Sandra, 54, was still working at that time and was providing the family's health insurance. Sandra was initially diagnosed with multiple sclerosis in 1990. Unfortunately, Sandra's M.S. progressed after Jim retired until she was no longer able to work by September 2006. Jim then took COBRA medical benefits through his former employer at that time so that the family would not be without health insurance. This COBRA medical coverage currently costs $1,250 per month and the ability to purchase it will expire in the spring of 2008. Sandra is uninsurable on the private insurance market due to the M.S.

 
  The problem

Overview

Jim's current Social Security income is $1,450 per month. The Millers have no other pensions or sources of ongoing monthly income. Jim and Sandra have $625,000 in taxable investments and $175,000 in tax-deferred assets. Additionally, Jim has set aside $30,000 in a savings account to supplement his Social Security income. Currently they are attempting to live on $3,000 per month, so the $30,000 reserve that is providing the additional $1,550 per month to supplement Social Security will be used up in about 20 months.

The Millers' house is paid off and they have no other debt. All investments are very conservative and income-oriented. Jim is uncomfortable with taking risks with his investments.

Read more  


Richard Salmen
This report was prepared by Chartered Financial Analyst Richard Salmen, CFP, Enrolled Agent.

Key issues

Lack of affordable health insurance options
Concern about outliving retirement assets
Possible need to go back to work
Investments may be invested too conservatively to meet long-term needs
Jump these money hurdles




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