Life Planning Guide Apr 2011 by Specialty Publications

will Your Savings last a lifetime? Selecting an Appropriate investment Manager 10 Tips for Saving More Pop Quiz: Test Your Financial Savvy!

Smart Money Tips, from Tots to Retirees long-Term Care insurance: The Basics what a widow Must Know Charitable Giving in Good Times and Bad

Advertising Supplement | The Record | Sunday, April 24, 2011 2

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will Your Savings last a lifetime? Selecting an Appropriate investment Manager 10 Tips for Saving More Pop Quiz: Test Your Financial Savvy!

Smart Money Tips, from Tots to Retirees long-Term Care insurance: The Basics what a widow Must Know Charitable Giving in Good Times and Bad

Advertising Supplement | The Record | Sunday, April 24, 2011 2

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Pop Quiz: Test Your Financial Savvy question

According to actuarial charts, how many years can you expect to live? question

At what age is a worker born between 1943 and 1954 eligible for full social security benefits? a. 62 b. 64

c. 66 d. 68

question

a. 5 percent b. 10 percent c. 15 percent d. 20 percent

question

What percent of a retiree’s income will be spent on healthcare, on average?

Procrastination is one of the main ways the average Joe and Jane get in trouble with their finances. Break the bad habit – starting now! Answer these basic questions and see how you rate.

How many years, on average, will a U.S. citizen spend in retirement? a. 10 b. 15 c. 20 d. 25

question 4: Income taxes go away after a worker retires. True or false?

Your credit score is: a. a snapshot of your credit risk b. an objective measurement used by lenders c. available to you on request d. all of the above

What percent of early baby boomers, age 56 to 62, are expected to run out of money to cover basic retirement living expenses? a. 17 percent b. 23 percent

question 7: True or False: If you die without a will, your sur viving spouse will be granted all or most of your assets.

c. 42 percent d. 47 percent

question

You can improve your credit rating by:

Insurance is a way of: a. saving for a rainy day b. preventing unplanned events c. handling risk d. all of the above

a. correcting inaccurate information as soon as possible b. disputing negative information c. correcting only the worst report d. asking that negative information not be included in your credit report © CTW Features

A How Do You Rate? 10 correct: Warren Buffet is your new best friend! 9 correct: Close… but we are not playing horseshoes! 8 or less correct: It’s time to do some homework!

1. The U.S. Social Security Administration estimates that a man reaching age 65 today can expect to live, on average, until age 83. A woman turning age 65 today can expect to live until age 85. To calculate your expected lifespan, go to: http://www.ssa.gov/planners/lifeexpectancy.htm 2. C: 66 years old 3. D: 20 percent 4. False. Pre-tax money a worker contributed to a retirement plan is subject to income taxes when it’s withdrawn during retirement years. 5. C: 20 years 6. D: 47 percent 7. False. Every U.S. state has unique laws governing who will own the property. To calculate the outcome in your state, go to www.mystatewill.com 8. C: Handling risk 9. D: All of the above 10. A: Correcting inaccurate information as soon as possible © CTW Features

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Selecting an Appropriate Investment Manager Provided by

Russell A. Ballew

Financial Advisor UBS Financial Services Inc.

This article has been written and provided by UBS Financial Services Inc. for use by its Financial Advisors.

Choosing an appropriate investment manager is one of the most important factors that can help you pursue your investment goals. Investment managers have different approaches to investing, and vary greatly in the investment styles they follow, risks they take, potential returns they generate, and the types of securities they hold. Sophisticated institutional investors commit considerable resources to help identify those managers with whom they can entrust their assets. Gaining access to some of the most highly respected professional investment managers used to require a lot of money – in most cases a minimum investment of $1 million. But now you can gain access to the nation’s leading investment managers for lower investment minimums – typically $100,000 – through separately managed account programs offered by some financial services firms. 4

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Who needs an investment manager? Most affluent investors, small- to mid-sized companies and other organizations lack the time and resources to manage their investment portfolios successfully. In fact, many of these investors, depending on suitability, would prefer to hand over the day-to-day investment decision-making to a full-time professional manager. But conducting the research to choose an appropriate, quality manager from the thousands of asset management firms available can be both time-consuming and expensive, not to mention very difficult to do. If you are interested in finding an investment manager, a good place to start is with your financial advisor. He or she can help you determine if separately managed accounts are suitable for your specific situation, in light of your risk tolerance, investment objectives, and liquidity needs. Through separately managed account programs available at their firms, a financial advisor can help investors with a broad selection of quality investment managers to find the manager(s) who are appropriate.

