Karina Moretz, ChFC®, shares her story of how Renters Insurance saved them thousands.

Pre-Insurance

Once upon a time I was a young, newlywed. Like many young couples, we started off our  married life with few possessions. In fact, we could fit everything they owned in our car. My husband was just beginning his Navy career and we were new to the state. 

When signing the lease for our first apartment, it was recommended (but not required) we purchase renters insurance. Money was very tight for us. I wanted to get it. We were adults now and it was the adult thing to do, right? My husband was against it since we didn’t have many possessions. First married argument right off the bat. 

Guess who won the argument? It wasn’t me. 

We made the decision to not purchase a renters insurance policy. 

That’s right, the wife didn’t win. Hey husbands, keep reading, there’s more to the story. 

For the next 18 months we worked our jobs and saved up money for our first “adult” purchase. A bed. We had been sleeping on an air mattress for six months before we had enough money saved to purchase a bed. What a wonderful sleep that first night was! A few months later we purchased a sofa. Goodbye camping chairs! A few more months and we had a dining table and chairs. It felt pretty good doing this “adulting” thing. 

After living in our apartment for a little over a year, we moved out of state and rented our second apartment. This one required renters insurance. I was happy to purchase a policy since we had more things. My husband, not so much. He looked around our home and didn’t believe the total of what we owned was really that much, even with the new furniture. He felt that if something did happen, we could easily replace the items over time just as we had done the previous year. 

Since it was a requirement to have renters insurance there was no argument. But I’m pretty sure I would have lost.

Post-Insurance

Since renters insurance was required, we purchased a small policy. By bundling it with our auto insurance we received a discount…. In the same amount of what the renters insurance policy cost each month. Ironic? I thought so. 

Six months later, we were traveling halfway across the country to visit our family. Five days into our visit, we woke to a 2:00 AM call from our property manager. There had been a fire at our apartment complex and they were contacting each resident. We cut our trip short and spent the next two days driving back home not knowing what we would find. 

Upon arrival, we discovered the entire building was destroyed. Three floors – twelve units. The third floor was entirely gone. The rest was rubble and frame. A total and complete loss.

Thankfully, no one was hurt in the fire. The complex had no space to transfer the twelve families and all the apartments in the area had waiting lists greater than two months. Where would we live? Where would we stay while waiting for a new apartment? How could we afford to live in a hotel for such a long time? This was before AirBnB’s existed.

After contacting our insurance provider, we learned our hotel and food would all be covered. That sounded great – almost like a free staycation!

Three days into eating out for ALL our meals, we were over it. We really missed vegetables. 

We detailed our possessions and the insurance company cut us a check. As exciting as a huge shopping spree for your home sounds, it was not fun. It was exhausting and emotionally draining. You don’t realize how expensive it is to outfit a kitchen and purchase a full set of linens and towels until you have to buy it all at once.

While I am so very thankful we were not home when the fire happened, there were still so many emotions in the aftermath of the fire. It took months to feel like I was somewhat emotionally recovered. I can’t imagine how much worse it would have been if we hadn’t had renters insurance. If we had no money to pay for the hotel or food all those weeks. If we had to outfit our apartment without the funds to do so. We did NOT want to go back to sleeping on an air mattress. 

Lessons Learned

Going through the process I quickly realized how “we don’t have much” is 100% wrong. I routinely thrift things for my home, especially my children’s clothing. And while thrifting is great, it doesn’t work when you need to quickly replace an entire room or home of basic items.

If you lost every piece of clothing you own and needed to replace a small basic wardrobe you wouldn’t have time to thrift, or even wait for a sale, to get everything you need. You’re at the mercy of what is in stock and the price at that time. My fire experience happened pre-Amazon days, so online shopping was nothing like it is now. Remember when Amazon was just books?

We are now both 100% on the same page about me always being right and him needing to listen having insurance coverage for all areas we need it. Health, auto, life, home, liability. No more (insurance) arguments. 

So get the insurance coverage you need. It might not be as expensive as you think.

And here’s your reminder to check your smoke detectors. 

Thanks to Karina Moretz ChFC® and Associate Advisor, for this post. Pathfinder Planning LLC is a registered investment advisor in North and South Carolina. We serve young adults and working families by providing personal financial planning and asset management for a simple fee. www.pathfinderplanningllc.com

The post Renters Insurance Saves the Day appeared first on Pathfinder Planning.

Blueprint for the Financial Planning Tower

The idea for the tower came as I started my financial planning firm. I began sharing with my friends my newfound career shift from stay-at-home-mom. I would say “I’m a financial planner” and they would respond, “Oh, so you sell insurance.”

No, no, no. That wasn’t right at all. I had to find a way to explain what financial planning was. So I began reading, researching and drawing.

Armed with background information from the likes of the Bible, the Certified Financial PlannerTM board, and lots of books and online searches, this idea came to me. Every financial group seemed to have a pyramid type shape, which seemed  to be a good place to start. The images I found were very focused on investing, which is only a piece of the puzzle, and I wanted to cover all aspects of financial planning. 

Two other pyramid shaped concepts came to mind. First, Abraham Maslow’s hierarchy of needs which explains how humans are motivated. Second was the Food Pyramid. I know that is now passé, but it still seemed an appropriate metaphor.

Should I call it a pyramid? Nope – sounds too much like Bernie Madoff and a pyramid scheme where people lose money. A tower sounds better. Towers are strong and sturdy and something to be proud of when complete. After much introspection (because that’s what introverts do) I developed the concept of a Financial Tower.

Level 1 – Financial Planning Tower Basics

Maslow’s hierarchy of needs begins with Physiological needs. Humans cannot really grow beyond this level until these needs are met. For example, if you are hungry, it’s difficult to focus on taking care of your children. You have to meet this basic need first.

Similarly, grains at the base of the Food Pyramid were thought to be the foundation for a solid diet.

Your budget is the foundation for all of your financial planning and makes up Level 1 of Your Financial Planning Tower.

Income

The base level of the tower begins with your Income. Remember when you were a kid and your mom gave you an allowance? Or maybe your grandmother gave you some money for your birthday. Maybe you earned money for babysitting or lawn work. Regardless of where it comes from, income is where everyone’s budget begins.

Expenses

Next comes your Expenses. Once you have some income, you’ll want to spend it. Notice that your expenses block is smaller than your income block. When your expenses are less than your income, you’ll have money to set aside in savings for an Emergency Fund. 

Emergency Fund

Your Emergency Fund is a critical corner of support for your Financial Planning Tower. Not only does this savings allow you to have money for unexpected events, it builds the habit of setting aside money. It trains you to save for a rainy day. Conventional wisdom says to have between 3 to 6 months worth of expenses in savings, but that number may be more or less, depending on other factors. Your job security, amount of debt, income, and other investment resources also factor into the right amount.

Notice that if you don’t have this block of your tower complete, the pieces above it are likely to fall.

Level 1 is the place where everyone starts budgeting. Just like Maslow’s concept of your Physiological needs, you have to have a budget first. If you have never created a budget, you still have one, it’s just dysfunctional. 

Just like the complex carbohydrates this level represents, your budget provides lots of energy, but little nutrition. It’s essential to your needs and always in motion, but doesn’t really grow your overall wealth unless you use it wisely.

As a planner, I want to be sure your budget works.

