More and more adult children are sending their parents overseas where they can afford the cost of senior care.
It sounds so strange on the surface, right? The Philippines is growing in increasing popularity because they are even marketing to elders with Alzheimer’s Disease. For someone with Alzheimer’s, the cost of senior care in California (specifically) can range from $4,000 to $9,000 a month, but in the Philippines $1,500 will do.
Similarly, Thailand is becoming a hot spot for affordable elderly housing, in addition to Mexico and even India.
- Is this going to be the new trend?
- If yes, will the cost of care rise?
- Is this solution a temporary fix for a bigger problem; i.e. How can we afford the cost of senior care at home?
In that regard, it becomes a question of “What level of care, will my elder receive?” Well, caregivers overseas are fairly skillful, to a point where immigrating caregivers have an easier time receiving work visas than those looking for work in other fields. In addition, there’s a cultural aspect that can’t be overlooked. On the eastern side of the world, there is much more emphasis placed on “respecting your elders,” so you know that they care and will continue to treat them with the kindness they deserve.
The nascent trend is unnerving to some experts who say uprooting people with Alzheimer’s will add to their sense of displacement and anxiety, though others say quality of care is more important than location. There’s also some general uneasiness over the idea of sending ailing elderly people abroad: The German media have branded it “gerontological colonialism.” Angela Lunde of the Mayo Clinic says that generally the afflicted do better in a familiar environment, but that over time, even those with advanced stages of the disease can adjust well.
The World Health Organization states that by 2050, the number of people who make it past their 80th birthday is expected to almost quadruple to 395 million – the age after which one in six people are estimated to have developed dementia. And more are opting for retirement in lower-cost countries.
“Medical tourism” has become a booming industry, with roughly 8 million people of all ages seeking treatment abroad annually, according to the group Patients Without Borders.
The U.K.-based Alzheimer’s disease International says there are more than 44 million Alzheimer’s patients globally, and the figure is projected to triple to 135 million by 2050. The Alzheimer’s Association estimates that in the U.S. alone, the disease will cost $203 billion this year and soar to $1.2 trillion by 2050.
Sending relatives to care homes abroad might be a choice that many more people find themselves considering, as the gulf between cost and quality continues to widen.The problem is partly fuelled by demand. People are simply living longer and to ages where chronic health problems are more likely.
Against Sending Seniors Overseas
The world is full of tropical paradises and other exotic places where a couple can live comfortably on $2,000 a month or less. Plus, good health care abroad can cost a fraction of what it does in the U.S.
If living more cheaply is the only reason you’d retire to another country, though, you’re likely to be unhappy. The United States is probably the most convenient country on the planet. You can get almost anything you want, almost any time you want with a phone call or the click of a mouse. The rest of the world is just not like that.
When it comes to moving an elder (especially one with Dementia or Alzheimer’s Disease), it’s going to be stressful and that stress is compounded when they realize they’re not in their own home anymore. This is most convincing argument against sending your elder overseas, it’s simply a matter of, “Is it the best thing for your loved one?”
It’s hard enough when the memory is fleeting, but if they’re living in another country with absolutely nothing familiar, that’s a recipe for disaster. In addition, not every adult child moves with their parents. So visiting can get expensive and if something dire happens, they may not be able to get their soon enough which is a doubly scary thought.
Now, that being said, a lot of adult children move with their parents to the foreign country… but even that shows it’s not for everyone, since that means uprooting your life as well. So, while the care may be cheaper, the visits to your elder can get expensive and if you’re leaving your life in America, that alone is a hefty sum.
We are also seeing more assisted living and care homes popping up in Latin America as the historic tradition of family taking care of their elderly becomes less viable in the modern age.
In Medellín, Colombia, for example, several development groups are building assisted living facilities that are of a very high standard but a fraction the cost of similar facilities in the United States.
Another option that can be very affordable in Latin America is to hire in-home nursing care. Qualified full-time nurses earn less than US $1,000 per month in many countries. Even if you need around-the-clock care, the cost of three full-time nurses working in shifts would be less than the cost of a nursing home facility in the United States.
The Philippines is offering Americans care for $1,500 to $3,500 a month — as compared with $6,900 the American Elder Care Research Organization says is the average monthly bill for a private room in a skilled nursing U.S. facility.
In Chiang Mai, a pleasant Thailand city ringed by mountains, lies Baan Kamlangchay “Home for Care from the Heart”, established by Martin Woodtli, a Swiss who spent four years in Thailand with the aid group Doctors Without Borders
Patients live in individual houses within a Thai community, are taken to local markets, temples and restaurants, each with three caretakers working in rotation to provide personal round-the-clock care. The monthly $3,800 cost is a third of what basic institutional care is in Switzerland. Those who end up staying at a facility being built in the outlying Chiang Mai district of Doi Saket will have amenities that would be tough for its European counterparts to match, including a clubhouse with a massage room and beauty parlor, a restaurant, Swiss bakery and pavilions with soaring ceilings and skylights.
Make A List
Now, find a comfortable chair, settle in, and make a list.
Write down everything that’s important to you. Consider all aspects of your life, big and small. What do you enjoy? What would you miss if it were gone from your life? What makes you crazy? And what would you like never to have to deal with again?
Think about the weather. Consider things related to infrastructure. Think about health care. Would you be comfortable being examined by a doctor who didn’t speak English? Do you have an existing health concern that could require emergency medical attention? In that case, it’s important to you to be within a, say, 20-minute drive of a First World hospital.
Will it bother you to have to pay attention to a fluctuating exchange rate between the currency of the place where you’re living and the currency your income or savings are denominated in? If so, maybe focus on places where they use the U.S. dollar (assuming that’s your home-base currency)… say, Panama or Ecuador, for example… or perhaps Belize, which pegs its dollar to the Greenback.
