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Ask a Lawyer Episode 2 – Financial Professional Yaakov Berman on Preparing for Financial Hurdles

Christine: Hello everyone, this is Christine Matus from the Matus Law Group, and we have a special guest with us today. It’s Yaakov Berman with Lee Nolan and Corey Glynn, LLC, a member of the Mass Mutual Financial Group. He works with many local families in preparing for financial hurdles down the road.

Yaakov, why are people so concerned about the rising cost of care as they age?

Yaakov: Folks are making significant investments into enjoying their senior years, so it’s important to protect that quality of life. Also, anyone who’s ever been involved in caring for an aging parent is well aware of the associated costs. Proper preparation can take much of the burden off your children and grandchildren. Being financially prepared to address these costs will also provide more options on where to receive care, and that can improve the quality of care

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Christine: At what age do people begin having this conversation?

Yaakov: A lot of people look at this in their early fifties when they start looking at retirement. The cost of care is probably the single greatest threat to retirement accounts, so it should be an essential component in retirement planning. Folks who are particularly concerned with associated costs, may want to begin earlier.

Christine: Does everyone need to do long-term care planning?

Yaakov: It’s important and is a quality of life decision everyone deserves to make on their own. Get all the information before deciding what’s right for you. There are specific needs when it comes to protecting assets, especially in a special needs situation. It’s mainly about preserving quality of life for as long as possible.

Christine: You said needs. What are the specific needs you meant?

Yaakov: In the case of someone who has substantial assets, you might want those assets protected from going towards the cost of care. In the case of a special needs situation, you may have a strategy in place to fund a special needs child. However, you wouldn’t want the cost of your care taking away from what is designated for that child.

Christine: That’s the focus of what we do at our firm, so that’s excellent information. Let me ask, what’s covered with Medicare?

Yaakov: After a three-day hospital stay, Medicare will cover the first 20 days in a skilled nursing care facility. For the next 80 days, it will cover all but $157.50 per day, and after 100 days it won’t cover anything. Medicaid will only cover care for someone with an acute illness, which are usually short term. Conditions such as arthritis and Alzheimer’s are not covered. You can become eligible, and it spends out all but $2,000 worth of assets. But, proper planning can delay entirely, or at least put off making that choice.

Christine: What are some of the costs related to long-term care?

Yaakov: According to Genworth, who did a study using a specific scenario, the median monthly costs in our area for homemaker services is north of $4,000 monthly. A private room in an assisted facility is north of $5,000. A semi-private room in a nursing facility is north of $10,000 monthly. According to a study conducted in 2017 by the Bipartisan Policy Center, people who are 65 today can expect to incur $138,000 in long-term care costs. A similar study conducted by Fidelity in 2016 estimates that a couple who retired that year will need $260,000 to cover healthcare costs in retirement.

Christine: Are those prices expected to remain stable, or will they grow with inflation?

Yaakov: With healthcare, in general, you need to factor inflation which historically has been between three and 5%, and Genworth assumes 3% in their projections. So, a semi-private room which today would cost $10,000 monthly, would be $18,000 in 20 years, and over $24,000 in 30 years. That same Fidelity study said $245,000 was needed for healthcare in 2015. That’s a 6% increase in just one year.

Christine: What caused that increase?

Yaakov: Several factors, but primarily, an uptick in utilization of medical services and rising drug costs.

Christine: Are there other factors you see that could affect the cost of health care in the future?

Yaakov: Life expectancy is on the rise. As baby boomers begin to age, the demand for care will rise dramatically, which can affect the costs. In 2010, 40 million Americans were age 65 or older. By 2050, that number is expected to jump to 88 million. The number of people 85 and older is also predicted to jump dramatically. It’s the frail elderly group most likely to need long-term care. In 2010, there were 5.5 million of these older people, but by 2050 there will likely be 19 million.

Christine: What are the chances of needing care before reaching an advanced age?

Yaakov: According to the Robert Wood Johnson Foundation, 43% of those needing care are under 65.

Christine: What is considered, “needing care”?

Yaakov: There may be different, specific qualifications, but the general definition is, when a person, as a result of illness or disability, is unable to perform basic daily tasks.

Christine: what are common objections you hear when trying to do proper long-term care planning?

Yaakov: Many people are scared away by the cost. Others are under the misconception that their health insurance has provisions for care. Again, while it’s true that Medicare does cover many health-related expenses in retirement, long-term care costs are generally not. Some people are afraid of what it may cost them to prepare. But it’s costly not being prepared and can cost a whole lot more.

Christine: What else is important to discuss?

Yaakov: Estate planning, which can be very complicated. It involves making sure you have a proper will in place, as well as a health care proxy and other legal documents. There may be trusts that need to be reviewed or drafted, as well as a review of any life insurance coverage. It’s important to make sure all beneficiaries are up to date as well.

Christine: How do folks get all this done?

Yaakov: Work with a financial professional and a good attorney, such as yourself, who can help people navigate important decisions. There’s a great guide called, “What My Loved Ones Need to Know” available, and I sent a number of copies to your office. I’m happy to provide a copy to anyone, free of charge.

Christine: How can you be reached?

Yaakov: My email is yberman@financialguidecom, and my phone number is 848-242-4332.

Christine: Our guest is Yaakov Berman with Lee Nolan and Corey Glynn, LLC, a member of the Mass Mutual Financial Group. This is Christine Matus from the Matus Law Group, and we protect assets for our families and provide unique solutions for unique families. You can reach us at 732-281-0060, with offices in Toms River and Red Bank, New Jersey.

Mass Mutual Financial Group is the marketing name for Mass Mutual Life Insurance Company and its affiliated companies and sales representatives. Estate planning services are provided to work in conjunction with your estate planning attorney, tax attorney, and/or CPA consultant for specific advice on legal and tax matters.

Christine Matus

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