Incorporating Liability Risks in Your Financial Planning

Other things that set physicians apart from the rest of us, aside from their extensive education, is that more liability rests on their shoulders.  Physicians often own their own practices.  An average American works for an employer and may contribute to a 401k plan.  Most typical Americans just contribute to their retirement plans without thinking
about needing to save for all the risks of liability that go along with their occupations.  You are obviously not in these same shoes.  You make quite a bit more money and let’s face it you are also a target of lawsuits and liabilities.  Your financial plan must be reinforced for the risks that precede your occupation, it is important to consider the following:

Incorporate your business

This will help with the liability of your occupation as an employer and a partner, but it will not help with medical malpractice.

Consider listing asset ownership without your name or jointly with your spouse

Most people will either list sole or joint ownership with their spouses under their given names, but for a physician the risks of losing assets are greater than most people.

It May not Be Fitting to Solely Rely on Pension Plans for Your Retirement

Retirement plans for your employees put you at risk:

Sure it is great that you are providing your employees with benefits but you are responsible, as the employer and business owner, to ensure that allocations and contributions are administered correctly.

Contributions to a traditional retirement plan may not lead you to save enough for comfortable retirement.

It would be smart to consider an alternative retirement plan to keep up with your cost of living as you reach the ripe age of retirement.  You are leading a lifestyle that is above the average American and therefore you may not be able to keep your retirement planning as simple as just contributing to a traditional plan.

Ask Your Financial Advisor About Nontraditional and Nonqualified Retirement Planning

These types of plans are designed for the higher incomes that you are bringing to the table.  With nontraditional and nonqualified retirement plans you will benefit with be able
to:

• Put more money away annually
• Deduct more of your income
• Stay under the radar of the Labor Department and regulations
• Access accounts before retirement if necessary (especially if needed to cover liabilities)

Your financial advisor should know that you are not going to be a cookie cutout client.  You have particular needs being in the industry that you are in.  Just as a cancer patient is much different from a patient with diabetes.  Each of these patients should see a doctor specialized and educated in the sphere of their particular disease.  If your finances are important to you, you will find the right “specialist” that fits your needs as a physician.

Estimated Costs of Health Care

Since we cannot foresee what kind of state we will be in once we reach the ripe age of
retirement, it is hard to define numbers to reach for needed healthcare goals.  Fidelity estimates that “a 65-year-old couple retiring last year will need $230,000.00 to pay for lifetime medical expenses, not including nursing-home care.” To get a basic idea of the
damage a serious illness could incur on your bank account here are some estimates:

Heart disease:
The CDC reports that more than 1 in 3 Americans suffer from a form of heart disease. One study estimated that “over the course of a person’s lifetime, the cost of severe coronary artery disease — the most common form of heart disease — is more than $1 million. That includes both direct and indirect costs.”

Diabetes: According to the American Diabetes Association, “people with diagnosed
diabetes incur average expenditures of $11,744 per year, of which $6,649 is attributed to diabetes. People with diagnosed diabetes, on average, have medical expenditures that are ?2.3 times higher than what expenditures would be in the absence of diabetes.”

Cancer: Each form of cancer is treated differently and is a completely different animal so it is hard to get a breakdown on how much the life of this disease will cost, but healthreform.gov gives us examples of costs such certain cancer medications costing $10,000.00, per dose.  Things like chemotherapy, tests, visits and operations could be extraordinarily expensive.

Alzheimer’s:  1 in 8 of our elderly have Alzheimer’s.  The Silverbook reports in
2009 that “the average cost of care for a person with Alzheimer’s disease in a facility is approximately $64,000 per year.”

How Can We Prepare for the Worst-Case
Scenario?

There is growing concern over how to prepare for our health in retirement.  Cognizant Americans are realizing that with their lasting longevity and with inflated medical costs they will not be able to assume the responsibility of paying for their own health care if something serious should arise. High costs of health care can leave fruitful portfolios bleak.  Becoming a patient should not force you to liquidate everything you have worked for.

Long-term Care Insurance  (LTI)

Purchasing a LTI policy is one option to assist in helping you feel that you have the
control that your assets will not be reallocated to your medical expenses. There are some drawbacks to LTI policies.  The American Association for Long-Term Care
Insurance states that “prices for LTCI policies this year are ranging from six to 17 percent higher than a year ago and many existing policy holders have been hit with double-digit rate hikes, as well.  If you are still thinking about purchasing an LTI policy, you should know that many carriers are pulling out of the market and as interest rates drop policy rates will increase.”
Learn About Medicare

Become your own diplomat and learn the in and outs of Medicare.  Even if you have to seek help with the technology it is incredibly important to sign up for what is necessary
and understand what you are signing up for.

