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June 15, 2011 Newsletter Archive

Time Flies when you Become a Parent So Start Saving for College Now

Ask any parent you know and they will tell you that having a child is exhilarating, fascinating, full of joy and anxiety. Expecting parents devote a lot of time planning for their new family member, and the birth is often accompanied by visiting family members and friends who shower affection and support on the new family.  Yet, new parents also have a daunting task ahead of them. Amid sleepless nights and multiple diaper changes, there is usually some anxiety as to whether you are being the parent you ought to be, and doing everything you ought to be doing.

There are several important action steps new parents ought to be taking. These include creating a will or updating an existing will to include a guardian for your child, reviewing your life insurance policies and considering long term care and/or disability insurance.

One area which is easy to overlook when your baby is new, or your children are young, is saving for college. With private college tuition, room and board topping out at over $50,000 these days, college savings seems to be a monumental task. Nevertheless, there are some steps you can take early on which will most likely add up in the long term to help support your child's college education.

What's the Plan?

Start with a 529 Plan
These funds offer tax-free growth for investments. There are a variety of investment vehicles from which to choose ranging from more risky to fairly low interest safer bets. There are no federal taxes due upon withdrawal if the funds are used for tuition, room and board, and other educational costs. Some states offer tax breaks for in-state investors.

Other Accounts
You can also use a Uniform Gift to Minor's Act account or other brokerage account. However, you will not receive the tax benefits from a 529 account.

Bank Accounts
Although a typical bank account offers none of the tax advantages of a 529 Plan, it does offer the security that your funds, up to $250,000, are insured by the FDIC.  Unfortunately, interest is quite low on the typical bank account so you won't have the potential for growth as you would in an investment vehicle.

Coverdell Education Savings Accounts
Through 2012, these accounts allow you to put in $2000 per year per child. Like a 529, if used for educational expenses, withdrawals are not taxed.

Begin Saving Now and Stick to It

One way in which you can ensure that you save regularly is to create a direct deposit from your paycheck or bank account into your child's 529 account. This is a fairly hassle free way to make sure that each month your child's account is funded and because you do not "see" this money, you adjust your way of life to your remaining resources.

You can also ask your relatives to provide gifts to the account for birthdays, holidays and special occasions instead of giving your children toys or clothes.  An individual can give $13,000 per year (a couple $26,000) without triggering a gift tax filing.

As Time Goes On

Continue to assess the risk involved in your child's particular account. The general rule of thumb is that as your child nears college age you want to begin reducing the investment risk.

Get your older children involved in the act of helping themselves.  If you have teenagers who work, have them begin contributing to their 529 Plan as well.

Have your teen apply for scholarships. With some research and determination your child may be able to access some scholarship money.

Contact your child's high school early and learn about the FAFSA and PROFILE process. Explore private colleges as well as public universities.  You would be surprised at the levels of college endowments and the amount of support colleges provide for students who demonstrate need.

Remember, you should not reach into your retirement nest egg for your child's college money. Time and again we see the same advice; your child can take low interest loans for college, but no one will give you a loan for your retirement. Do not forget to "pay yourself" first, that is, contribute to your retirement plan, and make sure that you use that nest egg for your retirement and later years.

You can read more about saving for college at www.savingforcollege.com and www.collegeboard.com.



To Buy or Not to Buy: Is Long-Term Care Insurance for You?

There is no doubt that Americans are living well into their 80's and 90's in numbers that we have never seen before. Although there is much written on financial planning, goal setting for retirement and overall wellness, often overlooked in these discussions is the question of whether long-term care [LTC] insurance is right for you, given your specific retirement goals, finances and health.

In response to the staggering statistic that at least 70 percent of people over the age of 65 will require some long-term care services at some point in their lives, the U.S. Department of Health and Human Services has supported long-term care insurance education at its web site www.longtermcare.gov/LTC/Main_Site/index.aspx.

The National Clearinghouse of Long-Term Care Information [National Clearinghouse] provides general information about the importance of long-term care planning, shares real stories from a group of individuals with diverse needs.