Would you be uncomfortable living among the locals? Would you prefer to minimize culture shock and avoid learning a new language if possible?
What would you like to see from your bedroom window every morning when you wake up? The beach? A wildflower-covered hillside? A cityscape?
And what would you like to hear outside your bedroom window each night as you fall asleep?
That’s how you get started at this. You make a list.
Have a purpose
We all need a reason to get out of bed in the morning. It can be challenging to find that purpose when you’re struggling with language and cultural differences.
Having purpose is key to a positive experience in a new place. The happy ones may take up a long-deferred hobby, learn a new language or start a business, but many expat retirees find their purpose by volunteering.
There are expat-retirees in different places who are volunteering as teachers, in orphanages, in single-mother facilities. This can be the best way to become a real part of your new community.
Understanding the difference between LLC manager vs member is critical when setting up an LLC. An LLC is a relatively newer business organization option, and it has some similarities in management style to corporations, but it’s still inherently different. There are some important things to understand about an LLC before you understand what role each person plays in the company:
• Anyone who is an LLC member is an owner. Owners can have any percentage of the company.
• All states recognize single-member LLCs, as well as multiple member LLCs.
• There is no cap on how many members an LLC can have.
Management of an LLC
Owners of an LLC are called members. You can have one member, which is a single-member LLC, or multiple members, which is a multiple-member LLC. LLCs must have at least one person who manages the company, similar to what a board of directors does in a corporation. You can opt to have it be managed by its members, or you can hire an outside person or team to manage it instead.
Essentially, with member-managed LLCs, all members participate in the day-to-day operations and management. With a manager-managed LLC, only designated member(s) or non-member(s) have the authority to run the business. Other members are considered passive investors and are not involved with day-to-day operations.
When defining what management means in this context, details are often covered in the Operating Agreement. In general, it usually is the ability to enter into contracts on the LLC’s behalf and participate in business decisions that take place.
Other tasks managers can do include:
• Open and close a bank account
• Make legal and financial decisions
• It doesn’t matter who is managing, but that person has a fiduciary, or legal, duty to always act in the LLC’s best interests.
Member-Managed LLCs: The More Common Choice
Most people who set up an LLC choose member-management, meaning that all the members share responsibility for the day-to-day running of the business. This approach is more common in part because most LLCs are small businesses with limited resources and they don’t need a separate management level to operate. Unlike corporations, LLCs have a streamlined organizational structure, without officers or boards of directors. As a result, the LLC form is often chosen by people who want to be directly involved in managing and operating their business.
If you and the other members of your LLC want to run your own business—actually make and sell products, take orders, provide services—then you will want a member-management structure for your LLC. For example, if your LLC is a bakery and all your LLC members want to play an active role in the business — crafting recipes, baking goods, hiring employees, opening and closing the shop — then you will want to operate the LLC as member-managers.
In most states, LLCs are member-managed by default under state law. This means that if you don’t designate a management structure for your LLC either in your formation documents or operating agreement, then it will be considered a member-managed organization.
Manager-Management: Better in Certain Circumstances
In some situations, a manager-management structure may be preferable. The most common example is when some members only want to be passive investors in the business. These owners often feel more comfortable if the LLC delegates management responsibilities to one or more other members (or nonmembers).
Two other situations where LLC owners may prefer a manager-management structure are: (1) when your business or ownership is too large, diverse, or complex to efficiently allow for sharing management among all members; or (2) when some of your members are not particularly skilled at management. (Sometimes, of course, these two situations go together.) Delegating management to a smaller group of people or just one person can be an effective way of balancing the varied skills and interests of multiple LLC members. It can also ensure more competent management of the business.
While LLCs that appoint managers often rely on one or more of their own members to fill the role, you can hire a nonmember as manager. It’s important to note that LLC members are owners, not employees. But if an LLC member also performs management duties, that individual can receive compensation as an employee. His or her employment income is separate from the member’s status as an owner.
This distinction should be spelled out in the LLC’s operating agreement or an employment agreement. If your LLC hires a professional manager, that person is an employee. In either case, the person doing the management tasks should be paid a reasonable salary and payroll taxes must be withheld.
LLC Structure Documentation
If you choose member-management, you may not be required to formally document this choice anywhere (although many states ask you to state whether your LLC will be member-managed or manager-managed in the articles of organization that you file to form your LLC). Nevertheless, all LLCs should have a written operating agreement that defines the basic rights and responsibilities of the members (and managers, if you have them). In a member-managed LLC, this would include things like member voting rights, additional capital contributions, buy-out provisions, and other important management and operational issues for the owners. Without an operating agreement, you run the risk of finding yourselves in a full-blown crisis when something unexpected arises because basic issues weren’t clearly addressed and agreed to early on.
If you choose manager-management for your LLC, there very likely will be a legal requirement that you clearly spell out this choice somewhere in your LLC’s organizational documents. Typically this is either in the articles of organization that you file with the state or your operating agreement. In addition to the items mentioned above for members that you want to include in an operating agreement, you also will want your agreement to address what authority and responsibilities the manager, or managers, will have. For example, will the managers have sole authority for all hiring decisions? What about equipment purchases? Just like with the member provisions, documenting the extent of the manager’s—or managers’— authority can help avoid problems down the road.
If you fail to create your own operating agreement, then your state’s LLC rules will apply. These are not necessarily the rules that you want for your business so make sure you have your own written agreement for your LLC.
The markets gave back some of their recent gains, with all of the major indicators headed south. Including dividends, however, all of the year-to-date figures are still in positive, double-digit territory.