Delay Your Retirement

If you are able to work a few more extra years, please do!  This will bring in more income and benefits to stockpile for your health and delay Medicare enrollment.  With our rowing longevity we need to work as long as we possibly can to ensure that we can pay till we reach the average age of death of 89 years old.

Check Your Benefits Once a Year

If you have insurance, it is always good to see if they have changed your policy.  Some insurance companies change prescription benefits. It is always good to “shop” around and make sure that the prescriptions and the coverage that you need have not dropped from your policy.

Talk to Your Advisor About Your Health Care Goals

If you have not done so now is the time to talk to your advisor.  There are different options for saving for your health.  Health Savings Accounts and Roth IRAs are two options to consider. More importantly, is the actual planning and saving the money to put
into your health.  Your advisor should talk to you about where you are with your health care goals and where you will need to be once your reach retirement. The work that you put into your finances now, for your future of medical expenses, may save you the load of distress that should not weigh down on you in a time when you are dealing with a serious illness.

• Stay at a healthy weight
• Exercise at least a half an hour a day
• Treat and prevent things like high cholesterol and blood pressure
• Find ways to stay involved as you age and not shut yourself in your
  home
• Find new activities and hobbies to keep your mind going

A problem with some Elderly is that they may not have some of the family support needed to stay socially active.  It is imperative to find community, church or support groups and stay socially active as much as possible to keep your mind sharp.  Activities that employ some thinking and new hobbies will also help to keep your mind active.  Just like your physical health, your cognitive health needs to be exercised. Find the resources to
keep fit in your minds, bodies and souls.

Once all the bugs are worked out and this technology is perfected this could mean great things, not just for our baby boomers, but also for all of us in support of a sustainable future. It is expected that less accidents will result with driverless cars, which can equate to lower insurance costs and lower fatalities and injuries to enter our lives and our healthcare systems. We will be looking forward to this positive breakthrough in driverless technology and we will keep our fingers crossed to see it on time for our 80 to 90 year old baby boomers to keep their autonomy and go wherever their hearts desire.

This disease may not affect all of our minds, but it may affect all of our pockets.
Chances are that you may have someone that you may know personally or who
is close to you that has Alzheimer’s.  According to the Alzheimer’s Association 5.4 million Americans suffer with this mind dwindling disease that is the 6^th leading cause of death in the United States.

The Astronomical Cost

This is not a preventable or a curable disease (although it has been recently linked to one of the most costly and preventable disease of diabetes) and the cost of care for a patient with Alzheimer’s is through the roof!  It is projected that in 2012 alone Americans will be paying upwards of $200 billion for the costly care of patients with Alzheimer’s. This
$200 billion is not including the costs of family members who relinquish their jobs to care for their loved ones with Alzheimer’s.  More than half of this $200 billion will be taken
out of American’s tax dollars to fund treatment through Medicare and Medicaid while roughly $33.8 is in out-of-pocket spending and $26.2 by private health insurance and other sources.

For 1 individual costs can be roughly $80,000.00 annually

Awhile back I mentioned that an acquaintance of mine that acquired the tough luck of having to put her Alzheimer’s impaired husband in a hospice care facility.  She mentioned that the cost of care is roughly $7000.00/mo.  This means that the cost of care for this one
individual is roughly $80,000.00 annually.  Any of us can find ourselves in this same situation and my empathy runs deep for her.  Not only has she lost the cognitive abilities of her lifelong partner, but she is also burdened with astronomical costs and sadly, no resolution.

Epidemic and Costs on the Rise

Unfortunately, financially, it is told that we will suffer even greater costs to Alzheimer’s.
The incidents of this disease are on the rise and our baby boomers are soon to be our elderly population.  By 2050 it has been projected that Alzheimer’s costs will put us at S1.1
trillion.  We can’t let our elderly go uncared for, but where will the money come from for care?  Maybe it is time for more research and advances to find solutions and lessen the heavy costs of this overly inflated disease.

Financial Planning

Have you build in medical costs in your financial plan? And how do you factor that in while you are not sure if you will have Alzheimer’s or not. These are question to post to a professional financial advisor and planner.

• Investors realize that stock appreciation can be challenging at the heightened
  uncertainty of global economic and financial developments
• Corporations that pay dividends are more
  attractive than stocks that are not in the position to do so. (Companies
  that pay high dividends tend to be the large corporations that are more able to
  weather the volatility of world events.)

Qualified Dividends:
For the purpose of calculating the dividend tax, ordinary dividends are for stocks that are held more than 60 days during the 121-day period that begins 60 days before the ex-dividend date. These are taxed at what is known as the qualified dividend tax rate, which is 5% or 15% depending upon the income tax bracket into which the investor falls. For investors with personal income tax brackets of 25% or higher, they will pay a 15% dividend tax on their qualified dividends. For investors in a lower income tax bracket, they will pay a 5% dividend tax. Qualified dividends must be paid between January 1, 2003 and December 31, 2010.