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The Importance of Manager Research Many full-service investment firms have designated manager research departments who carefully pre-screen and analyze investment manager candidates before the manager candidates may be accepted in the firm’s programs to manage client assets. If your financial advisor’s firm has a manager research department, it should be made up of professionals who have a depth of knowledge and expertise, and are backed by an array of capabilities and handson experience. Some firms have manager research departments that include professionals who are former investment managers, equity and fixed income traders in the capital markets, and investment consultants. The research team’s experience and capabilities enables the team to conduct quality and indepth research so that they can identify investment managers that they believe are wellpositioned to help investors pursue their financial goals. What should a manager research team look for in an investment manager before recommending the manager for

their firm’s clients? The managers should demonstrate excellence in a number of key areas. Quantitative performance screening and monitoring is an important part of the evaluation process, but more important should be how the manager meets requirements in qualitative categories such as the manager’s Organization, Quality of Personnel, Philosophy, Process, Quality of Research, Risk Management, and Implementation and Style Consistency. An integral part of the investment manager selection process is “due diligence.” Once the manager research team accepts certain managers for their firm’s clients, the managers must continue to meet the team’s due diligence standards over time in order to remain in good standing. In fact, given the importance of this function, some manager research departments spend more time monitoring the managers already in their firm’s programs than they do looking for new candidates. Choosing a Manager for You Whether your risk tolerance is conservative, aggressive or somewhere

in between, you can find a manager who is suitable for you. Your financial advisor can help you choose among managers who specialize in a number of asset classes and investment styles, such as domestic stocks, international stocks, fixed income or balanced investing. Together, you and your financial advisor should carefully review the manager evaluations prepared by the financial advisor’s manager research group before you select a manager. And although past performance is no guarantee of future results, you should also consider the manager’s track record. Don’t limit yourself to one manager; perhaps a combination of managers to handle different aspects of your portfolio would be the best approach for you to consider. Performance Monitoring If you decide to hire an investment manager, you will need to conduct ongoing monitoring of your manager’s performance to help assure that the manager is working toward your investment objectives. Performance monitoring should include quarterly reports that give you and your financial advisor an objective,

statistical analysis of your investment manager’s performance. The report should list all your account holdings and compare your rate of return with appropriate market indexes. And because performance is based not only on return, but also on the level of risk incurred to pursue that return, the report should clearly assess the volatility of your portfolio during specific time periods. For more information about professional investment management and, depending on suitability, how to select a manager or combination of managers who can help you pursue your financial goals, contact your financial advisor today. The information contained in this article is based on sources believed reliable, but its accuracy cannot be guaranteed. This article is for informational and educational purposes only and should not be relied upon as the basis for an investment decision. Consult your financial advisor, as well as your tax and/or legal advisors regarding your personal circumstances before making investment decisions.

The Gift that Keeps on Giving At a time when so many need so much, here’s how to determine a charitable giving plan that makes sense Danielle Cadet CTW features

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in tough economic times, when people are more conscious of where every dollar goes, charitable giving can easily fall off the “to do” list. But there are benefits – for the giver and the charity – to sustained, consistent donations to a worthy cause, especially when there are funds on hand that will likely outlive the owners. “The reality is, it’s all going to go away. There’s no U-Haul in the back of a hearse,” says Brian Kluth, a Colorado Springs, Colo.-based pastor and financial author who wrote and published You Are Invited on a 40 Day Spiritual Journey to a More Generous Life, a 2006 Bible-based guide to inspire generosity and increase giving to local churches. Developing a charitable giving plan can be a small or large part of financial planning, ranging from a one-time gift to a large donation outlined in a will. Regardless of the size of a bequest, the choice to give requires time and thought.

Even for small gifts, Kluth recommends that donors choose a charity carefully, and make sure it lines up with his or her values. “Givers should focus on their passions, and what’s made a difference in their own lives. It will make giving that much more significant,” he says. Finding the right charity can be as simple as choosing an organization the giver is already familiar with or doing some research to find a perfect match. Guidestar.com provides information about

non-profit organizations ranging from the company’s mission and goals to financial details on staff salaries and fiscal operations. CharityNavigator. org uses a numbers-based rating system to assess the financial health of more than 5,000 charities. Kluth says these sites offer to track the percentage of income a giver donates annually. “Sometimes people get into giving ruts and keep giving the same amounts even though >> CONTINUED ON PAGE 11 fin a n c ia l

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Will Your Savings Last a Lifetime? The Retirement Question Everyone Needs to Answer

Presented by:

David J. Stull CLU, ChFC

You’ve worked hard and saved diligently over the years, and now you’re looking forward to a long and comfortable retirement. No more morning commute, no more last-minute business trips, and no more late nights at the office. Finally, you can focus on the important things in your life -- family, travel, a favorite hobby, or perhaps just taking it easy. But before you do anything, make sure you can answer one very important question: will the assets you’ve accumulated for retirement last as long as you do? If you’re finding the answer to that question a little disturbing, you’re not alone. In his Guide to Stocks, author and former business editor Ken Little discusses the risks facing today’s investors – inflation, market risk, economic risk, and so on – but he also places a new risk on the retirement 6

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radar: longevity. “Longevity risk,” Little says, “is the good news/bad news that modern health care has extended the average American’s life span.” That’s the good news. The bad news is that many retirees now face the prospect of outliving their retirement-plan assets. One reason longevity presents such a problem is the way many people save for retirement. Rather than determining the amount of income they’ll need to maintain their lifestyles – and then saving with that income goal in mind - many just tuck away whatever percentage of income their retirement plans allow and count on taxdeferred growth and a generally positive investment climate to do the rest. It’s essentially a hitor-miss kind of strategy that a single market correction on the eve of retirement or two unforeseen years in a nursing home can completely destroy. Another reason longevity is becoming such a problem is higher-thananticipated expenses. According to an article in the Wall Street Journal (“Money Matters,” May 2007), many retir-

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ees find that the amounts they spend for travel, vacations and home improvement are higher and more unpredictable than they planned for. “The reality is that when people retire, they want to do more than when they were working and had no time,” says Larry Ginsburg, a Certified Financial Planner in Oakland, California. “But retirees are also encountering some surprising expenses, like higher-than-expected costs for homeowner’s insurance and health care. ” Finally, there’s inflation – an unfortunate reality that becomes especially problematic the longer “longevity” lasts. And with both longevity and inflation on the rise, many retirees face the prospect of scaling back their lifestyles or eliminating certain enjoyments altogether in order to be able to meet basic needs. Just how big an impact can inflation have on a retiree’s spending power? Well – judge for yourself: according to an online inflation calculator (www.westegg.com/ inflation), a 1976 dollar now has the purchasing power of just 28 cents.

