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

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

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