Of course, the hot news from the Fed was a cooling off of their campaign to “normalize” short-term interest rates. Chairman Jerome Powell announced at his news conference after the meeting last week that there would likely be no further increases in rates for 2019. In addition, he said that the FOMC’s efforts to trim its balance sheet would probably come to an end in September. Powell also noted that the economy was doing well overall and that the Fed was near its twin goals of stable prices and full employment. The markets didn’t react too violently, either to the committee’s report or to Powell’s comments and explanations. It certainly was a substantial pivot, however, from the committee’s aggressive stance late last year.
Long-term interest rates dipped sharply last week, while short-term rates were steady. That resulted in a further flattening of the yield curve, and for a time, the short end of the curve was inverted. That shook investors’ confidence and likely resulted in Friday’s big drop in share prices. Bank shares and other financial stocks will likely continue to suffer from the flat curve. It certainly continues to limit their profitability. And, an inverted curve, where short-term rates are higher than long-term rates, has often been a sign of an upcoming recession. I don’t think that’s actually very likely, but it will worry the markets in the coming months.
What should investors make of the current situation? First, I think we should focus our attention on corporate earnings for 1Q 2019 which will be coming out in mid-April. First quarter results are likely to be weak, and most analysts are expecting a stronger second half of the year. If that’s true, there’s no need to rush into buying stocks. Also, there’s bound to be some fallout from the delivery of the long-awaited Mueller report to the U. S. Attorney General last Friday afternoon. Whatever the outcome, it’s likely to add to uncertainties affecting the markets in the coming months.
It’s that time of year — W-2s are out, 1095-Cs are in the process of being filed, and consumers and businesses are checking off their tax related to-dos. Here are three healthcare tax tips for employees. It’s important to review your healthcare expenses when filing their taxes to ensure they are taking advantage of any savings opportunities.
It’s not too late to fund HSAs
Most people don’t know that you can actually fund your Health Savings Account all the way up to the tax-filing deadline for the prior year. In other words, contributions through April 15, 2019 apply toward 2018 limits. If employees haven’t maximized their contributions, it’s not too late. Individuals can contribute $3,450 for 2018, and families can contribute $6,900.
The medical expense deduction threshold jumps this year
Deducting medical expenses is difficult, but applicable consumers may want to itemize these costs. For qualifying expenses that occurred in 2018, consumers can deduct expenses exceeding 7.5 percent of their adjusted gross income, as long as deductions are itemized. Beginning this year, the threshold rises to 10 percent. Because health insurance premiums are most consumers’ biggest healthcare expense, and they are not eligible to be deducted, most consumers aren’t able to take advantage of this deduction. Further, most consumers do not itemize.
No penalty for lacking coverage in 2018
If employees didn’t have health insurance for any part of 2018, they won’t face a penalty for the first time since 2014. The Affordable Care Act requires most consumers to carry health insurance, and employees will still have to specify if they did when they file their taxes. However, the penalty has been set to $0.
By now divorce attorneys are familiar with the direct change the law known as the Tax Cuts and Jobs Act, made to divorce planning with the elimination of deductible alimony payments. However, there are ancillary and indirect changes that are not as obvious, but which might affect planning for divorced. In many instances, the TCJA amendments will change long-time planning. These changes will require advisers to pause before giving advice so that they may ponder whether the fundamentals of planning still apply. In many cases they will not.
Most important, the ripple effects of the broad TCJA changes will have unexpected consequences that many clients will not even realize require seeking professional advice. I encourage all clients that are divorced, in the process of divorcing, or have prenuptial or post-nuptial agreements to meet with their adviser’s team to review the potential consequences.
TCJA direct changes
The primary direct divorce change of the TCJA is that alimony payments will not be deductible by the payer spouse but will also not be included in income of the payee ex-spouse. This change is permanent and will not sunset (as many other personal income tax changes do). This new rule applies to any divorce or separation instrument (as defined in Sec. 71(b)(2)) executed after Dec. 31, 2018, or for any divorce or separation instrument executed on or before Dec. 31, 2018, and modified after that date, if the modification expressly provides that the TCJA amendments apply.
To determine the tax status of alimony payments you should confirm the date of the divorce agreement, whether it was modified, and, if modified, whether the TCJA provisions apply. If there is any ambiguity as to whether a modification applied the TCJA rules, CPAs should request that the client’s matrimonial attorney confirm. For example, does a modification of a divorce agreement after 2018 “expressly” provide that the new rule should apply? Document the status of any agreement that the CPA is reporting for tax purposes in the client’s permanent tax file.
Under pre-TCJA law, until the end of 2018, an alimony trust could have been used in a divorce to minimize the interactions of the former spouses. If a family business was involved, the alimony trust could have been used to hold interests in the business to protect the business interest while securing the interests of the payee spouse. The TCJA prevents the prospective use of alimony trusts in divorces after 2018 — with the TCJA’s repeal of Sec. 682, the spouse who creates the trust will be taxed on the income under the Sec. 672(e) grantor trust rules.
Indirect TCJA consequences practitioners should consider
The changes in the deductibility of alimony will have dramatic consequences to divorcing clients; that provision has received considerable attention. However, the TCJA made many other indirect changes that could have profound impact on divorcing clients. The discussion below points out only a few of these, but demonstrates how far-reaching the TCJA really is.
- Exemptions: Many divorce settlement agreements included good-faith negotiated provisions specifying which ex-spouse would get to claim which children as exemptions and in which years. The TCJA has suspended personal exemptions (other than for disability trusts that effectively will enjoy inflation-adjusted exemptions of $4,200 for 2019).The new larger standard deductions have been presented as a substitute for the lost personal exemptions. This elimination of personal exemption sunsets after Dec. 31, 2025. Clients who had given up other items of value to claim exemptions under the divorce settlement will be dismayed to learn that the bargained-for benefit has evaporated. There is likely little that can be done to salvage this. While it might be possible for the client to return to court to argue a change in circumstances, that will likely be more costly than the tax benefit lost.