So what can you do to help ensure that you don’t outlive your retirement assets? For starters, you can move your assets into investment vehicles that offer four important features: access to the equity markets, tax-deferred growth, built-in safeguards against volatile markets and the ability to keep pace with – or preferably outpace – inflation. Access to the equity markets is important because historically, only they have provided the kind of returns that can outpace inflation. Stocks, mutual funds, and variable insurance products are examples of such investments. (These investments are not FDIC insured, principal is subject to market fluctuations, and value at redemption may be worth more or less than the original cost.) CDs, bank savings, and money market accounts, while offering a safe and solid way to accumulate money, often barely exceed (and sometimes even lag behind) the rate of inflation. Add income taxes on earnings into the mix, and it’s actually possible to lose ground – at least in terms of inflation - in these kinds of invest-

ments. This is certainly not an attractive scenario, given today’s potentially longer life spans. One way to minimize – or at least postpone - the impact of income taxes is to find investments that offer tax-deferred accumulation. If you don’t have to pay income taxes on the growth of your money, you’ll simply be that much farther ahead in the battle to outpace inflation. Generally, qualified retirement plans (for example, IRAs, 401(k) plans, and tax-deferred annuities), life insurance cash value, and annuity contract values offer this kind of income-tax deferral. So, you may want to consider consolidating your assets, if appropriate, into these kinds of products at retirement in order to enjoy tax-deferred growth for as long as possible. Another important feature – especially if you have to make a fixed pool of money last for the rest of your life – is built-in safeguards that offer protection if the markets become volatile. Stocks, mutual funds, and other equitybased investments are great as long as the mar-

kets are going up, but a single market correction or a string of daily losses can reduce the value of these investments in pretty short order. Regardless of where you are in the retirementplanning process, your potential longevity doesn’t have to be a good news / bad news situation. With a little advance planning and the right products in place, your retirement years could – and should - be the best, most comfortable years of your life. Call your financial advisor today for information on the tools and strategies that may be right for you. 1

Lifetwo.com 2007

www.westegg.com/ inflation calculator 2007 1

Investors should carefully consider the investment objectives, risks, charges and expenses of a variable insurance product before investing. Please carefully read the prospectuses for the relevant variable insurance product and its underlying investment options, which contain this and other information. You can obtain a prospectus from your financial professional.

What a Widow Needs to Know

Checklist for New Widows & Widowers

The death of a husband launches many women into uncharted territory: financial planning Dawn Klingensmith CTW features

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ALTHOUGH WOMEN generally outlive their spouses, it’s still common in this day and age for husbands to handle long-term financial planning with little or no involvement from their wives. Once widowed, women often find that financial advisers who did business with their husbands fail to address their concerns. In fact, 70 percent of widows considered firing their advisers within three years of their husbands’ deaths, according to research by Minneapolis-based Allianz Life Insurance Co. “Advisers often aren’t as responsive as they should be, they talk down to widows, or they take the ‘Don’t bother your pretty little head’ approach and fail to explain things,” says Washington, D.C.based financial planner Alexandra Armstrong, co-author of On Your Own: A Widow’s Passage to Emotional and Financial Well-Being

(Armstrong Fleming & Moore Inc., 2006). Some women cede control not only because they’re overwhelmed by the estate-settling and grieving processes but also because they doubt their abilities when it comes to “high finance,” says behavioral psychologist Matt Wallaert, the lead scientist at Thrive, a New Yorkbased financial management Web site (JustThrive.com). Women routinely handle day-to-day household finances such as paying bills and managing bank accounts, Wallaert adds, but due to lack of exposure they tend to underestimate their investment-management capabilities. When put to the test, though, women usually know more about investing than they think they do. The basics of financial planning can be learned. Meanwhile, newly widowed women should make it clear they intend to retain control over their invest-

ments, that they’ll make adjustments in their own time and that they won’t tolerate strongarm tactics or dismissive treatment. However, Armstrong advises against making immediate changes. Unless an adviser’s dealings seem shady, in the beginning it’s easiest to work with that person because he or she is already familiar with the couple’s situation. This also applies to lawyers and accountants, Armstrong says. “In six months to a year, you can reassess these relationships,” she says. A widow’s first order of business when working with an adviser is calculating how much it will cost her to live. The adviser should provide her with a list of records she needs to assemble. She might want to take someone with her who’ll ask questions that don’t occur to her. Before inviting a family member, she should consider whether that person’s interests might be selfserving. She should take notes and ask that any recommendations be put in writing. “It’s a