Level 2 – Financial Planning Tower Safety Needs

Maslow’s second level is Safety. Until this need is satisfied, more or less, we can move to the next level. In  financial planning terms, this level of Your Financial Planning Tower is critical. Your safety needs protect the things you have and people you love, providing a strong second level for your tower. Financial planning around risk solves everyday problems.

Fruits and Vegetables

Families need more savings for specific spending items. You know when you need new tires on the car? You may not want to purchase them, but it certainly feels better to use money that you have instead of putting them on the credit card to pay another day. That’s why these extra savings categories are fruits. Everyone loves fruit.

We also need insurance and estate planning. These are your vegetables because nobody likes them, but you have to have them because they are good for you. 

Operations and Maintenance Funds

The first block is your Operations and Maintenance Funds. (By the way – if anyone comes up with a better name, please let me know!)

Anytime you own something that’s very large, you will have to take care of it. And that costs money. The three main things you need to maintain are:

• Home
• Cars / Vehicles
• Health

There will be times in life when you will need money to pay large expenses. For example, you may need a new roof for your home. Or you may need tires for your car. Maybe you need to meet a large medical deductible. These expenses are not in your normal budget. You should set aside money so that when they happen, you’ll be able to pay for them without having to dip into credit. 

Long Term Goals

Often we have specific goals we want to fund. For example, maybe you are saving for a trip to Europe, a wedding, or you are looking to buy a new car within the next few years. These are goals that you can budget and save for on a regular monthly basis.

That trip to Europe for the family may cost $10K. So, if you save a regular amount each month, plus any bonuses you may receive, you may decide that you can take that trip in about two years. That’s a powerful goal that the whole family can get behind!

Insurance

Managing risk helps protect from catastrophic hazards that could bankrupt your financial plan. Insurance provides a means to protect your family if you pass away. And it replaces your income incase you cannot work.

When planning, you will want to look at your health and property needs to protect your larger assets.

Reviewing your life insurance and disability insurance are a means of protecting your income. I’ve seen lots of plans with too little in disability and too much in life insurance. 

Long-term care is a category unto itself. You may or may not need this type of insurance, but it may be difficult to make this decision without some additional expertise.

A proper needs analysis will help you decide the right amount of insurance as well as the right type of policy to purchase.

Estate Planning

Estate planning is not just a concept for rich people. It’s the surest way to protect your family if you aren’t there.

Estate planning is the only place that you can designate someone to be the guardian of your children or manage funds if you’re incapacitated. You do not want to leave these decisions to the laws of  your state.

This is not just a need for when you die – it’s also for while you are alive. If you are incapacitated, you want to be sure you have the right people making your health and financial decisions.

As our dependence on technology grows, your digital accounts need attention. Uncle Ben may be a great executor when dealing with accounting paperwork, but Cousin Zach might be the best choice to manage your Facebook and Twitter accounts when you are not here.

Having instructions like these gives you the peace of mind you need to move to the next level.

Level 3 – Financial Planning Tower and Investing

Now that your first two levels are set, we move up to the fun stuff that everyone wants to talk about – retirement and investments. This is the traditional venue for financial planning.

Level 3 of the Financial Planning Tower is equivalent to Maslow’s Love and Belonging level. This is where we develop our sense of belonging and really begin to feel good about ourselves and others. The Food Pyramid expresses this level as Dairy and Meats. It’s much richer up here!

Retirement Funding

Everyone loves to talk about how well their 401(k) is doing when the market is up, and how terrible things are when markets are down. The top questions that I get revolve around when, where and how much is needed to retire.

Personally, I believe the government has made it extremely difficult for working families to save for retirement. It’s too complex! People have gazillions of questions about IRAs, Roth IRAs, 401(k)s and other retirement plans. Pension plans also get their fair share of concern. These plans are more common than you may think. In addition to teachers, police, firefighters and other state employees, many companies still offer pensions to employees.

And don’t get me started on Social Security, except to say that yes, I believe it will be there when you retire. 

Education Funding

Families look out for their children, so college saving runs a close second to retirement in terms of major goals. Unfortunately, we often wait too long to begin addressing this item, so parents seem panicked when they realize they only have two years to save.

When considering college, parents have many questions including:

• what is the viability of the student loan system?
• how do we effectively save?
• what is a 529 Plan and how does it work?
• can we afford the rising rate of education?

The rules around college often change with a new Presidential administration. We also need to consider if our children are ready for a four-years program. They may be better suited for two-year college, an apprenticeship or waiting and attending later. There are so many variables to address it can be overwhelming without some help.

Level 4 – Financial Planning Tower and Your Passion

Now that these three levels are covered, we move into what Maslow would call Esteem. Just like our body fat, our Esteem keeps us warm and happy. Level 4 of Your Financial Tower is your passion. While it is not directly related to money, this level is an emotional driver for all our goals.

We need to feel good about what we are doing in our life. We can be happy being an engineer, housewife, accountant, food server, or any number of careers, but often we are not. That may be because we haven’t done a good job building our tower. When we have not met our “deficiency needs”, as Maslow says, we have a difficult time being motivated.

When we are misspending and not saving, we always feel like we are behind the 8-ball. We feel like we can’t leave a job where we are unhappy because we have bills to pay and mouths to feed. We may feel trapped in a role that isn’t fulfilling because it doesn’t use our God given talents.

This is a time to rethink our purpose, maybe change old habits, and set new financial goals so we can shift from a job as an accountant to a passion of horse training. Or a food server to a bakery owner. Or a housewife to a financial planner.

Level 5 – Financial Planning Tower and Your Legacy

Level 5 of Your Financial Planning Tower is your Legacy. For us, that means our legacy – like Maslow’s self-actualization or the sugar on top. These are the things we leave behind.

This doesn’t necessarily mean the money we leave, although that is part of it. We’ve all heard the horror stories of debt-ridden people with nothing left for the kids. Families are then left to fight over the teapot.

Our legacy is truly how we are remembered when we are gone. Do you want to be remembered as someone who didn’t have much money, but was a great photographer who shared his work with everyone? Or would you rather be remembered as an overworked executive who didn’t have time for the kids?

Our legacy often has very little to do with our money.

In the Basement of the Financial Planning Tower

Now, if you look at Maslow’s tower, or the food pyramid, you’ll notice that that’s all there is. A few levels that build a triangle shape. However, in finance, we still have to deal with our debt.

I really had to think about this one, since there was no other comparable concept within the models I had. So I looked at my tower and decided that debt is just spending more money than we have, so it had to be an expense. But it couldn’t go up, so it had to go underneath our expenses. And down, and down.

Then, I thought what would it be like if we didn’t get the emotional support we need? And what if we didn’t get the food we need to survive? Well, that would be starvation, and that’s exactly what debt is.

When you continue to borrow money, your income goes to pay for expenses you couldn’t afford in the first place. You can never build your tower up because you are always busy filling in that hole. Debt robs us of the funds we need to build our tower, so we have to use it prudently and keep it under control. 

Construct Your Financial Planning Tower

After years of planning and telling the story of your Financial Planning Tower, I have seen it positively impact others. People often tell me that they never thought of planning that way, or that the image made so much sense to them.

