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Financial Fitness Blog

Reasons to Roth

(Retirement) Permanent link

Michelle Blog PhotoIf your district offers the Roth savings option in their 403(b)—or if you are debating between a Roth and Traditional IRA—you may want to consider directing all or some of your contribution to this after-tax option. Here are a few reasons why.

Reduce tax liability when you retire. Roth contributions are after-tax, which means you pay taxes now, but all qualified withdrawals, including earnings, are tax-free. For decades the assumption has been that most people would be in a lower tax bracket in retirement and thus would benefit from before-tax savings. However, this is less likely given changes in tax policy, including lower tax rates, the taxation of Social Security, and other deductions. Before-tax savings alone may not be the optimal tax strategy in every situation.

Potential benefits at all ages.

  • If you're a young public school employee, contributions compound tax free for decades. Paying taxes on contributions at current rates may be better than paying higher taxes later on contributions and earnings if you are taxed at a lower rate today.
  • Parents or grandparents looking for ways to pay for a child’s college education can access the money tax-free for this purpose if the Roth account is at least five years old and you are at least age 59½. Plus, retirement accounts generally aren’t part of federal financial aid calculations.
  • All Wisconsin public school employees have the benefit of receiving retirement income from the Wisconsin Retirement System, Social Security, as well as a 403(b) if contributions have been made. All are taxed when the money is withdrawn. Because retirement income from these sources may be substantial, you could get bumped into a higher tax bracket. If this is the case, you may benefit from paying taxes today on Roth contributions.

Roth savings could be worth more than a pre-tax. In some circumstances you may actually end up with more money at retirement by going with a Roth. In the example from our article, "Investing in a Roth 403(b) may give you a financial advantage," the Roth 403(b) can be worth significantly more than the pre-tax 403(b) at retirement with all things being equal and when taken out as a lump sum, even when you compare it to a pre-tax account where the tax savings has been invested over time. Learn more by reading our article.

Michelle Slawny, CFP®
Worksite Benefit Consultant

Talking with your parents about long-term care insurance

(Insurance) Permanent link

Kelly Blog Photo“Are you trying to put me in a nursing home?” Chances are you've heard this kind of response if you've ever talked to your parents about long-term care insurance (LTCi). It may be a challenging conversation, but it's an important one, because today's LTCi offers much more than nursing home care and could help your parents maintain their independence. Here are a few suggestions on how to approach it.

Focus on independence, quality of life, and peace of mind. Emphasize that you want to protect their ability to have choices about where and how they receive the care they need. Medicare won’t pay for extended personal care (nor will the best health insurance policy), and Medicaid is not something most people should be considering. In fact, the sad reality is that many people end up on Medicaid after they’ve spent through their personal assets and savings—something they had worked hard their entire lives to avoid.

Help them understand what LTCi covers. In the early years of LTCi (less than 40 years ago), it was primarily designed as nursing home insurance. This is no longer the case. Make sure your parents understand that today’s LTCi policies are designed to pay for home health care as well. When a policyholder qualifies for benefits, (i.e., needs help with activities of daily living such as dressing, bathing, etc.), the policy will pay for home health aides to provide such services along with transportation, housekeeping, shopping and more. Some policies will even pay cash to relatives and friends who assist with informal care needs. 

Express the hope that they remain in their home the rest of their lives. When asked where they would prefer to receive extended personal care, most people will choose the familiarity and comfort of their own homes. LTCi may help them do just that for a longer period of time.

Look into LTCi sooner rather than later.

  • LTC insurance is underwritten, which means they must be in reasonably good health when applying.
  • An LTC event can happen at any time, because no one knows when one might take a serious fall, suffer a stroke, or develop a disqualifying medical condition. 
  • The premiums are age-based, so the younger the applicant, the lower the premiums over the lifetime of the policy.

Invite them to a personal online LTCi seminar through Member Benefits where you can all learn together from the comfort of your home. One of our LTCi specialists will cover the basics of long-term care and what to look for in a policy, answer general questions about medical conditions, and estimate monthly policy costs.

Register for your personal seminar today or call 888-247-5905 for more information.

Kelly Behnke, CIC, CISR, ACSR
Personal Insurance Consultant

Don't let emotions dictate your financial decisions

(Money Management) Permanent link

Michelle Blog PhotoDid you know that we are psychologically hardwired to make financial decisions that aren’t necessarily in our best interest? It’s true. Behavioral economists have discovered that our financial decisions are strongly influenced by our emotions and not in a good way.

For example, objective logic would insist that getting $10 should make you equally as happy as losing $10 makes you sad. However, research shows that not only are we more upset about losing $10, but we’re twice as upset. It turns out that you would need to get $20 to feel ok about losing $10. Researchers call this a loss aversion ratio of 2 to 1. It’s not rational, but it does affect how we handle money—our financial decisions and the outcomes.

This loss aversion can have a big impact on investing behaviors and can wreak havoc on your future financial security. The risk is that you’ll come up short at retirement. To learn more about psychological weaknesses that influence your financial decisions, go to the Winter 2012-13 issue of your$ magazine and read the article, "P$YCH!"

Michelle Slawny, CFP®

Slippery sidewalks: Not funny

(Insurance) Permanent link

Mark Blog PhotoSlips and falls may be hilarious when part of your favorite sitcom, but in real life it’s no laughing matter. A tumble on snow or ice can cause serious injuries.

As a homeowner, it’s your responsibility to keep your property safe. Removing snow and ice from your property as soon as possible will help prevent visitors from injuring themselves on slippery walkways, stairs, or entryways. If someone is injured, you may be held liable for their medical expenses, lost wages, and even pain and suffering. Your home insurance offers protection against financial loss for claims, but preventing a claim in the first place is to your advantage. Many companies will raise rates or cancel policies depending on the situation.

Standard home insurance includes two coverages to protect you if someone is injured:

  • Medical payment coverage included in your home policy provides reimbursement of medical expenses to someone injured on your property regardless of fault. Coverage typically ranges from $1,000 to $10,000.
  • Liability protection pays if you are found negligent and your actions or lack of actions cause injury. Liability coverage pays the cost of the claim (up to the limits of your policy) as well as defense costs should you be sued. This coverage follows you wherever you go—not just at your residence.

Home policies offer liability coverage starting at $100,000, but Member Benefits’ standard coverage is $500,000 to provide more protection. Purchasing an umbrella policy would provide an additional one million dollars or more of liability protection.

It's easy to get an quote on home, renters, or condo insurance by using our Quick Quote web portal.

If you have questions about home or umbrella insurance coverage, call us at 1-800-279-4010 or set up a personal phone consultation.

Mark Dannehl, Personal Insurance Consultant