difficult time. Things go in one ear and out the other,” Armstrong says. A widow also should find out whether the adviser has an assistant who can answer basic questions. That way, she’s less likely to feel like a burden or like she’s being ignored in the event the adviser is busy with other clients. Initially, the goal is to make sure the widow has sufficient income to pay her current expenses. “Very rarely is there a situation where something immediate needs to be done with the investment portfolio,” Wallaert says. So if an adviser presses, a widow

might want to hire a replacement once the estate is settled. Often, “adult children kind of swoop in and take over,” Armstrong says. “Don’t succumb to any undue pressure from anyone, including family.” If a widow ultimately decides to hire a new financial planner, she should ask other trusted advisers (accountant, lawyer, banker) for recommendations, as well as her widowed friends. An adviser should offer an initial consultation for free. Wallaert recommends asking whether the adviser is incentivized to steer clients toward certain investments and to regard such a setup as a fin a n c ia l

• Get multiple, certified copies of the death certificate • Find the will and any trusts • Find any life insurance, including company insurance, and put in a claim immediately • Inventory the safety deposit box • If you’re covered under your spouse’s company health insurance, find out immediately about keeping the policy • Find the rest of the assets (including deeds, securities, bank accounts, retirement accounts, stock options) and liabilities (including mortgages and debts) • Pay all bills on time if they relate to your personal life • Claim any benefits you’re entitled to • Call your spouse’s employer to see how much money is due, and follow up with a letter Source: “Making the Most of Your Money” by Jane Bryant Quinn (Simon & Schuster, 2010) © CTW Features

potential red flag. Armstrong recommends asking whether the adviser belongs to an Estate Planning Council. Many competent advisers don’t, she says. But membership is a good indication the adviser is interested in working with widows. © CTW Features

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10 Tips to Jump-Start Your Savings Last we checked there was no bailout money for regular folks. Are you saving enough? rule of thumb: rule ofshould thumb: everyone have six everyone should months’ worth ofhave livingsix months’ worth of living expenses tucked away in expenses tucked away savings. reality: few in savings. folks do,reality: and thefew proverfolks do, and thelooms. proverbial “rainy day” bial “rainyStart day”setting looms. remedy: remedy: Start setting aside money today. here aside money today. are 10 ways to save here are 10 ways to save before you get soaked. before you get soaked.

TIP No.

Carry cash. People who Carry People whoof count cash. out bills instead count bills instead of payingout with debit or credpaying with debit orand credit tend to spend less it tendfewer to spend less and make unplanned make fewer unplanned purchases. purchases.

buy a la carte. this seems buy a la carte. this seems counterintuitive, but it counterintuitive, it may be cheaper tobut cancel may be cheaper tomemcancel subscriptions and subscriptions andasmemberships and pay you berships and pay as you go instead. In a study of go instead. a study of three fitnessInclubs, “two three fitnessfrom clubs, “two researchers Stanford researchers from Stanford and berkeley showed that and berkeley showedhow that people overestimate people overestimate how much they’ll use their much they’ll use their gym membership by over gym membership over 70 percent,” Sethi by says. 70 percent,” Sethi says. members who chose a members who a monthly fee of chose around monthly fee ofanaround $70 attended average $70 attended anmonth. average of 4.3 times per of 4.3 times per month. that comes out to more that comes to wheremore than $17 perout visit, than $17pass peronly visit,cost whereas a day as a day pass only cost $10. likewise, download$10.your likewise, downloading favorite tV ing your tV for shows offfavorite the Internet shows off the Internet for

2 2

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3 3

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Set a budget and stick to Set a budget and stickNo. to it. “budgeting is the “budgeting is the 1it.surefire way to saveNo. 1money,” surefiresays wayethan to save money,” says ethan ewing, president of bills. ewing, president bills. com, San mateo, of Calif. com, San mateo, Set specific goals, Calif. such as Set specific goals,bills, such as lowering grocery lowering grocery bills, and budget accordingly. and budget accordingly.

optimize your cell phone optimize your cell phone plan. “I like billshrink. plan. “I like you billshrink. com, where can find com, can find betterwhere credityou cards and better credit cardstoand cell phone plans suit cell plansneeds,” to suit yourphone individual your individual needs,” says ramit Sethi, author says founder ramit Sethi, and of author and founder of iwillteachyoutoberich. iwillteachyoutoberich. com, San francisco. com, San francisco.

Start Early, SavE MorE Start Early, SavE MorE The longer money is invested, the more time it The longer the interest. more time it has to grow,money thanksistoinvested, compound See has grow, thanks four to compound interest. howtoa conservative percent annual rateSee of how four percent annual returna conservative can make a small stash grow big rate overof return can make small stash over time: steps to fix aany errors yougrow maybig find. time: steps to fix©any errors you may find. CTW Features

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TIP No.

redeem reward points. If redeem reward your credit card points. offers If your them,credit checkcard youroffers statethem,to check yourmany statement see how ment to see many you have andhow then go to you have andwebsite then go the rewards toto the rewards website to to find out if it’s possible find out if it’s possible convert them into cashtoor convert them into cash or gift cards. Some credit gift Some cardscards. double thecredit value of cards double the value of rewards at specific retailrewards at specific ers, ewing says. retailers, ewing says.