Pathfinder Planning uses the Financial Planning Tower to help working families find gaps in their finances, fill them in, and continue building. Here are some examples of the successes our clients have had:

• Paid off $100K in debt
• Had disability insurance in place before a skiing accident
• Completed estate planning to accommodate an adult special needs child
• Rebalanced retirement accounts resulting in reduced investment fees and increased return projections
• Savings to support their family when the breadwinner lost their job during COVID
• Bought a second home
• Changed from a job to a dream before age 50

We understand how difficult it can be to address all your competing needs at once. The Financial Planning Tower gives you the structure you need to prioritize and achieve your goals. These concepts can and do work for our clients! They can work for you as well.

Pathfinder Planning LLC is a registered investment advisor in North and South Carolina. We serve young adults and working families by providing personal financial planning and asset management for a simple fee. www.pathfinderplanningllc.com

The post Build Your Financial Planning Tower appeared first on Pathfinder Planning.

Every day my morning starts with a news update followed by targeted financial headlines and then financial planning updates. Information is moving so fast, it’s hard to keep up.

Most recently, the government has passed multiple legislative acts to help American workers and small businesses during this unprecedented time. With that in mind, here is an overview of the relief that your family can expect as part of the CARES Act and other recent legislation.

As a bonus, we have a printable checklist for you as well!

Tax Relief

With the advent of the CARES Act, the government has made updates for taxpayers by providing rebates, additional credits, and upgraded deductions.

First, taxpayers who filed in 2018 or 2019 will receive a one-time emergency cash payment of $1200 per person, or $2400 per married couple filing jointly. Additionally, taxpayers will receive an additional $500 for each child under age 17. There are income limitations, so not everyone will receive a payment.

While this money is not a non-taxable credit, taxpayers who have a large increase in their adjusted gross income in 2020 may need to pay back some or all of their money next tax season.

If you haven’t received your money yet, check the IRS website for your status. 

The Federal tax filing deadline for 2019 has been moved from April 15 to July 15, 2020, so you have extra time to file and pay any taxes due. This July 15th deadline applies to North and South Carolina state taxpayers as well.

To help spur giving during this time, there are additional deductions for Charitable Giving. If your family uses the Standard Deduction, like 90% of our population, you can take advantage of a new tax credit of $300 of your cash charitable contributions beginning in 2020.

There are additional benefits for wealthy taxpayers, corporations and other businesses; however the above tax incentives are the most common ones you will see.

Student Assistance

Students and graduates can expect benefits of college grants, work-study benefits, and loan relief within the CARES Act.

Colleges will receive government funding to be used for grants to students to pay for course materials, technology, food, housing and child care. The allocation of these funds is up to each individual college, so you should check with your school to determine if funds are available for your student.

Students who are in a work-study program can continue to be paid, even if they are not able to work, and provides additional flexibility for colleges and universities in determining aid eligibility.

As the student loan crisis continues to be problematic, the CARES Act provides help in two ways. First, employers can provide up to $5250 per employee in payments of student loan principal and interest which is not taxable to the employee. While this benefit is not the norm, if your employer has this program, it’s a good time to take advantage of it. 

Next, the new legislation suspends student loan payments AND interest accrual through September 30, 2020. This can be a huge help to your cash flow if you have been laid off and are trying to decide whether to pay bills or make dinner. 

Retirement Breaks

The government knows that in times of crisis, the biggest asset workers have available is their retirement account. Since the market value of our IRAs and 401(k)s have decreased, it’s a bad time to withdraw money too. Fortunately, if you are normally required to take a distribution, you can skip it this year.

If you have to take funds out, there are some additional rules that you need to follow. However, they allow you to take funds out before age 59 ½  without the usual 10% penalty. 

• You, your spouse or a child has been diagnosed with COVID-19.
• You’ve experienced adverse financial consequences because you were quarantined, furloughed, or laid off, or because their employer reduced their working hours.
• You experienced adverse financial consequences because you were unable to work due to lack of child care.

While these distributions are still subject to income tax, you may spread the taxes over a three year period. Or, if the amount is repaid into an IRA or employer sponsored retirement plan within three years, no income taxes will be due. 

Help from Your State

In addition to the Federal help, you may be eligible for assistance through your state’s aid programs. The CARES Act beefed up unemployment benefits by adding an additional $600 per week to the regular payments.

North Carolina provides up to $950 per week in unemployment benefits. South Carolina has a page devoted to unemployment information for individuals and businesses 

Credit Breather

If you are concerned about making any payments for your loans, be sure to contact your lender. Whether you are struggling with your mortgage, car loan, or credit card payments, don’t hide from your creditor. They want to help! 

And when you talk with them, they are required to report to the credit bureaus that you are in compliance with your payments.

Blessings

These benefits, and many others for businesses and non-profit organizations, are here to help you. Use them to help keep your family afloat until the job market returns. 

I recently heard this: The storm wasn’t over when the boat got to the other side. It was over when Jesus got in the boat. Try not to become overwhelmed with the news. Hug your kids. Pray. And count your blessings. 

Still unsure about the emergency relief options available to you as a result of the coronavirus pandemic? We’ve got you covered with a printable checklist — click here to download! 

Pathfinder Planning LLC is a registered investment advisor in North and South Carolina. We serve young adults and working families by providing personal financial planning and asset management for a simple fee. www.pathfinderplanningllc.com

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Our childhood role models, however, don’t always cut it when we reach adulthood. Let’s investigate how Nancy’s life defied good financial planning.

A Spendthrift and an Enabler 

Going to all those college dances, jetting around the country on vacation, and giving to the needy consequently racked up quite a lot of bills. Nancy’s father, Carson Drew, a prominent lawyer, gave in to her every whim. 

She was able to beg and cajole her absentee dad into getting most anything, all in the name of “helping others”. Carson would hand over some cash and say: “now promise me you’ll be careful.” He never said: “bring back the receipts.” Neither of them were able to say no, ignoring a basic tenant of good budgeting. 

If Carson had budgeted for travel ahead of time, by June Nancy would be sitting on her front porch wondering about the mystery of the missing iced tea. Budgeting takes time, effort and discipline – none of which were evident in these stories.

Hello, SR-22 

Nancy Drew is a car insurer’s worst nightmare. For example, villains often tried to run her off roads and into ditches. 

She wrecked her own car, and frequently wrecked cars of friends, acquaintances, and don’t even ask what she could do to a rental car! 

Her father continued to purchase new convertibles for her (see enabler above). As a result, she never developed a healthy respect for the costs involved in driving and maintaining a vehicle. Surely, her poor driving record would have resulted in driver’s license revocation and expensive SR-22 insurance for high-risk drivers.

Open Door Policy 

Nancy’s home was a revolving door for criminals. Only her housekeeper, Hannah, had the sense to rig a makeshift burglar alarm with pots and pans. Couldn’t they have at least have installed some type of permanent alarm system? 

Intruders entered through windows upstairs and downstairs, so they hid in the garage. They ransacked the house and stole a variety of items from the mundane to the exquisite. The Drew’s homeowners policy was probably loaded with expensive riders to cover this type of theft and damage.  

To Be or Not to Be

Nancy constantly put her life in danger by taking unnecessary risks. She would run into dangerous situations with no concern for her own life. She has been slapped, pushed, hit over the head, drugged, bound, gagged, and left to starve. 

While her efforts to help others were noble, I’m sure any reasonable term-life underwriter would have denied her life insurance due to perilous activities. She may have been able to purchase more permanent life insurance, useful for paying her debts upon her death (see spendthrift above).

