No one wants to see someone they love in a nursing home. That’s why many older Americans and their families would opt for home-based care whether it’s for a temporary illness or disability, or end-of-life.

Yet the best time to plan for such an event is exactly at the time when no one wants to – when everyone’s healthy and in no mood to think of being sick.
Money is a big part of this decision.

Financial planning professionals can take a big-picture look at all the money and structural factors that go into any long-term care decision – the retirement picture, tax situation and estate structure the elderly relative has already made or needs to make. But the money planning process needs to be concurrent with a process to determine what role family members will play.

Here are some ways to begin the process, whether it’s for you or an aging relative.

Talk to family:

Even before you start addressing financial concerns, it’s important to understand how individual family members feel about the long-term care issues of an aging relative. Some family members will want to pitch in to care for them personally if they’re nearby; others may want to but fear the disruption of their careers and their own family life. And keep in mind that the perspectives stated in a private conversation or family meeting might change over time. Family members also need to work out how siblings, cousins and others will collaborate and give each other respite, because caregiving is an exhausting job.

Start by evaluating the senior’s finances:

If you have time and a good rapport with the senior, you have a valuable opportunity to settle a lot of important details. If there’s not a pending emergency, it’s a good idea to schedule a family meeting between you, your spouse and the elderly relative to make sure you understand what assets they have and how they want those assets applied to their long-term care. And even if an elderly relative is older but in relatively good health, it might make sense to check the cost of long term care insurance as a backstop to their savings. The premiums will definitely cost more – sometimes considerably more – than the average 50-year-old would pay, but depending on the relative’s situation, such a move might make sense.

Make sure key documents are in place:

It’s also important that you ensure that the elderly relative have critical documents in place such as a current will, relevant legal and health powers of attorney and any written instructions relevant to their care, their funeral wishes and other property issues. All that information should be stored in an agreed-upon place that all key decision-makers can get to easily.

Start researching care options now:

For a good overview website, check out FamilyCaregiving101.org, the website of the National Family Caregivers Association. Meanwhile, in virtually all communities, there are guides to various community programs that ramp up services as the relative needs them. Your local department on aging will have resources in at least these four critical areas related to caregiving:

•    Home care services: Guides to find certified professionals who can help with medical issues or personal care.

•    Meals and transportation: At the very least, meals-on-wheels can help assure proper nutrition for individuals who need more help with that. Also, many communities offer door-to-door transportation to medical and community facilities.

•    Adult day care: Similar to child day care, community centers offer a variety of programs for seniors to take part in during the day when caregivers need respite.

•    Respite care: These programs bring trained caregivers into the home for either a few hours or a few days, allowing the full-time caregivers to get away for as little as a hair appointment or a weekend off.

Make sure the care option fits the stage of health as well as the budget:

The options above suggest there are different stages to home-based care. Home health aides obviously allow a relative to stay in the home and have company when traveling outside, but adult day care can be a cheaper option.

Also, part-time caretakers can handle key tasks and supervision as needed – keep in mind that responsible college students need money more than ever and can help with grocery shopping, cleaning, meal preparation and supervision on health issues that medical personnel don’t always need to be present for.

Please call our office at (925) 299-1500 or toll free (888) 299-1500 if you are interested in scheduling a review of your investment strategy and/or financial plan. If you are not a client of Capital Advantage, Inc., we offer free no obligation consultations. We also have excellent referrals to a variety of professionals you may need.

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10 Things You Didn't Know About Social Security

The Social Security program turned 75 in August. Since Franklin Delano Roosevelt signed the Social Security Act on August 14, 1935, few workers have not been impacted by the social program. Almost all Americans pay into the system and Social Security is the largest source of income for citizens age 65 and older. Yet this huge entitlement has many facets, some of which are not widely known.

Here are 10 things you may not know about Social Security:

The system is bigger than the economy of most countries. For the past 20 years, the Social Security program has been the largest single item in the federal government's budget. "The amount of money flowing through the Social Security system each year is larger than the total economies of all but the 16 richest nations in the world," says Larry DeWitt, the U.S. Social Security Administration historian. The Social Security program has collected $13 trillion in income and expended $10.6 trillion in payments since the first tax collections began in 1937 through 2007. That's an amount of money that Social Security's first beneficiary, Ida May Fuller of Ludlow, Vt.--who collected initial payments of $22.54 a month for 35 years--probably never dreamed of.

