AUGUST 2010

Consider Long-Term-Care Insurance

Life expectancies have increasedsignificantly and are expected to

continue to increase in the future.As people age, they are more likelyto develop conditions that limit their ability to live independently.However, it is estimated that only14% of households have purchasedlong-term-care insurance (Source:Long-Term Care Costs and the NationalRetirement Risk Index, March 2009).

How likely is it that you’ll needlong-term-care insurance? It is esti-mated that approximately one-thirdof individuals age 65 and older willrequire at least three months of nursing home care, 24% more thanone year of care, and 9% more thanfive years (Source: What Is the Distri-bution of Lifetime Health Care Costsfrom Age 65?, March 2010). Thosefigures do not include individualswho require home care services. In2008, the average annual cost of anursing home was $71,000 (Source:What Is the Distribution of LifetimeHealth Care Costs from Age 65?, March2010).

Who needs long-term-care insurance? If your assets, not in-cluding your home, equal at least $2million, you can probably fund long-term-care costs with those assets, al-though you may not want to depleteyour assets for this care. Those withvery few assets will probably be cov-ered by Medicaid. It is the peoplebetween these two extremes whoshould consider long-term-care in-surance. This coverage may be espe-

cially important for women, whotend to outlive their husbands.

If you’re considering long-term-care insurance, review these points:• Purchase the insurance at a rela-

tively young age. You shouldprobably purchase the insuranceby the time you are in your 50s or early 60s. After that, the pre-miums become much more ex-pensive. Also, if you develop aserious health condition, you maynot be able to purchase the insur-ance.

• Check for inflation provisions.Since you may not receive benefits for many years, and costs

for long-term care have been in-creasing significantly in recentyears, check inflation protectionin your policy. You can obtainsimple or compound inflationprotection. Simple protection in-creases the benefit amount by aspecific percentage of the originalbenefit each year. Compound in-flation increases the benefit on acompounded basis, so it providessubstantially more protection.Another option is to make sureyour policy contains an annualrenewal option, so you can buyadditional coverage in the future.

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Calculating Your Life Insurance Needs

While life insurance can serve avariety of purposes, one of

the most common is to maintainyour family’s standard of living incase you die. Thus, you need topurchase an appropriate amount ofinsurance to ensure your family isadequately protected. Many rulesof thumb exist, such as five to seventimes your annual income, but don’trely on rules of thumb to determineyour coverage. These rules don’ttake into account your individualcircumstances, so they could leaveyou with an inadequate amount ofinsurance.

Your insurance needs will prob-ably change over time. When youare a young, single adult, you mayhave little reason to purchase life

FR2010-0423-0074

Financial Briefs

insurance. As you start a family,your insurance needs will begreater, since other family membersare depending on your income. Asyour children become independent,your insurance needs may decline.However, at that point, you mayneed life insurance for other purpos-es, such as to help fund estate taxesor for a business buyout.

To determine how much insur-ance you need, consider these ques-tions:

What lifestyle do you want toprovide for your spouse and de-pendents after your death? Reviewyour needs in detail, taking a look atthings like:• Do you want to provide the same

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3001 United Founders Blvd.

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(405) 842-3443 • (800) 725-4530

Investment Advisory Services offered through Investment Advisory Representatives

of Retirement Investment Advisors, Inc., a Registered Investment Advisor.

Long-Term-Care Insurance Reassess Your Insurance at Retirement• Obtain insurance from a stable

insurance company. You want toobtain insurance from a companythat is sure to be around for thelong term.

• Make sure the policy terms arereasonable. Many people choosea benefit period of three years tocover the average nursing homestay. However, due to the sub-stantial costs associated withlong-term care, you may want toselect a longer period. Benefitsshould be paid in as many situa-tions as possible, includingskilled care, intermediate care,custodial care, home health care,and adult day care. Many peopleprefer to remain at home for aslong as possible, so make surethat the policy covers a widerange of home services. Reviewthe waiting period carefully to en-sure a good balance between pre-mium costs and out-of-pocketcosts.

• Review carefully the level of as-sistance needed to qualify forbenefits. Typically, benefits arepaid when you are unable to per-form two of six activities of dailyliving, including bathing, eating,using the bathroom, moving backand forth from a chair to a bed,and remaining continent. Typi-cally, benefits are also triggeredwhen a cognitive impairment,such as Alzheimer’s disease, re-quires substantial supervision.

• Determine how benefits arepaid. Some policies pay a setdaily amount, regardless of youractual costs. This may be a goodalternative if you are staying athome and want to compensate afriend or family member for help-ing you. Other policies will onlypay your actual out-of-pocket expenses up to a dailylimit or may only pay reasonableand customary costs. Find outhow you prove you’re entitled tobenefits. Some plans require anin-house doctor to review yourhealth, while other plans allowyour own doctor’s review.