DIABETES AND ITS BRUTAL PARTNERS

Type 2 Diabetes is a largely preventable disease and it is also a very costly one.  “More than 24 million Americans have this disease and in 2007 it took $116 billion in excess medical spending (Harvard School of Public Health).” Diabetes can lead to other health problems especially in old age.  This disease is linked to dementia, blindness, kidney failure, loss of a limbs, heart disease and death, (being that it is the seventh leading cause of death in the US).

PREVENT IT NOW

This is such a serious and rampant disease, yet it is largely preventable.  Whether or not you are currently suffering from Type 2 Diabetes, you should take steps to preventing further illness or to prevent this disease from affecting you.
The major factors in prevention are:

• Controlling your weight
• Getting
  some exercise

Being obese makes you 20-40 times more at risk for the disease and for every 2 hours spent in front of the TV or being inactive, it will increase your chances of developing diabetes by 20%.

DEMENTIA AND DIABETES LINKED

Diabetes damages blood vessels that supply our most worthy organ, our brain.  It doubles our risk of harboring dementia and also may speed up some of the negative outcomes of the disease once contracted.  6.8 million people in the US are affected by dementia and if you have ever experienced caring for a loved one with dementia, you must know how difficult it is to see the person you love lose their cognitive abilities.  For
specialized nursing home care for dementia patients you may see costs on the
upwards of $80,000 annually.  Caring for a loved one with dementia may not be something that you can manage in an aged state.  It takes an emotional and even a
physical toll on the caregiver.

STEPS TO PREVENT DEMENTIA

The risks of Dementia can be lowered if you

• Stay at a healthy
  weight
• Exercise at least a half an hour a day
• Treat and prevent things like high cholesterol and blood pressure
• Find ways to stay involved as you age and not shut yourself in your home
• Find new activities and hobbies to keep your mind going

A problem with some Elderly, is that they may not have some of the family support needed to stay socially active.  It is imperative to find community, church or support groups and stay socially active as much as possible to keep your mind sharp.  Activities that employ some thinking and new hobbies will also help to keep your mind active.  Just like your physical health, your cognitive health needs to be exercised.
Find the resources to keep fit in your minds, bodies and souls.

I just wanted to touch on a little bit of information that may help you in your future as you age.  We are all living longer, well into our late 80’s and some simple steps like exercising 30 minutes a day and eating some of the “right” foods may make your period as a
retiree a more pleasurable and radiant time for you!

People are living longer in the Western world and the greatest rate of age of death is
well into the late 80’s.   Now that we have to look even further into our future we will have to ask ourselves “how can we plan for managing the costs that may arise due to old age (like dementia)?”  Recently I posted an article about the benefits of waiting to collect on social security benefits and yes! This is definitely one way you can help stockpile your wealth for later.  Try not to get lured into the siren song of “early retirement” if it can be helped.  The Government Accountability Office also suggests a couple of other ways to help
maintain financial security into old age, they suggest to: “convert some of client savings into an income annuity and also opt for an annuity provided by an employers’ defined benefit or defined benefit contribution plan.” It is recommended that you look into long-term care insurance so you do not find yourself paying roughly $70,000.00-$80,000.00 a year for nursing homes costs.   Long-term care insurance may be the answer for
some, but it can also come with risks. It is good to also be aware and skeptical about long-term care insurance. There has been more than one story about an insurance company that could not pay their obligation and went bankrupt.  This CAN happen. Questions like:  “How much should you be buying?” and “How soon should you start buying it?” are some of the questions you need to factor into your financial planning.

To fulfill and create a “healthy” financial portfolio you will need more than just stocks and bonds, to manage the risk of your overall exposure.  By diversifying your portfolio and factoring in variables such as health care costs is the key.  Annuities and long-term care insurance may or may not be the right fit for you, but it may also be just the thing your
portfolio needs. Please feel free to contact our office if you are interested in more information.

http://www.fiohinvestments.com/contact/

DEFINED CONTRIBUTION PLAN:  (401k or profit sharing) Employer, employee or both can contribute pretax dollars to fund the plan’s investments.

SELF-DIRECTED BROKERAGE ACCOUNTS:  This retirement choice gives the most freedom to physicians and employees of a medical practice.  It is much more versatile than
a professionally managed portfolio, but with this freedom also comes obstacles, and therefore consulting with a financial professional can be beneficial.

With the Employment Retirement Income Security Act (ERISA) all fiduciaries are all
responsible for participants investment decisions and a medical group can be held accountable if an investment decision is made that is not agreeable to all participants.  In the case of a 401(k) or profit-sharing Plan all participants are responsible for monitoring so “irresponsible” investment decisions can be caught.