11 Things Every Home Buyer Should Do

The more you know about the home buying process, the more money, time and hassle you'll save. We've outlined 11 things you should prepare for now if you plan to purchase a new house in the months ahead. Take a look.

If you're curious to know how much you can afford to buy, you can get prequalified for a mortgage by a lender. However, a prequalification is just an estimate of what a lender thinks you can afford, based on basic financial information you provide.

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Home buyers often believe they must make a down payment of 20% of the purchase price of a home to get a mortgage. Not so. Although a larger down payment may earn you a lower interest rate and results in a lower monthly mortgage payment, most lenders offer mortgage programs that allow low- to moderate-income borrowers to make much smaller down payments. With the Home Possible program, backed by Freddie Mac, you can qualify for a mortgage with as little as 3% down. You needn't be a first-time home buyer, but your income cannot exceed 80% of your area's median income. The source of funds for the down payment can include a gift from a family member. You can apply with a co-borrower, such as a parent, who won't live in the home. Fannie Mae offers a similar 3% down program, called HomeReady. The Federal Housing Administration (FHA) has traditionally served mortgage borrowers with less-than-stellar credit. Its loan program requires a minimum of 3.5% down.

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Get Preapproved for a Mortgage Loan

Figure Out How Much You'll Need for a Down Payment

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Buying a home may be one of the biggest purchases you will ever make.

Reshop Your Car Insurance

Average auto insurance costs can vary widely depending on who’s calculating them, but a 2019 study of rates from major car insurance companies in every state found that the average policy in the U.S. is $146 a month, or $1,758 per year. However, factors such as age, gender, marital status, driving record, credit score and the vehicle you drive can greatly affect policy prices. The upshot? You can take a number of steps to drive down your premiums. The best way is to comparison shop. Several online brokerages let you plug in basic details—such as your age and your car’s make, model and year—to compare rates from insurance companies. But to get an apples-to-apples comparison when shopping for quotes, says Tamara Naar, AAA’s director of insurance services, use your insurance company’s Declarations Page. The “dec page” is an industry standardized document that lists a plan’s protections and coverage limits. By providing the dec page of your current insurance policy to other insurance companies, you can see whether they can beat the rate while offering the same terms. Don’t stop at price and policy terms. Also look at the health of the insurer. “Does the company have good financial standing? Do they have complaints against them through the Better Business Bureau? Those are important things to consider,” says Marissa Mounds, senior managing director of product management at Travelers Insurance. You may want to create a spreadsheet to keep track of rates and terms; include your current policy in the comparison. And don’t forget that insurers typically cut you a break of 5% to 20% for bundling your auto policy with homeowners or other types of coverage. Gusner recommends you reshop your policy once a year. Major life events can also warrant shopping for a new provider, she says. For example, if you need to add a driver to your policy, or you recently bought a house, “there may be a better car insurance provider out there for you based on your new circumstances,” Gusner says. Although insurers look at the same basic factors, they weigh risk factors differently, she adds, “so finding the one that offers the best rates and service for your specific needs is what you’re after.”

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Finding the lowest rate to protect you and your vehicle can be a challenge.

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To help keep your premiums down, consider the following strategies. Raise your deductible. Your policy’s deductible is the amount you’d pay out of pocket in the event of a loss before your insurance plan kicks in to cover any remaining costs. There are two components: If your car is damaged or destroyed in an accident, collision coverage pays to fix or replace it. This applies if you hit another car or a stationary object. Comprehensive coverage, meanwhile, protects against incidents that don’t involve another vehicle, such as theft of your vehicle or its contents, vandalism, collision with an animal, glass breakage, or damage from falling objects, fire, explosion, earthquake, windstorm, hail, or flood. Collision and comprehensive insurance cover you up to the value of your vehicle—and your insurance rates will usually go down as your car depreciates, Gusner says. Some plans offer a $0 deductible, but generally the lower your deductible, the higher your premium. Hence, upping your deductible can help you curb your policy’s costs. (Note that you can generally choose a different deductible for collision and comprehensive coverage.) Increasing your deductible from $250 or $500 to $1,000 can reduce your premiums by up to 20%. It can also prevent you from filing small claims that could lead to a rate increase or jeopardize a claims-free discount. You could use the savings to bolster your emergency fund. If you’re driving a clunker, it might make sense to drop collision insurance altogether. If your car is totaled, the payment you get from the insurer may not justify the higher premiums. Claim any discounts you can qualify for. Many car insurance providers offer reduced rates for military personnel, veterans, good students, people with clean driving records, workers in select occupations (such as nurses and teachers), or affinity groups (such as alumni or fraternity associations). Some allow you to take a defensive-driving course in exchange for a rate reduction. Also, cars with advanced safety features, such as automated emergency braking or lane-departure warnings, can be less expensive to insure (but more expensive to repair after an accident).

Install a driving monitor. Many insurance companies will reduce your premiums if you prove that you’re a safe driver. Businesses assess your driving skills by installing a monitoring device in your car or using a smartphone app to track your driving speed, braking habits and other factors. The savings can be substantial: State Farm’s Drive Safe & Save program gives customers discounts of up to 50% on their auto insurance. And in most states you get an automatic discount just for participating. The caveat? Your insurance rate could increase if you (or your spouse or a teen driver) exhibit high-risk driving behavior. Change to a pay-as-you-drive plan. If you don’t drive often, signing up for a policy that is based on the mileage you log could make sense, says Floyd Yager, senior vice president of property management at Allstate Insurance. Currently, Allstate offers pay-as-you-drive plans in 14 states. The plans charge an average daily rate of $1.25 to $1.52, and an average per-mile rate of 9 to 10 cents. But not every insurance company offers a pay-as-you-drive plan. Don’t skimp on liability coverage. Liability coverage protects you if you or another person driving your car with your permission injures or kills someone or damages another person’s property. Let’s say you run a red light, strike another car and injure the driver. Under your liability coverage, your insurance company would pay claims to the other driver for vehicle damage and any bodily injuries, including medical and hospital costs, rehabilitation, nursing care, and possibly lost income and money for pain and suffering. (Note that liability insurance provides coverage for other people that you harm, not for you or your vehicle.) Many insurers use shorthand to describe liability coverage. For example, a policy might be listed as 50/100/25. The first figure refers to the coverage (in thousands of dollars) for injury to one person in an accident, the second number is the limit for injuries to all people in the accident, and the third figure is the coverage for property damage. Most people should buy more liability coverage than their state’s minimum requirements. As a rule of thumb, says Gusner, drivers should get a policy that provides limits of 100/300/100. You may need more coverage if you own a business to ensure that your policy will cover any exposure. Also, consider beefing up your protection from a lawsuit on all fronts with an umbrella insurance policy.

Click here to learn more about the NYSUT Member Benefits Corporation-endorsed Defensive Driving Program.

NYSUT NOTE: The NYSUT Member Benefits Trust-endorsed MetLife Choice platform offers a variety of insurance policies to NYSUT members including auto insurance.

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A New Way to Pay College Loans

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A little-known provision tucked into a law enacted at the end of 2019 allows parents to use money from their 529 college-savings plans to help their children pay off their student loans. A provision in the SECURE Act allows owners of 529 plans to withdraw up to $10,000, tax-free, to make payments on the plan beneficiary’s student loans. Account owners can also withdraw up to $10,000 to repay loans for each of the beneficiary’s siblings. In the past, families who had a balance in a child’s account had to change the beneficiary or pay taxes and penalties on earnings to withdraw the money. Before withdrawing 529 money to repay student loans, check with your state’s plan. Although many states will likely conform with the federal law, some may require you to return state tax deductions or credits you received if the money is used to repay student loans, says Ross Riskin, an associate professor of taxation at the American College of Financial Services.

Parents may now use money from their 529 college-savings plans to help their children pay off student loans.

Grandparents who have saved in a separate 529 plan could see benefits, too. Withdrawals from a grandparent-owned 529 plan are reported as untaxed student income, which can reduce a student’s financial aid package by up to 50% of the distribution amount. Now, grandparents can also use the money to help their grandchildren repay their loans.

NYSUT NOTE: NYSUT Members have access to the NYSUT Member Benefits Corporation-endorsed Cambridge Credit Counseling Program which offers free debt and student loan consultations with one of Cambridge's certified counselors.

Click here to learn more about the NYSUT Member Benefits Corporation-endorsed Cambridge Credit Counseling Program which can help you understand student loan repayment options.

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How to Find a Financial Planner You Trust

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A financial planner can help you navigate disquieting times, and it has never been more important to find one you can trust. A critical first step is finding a planner who adheres to the fiduciary standard, which requires that the planner must put your interests above his or her own. Fiduciaries are required to avoid conflicts of interest, such as steering you toward mutual funds with hefty commissions for themselves instead of lower-cost alternatives. Securities brokers follow a less stringent “suitability” standard, which means the investments they recommend must be suitable based on the client’s age and risk tolerance but don’t necessarily have to be the least expensive options available. During the Obama administration, the Department of Labor adopted a rule that would have required all financial professionals who give retirement advice to comply with the fiduciary standard. That rule was struck down by a U.S. Circuit Court, which held that the DOL didn’t have the authority to enforce the rule. Since 2009, certified financial planners have been required to comply with the fiduciary rule when providing financial planning, such as developing a retirement strategy. But as of June 30, 2020, all CFPs are required to comply with the fiduciary standard whenever they give financial advice. The broadened standard will most likely affect brokers and insurance agents who are CFPs but don’t typically provide financial planning. Many consumers are wary of hiring planners who work on commission because they’re compensated for recommending specific products or investments, and that creates the potential for conflicts of interest. The CFP Board contends that the broadened fiduciary standard reduces the potential for such conflicts. In addition, Keller says fee-only planners aren’t free of conflicts, either. Many fee-only planners charge a percentage of the amount of money clients give them to manage (known as assets under management, or AUM), which can range from 0.25% of AUM for a robo adviser—automated advice provided by many banks, brokerages and financial service firms—to 1% or more for a full-service planner. A planner whose fees are based on a client’s AUM might be tempted to discourage actions that would reduce the size of that account, such as taking a large withdrawal to pay off a mortgage, he says. Doing Your Due Diligence. Even with the broadened fiduciary standard, you should take extra steps to make sure any planner you hire is in fact looking out for your best interest. Start by making sure that the planner is a certified financial planner. To earn the CFP mark, a planner must complete a course in financial planning, pass a six-hour exam, have two to three years of professional experience, and complete 30 hours of continuing education every two years.

Use our road map to find an advisor who will truly look out for your best interests.

Once you’ve established that the planner is a CFP, do a background check. The CFP’s website, LetsMakeAPlan.org, will tell you whether the planner has ever been publicly disciplined by the CFP Board or has filed for bankruptcy within the past 10 years. Next, visit BrokerCheck.FINRA.org, a search tool provided by the Financial Industry Regulatory Authority (FINRA), a self-regulatory organization for the securities industry. This site will provide a record of a planner’s employment history and any regulatory actions taken against the individual, along with records of arbitration decisions and complaints. However, BrokerCheck has its critics: Research conducted by the Stanford Law School found that it’s not difficult for brokers to get complaints expunged from the site, even if they’re not in error. Still, brokers can’t erase criminal or regulatory infractions from BrokerCheck. You can also do a background check at the Securities and Exchange Commission’s database of investment professionals, where you’ll find information about the adviser’s professional designations, experience, previous employment, other business activities, and any complaints or disciplinary actions by regulators.

NYSUT NOTE: NYSUT Members have access to the NYSUT Member Benefits Corporation-endorsed Financial Counseling Program which offers fee-based financial services from Certified Financial Planners.

Click here to learn more about the NYSUT Member Benefits Corporation-endorsed Financial Counseling Program which offers access to Certified Financial Planners.

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Good Debt, Bad Debt: Knowing the Difference

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With U.S. household debt at a record-breaking $14 trillion at the end of 2019, more Americans are learning to live with and manage debt. Since the financial crisis, consumer credit in its many forms—from student loans and mortgages to auto loans and credit cards—has grown. In recent years, a strong economy and job market have encouraged many people to spend and borrow more. Not all debt is harmful to your financial health. In fact, many people divide borrowing into good debt and bad debt. Good debt is used to finance goals that will increase your net worth, such as earning a college degree, buying a home or owning a small business. Good debt is even better if it carries a low interest rate and is tax-deductible. Bad debt is money borrowed to buy things that won’t last or that you can’t afford, such as a handbag that you charge to your credit card but don’t pay off, or a vacation that you finance with a home equity line of credit or personal loan. Sometimes the boundaries between good and bad debt aren’t as clear. Many experts consider loans for cars or other depreciating assets to be bad debt. But if you take on debt to buy or repair a car you need to get to work or to pay for a necessary medical expense, that debt falls somewhere between good and bad, says Michele Cagan, a certified public accountant and author of Debt 101. Still, too much debt of any type is overwhelming. And even good debt can turn bad when you have too much of it, as happened for many households in the years leading up to the 2008 financial crisis. But rather than forgoing debt altogether, the key is understanding the purpose of the debt and what you can afford, says Cagan. If you’re considering taking out a loan, make sure you understand the details—including when you’ll need to start making payments, what the interest rate is and other repayment terms. Consider how those payments will fit into your budget. Strategies to pay it off. Once you’re on the hook to pay back money that you borrowed, the strategy is the same, no matter how much you owe. Start by taking inventory of the amount you’ve borrowed, the payment dates, the lenders and the interest rate for each of your debts. Build the minimum payment for each debt into your monthly budget. (If you’re having trouble meeting the minimum-payment amounts, see below.) Then see how much more you can afford to put toward your debts, and make a plan to speed up repayment. It might stretch your budget to make larger payments, but paying down your debts more aggressively will help you wipe them out more quickly and save you hundreds, if not thousands, of dollars in interest. Simple math shows that paying off your debt with the highest interest rate first, while making minimum payments toward the others—known as the avalanche method—will save you the most money. But some borrowers prefer what’s called the snowball method. With this strategy, you tackle the debt with the smallest balance first, then roll that payment into the next smallest debt. Creating a snowball isn’t the fastest way to get out of debt, says Cagan, but it can help borrowers stay motivated because they can see their progress. Other strategies to manage your debt will depend on the types of debts that you have. Because today’s interest rates are low compared with historical rates, you may be able to refinance some of your debts at a lower rate and use the extra cash to speed up repayment or boost your savings. With most credit card interest rates hovering between 15% and 20%, any credit card debt you have is likely costing you a bundle and is a prime candidate for faster repayment. While you’re paying down the debt, you might also consider a balance transfer, shifting the balance to a new credit card that charges no interest on transfers for a period of time. Most issuers give cardholders a year to 15 months to carry an interest-free balance. A few also waive promotional balance transfer fees. Just make sure you can pay off the balance by the end of the introductory period, when higher interest rates typically kick in. If you don’t qualify for a balance transfer or need more time to pay your debt, try negotiating with your issuer for a lower interest rate. Another option is credit counseling. Click here to learn more about the NYSUT Member Benefits Corporation-endorsed Cambridge Credit Counseling program. Dealing with student loans. For students who borrowed to attend college, the average debt at graduation was $29,000 among those who graduated in 2017–18, according to the College Board. In recent years, interest rates for federally backed student loans ranged from 3.4% to more than 7%. Fixed interest rates from private lenders currently range from about 4% to 14%, and variable rates range from roughly 3% to 12%. If you have federal student loans, consolidating them through the government can make payments more convenient, but it won’t lower your interest rates or save you money. The interest rate of the new loan is the weighted average of the interest rate of the loans that you combine. If you go this route, consider excluding your highest-rate loan and targeting it for early repayment. But consolidating will allow you to pick a new federal repayment plan. There are three main options beyond the traditional 10-year plan: plans that stretch your payment over longer periods, plans that gradually increase the amount of your monthly payments and plans that base the amount of your payments on income. To see what your monthly payment and loan terms would be under different repayment plans, visit StudentLoans.gov and use the Repayment Estimator. The longer the repayment period, the more you will ultimately pay in interest, so pick the plan with the highest monthly payment you can afford.

It’s often smart to borrow to boost your income and your assets.