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As retirement approaches, youshould reevaluate your in-

surance coverage. This will en-sure you are adequately protectedin all areas, while making surethat your premium costs are mini-mized. Some points to considerinclude:

Health insurance — SinceMedicare coverage doesn’t beginuntil age 65, you’ll need to consid-er other coverage if you retire before that age. Even with Medi-care, many costs aren’t covered, soyou’ll want to consider supple-mental coverage. With health in-surance premiums so high, youmight want to raise deductiblesand copayments to lower premiums.

Long-term-care insurance —This insurance covers the cost ofnursing homes or home healthcare. If you have significant as-sets, you may prefer to pay anycosts yourself rather than pay forinsurance. If you have few assets,Medicaid is likely to pay most ofthe cost. Those in most need ofthis insurance are individuals

with moderate assets who don’twant to deplete those assets to payfor nursing home costs.

Homeowners insurance —Make sure your coverage is suffi-cient to rebuild your home if it is de-stroyed. Keep your liability limitshigh to protect you in case you aresued.

Liability insurance — Yourauto and homeowners insuranceshould provide some coverage. Ifthose limits don’t at least equal yournet worth, obtain liability insuranceto cover the difference.

Life insurance — Whether youneed life insurance will depend onyour individual circumstances. Youmay not need life insurance if yourchildren are grown and you havesufficient assets to support yourspouse after your death. However,you may need life insurance to pro-vide for a spouse or child or to pro-vide for the payment of estate taxes.

Before retiring, review all yourinsurance to determine if it is appro-priate for your new circumstances.Please call if you’d like to reviewthis in more detail. zxxx

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• Review new policy provisions.Long-term-care policies are rela-tively new, so policy riders areevolving. Make sure to check outnew provisions, such as the abili-ty to combine a life insurance andlong-term-care policy, an acceler-ated premium provision that allows you to stop making premi-ums after a certain number ofyears, or a provision that returnspremiums if you die withoutusing benefits. Also look intopartnership policies, which allowyou to qualify for Medicaid afterexhausting the policy’s benefitwhile keeping more assets thannormally allowed by Medicaid.

• Consider sharing a policy withyour spouse. Some companiesnow offer policies that allowspouses to share the policy, whichcan operate in several ways.Spouses may take out separate

policies, with a rider allowing thespouses to use each other’s un-used benefits. Another alterna-tive is to purchase one policy thatboth spouses can use. A third al-ternative gives each spouse aspecified amount of benefits plusa third amount that can be drawnon by each spouse.

• Check the policy’s tax status. Aqualified policy allows you todeduct a certain percentage of thepremium, depending on yourage, as a medical expense on yourtax return. Medical expenses aredeductible to the extent they ex-ceed 7.5% of your adjusted grossincome. Also, payouts from qual-ified policies are received freefrom federal income taxes.

Please call if you’d like to dis-cuss your options for dealing withlong-term-care costs. zxxx

Life Insurance Needs

standard of living, includingthings like vacations and clubmemberships? Will your spouseand children live in the samehouse?

• Will the family have to make dif-ferent child care arrangements?

• Do you want to provide for college educations for your children?

• If your spouse doesn’t work, doyou want that to continue or doyou expect him/her to work afteryour death? If you expect yourspouse to work, what is a reason-able amount of income to expecthim/her to earn?

• Do you need to consider the sup-port of elderly parents or other

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Copyright © Integrated Concepts 2010. Some information provided in this newsletter was prepared by Integrated Concepts. This newsletter in-tends to offer factual and up-to-date information on the subjects discussed, but should not be regarded as a complete analysis of these subjects.The appropriate professional advisers should be consulted before implementing any options presented. No party assumes liability for any loss ordamage resulting from errors or omissions or reliance on or use of this material.

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FR2010-0423-0074

Avoid These Life Insurance Mistakes

Life insurance can be used for avariety of personal and estate

planning needs. To ensure yourlife insurance policy meets yourneeds, watch out for these commonmistakes:• Not considering life insurance

at all. Life insurance forces usto take a look at our own mor-tality, a subject most peoplewould prefer to ignore. In fact,one third of all adults have nolife insurance at all (Source:U.S. News & World Report, April6, 2009). But without life insur-ance, you could be leaving yourfamily in dire financial circum-stances if you die. You shouldthoroughly assess your situationto see how much life insuranceis needed.

• Relying on rules of thumb.When deciding how much lifeinsurance you need, avoid com-mon rules of thumb, such as fiveto 10 times your annual salary.These are general guidelinesand are not meant to be a

definitive guide to the amountof coverage you need. See thearticle “Calculating Your Life Insurance Needs” for more de-tails on this calculation.

• Making your decisions basedsolely on the premium amount.You should base your policy se-lection on the amount of cover-age it provides, rather thanmonthly or annual premiums.A wide variety of life insurancepolicies are available, many de-signed to meet specific needs.Understand the basics of eachbefore deciding which type is most appropriate for your situation.

