I really feel I need to focus on the truth about what middle-class retirees are facing. If you are a middle class retiree, perhaps you too have worked for 40-50 years, having saved a nest egg and raised a family. Even if you are not married, or you don’t have kids, what matters are your goals and desires. Most of my middle-class clients who are retirees, want to maintain control of their money. When they pass away, they want their assets to get to their loved ones, without interference from the government. Some people want their assets to go to the nonprofits they care about. They don’t to lose it to tax or long term care costs. The truth is we have a broken healthcare system for seniors. People are going broke in long term care facilities, which I see happen every week when families come to us for help.
What We Believe… and What is True
We all pay into the system for more than 40 years, believing that when we turn 65, we are going to have Medicare, in our senior years. The truth is that Medicare doesn’t pay for the single biggest health care expenses seniors face… custodial long term care. If I have cancer in my senior years, and I’m on Medicare, the treatments related to cancer are paid for. This includes surgery, chemotherapy, radiation and hospitalisation. There may be co-payments, but Medicare covers most of the costs.
Medicare Won’t Pay
If I have dementia, which is an equally terrible disease as cancer, I may need custodial long term care in a nursing home. This means I have to pay out of my own pocket because Medicare does not pay for custodial long term care. There are only two other agencies that can help – one being the Veterans Administration, and the other entity is Medicaid, known as medical assistance in Pennsylvania. However, to become eligible for Medicaid, you have to go broke first, which is the truth. Married people get to keep a little bit more money than single people, but it’s not enough to support the healthy spouse. Now the healthy spouse is forced to liquidate her house and assets. This is something I see all the time. The truth is, families are in financial difficulty because of the need for long term care.
Long Term Care
According to statistics from the Alzheimer’s Association, one in three of us will need long term care in a nursing home, and the other two of us are going to need some form of care. The average cost of a nursing home in Pennsylvania is $14,000 a month. It is true that the average stay in the nursing home is between two and three years, but there are also some long stays. These long stays would leave you financially destitute. My own grandfather was in a nursing home for almost 10 years and he lost a significant amount of money. When my family went to a local attorney, he said that once you’re in a nursing home, there’s nothing you can do. That is not true. I decided to investigate and discovered that there’s a lot we can do to help, as elder law attorneys. This is the reason why I do what I do. I decided to call this attorney, and suggested to him that maybe we could help people to protect assets. He responded to say that he thinks people should pay their own way, which is simply his opinion, but not the truth.
The Secure Act Changes Things
No one in the government is actively trying to fix this. In addition to this, the Secure Act was a law that was passed in 2019 and became effective in 2020. Essentially, the Secure Act was a massive tax hike on middle class Americans, since it impacts your retirement accounts. It was the case before the secure act, that your kids would inherit your IRA when you pass away. When they inherited your IRA, they could stretch it for their life expectancy. However, since the Secure Act was passed, your kids have to pull all the money out of your retirement account and pay ordinary income taxes. This would have to be done within the first 10 years after you pass away. This means your kids have lost out on 20-30 years of tax deferred growth on the money.
In addition, if I was in this situation, assuming my dad passes away when I’m 55 years old, I would inherit the money while I’m likely still working. This means I’m probably in a high income tax bracket, and now in addition to my ordinary income, I will be paying income tax on my dad’s retirement account. In our current environment, someone can die with up to $13 million without paying any federal estate tax. However, if a retired school teacher passes away with $700,000 in a retirement account, the money would go to her kids. There will be income tax that is due by her children, within a defined period of time after she passes away. It is almost like a death tax on the middle class.
Let Us Help You
There are planning techniques available to protect yourself. Your responsibility is to become educated, which is why we offer the estate planning and elder law workshop. We call it the 3 Secrets Workshop, to help protect your family and finances. Register for these workshops on our website. We’re going to teach you about innovative ways to get you the estate planning tools you need. Having these tools you will be able to protect your family at a fair price.
