Continuous Care Retirement Community – Understanding Your Options

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Becoming a member of a continuous care retirement community (CCRC) is something people nearing retirement should be considering. These communities are often called life plan communities because you’re making a decision today for your future living and healthcare needs.

What is a Continuous Care Retirement Community?

A CCRC is a community that you enter when you’re still in good health but getting older. The idea is that you join these communities and effectively secure your spot as your care needs increase.

Perhaps you’re in the community for 10 years, but then your hips or knees continue to get a little worse, and you could use some additional care.

As a member of the community, you would be able to secure one of these care spots as they become available so that you can get the care you need. You’ll have peace of mind that as a resident, you can be confident that your care needs will be met for life.

5 CCRCs Contract Types

1. Extensive

An extensive contract has a higher upfront price, but no matter your care needs, the costs never increase. You’ll be buying into a contract, and you can be confident that your costs will remain the same despite potentially increasing medical concerns and needs.

2. Modified

A modified contract has an entrance fee, which is typically smaller than an extensive contract, but the costs will change as your care needs change. So, if you need a skilled nurse, you will have to pay for the care.

The care may be offered at a discounted rate, or you may receive a certain number of care days for free each year.

The modified contract does have an upfront cost, but you will risk potentially higher medical costs as you age.

3. Fee for service

This contract has an entrance fee, but it’s typically cheaper. This option allows you to secure your CCRC, but you will pay a standard fee for any service that you do need.

4. Equity

An equity share is a very important type of CCRC because you’ll actually purchase the property in which you reside. The equity share differs from a contract because you own the property, which will then become an asset.

5. Rental

As a rental, you’ll rent the home, and care may or may not be provided to you. This option is the most affordable, but you’re also taking a major risk because there may or may not be care available when you need it.

One of the things that is important to understand is that all of these options have risks. If you pay more, you reduce your risk in most cases. High upfront costs allow you to have the comfort in knowing that your risks are rather low.

For most people, they’ll often choose:

  • Modified
  • Fee for service

Rental properties are also rising in popularity, as people are considering their options when retiring.

Wait Lists and Continuous Care Retirement Communities

Every community has a different commitment to join a wait list for a community. The population is getting older and living longer, so the demand for CCRCs is very high. Joining one of these lists will vary from community to community, but it will typically require:

  • Application
  • Deposit

The deposits are often refundable or will go to your costs if you do decide to join a community in the future.

With waitlists being long, it’s important to consider joining one as soon as possible. The waitlist can be years – sometimes 4 to 5 years. It’s worth considering joining a waitlist early, especially when you’re in good health, so that you can secure a spot if you want to join in the future.

Good Health and Qualifying for a CCRC

A continuous care retirement community will often recommend joining when you’re in good health. The term “good health” can be subjective. What usually occurs is that when you’re ready to join a community, you’ll be asked to have an exam to better understand what your health needs are today.

Communities are only able to provide a certain level of care, and they safeguard members by ensuring that their care needs can be met.

As a general rule of thumb, if you can live independently, you’re in good health.

Members may be able to join a community if they need assisted living or skilled nursing. Each community is different, so it’s important to ask the community upfront what options are available for new members.

CCRCs are built to help independent members, those that pay a lot upfront, if they have medical issues. A lot of CCRCs don’t allow people that are not independent to join because the commitment is to the independent individuals that joined the community when they’re healthy.

When Should You Join the Community?

A CCRC is a community that you can join and be amongst like minded people. While a lot of members are over 70, this figure is starting to come down. Many communities have a minimum age of 62.

When it comes to couples, one person may be older than the other, and this can cause some conflicts. There is often a lower age requirement for one spouse, but it’s only a few years, making it difficult for couples to enter into a CCRC.

Some people join waitlists in their 50s in preparation that they’ll have a spot available in the community when they need it.

Understanding Entrance and Monthly Fees

A continuous care retirement community will often have an entrance fee and a monthly fee. The entrance fee is sort of like an insurance that allows you to become a part of the community. This fee will have some potential medical costs rolled into it.