To lower the interest rate on your student loans, you’ll have to refinance with a private lender. Private lenders will refinance both private and federal student loans into one loan. Assuming you’ve established a good credit history since college, you’ll likely be able to score a lower interest rate on private loans than you did when you were a student; you may be able to lower the rate on your federal loans, too. If you refinance federal loans with a private lender, you’ll typically lose benefits and protections that come with federal student loans, such as deferment and forbearance. But some borrowers, particularly those with high-paying jobs, conclude that the savings from lower interest rates are worth the trade-off. When you need a helping hand. If you’re having trouble repaying your loans or think you may miss a payment, call your creditors. Explain the situation and ask about any repayment options that lower the interest rate or monthly payments while keeping the account in good standing. Many creditors will change due dates, waive interest and late fees for a while, or offer other options that can help. If you’re still struggling to repay your debts, consider credit counseling, a service that offers financial advice and debt-management plans.

NYSUT NOTE: The NYSUT Member Benefits Corporation-endorsed Cambridge Credit Counseling program can help NYSUT members gain a better understanding of credit card consolidation and debt management.

Click here to learn more about the NYSUT Member Benefits Corporation-endorsed Cambridge Student Loan Counseling program.

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Click here to learn more about the NYSUT Member Benefits Corporation-endorsed UnionDirect Mortgage Discount Program presented by Mid-Island Mortgage.

You'll need to take it a step further once you're ready to start seriously shopping for a home. You'll want to get preapproved for a mortgage loan. The difference here is that the lender actually pulls your credit report and requires you to submit documentation that verifies your income and financial history. Once this has been confirmed, you'll receive a preapproval letter that assures prospective sellers and their agents that you can obtain a mortgage and close the deal. Without one, a seller may not consider your offer, especially if they have other offers in play. A preapproval is usually good for 60 to 90 days.

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11 Things Every Home Buyer Should Do

First-time home buyers can tap their IRAs for a down payment. You're considered a first-time home buyer if you had no ownership interest in a main home within two years of purchasing a new house. You can use the money to buy or build a home for yourself or your spouse, kids, grandchildren or parents. First-time home buyers can withdraw up to $10,000 from a traditional IRA penalty-free. If your spouse has an IRA, he or she can do the same. If you take the money before you reach age 59 ½, you won't be hit with an early-withdrawal penalty, but you will owe taxes on the money. If you withdraw the money from a Roth IRA, nothing must be repaid, ever. You can tap all your contributions (not earnings) to your Roth for any purpose, including a down payment on a home, at any time, tax-free and penalty-free. And, after the Roth IRA has been open for five calendar years (including the year you made the first contributions), you also can withdraw up to $10,000 of earnings tax- and penalty-free for the purchase of your first home ($20,000 if you're married and you each have a Roth). With either a traditional or Roth IRA, you must use the money to buy or build a home within 120 days of the withdrawal. The $10,000 for a first-time home purchase is the maximum you can take over your lifetime, whether in one or multiple withdrawals.

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Virtual staging has become common practice with online home listings. It allows sellers to digitally decorate a property to showcase its best features and qualities in an effort to make it more attractive to buyers. A seller might do this to show what an empty room in their home looks like with furniture and home decor items. Where things can get tricky is if virtual staging is being used to remove a home's flaws. This includes changing paint colors, editing out stains on walls or carpets or deleting power lines in exterior shots of the home. This can be considered misleading and unethical. This is why you may want to consider buying from sellers who are working with a licensed Realtor®, who is a member of the National Association of Realtors (NAR). That's because they must adhere to the organization's Code of Ethics & Standards of Practice, which prohibits them from manipulating photos in a way that may mislead consumers. If you suspect the images have been virtually staged and it's not mentioned in the listing or there are no before/after photos, be sure to ask the seller's agent in advance. They should disclose without hesitation if that's the case. If you do visit a home that doesn't stack up to the listing photos, you may wonder what else isn't on the up-and-up. In this scenario, it's probably best to walk away. Then, you or your agent can file an ethics complaint about the listing agent with the local association of Realtors® (if he or she is a member) or contact the agent's managing broker.

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Consider Tapping Your IRA for a Down Payment

Carefully Review Photos in Online Home Listings

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11 Things Every Home Buyer Should Do

When you make an offer on a home, add a contingency for a home inspection to protect yourself from unpleasant and potentially costly surprises. In a market where buyers have some advantage over sellers, you can use the inspector's report for further price negotiations, especially if the property needs any major repairs. In a market where sellers have the advantage, you can renege on the purchase contract and get your earnest-money deposit back if the results of the inspection are unacceptable to you and the seller refuses to negotiate. Plan on paying between $300 and $400 for an inspection. That fee may vary by region and sometimes on the age, size and construction of the house.

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Besides gathering funds for a down payment, buyers should budget an extra 3% to 6% of the purchase price to cover costs you must pay at settlement. Those usually include the loan origination fee, any discount "points" you pay to get a lower mortgage interest rate, the cost of title insurance, government recording charges, transfer taxes, an initial deposit for an escrow account (say, for property taxes and hazard insurance) and services, such as an appraisal and home inspection. If you buy a home in a building or community with a homeowners' association, you may also have to pay your first year's annual HOA dues.

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Get a Home Inspection

Don't Overlook Closing Costs

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When the title to the home (your legal ownership with all of its rights and responsibilities) transfers from the seller to you, lenders want to make sure it's free of any impediments to your ownership and their collateral for the mortgage. Title defects, also referred to as clouds on the title, could include unreleased mechanic's liens, unpaid taxes, easements and unclear wills. A title company will perform a title search to reveal any title problems before your closing. But, just in case, you must pay for a lender's title insurance policy as part of your closing costs. It protects the lender, not you, from any problems with the property's title that arise.

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Find Out If You'll Need to Pay for Title Insurance

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11 Things Every Home Buyer Should Do

If your down payment on a home is less than 20% of the appraised value, you will have to pay for private mortgage insurance or PMI. It protects the lender if you default on your loan. It costs about 0.5% to as much as 5% of the original amount of the loan per year, according to ValuePenguin.com. So, for a $200,000 mortgage, you would pay about $1,000 annually, or $83.33 per month, at the lower rate. Generally, the bigger your down payment (short of 20%) and the higher your credit score, the less PMI will cost. With a loan backed by Fannie Mae or Freddie Mac, you can ask the lender to eliminate the cost of private mortgage insurance when your equity reaches 20% of the home's value (a loan-to-value ratio of 80%) through home-price appreciation and paying down the mortgage. So long as you are current on your mortgage payments, the lender must automatically eliminate the mortgage insurance when you reach 22% equity (a loan-to-value ratio of 78%). With an FHA loan, you must pay for mortgage insurance for as long as you have the loan.

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It's hard to beat the safety of a mortgage with a 15- or 30-year fixed rate of interest. You know what your rate and payment will be for the life of the loan. However, rates on adjustable-rate mortgages tend to be less than fixed rates. An ARM can be a good deal so long as you manage the risk of a rising interest rate. Choose an ARM with an initial fixed-rate period that matches how long you plan to own the house, say, 5 or 7 years. Your interest rate and payment will remain the same for that period of time. After that period ends, it will begin to adjust annually, up or down, depending on the movement of the underlying rate index to which the ARM is tied and any caps on adjustment that apply. To protect yourself against the possibility that you can't sell when you want or need to, make sure you can afford the monthly payment if the rate rises to the limit of the cap on the first rate adjustment. This is typically two percentage points. For their part, lenders must disclose what your maximum rate and payment could be after the first rate adjustment and approve you for the loan on that basis.

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Determine If You'll Need Private Mortgage Insurance

Consider an Adjustable-Rate Mortgage

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In the past you probably took the standard deduction when you filed your federal income taxes. But once you own a home, itemizing may make sense—and save you a lot on your tax bill. However, under the Tax Cuts and Jobs Act, which passed in late-2017, the deductions aren't as generous as they once were. Before then, you could deduct interest on a mortgage of as much as $1 million ($500,000 if you're married and filing separately). Since the Act passed, you can only deduct interest on as much as $750,000 ($375,000 if you're married and filing separately). You can also still deduct interest on a second home, but total mortgage interest (for all homes) is capped at $750,000. The law also caps the amount of state and local property taxes you can deduct at $10,000 ($5,000 if married filing separately). In the year you buy a house, you can still write off discount points you may have paid in exchange for a lower interest rate on your mortgage, as well as deduct points that the seller paid for you. In late 2019, Congress retroactively extended the deduction for mortgage insurance premiums for 2018, 2019 and 2020 federal returns.

Understand the Tax Deductions You'll Qualify for

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NYSUT NOTE: The NYSUT Member Benefits Corporation endorses the UnionDirect Mortgage Discount Program presented by Mid-Island Mortgage. This program can help NYSUT members save on many costs associated with buying a home.

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Deciding how much to offer for a home requires a lot of information about recent sales of comparable properties, which your real estate agent should provide. Say you find a condo you like in a building where friends live. They tell you that two other units in the building sold for $200,000 and $225,000. That's nice to know, but it's not enough information to make your decision. You should find out when those sales took place (the more recent, the better), what the properties were originally listed for and how long they were on the market. The closer to the original list price and the faster the property sold, the more accurately that seller set their price for the current market. Plus, you'll want to know how the units compare in size, style, amenities and location in the building. Then, consider the asking price for the unit you want and make allowances for the current market climate, whether it's a buyer's market or a seller's. (This shouldn't be an afterthought. It's part of determining whether those sales are truly comparable.)

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Determine an Appropriate Offer Amount

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How to Shop for Life Insurance

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No one needs to tell you why you should have life insurance: If you pass away and your family or anyone who depends on you for support could no longer count on your income, life insurance would replace that income—assuming you choose a policy with the amount of coverage that is right for you. In addition to deciding on the coverage amount, you have a few more hoops to jump through—namely, whether to buy a whole life or term life policy. Whole life (often called cash-value or permanent life insurance) provides coverage for life and has an investing component that allows you to take a loan against the policy. The downside: Compared with term coverage, it’s expensive, especially in the early years of the policy. Term life provides coverage for a defined period of time—typically five, 10 or 20 years—without the investment and loan bells and whistles. What you see is what you get. Another advantage: Term life policies typically cost far less than whole life.

You may be able to estimate how much you need online, but that’s just the start of your search.

For most people, term insurance makes the most sense and, dollar for dollar, gives you the most protection for your money. An insurance agent you trust may be able to make a compelling case for buying some version of cash-value insurance. To counteract the argument that with cash-value insurance you reap generous rewards after you’ve held a policy for a number of years, term proponents urge consumers to buy term and invest the difference in premiums. How much do you need? Rules of thumb—such as buying coverage equal to seven to 10 times your annual pre-tax income—and calculators provided by the insurance industry are a handy starting point. But these shortcuts gloss over specifics that shape how much coverage you’ll need. A recent analysis by online insurance broker Policygenius found that 77% of term life insurance shoppers were lowballing the amount of coverage they applied for. “Half a million dollars seems like a large lump sum, but over 20 to 30 years, it could leave you at the poverty line if there aren’t other sources of income,” says Nicholas Mancuso, a senior operations manager at Policygenius. A more reliable approach to determining the right coverage is to add up the income your family would need to cover ongoing expenses as long as they need it (say, the number of years until your youngest child graduates college); the estimated cost of sending your kids to college; your debts; and final expenses at death. Then subtract savings, college funds and other life insurance policies. Finally, adjust the amount to reflect your situation. For example, you may want to increase coverage if a stay-at-home parent provides child care. According to the Insurance Information Institute, similar policies often have annual premiums that differ by hundreds of dollars a year. How much you’ll actually pay for a policy depends on your age, gender, health and family history. Insurers generally ask about your height, weight, blood pressure, cholesterol levels and any medical issues, and they will often require a medical exam. Some will also factor in your driving record, credit history and any risky hobbies, such as scuba diving. If an insurance company quotes a steep rate because of your risk profile, shopping around can help. Some insurers charge much more than others for similar health conditions.

NYSUT NOTE: The NYSUT Member Benefits Trust endorses a number of quality, competitive insurance programs that are available to NYSUT members.

To learn more about the NYSUT Member Benefits Trust-endorsed life insurance programs, click here.

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How to Transition into Retirement

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When Ruth Wooden was president and CEO of Public Agenda, a nonprofit research organization, she found herself dreaming at night that she was sitting in a classroom. At the time, Wooden, who had worked in advertising and public service for decades, was turning down offers to teach college courses about advertising. She wanted to do something else. Wooden decided to try teaching—about conflict resolution, not advertising. Once on campus, she realized that she really wanted to study, not teach. Having retired from Public Agenda, Wooden began teaching in the fall of 2011. Soon after, she entered a master’s program in theology and religious studies, taking one or two courses per semester for four years. “It just energized me,” says Wooden, now 73.

Shifting into retirement can be bumpy, but having a plan (or stumbling upon one) can make the switch smoother.

Planning for the nonfinancial side of retirement is crucial to success, too. “It’s a shocker to see how hard it is to replace what you had at work,” says Robert Laura, author of Naked Retirement: Living a Happy, Healthy, & Connected Retirement and founder of the Retirement Coaches Association. Finding a path takes some effort. “We have to be realistic,” he says. “It’s not an easy transition if we’re not prepared for it. It doesn’t come automatically.” Laura recommends having a written plan for your everyday life in retirement. How are you going to replace status, social network, structure, purpose and challenge? “How am I going to stay relevant and connected? Money doesn’t buy anything unless you figure out how you’re going to use it or spend your time.” For Cynthia Heath, who worked as a corporate lawyer for 30 years in St. Louis, retirement was daunting. Her husband had passed away 12 years earlier. “My whole identity was two things: my children and my career,” she says. “Your own mortality is clearer the moment you retire.” She found herself thinking, “How many more years do I think I have?” She first retired at 67 in December 2016, then worked on retainer as a consultant and was called back to her law firm to work again as a consultant until December 2018. Considering the longevity in her family, she’s “counting on” 20 more years of life. The second time she wanted to retire, she knew she wanted to, but “I did not know who I was. I knew what I did,” says Heath, now 71. So, she contacted a retirement coach, Joanne Waldman, for help. Though Heath already served on a number of boards, including Washburn University’s, she says she was confused about her identity. “I was living the status (I had) with the company,” she says. “I knew I had things I could do. I wanted to get to my heart.”

NYSUT NOTE: NYSUT Members have access to the NYSUT Member Benefits Corporation-endorsed Financial Counseling Program which offers fee-based financial services to help with planning for retirement.

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Transitioning to retirement can be bumpy, but having a plan (or stumbling upon one) can make the switch smoother, experts say. That’s important because people are living longer and staying in the workforce well into their 60s and beyond. Many of them consider this an opportunity to try a new field. Wooden found her path through connections and introspection. Others seek retirement coaches to help them through the transition. To help people ages 55 and older adjust to changes later in their lives, Wooden has been teaching the Encore Transition Program, a four-month class at the Union Theological Seminary. Most of the participants “are in unfamiliar territory, particularly if they’ve had a long career,” Wooden says. “They’re kind of like lost sheep.” Many “have a sneaking suspicion that there’s something good waiting.” They just have to figure out what it is.

Start a New Chapter

People don’t always realize just how much of their identity, status, daily social connections, structure and purpose are tied to their work. “It sounds great to have all that freedom,” says Joe Casey, an executive coach in Princeton, N.J., who also became a retirement coach five years ago. Yet, with increased longevity, people who quit their long-time occupation at 55 or 65 often find that unstructured retirement “can be a long stretch,” he says. “It can veer into drifting if you don’t have a plan.”

Prepare for the Ride

Heath has numerous personal and business connections yet still found developing a new social network a challenge. “The social network is the hardest part,” she says. “We lose those connections when we leave that job,” says Waldman, who is director of training for Retirement Options and owner of New Perspective Coaching in Chesterfield, Mo. Once retired, though, you can create a new social network; reconnect with childhood friends, college friends and relatives; or get involved in new activities and classes. Waldman suggests that you ask yourself, “Who do I want to be with in retirement?” Heath enjoys the company of her daughters and grandchildren, sister, old friends and other sports fans who join her at St. Louis Cardinals games. Intergenerational connections can be a way to stimulate new ideas and friendships. “People wanted more of those opportunities,” says Charlotte Japp, founder of Cirkel, a New York-based intergenerational network and mentoring organization. “When not making these meaningful connections face to face, the less connected we actually feel to people.”