Uneducated, Unemployed and Unmarried

Nancy Drew graduated high school and did not attend college. Based on her skill set and her father’s clout, she would have been a natural for higher education; however, she only took art lessons. 

Having no marketable skills, Nancy was perpetually unemployed during a time when the economy was booming (1950’s). She only wanted to have fun with her friends and had no interest in a real job. Nancy did not seem inclined to pursue her special friend, Ned, into matrimony either. 

Although “a man is not a plan”, her noncommittal attitude and lack of employment leaves one to wonder how she would get by on her own and how she could possibly save for retirement. Maybe she was planning on a big inheritance from her father, or special gifts from the people she helped.

Tax Evasion 

Which brings us to tax evasion. Nancy often received a gift as a memento of her adventure. Some of them were quite rare and expensive. Nancy always claimed to be an “amateur detective” therefore she did not report any income or claim the expenses associated with her “business.” I’m sure the government would be interested in recovering that original Paul Revere bell she received. 

The Secret of the Financial Plan

As we mature from children into adults, the real world sets in and we have to put aside juvenile things. We must budget and plan, save and record, avoid unnecessary risks, and capitalize on our strengths.

If Nancy had planned for her future, she would have been a better risk manager, saved some of those travel funds, and considered how she would function once she moved out on her own. Alas, when you are forever 18, these things don’t really matter.

As adults, however, we sometimes need to seek help with our financial direction. Unlike Nancy Drew, the answers don’t fall in our laps. We must plan.

Pathfinder Planning LLC is a registered investment advisor in North and South Carolina. For more information, visit www.pathfinderplanningllc.com. 

The post Why Nancy Drew is Poor appeared first on Pathfinder Planning.

At this time of year, you probably receive your benefits package from your employer. As you evaluate them, don’t overlook their value as you consider your overall compensation.

According to the Bureau of Labor Statistics, benefits accounted for around 30% of employer costs of compensation in 2025, with salary making up the other 70%.

Put another way, the total compensation that you earn from your job is not just your paycheck — in fact, a lot more goes into it.

Most employees know what they earn on a weekly, bi-weekly, or monthly basis, but there is often less clarity when it comes to the benefits they are entitled to through their employer.

Fortunately, many employers provide total compensation statements on an annual — and in some cases, quarterly — basis that provide a more complete picture of compensation. On it, you can find things like your base salary along with bonuses and company-paid benefits with their dollar values. 

At least annually, you should review your benefits package to determine just how much these ‘extras’ contribute to your well being. And there is no better time than the fall during what I refer to as Benefits Season.

To help make sense of it all, let’s take a look at some of the more common benefits that companies offer and how the value of those offerings could affect your overall wealth.

What Benefits Packages (may) Include

For comparison’s sake, while we’re reviewing common benefit offerings, let’s break down the differences as a component of total compensation by comparing a hypothetical newlywed couple — Ross and Rachel — who both earn the same amount in base salary but have significantly different benefits packages. 

We’ll begin with Medical Insurance. 

Medical Insurance

Medical insurance is often the most significant component of your benefits. In fact, according to the 2019 Milliman Medical Index, the cost of healthcare for a typical family of four covered by an average employer-sponsored PPO plan is $28,386, with employers typically picking up 59% of the cost. 

Of course, these numbers can vary significantly depending on the employer and the amount they are willing to subsidize — to which our friends Ross and Rachel can attest.  

For example, Ross’ plan pays 100% of his health insurance premium (which equals $2,500 per year) and contributes up to 85% of the coverage for their kids (which equals an additional $1,750). Rachel, on the other hand, only has 85% of her health insurance premium covered (equals $2,125 per year) and that number drops to 60% for the kids (equals an additional $875).

Dental & Vision Insurance

Everyone knows how important medical insurance is to cover the costs of illnesses and injuries, but there are two other kinds of health insurance that are also important for your well-being: dental and vision insurance. 

The next time you have a cavity filled or need a new pair of glasses, you’ll be grateful you have the coverage to offset some of the costs. 

Typically, dental coverage pays in full for preventative care and half the cost of certain procedures — up to a predetermined limit per family member per year. 

Vision insurance plans are similar, in that they generally provide coverage for eye exams and preventative testing, but only cover a portion of lenses, frames, contacts, and elective procedures. 

In the case of Ross and Rachel, their dental and vision plans are identical and provide coverage for up to $1,500 in dental and $500 in vision expenses.

Health Savings Account (HSA) 

A Health Savings Account (HSA) is like a personal savings account, but the funds can only be used for qualified healthcare expenses.

As a perk of employment, more and more employers are offering HSAs in conjunction with high deductible health plans. In many cases, they are contributing to the employees’ HSAs, as well. 

Ross’ company, for example, contributes $1,500 to his HSA, and he has additional contributions of $50 withdrawn from his paycheck on a bi-weekly basis to deposit into the account. Rachel also has an HSA plan, but her company contributes slightly less — at $500 per year. 

Life Insurance

Employers often provide a small amount of term life insurance coverage for free. Your plan may cover a fixed amount, usually $50K, or an amount equal to one or two times your annual salary. In addition, you may find supplemental life insurance is available for a low, additional cost. 

For Ross and Rachel, both of their company’s provide term life insurance equal to their annual salary. 

Disability Insurance 

Disability insurance is a type of insurance that will provide income in the event a worker is unable to perform their work and earn money due to a disability. These amounts vary widely.

In Ross’ case, his employer offers a policy that provides a $2,500 per month benefit (after a 60-day elimination period) which cost $200 per month, for which the company pays the entire premium.

While Rachel’s job doesn’t cover disability insurance, they offer it as a voluntary benefit — which allows employees to purchase coverage at a group rate. In her case, this amounts to the same monthly benefit as Ross ($2,500), however she has to pay the $200 monthly premium out of pocket.

Retirement Plan Matching Contributions 

Employers may choose to contribute to an employee’s retirement plan by matching a certain amount of what the employee contributes. This is a great way to build your retirement that doesn’t impact your cash flow. Sometimes, we refer to it as ‘free’ money. 

Ross and Rachel’s employers both offer a fairly common matching policy whereby they will match 50% of the first 6% of their salary that they contribute. Assuming they both take full advantage of the match, their respective employers would contribute 3% of their salary to their retirement plans, or $1,932.90 per plan.

Student Loan Benefits 

Student loan repayment as an employee benefit has been growing in popularity over the last few years as the average student loan debt for those graduating with a bachelor’s degree has climbed to over $29,000. 

To put that into context, for a student loan of $10,000 with a 6.75% interest rate, an extra $100 per month in company-paid student loan benefits applied towards the principal could help pay off the loan in 55 months instead of 120 and save $2,144 in interest. 

Ross’ company offers this benefit and provides $100 per month toward student loan debt — which he has signed up for and is consequently on track to have his final student loan payment completed within the next 24 months. Rachel’s company, on the other hand, doesn’t offer this benefit so she has been diligently making additional payments toward her student loan debt so, she too, can be finished paying it off in the next two years. 

Financial Wellness 

Full-disclosure – I’m totally for this one. Financial wellness programs are one of the best, yet most underutilized employee benefits that companies offer. I mean, if you’re fortunate enough to have access to employer-paid financial coaching and guidance, it’s like having a financial planner on retainer all year long — which on it’s own could easily cost thousands of dollars per year. 