- Fewer clients will plan their estates: A couple with a $6 million estate may view estate planning as irrelevant (assuming that they do not live in a decoupled state) as even a halving of the estate tax exemption will not result in their estates’ being taxable. The unfortunate consequence of this is that even many wealthy clients will rely on old simplistic wills that do not provide adequate trusts for divorce protection for their heirs. Outright bequests and bequests to simplistic trusts that distribute outright to a child at a specified age, e.g., 30, will expose all of those assets to divorce claims.
- Nongrantor trusts: Grantor trusts are the focus of much income and trust planning post-TCJA. However, clients making transfers to irrevocable trusts, unless they are very wealthy, will need access to trust assets. A trust can be structured to be both nongrantor and permit a spouse to have access by requiring that an adverse party, e.g., a remainder beneficiary whose interests will be reduced by the approved distribution, consent to any distribution to the spouse. You will have to consider the potential consequences of this if the couple later divorce. For example, who is named as the adverse party and what reaction will he or she have? Will he or she refuse to approve distributions post-divorce?
- State and local taxes: Might the loss of the full deduction for state and local taxes for a high-income spouse in a high-tax state have sufficient economic impact to create a financial hardship for a divorced client who faces a substantial tax increase? This might be particularly a concern for a professional in such a high-tax state who is subject to the limitation of being in a specified service trade or business and cannot avail himself or herself of the 20% Sec. 199A deduction. Might the SALT changes depress property values upsetting the intended implications of a negotiated settlement?
- Reliance on marital bequest: Many commentators are suggesting that a qualified terminable interest trust (QTIP) or other marital bequest is preferable to a credit shelter trust because assets receive a second basis step-up on the surviving spouse’s death. The reasoning for this is that the estate tax exemption is so high that there is no worry about aggregating all assets of the marriage in the survivor’s estate, i.e., there is no negative cost to a basis step-up. While there can be merit to this planning in some instances, its use could change the dynamic post-divorce. Many credit shelter trusts include the children of the marriage as beneficiaries whereas a QTIP cannot. If one spouse dies and the survivor remarries, there will be less or even no flexibility to get distributions to the children of that prior marriage if the assets are held in a QTIP. How might this affect future divorce planning?
- Changing prenuptial and divorce settlement agreements: You might consider suggesting that the client consult an attorney to reopen an existing divorce arrangement for changed circumstances. Might that succeed? If a prenuptial agreement already in place provides for a certain level of alimony (when it was anticipated it would be deductible under Sec. 215), would a court permit it to be modified now that, if the divorce occurs after 2018, it will no longer be deductible? To set aside a prenuptial or other marital agreement, the client might have to prove fraud, duress, overreaching, or unconscionability. Likewise, for reformation or rescission of a divorce agreement, including its property settlement terms, certain contract principles may apply, including mutual mistake and unjust enrichment. It remains to be seen whether the new issues that arise by virtue of the TCJA will constitute enough of a change in circumstances or other basis to warrant a modification in court.
The TCJA dramatically changed tax planning related to marriage and divorce in many ways — often indirect and unexpected — that could have varied and adverse impact on different clients.
The Internal Revenue Service allows taxpayers quick and easy solutions if they can’t file their returns or pay their taxes on time, and they can even request relief online. So don’t panic!
Tax-filing extensions are available to taxpayers who need more time to finish their returns. Remember, this is an extension of time to file, not an extension of time to pay. However, taxpayers who are having trouble paying what they owe may qualify for payment plans and other relief. Either way, taxpayers will avoid stiff penalties if they file either a regular income tax return or a request for a tax-filing extension by this year’s April 15 deadline. Taxpayers should file, even if they can’t pay the full amount due. Here are further details on the options available.
More Time to File
People who haven’t finished filling out their return can get an automatic six-month extension. The fastest and easiest way to get the extra time is through the Free File link on IRS.gov. In a matter of minutes, anyone, regardless of income, can use this free service to electronically request an automatic tax-filing extension on Form 4868.
Filing this form gives taxpayers until Oct. 15 to file a return. To get the extension, taxpayers must estimate their tax liability on this form and should also pay any amount due. By properly filing this form, a taxpayer will avoid the late-filing penalty, normally five percent per month based on the unpaid balance, that applies to returns filed after the deadline. In addition, any payment made with an extension request will reduce or eliminate interest and late-payment penalties that apply to payments made after April 15. The current interest rate is six percent for the first quarter if 2019, compounded daily, and the late-payment penalty is normally 0.5 percent per month.
Besides Free File, taxpayers can choose to request an extension through a paid tax preparer, using tax-preparation software or by filing a paper Form 4868, available on IRS.gov. Of the nearly 10.7 million extension forms received by the IRS last year, almost 5.8 million were filed electronically.
Some taxpayers get more time to file without having to ask for it. These include:
- Taxpayers abroad. U.S. citizens and resident aliens who live and work abroad, as well as members of the military on duty outside the U.S., have until June 17 to file. Tax payments are still due April 15.
- Members of the military and others serving in Afghanistan or other combat zone localities. Typically, taxpayers can wait until at least 180 days after they leave the combat zone to file returns and pay any taxes due. For details, see Extensions of Deadlines in Publication 3, Armed Forces Tax Guide.
- People affected by certain tornadoes, severe storms, floods and other recent natural disasters. Currently, parts of Mississippi are covered by a federal disaster declaration, and affected individuals and businesses in these areas have until April 30 to file and pay.
