Cornerstone

Happy Birthday, ERISA

Thirty-one years ago today, President Gerald R. Ford signed into law the Employee Retirement Income Security Act (ERISA) of 1974.  As with most laws passed by Congress, there were perceived and actual abuses in the system surrounding retirement plans of businesses.  This law was passed to provide guidance, rules of law, and other procedures for employers to follow when establishing, operating, and terminating retirement plans for their employees.  ERISA has evolved over time as the market conditions for providing retirement plan options has changed.  ERISA is still being tested by all of these market changes.  ERISA is generally governed and monitored by the Department of Labor, the Internal Revenue Service and the Court system.  The watchdogs exact the cost or penalty for not following ERISA's rules.

We wish ERISA well, and another thirty plus years of employee retirement system protection.  May it continue to provide reasonable guidance to ensure that our retirement assets are protected in prudent environments.

Long Term Care. . .As Important as Savings?

In a recent retirement planning meeting, my client was alarmed when our conversation approached their health, health insurance and long-term care insurance..."What's that got to do with retirement?"

My response, "Everything!"

Rising health costs should alarm all of us as we consider our retirement nest egg and whether we have "enough" to retire.  Health care costs have increased in our area generally by about 15% this past year.  If that trend were to continue, most Americans do not have adequate savings to cover a major health care concern during their retirement days and continue their lifestyle.

If we don't have enough saved or can't get enough saved, what should we do?

Consider purchasing a long-term care insurance policy today.  I think of LTC as risk management...in the future if something where to happen to my health and the costs were significant, what impact would that have on my savings and would those costs impact my lifestyle or treatment?

According to the National Association of Insurance Commissioners, in 2001, the national average cost for nursing home care was $56,000 per year.  If the average length of stay in a nursing home was 3.5 years, a person would use $168,000 of their savings.  The same study reported the national average cost of part-time basic home care ranged from $12,000 to $16,000 per year.  If a person were able to live their last 8 years at home but needed assistance, the cost would be $96,000 to $128,000...keep in mind these are based on 2001 costs and health costs have risen steadily since then.

Like many insurance policies, LTC is more affordable when purchased at an earlier age...if you don't own a LTC policy and you're 50 years old or older, meet with your advisor soon to review your retirement plan and the impact a health issue could have on your retirement nest egg.  Generally, individuals and their families pay for part or all of the costs of long-term care from their own funds...with most using savings, investments and in many cases the proceeds from the sale of their homes.

Be prepared by making sure that all aspects of your life are considered in your retirement plan!  When you're 50 and healthy it's difficult to see the value in purchasing a LTC policy, however, your family members will appreciate your responsible actions knowing that you have made the appropriate arrangements for your health care concerns.