This benefit alone could help maximize the value of your other employee benefits, as well as take your personal financial plan to the next level.

Fortunately, this is offered through Ross’ job at an annual benefit amount of $2,400. 

Alternatively, Rachel’s job offers a once-per-year meeting with a “financial advisor”, but she found the advice more closely resembled that of an insurance salesman and decided not to continue after her first year with the company.  

Other Voluntary Benefits 

In addition to the items listed above, your company may offer other voluntary benefits such as gym memberships, pet insurance, pre-paid legal assistance, and more. 

The value and cost can vary quite a bit, but because they are group plans, the cost is often much lower than what you would pay by purchasing them individually.

Adding It All Together

So how much are the benefits for our hypothetical couple worth?

In the case of Ross, his total compensation is $80,113 — with benefits totaling nearly 1/4th of his total compensation.

Whereas Rachel, while not too far behind, has a slightly smaller total compensation package of $71,863 — with benefits totaling 12% of her total compensation. 

What’s your total?

Clearly, benefits can amount to a significant portion of your compensation and should be closely analyzed on at least an annual basis. 

So, what’s your estimate of what your employee benefits are worth? Add up the items and divide the total by your salary and bonus. When you look at those numbers, my guess is that you’ll appreciate those benefits more.

Pathfinder Planning LLC provides personal financial planning advice and asset management for a simple fee to young adults and working families in North and South Carolina through group classes, one-on-one planning, and ongoing advice.

Your Financial Mom blog posts are not meant to be legal, accounting or other professional service advice. Content represents the opinion of the author only. Pathfinder Planning LLC is not responsible for the accuracy or validity of content contained in third-party comments.

The post Total Compensation: Understanding Benefits Packages in Your Job appeared first on Pathfinder Planning.

My kids love vegetables! I might have the only boys who will eat asparagus and brussels sprouts. They know that vegetables are good for building healthy bodies. Even if they think they won’t like a vegetable, they give it a try.

Most of us don’t like vegetables this much, even though we know they are good for us. The same goes for insurance. It’s not fun, glamorous, or sexy, but we do need it to build a healthy financial platform for future investing.

Life insurance is a way to protect those who depend on your paycheck against possible financial trouble in the event of your death. If you die prematurely, life insurance can provide ongoing income to your dependents, until they are able to live comfortably without it. It can also provide emergency support for legal, medical and funeral costs, should family savings not be enough to cover them.

Life insurance can do a number of great things especially during the worst of times. The problem is, many people are confused about the options available or don’t realize the importance until it’s too late. They may put off the decision to purchase because it’s kind of morbid to think about.

Understanding life insurance can be easier than you think. To help make sense of it all, here’s a quick refresher on the subject that will provide a basic understanding of the options available and why they’re important to you.

How Much Is Enough

There are a number of factors to consider when determining the appropriate amount of life insurance to purchase. Are you single or married? Do you have any dependents? What is your annual household income and how much longer do you plan to work? These are just a few important questions that must be addressed in order to be sure that you are purchasing an adequate amount of coverage.

With life insurance, you don’t want to be under-insured or over-insured. Being under-insured means there will not be enough money left for your family in the event of your death. Being over-insuring is essentially having more coverage than is necessary, causing you to pay higher premiums along the way.

You may have heard of several ways to calculate amount of life insurance you may need. Some of these include four times your salary, ten times your salary, your salary times the number of years left until you retire. I’m a fan of calculating insurance based on your needs. Here’s an example:

Let’s say you have an annual salary of $50,000 that you expect to continue receiving over the next twenty years. You’ve calculated that your burial costs will run around $15,000. You currently have $17,000 in outstanding debt and you make an annual charitable contribution of $12,000. There’s also a beach house that you inherited, and the taxes and upkeep cost around $5,000 per year. In your scenario, you would calculate the following.

Annual Salary for 20 Years:    $1,000,000  (well, we didn’t include inflation for this example)
Final burial costs:                      $15,000
Loan Payoff amounts:               $17,000
Gifts to charity:                        $240,000
Other needs:                             $100,000

Total Coverage:                     $1,372,000

In this example, if you had used four or ten times your salary, you would have been woefully under-insured to cover your expenses with a policy of $500K. Even if you had 20 years until retirement, you would have come up short using that as an estimate.

What Type of Insurance Do I Need?

With the myriad of insurance products available on the market, many people don’t understand what type of policy they need, when they should buy it or even why they need life insurance in the first place.

Although some insurance salesmen may try to convince you otherwise, there really is no one-size-fits-all-approach to life insurance (like term only). This is why, instead of making blanket recommendations for your specific situation (which would be next to impossible and careless on my part), I’m going to describe what type of life insurance might make the most sense at various stages in your life.

Before we jump in, it’s important that you understand two basic types of life insurance: term and permanent.

Term life insurance provides a guaranteed death benefit and covers you for a predetermined number of years, often somewhere between ten and thirty.

The annual premiums are a fixed amount and based on your health and life expectancy at the time you apply for the policy. Term insurance is considerably cheaper than the permanent alternative and once the term period ends, your coverage ends. If you were to pass away prior to the term period ending, then your beneficiaries receive the face value of the policy.

Permanent life insurance combines a death benefit with a savings or investment account. You may have heard of policies such as Whole Life, Variable Life, or Universal Life Insurance. These are all types of permanent life insurance.  As the name implies, the policy covers you for as long as you’re alive, even if that means you live to be 110. Depending on the policy that you purchase, these premiums can be fixed or variable, and similar to the term insurance, the premiums are based on your health and medical history.

One major criticism of a permanent insurance policy is that it is several times more expensive than a term policy for the same amount of coverage. Proponents of permanent life insurance tout its ability to provide some cash value through a savings/investment component as justification for the higher premium.

Although the savings growth and investment potential is an attractive feature, many with opposing views are quick to point out that you could accomplish a similar benefit by taking the money you save on buying a term policy and investing it yourself — with far fewer restrictions than investing within the parameters of the permanent life insurance policy. While this may be true (if you can stick with the plan!) sometimes a permanent policy is the best – it all depends on your needs.

Now that we’ve established the basic differences between the two, let’s take a look at when you should purchase life insurance and how much coverage you may need.

Young and Single

If no one depends on you financially, some experts will suggest that you probably don’t need life insurance. Many companies offer one or two times your salary in life insurance as a free benefit, so this amount may be more than enough coverage for you. While your untimely death will affect a number of people close to you, it probably won’t put them in a financial bind. One caveat is if you have private student loans that required a co-signer.

Upon your death, the co-signer will become fully responsible for the remaining balance of your debt. Given this case, consider purchasing a small, inexpensive policy to cover the remaining balance of your student loan debt in addition to your potential funeral and burial costs.

Newlyweds

Getting married in and of itself doesn’t mean you need to purchase life insurance. It’s typically the events that follow, like purchasing a home and having children, that indicate you need to get a policy in place.

The younger and healthier you are, the better your rates. That’s why it makes sense to get a policy in place as soon as possible. You can always go back and add-to or change a policy as you enter different life stages. But by establishing your plan early, you stand to pay significantly lower premiums and you can enjoy the peace of mind knowing that your newly-established family is in good financial shape if anything were to happen to you.