The monthly fee is for all of the additional perks, such as:

  • Meal plan
  • Housekeeping
  • Utilities
  • Amenities
  • Fitness center
  • Classes
  • Transportation 
  • Maintenance, etc.

Monthly fees cover virtually everything with the exception of Internet. The monthly service fee at a CCRC covers everything so that you can relax and not worry about fixing a roof or mowing the lawn.

Specific Situations Within a CCRC

CCRCs have had to adapt with the times. There was a time when everything was standard, and meal plans couldn’t be adapted based on a person’s dietary needs or desires. Today, a lot of these retirement communities are offering made-to-order meals to adhere to the dietary differences of their members.

In addition to food concerns, another concern is how the fee structure may be different for couples when one is healthy, and one has higher care needs.

If a community can serve these individuals, they’ll often work with you. Members are different because if they enter as an independent, these communities understand that one individual may have more needs, while others don’t.

One spouse would move into the assisted living while one remains in independent living.

There are also options where an outside agency may send someone to care for the spouse so that the couple can stay together for longer.

A continuous care retirement community is a great option for anyone that wants to cover their bases as they age and grow older in a community that is more like a resort than a traditional retirement home. If you need additional care in the future, the CCRC can offer you the care you need at a place that you’ve long called home.

If you want more information about preparing your finances for the future or retirement, check out our complimentary Master Class, ‘3 Steps to Secure Your Retirement’. 

 In this class, we teach you the steps you need to take to secure your dream retirement. Get the complimentary Master Class here.

The Difference Between Asset Allocation and the Strongest Assets

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When working with a financial planner or advisor, it’s important that you’re aligned on how you want your money invested. There are many different investment strategies and what you might be comfortable with may not be your advisor’s preference. So, how can you ensure that your money will be managed how you like?

The first step is to have a basic understanding of investment strategies. This way, you’ll know what’s more suited to your personality and how you want your investments taken care of.

In this post, we’re explaining the differences between two investment strategies, asset allocation and strongest assets. We share the fundamentals of each, why people choose them, and how to figure out if they’re appropriate for your money management style.

You can watch the video on this topic at the top of this post, to listen to the podcast episode, hit play below, or read on for more…

What is asset allocation?

Asset allocation is the most common way of investing. It’s a preferred method for two reasons.

  1. Asset allocation is relatively easy to do
  2. There’s very little maintenance, unlike other investment strategies

If you’re familiar with the buy and hold strategy or buying a well-diversified portfolio, then you’ll already have an idea of how asset allocation works.

For example, if you have money to invest, and decide to put it in the stock market, you might distribute it to more than one area. You may want to put a portion of your money in stocks, such as large cap stocks, like Apple, Amazon, Google, or mid cap or small cap stocks. There are also sectors that you might want to get involved in. Financials, healthcare, technology, and energy are all popular sectors that many people invest in. Finally, you could decide to buy up some bonds and fixed-income investments.

When you add all of these investments together, you get an investment pie. You can use this to visualize where all of your slivers are in the market, as they may all be in different areas. Essentially, this investment method is asset allocation.

Why asset allocation is a long-term strategy

With asset allocation, you’re advised to hold these investments for the long term. The idea is, if you hold these investments for 5, 10, 15+ years, then the market will go up, and so will all your different pieces of the pie.

Now, let’s look at how this method performed in a tumultuous year, such as 2020. Overall, large cap stocks did well, but mid and small cap stocks were greatly affected. So, if you held a mixture of large, mid, and small cap stocks, the increase in large cap stocks may make it look like your portfolio performed adequately. If you hold a diversified portfolio, you’re always going to have slivers that outperform others. The aim of this strategy is to wait long enough that, eventually, the pie as a whole increases over time.

Many of us first encounter this kind of strategy when we get our first job and 401(k). Often, people pick different investments in this scenario. A popular choice is target-date funds, which create an asset allocation based on how much longer you have to work. This will then adjust according to your age.

In terms of maintaining an asset allocation, it requires very little attention. Your advisor may rebalance the account quarterly or even once a year. This strategy is an easy way to “set it and forget it.”