Build Your Network

Planning for the nonfinancial aspects of retirement is best done three to five years before you retire, Laura says, yet many people wait until much later. Retirement work can range from being a porter at a rental car company to running the pro shop at a golf course. For others, retirement is the time to take a painting class or learn how to cook. Some people start a business on their own or with their adult children. Having a variety of interests, activities and contacts typically makes for the most successful retirement. Yet, meaning can be elusive. Grief or sadness can be part of aging. “Look inward to find what’s important to you,” says Jacob Brown, a psychotherapist in Corte Madera, Calif., who counsels adults about aging and grief. “Look outward to how you can express that in the world, rather than trying to fill it with cruising, golf or fishing.”

Plan for Purpose

How Cruise Ships Are Setting Sail During COVID

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If you’re scouting around for a new place to live in retirement, you need to consider sales, property and any other local taxes in addition to income tax rates. If you’re planning to buy a home in your new location, property taxes should be examined closely, because they can be quite a bit higher than income taxes in many places. This is especially true in popular retirement locations that have low or no income taxes, such as Arizona, Florida, Nevada, South Carolina, Tennessee and Texas. You also should educate yourself about the property tax breaks, if any, available to senior citizens in each locale. They can cut down your property tax bill significantly if you qualify.

Retirees wanting to take a cruise should plan for additional safety measures, such as temperature checks and wearing a mask in public areas.

Expect the Cruise Experience to be Different

Gene Sloan, the cruise and travel writer for The Points Guy website, sailed on the SeaDream 1, which, in November, became the first Caribbean cruise to sail since the pandemic hit. SeaDream 1 holds 112 passengers and was sailing at about half capacity for a seven-day trip. Sloan, who wrote about his experience on The Points Guy website, says he had to take a COVID-19 test within three days of sailing and then again on the day of departure. His temperature also was taken, and his hands, shoes and hand luggage were sprayed with sanitizer. Nothing was particularly invasive or annoying, he says, and once on board no one was required to wear masks, a decision that was partially reversed a few days later. But the social distancing was a big change. Cruising is “a very social experience,” Sloan says. “People like it because they can meet other people. I had to sit at a little table by myself.” In the bar, every other barstool was taped off. He had to make an appointment for the gym and was limited to a 30-minute workout with three other people in the room. After every half-hour workout, the gym was shut down and sanitized. All meals were outdoors except the first night before sailing. Despite the precautions, three days into the cruise, seven people tested positive—mostly from one family—and passengers “were immediately told to go back to their cabins to isolate,” Sloan says. The ship then sailed to Barbados. From Wednesday to Saturday, Sloan was quarantined in his cabin, as the Barbados government began contact tracing. Crew members slipped menus under his door; he filled them out and slipped them back. The crew delivered his meal tray, placed it in front of the door, knocked and then stepped away. It is believed someone unknowingly carried a low level of the virus not picked up by the testing, Sloan says. The Sea Dream Yacht Club, which owns the ship, did not return requests for comments. “There’s going to be a lot of learning from this one,” Sloan says. “Two rounds of testing and someone slipped through.”

10 Things You'll Spend Less and More on in Retirement

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5 Things You'll Spend Less on in Retirement

A popular retirement guideline suggests retirees need 80% of their preretirement income to make ends meet, and some experts encourage saving even more to avoid running out of money. Facing such daunting goals, 53% of preretirees say they plan on working past age 65 to ensure that they have enough money, according to the Transamerica Center for Retirement Studies. But the 80% rule isn’t for everybody, and it may lead to inflated savings goals that cause undue anxiety as you plan for retirement. Consumer spending actually decreases -- significantly -- as you age. Data from the Bureau of Labor Statistics shows the average retired household spends 25% less than the average working household. In order to know how much you need to save for retirement, it’s important to know what your spending will look like once you actually retire. Here’s a little pep talk: You’ve actually been practicing for retirement for the last year if you’ve been locked down this entire time.

What Retirees Must Know About Telehealth

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What Retirees Must Know About Telehealth

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How to Pay for College

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The average sticker price for the 2020–21 academic year at a four-year public institution, including tuition, fees, and room and board, was $22,180 for in-state students and $38,640 for out-of-state students, according to the College Board. The average tab at private colleges was $50,770, but many private schools post annual sticker prices north of $60,000. It's tough to predict what college will cost by the time your child (or grandchild) enrolls. The steady rise in the cost of a college education continues, but the pace has slowed in recent years. Over the past decade, published figures for in-state tuition, fees, and room and board at public four-year colleges increased 15% in inflation-adjusted dollars, and private four-year institutions increased 17% in inflation-adjusted dollars. To get an estimate of the costs by the time your child heads off to college, use the College Cost Projector at FinAid.org. Such eye-popping sums may seem like an insurmountable obstacle, particularly if you're just starting to save or you have more than one child to send to college. But most families pay far less than a school's sticker price. At many schools, generous need-based-aid awards often reduce the school’s net price by 50% or more of the published price for families who qualify. Scholarships and non-need-based aid, also known as merit aid, can further reduce costs. "Your biggest worry shouldn't be how much to save," says Brian Boswell, former vice president of research and development at SavingforCollege.com. "Instead, worry about getting started—and soon." The longer you wait, the more difficult it will be to reach your savings goal. Although you have a variety of options, the savings vehicle of choice is the 529 college-savings account, which allows earnings to accumulate tax-free and usually offers state tax breaks for contributions. Most experts recommend that you aim to save between one-fourth and one-third of the projected sticker price for each child. You'll generally be able to use a combination of scholarships, grants, loans and a portion of your current income when your child is enrolled to cover the rest of your college costs. Families with their eye on an in-state public university may want to use a slightly different strategy. Fidelity recommends multiplying your child's current age by $2,000 and comparing that figure to your savings efforts to get a quick read on whether you are on track to cover half the cost of an in-state public college.

The tab for a four-year education is mind-boggling. But don’t panic: You don’t have to save the entire cost.

For a clearer picture of your college-savings goal, you can use online tools to tailor that guideline to your family's circumstances. The College Savings Calculator at SavingforCollege.com creates an initial estimate of how much you need to save per month based on your child's age. But you can customize the results to also consider the cost of the school your child may attend, what portion of the projected costs you hope to cover, how much you have already saved and other details. Although the federal financial aid formula and the details of your family's financial situation may change by the time your child reaches college age, it's still worth getting a rough idea of the kinds of financial aid your student may qualify for, says Carol Stack, coauthor of The Financial Aid Handbook. Start by using the U.S. Department of Education’s FAFSA4caster tool at FAFSA.edu.gov. Later, once you have the short list of schools your child is interested in attending, visit each school's website to use its net price calculator. After providing some information about your student and your family's financial situation, you'll be able to see what families like yours paid to attend the previous year, after grants and scholarships. Even if you think your household income is too high to qualify for aid, don't write off the possibility of receiving need-based aid. Many schools have generous definitions of who qualifies. And no matter what the FAFSA4caster or a net price calculator shows now, plan to rerun the calculations as your child gets closer to college and as your family's financial situation changes. If you're saving for college for more than one child, you'll need to do some more math—and some more saving. The number of dependents in the family and the number of children enrolled in college at the same time are considered as part of the federal financial aid formula and will reduce your expected family contribution, as well as boost how much need-based aid you qualify for. But those changes are often smaller than you might think, says Boswell. The formula does, however, adjust your family contribution if you have more than one child enrolled in college at the same time. You can use the EFC calculator at CollegeBoard.org to see your estimated family contribution. A handful of schools offer programs that reduce tuition for families with more than one member enrolled at the school at the same time. For example, Saint Anselm College, in Manchester, N.H., offers a grant of $4,000 for each sibling who's enrolled beyond the first (split equally among them).

State 529 college-savings plans usually trump other savings options. They grow tax-sheltered and let you skip taxes on earnings if the withdrawals are used for qualified education expenses. There’s no income limit to save in a 529, most states offer tax breaks for contributions, and the accounts have minimal impact on financial aid. But a 529 isn't the only way to save. Some vehicles offer more flexibility or a broader range of investment options, and the various types of accounts affect financial aid in different ways. Some families choose to save in more than one type of account. Prepaid plans. If you're sending your child to school in-state, prepaid plans allow you to lock in tuition at your state's public colleges years in advance. Most plans are available only to state residents and offer the same tax benefits and penalties as 529 plans. As of 2020, only 10 states offer plans that are open to new enrollees, but nearly 300 private colleges and universities allow you to prepay through the Private College 529 Plan. Coverdells. Like 529s, Coverdell education savings accounts allow your savings to grow tax-free and escape taxes if used for qualified education expenses. Depending on your modified adjusted gross income (MAGI), you can set up an account at a bank or brokerage firm and contribute up to $2,000 per student each year until the beneficiary reaches age 18. Roth IRAs. Withdrawing money from your own Roth IRA to pay the tuition bill isn’t a great idea if those funds are important to a secure retirement. But the flexibility of a Roth means it could be part of your college savings strategy if you have other ways to save for retirement such as a 401(k) or 403(b). Because you stash after-tax money in Roth accounts, you can withdraw contributions tax-free anytime. Withdrawals of earnings after age 59½ are tax-free if you have held the account for at least five years, but you'll pay tax and a 10% penalty on earnings if you make a withdrawal before then—unless the money is used for qualified education expenses for your child or grandchild. In that case, you'll owe tax on any earnings you withdraw, but you won't pay a penalty. Custodial accounts. Also known as UGMAs (for the Uniform Gifts to Minors Act) and UTMAs (for the Uniform Transfers to Minors Act), such accounts let you set aside money or other assets in trust for a minor child and manage those assets until the child reaches the age of majority (18 in most states). At that age, the child owns the account and can spend the money for whatever he or she wants. Even if your child spends the money on education expenses, as you intended—instead of, say, a new car—custodial accounts can have a downside: In financial aid formulas, students are expected to contribute a much higher percentage of assets toward their education than parents.

Where to Save

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How to Pay for College

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When it's time to pay the bills, you can use a number of sources—financial aid, scholarships, loans and current income—to close the gap between your savings and the cost of college. You can fill out the Free Application for Federal Student Aid (FAFSA) as early as October 1 of your student's senior year of high school. Do it as soon as possible, even if you think your family earns too much to qualify for need-based aid. The federal formula considers family size and other factors besides income and assets. Plus, many colleges require the FAFSA in order to consider your student for other aid provided by the institution—and the school's definition of financial need may surprise you. For example, Princeton University awards need-based aid to 60% of students, including those from families who earn up to $250,000. The federal formula for financial aid looks at income and assets for both parents and students when determining how much your family can pay for college. But assets in a student’s name, such as custodial accounts, are assessed more heavily than assets in a parent's name, such as a 529 college-savings account. About 200 colleges and universities also require families to file the CSS Profile, which measures income and assets differently. For example, many colleges that use the CSS Profile consider home equity and grandparent-owned 529 plans as assets. Money held in a grandparent-owned 529 plan isn’t counted as an asset on the FAFSA. However, when you take withdrawals to pay for your grandchild's college expenses, those distributions are treated as the child’s income on the FAFSA and will reduce the student’s financial aid award eligibility. To maximize financial aid, consider waiting until after January 1 of the student’s sophomore year of college to make the withdrawal. That way, it won’t show up on the FAFSA as long as the student graduates in four years. If the student needs the money earlier, consider switching ownership of the account to the child's parents if that change is allowed by the plan’s rules. Even families who save diligently and apply for financial aid often find there's a gap between what the school expects them to pay and what they can afford. Students can ask their school guidance office for local scholarship information and visit sites such as Scholarships.com and Fastweb.com for national lists. To avoid borrowing too much, aim to cap total debt at no more than the anticipated starting salary after graduation and plan to pay it off in 10 years or less. Visit PayScale.com to see salaries in specific fields and use the figures as a guide.

When the Bills Come Due

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Emergency Funds: How to Get Started

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Emergency funds typically fall into one of two broad categories. One is set up to handle unexpected expenses—say, when your car breaks down or your water heater springs a leak. The other provides income if you lose your job. You should have both types, but when it comes to keeping a roof over your head, the second is the most important. Your personal circumstances will dictate how much money you’ll need if you lose your job. If you’re the sole wage earner, you should have six to 12 months’ worth of monthly living expenses set aside, whereas dual-income households can normally get away with three to six months of emergency reserves, says Jamie Lima, a certified financial planner in San Diego. However, if one or both members of a dual-income household work in a sector sensitive to changes in the economy, you may need to save more. For example, if you’re employed in the travel-and-leisure sector, which experiences a lot of ups and downs, you may need to cover more than six to nine months of expenses. Conversely, if you work in an industry that’s less sensitive to economic swings, such as a public sector job, two to four months of expenses may be enough. But spouses who both work in the same industry may need to save at least six months of expenses in an emergency fund because both could be laid off at the same time. When calculating your monthly expenses, focus on the basics, including housing, transportation, food and health insurance, along with any other insurance you may need, such as homeowners and car insurance, says Eliot Pepper, a CFP and cofounder of Northbrook Financial, in Baltimore. Set your priorities. Paying off credit card debt and building an emergency fund are both important, but if you must choose between the two, building an emergency fund should come first, says Brandon Renfro, a CFP in Hallsville, Texas. If you are faced with a situation in which you need money, you can’t tap the paid-off debt the way you can an emergency fund. (If you’ve lost your job and don’t have an emergency fund—or the amount you’ve saved falls short of what you’ll need—see below for other strategies to raise cash.) Because you don’t know when you’ll need it, the money in your emergency fund should be immediately accessible. Pepper recommends a high-yield savings account that has no fees, requires low (or no) minimums and is federally insured. You can link it to your regular checking account so that you can transfer money easily.

There’s no one-size-fits-all formula for how much you’ll need.

One drawback: Rates on high-yield savings accounts could drop. One way to lock in a rate for at least a few months is to invest in a “ladder” of short-term certificates of deposit. Stagger them so that each month one matures with enough to cover that month’s living expenses. If you don’t need the cash that month, reinvest it in another CD that matures at the end of your current series.

If you don’t have an emergency fund and the bills are starting to pile up, you may be tempted to start charging more expenses to your credit cards. But before you run up a high-interest balance that could take years to pay off, explore these options. Roth IRA. If you need the money, a Roth is a low-cost source of funds. You can always withdraw the amount of your contributions tax- and penalty-free. That money comes out of the account before earnings do; you won’t pay taxes until you’ve depleted your contributions. A 401(k) or 403(b) loan. Many 401(k) and 403(b) plans allow you to borrow money from your account. Typically, you may borrow up to 50% of the account value, but not more than $50,000. Though this gives you quick access to your money, you could be hit with fees and a tax penalty if you’re younger than 59 ½ and fail to repay the loan on time. Your health savings account. If you have an HSA, you can use money in the account for a variety of medical expenses, from dental work to co-payments. And if you lose your job, you can use money from your HSA to pay premiums under COBRA, the federal law that lets you continue group coverage. You can also use money from your HSA to pay health insurance premiums while you’re receiving unemployment benefits. Your life insurance policy. A permanent life insurance policy has two components: a death benefit, which is the amount that will be paid to your beneficiaries when you pass away, and a cash value, a tax-advantaged savings account that’s funded by a portion of your premiums. You can withdraw your basis—the amount in the cash-value account you’ve paid in premiums—tax-free. Just make sure you don’t take out more than the basis in your cash value account, because the excess will be taxable. The death benefit will be reduced by the total amount you withdraw. Alternatively, you can borrow against your policy. Interest charges range from about 6% to 8%, depending on market rates and whether the loan is fixed or variable. If you don’t repay the loan, or pay back only part of it, the balance will be deducted from your death benefit.