Easy Ways to E-Pay
Taxpayers with a balance due now have several quick and easy ways to electronically pay what they owe. They include:
- Electronic Federal Tax Payment System (EFTPS). This free service gives taxpayers a safe and convenient way to pay individual and business taxes by phone or online. To enroll or for more information, call 800-316-6541 or visit www.eftps.gov.
- Electronic funds withdrawal. E-file and e-pay in a single step.
- Credit or debit card. Both paper and electronic filers can pay their taxes by phone or online through any of several authorized credit and debit card processors. Though the IRS does not charge a fee for this service, the card processors do. For taxpayers who itemize their deductions, these convenience fees use to be claimed on Schedule A Line 23 prior to the TCJA change.
Taxpayers who choose to pay by check or money order should make the payment out to the “United States Treasury.” Write “2018 Form 1040,” name, address, daytime phone number and Social Security number on the front of the check or money order. To help insure that the payment is credited promptly, also enclose a Form 1040-V payment voucher.
More Time to Pay
Taxpayers who have finished their returns should file by the regular April 15 deadline, even if they can’t pay the full amount due. In many cases, those struggling with unpaid taxes qualify for one of several relief programs, including the following:
- Most people can set up a payment agreement with the IRS on line in a matter of minutes. Those who owe $50,000 or less in combined tax, penalties and interest can use the Online Payment Agreement to set up a monthly payment agreement for up to 72 months. Taxpayers can choose this option even if they have not yet received a bill or notice from the IRS. With the Online Payment Agreement, no paperwork is required, there is no need to call, write or visit the IRS and qualified taxpayers can avoid the filing of a Notice of Federal Tax Lien if one was not previously filed. Alternatively, taxpayers can request a payment agreement by filing Form 9465. This form can be downloaded from IRS.gov and mailed along with a tax return, bill or notice.
- Some struggling taxpayers may qualify for an offer-in-compromise. This is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed. The IRS looks at the taxpayer’s income and assets to make a determination regarding the taxpayer’s ability to pay. To help determine eligibility, use the Offer in Compromise Pre-Qualifier, a free online tool available on IRS.gov.
The markets registered another solid month, with all of the major indicators moving further into double-digit returns for 2019. The strong performance, surprising to many economists and analysts, comes in spite of the lukewarm earnings gains for many companies.
Weaker earnings gains were anticipated by the market, but some had gone too far, predicting actual losses rather than smaller increases when compared with 2018.
The U. S. economy continues to chug along, though at a slower pace than the Trump Administration might have hoped for. The benefits of last year’s major tax legislation appear to be waning, with little or no increase in capital expenditures by business. Most of the funds freed up by lower tax rates appear to have been spent on stock buybacks. Another reason for slower economic growth over the past couple of years has been the moribund U. S. housing market. So far, this year has proven no different. Existing-home sales fell 1.2% in January, their third straight monthly decline. Year-over-year, the decline was 8.5%.
Another perspective on the history of the real estate sector comes from so-called “housing starts.” New construction fell dramatically during the Great Recession of 2007-2008, falling from almost 2.4 million units per year before the financial crisis to a little more than 1.2 million units last year.
Interest rates, specifically mortgage rates, have always been a key factor in the strength of the housing market. That belief too now appears to be in question. Ten years of ultra-low mortgage rates haven’t sparked a recovery in new home construction. Another reason often given for the continuing weakness is the lack of demand from young people – the millennial generation, which is already burdened by more than $1 trillion in student loan debt.
Another data item of interest last week was the outflow of funds associated with foreign investors. For the first time in six months, foreigners withdrew more than they invested, leaving net withdrawals of -$48.3 billion. As usual, most of their activity was concentrated in Treasury and Agency securities, not common stocks.
In December 2018 it was announced that MetLife was ordered to pay a fine of $1 million and provide payments, with interest, to 13,500 people nationwide it had wrongly designated as “presumed dead.” MetLife bought the obligation to pay the employees’ pensions from their former employers and was required to keep funds in reserve for these retirees and to make payments when the former workers came of age. In 2017, the company disclosed it failed to make payments to thousands of retired workers because of MetLife’s own inability to locate them.
When changing jobs, you may have choices to make about your retirement money. The choices will depend on your age and the type of plan you are in, as well as the rules of the plan. If you are in a traditional pension plan, you may not be able to receive your benefits until you meet the plan’s requirements for retirement, or early retirement if the plan rules allow it. You must keep track of the pension and make sure the administrators of the plan know how to contact you.
Some people lose track of their pension plan from a prior job. A company might merge with or be bought by another company and change its name, move to a new location in a different city or go out of business. It might take a little research to find out what happened to your plan. Here are some tips to make sure you don’t lose track of your pension.
Educate Yourself about Your Plan
While you are still working for a company with a pension, educate yourself about how your plan works. Contact your company’s benefits officer and ask for a Summary Plan Description. This will show how your pension is calculated. Request a personal statement of benefits which will tell you what your benefits are currently worth and how many years you’ve been in the plan. It may even include a projection of your monthly payment amount. Check the statement for accuracy. Is the plan crediting you with the correct number of years of service? Do the statements show all the contributions you have made?
Create a “pension file” to store all your documents from your employer. Also keep records of the dates you worked and your salary since this type of data is often used by employers to calculate the value of pensions. All correspondence including any notices or documents relating to the retirement plan and your benefits should be retained.
Summary Plan Description
If you leave the employer before retirement age, verify you are vested in the plan and make sure you have a copy of the most recent Summary Plan Description. Before leaving, verify your beneficiary election and keep it in your pension folder.
Now it will be up to you to keep track of your former employer and pension administrator. Summary Plan Descriptions are updated every year. Make sure you contact the employer to get a copy of the latest update every year. Use this opportunity to verify they have your correct contact information on file.