High-Risk Activities

Suppose you like to go sky-diving. While this is an awesome activity, it could potentially cause problems when you are looking for insurance. During the underwriting process, the insurance agent will ask questions about your outside activities. And although you always want to remain truthful, keep in mind that your premiums may be higher as a result.

Another high-risk scenario that could affect your insurance options is working in a dangerous occupation or environment. Every insurance company evaluates high-risk jobs and activities differently, just as they do with smoking or your health. As a result, it’s not uncommon for life insurance policies for individuals with high-risk occupations to be more difficult to obtain and include higher premiums.

New Parents

As a new parent, you should have life insurance. What could happen if you or your spouse passes away unexpectedly? The surviving spouse will bear the brunt of not only the financial burden of the household expenses, but also caring for the children.

At this life stage, you will want to establish a policy that will not only pay for at least 18 years of child-rearing expenses, but also household expenses that will allow your family to maintain the same standard of living. And don’t forget to insure a stay-at-home parent. They add a tremendous amount of value that you can’t put a price on.

If you already have life insurance in place, be sure to re-evaluate your policy because there might be a need to purchase additional coverage.

The Bottom Line

We never like to think about the inevitable loss of a loved one, or our family unit without our presence. But fortunately, life insurance provides our family with a level of safety so they will know the finances are taken care of, no matter what else happens. Even if you don’t like to think about insurance, it’s good for you to have some. Just like broccoli.

If you have questions or would like an objective opinion about your insurance needs, please contact me to schedule an appointment. There is no charge for a consultation, so you can’t go wrong.

Pathfinder Planning LLC provides personal financial planning advice and asset management for a simple fee to young adults and working families in North and South Carolina through group classes, one-on-one planning, and ongoing advice.

Your Financial Mom blog posts are not meant to be legal, accounting or other professional service advice. Content represents the opinion of the author only. Pathfinder Planning LLC is not responsible for the accuracy or validity of content contained in third-party comments.

www.pathfinderplanningllc.com

The post How Life Insurance is Like Eating Your Daily Dose of Vegetables appeared first on Pathfinder Planning.

What is your biggest asset?

When I ask this question to prospective clients, most respond that it is their house. Others say it’s their retirement savings account. I contend that your biggest asset is your ability to earn money over your lifetime.

Without that, all of your other assets disappear.

You probably have insurance on your home and car, and maybe even your mobile phone or your refrigerator. Why wouldn’t you also want to insure your earnings as well?

Often, we are too short-sighted in this area. When it comes to protection against loss of income, most people’s immediate thoughts go to life insurance, which provides income benefits in the event of death.  

While this is certainly important, fewer people consider protecting their ability to earn money in the event they become sick or injured.

But the truth is, we’re far more likely to become disabled throughout our working career than we are to die.

To put that into perspective, the Social Security Administration estimates that over 90% of women and 85% of men will live to the age of 67. However, the same study reports that beginning at age 20, the average individual has more than a 25% chance of being disabled for at least 12 months before reaching the age of 67.

Are you prepared to lose your income for 12 months?

When I thought of disability, I always imagined losing an arm. Or someone with a spine injury or debilitating disease. While these instances are all true, disability is caused by far more common activities.

According to the Council for Disability Awareness, the most common cause of long-term disability is actually musculoskeletal disorders (29%).

Just think — you could make one wrong move and pull a muscle in your back (and really, who hasn’t had this happen!) You could tear a hamstring while exercising, or develop carpal tunnel syndrome from work. I knew someone who broke both her wrists skiing! The fact that regular  activities can impact your ability to do your job and earn an income should be frightening.

If you rely on a paycheck to provide for your family and you don’t have disability insurance in place, your first order of business — if you have any intention of covering your ass(ets) — should be to establish coverage.

Start with Your Employer

According to the Bureau of Labor Statistics, about one-third of employers offer a disability policy. These plans typically cover 60 – 70% of an employees salary for a short-term — generally three months. Short-term disability is a great place to start your coverage. Just know that it ends when you leave your job, and because the employer is providing this benefit for you, any payout is treated as taxable income.

Some employers also offer long-term disability that covers a percentage of income (usually 50 – 70%) for a longer period of time. This is great, too. It may be optional insurance that you can only add during open benefits enrollment, however, since you are paying for the insurance, any payout is non-taxable.

On the surface, these are low-cost (sometimes no-cost) benefits to the employee.

However, since these plans only replace a small percentage of income for a limited time, they provide insufficient protection for any long-term loss of income.  

Find Additional Coverage

In addition to your employer’s regular benefits, some allow you to purchase additional long-term insurance.

In many cases, it’s worth purchasing the maximum coverage through your employer’s group plan because it may be substantially cheaper than an individual policy. Another perk, since you pay directly to the insurance company, means you can usually keep it, even if you leave your job.

In the event your employer doesn’t offer a long-term option, you can look to professional associations and individual policies for plans tailored to your needs.

Determine the Appropriate Amount of Coverage

When it comes to disability insurance, most people base the necessary amount of coverage on their current spending. What’s being left out of that calculation is the fact that disability can cause medical expenses to skyrocket and if a disability causes you to quit your job, you’ll likely have to change your medical insurance as well.

On top of that, your need may be significantly more pronounced if you’re married or have children because your disability might necessitate hiring help with the kids or other household chores.

Don’t Leave Your Financial Plan Incomplete

Aside from estate planning, disability insurance is the biggest gap in most people’s financial plan.

That’s despite the fact that you’re more likely to become disabled in your working life than you are to die — even if you don’t work in a hazardous position.

Illness can strike anyone at any time and a disability policy will be what you need if it happens to you or your loved ones.

Don’t leave a gaping hole in your own otherwise comprehensive financial picture. Use this post as a gentle nudge to stop procrastinating and start protecting your most important asset.

Think your chances of becoming disabled are slim? Take this quiz to find out your chances.

Pathfinder Planning LLC provides personal financial planning advice and asset management for a simple fee to young adults and working families in North and South Carolina through group classes, one-on-one planning, and ongoing advice.

Your Financial Mom blog posts are not meant to be legal, accounting or other professional service advice. Content represents the opinion of the author only. Pathfinder Planning LLC is not responsible for the accuracy or validity of content contained in third-party comments.

The post Have You Covered Your Ass(ets)? appeared first on Pathfinder Planning.

Last October, my oldest nephew got married in a beautiful ceremony at a mountaintop chapel about two hours away from our home. Since we were already going to be away for the day of the wedding, we decided to make a mini-vacation out of it and spent three days with family and close friends.

It was a really great time, that is until we arrived back at home.  

Imagine pulling into your driveway, kids restless from the drive, you and your spouse needing a vacation from your vacation, only to open the garage door and discover that it is full of water and sheetrock.

Ugh, right?!

Yeah, that was me, too.

It is a horrible thing to come home from a fabulous event to find your garage ruined and three upstairs rooms soaked through.

Once the initial shock wore off, we turned off the water to the house and tracked down the source of the leak. We knew it was coming from the kitchen and it looked like the refrigerator. When our repairman arrived (he’s great, by the way) we discovered that a small 50 cent coupler holding the water line together had failed. This small piece caused thousands of dollars of damage.