Plan B if you need cash fast

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14 Social Security Tasks You Can Do Online

If you’ve ever had to go to your closest Social Security office for, say, a name change or a replacement for your ancient (and MIA) Social Security card. . . well, the wait was likely long and the experience awkward. In pre-internet days, you had no choice but to physically go to a Social Security office for many tasks. However, these days, you can manage your own Social Security profile and execute many critical moves yourself online. (Note: During the COVID-19 emergency, Social Security offices nationwide are staffed but not open for face-to-face services. Call your local office—they’re typically staffed until 4 p.m. weekdays—if you need help.) Whether you’re a pre-retiree on the cusp of claiming your hard-earned Social Security benefits or a young worker decades away from retirement, you should set up a free MySocialSecurity account. It’s a good way to protect against Social Security fraud, and it’s a prerequisite for many of the items on our list here. Once you’ve set up your MySocialSecurity account, take charge of your Social Security benefits by reviewing your earnings history, calculating your benefits, ultimately filing for Social Security and Medicare, and much more. Let us show you how.

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If you’re just looking for a replacement Social Security card, there’s no need to go to a Social Security office and wait. You can do it online at SSA.gov. The replacement card should arrive within two weeks. The Social Security Administration is still rolling out the replacement card service in some states, and you cannot request one online if you live in Minnesota, Nevada, New Hampshire, Oklahoma or West Virginia. (If you live in those states, find the Social Security office nearest to you to request a new card in person.)

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Can’t locate your red, white, and blue Medicare card? You can request a replacement card through the Social Security website. Sign in to your MySocialSecurity account, click the “Replacement Documents” tab, then tap “Mail My Replacement Medicare Card.” You should receive it in approximately 30 days. For other Medicare questions and issues, visit Medicare.gov, where you should also have a MyMedicare.gov account.

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Request a Replacement Social Security Card

Request a Replacement Medicare Card

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Why visit a government office to get your Social Security business done? You can do much of that online.

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14 Social Security Tasks You Can Do Online

You’ve been paying into Social Security for years. So, it’s only fair to want to know how much you’ll have coming your way when you apply for the benefits. With your MySocialSecurity online account, you can quickly access and review your Social Security statement that the SSA otherwise mails once a year. (Here’s a PDF of what a Social Security statement looks like). Whatever your age, it’s good to keep up with your Social Security benefits projections—for claiming at 62 when you are first eligible to take Social Security (40% of Americans do so at this age), at “full retirement age” (66 or 67, depending on what year you were born), and at age 70 (the age at which benefits cease to increase.

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Stroll down memory lane by looking at exactly how much money you earned each year since you turned 18. But the fun can stop if you spot an error in your earnings history. If the SSA doesn’t have that record correct, you could be shorted in benefits (and that’s one of the reasons your earnings history is available). Check it out, and if you see something’s wrong, report it to the Social Security Administration through your MySocialSecurity account.

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Estimate Your Social Security Benefits

Review Your Earnings History

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You're of age, and you’ve picked your retirement date. Now, it’s time to apply for the Social Security benefits you’ve earned. You no longer need to drive to a Social Security office or make an appointment with a representative. You can apply online to start receiving your retirement benefits. The online process takes all of 15 minutes, according to the SSA. If there are questions about your application, you will be contacted by the SSA by phone or through the mail.

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Apply for Social Security Benefits

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14 Social Security Tasks You Can Do Online

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Turning 65 soon? Take advantage of the Social Security website to enroll in Medicare parts A and B. Note that your initial enrollment period starts three months before your 65th birthday and ends three months after your birthday month. Medicare Part A is hospital insurance, and Medicare Part B is Medicare Part B is medical insurance, which you pay for (and can turn down). The Social Security website answers a ton of questions about Medicare options and offers you plenty of links.

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Have you already applied for Social Security benefits? You can check the status of your Social Security benefits application online, rather than visiting your nearest Social Security office or trying to raise somebody on the phone. Within your My Social Security account, you’ll be able to see your re-entry number for an online benefit application or appeal that has not been submitted; the date the SSA received your application or appeal; your scheduled hearing date and time; the location where your current claim or appeal is being processed; and if a decision has been made.

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Apply for Medicare Benefits

Check the Status of Your Social Security Application

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Were you denied Social Security benefits when you applied? You can appeal that negative decision online. You have up to 60 days after you hear about that denial to file an appeal (the reasons for the denial will be in that letter). You have several recourse options: You can request a reconsideration; you can ask for a hearing by an administrative law judge; you can seek a review by the SSA’s Appeals Council; or you can seek a federal court review.

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Appeal a Social Security Decision

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14 Social Security Tasks You Can Do Online

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New Social Security beneficiaries (since 2013) must receive their benefits electronically. Older beneficiaries can switch to direct deposit at any time. It’s easy to set up or change your direct deposit of Social Security benefits online if you have a MySocialSecurity account.

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Before you go and print your proof of benefits you’ll first probably want to know what a Social Security Benefit Verification Letter is. Also known as a benefits letter or Social Security award letter, this document serves as proof of your retirement benefits. It includes your name, date of birth and the Social Security benefits you are receiving. To access it and print it, visit your My Social Security account.

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Set Up or Change Direct Deposit

Print Proof of Social Security Benefits

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Do you have a question about Social Security benefits, whether offices are open, how to replace a Social Security card for one of your children or some such? Visit SSA.gov and tap the FAQs. They have answers.

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Get Answers to Frequently Asked Questions About Social Security

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If you have a medical condition that leaves you unable to work for at least a year, you may be eligible for Social Security disability benefits. On the Social Security website, you can click into the disability planner to see if you qualify. You can also apply online for disability benefits.

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Apply for Social Security Disability Payments

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If you’ve bounced around a time or two in your career, make sure the Social Security Administration knows where to find you. You can update your contact information online via your MySocialSecurity account. Log in, click “My Profile,” then click the “Update Contact Information” button, and make and submit your changes. Simple.

Change Your Address and Telephone Number

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At tax time, you need your documents—and early-bird filers may not want to wait for their Form 1099 for any Social Security benefits received in the previous year to arrive in the mail. You can print that Form 1099 from your MySocialSecurity account.

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Print Your 1099

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Medicare Basics: 11 Things You Need to Know

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Heading into retirement brings a slew of new topics to grapple with, and one of the most maddening may be Medicare. Figuring out when to enroll in Medicare and which parts to enroll in can be daunting even for the savviest retirees. There's Part A, Part B, Part D, Medigap plans, Medicare Advantage plans and so on. And what is a doughnut hole, anyway? To help you wade into the waters of this complicated federal health insurance program for retirement-age Americans, here are 11 essential things you must know about Medicare.

Medicare is divided into parts. Part A, which pays for hospital services, is free if either you or your spouse paid Medicare payroll taxes for at least 10 years. (People who aren't eligible for free Part A can pay a monthly premium of several hundred dollars.) Part B covers doctor visits and outpatient services, and it comes with a monthly price tag—the standard premium in 2020 is $144.60 per month and will rise to $148.50 in 2021. Part D, which covers prescription-drug costs, also has a monthly charge that varies depending on which plan you choose; the average Part D basic premium in 2021 will be about $30 a month, roughly the same as 2020. In addition to premium costs, you'll also be subject to co-payments, deductibles and other out-of-pocket costs. To find the latest costs, visit Medicare.gov/your-medicare-costs.

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Beneficiaries of traditional Medicare will likely want to sign up for a Medigap supplemental insurance plan offered by private insurance companies to help cover deductibles, co-payments and other gaps. You can switch Medigap plans at any time, but you could be charged more or denied coverage based on your health if you choose or change plans more than six months after you first signed up for Part B. Medigap policies are identified by letters A through N. Each policy that goes by the same letter must offer the same basic benefits, and usually the only difference between same-letter policies is the cost. Plan F is the most popular policy because of its comprehensive coverage, but as of 2020, Plan F (along with Plan C) is unavailable for new enrollees. The closest substitute for Plan F is Plan G, which pays for everything that Plan F did except the Medicare Part B deductible. Anyone eligible to enroll in Medicare before 2020 can still sign up for plans F and C.

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Medicare Comes With a Cost

Fill Medicare's Coverage Gaps With a Medigap Plan

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There’s Medicare Part A, Part B, Part D, Medigap plans, Medicare Advantage plans and so on. We sort out the confusion about signing up for Medicare—and much more.

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Medicare Basics: 11 Things You Need to Know

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You can choose to sign up for traditional Medicare: Parts A, B and D, and a supplemental Medigap policy. Or, you can go an alternative route by signing up for Medicare Advantage, which provides medical and prescription drug coverage through private insurance companies. Also called Part C, Medicare Advantage has a monthly cost, in addition to the Part B premium, that varies depending on which plan you choose. With Medicare Advantage, you don't need to sign up for Part D or buy a Medigap policy. Like traditional Medicare, you'll also be subject to co-payments, deductibles and other out-of-pocket costs. In many cases, Advantage policies charge lower premiums than Medigap plans but have higher cost-sharing. Your choice of providers may be more limited with Medicare Advantage than with traditional Medicare, and recent research has found that sicker enrollees often dump Medicare Advantage in favor of original Medicare.

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Medicare has a standard premium for Part B and most enrollees pay that amount. But Medicare has different tiers of premiums for those with higher incomes. These higher premiums are based on your adjusted gross income from two years earlier. Similarly, higher-income beneficiaries also pay extra for Part D, prescription drug coverage. For the latest costs, visit Medicare.gov/your-medicare-costs.

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Consider Medicare Advantage for All-in-One Plans

High Incomers Pay More for Medicare

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If you are already receiving Social Security benefits, you will be automatically enrolled in Parts A and B at age 65 You can choose to turn down Part B, since it has a monthly cost; if you keep it, the cost will be deducted from your Social Security benefit. For those who have not started Social Security, you will have to sign yourself up for Parts A and B. The seven-month initial enrollment period begins three months before the month you turn 65 and ends three months after your birthday month. To ensure coverage starts by the time you turn 65, sign up in the first three months. If you are still working and have health insurance through your employer (or if you’re covered by your working spouse’s employer coverage), you may be able to delay signing up for Medicare. But you will need to follow the rules and must sign up for Medicare within eight months of losing your employer’s coverage to avoid significant penalties when you do eventually enroll.

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When to Sign Up for Medicare

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Medicare Basics: 11 Things You Need to Know

There are several enrollment periods, in addition to the seven-month initial enrollment period. If you missed signing up for Part B during that initial enrollment period and you aren't working (or aren't covered by your spouse's employer coverage), you can sign up for Part B during the general enrollment period that runs from Jan. 1 to March 31. Coverage will begin on July 1. But you will have to pay a 10% penalty for life for each 12-month period you delay in signing up for Part B. Those who are covered by a current employer's plan, though, can sign up later without penalty during a special enrollment period, which lasts for eight months after you lose that employer coverage. If you miss your special enrollment period, you will need to wait until the general enrollment period to sign up. Open enrollment runs from Oct. 15 to Dec. 7 every year during which you can change Part D plans or Medicare Advantage plans for the following year, or switch between Medicare Advantage and original Medicare. Advantage enrollees also can switch to a new Advantage plan or original Medicare between Jan. 1 and March 31. And if a Medicare Advantage plan or Part D plan available in your area has a five-star quality rating, you can switch to that plan outside of the open enrollment period.

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The doughnut hole is a coverage gap in which you used to face much higher out-of-pocket costs for your drugs, but that is no longer the case. For 2021, the coverage gap begins when the total amount your plan has paid for your drugs reaches $4,130 (up from $4,020 in 2020). At that point, you’re in the doughnut hole, where you’ll now receive a 75% discount on both brand-name and generic drugs. Prescription drug manufacturers pick up 70% of that tab and insurers 5%. You pay the remaining 25%. Catastrophic coverage begins when a patient's out-of-pocket costs reach $6,550, the maximum spending limit for beneficiaries in 2021(up from $6,350 in 2020). Any deductible paid before you entered the doughnut hole counts toward that annual maximum as does the 25% you contributed while in the doughnut hole and the 70% that pharmaceutical companies paid on your behalf. For the latest information, visit Medicare.gov/drug-coverage-part-d.

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A Quartet of Medicare Enrollment Periods

The Doughnut Hole for Medicare Part D

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Medicare beneficiaries can receive a number of free preventive services. You get an annual free "wellness" visit to develop or update a personalized prevention plan. Beneficiaries also get a free cardiovascular screening every five years, annual mammograms, annual flu shots, and screenings for cervical, prostate and colorectal cancers.

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Medicare Offers More Preventive Services

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Medicare Basics: 11 Things You Need to Know

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Although most Medicare Advantage plans have been covering telehealth for years, traditional Medicare used to restrict the service only to certain devices and practitioners, and patients had to be at a Medicare facility. When the coronavirus pandemic hit, telehealth was expanded so that patients could use smartphones in their own homes to consult with a broader range of medical professionals, a feature that is expected to become permanent. But Medicare offers no discounts for telehealth, and in most cases beneficiaries pay the same cost for virtual visits as those in an office.

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While Medicare covers your health care, it generally does not cover long-term care—an important distinction. Under certain conditions, particularly after a hospitalization to treat an acute-care episode, Medicare will pay for medically necessary skilled-nursing facility or home health care. But Medicare generally does not cover costs for "custodial care"—that is, care that helps you with activities of daily living, such as dressing and bathing. To cover those costs, you will have to rely on your savings, long-term-care insurance or Medicaid—if you meet the income and asset requirements. Traditional Medicare also doesn't cover routine dental or eye care and some items such as dentures or hearing aids.

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Medicare Expands Telehealth Offerings

What Medicare Does Not Cover

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If you disagree with a coverage or payment decision made by Medicare or a Medicare health plan, you can file an appeal at Medicare.gov. The appeals process has five levels, and you can generally go up a level if your appeal is denied at a previous level. Gather any information that may help your case from your doctor, health care provider or supplier. If you think your health would be seriously harmed by waiting for a decision, you can ask for a fast decision to be made and if your doctor or Medicare plan agrees, the plan must make a decision within 72 hours.

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You Have the Right to Appeal a Medicare Decision

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10 Questions Retirees Often Get Wrong About Taxes in Retirement

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You worked hard for your retirement nest egg, so the idea of paying taxes on those savings isn't exactly appealing. If you know what you're doing, you can avoid overpaying Uncle Sam as you start collecting Social Security and making withdrawals (including RMDs) from IRAs, 401(k)s or 403(b)s. Unfortunately, though, retirees don't always know all the tax code ins and outs and, as a result, end up paying more in taxes than is necessary.

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Question: When you retire, is your tax rate going to be higher or lower than it was when you were working? Answer: It depends. Many people make their retirement plans with the assumption that they'll fall into a lower tax bracket once they retire. But that's often not the case, for the following three reasons.

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Question: Are Social Security benefits taxable? Answer: Yes. Depending on your "provisional income," up to 85% of your Social Security benefits are subject to federal income taxes. To determine your provisional income, take your modified adjusted gross income, add half of your Social Security benefits and add all of your tax-exempt interest. The IRS has a handy calculator that can help you determine whether your benefits are taxable. And don't forget state taxes. In most states (but not all!), Social Security benefits are tax-free.

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Tax Rates in Retirement

Taxation of Social Security Benefits

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You worked hard to build your retirement nest egg. But do you know how to minimize taxes on your savings?

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10 Questions Retirees Often Get Wrong About Taxes in Retirement

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Question: Are withdrawals from Roth IRAs tax-free once you retire? Answer: Yes. Roth IRAs come with a big long-term tax advantage: Unlike their 401(k), 403(b) and traditional IRA cousins—which are funded with pretax dollars—you pay the taxes on your contributions to Roths up front, so your withdrawals are tax-free once you retire. One important caveat is that you must have held your account for at least five years before you can take tax-free withdrawals. And while you can withdraw the amount you contributed at any time tax-free, you must be at least age 59½ to be able to withdraw the gains without facing a 10% early-withdrawal penalty.

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Question: Is the income you receive from an annuity you own taxable? Answer: Probably (at least for some of it). If you purchased an annuity that provides income in retirement, the portion of the payment that represents your principal is tax-free; the rest is taxable. The insurance company that sold you the annuity is required to tell you what is taxable. Different rules apply if you bought the annuity with pretax funds (such as from a traditional IRA). In that case, 100% of your payment will be taxed as ordinary income. In addition, be aware that you'll have to pay any taxes that you owe on the annuity at your ordinary income-tax rate, not the preferable capital gains rate.