SavEd $2,000 pEr yEar SavEd $2,000 pEr yEar Kept money in account until age 65

Kept money in account until age 65 $260K

from age 20 through age 30 from age 20 through age 30 from age 20 to age 65 from age 20 to age 65 from age 30 to age 65 from age 30 to age 65 from age 40 to age 65 from age 40 to age 65 from age 50 to age 65 from age 50 to age 65

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TIP No.

aMount invEStEd aMount $20K $40KinvEStEd $60K $80K $20K

$40K

$60K

$80K

TIP No.

Negotiate car insurance. Negotiate carcompare insurance. once a year, difonce aproviders’ year, compare ferent rates.different rates.the even ifproviders’ you stay with even if you stay with the same company, you likely same company, you likely can save money by adjustcan save money by adjusting your deductible; ing your deductible; unloading unnecessary unloading unnecessary services (such as roadside services (such as roadside assistance if you’re an AAA assistance if you’re AAA member); or askinganabout member); or asking about repeat-customer, lowrepeat-customer, lowmileage and safe-occupamileage and safe-occupation discounts. use Sethi’s tion discounts. use Sethi’s negotiating script:tinyurl. negotiating script:tinyurl. com/carinsurance1. com/carinsurance1.

ferret out special offers. ferret out special offers. “Any time you make a “Any timefrom you amake a purchase major purchase from a major retailer – a new computretailer – a new computer, flowers, furniture – er, flowers, furniture check out your credit– check outcar your credit card and insurance card and for car deals,” insurance websites Sethi websites deals,” Sethi says. “myfor credit card says. “my credit card gives me discounts of up gives discounts to 30 me percent off forof up to 30 percent off to forpurthings I’m going things I’m going to purchase anyway.” chase anyway.”

$100K $100K

intErESt EarnEd intErESt $120K $140K EarnEd $160K $180K $120K $140K

$160K

$85,688 $85,688

final total final $220K total $240K

$200K

$180K $200K

$107,209 $107,209

$41,015 $41,015

a per-episode fee might be acheaper per-episode fee might be than cable. cheaper than cable.

$260K

10 10

$152,288 $152,288

$220K $240K

$251,578 $251,578 Source: American Savings Education Council; Employee Source: AmericanInstitute Savings Benefit Research Education Council; Employee Benefit Research Institute

in Over YOur Head? TIP No.

Sell stuff. Auction off unneeded items on ebay or hold a yard sale. Sock away windfalls. TIP No.

When you receive extra cash – such as a tax return, bonus, birthday gift or proceeds from your yard sale – save it rather than indulging in a splurge.

TIP No.

10 eliminate temptation: unsubscribe. many retailers send special offers via e-mail. If you’re the sort of shopper easily tempted to overspend on an impulse, click on the “unsubscribe” link at the bottom of such e-mails to stop receiving them. © CTW Features

Financial journalist Catey Hill, selfdescribed shoe addict and money editor of NYDailyNews.com, says an overspending habit is hard to admit to and even harder to curb, but imperative nonetheless. “Until you

control how much you spend, you’re never going to have enough money,” she says. When Hill realized her irresponsible spending habits, she started a “cash-only diet” and wrapped a piece of paper around her credit card that read, “Do I need this?” Here are signs you may be in need of your own spending diet from her new book, “Shoo, Jimmy Choo!” (Sterling, 2010). • You have no concrete plan for a secure financial future. • You have significant debt and no solid plan to get out of it. • Less than 13 percent of your income goes to your retirement savings (or worse, you haven’t even thought of saving for retirement).

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• You have only a small in-case-ofemergency fund, or none at all. • You pay only the minimum, or a little extra, toward your credit card every month. • You don’t understand the difference between a Roth IRA, a traditional IRA and a 401(k)… • … Nor do you know the best ways to invest in these retirement plans. • You get a huge income tax refund each year. • You don’t have the insurance you need. • You don’t have a clue about where your money goes each month (but it sure goes somewhere). © CTW Features Source: “Shoo, Jimmy Choo: The Modern Girl’s Guide to Spending Less and Saving More,” by Catey Hill (Sterling, 2010)

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Long-Term Care Insurance: The Basics Provided by

Russell A. Ballew

Financial Advisor UBS Financial Services Inc.

This article has been written and provided by UBS Financial Services Inc. for use by its Financial Advisors. Long-term care, while not inevitable, is a possibility for millions of Americans. In fact, the American Society on Aging estimates that Americans who are age 65 and older have a 70% chance of requiring long term care. Long-term care can be very expensive. A recent survey revealed that the average annual national cost for nursing home care is over $70,000. Depending on where you live and what type of facility you choose, the cost may even be higher. Home healthcare, too, can prove to be a significant drain on resources. The national average cost of home healthcare is over $52,000 annually. The question becomes how do you pay for long-term care when you need it. One answer may be long-term care insurance. Long-term care insurance can provide you with the ability to meet a considerable portion of these costs over an extended period of time.

