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Old 12-05-2014, 11:04 AM
 
5 posts, read 4,722 times
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Hi to all.
I am a single male, 62, no children or siblings. I have no reason to have an estate to give to someone when I die. I am a Federal Employee, so I will keep my Blue Cross at a low rate forever. Medicare added at 65. I have 300K in savings and my house is paid for. Social Security and my Annuity won't quite make my monthly needs, but if I were to take 1K out of savings every month to supplement, that would take me to age 90. If then (or before) I need to move into nursing or long term care, I simply sell the house that is probably worth 300K and tell the nursing home to take it and take care of me. It seems too simple. What am I missing?
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Old 12-05-2014, 11:15 AM
 
775 posts, read 542,981 times
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I think it would be better to post your question in one of the financial / retirement forums which are also part of city-data ... scroll down and you will find them.
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Old 12-05-2014, 11:34 AM
 
20,214 posts, read 37,556,653 times
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Woodie, Nursing Home costs run about $6k/month, it can bankrupt you.

One way to cover long term nursing home costs (MediCARE will not do that) is with long term care insurance (LTCI) which will cover that cost. MeciCARE will ONLY cover a nursing home for up to 90 days PROVIDED that you go straight from a hospital to the nursing home for the SAME reason you were in the hospital; e.g., you broke a hip and after surgery you were sent directly from the hospital to the nursing home for rehab therapy, etc.

Without LTCI you are on the hook for long term nursing home costs and you'll have to spend everything you own down to about $2.5k which is functionally bankrupt, and only after that point is reached will MediCAID cover that cost. They'll put a lien on your home; if married the spouse can stay in the home but essentially your state MediCAID office will own it. If you are still a Fed, look into the LTCI plans offered to Feds, especially now during open season which closes in a few days.

I recommend you have an elder law attorney draft up a MediCAID bypass trust (or some other form of trust) so that you CAN leave your estate to a place that will do well with it, like a museum or whatever topic appeals to you (SPCA, Red Cross, you name it, there are charities that do excellent good with donations). It should only cost you a couple thousand dollars and it gives you peace of mind. Trusts often need to be in place for 5 years before MediCAID will honor it, else there are some penalties that can apply for whatever length of time exists before the 5-year mark.
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Old 12-05-2014, 12:15 PM
 
29,360 posts, read 33,441,785 times
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On the topic of nursing home care. You have a annuity/pension and SS as fixed income streams. What percentage of your monthly what percentage of your nursing home cost will they take care of? How is your 300k invested? Taking out $1,000 per month is the equivalent of a 4% draw down rate so it is possible to keep much of it intact.
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Old 12-05-2014, 12:39 PM
 
48,521 posts, read 80,450,655 times
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Quote:
Originally Posted by TheWoodMan View Post
Hi to all.
I am a single male, 62, no children or siblings. I have no reason to have an estate to give to someone when I die. I am a Federal Employee, so I will keep my Blue Cross at a low rate forever. Medicare added at 65. I have 300K in savings and my house is paid for. Social Security and my Annuity won't quite make my monthly needs, but if I were to take 1K out of savings every month to supplement, that would take me to age 90. If then (or before) I need to move into nursing or long term care, I simply sell the house that is probably worth 300K and tell the nursing home to take it and take care of me. It seems too simple. What am I missing?
You'd have to sell home and contents. They deal in cash or insurance cash. If your not able you need someone else. Speak to a known attorney. Also recommend pre-arrange funeral;whatever you want.
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Old 12-06-2014, 12:51 PM
 
5 posts, read 4,722 times
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Default Thanks for the feed back

For a little more clarity, I have only been a Fed for 6 years. Hence my annuity from them is going to be only about $450/Month. My SS should be about $1500/Month. I was able to pay off the house only because of an inheritance. Half of my savings is in a 401K (pre-tax) so I will owe tax on every withdrawal and I haven't figured out taxes on the SS or annuity.
Part of my anxiety is because of all the reports that say you have to have a million dollars to retire. But I think that is only if 1. You have a spouse to consider. (I don't and won't) 2. You have children to consider. (Ditto) 3. I am a little concerned that the value of the house, $300K would last me in a nursing facility, but the average stay there is like 3 years. Then you die.

Thanks for the input. I never thought I would make it to retirement planning.
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Old 12-06-2014, 01:42 PM
 
Location: Maryland
282 posts, read 285,543 times
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I am not an expert, but am in a similar situation as you (no wife, no children, no dependants, house paid off, etc.). Long Term Care insurance should be considered, but it isn't "right" for everyone. I think it is a tough call for you (and me). You make a good point about the average stay in assisted care facilities, it normally isn't that long and I have seen numbers from an average stay of 3 months to a year or two. But averages are just that anyone could end up with many years of needed care.

I have slightly more retirement savings than you do, and I could use that as "self insurance" for a typical LTC of a year or less. I also have 34 years of service in the older CSRS system, so my pension is enough to live on by itself (CSRS does not collect social security). Those million dollar retirement accounts are if you have zero pension/annuity and no inflation protection (COLA). And everybodies life style and therefore cost of living is different.