Understanding your investment risk tolerance

It’s important to note that you can still lose money with an asset allocation strategy – even if you have a very conservative portfolio. The idea is that if you stick with it and stay invested, then you will make your money back. The question is, can you stomach the negative?

This is where understanding your risk tolerance comes into play. Knowing what downside number you’re comfortable with can help you figure out what investment strategy is right for you. We demonstrate this by using real figures. For example, instead of theoretically asking you if you’re happy with a 20% loss, we’d ask if you’re happy to lose 20% of $1million, so, $200,000. This puts your loss into perspective.

Remember that if you’re using an asset allocation strategy, you do not sell when the market is crashing. You have to be able to withstand the financial impact of a pandemic, a financial crisis, or anything else that might be thrown at you. If you sell when the market goes down, you defeat the purpose of this strategy. Your advisor will tell you to hang in there.

What is the strongest asset strategy?

A strongest asset strategy differs from asset allocation because it allows you to sell whenever those assets are no longer strong.

When you’re thinking about investing using this strategy, you need to picture the entire stock market world. This includes equities, stocks, companies, bonds, fixed income, cash options and then you’ve got some alternatives. Once you’re looking at them altogether, you can start to see who’s winning the race.

Now, usually equities win the race because they have growth. Bonds are stable and make a good rate of return, but they may not always be the strongest option. Cash, on the other hand, hardly moves. However, if there’s a scenario where the market is crashing and equities and bonds are pulling back, cash could be the front runner because it’s not moving backward.

You then use this analysis to see where the strongest area is to invest. You could invest 100% of your portfolio in equities, but it doesn’t mean you have to stay there. You could move that 100% from equities to bonds, and again from bonds to cash, depending on market performance.

Strongest asset: a more active approach

If you decide to invest 100% of your portfolio in equities, you can take the same approach again. This time looking at the top performers in the equity world. In 2020, for example, large cap technologies were winning the race. This sector thrived during the pandemic, with mid and small caps struggling. So, we shifted all of our portfolios to accommodate this. In January 2021, mid and small caps started to come back, so we shifted again.

A strongest asset strategy does require more maintenance than asset allocation. You need to be actively managing your portfolio and prepared to make changes. We want to make a good rate of return for our clients, so we watch the market every day. If the market starts to change, then we make decisions, such as selling, to protect our clients’ investments from a downturn.

Which strategy suits your personality?

So, if you’re building out an investment portfolio or considering your investment options, think about which strategy suits your personality more. Do you prefer the idea of buy and hold (asset allocation), or do you want to keep a closer eye on your money and how it’s performing (strongest asset)?

When you decide which option is for you, the next step is to find a financial advisor who can help you manage your money this way.

To learn more about preparing your finances for the future, check out our complimentary masterclass, 3 Keys To Secure Your Retirement. The free interactive webinar gives you more information on how to build a retirement income plan and shares valuable money management tips and advice. Get it here.

2021 Tax Deductions and Tips

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Tax professionals offer the best option for learning about 2021 tax updates. A good CPA can provide you with updates that can affect you when filing your taxes and can hopefully reduce the taxes you owe or increase the refund you’re owed.  Here are some suggestions from a CPA that we know and trust.

2021 Tax Updates You May Have Overlooked

Charitable Tax Deductions

Charity tax deductions are still available, allowing you to take advantage of giving away some of your money. One of the main differences this year is that you’ll need to itemize your charitable tax deduction, which is an unexpected change for a lot of people.

You can deduct at least $300 for an individual or $600 for a couple.

Itemizing your deductions only makes sense when you have more than the standard deduction of $12,500 or $25,000 for couples. For example, it makes more sense not to itemize your deductions when the itemized deduction comes out to less than the standard deduction.

Straight donations are mostly the same, so it’s important to get a receipt. You should be itemizing deductions to really leverage straight deductions which may include:

  • Cleaning out your attic
  • Donating items to Goodwill or another charity

When you’re donating to charity, you can donate up to 60% of your adjusted gross income for tax purposes. Most individuals will not hit this threshold because it’s high, but it is something high net worth individuals may want to think about.

