Team Aguilar May News
TIME STANDS STILL FOR NO MAN, WOMAN, OR CHILD. And neither does inflation. In fact, every year the costs associated with higher education shoot up an average of 5%. So make sure you plan ahead. The article below includes important tips to help you get started-including how your mortgage can help cover your child’s college expenses. College isn’t the only thing that’ll cost you in the future. Did you know that nursing homes cost about $70,000 a year? Worse yet, Medicaid doesn’t kick-in until your assets are used up. If you or someone you know is planning on leaving even a modest inheritance, you’ll want to read the article below!As always, feel free to pass this newsletter along to family members, friends, and coworkers. And if you have any questions or need any assistance, please contact me anytime.
BE TRUE TO YOUR SCHOOL…LET YOUR COLORS FLY
When the Beach Boys sang about school colors, they weren’t exactly referring to the color GREEN! But, they may as well have been. These days, higher education is all about the green. In fact, college grads earn 75% more than those without degrees!The problem is, college also costs a lot of green-anywhere from $13,000 per year for an in-state college to around $30,000 a year for a private college. And with the cost inflating approximately 5% annually, those numbers are on the rise.As a parent who wants your child to attend college, what can you do? Plan early! Let’s look at a tale of two parents to illustrate how important it is to get started right away.A Tale of Two Families
The preschool open house was in full swing, and two parents were chatting over the punchbowl, remarking on how they knew time would fly, and before you know it, their kids would be off to college.
Taylor’s parents are prepared. They recently sat down with a mortgage professional and learned that completely funding Taylor’s four-year education at the local college would cost either $300 per month in savings or-by using the equity in their home-only $133 per month after tax. “What a relief to know it’s all taken care of!” they commented to Max’s parents. But Max’s parents replied, “Hey, what’s the rush? Look, the kids are only knee-high right now…we’ll worry about this later.”
Seven years later, the kids are in 5th grade, and the parents meet up again at a birthday party. College comes up in the conversation, as Max’s parents just learned that for him to attend the very same college as Taylor, it would now require them to save $835 per month to be ready on time, which is not something they are prepared to do. Taylor’s parents recommend that they meet their trusted mortgage professional, who advises them that by using the mortgage wisely, it will only cost them $260 per month after tax. Much easier to swallow-but it’s twice as much per month as Taylor’s parents, who planned ahead and started earlier.
The Moral of the Story?
If you want to save for your child’s college expenses, start the investment early. The money you put away today will have more time to gain interest and multiply-which means you won’t have to struggle to save as much. Don’t be discouraged by the amount you think you can put away. Every little bit helps. And you can even structure your mortgage so that your child’s college costs are taken care of…without struggling to save huge amounts of money every month!
You should also encourage your children to save a portion of the money they receive from allowance and from side jobs such as mowing lawns or babysitting. They’ll learn important lessons about planning for the future and the value of a college education.
Finally, as the college years approach, you should explore scholarships, financial aid, and federal direct aid, which is money that does not have to be repaid. Of course, when your children are young, you don’t know whether they’ll be star athletes or straight “A” students-so it’s always best to plan ahead. If scholarship money does become available, then you’ll have more than enough money in savings, due to your good planning.
By exploring your options and taking steps now, you can help make sure your child’s college expenses are taken care of in the future. If you have friends or family members who are struggling to save for their children’s education, be sure to share these strategies and tips with them as well.
BE NICE TO YOUR KIDS. THEY’LL CHOOSE YOUR NURSING HOME!
We may laugh about our children picking our nursing home. But it might not be a joke when your kids find out nursing homes cost about $70,000 per year! Worse yet, Medicaid only pays nursing home bills after your assets are basically used up. Which means, many children and family members who are expecting even a modest inheritance, often watch the money quickly disappear.The good news? With a little knowledge, you can act now to protect yourself and your family before it’s too late.First, Medicaid has always had a “look-back” period, where they literally look back a certain number of years at gifts made to family in particular, knowing that this may have been done so to remove assets, and therefore to qualify for Medicaid assistance earlier. The time frame used to be a “look-back” is now extended to five years.So if nursing home care is needed within five years of giving a gift, proof may be required to show that at the time of giving the gift, the donor was in excellent health, and was not giving the gift with the express intention of transferring assets to avoid paying nursing home expenses. If the individual is unable to prove this, the asset will be counted towards a waiting period until Medicaid assistance can be received. For example, if a father gives his daughter a $50,000 gift and subsequently needs nursing home care, expected to cost $5,000 per month, the waiting period would be ten months before any Medicaid could be received…even if the gift money is long spent and gone. Worse yet, the waiting period clock used to start “ticking” at the time the gift was given-but it now starts ticking at the time Medicaid is applied for. If the father is in immediate need of medical care, this could present some very serious problems.
Next, the equity in your home will come under scrutiny…and if you have more than $500,000 equity in your home, you will be ineligible for nursing home coverage from Medicaid. States have the ability to raise the limit to $750,000-but it has been questioned why any state would make this decision, since it would result in higher Medicaid costs for the state. Since many Americans strive to pay off their home by retirement age, this could impact many people who are simply unaware of the rules.
What can you do to protect yourself and your loved ones?
Be informed and plan now. For more information, visit www.elderlawanswers.com, or the Kaiser Family Foundation information site at www.kff.org. New strategies may need to be developed for your retirement, including not leaving equity trapped in your home where it could work against you for retirement assistance. Many are reconsidering the wisdom of having a home paid for in full, and are planning to instead leverage the equity via a refinance into a financial plan that works for them, not against them.
Because these laws are so complex, it’s always best to consult a professional to determine the best plan for your own retirement, or that of your loved ones.