Back to your plan...
Don't forget you need an emergency fund for things like a new roof, major car repairs, or even short term medical costs. Blue Cross health insurance plus medicare Part A and Part B ($104/month) is fantastic coverage. If you don't buy Part B, you could have higher out of pocket expenses in the event of a medical issue (broken leg, dental surgery, pneumonia, prescription drugs, etc.).
And you need to save some money each month for normal maintenace and car replacement, etc.
Your 401k (or TSP, or IRA) invested with a reasonable mix of investments could be used as a monthly source of income withdrawls around 4% per year. I would feel more comfortable if you could adjust your spending to only need 3% per year from retirement savings. Remember inflation adds up over 30 years, but your social security and federal annuity do have some COLA adjustments each year.
Quote:
Most single individuals should not buy [long-term care] insurance given the availability of Medicaid.”

This is what the Center for Retirement Research at Boston College (CRR) wrote in a newresearch brief.A study from the organization looked not only the chances of needing nursing home care after age 65, but also the average duration of that care. The CRR found that previous research understated the probability of ever needing care, while also overstating the average duration of nursing home care.
Long-Term Care: How Big a Risk? | Center for Retirement Research

Last edited by CSRSJim; 12-06-2014 at 01:53 PM.. Reason: link added
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Old 12-06-2014, 01:44 PM
 
7,148 posts, read 4,309,396 times
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You're not going to be paying much federal income tax.

If half of SS + all other income is more than 25k, SS becomes partially taxable.

Half of SS is 9k, annuity is 5.4k, 6k from 401k. (Other 6k is in taxable account, so withdrawals aren't income). You're under 25k, thus SS benefits are not taxable. If your taxable account should throw off a lot of interest, dividends, and/or taxable gains, it is possible you may have a year where SS does become partially taxable. Try to keep tax efficient investments in your taxable account to minimize this possibility.

Your taxable income is 5.4k from annuity, 6k from 401k withdrawal, plus whatever interest, dividends, and capital gains your taxable account throws off.

Subtracting your standard deduction (6200 for 2014, 7750 if over age 65) and personal exemption (3950 for 2014), you have very little taxable income, possibly none at all.

Edit: You know what I would do in this situation? Until I hit RMDs, I would not withdraw from 401k. Instead, I would convert that 6k to a Roth and take my entire 12k annual withdrawal from taxable. This will minimize taxes further. When you do hit RMDs, if they are lower than 6k, take the RMD and convert the difference.

And when I have said "401k", I really mean the money you currently have in your 401k. Once you retire, you should roll that to a traditional IRA.
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Old 12-06-2014, 02:56 PM
 
Location: Sierra Nevada Land, CA
7,824 posts, read 8,352,396 times
Reputation: 11252
Quote:
Originally Posted by TheWoodMan View Post
Hi to all.
I am a single male, 62, no children or siblings. I have no reason to have an estate to give to someone when I die. I am a Federal Employee, so I will keep my Blue Cross at a low rate forever. Medicare added at 65. I have 300K in savings and my house is paid for. Social Security and my Annuity won't quite make my monthly needs, but if I were to take 1K out of savings every month to supplement, that would take me to age 90. If then (or before) I need to move into nursing or long term care, I simply sell the house that is probably worth 300K and tell the nursing home to take it and take care of me. It seems too simple. What am I missing?
Nothing really, assuming you reach 90.

Quote:
Originally Posted by Mike from back east View Post
Woodie, Nursing Home costs run about $6k/month, it can bankrupt you.

One way to cover long term nursing home costs (MediCARE will not do that) is with long term care insurance (LTCI) which will cover that cost. MeciCARE will ONLY cover a nursing home for up to 90 days PROVIDED that you go straight from a hospital to the nursing home for the SAME reason you were in the hospital; e.g., you broke a hip and after surgery you were sent directly from the hospital to the nursing home for rehab therapy, etc.

Without LTCI you are on the hook for long term nursing home costs and you'll have to spend everything you own down to about $2.5k which is functionally bankrupt, and only after that point is reached will MediCAID cover that cost. They'll put a lien on your home; if married the spouse can stay in the home but essentially your state MediCAID office will own it. If you are still a Fed, look into the LTCI plans offered to Feds, especially now during open season which closes in a few days.

.
I think you missed some key points. The OP is single, plans to sell his home to pay for LTC, is willing to become Medicaid eligible and who cares if he has no money after he dies in said nursing home with $2000 in his patient account?

I think the only problem is that 50% of people over 90 end up in a nursing home. So OP might die at home and be short on cash, however he could move into senior housing and pay a very subsidized rate and take advantage of many helpful programs ranging from State paid in home care (IHSS) to food and senior center activities. Many seniors do very well in my area and some of them live on $1000 a month. Many options out there.

I think the OP has a reasonable plan.
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Old 12-06-2014, 07:52 PM
 
Location: Florida
3,761 posts, read 3,043,828 times
Reputation: 3334
First thought is that you did a good job asking the question and your plan can work.
Missed:
Consider postponing SS until 70. Use the 300,000 to cover living costs. The SS will give you a lifetime inflation adjusted annuity. The monthly income at 70 is a lot more than 62. If you are not sure talk to a hourly fee financial advisor.

A reverse mortgage could work as a safety net so you might want to look into it but do nothing until the need arrises.
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