January 2002 Newsletter

The Sandwich Years

The goal of financial planning is to protect your quality of life, which can mean many things: to provide for a certain level of lifestyle or comfortable retirement, to pay for children's education, to care for aging parents. If you are trying to accomplish all of these goals at the same time, welcome to "The Sandwich Years."

Silver Oak is going to sponsor two new educational seminars in 2002 for clients and friends of the firm, one on financing college and one on long term care. Please contact us if you would be interested in attending either or both presentations.

Perhaps the most overlooked planning issue for the majority of people is the area of long term care. Many of us have only a vague notion of what long-term care may mean for the quality of their lives; most probably equate it with aging. In a society that worships perpetual youth and beauty, acceptance of growing older is not something that Americans do well.

But there is a significant chance that an individual will need long-term care at some point in their lives. "Long term care" does not only mean nursing homes — a better definition may be "planning to preserve independence." In the year 2030, 77 million Americans will be age 65 or older; by the year 2060, as many as 24 million people will need long term care services, and the greatest number will be single women.

According to the General Accounting Office, spending for long term care in the U.S. in 1995 totaled almost $91 billion. Costs paid directly by individuals for nursing home care are estimated to reach $158 billion by 2030. The average cost of a year in a nursing home is now $51,000; the cost of 24-hour in-home care can cost $10,000 a month.

What can you do to prepare for this risk to your family? First, acknowledge that you need to plan for it as you do any other financial goal. The risk of needing some level of long term care in your lifetime is much higher for an individual than the risk of a fire destroying your home, yet only about 8% of Americans own a long term care insurance policy while almost everyone has fire insurance.

Second, understand that the government will not pay for it; these expenses are not covered by Medicare or a supplemental health insurance policy. Individual planning is needed.

Third, educate yourself enough to make an informed choice. Lack of information and fear stop people from making decisions and put them at risk of catastrophic loss.

Most advisors recommend the purchase of a long term care insurance policy before the age of 60 (and some suggest earlier, because 40% of Americans receiving long term care are under age 65) for the best premium prices. While not everyone will choose to purchase a policy — deciding to self-insure the risk instead — the issue needs to be examined, especially for the Baby Boomer generation.

IRA Contributions

Remember to make your 2001 IRA contributions before April 15, 2002 — and the earlier, the better! If you are under the income limits, a Roth IRA contribution may be your first choice for the tax-free feature and no required lifetime distributions. If you are not eligible for a Roth, a traditional IRA account, even if you can't deduct the deposit, is a worthwhile savings habit.

Paying for College

Many parents are taking their high school children on college visitation trips around the country. Selecting a college can be a daunting task, and financing four or more years of schooling is a big investment. Adding to the complication is the growing level of competition at schools, because the numbers of applicants far exceed the openings.

Consultants are available to assist families in this process, and can be great resources. They can help you fill out financial aid forms, narrow down the list of suitable schools, offer advice on "marketing" your child to the college of his/her choice, and seek scholarship and loan money. 42% of money awarded to students today is based on merit rather than financial need, so everyone can apply — but you need to be "first in line" for the money.

Experts recommend that students start the college search process when they are sophomores or juniors, but they can still help high school seniors. Most consultants will offer a free appointment to discuss their services and your needs.

Boot Camp 2002

By popular demand, here are the 2002 dates for Silver Oak's "Investment Boot Camp:"

February 6 (Wed.), 11:30 - 1:30 pm
April 13 (Sat.), 9:30 - 11:30 am
June 6 (Thurs.), 3:30 - 5:30 pm

Call or e-mail Mary Barr to register.

Giving Circle Update

We will be having the second planning meeting of the Silver Oak Charitable Giving Circle on Saturday, February 2nd at 10 am. A speaker will be giving us an overview of charitable organizations in the local area. At our first meeting, we expressed interest in the areas of education, hunger, environment, literacy and health. If you are interested in joining us in this new endeavor, contact Deborah for details.

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