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Understanding Government Benefits and Healthcare Options
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  • [Read slide.]Centers for Medicare & Medicaid Services: http://cms.hhs.gov/MedicaidGenInfo.
  • [Read Slide.]Centers for Medicare & Medicaid Services: http://cms.hhs.gov/MedicaidGenInfo.
  • There are two types of reverse mortgages. One is the Home Equity Conversion Mortgage (HECM) reverse mortgage insured by Housing and Urban Development (HUD). The other is a commercial bank, uninsured reverse mortgage. Today we will only be reviewing the HUD insured reverse mortgages.A reverse mortgage is a method of accessing home equity. All homeowners must be age 62 or older. The home must have a minimum of 50% of its equity available. The reverse mortgage is paid at the death of the homeowner(s), or the sale of the home, or when they move to a long-term care facility. If there is a surviving spouse or dependent child in the home, the sale will be delayed.At the sale of the home, the reverse mortgage is paid in full and any remaining equity will be paid to the homeowners’ heirs and/or creditors. If the home sells for less than the reverse mortgage, the HUD insurance will pay the remaining balance.
  • [Read slide.]

Understanding Government Benefits and Healthcare Options Presentation Transcript

  • 1. Government Benefits
    UnderstandingGovernmentBenefits and Health Care Options
    General concepts only
    Unique situations = unique results
    Financial Advisors and financial firms do not provide tax, accounting, or legal advice
    Seek specific tax and legal advice
    From a qualified tax professional
    From an attorney qualified in these matters
    This material is not intended to provide legal, accounting or other advice. This material seeks to make no representation or opinion regarding the subject matter contained herein. Consult you’re your tax advisor for tax advice and your legal counsel for legal advice. Financial Advisors do not provide legal or tax advice.
  • 2. Government Benefits
    Overview of Government Benefits
    Brief history of Social Security
    Qualifications and benefits
    Medicare A–D
    Deficit Reduction Act of 2005
    Planning considerations
  • 3. Government Benefits
    History of Social Security
    Signed into law August 14, 1935
    Began benefit accrual January 1, 1937
    Initially lump sum benefit
    Monthly payments began in 1942
    Automatic COLAs started in 1975
    Partial taxation of benefits effective 1984
    Source: Social Security Web site, 2008.
  • 4. Government Benefits
    Social Security
    Collection of programs:
    Retirement
    Disability
    Survivor’s benefits
    Lump-sum death benefit
    Note: Social Security is more than a
    monthly government retirement check
  • 5. Government Benefits
    Social Security Benefits
    Source: Social Security Web site, 2008.
  • 6. Government Benefits
    Social Security
    Combination of an insurance and a retirement plan
    Benefits cannot be garnished or assigned
  • 7. Government Benefits
    Worker Eligibility for Retirement
    Workers must earn 40 credits of coverage
    Credit of work is equivalent to $1,120 of earned income
    Only 4 credits may be accumulated annually
    This typically works out to 10 years of qualified
    work history to qualify for Social Security benefits
  • 8. Government Benefits
    Social SecuritySurvivor Eligibility
    Credits needed vary by age of worker at death
    No more than 40 credits of coverage necessary
    Typically equates to 10 years of work
    Survivor benefits are available to the dependents of a deceased worker who has worked1½ years of the prior 3 years
  • 9. Government Benefits
    Social SecurityNonworker Eligibility
    Spouse of insured, disabled, or deceased workers
    Age 62 for retirement benefits
    Age 60 for survivor’s benefits
    Disabled
    Widowed and not remarried
    Caring for minor or disabled children of worker
  • 10. Government Benefits
    Disabled Worker Eligibility
    Earned 6 credits for disability or death benefits
    In 2010, 1 credit for each $1,120 on earnings
    Disability benefit eligibility is independent of age
  • 11. Government Benefits
    Social Security PIA
    Primary insurance amount (PIA)
    Calculated on average monthly earnings
    35 highest earning years
    Employer and employee each contribute 6.2%
    Maximum benefit base
    Determines benefits paid
    Reductions and increases
    Determined by age when benefits start
  • 12. Government Benefits
    Social Security Retirement Benefits
    Reduced benefit at age 62
    Full retirement age (FRA) dependent on year of birth
    2010 FRA is 66 years if born between 1943 and 1954
    Maximum benefit at age 70
    COLA
  • 13. Government Benefits
    Early Retirement
    Earliest retirement at age 62
    Earnings history
    Social Security provides larger percentage of lower-wage-earners income
    Reduction of benefit
    Approximately 25%
    Family history and marital status
  • 14. Government Benefits
    Full Retirement Age (FRA)
    FRA in 2010 is 66 years if born between 1943 and 1954
    COLA
    No marriage penalty
    Increase benefit over early retirement
    100% of PIA
  • 15. Government Benefits
    Delayed Retirement
    Retirement at age 70
    Maximum benefits
    Increased benefit over age 66
    Up to approximately 35%
  • 16. Government Benefits
    Combined Income
    What constitutes total income?