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How does long-term care insurance work? Typically, a long-term care insurance policy provides benefits if you: • Require assistance for an extreme cognitive impairment such as Alzheimer’s disease • Can not perform a specified number – usually at least two – of what long-term care policies refer to as activities of daily living, such as bathing and dressing. Most policies pay a maximum daily (or monthly) benefit for a specified number of years, known as the benefit period. This maximum daily (or monthly) benefit is simply the maximum amount the insurance company will pay per day (or month) for nursing home or other long-term care costs. Long-term care policies also include a lifetime benefit or the maximum total amount the insurance company will pay. The lifetime benefit is typically calculated by multiplying the daily (or monthly) benefit by the benefit period. If your long-term care costs are less than the maximum daily (or monthly) benefit, you may receive benefits for a longer period of time than the benefit period. But you will never receive more than the lifetime benefit. Most policies impose an planni ng

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established waiting period, called the elimination period, before any benefits are paid. What does long-term care insurance cover? Although some basic policies cover only nursing home costs, longterm care policies generally cover costs for skilled nursing care, intermediate care and custodial care. You can typically receive this care at an assisted-living facility, adult-care center or at home. Coverage can vary greatly from insurer to insurer and policy to policy. Each policy has its own eligibility requirements, restrictions, and determination of benefits and cost. How much does long-term care insurance cost? The actual cost of the premiums you pay depends on several factors, including: • Your age when applying for the policy • Your state of health when applying for the policy • The length of the benefit period and the elimination period • The types of services offered • The Maximum Daily or Monthly Benefit • Other policy features such as inflation protection

The features and the options of the policy can usually be customized to fit both your needs and your budget. What about inflation protection? Long-term care costs continue to rise. To protect yourself at least partially, you may generally choose from a variety of inflation protection options that offer increased coverage over time. The options vary by policy. What about Medicare, Medicaid and other medical insurance? Some consumers decide against purchasing longterm care insurance because they mistakenly believe that their medical insurance or Medicare or Medicaid will cover them. Unfortunately, these assumptions are generally not true. Traditional medical insurance typically does not cover longterm care expenses.

Medicare may cover medically necessary care at home or at a skilled nursing facility on a part-time or intermittent basis, but, generally, Medicare covers these expenses only after a required minimum hospital stay of three days, and coverage for an extended period is limited. Medicaid provides certain types of coverage only after people have depleted most of their assets. Your Financial Advisor can work with you to help you decide whether long-term care insurance is appropriate for your individual situation. Additionally, you should work closely with your Financial Advisor, as well as your legal and tax advisors, to make certain any long-term care policy you consider is coordinated with your investment, retirement and estate planning strategies.

Important Considerations: • Insurance products are made available by UBS Financial Services Insurance Agency Inc. and by other insurance-licensed subsidiaries of UBS Financial Services Inc. through thirdparty insurance companies unaffiliated with UBS Financial Services Inc. • UBS Financial Services Inc. does not offer tax or legal advice. You must consult your tax advisor and attorney regarding your specific situation. • The premiums initially listed on long-term care policies are not guaranteed and may change over the lifetime of the policy. The information contained in this article is based on sources believed reliable, but its accuracy cannot be guaranteed. This article is for informational and educational purposes only and should not be relied upon as the basis for a purchase decision.

Charitable Giving, continued from page 5 their incomes continue to rise. Usually only systematic givers continue to grow their giving as their incomes go up,” he says. Some charities offer gift annuity plans that provide income and tax savings to givers who make substantial donations. There are two types of plans that provide the giver with revenue: a charitable gift annuity and a charitable remainder trust, says Greg Ring, founder of Fulcrum Philanthropy Systems, a Colorado Springs, Colo.based advisor to nonprofits. In a charitable gift annuity, an individual transfers cash or property to the organization in exchange for the charity’s promise to make fixed lifetime payments. In a charitable remainder trust, the grantor turns over property or money to a charity but continues to use the property and receive income from it while living. The

? Ask Before Giving

grantor’s beneficiaries receive the income and the charity receives the principal after a specified period of time. The grantor avoids capital gains tax on the donated assets and also gets an income tax deduction for the fair market value of the remainder interest that the trust earned. In addition, the asset is removed from the estate, reducing subsequent estate taxes. While the contribution is irrevocable, the grantor may have some control over the way the assets are invested, and may even switch from one charity to another. With charitable annuities, individuals can donate to a cause while avoiding taxes on their income at the time of their death or the deaths of their loved ones. “At a simplistic level, people can take the money that was going to go to the government

Money magazine offers these tips for best initial questions to ask a charity (answers in parentheses) to evaluate its worthiness: • Does the IRS recognize you as a charity? (Yes) • How long have you been around? (Five years or more)

and instead give it to charity,” Ring says. Annuity gifts don’t have to be cash. Securities and assets, which typically constitute a larger percentage of net worth, can also be transferred. “In a tough economic time when people are watching their budgets and salaries are going down, other folks may find they can do much more if they give assets rather than cash,” Ring says. This option is ideal for a donor with any range of income. No matter what the financial climate, donating money to charity is always relevant. Developing a charitable giving plan that makes sense and reinforces individual values can be beneficial to the giver and the world at large. © CTW Features

• What percentage of my donation will go to charitable works? (75 percent or more) • Do you have a year's worth of working capital? (Yes) • Are you slashing services this year? (No) © CTW Features

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FinancialPlanning PlanningTimeline Timeline Financial TaniesHa Taniesha Robinson Robinson CTW feaTures CTW features

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good financial habits start early. The very best last well into old age. for those somewhere in the middle and still trying to figure it all out, there’s help. no matter what stage of life, a person can always take steps to improve his or her finances, says Julie Jason, president of the Jackson, grant investment advisors, Stamford, conn. Here are tips on what family members need to think about and plan for at all stages of life, from childhood to retirement.

