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Casual Articles - Opportunity Cost and Your Long Term Care Decision
Blogging has exploded in the last few years. It's not like it's a new phenomena, at least relatively speaking, because it's actually been around since the very beginnings of the world wide web. But what has changed, is that blogging is now being seen as a mainstream tool, and hence is increasingly being used by businesses to promote themselves. In a way, this is good, because it does mean that consumers are increasingly getting more and more information about products and services that they use on a regular basis.
If either Dick or Jane needs any form of long term care, the insurance company plan will pay them $3,900 a month for 50 months--$900 a month more than the traditional plan.
But here's the real kicker.
If Dick and Jane never need long term care, then the camp that doesn't b
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Dick and Jane are both age 65, recently retired and models of good health. They have ignored the long term care subject until recently. They just put Jane's mother, who is 88, into a nursing home. Talk about sticker shock! She is in a nice place, but Dick and Jane are not 100% certain that her assets will allow her to stay there for the rest of her life.
Consequently, they have been out looking at long term care for themselves. They figure they can afford to insure a portion of what it might cost them if they ever need some form of LTCI, so they are looking at a benefit of $3,000 a month. The premium is around $4,200 a year.
Here's a new concept that Dick and Jane must become accustomed to now that they are retired. They both had good jobs during their working years. If they ever wanted to buy anything, it was just a question of looking at their income to see if they could swing the purchase. Pretty straightforward.
Now that they are retired, most of their expenditures are going to come from investment returns on the assets they have accumulated, not income from working. So they need to understand the difference between premium cost and opportunity cost. Here's what I mean…
If they elect to buy this $4,200 a year long term care policy, the money has to come from somewhere. Chances are it's coming from the interest earned on perhaps a CD or an annuity. But there is an opportunity cost associated with paying the premiums from earnings on any asset.
Let's say they are going to pay this $4,200 from the interest on a CD they own which is earning 5.4% interest. Since interest is taxable, and assuming they are in a 15% tax bracket, they would have to have $91,300 in that CD to produce $4,200 after tax to pay the premium.
They can't spend the $91,300. It can't grow. Basically, they have "committed" $91,300 of their assets to pay the premium on their LTC policy. That's the one "job" of this $91,300. The premium may only be $4,200 a year, but the opportunity cost is $91,300.
Let's take a look at another of their alternatives. It's called asset based long term care. How it works will unfold as I provide the example and contrast below.
One approach to asset based long term care involves re-positioning $91,300 of Dick and Jane's CD to a combination long term care/life insurance policy plan with an insurance company. Here's what moving this money does for them…
The money on deposit with the insurance company grows at interest, but it is tax-deferred interest so the insurance company will not send them 1099s every year for an amount they have to pay tax on like the bank is required to do. In 10 years, assuming current rates, the $91,300 will grow to $127,000; in 20 years $161,000. The CD, remember, does not grow, as its job is to spin off interest to pay the annual $4,200 premium on the traditional LTCI plan.
If either Dick or Jane needs any form of long term care, the insurance company plan will pay them $3,900 a month for 50 months--$900 a month more than the traditional plan.
But here's the real kicker.
If Dick and Jane never need long term care, then the camp that doesn't bu
Billing Performance Index (BPI) in March 2007 underperformed its February value by another 1.3%, dropping the index from 17.6 down to 18.9, while replacing three of BPI participants in February on the list of top ten performers. Chiropractic Billing Performance Index guides chiropractic office managers and helps the development of both chiropractic billing software and billing performance standards. This article describes the 10-th iteration of a rule-based chiropractic billing index, including its coverage defi
Consequently, they have been out looking at long term care for themselves. They figure they can afford to insure a portion of what it might cost them if they ever need some form of LTCI, so they are looking at a benefit of $3,000 a month. The premium is around $4,200 a year.
Here's a new concept that Dick and Jane must become accustomed to now that they are retired. They both had good jobs during their working years. If they ever wanted to buy anything, it was just a question of looking at their income to see if they could swing the purchase. Pretty straightforward.
Now that they are retired, most of their expenditures are going to come from investment returns on the assets they have accumulated, not income from working. So they need to understand the difference between premium cost and opportunity cost. Here's what I mean…
If they elect to buy this $4,200 a year long term care policy, the money has to come from somewhere. Chances are it's coming from the interest earned on perhaps a CD or an annuity. But there is an opportunity cost associated with paying the premiums from earnings on any asset.
Let's say they are going to pay this $4,200 from the interest on a CD they own which is earning 5.4% interest. Since interest is taxable, and assuming they are in a 15% tax bracket, they would have to have $91,300 in that CD to produce $4,200 after tax to pay the premium.
They can't spend the $91,300. It can't grow. Basically, they have "committed" $91,300 of their assets to pay the premium on their LTC policy. That's the one "job" of this $91,300. The premium may only be $4,200 a year, but the opportunity cost is $91,300.
Let's take a look at another of their alternatives. It's called asset based long term care. How it works will unfold as I provide the example and contrast below.
One approach to asset based long term care involves re-positioning $91,300 of Dick and Jane's CD to a combination long term care/life insurance policy plan with an insurance company. Here's what moving this money does for them…
The money on deposit with the insurance company grows at interest, but it is tax-deferred interest so the insurance company will not send them 1099s every year for an amount they have to pay tax on like the bank is required to do. In 10 years, assuming current rates, the $91,300 will grow to $127,000; in 20 years $161,000. The CD, remember, does not grow, as its job is to spin off interest to pay the annual $4,200 premium on the traditional LTCI plan.