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Withdrawals from Roth IRAs

Taxation of Annuity Income

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Question: At what age must holders of traditional IRAs, 401(k)s and 403(b)s start taking required minimum distributions (RMDs)? Answer: Age 72. The SECURE Act raised the age for RMDs to 72, starting on January 1, 2020. It used to be 70½ ... and for those born before July 1, 1949, it still is. As for the amount that you are forced to withdraw: You'll start out at about 3.65%, and that percentage goes up every year. At age 80, it's 5.35%. At 90, it's 8.77%. Your plan sponsor/administrator, however, should calculate the RMD for you.

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Age for Starting RMDs

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10 Questions Retirees Often Get Wrong About Taxes in Retirement

Question: Are RMDs calculated the same way for distributions from multiple IRAs and multiple 401(k) or 403(b) plans? Answer: No. There are important differences if you have multiple retirement accounts. If you have several traditional IRAs, the RMDs are calculated separately for each IRA but can be withdrawn from any of your accounts. On the other hand, if you have multiple 401(k) accounts, the amount must be calculated for each 401(k) and withdrawn separately from each account. For this reason, some 401(k) administrators calculate your required distribution and send it to you automatically if you haven't withdrawn the money by a certain date, but IRA administrators may not automatically distribute the money from your IRAs. Note that the rules for 403(b) plans are similar to traditional IRAs. If you have more than one of these accounts, you can total the RMDs and then take them from any one (or more) of them.

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Question: Do you have to take your first RMD by December 31 of the year you turn 72? Answer: No. Normally, you have to take RMDs for each year after you turn age 72 by the end of the year. However, you don't have to take your first RMD until April 1 of the year after you turn 72. But be careful—if you delay the first withdrawal, you'll also have to take your second RMD by December 31 of the same year. Because you'll have to pay taxes on both RMDs (minus any portion from nondeductible contributions), taking two RMDs in one year could bump you into a higher tax bracket. It could also have other ripple effects, such as making you subject to the Medicare high-income surcharge if your adjusted gross income (plus tax-exempt interest income) rises above certain income thresholds.

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RMDs From Multiple IRAs, 401(k)s and 403(b)s

Due Date for Your First RMD

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Question: If your spouse dies and you get a big life insurance payout, will you have to pay tax on the money? Answer: No. You have enough to deal with during such a difficult time, so it's good to know that life insurance proceeds paid because of the insured person's death are not taxable.

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Taxation of Life Insurance Proceeds

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10 Questions Retirees Often Get Wrong About Taxes in Retirement

Question: How valuable must an individual's estate be at death to be hit by federal estate taxes? Answer: For 2021, an individual can shelter as much as $11.7 million in assets (up from $11.58 million in 2020) from federal estate taxes. Married couples can exempt twice that amount. If the value of an estate is less than the threshold amount, then no federal estate tax is due. As a result, estate taxes aren't a factor for very many people. However, 12 states and the District of Columbia charge a state estate tax, and their exclusion limits can be much lower than the federal limit. In addition, six states impose inheritance taxes. See IRS.gov for the latest information.

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Question: If you're over 65, can you take a higher standard deduction than other folks are allowed? Answer: Yes. For 2020 returns, the limits are $12,400 for individuals and $24,800 for married couples filing jointly. However, those 65 and older get an extra $1,650 in 2020 if they're filing as single or head of household. Married filing jointly? If one spouse is 65 or older and the other isn't, the standard deduction increases by $1,300. If both spouses are 65 or older, the increase is $2,600. For 2021 returns, the limits will grow to $12,550 for individuals and $25,100 for married filing jointly. Those 65 and older who file as single or head of household will get an extra $1,700 ($1,350 for married couples filing jointly if only one spouse is 65 or older; $2,700 if both spouses are).

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Estate Tax Threshold

Standard Deduction Amounts

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Here are 10 questions retirees often get wrong about taxes in retirement. Take a look and see how much you really understand about your own tax situation.

Retirees typically no longer have all of the tax deductions they once did. Their homes are paid off or close to it, so there's no mortgage interest deduction. There are also no kids to claim as dependents, or annual tax-deferred 401(k) or 403(b)contributions to reduce income. So, almost all of your income will be taxable during retirement.

Retirees want to have fun—which costs money. If you're like many newly retired folks, you might want to travel and engage in the hobbies you didn't have time for before, and that doesn't come cheap. So, the income you set aside for yourself in retirement may not be much lower than what you were making in your job.

Future tax rates may be higher than they are today. Let's face it…tax rates now are low when viewed in a historical context. The top tax rate of 37% in 2020 is a bargain compared with the 94% of the 1940s and even the 70% range as recently as the 1970s. And considering today's growing national debt, future tax rates could end up much higher than they are today.

Because you stash after-tax money in Roth accounts, you can withdraw contributions tax-free anytime. Withdrawals of earnings after age 59½ are tax-free if you have held the account for at least five years, but you'll pay tax and a 10% penalty on earnings if you make a withdrawal before then—unless the money is used for qualified education expenses for your child or grandchild. In that case, you'll owe tax on any earnings you withdraw, but you won't pay a penalty. Custodial accounts. Also known as UGMAs (for the Uniform Gifts to Minors Act) and UTMAs (for the Uniform Transfers to Minors Act), such accounts let you set aside money or other assets in trust for a minor child and manage those assets until the child reaches the age of majority (18 in most states). At that age, the child owns the account and can spend the money for whatever he or she wants. Even if your child spends the money on education expenses, as you intended—instead of, say, a new car—custodial accounts can have a downside: In financial aid formulas, students are expected to contribute a much higher percentage of assets toward their education than parents.

Will Monthly Child Tax Credit Payments Lower Your Tax Refund or Raise Your Tax Bill?

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Millions of people have already received their first of six monthly child tax credit payments. Depending on your household income, these payments can be as high as $300 a month for each child under the age of 6 and $250 each month for child 6 to 17. That's an extra $1,800 in your pocket for a younger child if you get the full amount for all six months. But will these monthly child tax credit payments decrease your tax refund when you file your 2021 return? Or will the payments increase your upcoming tax bill? Some families count on a big tax refund each year to make large purchases or simply to provide a financial cushion (although we don't recommend this strategy, since it means you're basically giving the government an interest-free loan). Other people will do anything to avoid having to write a sizeable check to the IRS when they file their tax return. Unfortunately, though, if you're receiving monthly child tax credit payments, you might be sacrificing your big refund and/or setting yourself up for a hefty tax bill next year.

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Everyone loves receiving large sums of money from Uncle Sam. But people who take advance child tax payments may take a hit on next year's tax refund.

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A COVID Storm Hits Senior Living

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In late 2019 Jack and Peggy Devine, of Spring Lake, N.J., and Aiken, S.C., reserved a new apartment at Falcons Landing Life Plan Community, a continuing care retirement community, or CCRC, for former military officers and high-level federal employees in Sterling, Va. The CCRC was home to Peggy’s aunt, and the couple had visited the community many times and made friends there. Now, however, the DeVines are wrestling with whether to proceed. The pandemic has forced the community to curtail group activities and socializing. The closure of places where residents congregate and restrictions on interaction would diminish the very things they love most about the senior living community: the opportunity to connect with old friends and make new ones, to do things and go places together. “Although I realize it’s temporary, the looming question in my mind is what is the new normal after this is all over?” says Jack. When their apartment is ready, probably in mid-March, the DeVines will have 90 days to execute their contract and move in. CCRCs are essentially insurance companies. They promise you priority access to a continuum of care for the rest of your life in exchange for an entrance fee and monthly rent. Depending on how long it takes for the vaccine to roll out and any other surprises COVID has in store, Jack believes this spring could be the worst possible time to make a move from two states. He’s also concerned the community will face strategic challenges ahead. Falcons Landing has assured him it will try to be flexible. But “if I’m not confident we can make this a smooth move, I’ll be biased toward saying no,” says Jack. If the DeVines decide to postpone the move for now, they will sacrifice a small part of their deposit, lose the “primo” unit they originally chose and return to the end of the waitlist. Vaccination provides a light at the end of the tunnel for senior living communities (including independent living, assisted living, memory care, skilled nursing and CCRCs), but it’s unclear how long the tunnel is. Even after widespread vaccination, no one expects an immediate return to normalcy. It will be some time before masking and social distancing aren’t required and family members and other visitors can come and go freely. All senior living communities face financial challenges now—more so if they came into the pandemic that way. So whether you’re considering a move to a senior living community by choice or necessity, it’s more important than ever to assure yourself of its financial viability and the quality of life you can expect. In many communities, the pandemic has tested both.

The pandemic has created significant challenges for all types of senior living communities. Because of that, it's more important than ever to review a facility's financial stability and quality of life before making a move.

The virus hit nursing homes and health centers within senior living communities hardest because they care for those most vulnerable—the oldest and sickest seniors. As of late January, the Centers for Medicare and Medicaid Services reported nearly 550,000 confirmed cases among residents of nursing homes and more than 107,000 deaths since the pandemic began. Tragically, many residents have died without family members present. Pandemic-related government or community restrictions prohibited visitors, although CMS recommends that nursing homes allow visits for compassionate care, including at the end of life, subject to social distancing and other guidelines. Many communities disclose the number of COVID cases, recoveries and deaths among residents and staff daily and post updates about restrictions on their websites. Look for senior living communities that make this data available. “[It’s] about transparency. Are they treating their residents like partners during a really tough time?” says Justine Vogel, CEO and president of the RiverWoods Group, which has three CCRC campuses in southeastern New Hampshire. Many current residents of CCRCs appreciate that they are “in this together” as a community of friends, adds Brad Breeding, president and founder of myLifeSite.net, a resource for CCRC shoppers. Illness and death from COVID have been lower in CCRCs because the majority of residents live independently and are healthier, while those who need assistance or nursing live apart with separate staff, which makes containing the virus easier, according to a recent report by “The Senior Care Investor” newsletter. Under normal circumstances, when you need more care than you’re receiving currently, some communities allow private caregivers to help you in your home, but others may require you to move to assisted living or skilled nursing. During the pandemic, sometimes that meant one spouse moving to assisted living or skilled nursing while the other couldn’t visit because of COVID restrictions. In fact, socializing for everyone living at these communities has been a challenge during the pandemic, with visits from outsiders and other community members not allowed even for healthy residents. Isolation accelerates mental and physical decline in seniors. Some communities have beefed up internet service and Wi-Fi capability for virtual visits with family members and provided tablets or other devices to residents who need them, as well as instruction and technical support. Some memory care and nursing centers have scheduled regular video calls between residents and their families. For in-person gatherings, communities have offered “closed-window visits” and created visitation booths, where people can see and hear each other, or using plastic sleeves, hug through a plastic barrier. Communities also have gotten creative by brainstorming new ways to hold activities. One community in Florida launched virtual birthday parties, book clubs, continuing education lectures and wellness classes, museum tours, art classes and other programming. Communities have live-streamed religious services. The RiverWoods held socially distant outdoor events, including happy hours with individually packaged wine and cheese and a cornhole tournament. Other examples include hallway exercise or bingo with residents participating from their doorways, virtual cooking classes led by the head chef, and residents walking outdoors or riding adult tricycles. “You can have fun in a pandemic,” says Vogel. When visitation isn’t permitted in assisted living or skilled nursing, staff members have done the best they can to keep residents engaged with one-on-one visits and activities, says Debra Feldman, a senior care manager in suburban Chicago. Safety, of course, remains paramount, and all communities should be able to demonstrate that they have a solid plan for early detection and prevention of not just current but also future outbreaks of disease. Along with reassuring you, those plans serve as an important marketing and sales tool, says Breeding, who is also the author of What’s the Deal With Retirement Communities. “Operators have responded aggressively and proactively to turn the tides,” says Beth Burnham Mace, chief economist of the National Investment Center for Seniors Housing and Care. They’ve implemented extensive and thorough sanitation, contagion protection, infection control, health screenings and testing protocols. But the cost has been high, including expenses for extra personal protective equipment, testing and well-deserved “hero” pay for staff members. Labor costs were rising before the pandemic, given low unemployment and a shortage of skilled workers. Communities were having difficulty attracting and retaining qualified people. COVID made the situation worse, as staff members left or were absent due to illness, lack of child care or fear of infecting their families. Employers filled the gaps temporarily with expensive agency help.

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A COVID Storm Hits Senior Living

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For residents, the loss of familiar faces meant other hardships. “Temporary staff may take care of the individual physically, but they have no idea about the little things that person likes. When those niceties can’t be provided, it makes life miserable,” says Feldman. If you’re considering one of these communities now, you’ll want a sense of what the quality of life is like even at its worst, when residents can’t visit with one another or enjoy group activities in quite the same way as before. Virtual tours, which many communities introduced during the pandemic, are a good first step and should continue to be offered even after communities reopen fully. “I doubt anyone would move in without ever actually seeing the community with their own eyes, but a quality virtual tour can get you a long way through the process and answer many of your questions,” says Breeding. Normally, prospective residents are invited to attend community events, a great way to get a good feel for the community and to know people. Ask if you can attend any virtual community events, a substitute for now. Try to speak with a resident, if possible, too.

Another challenge has been occupancy rates, which had slipped industry wide before the pandemic because of overbuilding. Occupancy fell further throughout 2020 as governments and communities imposed moratoriums on move-ins; families chose to care for loved ones at home, at least temporarily; and prospective residents took a wait-and-see attitude. Throughout the pandemic, CCRCs have had the highest occupancy rates across all levels of care and the smallest year-over-year drops in occupancy compared with other types of senior living. Unlike the Great Recession, the pandemic economy hasn’t been a barrier to prospective residents, who have had no difficulty selling their homes or cashing out their equity and paying an entrance fee. Chances are their investment portfolios have been rising in value, too. Lower occupancy means lost revenue, which has forced many communities to tap reserves. By December, those reserves were starting to be tapped out, says James Balda, president and CEO of Argentum, an association of senior living communities. A community that is part of a larger system that can help it weather the storm is likely to be better off than a “single-shingle” organization with no one to help save the day, says Lisa McCracken, director of senior living research and development at Ziegler Investment Banking. Rents have been rising about 2% to 3% annually for the past several years, according to Burnham Mace. Given the overall economy, raising rents may not be possible now. As of late last year, many senior living communities in the U.S. were offering rent concessions and other incentives to attract new residents. Some incentives include assistance with moving costs, discounts on entry or monthly fees, and deferred or waived payments, says McCracken. Once the vaccine rolls through and occupancy is up, those incentives will diminish or disappear. But communities may begin charging à la carte for ancillary services, including some new ones introduced during the pandemic. Many communities, for instance, launched concierge services to take orders for meals and groceries, get takeout delivered, and more. Now that many residents have become accustomed to the concept, the services most likely will be expanded post-pandemic, says Breeding. Defaults and bankruptcies didn’t rise in 2020, says McCracken. But nursing homes hit record-low occupancy in December, and many are poised to fail. Some nursing homes have already closed their doors. When a senior living community fails, generally it is sold. Every change of ownership, for any reason, has the potential to disrupt the community. If the previous owners outsourced the community’s operation to another company, the new owners often keep the same operating company to increase continuity and stability, says McCracken. Waiting lists are a good sign of a stable CCRC, as is a large share of units that have presold in a new community. If you’ve chosen a CCRC but are considering whether to delay moving in, ask how long the waitlist is and if you can go back to the end of the line in case you’re not ready when a unit becomes available. If you delay, keep in mind that a change in your health status could prevent your entry into independent living.