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Children

Teens

if little ones start to learn the basics of money management as they grow, perhaps they can avoid the debt and exuberant spending habits that plague many adults. it’s important to teach children that every dollar they receive is not a dollar they can spend, says Manisha Thakor, personal finance expert for women and author of “get financially naked,” (adams Media, 2009). Kids should learn to divide allowances into three buckets: one for savings, one for charity and one for spending. Thakor recommends parents help children allocate 10 percent for savings, 10 percent for charity and 80 percent for spending.

as kids approach their teenage years, they can start to grasp the truth in the old adage “money doesn’t grow on trees.” Thakor tells teens to think about how many hours they would have to work to earn enough to buy an item they want. This way, they begin to understand how much labor really goes into an iPod or Xbox purchase. Encourage a teen to find a part-time job, and share your views on money matters and what you’ve learned about saving and spending.

tip

Required reading: Jean Chatzky, awardwinning financial journalist, wrote “Not Your Parents’ Money Book: Making, Saving and Spending Your Own Money,” (Simon & Schuster, 2010) to help start teens on a path to financial success.

Help kids learn to save: Fiddle with the online allowance calculator at www.threejars.com to come up with a weekly sum that’s reasonable, based on the age of the child and the parent’s own experience.

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Howtotothink thinksmarter smarterand and plan How plan betterininmoney moneymatters matters better atat allall stages toto retirees stagesofoflife, life,from fromtots tots retirees

tip

College sTudenTs

The average college-age credit card holder carries a balance of more than $3,000, according to Sallie Mae. fortunately for frisky, young credit users, credit card reform measures that started rolling out in 2010 make it more difficult to overload on credit and debt, requiring anyone under age 21 to show proof of income or get parents to co-sign in order to get a credit card. college students shouldn’t avoid credit cards completely, however. a student should get one credit card in his or her name; monitor his credit record at the three major agencies; and pay off the bill every month. Used responsibly, a credit card can help young adults build a strong credit profile.

neWlyWeds

a new couple’s main financial goal should be to build a solid foundation that includes an emergency fund to cover three to six months of living expenses, Thakor says. However, this should happen only after each partner pays down any debts they may have accumulated before marriage. Thakor urges newlyweds to conduct financial check-ins on all assets at least semi-annually. couples should save 20 percent of their income, Thakor says.

tip investment smarts: If your employer offers a tax sheltered savings plan, such as a 401(k), sign up and contribute all you can. Your taxes will be lower, your company may kick in more, and automatic deductions make it easy. >> conTinUeD on PaGe 14

Financial Planning Timeline continued... Married WiTh a faMily once the storks start dropping baby bundles at the doorstep, it’s time to think about life insurance. Whole life insurance is expensive and unnecessary in Thakor’s opinion. She suggests acquiring term life insurance instead, which provides coverage for a set time period – usually five to 30 years – at a fixed rate. Keep retirement saving in mind, despite the focus on children. You can put $5,000 a year into an individual Retirement account (iRa) and delay paying taxes on investment earnings until retirement age. if you don’t have a retirement plan (or are in a plan and earn less than a certain amount), you can also take a tax deduction for your iRa contributions.

tip college planning: The College Savings Plan calculator at the financial education website www.mindyourfinances. com, can help families develop or fine-tune a college savings plan, factoring in number and ages of children in the family. Click on “Financial Tools.”

in your 30s and early 40s

“The challenge as you enter into these years is to avoid lifestyle creep,” Thakor says. “it’s very easy to start living beyond your means. The more you earn, sometimes the more you spend.” This presents a big problem for savings for a couple’s retirement and their children’s college education. Thakor has noted another dangerous trend in this age bracket: risky investments. an investment portfolio at this age should be a low-cost, high-quality mix of stocks, bonds and mutual funds that grows conservatively over time, she says.

tip Start early. Make retirement saving a priority. Devise a plan, stick to it and set goals. Grab a quick estimate of your retirement needs using the “Ballpark Estimate” tool at www.choosetosave.org/

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in your 50s…

in your 60s…

“fifty is the time of preparation and a time of opportunity,” says Julie Jason, author of “The aaRP Retirement Survival guide: How to Make Smart financial decisions in good Times and Bad,” (Sterling, 2009). Make catch-up contributions, an extra amount those over 50 can add to 401(k) and other retirement accounts. at age 59 1/2 you will no longer be hit with tax penalties on withdrawals from retirement accounts, but leaving money in means more time for it to grow. imagine you’re retiring on Monday and need to calculate how long your funds will last. Jason says this scenario forces people to look at their expenses, savings and income sources outside of work. “if you do the analysis, you can adjust your savings and investing,” she says.

