Step #4 – Durable Power of Attorney for Health Care
Stroke? Ski accident? Put on life support with no chance of
survival? If you don’t decide now,
somebody else could decide what should happen for you later about taking you
off life support, and with high medical and hospitalization costs, once the
maximum of health insurance is gone (average limit is $1 million), your
relatives have to pay the rest that will keep piling up.
There are 3 basic options:
1. Prolong your life no matter
what the cost and no matter what the condition, leaving expenses to relatives
2. Prolong your life unless in a
coma or ongoing vegetative state, with 2 doctors making final decision
3. Do not prolong life at all
unless complete physical and mental restoration is possible
Name a loved one who you know loves you and is strong in making such a
tough decision to be the “agent” in making any final decisions about your life,
and then name two alternatives as “co-agents” in case the main person is not
available for some reason.
A living will can give your wishes about life support, but it does not
appoint someone to make any final decisions, which means the doctors will have
to do it. Not even the living trust can
do this. The durable power of attorney
for health care takes care of it all. A
living will, a living trust, and the durable power of attorney for health care
are three separate documents. All
hospitals have the form free of charge, plus your attorney who is doing your
trust and will can also take care of this at the same time. Don’t put it off—when you need it, it’ll be
too late to create it.
Step #4: Life Insurance
Original purpose in having life insurance was for the young breadwinner
dying early and unexpectedly without any money to leave his/her family. If you outlive the policy purpose, then
usually that means you’ve accumulated enough assets to take care of the family
and don’t need it. Huge industry in
selling life insurance because the agent you bought it from earns 80% to 90% of
the first year’s premium! For that
reason, you need to figure out how much you want for a comfort level for
yourself if you outlive the policy and do not wish to work any more, or can’t
work any more, as well as how much you want for your loved ones if you
die. You need to go back to your monthly
expenses done in Step #3, to see how much money goes out and how much money
comes in, and then use this formula:
Rule of Thumb Formula for Life Insurance >> $100,000 for every $500 of monthly income
required.
Example: $3,000 needed to cover
all household expenses per month divided by $500 = 6 x $100,000 = $600,000 life
insurance.
Or perhaps you only need $1,500 per month to cover some of the expenses
(after adding it to your salary), so use the same formula above >> $1,500
divided by $500 = 3 x $100,000 = $300,000.
How long do you need life insurance?
If you’ve followed the steps outlined, you should have enough retirement
benefits to support you and your loved ones after you’re gone. Bottom line, by the time you’re 65 at the
latest, there should be no need for life insurance. If you choose life insurance, the best to get
is term life insurance, which is considered a “just-in-case” policy. The industry knows you have relatively little
chance of dying before the policy expires which excludes them from paying any
death benefit, so these are not expensive at all. With whole life or universal life, they know
they will have to pay, so it’s priced accordingly. The only advantage to whole and universal
life is the cash value that you can cash in, or borrow from, during emergencies. Just remember the commission is the most
lucrative of any business, and you’re the one paying it. If you just want to put money aside, there
are far, far better ways to save it without paying the commissions.
Step #4: Long-Term Care Insurance
If you’re 50 or older, same as fire insurance or car insurance, you
need long-term care insurance (LTC) for future years that you and your spouse,
or your parents, may need a nursing home (fire insurance, 1 in 1,200 use it;
car insurance, 1 in 240 use it; long-term care insurance, 1 in 2 use it). No health insurance policy covers nursing
homes, and there are limits and regulations to how many times you can stay in
the hospital before Medicare kicks in for only a small percentage of the
overall expenses, causing nursing home care expenses to
relatives after all assets have been sold.
It's now considered as a criminal offense to hide/transfer assets to
qualify for Medicaid. The price of the
LTC policy goes up as your age goes up.
Average cost of nursing homes 30 years from the date of this book, 1998,
is projected to be $13,000 per month, as opposed to average cost for good
nursing homes in the year 2000 being $4,500 per month in some areas, and
$100,000 per year in major cities--rule of thumb, the longer you wait, the more
it will cost (once in use, no more premiums are paid). Consumer Reports rated LTC insurance
carriers, and the one they'd ranked as #1 has gone bankrupt before the magazine
hit the news stands, so have to choose one that's in the LTC business for the
long haul. Suze gives a list of
questions to ask the company about it's history and future plans, as well as
questions to ask about their policy.
Calculate precisely if you can afford it after you're retired with no
money coming in.
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