Unfortunately, it is easy to ignore planning for later life for a number of reasons. First, most of us do not want to readily confront the realities of aging and the possibility of dependency in our late life. We also tend to ignore realities of how costly care-giving in later life will be. Sometimes, we realize that we have to plan, but do not always know where to turn. The National Clearinghouse helps us understand our fears, the costs, and where to look for reliable advice regarding meeting long-term care needs.

If you are ready to investigate whether long-term care insurance is appropriate for you, here are some ideas to considerwhen researching the best plan.

When should you buy a policy? This is certainly not a simple question. The longer you wait the more probable that you will develop an illness or condition that prevents you from being underwritten. This is one of those times when you run the numbers and determine which scenario is best for your needs.

Make sure you account for inflation. Certainly costs today are not going to be the true costs to you in twenty to twenty-five years, at the time when you may likely need to use your policy. Some policies provide a 5% compound inflation option but these can double your premium. Some major insurers are now providing inflation protection that ties increases to the consumer price index or CPI. At the moment, the CPI is very low (2% per year), but the notion is that if inflation increases at a fast pace in the future, one could end up with a bigger pool of money at a lower cost.

Understand the daily benefit that you are purchasing, the length of coverage and the waiting period allotted before your insurance kicks in. If you have a general idea of the geographic area in which you plan to live your late life, then you can identify the average costs of home care and nursing care in that area. This average will provide you with a base-line from which you can then determine at what level you want to be covered.

You should also identify the number of years for which you would like coverage. We know that today, the average nursing home stay is three years. However, if you have certain illnesses in your family which lead you to think that you may require care giving services for a longer period of time then you may want to increase the number of years. There are numerous LTC products today which provide husbands and wives a pooled number of years of coverage. The waiting or elimination period is the number of days that you have to wait before the insurance begins paying. The waiting period can range from 0 to 180 days, and of course, the length of the elimination period plays into the LTC insurance product's cost to you. Again, considering a number of scenarios with various daily benefits, lengths of coverage and waiting periods allows you to examine a variety oof options and their costs side by side.

A number of larger insurers such as MetLife, Genworth, John Hancock, and New York Life to name only a few, sell long-term care insurance. Each company's products have their own details and pricing schemes and this can pose a challenge when determining what the best options are for your needs.

An LTC Insurance Pitfall - the Notorious Rate Hike and How to Cope with it.

Unfortunately, one of the realities of LTC insurance products is that there may be potentially steep increases in premiums. For example, we have been experiencing very low interest rates and these have deeply cut into the investment earnings on which insurance companies rely to fund benefit payouts. Additionally, policy holders live longer than ever and tend to hold on to their policies.

While the concern for steep rate hike increases may make us pause before we purchase, we are reminded that on the flip side, having LTC coverage can protect ourselves and our families from the incredulous costs of long-term care.

Once you have coverage, in the face of a sharp rate increase you should probably still retain your coverage, especially if your policy is already quite old. If you purchased this policy years ago, even the rate increase will probably mean lower rates than purchasing new coverage now in your later years.

Make sure that you review your current policy and that it still fits the needs you sought or now seek. If you have a policy with a compound inflation rider, assess its current value in today's dollars. If you cannot afford your policy with the rate hike after all, you may be able to cut back on the policy's benefits rather than canceling the policy.

At the end of the day, when considering your entire life planning needs, including your asset distribution, health care directive, and your wellness, a researched and thoughtful look at whether long-term care insurance fits into your life is worth the effort.

If you would like more information on all your life care planning needs contact us at 603/643-6072 or 802/457-9492.

Kiplinger's Retirement Planning Insurance for the Long Haul, Fall 2007


New College Grad is 81 Years Young

File this under the category, "it's never to late." Octogenarian Jeanne Bernek recently graduated from Community College of Vermont. Ms. Bernek's enthusiasm was very apparent during her interview on WCAX News, yet she was also very matter of fact about her life experiences. Intelligent, eloquent and beautiful, we are deeply moved by Jeanne's perseverance to pursue her education and be an inspiration to others. To see her interview and read more about Jeanne Bernek click these links:



Melendy Moritz PLLC is a client centered boutique firm. We focus on your unique needs by providing the individualized legal counseling and advising tailored to your specific situation.

We concentrate on the planning that matters to you.
Call us at 603.643.6072 or 802.457.9492


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