Occupancy Rates Under Pressure

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Make a Plan to Start Repaying Student Loans

In an effort to provide economic relief during the pandemic, the federal government suspended payments on federal student loans last year, with no interest accrual on loan balances. The moratorium, already extended a couple of times, was extended again in August, this time until January 31, 2022. Borrowers can expect to hear from their loan servicers by the end of the year about the date their payments will resume. Time to refinance? In addition to a notice from your loan servicer, you may receive fliers or e-mails from private lenders offering to refinance your student loans at interest rates as low as 2.5%. The best private-loan deals are limited to borrowers with excellent credit or a co-signer. But even if you qualify to refinance at a lower rate, you may want to wait. If President Biden fulfills his pledge to forgive up to $10,000 in student loan debt, it will likely be limited to federal loans. And once you refinance to a private loan, you can’t refinance back to a federal loan. Another reason to wait: Rates on private student loans are likely to remain low through the end of 2022, says Mark Kantrowitz, a financial aid expert and author of How to Appeal for More College Financial Aid, which means borrowers interested in refinancing have plenty of time to consider their options. If you still think it’s a good idea to refinance to a private loan, read the fine print on any offer you are considering. Some plans offer low interest rates in the first year and hike them later. But it’s important that you do not refinance unless you’re confident you can afford payments under the plan you’re considering. Options for private loans for borrowers who are unemployed or experiencing other economic difficulties generally aren’t as flexible as federal loans. However, if you already have private student loans, there’s no reason not to look into refinancing to a loan with a lower rate. Be sure to compare the monthly payment with the total cost when you are considering consolidating or refinancing student loans, Kantrowitz says. Simply extending your payment period will lower your monthly payments, but you could pay thousands of dollars more in interest by the time you pay off the loan. To avoid interest-rate hikes down the road, look for a low fixed rate rather than a variable rate. And if you can afford it, you may also want to consider a shorter repayment term. Although your monthly payments may go up, you’ll save on interest and get out of debt sooner. Most lenders offer loan repayment terms of 10, 15 and 20 years. Options for federal loans. If your budget can’t handle payments on your federal student loans, you may be eligible to lower them by enrolling in an income-driven repayment (IDR) plan. There are several IDR plans available through the Department of Education, but all base your monthly payments on your earnings. If you’re already enrolled in an income-driven plan and your income has declined considerably, you can also ask your loan servicer to recertify your income and recalculate the payment, which could dip as low as $0. You can apply for an IDR plan at https://StudentAid.gov/app/ibrInstructions.action and select the plan that you qualify for that will provide you with the lowest monthly payment. You may end up paying more in interest in the long run because you’re extending the repayment period, but after 20 years of payments, you may be eligible to have the balance forgiven. If you can’t afford to make payments at all, you may qualify for deferment or a forbearance. There are two types of deferments: economic hardship and unemployment deferment. You must be out of work to qualify for the unemployment deferment, but you may qualify for economic hardship if you’re receiving federal or state public assistance, you’re a Peace Corps volunteer, you’re working full-time but earn less than or equal to the federal minimum wage, or you have income that’s less than or equal to 150% of the poverty line for your family size and state (about $26,000 for a two-person household). Both of these options, as well as general forbearance, are available for up to three years, and you can use a combination of deferments and forbearance for up to nine years. Interest may continue to accrue while payments are suspended, depending on the type of loan you have. A subsidized or Perkins loan, for example, will not accrue interest during a forbearance or deferment. For other loans, the interest that accrues while payments are suspended will likely be added to the loan balance at the end of the deferment or forbearance period. Prepare to pay. Once you decide your path forward, calculate your payment. For federal loans, you can use the loan simulator tool at https://StudentAid.gov/loan-simulator. If you haven’t already checked, be sure that your loan servicer has your current contact information. If you signed up for automatic payments, you may be required to confirm that your bank account information has not changed. Another step to consider before the end of the federal payment suspension is whether to request refunds for payments made after March 13, 2020. Any payment you made during the suspension of payments can be refunded, which is useful if you need the money or think you will in the future. Contact your loan servicer before January 31. The call centers may be busy, so you may get better results by using your lender’s online contact forms. Finally, be on guard against fraud. The Department of Education says student loan borrowers have received phone calls, e-mails, letters and texts warning them that the suspension program will end soon and offering debt relief. Usually, companies offering these types of services don’t offer any relief, and some are crooks looking to take advantage of vulnerable borrowers.

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The pandemic-era pause on student loan repayments is scheduled to end January 31, 2022. If you can’t afford payments, you have options.

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COVID's Impact

When researching a community, always express interest in learning more about its financial well-being. Ask for any information that will help give you confidence that it is well-managed financially today and has planned to meet its longer-term obligations, says Breeding. It’s a good sign if staff members are open to and well-prepared for the discussion. The higher a community’s occupancy, the greater its revenue, so start there. Historically speaking, occupancy of at least 90% is ideal, says McCracken. Ask for the current occupancy rate and several years of historical averages to determine the pre-pandemic trend. Also, what is the community or organization doing to enhance and market itself? In a CCRC, 95% occupancy is considered full; some units will always be empty for refurbishment. Plus, you don’t necessarily want to see full occupancy in a CCRC’s assisted living facility or skilled nursing unit because the space may not be available when a resident needs it, according to the National Continuing Care Residents Association. If a community is for-profit and part of a publicly traded company, you can obtain an annual report and other financial disclosures. If it’s privately owned, those disclosures probably won’t be available, but in all cases, you can ask whether the facility is profitable and how many times it’s been sold. Nonprofit communities must file a Form 990 annually with the IRS. Search by community name at ProPublica’s Nonprofit Explorer, a database of tax-filing documents from tax-exempt organizations. Credit ratings agency Fitch Ratings says the outlook for nonprofit CCRCs in 2021 is stable. Most CCRCs are nonprofits, and state transparency laws often require CCRCs to provide financial information if you ask for it. Many communities post their most recent audited financial statement on their website, but it can be difficult to interpret. Ask a trusted financial adviser to review the contract and financial disclosures with you. Breeding says you really want to know if projected monthly fees will cover operating expenses with a reasonable rate of inflation. Will pricing and reserves cover future obligations to residents? Any level of debt the community carries should be reasonable relative to total assets. To learn about the financial ratios that answer those questions, download the “Guide to Evaluating the Financial Viability of a CCRC." Visit mylifesite.net for useful tools and CCRC information. Another resource, the “Consumer Guide,” published by the National Continuing Care Residents Association, includes information about determining a CCRC’s long-term financial strength. You can join NaCCRA for $25 and get access to the guide, as well as member forums, where current and prospective residents share information and advice.

Assessing a Facility's Financial Health

We spend a lot of time worrying about running out of cash in retirement. But you might be surprised to see some of the things you'll find yourself spending less on in your golden years. Consider these five budget line items on which you’ll likely spend less in retirement.

1. Transportation

Before we were all in the pants-optional world of working from home, it's likely you spent what you needed to look sharp at your job. In retirement, no more pressed shirts or high heels, and your wallet gets a break from updating your work wardrobe. The average retired household spends $1,070 a year on apparel, while the average working household spends $1,866 a year. Also, factor in the money you’ll save on dry cleaning (averaging as much as $1,000 a year in some metropolitan locations). A caution though: Although household spending on apparel decreases overall in retirement, Marguerita Cheng, the chief executive officer at Blue Ocean Global Wealth, says that she sees spikes in spending from recently retired clients who feel the need to update casual wardrobes in the first few years of retirement.

2. Clothing

Even if you dream of a retirement filled with steak dinners and brunch dates, chances are you’ll still spend less on the food you consume in and out of your house. The average household spends 25% less on food in retirement. According to Erik Hurst and Mark Aguiar, professors from the University of Chicago and Princeton University, the logic to this is simply that you have more time to shop. When you’re not in a hurry at the grocery store, you’re more likely to compare prices on similar products, use coupons and spend more time planning meals for the week ahead. Spending on dining out drops even more sharply — as much as 35%. Hurst and Aguiar say that the story behind this is similar. When you’re working, much of your dining out may be quick lunch runs or costly lattes on the way to work. Instead of patronizing fast-food restaurants more frequently, retirees reserve their eating-out dollars for table-service restaurants.

3. Groceries

Plenty of time for plenty of fun, am I right? No. There’s a common misconception that you’ll spend more dough-re-me in retirement on entertainment — concerts, movies, clogging, you name it — because you have more time. But the numbers don’t back this up. And who knows when entertainment venues will fully reopen to large crowds, if ever, post-pandemic? See how much you’re saving right now, pre-retirement? This decline likely corresponds with changes in mobility as you age. You may also be nervous about being in crowds as COVID-19 still rages. Or you just want to chill after years of slogging to the office. Even if you occasionally splurge to see your favorite college band, you may find yourself opting to watch Netflix instead of going out every weekend. But be careful. Streaming services are popping up everywhere, and their layered charges for more and better options can jack up your entertainment bill. We’re looking at you, Paramount+, Discovery+, Disney+ and all your compadres.

4. Entertainment

Hopefully, you’ve timed this right: According to the Bureau of Labor Statistics, 61.7% of Americans between the ages of 65 and 74 don’t have mortgage debt, and 82.5% of Americans 75 and older are mortgage-free. To be sure, housing costs don’t disappear entirely in retirement. Even if you’ve paid off the mortgage, you’ll still spend on home maintenance, property taxes, utilities, and you’ll incur moving costs associated with downsizing, relocating or moving into senior-living facilities. Still, average annual spending on housing for Americans who are 55 to 64 is $18,006. It decreases to $15,838 for those age 65 to 74, and it drops further to $13,375 for those 75 and older.

5. Mortgage

Sure, we’re all eager to hit the road again and travel, which has been curtailed for most people during the pandemic. And most retirees put “travel” at the top of the list of things to do more of in their golden years. Maybe you plan to set off on luxury cruises (the Centers for Disease Control and Prevention no-sail mandate on ships carrying 250 people or more in U.S. waters has been modified for phased reopening). Or perhaps you simply want to pack up your car for weekend getaways with your grandkids. Either way you may find yourself spending more on travel in retirement than you bargained for. Customer-starved travel firms are eager to get retirees back on the boat, bus, train — or into an RV. While overall transportation expenses decline throughout retirement, many retirees take the kind of trips they could only dream about while working full-time. For instance, compared with their working peers, retirees were choosing (pre-pandemic!) longer cruises and cruises that visit more destinations, according to travel experts. To make these dreams a more affordable reality, Deborah L. Meyer, a certified financial planner and founder of fiduciary advisory firm WorthyNest, recommends a five-step plan for pre-retirees:

1. Travel

1 Assign specific cost estimates to travel goals. 2 Break the big savings goal into monthly or quarterly allocations to savings. 3 Adjust income and expenses to make room for the regular savings. 4 Don’t compromise on future goals. 5 Act on achieved goals.

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5 Things You'll Spend More on in Retirement

From travel to fitness, the demands on your savings during your golden years might surprise you. Here’s a look at five budget categories where retirees are likely to spend more.

10 Things You'll Spend Less and More on in Retirement

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It's fun to make big travel plans in retirement. What’s less fun: the reality that we spend more on medical care after we retire, and those costs keep increasing as we age. The Employee Benefit Research Institute found that the percentage of a household’s total spending on health care increases from 8% in preretirement households to up to 13% by the time a household is past the age of 85. A similar finding turns up in a more recent survey by the Employee Benefit Research Council. Unpredictable and costly new diagnoses and hospitalizations drive much of the increase in health care spending for the average retired household, but overall spending rises for general health needs, health insurance, prescription medication, medical supplies and medical services as well. As the National Council on Aging reports, 84% of people 65 and plus have at least one chronic condition.

2. Health Care

Holey moley, talk about practicing for retirement while we work remotely: Have you checked out your utility bills? Chances are, you’ll have finished paying off your mortgage (or come pretty close) when you reach retirement age. That means you’ll be saving thousands each year. However, the average retired household spends more each year on utilities than the average working household, according to the Urban Institute. Why? If retirees are home more often, they’re simply using utilities more — just like those of us who have been working remotely during the pandemic. If you’ve seen a bump in your bills — gas, electric, water and sewer, cable and streaming services — think of it as a precursor.

3. Utilities

Once the nest empties out, the thinking goes, downsizing that multi-bedroom home for smaller living quarters is an obvious move. For the most part, that’s true. But the move-out process can set you back thousands of dollars. Take it from experience. My wife and I recently moved into our “retirement” home and community. Retirement is in quotes because we’re not retiring anytime soon. But the right house in the right city popped up on our radar at the right time and we made the move. Fortunately, we’re still working and were able to cover the thousands of dollars in expenses relating to getting a home ready to sell, selling a home, buying a new home, and moving. Not to mention upgrading appliances, new lighting, window treatments, etc. According to Mike Palmer, a certified financial planner with Ark Royal Wealth Management, downsizing in full retirement can present huge unexpected costs for some of his clients, particularly when they want to stay within urban areas. “I see a lot of folks thinking they’re going to walk away with $200,000 [by downsizing], but that’s rare. In most cases, it will be lateral,” he says. To avoid this, he recommends trying to move from an urban area to a more rural one. It can be nearly impossible to predict every moving expense as it comes, but Squared Away can help: It offers a calculator that estimates what you’ll spend.

4. Moving and Relocating

With more time on their hands, retirees may exercise more — raising their spending on gym memberships and fitness classes (when more gyms reopen and classes resume following the pandemic.) Research has also shown that retirement itself is a motivator to get fit. With a flexible schedule free of commuting and the stress of a busy work week, many retirees drop unhealthy habits, such as drinking and smoking, and pick up healthier ones. Approximately 53% of retired Americans participate in physical activity and allocate about 13% of their annual spending to fitness and leisure activities. Because of this, Fung Global Retail & Technology says that the fitness industry is starting to cater to seniors as well, offering more specific (and pricey) gym options for aging populations. Marguerita Cheng, the chief executive officer of Blue Ocean Global Wealth, says that fitness is one of the biggest new expenses she sees her retired clients take on. For her clients, she says, it is often the fear of declining health as they age that motivates them to take fitness seriously. Some of her clients put so much time and money into fitness that they schedule meetings with her around their yoga or spinning classes.

5. Fitness

Many cruises have been taking place without problems. Some Genting cruises have been sailing since July 26 in Taiwan. Another started on Nov. 6, with no cases of COVID-19 reported so far, says Kent Zhu, president of Genting Cruise Lines. Morgan O’Brien, a travel video blogger based in Hamburg, Germany, has taken three cruises: two on a German cruise line through northern Europe in June and one on an Italian ship around the Mediterranean in October. Some safety measures made for a better trip, he says. Because boarding times were strictly enforced, “it’s never been easier to board. I’ve sometimes waited an hour and a half to embark.” O’Brien, who loves buffets, was happy to see they hadn’t been abolished, although the food was dished out by a waiter, which he termed “a buffet buddy.” He joined an excursion on the Mediterranean cruise, noting that “it was supervised like in high school. Everyone had to wear a bright-colored vest, and we had to stick with the group. You couldn’t interact with locals or do any extra shopping.” Perhaps O’Brien isn’t a typical cruiser, but he liked the social distancing. “I hate being put with different parties,” though he acknowledges, “if you’re a social butterfly who after every cruise has 10 new pen pals, that’s not going to happen now.” He was also pleasantly surprised at how compliant almost all the guests were, and when someone wasn’t, how rapidly the crew responded. “I forgot to put my mask on when walking, and I was very quickly and firmly told, ‘Don’t forget to wear a mask.’” For those who are keen to go back but worry cruises won’t be the same, O’Brien, himself an avid cruiser, says go for it. “It’s way more like a cruise, than not like a cruise.”

Safety Measures for Dining and Excursions

While the coronavirus remains a threat, this is what cruise ship passengers can expect:

The New Normal for Setting Sail

Required testing for COVID-19 from a few days to 24 hours before you board. A health screening, including temperature-taking at the terminal and perhaps daily checks while aboard. Mandatory wearing of face masks in public areas, with some exceptions, such as for dining. Fewer passengers and crew, with some cruises at 50% capacity. No more dining with strangers, and no self-serve buffets. No port stops except in isolated areas or when group excursions can be closely monitored. No wandering off on your own. Better ventilation systems that limit or eliminate recirculating air.

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Learn more.

