Planning Archives

11 DEC 2013

Improving Your Financial Health in 2013

By Commonwealth

For months, the media has focused on the fiscal cliff—those sweeping tax increases and spending cuts that are due to go into effect on January 1, 2013, unless Congress acts to change them. But that discussion shouldn't overshadow positive developments in the U.S., nor should it stop you from making improvements to your financial health in 2013.

Consumer markets look good
Consumer sentiment is as high as it has been since 2007; this can be attributed to three main areas:

  • At 7.7 percent, as of November 2012, the unemployment rate is well below its peak, and analysts expect slow but steady increases in employment in 2013.
  • Low borrowing rates have helped consumers reduce their obligations significantly, bringing debt to its lowest levelsince the start of the recession.
  • Demand for houses has risen, resulting in increased prices and leading both sellers and buyers to take action. Demand should stay high if the Federal Reserve continues its bond-buying program, which will keep mortgage rates low.

Uncertainty abroad
Although there are signs of optimism on the home front, international concerns could spill over into our economy in 2013:

  • A continued rebound in the euro could signal a potential end to the European debt crisis.
    • It remains to be seen whether or not Spain will be too proud to accept the European Central Bank's offer to buy its bonds.
    • Elections in Germany and Italy in 2013 are expected to have a significant impact on the future of the eurozone.
  • A current feud between China and Japan over ownership of several islands could restrain growth in this booming region.
    • The yen is also very weak.

Your personal financial health
Macroeconomic issues like these are beyond our control, and we often have to accept a degree of uncertainty when it comes to the financial outlook both at home and abroad. But you shouldn't leave your personal financial future to chance. You can make positive adjustments like these to help ensure that you are better prepared for whatever the future might bring:

  • Pay down debt. Start with credit cards that have the highest interest rates, and always pay more than the monthly minimum.
  • Increase your savings. No matter what your goal is—maybe a vacation or an emergency fund—create a timeline and action strategy to help you get there.
  • Develop a budget. Track your monthly and yearly expenditures so you can see exactly where your money goes—and how much discretionary income you have left to work with.
  • Review your credit report. Everyone is entitled to one free report a year from Equifax, TransUnion, and Experian. Request yours at
  • Assess life changes. Review your insurance coverage, retirement plan, will, and estate plan to ensure that they continue to meet your needs.
  • Protect your identity. Review statements for suspicious activity, avoid using your social security number, make online purchases only on secure websites (which have addresses that begin with https), and don't open e-mails from unknown senders.
  • Further your financial knowledge. There are countless websites, TV shows, and books that can help you learn more about personal finance.

No matter what 2013 brings, your financial advisor can help navigate your way to your goals. Please do not hesitate to contact our office with any questions you may have. Most important, best wishes for a happy and healthy New Year!

©2013 Commonwealth Financial Network®



01 JAN 2014

Baby Boomers on the Move: What to Consider If You Are Planning to Relocate

By Commonwealth

You've worked incredibly hard and are finally getting close to retirement. Like many other baby boomers, with your kids out of the house and a surplus of empty space and time, you may have thought about moving. If you are considering relocation, you'll want to read this list of tips.

Is downsizing right for you? 
Downsizing may seem like a pretty clear-cut decision, but before taking action consider:

    • Can you take care of your current home? Even if the answer is no, moving is not the only solution. Others include renovations to make your house more accessible, hiring help to do housework, or having a family member move in with you.
    • Can you get income out of your current home? If the only reason you are selling your home is to generate income for retirement, you may want to consider:
      • A home equity loan or line of credit
      • A reverse mortgage
      • Renting an unused room

Please note:

    Because reverse mortgages can be costly, they should be used as a last resort, and proceeds from reverse mortgages should never be used for investing in securities.