If either Dick or Jane needs any form of long term care, the insurance company plan will pay them $3,900 a month for 50 months--$900 a month more than the traditional plan.
But here's the real kicker.
If Dick and Jane never need long term care, then the camp that doesn't b
Increasing yield - while maintaining an appropriate allocation - is often a difficult trick for trustees of living trusts. But one tool you can pull out of your kit is the “Dogs of the Dow,” a contrarian strategy designed to potentially increase yield and growth.First put forth by Michael O'Higgins in his 1991 book, “Beating the Dow”, the strategy itself is the model of simplicity. You select the 10 Dow stocks with the highest dividend yield and one year later rebalance to the new 10 with the highest yield.ave accumulated, not income from working. So they need to understand the difference between premium cost and opportunity cost. Here's what I mean…
If they elect to buy this $4,200 a year long term care policy, the money has to come from somewhere. Chances are it's coming from the interest earned on perhaps a CD or an annuity. But there is an opportunity cost associated with paying the premiums from earnings on any asset.
Let's say they are going to pay this $4,200 from the interest on a CD they own which is earning 5.4% interest. Since interest is taxable, and assuming they are in a 15% tax bracket, they would have to have $91,300 in that CD to produce $4,200 after tax to pay the premium.
They can't spend the $91,300. It can't grow. Basically, they have "committed" $91,300 of their assets to pay the premium on their LTC policy. That's the one "job" of this $91,300. The premium may only be $4,200 a year, but the opportunity cost is $91,300.
Let's take a look at another of their alternatives. It's called asset based long term care. How it works will unfold as I provide the example and contrast below.
One approach to asset based long term care involves re-positioning $91,300 of Dick and Jane's CD to a combination long term care/life insurance policy plan with an insurance company. Here's what moving this money does for them…
The money on deposit with the insurance company grows at interest, but it is tax-deferred interest so the insurance company will not send them 1099s every year for an amount they have to pay tax on like the bank is required to do. In 10 years, assuming current rates, the $91,300 will grow to $127,000; in 20 years $161,000. The CD, remember, does not grow, as its job is to spin off interest to pay the annual $4,200 premium on the traditional LTCI plan.
If either Dick or Jane needs any form of long term care, the insurance company plan will pay them $3,900 a month for 50 months--$900 a month more than the traditional plan.
But here's the real kicker.
If Dick and Jane never need long term care, then the camp that doesn't b
A press release is a statement written in the third person that is distributed to the media, articulating to a journalist or editor how and why a particular person, company, event, product or service is newsworthy.Press releases conform to a short but established cookie-cutter format. They are emailed, faxed or snail mailed to media including newspapers, radio and television stations. A press release is not written to be read by consumers. Target readers are reporters, editors and news directors – those who de
They can't spend the $91,300. It can't grow. Basically, they have "committed" $91,300 of their assets to pay the premium on their LTC policy. That's the one "job" of this $91,300. The premium may only be $4,200 a year, but the opportunity cost is $91,300.
Let's take a look at another of their alternatives. It's called asset based long term care. How it works will unfold as I provide the example and contrast below.
One approach to asset based long term care involves re-positioning $91,300 of Dick and Jane's CD to a combination long term care/life insurance policy plan with an insurance company. Here's what moving this money does for them…
The money on deposit with the insurance company grows at interest, but it is tax-deferred interest so the insurance company will not send them 1099s every year for an amount they have to pay tax on like the bank is required to do. In 10 years, assuming current rates, the $91,300 will grow to $127,000; in 20 years $161,000. The CD, remember, does not grow, as its job is to spin off interest to pay the annual $4,200 premium on the traditional LTCI plan.
If either Dick or Jane needs any form of long term care, the insurance company plan will pay them $3,900 a month for 50 months--$900 a month more than the traditional plan.
But here's the real kicker.
If Dick and Jane never need long term care, then the camp that doesn't b
I am writing this to shed some light on the complex (and somewhat confusing) topic of credit repair. This is chapter 1 in a series of credit repair, credit monitoring and credit FAQ reports.Credit. The one thing so many companies are willing to give out to the doe-eyed 18 year old highschool grad and so unwilling to give out to the individual who make a few mistakes later on down the road.Credit has been around since the dawn of commerce. Although, when Caveman Ogg couldn't make his minimum monthly
If either Dick or Jane needs any form of long term care, the insurance company plan will pay them $3,900 a month for 50 months--$900 a month more than the traditional plan.
But here's the real kicker.
If Dick and Jane never need long term care, then the camp that doesn't buy it would have been right. If Dick and Jane bought the traditional long term care plan, in 10 years they would have paid out $42,000 in premiums and about $7,400 in taxes on their CD interest in order to net out the required premium. That's a total of $49,700. The $91,300 portion of their CD would still be $91,300.
However, if Dick and Jane never need long term care, chose the asset based long term care plan and both die, for example in 10 years, the outcome is different. They have paid no annual premiums and the life insurance company will pay about $198,000 tax free to their kids.
Which sounds like a better plan?
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