    Adjusted gross income (AGI), plus
    Tax-exempt interest income, plus
    Half of Social Security benefits
  • 17. Government Benefits
    Benefit Taxation—Individual
    Combined income between $25,000 and $34,000
    Income tax on 50% of your benefits
    Combined income more than $34,000
    Up to 85% of your benefits may be taxable
  • 18. Government Benefits
    Benefit Taxation—Joint
    Combined income between $32,000 and $44,000
    Income tax on 50% of your benefits
    Combined income more than $44,000
    Up to 85% of your benefits may be taxable
    Source: www.SocialSecurity.gov, 2008.
  • 19. Government Benefits
    Benefit Reduction
    Continue working prior to attaining normal retirement age
    Under FRA in 2010 for the entire year
    Deduct $1 from your benefit payments for every $2 you earnabove the annual limit
    For 2010 that limit is $14,160
    FRA in 2010
    Deduct $1 in benefits for every $3 you earn above $37,680
    Only earnings before the month you reach your FRA
    Beginning in the month you reach your FRA
    There is no limit on earnings
  • 20. Retirement Planning
    Government Benefits
  • 21. Government Benefits
    Retirement Planning
    Source: Social Security Administration, 2009.
  • 22. Government Benefits
    When Should You Begin Benefits?
    Personal decision based on your needs and probable life expectancies
    Healthy individual may choose to delay
    Less healthy individual may begin at age 62
    You may delay to increase future benefits to a younger or healthier spouse
  • 23. Government Benefits
    Break-even Ages
    Source: www.SocialSecurity.gov, 2008.
  • 24. Government Benefits
    Medicare
    Available to the elderly (age 65+), the disabled, and those with permanent kidney failure requiring dialysis or a kidney transplant
    Eligibility for SS or railroad retirement benefits may affect whether or not the benefit is provided with no additional cost
    Part A—no cost
  • 25. Government Benefits
    Part A:Hospital Insurance
    Inpatient care in a hospital
    Skilled nursing facility after a hospital stay
    Home healthcare
    Hospice care
  • 26. Government Benefits
    Part A:Hospital Insurance
    Eligible for full Social Security
    Eligible for railroad retirement benefits
    Medicare-qualified government employment
    Dependent parent of someone who worked a government job where Medicare taxes were paid
    Pay monthly premium
  • 27. Government Benefits
    Part B:Medical Insurance
    Doctors’ services, other medical services, and supplies not covered by Part A
    Anyone who is eligible for free Part A can elect Part B for a monthly premium
    Or, without Part A and age 65+
    U.S. citizen
    Lawfully admitted non-citizen in U.S. for five years
  • 28. Government Benefits
    Part C:Medicare Advantage Plans
    Formerly Medicare + Choice
    Option to receive all healthcare services through a provider organization
    Medicare-managed care plans
    Medicare preferred provider organizations (PPO) plans
    Medicare private fee-for-service plans
    Medicare specialty plans
  • 29. Government Benefits
    Part D:Prescription Drug Plans
    Helps pay for prescribed medications
    Voluntary program
    Pay additional monthly premium for the coverage
    May delay enrollment if you have another prescription drug coverage
    Delay may result in penalty if prescription drugcoverage deemed inadequate
  • 30. Government Benefits
    Medicare Enrollment
    Sign up three months before age 65
    www.SocialSecurity.gov
    Publication No. CMS-10050,Medicare & You
    Describes Medicare benefits and plan choices
  • 31. Government Benefits
    Deficit Reduction Act of 2005
    Signed by President Bush on 2/8/06
    Changed the rules on qualifying for Medicaid
    Begins at date of application—not date of gift
  • 32. Government Benefits
    Medicaid
    What is Medicaid?
    A federal/state entitlement program under Title XIX of the Social Security Act
    State administrated program
    Each state sets own guidelines regarding eligibility and services
  • 33. Government Benefits
    Medicaid/Medicare Relationship
    Medicare beneficiaries with low income and limited resources may qualify for Medicaid
    If eligible, service may include:
    Nursing facility care beyond the 100-day limit under Medicare ― eyeglasses ― hearing aids
    Approximately 6.5 million Medicare beneficiaries will receive some level of supplemental support from Medicaid
  • 34. Government Benefits
    LTC and the Partnership Program
    Deficit Reduction Act of 2005 expanded the Partnership for Long-Term Care program
    Dependent on state status
    Non-partnership
    Partnership
  • 35. Government Benefits
    LTC and the Partnership Program
    Special eligibility rules for Medicaid
    Standardized format
    “Dollar-for-dollar” protection formula
    NAIC Insurance Model Act and Regulation
    Agent education requirement
    2010—annuities and long-term care
  • 36. Government Benefits
    Gifting Example
    How is the penalty period determined?
    Assume gifts of $500,000 have been made
    Assume monthly costs are $5,000
    $500,000/$5,000 = 100 months of ineligibility
    What happens now?