Search for Unclaimed Retirement Benefits
Your plan could be terminated before you reach retirement age. Traditional defined benefit pension plans that are fully funded are generally sold to companies like MetLife to pay all promised benefits as workers qualify. Underfunded plans are likely to end up with the Pension Benefit Guaranty Corporation (PBGC). The PBGC guarantees benefits in most traditional pension plans, but not all benefits are protected. The PBGC maximum guarantee for participants in single-employer plans is determined using a formula prescribed by federal law that calls for periodic increases tied to a Social Security index. The maximum monthly guarantee in 2019 for a 65-year old retiree is $5,607.95/month for a straight life annuity and $5,047.16/ month for joint and 50% survivor annuity.
Pension Benefit Guaranty Corporation
The PBGC is a good place to start for anyone who has already lost track of their pension. They maintain a database2 of unclaimed pensions that lists approximately 38,000 people who are eligible for pension payments that could not be located by the PBGC or their former employer.
The PBGC does not have anything to do with defined contribution plans like 401(k)s and 403(b)s. To find one of these plans start with your former employer. If the company has gone out of business, try the Department of Labor’s Form 5500 search. Plan administrators are generally required to file Form 5500 annually. The form should contain the name of the plan administrator and their contact information. Unfortunately, the search only goes back to 2009. This won’t help if the plan went out of business before 2009.
National Registry of Unclaimed Retirement Benefits
The National Registry of Unclaimed Retirement Benefits3 is another free service to assist former employees looking for their unclaimed retirement benefits. A Social Security number is required to perform the search. The registry provides contact information for former employers when a match is found so the employee can claim their account.
Take Your Assets with You
Probably the best way to keep track of your retirement funds is to take them with you when you change jobs. There are usually limited options with a defined benefit pension. You may be able to take the money as a lump sum if the vested balance is small. Be sure to ask. The lump sum payments are eligible for rollover to an IRA to avoid tax. Defined contribution plans like 401(k)s and 403(b)s can also be rolled over to an IRA and sometimes to your new employer’s plan.
Your goal should be to have all your retirement funds working together for you in the most efficient manner possible. Some people think having multiple accounts is a form of diversification. It is not. The investments within the account are what provides diversification. Having fewer accounts to monitor makes implementing your investment strategy easier and helps to avoid losing track of a plan in the future.
The number of unmarried couples who live together are on the rise whether you know it or not. In fact, I’m willing to bet that some of your “married” friends are actually domestic partners. You may have attended their wedding but that does not mean they signed the legal document. Only their accountant or financial planner may know the truth.
Marriage is a legal contract and offers benefits and consequences when the marriage ends in divorce. Historically, marriage was a business transaction between families. The concept of “I Love You” marriage is modern. Current marriage and divorce laws were put in place mainly to protect the wife, as women often were homemakers and would be financially devastated in the event of a divorce.
As more women join the workforce and become the breadwinning partner (as is often the case for women attorneys), these laws can seem antiquated and often work against us. I am not suggesting that you never get married. But it may make a lot of sense to delay marriage for some time. There are a few, mostly financial, perks of cohabitating without signing a marriage certificate. For certain situations, staying unmarried may be the best move
Unmarried Couples Save on Taxes
Prior to the Tax Cuts and Jobs Act of 2017, many dual professional married couples were subject to a marriage penalty tax. That’s because the married tax brackets were not double the single tax brackets. The penalty came into play when both partners made similar incomes. If one partner made significantly less, or was a stay at home spouse, then a marriage bonus may have applied.
The new tax law has largely eliminated the penalty, but it has introduced another penalty for married couples living in high income tax states — a limit on state and local tax deductions on tax returns, also known as SALT. SALT is now limited to $10,000 whether you are single or married. So, a married couple can deduct $10,000 versus two unmarried partners who can deduct $10,000 each.
There are a few other tax benefits for unmarried couples with children. One partner may file as head of household (HOH) and the other partner files as single. The 2019 HOH standard deduction is $18,350 while the deduction for filing single is $12,200 for a total of $30,550. Contrast this with married filing jointly whose standard deduction is $24,400 total.
If the unmarried couple with children also has access to a high deductible health plan with a health savings account (HSA), they can take advantage of having both a family HSA and a single HSA for a total of $10,500 versus $7,000 for a family HSA only. Hopefully, they are using it as a stealth IRA.
Unmarried Couples May Save On Student Loans
Staying separate can sometimes help with student loans. You may save tens of thousands of dollars if you’re pursuing income-based repayment, including pursuing Public Service Loan Forgiveness. This makes sense especially if you are with another high-income earner.
However, being married may be more advantageous if you live in a community property state (California, Texas, Arizona, New Mexico, Louisiana, Nevada, Idaho, Washington, and Wisconsin) and file taxes separately. In community property states, you can divide the combined income in half. This works well for someone with a partner who makes less.
These calculations can be complicated. I recommend seeking professional student loan advice before delaying marriage for this particular reason.
Blended Families are Complicated
When partners come together with children from previous relationships, they become a blended family. There is no doubt that this adds both emotional and financial complexity to the partnership. As a result, the divorce rate for blended families is about 60%, higher than for couples who bring no children into the marriage. If both partners bring in children, it approaches 70%.
We all know divorce can be financially catastrophic for physicians. I believe a prenuptial agreement is a significant and often overlooked element of asset protection for anyone entering into a blended family.
Those in blended families should also be aware of all the financial obligations your partner has. Read the parenting agreement which outlines the custody agreement and each parent’s financial responsibilities. Consult a family lawyer in the state of custodial residence of the child(ren) to discuss any precedents.
Although most, if not all, states consider the new spouse’s income separate, it can play a role in certain situations. For example, it does not stop an ex-spouse attempting to file for more child support. Courts have ruled both ways. Because of the above, I believe forming a “legally” blended family is a top reason to delay marriage until the children no longer require child support and college assistance.