5 Things You'll Spend Less on in Retirement

To make these dreams a more affordable reality, Deborah L. Meyer, a certified financial planner and founder of fiduciary advisory firm WorthyNest, recommends a five-step plan for pre-retirees:

1. Travel

2. Health Care

Holey moley, talk about practicing for retirement while we work remotely: Have you checked out your utility bills? Chances are, you’ll have finished paying off your mortgage (or come pretty close) when you reach retirement age. That means you’ll be saving thousands each year. However, the average retired household spends more each year on utilities than the average working household, according to the Urban Institute. Why? If retirees are home more often, they’re simply using utilities more -- just like those of us who have been working remotely during the pandemic. If you’ve seen a bump in your bills -- gas, electric, water and sewer, cable and streaming services -- think of it as a precursor.

3. Utilities

4. Moving and Relocating

3. Groceries

10 Things You'll Spend Less and More on in Retirement

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To make these dreams a more affordable reality, Deborah L. Meyer, a certified financial planner and founder of fiduciary advisory firm WorthyNest, recommends a five-step plan for pre-retirees:

2. Health Care

Occupancy Rates Under Pressure

A COVID Storm Hits Senior Living

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Safety, of course, remains paramount, and all communities should be able to demonstrate that they have a solid plan for early detection and prevention of not just current but also future outbreaks of disease. Along with reassuring you, those plans serve as an important marketing and sales tool, says Breeding, who is also the author of What’s the Deal With Retirement Communities. “Operators have responded aggressively and proactively to turn the tides,” says Beth Burnham Mace, chief economist of the National Investment Center for Seniors Housing and Care. They’ve implemented extensive and thorough sanitation, contagion protection, infection control, health screenings and testing protocols. But the cost has been high, including expenses for extra personal protective equipment, testing and well-deserved “hero” pay for staff members. Labor costs were rising before the pandemic, given low unemployment and a shortage of skilled workers. Communities were having difficulty attracting and retaining qualified people. COVID made the situation worse, as staff members left or were absent due to illness, lack of child care or fear of infecting their families. Employers filled the gaps temporarily with expensive agency help. For residents, the loss of familiar faces meant other hardships. “Temporary staff may take care of the individual physically, but they have no idea about the little things that person likes. When those niceties can’t be provided, it makes life miserable,” says Feldman. If you’re considering one of these communities now, you’ll want a sense of what the quality of life is like even at its worst, when residents can’t visit with one another or enjoy group activities in quite the same way as before. Virtual tours, which many communities introduced during the pandemic, are a good first step and should continue to be offered even after communities reopen fully. “I doubt anyone would move in without ever actually seeing the community with their own eyes, but a quality virtual tour can get you a long way through the process and answer many of your questions,” says Breeding. Normally, prospective residents are invited to attend community events, a great way to get a good feel for the community and to know people. Ask if you can attend any virtual community events, a substitute for now. Try to speak with a resident, if possible, too.

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Expect the Cruise Experience to be Different

Financial Learning Center

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Child Tax Credit 2021: Who Gets $3,600? Will I Get Monthly Payments? And Other FAQs

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People have lots of questions about the new $3,000 or $3,600 child tax credit and the advance payments that the IRS will send to most families in 2021. Here are answers to some of those questions

The child tax credit is bigger and better than ever for 2021, which should make things a little easier for families taking a financial hit during the COVID-19 pandemic. Thanks to the recently enacted $1.9 trillion American Rescue Plan Act of 2021 ("American Rescue Plan"), the credit amount is significantly increased for one year, and the IRS is required to make advance payments to qualifying families in the second half of 2021. But the changes are complicated and won't help everyone. For instance, there are now two ways in which the credit can be reduced for upper-income families. That means some parents won't qualify for a larger credit and, as before, some won't receive any credit at all. The IRS also has some wiggle room when it comes to the advance payments, so the size and frequency of the payments aren't set in stone yet. More children will qualify for the credit in 2021, too. And, if you have more than one kid, the credit amount could differ from one child to another.

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Now Is the Time to Protect Your Health Care Decision-Making Rights

A living will addresses the situation where you are in an end-stage medical condition or permanently unconscious. In either case, a living will can serve as your advance written directions as to the kinds of treatment you want to be withheld or withdrawn, or the treatment you always want to be provided, if you are not able to communicate your own wishes at the time.

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Now Is the Time to Protect Your Health Care Decision-Making Rights

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Now Is the Time to Protect Your Health Care Decision-Making Rights

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Ensuring that your wishes on your medical care are followed is up to you. Take action now while you’re well, or you could lose a say in the matter during a crucial time later.

As hard as it is to get some people to embrace estate planning, getting them to take seriously the need for a health care decision-making plan is even more difficult. At least, that was the case pre-pandemic. We are no longer in an era of hypotheticals. There is a growing sense that being incapacitated by a disease or serious injury is not something conjectural or out of the realm of possibility. The last 12 months have reminded us all that our health is fragile, regardless of our age or if we have an existing medical condition. For those who are waking up to this fact, it is important to recognize that, while making our own decisions regarding medical treatment is a fundamental right, getting those decisions honored is not assured. Without a well-considered health care decision-making plan, you may forgo your right of self-determination if you later become incompetent. It also leaves your family in a difficult position, potentially needing to go to court to settle a dispute among family members over who can make decisions on your behalf. The most effective way to exercise your rights can vary, largely depending on your state’s laws. Nevertheless, there are generally three statutory solutions that have emerged from states’ efforts to protect incompetent individuals’ decision-making abilities.

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Need help eliminating your debts as you approach retirement? NYSUT Member Benefits endorses Cambridge Credit Counseling, to provide free debt counseling and other debt management services for NYSUT members. Click here for more information.

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Before getting into how your future refund or tax bill may be affected by the monthly payments, let's go over a few important changes to the child tax credit that apply for the 2021 tax year. First, thanks to the American Rescue Plan enacted in March, the maximum child tax credit for 2021 is $3,000 per child 6 to 17 years old and $3,600 for children 5 years old and younger. Last year, the credit for children below the age of 17 was just $2,000. The American Rescue Plan also requires the IRS to pay half of your total credit amount in advance through monthly payments issued from July to December. The IRS will base these payments on the information it pulls from your 2020 or 2019 tax return. You'll claim the remaining half of the credit on your 2021 tax return. This means that you'll subtract every dollar you received from July to December from the total credit you're entitled to claim and then report the excess amount, if any, as a child tax credit on your 2021 return. Finally, the credit was also made fully "refundable" for the 2021 tax year. That means everyone is eligible for a tax refund if the credit is worth more than your tax liability. Before 2021, the refundable portion of the child tax credit was limited to $1,400 per eligible child.

Changes to the Child Tax Credit for 2021

Unlike stimulus checks, the monthly child tax payments are simply early payments of a credit that already exists. It's not "extra" money – it's just an advance. This means that, instead of claiming the full amount of the credit when you file your 2021 tax return, you'll only claim half that amount if you receive a full contingent of monthly payments, since the other half will have been paid to you in advance this year. So, for example, a family with a 3-year-old toddler who takes the monthly payments will receive $1,800 in advance and then claim an $1,800 child tax credit when they file their 2021 tax return next year. If the child tax credit you claim on your tax return is chopped in half (or otherwise reduced), it will cut into your tax refund or boost your tax bill. That's because tax credits are taken into account after your tax liability is calculated. As a result, every dollar you can claim as a child tax credit on your tax return is subtracted from the tax you owe. Since the 2021 credit is fully refundable, you'll get a tax refund if the credit amount you claim on your return is greater than your tax liability. If the credit amount available is less than your tax liability, you'll still see a reduction of the tax you owe. But if the credit amount that you're allowed to claim on your tax return is lowered (e.g., cut in half), then that also means there's less money subtracted from the tax you owe. That translates into a smaller refund or a larger tax bill. To illustrate the point, assume the family mentioned above with a toddler has a tax liability of $2,000 on their 2021 tax return. Their total child tax credit for 2021 is worth $3,600. Since they received half their credit ($1,800) in advance through monthly payments from July to December, they can subtract the other half from their $2,000 tax liability on their return. That leaves them with a $200 tax bill ($2,000 - $1,800 = $200). However, if they didn't receive the monthly advance payments, they could have subtracted the full credit ($3,600) from their tax liability, which would have resulted in a $1,600 tax refund ($2,000 - $3,600 = -$1,600). In the end, it's not that you get less money. It's just a question of getting it sooner rather than later. For some families, it's better to hold off on the advance payments and take the full credit when they file their 2021 tax return. It all depends on whether you need the money now, or whether you're counting on a big refund or low tax bill when you file your return next year.

How Monthly Child Tax Credit Payments Will Impact Your 2021 Tax Return

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Once you have run the numbers, you may conclude that you can handle the cost of long-term care. However, if you’re married, you may still want to consider buying a long-term-care insurance policy, Adam says. The risks are higher that at least one spouse will require long-term care, and those costs could exhaust your combined savings, leaving the other spouse with no resources. A 55-year-old couple can expect to pay $2,100 a year for a typical policy with an initial benefit pool (the pot of money the insurance company will pay out) for each spouse of $165,000 to cover adult day care, home aide services, assisted living and nursing home costs. If that seems like a high price to pay for something you may never use, there are ways to trim the cost. Married couples can reduce what they pay in the long run by buying a shared benefit plan, which allows spouses to pool their benefits. If one spouse exhausts his or her benefits, then he or she can tap the other spouse’s share. To get the best value, both spouses need to apply for the same amount of benefits—for example, three years at $200 a day—and then add a shared benefits rider. Plus, depending on the carrier, both spouses can get a discount of between 15% and 30% on their premiums if both buy a policy with the same company, according to Bill Dyess, a long-term-care expert and insurance broker in Boca Raton. However, even if just one spouse buys a policy, the insurance company is likely to provide a 10% to 15% premium discount because married people are less likely to go into a nursing home than single people. You can also save money by skipping the inflation rider. While these riders will help you keep up with the rising costs of long-term care, they can double your premiums, Dyess says. For example, if a 55-year-old man bought a traditional policy with a benefit pool of $165,000 and he wanted to add a 2% inflation rider, he would pay $1,750 in annual premiums, compared with $950 for a policy without a rider, according to data from the AALTCI. A 55-year-old woman would pay $2,815 instead of $1,500. Buying a policy when you are in your forties or early fifties will also decrease the cost of premiums (although you’ll be paying for them over a longer period of time). Insurance companies assume you’re at a higher risk for health problems as you age. Slome says the sweet spot for buying a policy is between the ages of 55 and 65, before you sign up for Medicare. “The first time that people actually take advantage of all those wonderful free health screens is usually after they sign up for Medicare,” he says. “And when they do, the doctors tend to find something.” If you have a health condition, you’ll pay higher premiums, or the insurer may decline to cover you at all. A traditional policy with $165,000 in initial benefits (and no inflation rider) that would cost a 55-year-old man $950 a year jumps to almost $1,200 a year, on average, if he waits until his 60th birthday to buy coverage. A 55-year-old woman’s premiums would jump from $1,500 to about $2,000. If you decide to buy a policy at a relatively young age—in your fifties, for example—you may want to add a restoration of benefits rider. If you make a claim and later recover from the illness that caused you to require long-term care, the rider enables the benefit amount you used to be restored to your policy benefit pool. For example, suppose at age 60 you make a claim for $50,000 to pay for your care. If you recover and can show your insurance company you’ve been healthy for a set amount of time (usually determined by the insurance company when the policy is written), the restoration rider will add back the $50,000 you initially used. This type of benefit is typically only good for a one-time use. A policy with this rider, which not every insurer offers, costs about 4% to 6% more than one without it. If the numbers start to feel overwhelming, keep in mind that you probably don’t need a policy that will cover 100% of your long-term-care costs, Adam says. Instead, you should consider whether a policy can help you pay for some of your long-term care without depleting all of your retirement assets. And if a policy that offers the benefits you want is unaffordable, a long-term-care insurance specialist can help you look for ways to lower the cost.

The case for insurance

Plan Now for Long-Term Care

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Family of four covering their ears and looking surprised

Illustration by Joe Anderson

If you have sufficient assets, you may choose to self-insure, which means any long-term-care needs you have will be paid out of your own coffers. “If someone has over $1 million in liquid assets, then they could probably self-insure, provided they were willing to spend it all for their own care,” Slome says. If you’re married, he ups the number to $2.5 million. When you self-insure, you’re basically betting that you won’t require a prolonged stay in a nursing home—and it’s not a bad bet. According to the Administration for Community Living, most people who go into a nursing home stay for less than 12 months. Instead, you are more likely to rely on in-home care. It costs about $4,600 a month for one or more caregivers to provide 44 hours a week of in-home care, according to the Genworth Study. Mari Adam, a certified financial planner with Mercer Advisors, in Boca Raton, Fla., suggests sitting down with a financial planner to figure out how much you’ll have in savings to cover long-term care. You’ll typically include funds in your traditional and Roth IRAs, 401(k) plans, taxable accounts, Social Security, and any pension income. Your home is also part of the equation when calculating whether you can self-insure. If you’ve built a substantial amount of home equity, you can downsize to a smaller place. If you eventually need to move to assisted living or a nursing home, you may be able to use proceeds from the sale of your home to cover the costs. If you don’t want to sell your house, a home-equity line of credit or a reverse mortgage is also an option. If you’re enrolled in a high-deductible health insurance plan, you can also harness the tax-saving power of a health savings account (HSA) to pay for some of your long-term-care costs. Contributions are pretax (or deductible if you set up an HSA on your own), earnings are tax-free, and distributions aren’t taxed if you use them to pay for qualified medical expenses. Plus, you can keep your account after you stop working and take tax-free withdrawals for medical expenses in retirement, including any long-term-care costs. To qualify for an HSA, your 2021 health plan must have at least a $1,400 deductible for self-only coverage or $2,800 for family coverage. You can contribute up to $3,600 if you have self-only coverage or up to $7,200 if you have family coverage. If you’re 55 or older at the end of the year, you can contribute an extra $1,000 in catch-up contributions. Once you enroll in Medicare, you’re no longer allowed to contribute to an HSA, but the money continues to grow until you’re ready to use it. You can also use money from your HSA tax-free to pay long-term-care insurance premiums, with the maximum annual tax-free amount based on your age. If you’re age 40 or younger, you can withdraw up to $450 tax-free from an HSA in 2021 to pay the premiums; if you’re 41 to 50, you can take out $850; if you’re 51 to 60, $1,690; if you’re 61 to 70, $4,520; and if you’re 71 or older, $5,640. If you and your spouse both have long-term-care policies, you can each use money tax-free from your HSA to pay premiums, up to the maximum for each of you based on your ages by the end of the year. These limits increase slightly each year to adjust for inflation.

Can you self-insure?

In early June, a 102-year-old South Carolina woman made headlines with her secret to a long life: minding her own business. While most of us probably won’t live that long (or resist the temptation to be nosy), modern medicine has increased the likelihood that we’ll live well into our nineties. But living longer also raises a daunting question: Will you need long-term care, and if so, how will you pay for it? More than two-thirds of 65-year-olds will need some type of long-term care in their lifetime, according to the Administration for Community Living, a division of the U.S. Department of Health and Human Services. The cost of long-term care can deplete even a well-funded retirement savings plan: According to the 2020 Genworth Cost of Care Survey, the median cost of a private room in a skilled nursing home exceeds $8,800 a month. And the cost varies depending on where you live. A typical private room in New York costs about $12,930 (according to the Genworth survey), compared with about $7,600 in Tennessee. (To get an idea of how much you would need in each state, check the Genworth Cost of Care Survey.) Many Americans mistakenly believe that Medicare will cover their long-term care. Medicare Part A may cover care that is deemed medically necessary at a certified skilled nursing facility for up to 90 days, but if you need custodial care for a condition such as dementia, Medicare won’t cover the costs. Long-term-care insurance provides benefits in the event you need help with at least two “activities of daily living”—bathing, getting dressed or eating, for example—for more than 90 days. (Some policies will kick in at 60 days or less, but you’ll pay higher premiums.) Most policies will pay for care in your home or at a long-term-care facility, and some will pay for your transportation to a doctor’s appointment. A long-term-care policy could give you peace of mind, but the cost is steep. Premiums are expensive and are continuing to increase, due in large part to the rising cost of care and historically low interest rates. These premiums, as well as returns from fixed-income investments, cover the cost of long-term-care insurance. But many policies were designed 30 years ago, when interest rates on U.S. Treasuries were much higher than they are today, says Jesse Slome, executive director of the American Association for Long-Term Care Insurance (AALTCI). For a single percentage point decline in interest rates, an insurer needs to raise premiums 10% to 15%, he says. If rates rise significantly, premiums could decrease, but that’s unlikely anytime soon. Costs aside, you have to deal with the uncertainty of your long-term needs. You or your spouse may not require care at all or only for a short period of time. Determining whether insurance is right for you depends on whether you have enough money to self-insure and what’s best for your family. If you can’t afford to pay for long-term care, family caregivers could be forced to cut back on work hours or quit their job to take care of you, jeopardizing their own retirement security. In a recent survey by Fidelity Investments, 28% of respondents left their job due to caregiving responsibilities. Of those who eventually went back to work, more than one-third said their earnings declined.