• Not selecting appropriate bene-ficiaries. Estate and tax ramifi-cations should be considered before selecting beneficiaries.For instance, naming your estateas beneficiary could cause theproceeds to be included in yourtaxable estate. Or, if yourspouse owns the policy on yourlife with your children listed as

beneficiaries, the policy pro-ceeds may be considered a gift,subject to gift taxes. Be sure toname contingent beneficiaries incase your primary beneficiarydies before you do.

• Replacing an existing policywithout first evaluating it.Look at an in-force ledger state-ment to determine the policy’scurrent status and growth pro-jections. If you need more in-surance, you can always applyfor another policy for the addi-tional amount needed. A policychange may require a medicalexamination and may incur feesand costs.

• Not evaluating your situationperiodically. Your life insur-ance needs are likely to changeover time, as your personal andfamily situations change. Thus,you should periodically reviewyour needs to see if changes arewarranted. zxxx

relatives?• How long must your family live

off the insurance proceeds? Willyour current retirement fund pro-vide enough income for yourspouse to live on after retirementor do you need to provide incomeuntil his/her death?

• Do you want to pay off a mort-gage or other debt with insuranceproceeds?

• Do you have estate tax considera-tions you want to address withlife insurance?

How much will that lifestylecost? Come up with an estimate ofhow much this lifestyle will cost. In-clude all of your current expensesthat would remain the same, as wellas any new expenses you have iden-tified, such as for child care. Re-member to factor in hidden costs,

such as providing for health insur-ance that was paid for by your em-ployer. For large debts, such as amortgage, determine whether itmakes sense to pay the loan off infull or to continue making monthlypayments.

How much life insurance doyou need? First, consider whatother income sources your spouseand/or dependents will have. Thiscould include your spouse’s earnings, retirement plans, Social Security benefits, savings, and in-vestments. Life insurance proceedswill be needed to provide the differ-ence.

Your life insurance needs willchange over time, so you should pe-riodically go through this analysis.Please call if you’d like help assess-ing your life insurance needs. zxxx

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News and Announcements

From the Alexander HouseholdMagical moments; you know, the ones that

take your breath away, even momentarily, are

among the amazing parts of life. I don’t know

if there have been more lately in my life or if

I’m just paying more attention, but either way I

find I am more aware of them. Most of the

recent events that come to mind involve family.

Jackson and Luke’s delight when the car in

Lyric’s performance of Chitty Chitty Bang Bang

flies and then takes a bow during the curtain

call, sitting on the front row of the RAIN

Tribute to The Beatles with Kerry, Luke leaning

over to kiss my shoulder during a movie, or

finding Luke and Jackson reading a book to

their toys that are lined up as if they are watch-

ing a drive-in movie; for me, it doesn’t get any

better than that. Some of these events result

from family traditions. My parents have had

season tickets to Lyric Theatre since I was a

child and Pollard Theatre for a couple of

decades, and now I can share my love of the

theatre with our children. Magical moments

occur more than we realize…we just need to

slow down enough to notice.

Carol Ringrose AlexanderFrom the Rudy Household

Although I’ve been with Retirement Invest-

ment Advisors in the Dallas office since last

November, this is my first contribution to the

monthly newsletter. I thought I’d share how

my wife, Amy, daughters Kayla (8), Megan (6),

and Tatum (3), and I came to live in our current

city of Frisco, Texas. Fourteen years ago, Amy

and I moved from Oklahoma City to Houston.

With most of our family still living in Okla-

homa, we always knew we wanted to move

closer “someday.” Well, 12 years and three

daughters later, we had made no progress

toward our goal. In 2008, we decided to move

to Frisco, which is the most northern Dallas

suburb and is considered “Oklahoma” by

many in the Dallas area. We felt this was a

great compromise, since it allowed us to move

closer to our extended family yet remain close

to the many friends we made in Texas. Being

only three hours away rather than eight, has

made family visits much easier and more fre-

quent. In fact, we just returned from our most

recent visit with family at Robbers Cave, a state

park in eastern Oklahoma. We are already

looking forward to our next visit.

Chad Rudy

From the Thurman HouseholdLevi is doing well and enjoying summer.

He will enter the eighth grade and recently

tested at the college level in reading and vocab-

ulary. He gives me the word for the day. He is

enjoying playing Ping-Pong with Dad but really

likes a new game, a cross between Ping-Pong

and Four Square called Poly Pong. A fun, fun

game.

I am continuing work on running and just

had my entry accepted for the Boston Half-

Marathon and looking forward to it.

I just came back from the YMCA General

Assembly in Salt Lake City. A four-day confer-

ence with great speakers. I have boiled down

the speaker ’s notes to seven pages. If you

would like a copy, give us a call or e-mail me.

The end of the conference we had a 5k run up

the side of a small canyon and back down.

Tough, but fun course.

Pati broke her elbow. Seems she couldn’t

get her foot out of the bike pedal when she

stopped. Fell on her elbow. Ouch! She is heal-

ing well but doesn’t like that Doc won’t let her

bike until her elbow completely heals.

Hope you have a super fantastic month!

Randy Thurman