Money matters—searching for a lower cost of living
In the past, retirees often relocated to enjoy a warmer climate; recently, however, the cost of living and health care expenses have become their most common reasons for moving. To help with your financial situation, consider:

  • Paying off debt. Trading in your current house for a more affordable one may put extra cash in your pocket. Use the cash to pay down debt or build up savings.
  • Tax-free gains. Married couples can exclude up to $500,000 in capital gains from the sale of their primary home ($250,000 for single sellers). In order to do so, you must have owned and used the home for at least two out of the last five years and may not have excluded a gain from the sale of another home within the past two years.
  • Cost of living. Research income, sales, property, estate, and inheritance taxes. Don't be fooled by a low number in one category—typically, another tax will be higher to compensate. Property taxes are usually the most costly, so pay special attention to them.

    Please note: Tax credits and homestead exemptions may be available. Talk to your tax advisor before making any decisions.
  • Health care costs. Obtain prices and terms for medical facilities and insurers by checking
  • Less space means less stuff means lower expenses. When moving to a smaller home, you can't take all of your belongings. You may be able to earn cash selling items you leave behind. A smaller home also cuts future spending—you'll have less space to fill.
  • Time is money. Moving to a smaller residence means less time spent cleaning!
  • Utilities. A smaller house means less money spent on heating, cooling, and electricity.

Looking to stay active and involved
College towns are a popular choice for retirees. If you are hoping to stay active, consider:

  • Recreation. Does the community offer arts, cultural, and outdoor activities?
  • Proximity to services. Is it easy to get to the nearest major city, airport, or hospital? Is public transportation adequate?
  • Job opportunities. If you plan to work during retirement, see this list of job websites:
  • A condominium. This option offers a community of other retirees, organized activities, and home maintenance. But beware of monthly fees that cover maintenance.

Moving is never simple, but it can help you simplify your life. Talk to your financial advisor about any questions you have, so you can better prepare for this exciting transition.

©2012 Commonwealth Financial Network®



Avoiding a Personal Financial Filibuster

By Commonwealth

Is the current political race getting in the way of your financial plan? Depending on the way the data is manipulated, one may come to the conclusion that the market itself predicts the presidential election or that the party in office dictates the ensuing returns. If you're paying attention to pundits, you may well want to sit on the sidelines while things shake out.

Ultimately, that decision lies with you. But consider the following propositions before you vote on a specific action—or inaction.

  • Markets tend to be party-neutral over time. Based on data from Morningstar®, the S&P 500 Index's average annual return was negative in only four election years; in two—1940 and 2000—a Democrat was in office, and in the other two—1932 and 2008—a Republican was in office. Otherwise, the average return during the last 21 presidential election years is 11 percent, which is very close to the average return of all years between 1925 and 2011, based on return data from Standard & Poor's.
  • A vote against timing the market. Attempting to gauge the right time to get in or out of the market can be a losing proposition, as noted by the chart below.
Growth of $100 Invested in S&P 500
  • From the White House to your house. Regardless of who lives in the White House, most of us are more interested in our own financial house. There are numerous factors that can affect your long-term financial strategy. The top four are:
    • Inflation. In order to maintain your standard of living over time, your assets need to keep up with inflation. Inflation is generally measured by the Consumer Price Index (CPI), which jumped from 1.6 percent in 2010 to 3.2 percent in 2011. It's widely thought that inflation will remain low for some time; however, keep in mind that the CPI does not measure two consumer goods near and dear to your bottom line—gas and groceries.
    • Interest rates. The federal funds rate, influenced by Federal Reserve policy, dictates short-term interest rates. Interest rates are low and are expected to remain so for some time, which is good news if you have outstanding debt that can be refinanced. It could also mean, however, that your investments in fixed income may be producing a yield lower than the rate of inflation.
    • Market volatility. Peaks and valleys aside, over the long term the market has remained an effective hedge against inflation. As previously discussed, it's easy to panic when things get bumpy, but reacting to fear can result in lost opportunity.
    • Taxes. Tax increases are always a concern, no matter who is Commander-in-Chief. A financial professional can advise you on the best mix of taxable, tax-deferred, and tax-free investments for you.