You could buy insurance to finance future costs, but policies are pricey. Here’s how to decide whether you need coverage.

Plan Now for Long-Term Care

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NYSUT Note: NYSUT members and their families have access to a team of dedicated long-term care planning specialists through the NYSUT Member Benefits Trust-endorsed New York Long-Term Care Brokers program. These specialists will provide, explain and compare the different long-term care insurance providers and products to help you choose the best coverage at the most competitive premium. Click here to learn more.

10 years until retirement

Retirement is on the horizon, but other matters—your family, your job, your kitchen renovation—tend to consume most of your attention. Still, it’s not too soon to start running the numbers, ideally with the help of a certified financial planner, to get a sense of whether your planned retirement date is realistic. In the wake of the COVID-19 pandemic, you may need to make some course corrections. More than 80% of Americans say the pandemic has affected their retirement plans, and one-third estimate that they’ll need two to three years to get back on track, according to a survey conducted by Fidelity Investments. The Coronavirus Aid, Relief and Economic Security (CARES) Act enacted early last year allowed people who suffered financial setbacks as a result of the pandemic to withdraw up to $100,000 from their 401(k), 403(b) or other employer-provided retirement plans without paying a 10% early-withdrawal penalty. If you took a hardship withdrawal (and your employer allows it), you have up to three years to repay the funds and have the repayment treated as a tax-free rollover. (If you repay the distribution after you’ve paid taxes on it, you can file an amended return and get a refund.) The sooner you repay any hardship withdrawals, the more time your money will have to grow. Similarly, while the CARES Act gave borrowers six years instead of five to repay 401(k) and 403(b) loans, the sooner you repay the loan, the sooner you’ll be able to take advantage of market gains on a bigger balance. Use your stimulus check or other money you’ve saved to increase contributions to your retirement plans. If you’re 50 or older, you can stash up to $26,000 in your 401(k), 403(b) or other employer-sponsored retirement savings plan. You can also contribute up to $7,000 (if you’re age 50 or older) to a traditional IRA or, if you don’t earn too much to qualify, a Roth IRA (see below). If your employer offers one, consider shifting some of your 401(k) or 403(b) contributions to a Roth 401(k) or Roth 403(b). Having all of your savings in tax-deferred 401(k) or 403(b) plans and traditional IRAs can result in big tax bills when you start taking withdrawals, says Karen Van Voorhis, a CFP in Norwell, Mass. And while many dual-income married couples earn too much to contribute to a regular Roth, there are no income limits on contributions to Roth 401(k) or Roth 403(b) plans. Contribute to a health savings account. In 2021, workers age 55 and older who are covered by a high-deductible health insurance plan can contribute up to $4,600 to an HSA. You can use the money to pay for medical expenses that aren’t covered by your insurance, but if you pay those expenses out of pocket and let the money in your HSA grow until you retire, you’ll have a stockpile of tax-free money to pay for medical expenses that aren’t covered by Medicare. Many plans let you invest contributions in mutual funds or exchange-traded funds. Pay off high-interest debt, such as credit cards or PLUS loans you took out for your children’s college education. Nearly one-fourth of retirees say that debt has made it more difficult for them to live comfortably in retirement, according to the Employee Benefit Research Institute’s 2021 Retirement Confidence Survey. With interest rates at record lows, though, paying off your mortgage before you retire may not be the best use of your money.

Changes to the Child Tax Credit for 2021

Before getting into how you might end up with an overpayment and the details of the payback rules, it's probably a good idea to go over some of the changes to the child tax credit that apply for the 2021 tax year (and, so far, only for 2021). Last year, the maximum child tax credit was $2,000 per child 16 years old or younger. It was also phased-out if your income exceeded $400,000 for married couples filing a joint return or $200,000 for single and head-of-household filers. For some lower-income taxpayers, the credit was partially "refundable" (up to $1,400 per qualifying child) if they had earned income of at least $2,500 (i.e., you got a refund check for the refundable amount if the credit was more than the tax you owed). The American Rescue Plan, which was enacted in March, made some major changes to the child tax credit for the 2021 tax year. For one thing, the credit amount was raised from $2,000 to $3,000 for children 6 to 17 years old and to $3,600 for kids 5 years old and younger. The $2,500 earned income requirement was also dropped, and the credit was made fully refundable (which means refund checks triggered by this year's credit can be greater than $1,400). There are also two phase-out schemes in play for families with higher incomes in 2021. The first one can't reduce the credit amount below $2,000 per child. It kicks in if your modified adjusted gross income (AGI) is above $75,000 (single filers), $112,500 (head-of-household filers), or $150,000 (joint filers). The second phase-out is the same $200,000/$400,000 one that applied before 2021. Finally, the American Rescue Plan requires the IRS to pay half of your total credit amount in advance through monthly payments issued this year from July to December (you can opt-out if you want). In most cases, the IRS will base the amount of these payments on information it pulls from your 2020 tax return. Next year, you'll claim the remaining half of the credit on your 2021 tax return. In practice, this will be done by subtracting every dollar you received from July to December from the total credit you're entitled to claim and then reporting the leftover amount, if any, as a child tax credit on your 2021 return. (Use our 2021 Child Tax Credit Calculator to see how much your monthly payments will be and what should be leftover to claim as a credit on your 2021 tax return.)

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Warning:You May Have to Pay Back Your Monthly Child Tax Credit Payments

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Changes to the Child Tax Credit for 2021

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Payback Requirements for the 2021 Child Tax Credit

Now let's talk about what happens if you end up with a child tax credit overpayment. Depending on your income, you might have to pay some or all of it back as an addition to the tax you owe when you file your 2021 return next year. Lower-income people get a good deal. If your modified AGI for 2021 doesn't exceed $40,000 (single filers), $50,000 (head-of-household filers), or $60,000 (joint filers), and your principal residence was in the U.S. for more than half of 2021, you won't have to repay any overpayment amount. That's a win for you! On the other hand, parents with higher incomes don't get any breaks at all. If your modified AGI for the 2021 tax year is at least $80,000 (single filers), $100,000 (head-of-household filers), or $120,000 (joint filers), you have to pay back your entire overpayment. Ouch! It's a little more complicated for people in the middle. All or part of your overpayment might be forgiven if your modified AGI for 2021 is between $40,000 and $80,000 (single filers), $50,000 and $100,000 (head-of-household filers), or $60,000 and $120,000 (joint filers). To determine how much of your overpayment is wiped out (if any), you first need to calculate what the IRS calls your "repayment protection amount." This is equal to $2,000 multiplied by: ■ The number of children the IRS used to calculate your monthly child tax credit payments, minus ■ The number of children used to calculate the total credit amount on your 2021 tax return. If there's no difference between the number of children used to calculate the two amounts, then there's no overpayment reduction, and the full amount must be repaid. If you have a positive repayment protection amount, it's then gradually phased-out as your modified AGI increases within the income range above. The phase-out rate is based on how much your modified AGI exceeds the lower limit of the applicable income range. Once your final repayment protection amount is calculated, it's subtracted from your overpayment to determine how much you need to repay (but your overpayment can't be reduced below zero). Here's an example of how this works: Joe, who is single, claimed a child tax credit for two children on his 2020 tax return (the children are 2 and 4 years old at the end of 2021). As a result, the IRS sent him $3,600 in monthly payments in 2021. However, Joe can't claim the child tax credit on his 2021 return because his ex-wife is claiming the children as dependents on her return. Since his 2021 child tax credit is $0, the entire $3,600 he received from the IRS is an overpayment. Joe's initial repayment protection amount is $4,000 (i.e., $2,000 for each child). If Joe files a 2021 return with a modified AGI of $60,000, his modified AGI exceeds the lower limit of the applicable income range – $40,000 – by 50% ($60,000 - $40,000 / $80,000 - $40,000 = 0.5). As a result, Joe's $4,000 repayment protection amount is reduced by 50% to $2,000. Therefore, Joe only has to repay $1,600 of his $3,600 overpayment ($3,600 - $2,000 = $1,600). [Note: You may also have to pay a portion of your overpayment if your modified AGI is less than or equal to $40,000 (single filers), $50,000 (head-of-household filers), or $60,000 (joint filers) and you lived outside the U.S. for at least half of 2021.]

Fewer Bargains, More Flexibility

Last year, when most people were reluctant to fly or stay in hotels, rates were tantalizingly low. But as the industry bounces back, bargains are getting harder to find. "People shouldn't expect great deals," says Elizabeth Blount McCormick, president of Uniglobe Travel Designers, a travel management company. Domestic airline prices are largely back to where they were prepandemic with one big exception: Almost all carriers are waiving the fees for canceling or changing a flight. Those fees sometimes came to hundreds of dollars. That policy should continue at least until the end of the year, predicts Ewen, adding that some airlines are thinking of eliminating the fees permanently. Because you won't have change fees to consider, book a flight with a reasonable fare as soon as possible, and then set a Google Flights alert to notify you if the price drops. Then you can rebook at the cheaper fare, although you will typically get credit with the airline, not cash, for the difference in cost. If you need to cancel completely, you will most likely get a voucher for that airline that is good for at least a year. Airlines are still scrambling to figure out how many planes they need to bring back into service and where. Because of that, some flights may be combined or canceled. If your flight is canceled by the airline or a new time no longer works for your schedule, your money should be refunded. With limited demand for international travel, some airlines are flying their widebody jets, typically used for overseas flights, cross-country with their lie-flat seats in business and first class. It might be worth an upgrade to enjoy that perk, especially if you have frequent flyer points to spare. Hotel rooms may be a little cheaper than prepandemic. Room rates won't hit 2019 levels until 2025, according to Jan Freitag, an analyst specializing in hospitality for the CoStar Group. He warns that in places with high tourist demand, like Miami or Hawaii, hotel rates will recover faster. Several trends in the hotel industry that either began or grew during the pandemic are likely here to stay. Guests should expect to use a smartphone app for just about everything, from checking in to opening a room door to ordering more towels. Hotels that offered free breakfasts often now provide a "to-go" choice along with the typical buffet. Lower-end hotels may continue to only clean rooms after checkout. "If you have a multinight stay, you may have to request cleaning and be charged for it," Freitag says.

NYSUT Note: NYSUT Member Benefits endorses Cambridge Credit Counseling, to provide free debt counseling and other debt management services for NYSUT members. Click here for more information.

What to Expect Traveling in a Post-COVID World

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The economy has begun to rebound this year, but many workers are still unemployed or have seen their hours reduced, and some have voluntarily taken time out to care for at-home children. If you fall into that camp, you may be able to take steps that will reduce your tax bill when you retire. If the reduction in your income caused you to drop into a lower tax bracket but you’re still in good financial shape, this year may be the ideal time to convert some of the money in your traditional IRA to a Roth, says Karen Van Voorhis, a certified financial planner in Norwell, Mass. You’ll pay taxes on any money you convert, but you’ll pay less than you would owe in higher-income years. And once you retire, withdrawals from your Roth will be tax-free, as long as you’re 59½ or older and have owned a Roth for at least five years. A decline in your household income could also make it possible for you to contribute to a Roth. If you’re married and file jointly, you can’t contribute the maximum to a Roth IRA if your 2021 modified adjusted gross income is more than $208,000. If your household income falls below that threshold this year, you have until April 15, 2022, to contribute to a Roth. Each spouse can contribute up to $6,000 in 2021, or $7,000 if they’re 50 or older.

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Fortunately, there's a way to lessen the impact of monthly child tax credit payments on next year's tax refund or tax bill – you can opt-out of the advance payments. If you want to opt-out, the IRS has an online Child Tax Credit Update Portal where you can unenroll from advance payments. That way, you'll be able to claim the full credit when filing your 2021 tax return. The IRS sent the first round of advance credit payments to eligible families on July 15. Additional payments will arrive on August 13, September 15, October 15, November 15, and December 15. There are monthly opt-out deadlines if you want to cut off payments before the next one arrives. To opt-out before you receive a certain monthly payment, you must unenroll by at least three days before the first Thursday of the month in which that payment is scheduled to arrive (you have until 11:59 p.m. Eastern Time). If you miss the deadline and you're eligible for a monthly payment, you'll continue to get scheduled payments until the IRS processes a request from you to unenroll from monthly payments. If you do opt-out of the monthly payments now, you won't be able to re-enroll until at least late September 2021. If you're married and file a joint tax return, your spouse also needs to opt-out since unenrolling only applies on an individual basis. If your spouse doesn't unenroll, you'll still get half of the joint payment you were supposed to receive with your spouse. There are other reasons why you might want to opt-out of the monthly payment, too. For instance, if you're in a shared custody situation and you won't be able to claim your child as a dependent for 2021, your income is substantially higher in 2021 when compared to last year, or you're worried about having to pay back some of the monthly payments.

The Solution: Opting Out of Monthly Child Tax Credit Payments

Another alternative to a traditional long-term-care policy is a hybrid life insurance policy that includes long-term-care benefits. If you tap the policy to pay for long-term care, your death benefit will be reduced, although some hybrid policies will pay a small residual benefit even if the entire death benefit is exhausted by long-term-care costs. Say you have a hybrid policy with a $120,000 death benefit that provides $180,000 of potential long-term-care benefits. If you spend $80,000 on long-term care, your heirs will still receive $40,000 after you die. If you spend the entire $180,000 on care and your policy pays a small residual death benefit, your beneficiaries may receive $10,000. Such a policy may appeal to you if you’re determined to leave something to your heirs, but you’ll pay more for this kind of insurance. A 55-year-old man can expect to pay roughly $4,600 a year (compared with $950 for a traditional long-term-care insurance policy) for a life insurance policy that provides $180,000 in long-term-care benefits with a $120,000 death benefit.

Consider a hybrid policy

In a recent poll conducted by the Associated Press, 60% of respondents favored a federal, Medicare-like long-term-care insurance program. Some 70% said Medicare should cover long-term care. While a federal long-term-care program is unlikely anytime soon, President Joe Biden has proposed spending $400 billion on home and community-based services for long-term care (although the outlook for the proposal is unclear). In the meantime, some states may look into starting their own programs. In 2019, the Washington State legislature passed a bill to create a state long-term-care program funded by a new payroll tax. Starting on January 1, 2022, the state will add an additional 58 cents to payroll taxes for every $100 of eligible wages reported on Form W-2. Employees can opt out by November 1, 2021, if they purchase a qualifying long-term-care insurance policy. If you’re thinking that Medicaid will be your golden ticket for long-term care, think again. To qualify for Medicaid, you must spend down nearly all of your assets first. Medicaid also has a “look back” period that involves examining your financial transactions from the past five years to determine whether you gave away money to qualify for Medicaid, which could render you ineligible. And even if you qualify for Medicaid, you’ll have to go to a facility that accepts Medicaid, and as the population ages, those will be increasingly hard to find.

Is government help on the way?

The probability that a 65-year-old will need long-term care—and if you need it, for how long.

Who will need long-term care?

Source: HealthView Services

NYSUT Note: NYSUT members have access to the NYSUT Member Benefits Corporation-endorsed Cambridge Credit Counseling program, which helps members better understand their student loan re-payment options. Find out how to get your free debt and student loan consultation with one of Cambridge's certified counselors by visiting here.

The case for insurance

Consider a hybrid policy

Is government help on the way?