Bonus: Qualified Charitable Distributions (QCDs) are for people older than 70.5, and it allows you to take money out of your IRA and donate directly to charity. This can be done on top of your standard deduction and must be made out directly to the charity. When you do this, you’re not taxed on the withdrawal and you can deduct the donation on your taxes to offer a double benefit to you.

Medical Deductions

When you’re older, closer to retirement or have had to pay for medical procedures in the past year, medical deductions are something that you should be considering. A lot of medical deductions can be made:

  • Insurance
  • Prescriptions
  • Direct doctor costs

If you have a major deduction, you may want to itemize to leverage these deductions. The $12,500 or $25,000 deduction will need to be considered because there’s really no reason to itemize if you’re not trying to deduct higher than this amount.

Reaching a high enough threshold to itemize your medical deductions is often only possible when you’ve had major medical procedures performed. A few of the procedures that may be included are:

  • Dental implants
  • Nursing care
  • Other major issues

Earned Income Tax Credit

The earned income tax credit is based on how much you earn and how many qualifying children that you have. You need to be between 25 and 65 years old and have qualified earned income. A person must earn $16,000 as a single person or $22,000 as a couple to maximize this credit.

When you hit $51,500 as a single person and $57,500 as a couple, this is when the earned income tax credit starts to really phase out for you.

If you have no children, you can expect up to $543, and with three children, $6,700.

Child Tax Credit

A $2,000 tax credit is given to a qualified child between the age of 0 and 16. Once they hit 17 and older, this credit drops to $500, which is quite a jump. The year that the child turns 17, the credit is lowered.

There is also an income threshold for this credit:

  • $200,000 for a single person
  • $400,000 for a couple

Home Office Deductions

A lot of people are working from home this year. COVID has changed a lot of people’s working situations, and there are a lot of questions surrounding home office deductions. Employees that receive a W2 are no longer able to deduct their home offices.

Business owners can write off their home office if it remains their primary place of business.

You can deduct $5 per square foot, or you can itemize your deductions. The itemization is only beneficial if you can deduct more than the square foot value of your office. Remember to keep receipts on all of your expenses from your home office to ensure that you can maximize your deductions and have proof of your expenditures.

If you only work from your home office once or twice a week, you won’t be able to claim this deduction because it’s not your principal place of business if you’re working more days per week outside of your home.

Unemployment Benefits and Your Taxes

All of your unemployment income is viewed as wages. The income is reported on a 1099G, which you will use to claim all of these benefits on your taxes.

Bonus: Stimulus Check and Claiming It as Income

You do not need to claim your stimulus check on your tax return.

Tips When Thinking About Your 2021 Taxes

A few of the tips that we want you to know about when thinking about your taxes in 2021 are:

  • Financial management to manage your portfolio can help you leverage capital gains rates at the current rate.
  • Employee benefits should be managed, such as HSA, 401(k) and other options. Maximize your 401(k) and consider an HSA to use for your health expenses. The HSA can be funded and grow, and by the age of 65, you can take out the money while enjoying tax benefits. Otherwise, the HSA withdrawals all need to be medical related.
  • Review federal withholdings early in the year to ensure that your withholdings are proper. Recent changes to the withholding rate have left many people paying more at the end of the year than they expected. Use the IRS.gov Tax Withholding Estimator to properly adjust your rates at the beginning of the year so that you have fewer surprises at tax season.
  • Try and donate $300 to $600 to a charity this year for additional savings.
  • If you’re going to itemize, consider giving more to charity if you can. Double up on donations to maximize your deductions.
  • Mortgage interest rates can also be deducted on the itemized deductions.

On a final note, be sure to be compliant and file your taxes on time or get an extension. Also, make all of your estimated payments and pay what you think you’ll owe on April 15 because you’ll be penalized otherwise even if filing an extension.

 If you want more information about preparing your finances for the future or retirement, check out our complimentary Master Class, ‘3 Steps to Secure Your Retirement’. 

 In this class, we teach you the steps you need to take to secure your dream retirement. Get the complimentary Master Class here.