A trusted advisor can help you develop a strategy around all of these factors—and more. Even the best politician would be nothing without advisors and strategy, so embrace the spirit of the election by adopting these two timeless tactics.

And remember . . . Presidential candidates and agendas are based on four-year plans, but your personal financial plan is based on a much longer timeline. So, ask yourself: Will your current strategy last as long as campaign promises or throughout the long term?

Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is not indicative of future results. Diversification does not assure a profit or protect against loss in declining markets. All indices are unmanaged and investors cannot invest directly into an index. The S&P 500 Index is a broad-based measurement of changes in stock market conditions based on the average performance of 500 widely held common stocks.

©2013 Commonwealth Financial Network®



The Light at the End of the Tunnel

By Commonwealth

As we look at the trajectory of the U.S. economic recovery, once again this year we see a light at the end of the tunnel and wonder if it is an oncoming train. At this point, it looks as if 2012 may bring the start of sustainable growth. But the end result remains vulnerable to outside influences, so the real question is, How will we know?

The bright spots: employment and housing
When it comes to sustainable growth, economists focus on a number of key indicators, including:

  • Employment. Employment generates wage income, which is the base of consumption. Consumption accounts for more than two-thirds of our economy, so without growing employment, we can't grow anything else with any lasting momentum. The 2012 employment picture has been encouraging, despite some recent weakness. Increases in employment have been accompanied by growth in incomes, which has helped to support an increase in consumer spending.
  • Housing. We're starting to see rising prices in some markets, as well as an uptick in housing starts. Combine that with high affordability levels, low mortgage rates, and rising rents, and you've got a recipe for a continued recovery.
  • Durable goods demand. You may not need a new car every year, but you will eventually, and it seems that many Americans are digging into their pockets to fund big-ticket purchases again.

Are these improvements sustainable? They could be. The current level of employment growth seems to be sustainable around a trend line that would promote continued recovery; continued growth in spending would follow as a result. The housing recovery and growth in durable goods demand should also be able to continue their forward trajectory. Factor in a gradual recovery in local and state government spending and slow growth in business investment—both of which are occurring—and the recovery appears to be on track.

So what could derail it?

The obstacles: political vs. economic 
Major obstacles to the ongoing economic recovery would likely be external events:

  • A war in the Middle East
  • A European economic collapse
  • A significant political event in the U.S.

Of the three, the most probable seems to be the last (although ongoing debt concerns in Europe have certainly added to market volatility). Notably, however, all three examples are political, not economic, events. That political events now trump economic ones is a reflection of the new world order. In some sense, though, this is just a reversion to the origins of the economics discipline, when it was known as political economy. Events in the real world are once again dominating those in the financial world.

Which brings us to the major issue of the day.

The oncoming train? 
It's no secret that the U.S. has budget problems, which came to light in a very public way last summer with the debate in Congress over whether or not to raise the debt ceiling. Now, we have to face the reality that this year's presidential election will determine the government that will have to make long-term decisions about how to deal with the country's budget woes.

To understand the basis of the decisions they will make, we must first understand the underlying facts:

  • The so-called fiscal cliff. The expiration of the Bush tax cuts, the sequestration of government spending, and the renewed debate over the debt ceiling are all expected to hit at the end of the year—or sooner. As a result, we could be facing some extreme uncertainty and the possible derailment of the economic improvements we've seen thus far.
  • Spending and taxes. We currently spend about 50 percent more than we raise in taxes; taxes cover about two-thirds of spending and borrowing accounts for about one-third.
    • Should we just raise taxes? The numbers above mean that if we raised taxes without cutting spending, taxes would have to go up by about 50 percent.
    • What about cutting spending alone? We would either have to substantially eliminate discretionary spending (defense and other government programs) or cut back on discretionary spending while also reducing Social Security and Medicare spending. Neither "solution" would sit well with U.S. citizens; just look at what happened in Greece.