All too often we become comfortable in our surroundings and forget that bad things actually do happen to good people. When something bad actually does happen, we find ourselves underprepared and struggle to get through the tough times.

We have been trained to save for retirement, but we forget to save for the everyday occurrences. Many families don’t have $1,000 in the bank for situations like these, and that’s a problem.

If you are one of those that would struggle to pool enough resources together to pay for a $500+ home or car emergency, don’t fret. Here are a few ideas that you can begin implementing immediately to help build up an emergency fund ASAP.

Emergency or Maintenance?

First, we want to separate a true ‘Emergency Fund’ from regular maintenance on our property. Think of an emergency fund as the “Oh my goodness, I just lost my job!” fund. This is a catastrophic event that requires you to make some immediate lifestyle adjustments. Having a fund of four to six months of expenses will be critical.

A ‘Maintenance Fund’ differs from an ‘Emergency Fund.’ For example, if you own a home, you know you will need to keep it in good condition. This means expensive things like replacing the roof or air conditioner, replacing siding or painting, upgrading rotten wood or adding landscaping. These events are expensive and happen infrequently, but can take a toll on your budget if you are not prepared.

So, your ‘Maintenance Fund’ is more like the ‘Oh crap, my refrigerator just died!’ fund. That type of emergency doesn’t change your lifestyle, it’s just inconvenient.

You may want to have a separate fund for your home, your car, your health (yes, that’s an asset!) or any other large item that needs periodic maintenance.

Create an “Out-of-Sight, Out-of-Mind” Account

We pay our bills from one primary checking account and we keep savings for home maintenance in a separate savings account at a completely different bank — with no bank card or easy transfer option. If we need to use the money in that account, we have to go out of our way to withdraw it.

This inconvenience is by design to allow us time to determine if what we’re experiencing is a true emergency or just an inconvenience.

Create Automatic Withdrawals

The easiest way to fund any savings plan, but specifically a fund for home maintenance is to automate your money. I treat this fund just like a monthly bill and set up automatic transfers from my bank into it once a month.

The result is a two-fold win because I know exactly how much money is leaving my account and work that amount into my budget (which I love), not to mention the ease of continuing to fund my accounts without forgetting.

Now that we know what a ‘Maintenance Fund’ is and how to create it, let’s talk about when you should use it and when you should not.

Improper Uses of an Emergency Fund

Once you have money in your fund, the next challenge is managing it and determining what is a true emergency or something you should save for instead.

Here are a few scenarios of when you might consider using your maintenance fund:

Example #1: Your car needs new tires that will cost $400 to replace.

Q: Should you use your emergency fund? Or maintenance fund?

A: Maintenance fund. While many people keep driving cars because they are paid for and have lower insurance rates, one tradeoff is that they need more repairs than a brand new car. Certain automobile expenses, such as tires, occur every few years and should be saved for in a maintenance fund. You can also save for car taxes and a car purchase in this type of account.

Example #2: Your child falls from a tree and breaks their arm and needs medical attention.

Q: Should you use your emergency fund? Or maintenance fund?

A: Maintenance fund. You might need to pay the bill before you are reimbursed by your insurance provider. Just remember, when it comes to medical expenses it’s important to distinguish between a true emergency and a normal health-related expense (ex: emergency surgery vs braces or contact lenses).

Insurance deductibles should be considered maintenance, so if you set up a separate fund for this, determine your maximum out of pocket costs. That is what you should have on hand.

Example #3: Your dream vacation to Aspen will cost $5,000.

Q: Should you use your emergency fund? Or a maintenance fund?

A: Maintenance. Vacations are not unexpected expenses and need to be planned for through the year like Christmas shopping. Set up a separate fund just for family vacations and save toward your dream trip.

Clean Up

So, what happened to our waterlogged house? There were several ways we could have looked at the problem.

Anger was the first that came to mind, but the least productive — so that was out. We could’ve wallowed in our sorrow with a “woe is me” attitude, but that would’ve done little to change our situation.

Blame. We could have blamed our repairman, but we didn’t. He’s a great guy and he felt just as sick about it as we did.

Instead, we just sighed and said, “Well, this is what insurance is for” and set about the work of putting our house back in order.

We also chose to look at this as a ‘first world problem.’ I mean, really…anyone with too much water in their house has a first world problem. Having this attitude, and funds to cover our deductible, took what was a massive mess and made it a mere inconvenience.

Pathfinder Planning LLC provides personal financial planning advice and asset management for a simple fee to young adults and working families in North and South Carolina through group classes, one-on-one planning, and ongoing advice.

Your Financial Mom blog posts are not meant to be legal, accounting or other professional service advice. Content represents the opinion of the author only. Pathfinder Planning LLC is not responsible for the accuracy or validity of content contained in third-party comments.

The post When a 50-cent Part Breaks: Protecting Against Life’s Uncertainties appeared first on Pathfinder Planning.

He had COPD and all his mental faculties were intact, so he was able to live at home where he was comfortable — which was of the utmost importance to those of us close to him.

Even with the Hospice care, we supplemented his care with paid sitters, cleaning assistance, and Meals on Wheels. Not to mention, my siblings and I contributed where we could. My sister checked in daily and took over paying his bills. My brother lived there so Dad had help with his everyday needs and someone to maintain the house. And since my other brother and I lived out of town, we visited on the weekends to help out where we could.

As a family, we surely employed an all-hands-on-deck approach, but even then, we were lucky.

I say “lucky” because many years earlier my dad invested in long-term care insurance. I cannot imagine affording the level of care that sustained him for six years without it. In fact, he told me one time: if they were to take away his Hospice care, he would rapidly be dead.

During my crash course in long-term care, I realized how ill-prepared most people are for unexpected elder care expenses. A study from the National Bureau of Economic Research reinforced my views by stating that only 10% of the elderly currently have a private long-term care insurance plan in place.

So what does that mean for the other 90%? High out-of-pocket costs, or worse, the inability to cover related expenses which could lead to a rapid decline in health.

Clearly, neither option is ideal.

Like most things, there is no one-size-fits-all answer to the question but rather several equally adequate options, depending on your circumstances. Let’s look at a couple of the most common ones: Long Term Care Insurance and Critical Care Insurance.

Long-Term Care Insurance

Long-term care insurance covers your medical needs in cases when chronic, long-term illness prevents you from being able to maintain your quality of life. These include bathing, dressing, preparing meals, and the like. Also known as “activities of daily living” or ADL, a long-term care insurance policy kicks in when individuals are no longer able to perform two ADLs and/or have a cognitive impairment.

This insurance allows you to protect your savings by paying for those medical expenses associated with a long-term illness. It provides funds to assist with caregiver responsibilities and allows you to remain in your own home longer. That’s always better than ending up in a state-run facility.

Who Should Buy Long-Term Care Insurance?

While the general assumption is that long-term care insurance is only for older people, it is estimated that 37% of people age 64 and younger used some type of long-term care. Many times this is the result of accidents or injuries that have resulted from a critical illness.

Needless to say, long-term care insurance is a value-add at any age and can be used for a variety of care and rehabilitation facilities.

Here are a few of the most common:

• Nursing home care or assisted living
• In-home care
• Respite and hospice care
• Physical and occupational therapy that is not covered by insurance
• Alzheimer’s facilities

Important Policy Elements to Consider

At Pathfinder Planning, we partner with Low-Load Insurance Services (LLIS) nationally, and Nathan Garnett of Doll & Associates locally, to provide long-term care to clients.

