What Medicaid Covers – Part 2
In last week’s post I was telling you about a call I received revealing a very common misconception about Medicaid. Julie will lose her alimony payments in 6 months, dropping her income from $5000 per month down to $1000 per month. She is 69 years old and in good health. She does not need any long term care at this time. The reason for her call was to ask me about applying for Medicaid. Her thought is that Medicaid could replace her income. It’s that thought that is so common and also so wrong. That’s because the Medicaid program does not provide income. It also does not provide any money directly to a recipient. Instead, it is an insurance program that pays the cost of medical and long term care – depending on which program a recipient is eligible for. In some cases, people become eligible for Medicaid because they are also eligible for SSI. Supplemental Security Income does provide income to certain low income disabled individuals. They also get Medicaid health insurance coverage when they start receiving SSI payments. In Julie’s case, however, she won’t qualify for SSI. She already gets a
What Medicaid Covers – Part 1
The call we received last week raised a common misunderstanding about Medicaid. Julie called regarding getting Medicaid benefits. Julie is 69 and in relatively good health for her age. She is selling her home and will be moving to a rental unit in a senior housing complex.
Julie expects to sell her home and net $200,000 after paying off a $250,000 balance on her mortgage. She has another $200,000 of savings. Julie also has a long term care insurance policy that pays as much as $300 a day for long term care in a nursing home, assisted living facility or care at home for 3 years. She also has income of $1000 per month from Social Security and she receives $4000 per month of alimony from her ex-husband.
So why is Julie asking about Medicaid? It appears that $5000 of income per month is enough to support her lifestyle. Julie is concerned because her alimony payments will terminate in 6 months and she is looking to replace the $4000 of alimony income that she will lose. With only $1000 a month of income, Julie will need to dip into her savings to meet her monthly expenses. Julie figured that Medicaid could help plug that gap.
Counting on Inheritance to Pay for Retirement
A recent study of affluent children between the ages of 18 and 22 caught my eye. The study reported that 63% of 1000 people surveyed in this age group said they believe their financial security in retirement will depend in part on inherited money. Granted, most of the people in this age group are still in college. Very few are yet in the working world and in the midst of their careers so maybe their fears are not yet warranted. But, the survey focused on the “mass affluent”. For the age group of 18 to 40 that is defined as someone with investable assets between $50,000 and $250,000 or investable assets between $20,000 and $50,000 with annual income of at least $50,000. What I find quite interesting is that of the 18-22 year old age group, many believe the inheritance will come from someone other than their parents. 17 percent think it will come from friends or from grandparents. Another 14% think other family members will leave them something. Much has been written about how the children of baby boomers will be the first generation less well off than their parents. There are many
Update on Social Security and Medicare
The federal government has issued annual updates on the financial soundness of Social Security and Medicare, stating that each government benefit program will run out of money within the next 8 to 16 years or so. Here’s the latest news. For the first time since 1982 the Social Security program’s costs will exceed its income, requiring the use of funds from the program’s $3 trillion trust fund to cover the shortfall. This is happening 3 years earlier than was predicted at the time of last year’s report. The trust fund has grown to its current size in part because there has been more money collected than has been paid out. The excess funds have been added to the trust fund. That may be nearing an end. There are several causes for this. Certainly demographics plays a role. The population continues to age which means there are fewer people paying into Social Security and Medicare via payroll deductions from wages while at the same time there are more people applying for benefits and living longer while receiving those benefits. Last year there were 2.8 workers for every Social Security recipient. 10 years before that
A Family Story of a Different Sort
Most of the stories I write about involve parents helping out their adult children and how that might affect their own finances, especially when they need long term care. As a result of divorce, losing a job, having special needs that restricts or prevents the ability to earn a living, an adult child often needs financial assistance or may need to live/move back in with aging parents. This has an impact on the parents’ finances especially if they must consider qualifying for Medicaid. But, what if the situation reverses itself? What if the parents have had enough? What if an adult child refuses to leave the home and refuses to seek employment but would rather continue to look to his/her parents for support? What rights do each of the parties have? In upstate New York, parents went to court seeking to evict their 30 year old son from their home. Mark and Christina Rotondo sent their son, Michael several letters asking him to move out and get a job. In an interview explaining himself, Michael said that he was unemployed because he needed to concentrate on being a father to his child rather than focusing on his career, although
Social Security and Student Loans – Part 2
Last week I wrote about Social Security recipients who are delinquent on their student loans, an increasing problem as the population continues to age. For disabled and retired student loan borrowers, if they fall behind on student loan payments Social Security can garnish their checks – hold back an amount to pay down the debt. In reality, however, the amount garnished does little more than cover the fees and interest. 68% of borrowers who have Social Security reduced see none of it pay down their principal amount owed. Is there a way out? A borrower can apply for a financial hardship exemption or reduction. The Department of Education website does not clearly publicize this option, however there is an application form online at www.studentloanborrowerassistance.org. Another option for borrowers is to try to get the loan discharge because they are suffering from a total and permanent disability. A form must be completed and submitted with a document from a doctor certifying that the borrower is totally and permanently disabled. Alternatively, a Social Security Disability or Supplemental Security Income decision is sufficient but there must also be an indication that the Social Security Administration will