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How to retire well and well off |
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"If you buy a long-term care insurance policy, you want to get as close to what the true cost of care is today as you can. And make sure you have an inflationary rider because the experts say that with inflation, the cost of care today will double in 10 years, and potentially triple in 20 years. I would shoot for the moon and get lifetime coverage, say $140 a day with a 5 percent inflationary rider. That would be ideal."
The best line of defense is to have a good long-term
care policy, Rettick says. But according to AARP, about 25 percent
of all applications from ages 55 and above don't qualify because
of pre-existing conditions. One possible alternative is a modified
endowment contract, or MEC, a life insurance contract that is similar
to an annuity in terms of tax-deferred accumulation of your initial
premium. However, in an annuity, if the owner passes away during
the annuity's accumulation stage all deferred income taxes on growth
become due. MECs can avoid that by including a "rider" designed
to pass the entire account value to your beneficiaries income tax-free.
6. Annuities -- the path to retirement security.
Annuities often get a bad name, if only in the press, says Rettick, primarily because they're subject to ordinary income taxes, instead of lower capital gain treatment.
"But Albert Einstein said the eighth wonder of the world was the miracle of compounding interest," Rettick says. "So even after paying taxes, you're going to have more money to spend than if you had that money in the bank in a CD, where you're paying taxes every year on that interest. For money that you don't want at risk, this is an ideal account." Rettick advocates fixed indexed annuities which are tied to a popular equities index such as the S&P 500.
7. Investment management -- maximum returns, minimal taxes, fees
"When you go looking for a financial adviser, you'll find there are lots of different designations out there, some of which are important and some of which are not especially valid," says Rettick. "Look for somebody who is insurance and securities licensed. Your normal CFP doesn't understand Medicaid. If you ask somebody what he specializes in and he says, 'I help anybody age 20 to 100,' then he's a generalist, not a specialist. Find somebody who focuses on the pitfalls of retirement and the challenges of making sure your money lasts, especially if you have a catastrophic illness.
8. Tap your home's equity -- you've earned it
"Reverse mortgages once looked like a fad, but they are now endorsed by the government," says Rettick. "If you have a house that's worth $200,000 and it's debt free, that's a good thing. The bad part is that it's not generating any income. If you don't need any additional money, then leave it alone. But if someone needs to pay for long-term care or supplement his Social Security income, a reverse mortgage company will either provide a lump sum of 60 (percent) to 70 percent of the house value, or a monthly income stream that will last for life. Once that person passes away, the house is sold and the company recoups its investment plus interest. The balance goes to the heirs. However, in some situations, you might want to compare an equity line to a reverse mortgage, even though the equity line might have a high interest rate."
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