Financial Benefits of Marriage
There are plenty of financial benefits for married couples! You can gift unlimited amounts of money to each other, get access to your spouse’s social security benefits, and automatically be named next of kin. You can also share the estate tax limit — whatever your partner does not use goes to you (if you file an estate tax return). Married partners also have the ability to fund a spousal Roth IRA and to stretch an inherited IRA.
Access to health insurance is generally easier for married couples, although many employers now allow domestic partners to enroll.
Legal Documents for Unmarried Couples
If you opt out of a legal marriage contract, it is even more important that you have other documents in place for protection.
One of the most essential is a Last Will and Testament (LWT) for each of you. Your LWT allows you to name your children’s guardian(s). It will also ensure distribution of your estate according to your wishes. Otherwise, the laws of your state will determine which relatives get what and it’s a pretty sure bet your partner will be left empty-handed – probably after a nasty court fight.
Your LWT also allows you to name an Executor. Without an Executor, the court will decide who handles your estate and controls distribution.
You should each also have Durable Powers of Attorney in case one partner becomes incapacitated. If you don’t have one, again, the court will have to decide who has permission to make financial decisions on your behalf. Of course, we all know about health care proxies. Be sure you have one on file for your state of residence.
Because insurance and retirement account proceeds do not pass through your estate, be sure to update your beneficiaries. Otherwise, the courts will decide who receives the proceeds, such as your partner’s ex-spouse.
Don’t forget to have all of these documents signed and notarized according to the laws of your state or they will probably not be valid. Be sure to keep copies where the other partner can find them. Also, give your partner access to the passwords for your online accounts. Consider a password aggregator, such as LastPass.
The decision as to whether you need a dental treatment is often in a gray area. One dentist will say one thing, one will say another. This is normal, and it’s to be expected. But it means that the usual signs of insurance fraud – a practitioner prescribing more procedures than his or her colleagues – are more difficult to detect, because there’s more variation, and it’s more difficult to really pin down a procedure as unnecessary.
You need medical insurance, if only to protect against the cost of an accident or illness so expensive that you could be ruined financially. But do you really need dental insurance? It’s an interesting question, because you can avoid the most likely causes and expenses of dental problems, decay and gum disease, by brushing and flossing your teeth diligently. Several studies have shown that visiting the dentist twice a year doesn’t deliver notable benefits compared with one exam a year. But some teeth are more prone to problems, and when they have a problem, the costs can mount quickly.
On average, Americans pay about $360 a year, or between $15 and $50 a month, for dental insurance. Costs will vary depending on your state. Most plans come with a maximum annual benefit or coverage limit. This limit usually falls between $1,000 and $2,000 person (a figure which hasn’t changed since the 1970s). Adjusted for inflation, dental insurance plans should be paying out between $4,000-8,000 a year by now, according to MarketWatch.com.
Unlike medical insurance, which covers costs after your bills reach the amount of your deductible, dental insurance cuts off coverage after your bills reach the annual limit. With dental insurance you may have a deductible to pay before coverage kicks in. After you’ve met it, your insurance pays a percentage of your dental costs; you pay the remainder, called coinsurance. The coverage stops entirely when the insurance company’s payout reaches that maximum benefit amount. Beyond that, you’ll pay 100% of your costs out of pocket. And the two annual cleanings often “included” in a plan count toward your max. In addition to your benefit being limited to a maximum of about $1,000 to $2,000, you’ll be trading away the potential to pick your dentist of choice (and location) and perhaps negotiating a price, all for the benefit of saving a few hundred dollars.
If you plan to get insurance, your best bet is to purchase a policy before, not after, you need major work. Otherwise you could be waiting months (sometimes years) for coverage to begin a procedure.
What does a monthly dental premium cover?
The National Association of Dental Plans (NADP) describes these elements of coverage in a typical plan, which provides a level of coverage known as 100/80/50 coverage:
- Preventive care: periodic exams, X-rays and, for some age groups, sealants — 100 percent.
- Basic procedures:office visits, extractions, fillings, root canals (sometimes) and periodontal treatment — 70 percent to 80 percent.
- Major procedures: crowns, bridges, inlays, dentures and sometimes implants and root canals — 50 percent or less.
Orthodontics coverage usually can be purchased as a rider and cosmetic care isn’t covered. So, in deciding if an insurance plan is right for you, weigh:
- The annual premium
- The cost of the dental care you need
- Your policy’s limit on how much it pays out in benefits and whether you can roll over unused benefits from the previous year
- Policy coverage
While many dental policies focus on preventive measures by offering two annual visits, you’ll really start seeing the savings with more expensive treatments, like root canals and crowns.
What types of dental insurance plans can you choose from?
The typical dental plan falls into one of three categories.
- Indemnity or fee-for-service plans
- PPO or Preferred Provider Organization plans
- HMO or Health Maintenance Organization plans
Indemnity or fee-for-service plans
This plan allows you to pick a dental provider and your plan pays a percentage of the provider’s fee.
Pros: These plans let you choose from the widest variety of providers. The deductible (the amount you pay for procedures before insurance coverage kicks in) may be lower than other plans. The annual maximum coverage limit may be higher.
Cons: The premiums (what you pay monthly) tend to be higher than other plans. You’ll be paying your share of service costs up front.
This plan is best if: You have a certain dental provider you want to see, or you anticipate needing major, costly procedures.
PPO or Preferred Provider Organization plans
With a PPO, you pay lower fees to see certain in-network or “preferred” providers.
Pros: The insurance network pays more than they might with an indemnity plan or HMO plan. You aren’t required to see in-network providers, but you save money when you do.