Here are a few of the important elements that are included in their policies:

Elimination period. Sometimes called the deductible or waiting period. Typically 30, 60, 90, 180, or 365 days. During the elimination period, other people or assets would be relied upon for care. The longer the elimination period, the lower the premium.

Benefit amount. The maximum amount paid by a policy on a daily or monthly basis. We can help determine how much benefit is needed by providing the current cost of care in an area. Lower benefits mean lower premiums. As with most types of insurance, younger and healthier people get lower rates.

Policy Options

• Inflation option. Costs for LTC have increased at a steady rate. This option offers protection from rising LTC costs by minimizing the effects of inflation.
• Partner discount. Available even if partner doesn’t apply. Applicable to married and unmarried couples.
• Shared care. This option pools partners’ benefits, allowing each partner to access the other’s.

Critical Care Insurance

According to a report from The American Journal of Medicine, more than 60% of bankruptcies are medically related. Critical care insurance aims to lower that number by providing lump sum benefits (that may be income tax-free) and can be used for anything.

Critical care insurance (also known as: critical illness insurance) is paid when you are diagnosed with specific diseases or conditions.

Some conditions that are commonly covered are:

• Heart attack
• Stroke
• Cancer
• Organ Transplant
• Kidney Failure

In addition, conditions like hearing loss, blindness, and loss of limbs may be partially covered.

Who Should Buy Critical Care Insurance?

In the same way that thinking long-term care insurance is only for older adults, the assumption that critical care insurance should not be considered by young people is also false.

According to Cancer.gov, while the majority of cancer diagnosis occurs in people aged 65+, diagnosis for people aged 20-49 has increased by 13% when comparing the years from 1975 – 2013.

When it comes to managing a critical illness, there can be a number of unexpected expenses that may creep into your budget. Critical care insurance can help you pay for these extra expenses without any additional stress or worry.

Here are a few of the common ones that would be covered by critical care insurance:

• Medical Costs (Deductibles, co-pays and prescriptions)
• Transportation Costs
• Loans (Mortgage, Auto Loans, Credit Cards)
• Lost Wages
• Childcare Expenses
• Special diet or supplement needs

Speaking from experience, the fact that my Dad had coverage in place truly lifted a burden from us financially; however, the emotional toll of caring for a dying parent still comes with a price. Your family will suffer enough without the additional burden of worry about how to pay for your care.

If this is something you need, don’t let the price be a deterrent.

As I once heard it said: when it comes time to pay for care, would you rather sign the front of a check or the back of a check?

Pamela J. Horack, CFP® of Pathfinder Planning LLC provides personal financial planning advice and asset management for a simple fee to young adults and working families in North and South Carolina through group classes, one-on-one planning, and ongoing advice.

The post Long-Term Care vs. Critical Illness Insurance: What You Need to Know appeared first on Pathfinder Planning.

Of course, we’ve all been there!

To make matters worse, when you try to convey your feelings about said day to your spouse, colleague or anyone else within an earshot of your self-pity, they generally respond with the requisite, “well, it could be worse”?

And they’re right — it could be worse. It could ALWAYS be worse! It’s just that hearing that sentiment doesn’t exactly help turn things around…am I right?

I’m probably dating myself here, but do you remember Alanis Morissette’s hit song from the 90’s: Ironic?
In it she talks about life’s unfortunate timing, describing the irony of things like rain on your wedding day or a free ride when you’ve already paid.

Toward the end of the song, she — in my opinion — perfectly articulates the overall premise of this post when she says:

Well, life has a funny way of sneaking up on you
When you think everything’s okay and everything’s going right
And life has a funny way of helping you out when
You think everything’s gone wrong and everything blows up
In your face 

I’ll admit, I’m fairly positive that she wasn’t in the studio writing this verse because she was oh-so-passionate about insurance planning.

But I am! And since I’m not a singer/songwriter (you’re welcome), I’ve decided to borrow her words to explain the importance of insurance, not just for loss of life, but also loss of income related to disability.

Don’t Underestimate Your Ability to Earn an Income

When meeting with clients, specifically those with young families, I’ve started to notice a trend. While most realize the importance of life insurance as a way to secure the financial future of their family in the event of an untimely death, many overlook the benefits of securing insurance on their income.

Here’s the thing: Illness is a respecter of no person!

In fact, the loss of income due to disability, whether caused by an accident or illness, usually deals an unexpected gut-punch to the family budget. If you find yourself out of work for any length of time due to disability, not only have you just lost the source of income to pay your monthly obligations, but you may also incur additional expenses related to the disability.

Having the ability to earn an income is a key ingredient of any financial plan. If a family loses that ability, the foundation required for financial stability has been removed. When volunteering at my local food pantry, the majority of people that found themselves in financial need were those who encountered some type of unexpected disability that impaired them from work.

Don’t think it could happen to you? Think again!

Here are a few stats that are both surprising and sobering:

• According to the U.S. Social Security Administration Fact Sheet, dated Feb. 7, 2013: 25% of today’s 20-year-olds will become disabled before they retire.
• Approximately 90% of disabilities are caused by illness rather than accidents. Of those, the most prevalent cause remains musculoskeletal problems such as muscle, back and joint disorders, including chronic back pain and arthritis.
• Over 12% of the population is currently classified as disabled. Of that, approximately 50% of those disabled Americans are in their working years — between the ages of 18 and 64.
• The average monthly SSDI benefit in 2017 is $1,171
• The American Journal of Medicine, Vol. 122, No. 8, Aug. 2008 reported that every 90 seconds someone files for bankruptcy in the wake of a serious injury or illness.2

So, What Should You Do? 

Although you may never need to use a disability (income protection) plan, having one in place is paramount to keeping your financial goals on track. You don’t want to make a bad situation worse by not having it. And by not having it, you mess up everyone’s pat response of ‘it could be worse.”

If you don’t already have a plan in place, start by looking at your employee benefits. While you’re probably familiar with the health and retirement aspects of your benefits, you might be surprised to know that many employers also offer income protection through disability plans.

If offered, look for information on both short-term and long-term disability insurance. As an added perk, some companies automatically provide short-term disability for free and offer long-term disability at a discounted rate.

This would be your best bet to start looking, as it will usually offer the most coverage for the least premium dollars.

But remember, like most things — all disability plans are not created equal. That means coverage may vary from plan-to-plan. If you have any specific questions, don’t hesitate to reach out to your human resources department or the insurance company directly get answers.

Alternatively, if your employer does not offer this benefit option, you may still be eligible to obtain income protection through a private policy.

While slightly more expensive, private disability policies offer the same income protecting benefits as the employer group plans, and are relatively easy to qualify for given you work in a semi-safe career and are remotely healthy.

Although we never know where life will take us, preparing for those “it could be worse” moments is always a prudent idea. If you need help navigating your insurance plan, or just want a second-opinion on what you currently have in place, we should talk. Click here to schedule a complimentary meeting where we can discuss the specifics of your insurance needs and create a plan to prepare for the unexpected.

Pamela J. Horack, CFP® of Pathfinder Planning LLC provides personal financial planning advice and asset management for a simple fee to young adults and working families in North and South Carolina through group classes, one-on-one planning, and ongoing advice.

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