The light
Despite how uncertain our economic picture may be, especially when you consider the political obstacles that could derail the recovery, there are positive developments at work. As financial advisors, we work with investors to help keep their financial plans on track, regardless of what the future brings. And we'll be keeping an eye on that light in the tunnel and hoping for the best.

©2012 Commonwealth Financial Network®



Organizing Your Finances: Before and After a Personal Loss

By Commonwealth

The death of a spouse or life partner is one of the toughest events you can go through. Along with the emotional adjustment of continuing on without your best friend, there is additional stress involved in facing the relevant financial issues while you are still grieving. But there are things you can do now to help you through this difficult time. The following lists provide a framework for keeping your finances organized before and after a personal loss.

Preparing now to minimize stress later

  • Keep a list of insurance companies, policy numbers, and social security numbers on hand.
  • Store important documents—such as your marriage certificate, wills and trusts, and children's birth or adoption certificates—in a safe location for easy accessibility.
  • Ensure that each spouse has a credit card in his or her own name or that you have a joint account in both names.

During and after the loss

  • Notify others and seek advice. In addition to notifying your employer and your spouse's employer, be sure to contact the funeral director and your attorney, insurance professional, financial advisor, and accountant, so they can get started on paperwork and financial matters.
  • Obtain at least 10 certified copies of the death certificate, so you can file for various benefits and change the ownership of investments.
  • Continue to pay bills so you don't incur late fees.
  • Cancel unwanted club memberships and magazine subscriptions.
  • Retrieve your spouse's belongings from his or her workplace, and collect any salary, vacation, or sick pay owed to your spouse.
  • Check with your credit card, bank, and loan companies regarding eligible death benefits.
  • Change the ownership of bank and brokerage accounts.
  • Discuss what to do with IRAs and employer retirement plans with your financial advisor.
  • Contact the Social Security Administration to discuss eligibility for benefits.
  • Obtain tax identification numbers.
  • Talk with your attorney and accountant before transferring accounts or distributing assets, as you may or may not incur additional taxes at your spouse's death.
  • Take advantage of health insurance benefits, such as COBRA.

Addressing personal financial affairs
Remember, you may need to take some time after experiencing a loss before making major financial decisions. Be sure to have a trusted advisor look over any financial decisions you are considering and to ask as many questions as necessary during this stressful time.

©2012 Commonwealth Financial Network®



Encore Careers: Becoming Your Own Boss

By Commonwealth

These days, retiring from one career doesn't necessarily mean quitting work altogether. In fact, entrepreneurs in their 50s and 60s have launched more new businesses over the past decade than any other demographic. Drawing on the knowledge and professional networks they've developed over the years, these older entrepreneurs are proving that, when it comes to starting a business, the adage "the older, the wiser" often rings true.

Why the business boom among older Americans? 
For older business owners, entrepreneurship offers a number of benefits, such as:

  • The chance to pursue a lifelong passion
  • A more flexible lifestyle
  • Supplemental income
  • New challenges
  • The satisfaction of being their own boss

Of course, starting a business isn't a decision to be taken lightly. According to the U.S. Small Business Administration, nearly half of new ventures fail within the first five years. Yet, despite these grim statistics, older entrepreneurs are often better equipped than their younger counterparts to withstand the hardships of business ownership. On the other hand, they may have greater family responsibilities and living expenses to consider.

Is entrepreneurship for you? 
If you're thinking about going into business for yourself, keep these tips in mind:

  • Maximize your skills. What's your area of expertise? Take advantage of your experience and existing network.
  • Do what you love. Now's your chance to be genuinely, 100-percent passionate about your work.
  • Conduct a self-assessment. Be sure to consider your risk tolerance and acknowledge your limits. How driven are you to succeed?
  • Test the waters. Before you take the plunge, do your research and find a mentor in the industry you're looking to join.
  • Choose the right business model. Franchise, sole proprietorship, online business? The model you select can have a big impact on your success.
  • Take advantage of your resources. Work with your financial planner to determine how starting a business will affect your overall financial situation.