It's not just a retirement program. The original Social Security program paid benefits only to retired workers. Later, disability benefits and payments for a beneficiary's spouse and children were added to the program. "If you graduated from college four years ago, you are already protected against disability," says Edward Berkowitz, professor of history and public policy and public administration at George Washington University. "If you are married and have children, your dependents are protected." Annual Social Security Administration mailings to all workers age 25 and older include an estimated amount that you would be paid if you become disabled and how much your spouse and children would receive if you should pass away.

You pay 6.2 percent of your income into the system. Almost all American workers (94 percent) pay 6.2 percent of their taxable income, up to $106,800 annually, into the Social Security trust fund. Employers pay a matching 6.2 percent for each worker. Self-employed workers must contribute 12.4 percent of their income annually.

There haven't always been cost-of-living increases. Annual cost-of-living adjustments didn't become a part of Social Security until 1975 (as a result of a 1972 law). Prior to 1975, an act of Congress was required to increase benefits to keep up with consumer prices. "Before then, benefits were protected from inflation only when Congress chose to notice it," says Berkowitz. Now increases in payments are tied to the Consumer Price Index for Urban Wage Earners and Clerical Workers. Annual increases have ranged from 1.3 percent in 1996 and 1998 to 14.3 percent in 1980. For the first time in 2010, there was no cost of living boost because the index did not increase between the third quarter of 2008 and 2009.

Retirees can increase annual payments by waiting to claim. Workers can begin receiving Social Security benefits at age 62. But payouts increase by 7 to 8 percent for each year you delay your start date, up until age 70. Workers who sign up early receive smaller monthly checks over a great number of years, while those who delay claiming receive bigger payouts for the rest of their life. "If you know you are going to live past the age of 80, you are better off delaying Social Security," says Lita Epstein, author of The Complete Idiot's Guide to Social Security and Medicare. "Baby boomers who know they are going to have a long life are much better off waiting." Epstein, who is spending down her Roth IRA assets in order to delay claiming Social Security, says her benefits will increase by about $500 each month by waiting until age 70 to sign up.

Couples have extra options. Spouses are entitled to Social Security benefits of up to 50 percent of the higher earner's check if that amount is higher than the payments based on his or her working record. Widows and widowers are entitled to the higher earner's full retirement payout. Duel-earner couples who have reached their full retirement age can even claim twice by first signing up for a spousal payment, then claiming again later based on their own work record (which will then be higher due to delayed claiming).

Ex-spouses are also eligible for benefits if the marriage lasted at least 10 years. Existing beneficiaries can get a do-over. If you've already signed up for Social Security and received a reduced payout, it's not too late to boost your check. If you pay back the entire amount you have already received from Social Security without interest, you can then qualify for higher payments for the rest of your life.

Social Security numbers have significance. The first three digits of your Social Security number are assigned based on geographical region, with the lowest numbers being assigned in the Northeast and increasingly higher numbers assigned to residents in the West. The middle two digits, called the group number, are allocated in a precise but nonconsecutive order between 01 and 99.
The last four digits are issued in a sequential order. Over 420 million unique numbers have been issued and they are not reused after a person's death. Social Security numbers have been assigned shortly after birth since 1989, which makes younger American's Social Security numbers somewhat predictable if you know a person's date of birth and home town, which is common information that young people list on social networking websites, according to research by Alessandro Acquisti, an associate professor of information technology and public policy at Carnegie Mellon University. "Do not offer personal information such as date of birth and hometown publicly," he advises.

Paper Social Security checks will soon be retired. Social Security recipients will be required to collect payments by direct deposit into a bank account or a government Direct Express Debit MasterCard beginning on March 1, 2011. Existing beneficiaries must switch to electronic payments by March 1, 2013. Paperless payments are expected to save $300 million over five years, according to Treasury Department estimates.

The trust fund has a projected deficit. The Social Security trust fund is currently projected to be sufficient to provide payments until the end of 2037. Then, unless changes are made to the program, there will only be sufficient resources to pay about 78 percent of scheduled benefits. Congress is currently considering a variety of potential fixes, including tax increases, benefit cuts, and pushing back the retirement age. A U.S. Senate Special Committee on Aging report released in May found that relatively minor tweaks could put the trust fund back on sound financial ground for at least 75 more years. "It's a shame that the tone of the 75th celebration is sort of nostalgic," says Berkowitz. "I would hope that the 75th anniversary is not only about how good things used to be, but also about how good things could still be in the future."