  • 37. Government Benefits
    Income First
    Income of institutionalized spouse will be added to spouse’s income to determine minimum monthly maintenance needs allowance (MMMNA)
    This reduces the amount of assets that maybe maintained to meet income needs of non-institutionalized spouse
    Source: www.SocialSecurity.gov, 2008.
  • 38. Government Benefits
    Annuities and Long-Term Care
    Considered disposal of an asset for less than fair market value unless state is:
    Primary beneficiary
    Secondary beneficiary after spouse or dependent child
    State has the ability to recoup from assets any payments made for care of the individual
  • 39. Government Benefits
    “Valid Annuities”
    Irrevocable and non-assignable
    Variable payments not allowed
    Actuarially sound—federal guidelines
    Payments in equal installments
    No deferral or balloon payments
    Retirement plan exception
  • 40. Government Benefits
    Balloon Annuities
    Provides low payout for specified period
    Usually a short period
    Distributes remaining balance at death of owner
    Not allowed
  • 41. Government Benefits
    Exemptions
    Qualified plans or IRAs paid as an annuity will not need to name the state as the primary beneficiary.
  • 42. Government Benefits
    Do You have Equity in your Home?
    Cannot exceed $500,000 or state can optionally increase to no more than $750,000
    Can apply for reverse mortgage or home equity line
    These assets must now be spent down before qualifying for Medicaid
  • 43. Government Benefits
    Home Equity
    Not applicable if spouse or dependent child lives in the home
    State can apply lien to home while institutionalized person is alive
    If house is sold, Medicaid payments will stop until assets depleted
  • 44. Government Benefits
    Reverse Mortgages
    Home Equity Conversion Mortgage (HECM) Reverse Mortgage
    Insured by Housing and Urban Development (HUD)
    Method of accessing home equity
    All homeowners must be age 62 or older
    Commercial Reverse Mortgages
    Less restrictive—Not insured by HUD
    Note: It is strongly recommended that you consult with your family, a tax advisor and attorney before entering into any reverse mortgage
  • 45. Government Benefits
    Pros and Cons of Reverse Mortgages
  • 46. Government Benefits
    Web Sites
    www.SocialSecurity.gov
    www.naela.com (National Academy of Elder Law Attorneys)
    www.medicare.gov
    www.cms.hhs.gov/home/Medicaid.asp
  • 47. Government Benefits
    Suggested Reading
    The New Retire-mentality
    Planning Your Life and Living Your Dreams . . .at Any Age You Want
    by Mitch Anthony
  • 48. Government Benefits
    In Summary
    Social Security is unlikely to meet the needs of most individuals; build your own savings
    Medical costs will continue to rise
    Long-term care (LTC) costs will not default to the state as easily as in the past
    Gifting has become more problematic
    Individuals should research and consider purchasing LTC insurance
    Individuals should seek counsel of an elder law attorney
  • 49. Government Benefits
    This material is not intended to be used, nor can it be used by any taxpayer, for the purpose of avoiding U.S. federal, state, or local tax penalties. This material is written to inform, educate and support matter(s) addressed by this material.
    Financial Advisors do not provide tax, accounting, or legal advice. Any taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor. Legal matters to do with these matters need to be addressed with a qualified attorney.
  • 50. Government Benefits
    You should carefully read a prospectus or company literature before investing in anything. Read them carefully before investing and consider an investment’s risks, charges, limitations, and expenses. This and other information about mutual funds, variable annuities or fixed annuities are provided in the applicable product material and underlying fund prospectuses. Prospectuses are available from your registered representative. Fixed annuities do not provide prospectuses but provide product guidelines and disclosures.
    It’s always best to seek the opinion of a Series 65 licensed financial professional before investing.
  • 51. 1/10
    Thank You
    Variable annuities are long-term investments designed for retirement. The value of the variable investment options will fluctuate and, when redeemed, may be worth more or less than the original cost. Withdrawals and other distributions of taxable amounts, including death benefit payouts, will be subject to ordinary income tax. If withdrawals and other distributions are taken prior to age 59½, a 10% federal tax penalty may apply. A withdrawal charge also may apply. Withdrawals will reduce the value of the death benefit and any optional benefits.
    Pacific Life refers to Pacific Life Insurance Company and its affiliates, including Pacific Life & Annuity Company. Insurance products are issued by Pacific Life Insurance Company in all states except New York and in New York by Pacific Life & Annuity Company. Product availability and features may vary by state. Each company is solely responsible for the financial obligations accruing under the products it issues. Product and rider guarantees are backed by the financial strength and claims-paying ability of the issuing company and do not protect the value of the variable investment options.
    Variable annuities are distributed by Pacific Select Distributors, Inc. (member FINRA & SIPC), a subsidiary of Pacific Life Insurance Company, and are available through licensed third-party broker/dealers.
    Mailing addresses:
    Pacific Life Insurance Company
    P.O. Box 2378, Omaha, NE 68103-2378
    (800) 722-2333  www.PacificLife.com
    In New York, Pacific Life & Annuity Company
    P.O. Box 2829, Omaha, NE 68103-2829
    (800) 748-6907  www.PacificLifeandAnnuity.com