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Personal Finance: Considering Long Term Care (LTC)
Insurance? Facts you need to know:
TROA recently completed a review of the Federal Long Term Care Insurance
Program to help us decide if TROA should cancel its longstanding endorsement of
General Electric Capital Assurance (GECA) and recommend that members consider
the new federal plan. TROA had taken a similar action with the MEDIPLUS Medicare
supplement program after TRICARE For Life became a reality. So far what we have
discovered is a mixed bag . . .
The new federal plan offers some benefits the GECA plan doesn't including:
- Informal home health care benefit that pays for 365 days of care at 75% of
the daily benefit level received from a family member. (The family member
must not have been living in the home of the insured at the time of benefit
eligibility.)
- Payment of up to 80% of the lifetime maximum for custodial care received
outside the US.
- Rates 13% to 33% less than the GECA plan when applying for individual
coverage only.
However, the GECA/TROA plan has benefits not found in the federal plan
including:
- A far superior home health care benefit paying 100% of the daily benefit
level.
- No waiting period to receive home health care benefits.
- Credit towards the facility waiting period for every day that benefits are
received at home.
- Discontinuance of premium payments (under certain circumstances) by a
surviving spouse when one of the insured dies.
- Spousal discounts of 25% for insured plus an additional 10% for those
considered to be in excellent health.
- Rates 4% to 15% less than the federal plan for those using the spousal
discount.
- Rates 13% to 26% less than the federal plan when taking advantage of both
spousal and health discounts.
Bottom line recommendation: shop around. |
Saving for College Through 529 Plans: Parents and
grandparents can now establish state-sponsored investment accounts called 529
College Savings Plans for the benefit of a child or in some
cases, adult students.
The account earnings accumulate tax free and then may be withdrawn, again
free from federal taxes, to pay for most college expenses. Each state
establishes its own plans so there are some differences, but most of them
operate similarly:
- Your contribution goes into a stock fund, stock and bond fund or
guaranteed interest account.
- Your investment grows tax free and can be withdrawn tax free at any time
to pay for college expenses, including graduate school. However, you will be
liable for ordinary income taxes and a 10% penalty on the earnings for
withdrawal for non-qualified expenses.
- In most plans you can move your investment to a different plan option
every year. If you are not satisfied with your current plan, you can
rollover your account to a different state's program once every 12 months.
- Some states do not have residency requirements. You can choose the state
plan that suits you and use the plan assets to pay education expenses in any
state.
- You stay in control of the account and decide when withdrawals are taken
and for what purpose.
- You can change the plan beneficiary at any time to any member of your
extended family.
- The plan may be used for estate tax purposes as it allows for a special
gift tax exclusion of $55,000 per beneficiary or $110,000 for a married
couple in a single year (no additional gift may be made to the beneficiary
for the next 5 years).
The 529 plans are excellent vehicles to save for college while taking
advantage of tax breaks. However, you should shop around.
For more information, including a state-by-state comparison, go to
http://www.savingforcollege.com
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