Cons: You’ll pay more if you see a provider out of the network. PPO plans often come with a maximum amount they’ll reimburse in a calendar year. Some procedures may not be covered or have a waiting period before coverage starts.
This plan is best if: You don’t need major dental work right away, but want to be prepared in case you need it in the future. You’d like some flexibility in your choice of dental providers but don’t want to pay high premiums.
HMO or Health Maintenance Organization plans
With an HMO, you’re required to see dental providers in the insurance network.
Pros: Preventive services—cleanings and X-rays—will be 100 percent covered, while basic procedures come with a co-pay. You may not have a deductible or maximum annual limit and premium payments will likely be lower.
Cons: Major or restorative procedures may come with less than 50 percent coverage or no coverage at all. You won’t have a large choice of providers.
This plan is best if: You don’t anticipate needing any major dental procedures in the near future. You have no provider preferences as long as basic dental work is covered financially.
If you already have a dental provider you trust, see which plan their office recommends. Most plans won’t immediately cover pre-existing conditions or reimburse for major procedures completed before you got insurance. When in doubt, ask what’s covered and when. Keep in mind there’s always a possibility you may need a procedure you don’t anticipate—and it may not be covered by your policy. The higher your premium, the more likely you are to have coverage for more extensive work. Your dentist will often tell you (or you can ask) which procedures you’re likely to need down the line.
The perverse incentives by insurance companies
Insurance plans put perverse incentives in place for in-network dentists. When dentists become part of these networks, they agree to extremely low reimbursements for cleanings and exams, in exchange for a steady stream of patients. To make up for it, some dentists will perform procedures that have a significant patient portion or heavily promote cosmetic work as being necessary.
Often, it works like this: A dentist will agree to be “in-network” in exchange for a steady stream of patients from the insurance company. They get paid by the insurance company “by the head” instead of according to how much treatment they actually provide. If the insurance company agrees to send the dentist 12,000 patients per month, and the dentist gets $8 per head per month (this is called a capitation plan) then that’s $96,000 per month, regardless of what their costs are. See the problem?
So the incentive is to pocket as much of the cash as possible by reducing overhead. To reduce overhead, they’ll push off work that needs to be done in their patients and then promote treatments that aren’t covered by insurance.
With perverse incentives like these, how much is that in-network dentist or that free cleaning actually costing you and your family — both money-wise and health-wise?
What questions should you ask before picking a policy?
- Which dental procedures am I likely to need this year? How much would they cost out of pocket? How much would they cost with insurance?
- How much will I pay monthly and annually in premiums?
- How much will I pay for a regular cleaning without insurance? With insurance?
- What is the maximum annual payout for this insurance policy? Which procedures are covered?
How can you save money on dental care without insurance?
If you decide to skip dental insurance, you’ll still want to get your teeth cleaned once or twice a year. And you’ll want options if unexpected dental work comes up. Here’s where you can look for care outside of the typical insurance marketplace.
Visit a dental school
You’ll see students whose work is supervised by trained dentists. In exchange, you pay a low cost for appointments, even if you’re uninsured. The ADA lists dental schools across the country; find one near you.
Visit a dental clinic
Some clinics offer a sliding scale fee based on income, and diagnostic exams may be free. Find a local branch of a national clinic like America’s Dentists Care Foundation, or see what low-cost care options your state and local dental societies have to offer.
Dental school and clinic appointments are often in high demand. Be prepared to schedule far in advance or put your name on a waiting list. Even with walk-in clinics, it’s best to call ahead and find out their procedures before you go.
Look into a discount dental plan
It’s easy to confuse dental savings plans (also known as dental discount plans) with dental insurance, but they’re very different. Whether insurance or a discount plan — or some combination of the two — is right for you will depend on how much dental work you and your family get per year and how much you’re paying out of pocket.
Discount dental plans or dental savings plans can give you the security of coverage without the cost. You’ll pay an annual fee and get a discount, anywhere from 10 percent to 60 percent, on average dental care prices. Unlike insurance plans, there are no annual caps or waiting periods. With dental discount plans, you enjoy savings at participating dentists by paying the dentist directly for services at a lower price. This is not an insurance plan, so there are no copays or premiums, Before you buy into a plan, look over its list of covered procedures to see if they’re ones you are likely to use.
It may be a good option for people who don’t have access to dental insurance or who want services that aren’t covered by insurance. This might include senior citizens who don’t have dental insurance under Medicare or younger people who want discounts on something like teeth whitening, which traditional insurance typically doesn’t cover. You also might think about a dental savings plan if you need dental work that costs more than your dental insurance will pay. (Many dental insurance plans cap their total payout at less than $2,000 a year.) For example, savings of 50% on a couple of root canals that cost $1,000 each would add up quickly.
If you have a dentist you like, ask her if she takes part in one and how much you could save with it. If you’re open to new providers, call a few who are in the plan you’re thinking about to see if the savings would be worth it. Thousands of dentists take part in dental savings plans, and you can usually get a member list from the plan’s sponsor. While many reputable companies offer dental savings plans, the industry has attracted some fraudsters. Avoid scams by asking to be mailed information before you make a payment, and say no to high-pressure salespeople. You also can check with the Better Business Bureau or your state’s insurance regulator to see if a company has had complaints made against it.
Price check and do your research
Tooth pain is a great motivator. When you’re in pain, you’re often willing to fork over any sum to find relief. But take steps to make sure you’re paying market rate. First check the Healthcare Blue Book, a respected online tool that provides a fair price for thousands of medical and dental procedures in your ZIP code. And don’t be shy to call around to other dentists in your area to price shop. Ask friends and neighbors for recommendations, and check out any potential dentist with your state’s dental board to ensure he or she is licensed and to find out if any disciplinary action has been taken. Most offer an online search tool.