The minimum age to receive Social Security benefits is age is 62, but delaying to a later year will mean a bigger monthly benefit. generally, governmentsponsored Medicare health insurance is available to those age 65 and older. at 66, those born between 1943 and 1954 are eligible for full Social Security benefits. Jason says that those at age 65 must realize that they’re targets for every ambitious financial advisor. “Put on a skeptics hat,” she says. Retirees should interview professionals to make sure they have prior experience with retirement accounts and clients in financial situations similar. Making decisions for a $100,000 account is very different from making decisions for a milliondollar account, Jason says.

tip get going! Are you on track financially for a comfortable retirement? The Financial Planning Assoc. offers an interactive Financial Roadmap tool to help highlight areas where you need to improve: Go to www.fpaforfinancialplanning.org/ and click on “Financial Roadmap” under Tools & Resources.

tip Learn what your estimated social security benefit will be at retirement by using the retirement estimator at www.ssa.gov/estimator or call 1-800-772-1213.

in your 70s…

80s and beyond

“now is the time to review assumptions and make adjustments to your cash flow and to your investments,” Jason says. at the outset of retirement, people assume that healthcare will be their greatest expense. it turns out that the largest expense is most often taxes. Plan to begin taking minimum withdrawals from most retirement accounts by 70 1/2 or you may be charged a penalty.

Healthcare and legacy planning should come into the picture around age 85, Jason says. longterm care for husbands and wives should be determined. “at a certain point you have to bring in your spouse and see if you’re in sync with each other,” Jason says. She reminds retirees to include the desire to leave an inheritance in their planning.

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When Home alone Isn’t enough Families face difficult choices when one or both of their parents can no longer live on their own JIm Gorzelany CTW feaTuRes

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one of the toughest decisions many of us will face in our lifetimes is what to do when an aging parent can no longer live independently. Just ask theresa Duff of Joliet, Ill. her mother, Rita, already losing her eyesight from macular degeneration, was further hobbled by a broken shoulder and two shattered wrists due to a fall. “It was painful to see mom, who had raised a house full of kids, nursed her husband after his stroke and remained active into her 80s, suddenly become so frail,” Duff says. As the population ages, the number of adults who need long-term care rises. About nine million senior citizens will need some form of long-term care this year, according to the

U.S. Department of health and human Services. While the department says family members and friends are the sole caregivers for 70 percent of the elderly, this may not always be possible or practical. “Mom wasn’t ready for a nursing home just yet, but none of the family members still living in the area had homes that could accommodate her limited mobility,” Duff says. “We had to weigh our choices

Take Care People age 60 and up are twice as likely to be the victims of fraud and financial scams. To register a telephone number on the federal government’s national Do Not Call Registr y call (888) 382-1222 or go online at www.donotcall.gov.

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carefully to address her needs, wishes and dignity.” If a family member feels a parent who’s living on his or her own is on the decline and needs custodial assistance, he or she should consult with a medical professional. either way it’s essential to determine what level of care is needed. this can run from simple help with housekeeping and shopping to more acute levels of care such as health monitoring and physical, speech or occupational therapy. Ultimately, this becomes a decision based as much on a family’s

financial resources as it is on an aging parent’s needs. that’s because neither Medicare nor most supplemental health insurance policies pay for long-term care costs. for many, in-home health care can be a desirable and reasonably affordable option. those who require only modest assistance may have their needs served by a part-time caregiver. those requiring additional help may require 24-hour live-in assistance. Aside from the cost, family members have to consider the effort involved in hiring a caregiver and following up regularly to ensure that proper care is being given. Another approach is to use the services of a licensed home health care agency, which is a necessity if an individual requires skilled nursing care or physical therapy services. the national Association for home Care & hospice maintains a national database of such agencies with tips on how to choose and deal with one on an ongoing basis at www.nahc.org. If living at home proves to be particularly difficult because of stairs or other hazards, placing an elderly parent in an assisted living facility may be best. Residents often live in separate apartments, enjoy communal meals and participate in planned activities. Costs usually depends on

the size of the living area, services required and where the facility is located, adding up to several thousand dollars a month. for those who require constant care, a nursing home may be the only option, albeit a costly one. Medicare pays for skilled nursing facility care for a limited period following a hospital stay for rehabilitative purposes, but not for ongoing care. State Medicaid programs will generally pay for basic nursing home services, but only after an individual’s personal assets are exhausted and he or she has no other means to cover the cost. All nursing homes that participate in Medicare or Medicaid are subject to annual inspections. In addition to personal vetting of any facilities under consideration, it’s a good idea to compare these inspection records by consulting the “nursing home Compare” resource at www.medicare.gov. So how did the Duff family finally decide to care for their mom, Rita? “We wrestled with our options and though the family would have preferred that she live out her final years at home, we finally settled on moving her to an assisted living center,” Duff says. “We didn’t have to worry about caregivers not showing up or being inattentive to mom’s needs,

lonG-Term Care resourCes • For help in identifying elder care services and facilities in the community, contact the state or city’s elder care agency. find the contact information online at www. eldercare.gov or by calling (800) 677-1116. • Locate a local home health care agency at the National association for Home Care’s website, www.nahc.org. Click on “Consumer Information.” • For information on assisted living homes, consult the assisted Living Federation of america at www.alfa. org. • Check local home health-care agency and nursing home accreditation via the Joint Commission on the accreditation of Healthcare Organizations at www. jointcommission.org. • Research inspection records of nursing homes at www.medicare.gov. Click on “Resource Locator.” © cTW features

and it afforded her some independence and socialization without her having to be cooped up alone at home.” © cTW features

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