Launching a business comes with significant risks, as well as the potential for significant rewards. To increase your chances of success, it's important to plan ahead and weigh all aspects of the decision with your financial advisor. For more information and tips on becoming an entrepreneur after 50, visit the U.S. Small Business Administration's website at

©2012 Commonwealth Financial Network®



Preparing for the Return of a Boomerang Kid

By Commonwealth

Is your recent college graduate or adult child moving back in with you? It's far from an uncommon scenario these days. According to a recent Pew Research Center study, 3 in 10 young adults between the ages of 25 and 34 have lived with their parents in recent years.

Known as the "boomerang generation," young adults today are apt to move out of the family home for a period of time before returning to live with their parents. Grown children may need or want to move back in with mom and dad for any number of reasons, including poor job prospects or the desire to pay down debt.

Keeping your financial life on track with a full house
Before you welcome a child back under your roof, it's important to make a plan to manage the transition. Use the tips below to help keep peace in your household and ensure that both you and your child stay on course to meet your financial goals.

  • Be realistic. It's natural to want to support your child as he or she searches for employment or saves money. But don't exceed your financial limits. Your child should understand that it's important for you to meet your own retirement and debt repayment goals and obligations.
  • Map out a financial plan for your child. Work with your child to set a budget and savings goal. Discuss the amount of financial help you're able to provide and decide if your child will stay on your health insurance plan (most plans cover kids up to age 26).
  • Set a target move-out date. If you don't set a limit, your child may stay at home longer than expected or delay working toward future plans. If he or she needs to start paying off debt or is hoping to save money for a down payment on a house or condo, have a realistic discussion about how long it will take.
  • Reassess the plan as necessary. Once you've made a financial plan and set a move-out date, ensure that your child is making progress toward those goals. Talk regularly about obstacles he or she has encountered and how you may be able to help with the job search. If your child hasn't been able to find a job, you may need to update the plan to reflect a more realistic time frame.
  • Decide if your child will pay rent. Some parents charge grown children rent to offset the costs of having another person under their roof.If you don't need the rent money, you might consider letting your child save that amount to use when he or she moves out. Exchanging household chores for room and board is another option.
  • Consider whether you'll help pay off your child's debt. If you decide to assist your child in paying off education loans or credit card bills, be sure to create a contract that outlines what you expect in return.

Making the best of a not-so-ideal situation
Dealing with a full house can be tricky, especially if you've lived in an empty nest for a while. But setting clear ground rules and financial expectations will help ensure a smoother transition when a child returns home—and help him or her regain financial independence more quickly.


©2012 Commonwealth Financial Network®


Reducing Your Fuel Costs in the Summer Months

By Commonwealth

Before the summer travel season begins, be prepared for what to expect when filling up at the pump and consider how you can save on fuel costs.

Gas prices typically go up in the summer

  • Summer means more roads trips and people traveling. The increase in driving during summer causes the demand for gasoline to shift up across the nation.
  • In early spring, energy companies conduct maintenance on their refineries. Routine maintenance affects supply levels, and maintenance costs are passed along to consumers.
  • Natural disasters, such as hurricanes and tornadoes, generally occur during the summer, and the consequent damage can limit the supply of gasoline.
  • Winter fuel is less expensive to produce than summer fuel.

Winter-grade and summer-grade fuel
Fuel sold by gas stations in the summer is different from the fuel sold in winter. Summer-grade fuel costs more to produce, and the transition to making it can lead to a decrease in supply, as it takes time for the refineries to switch production lines. Why is summer-grade fuel more expensive? There are several reasons:

  • Compliance with the Clean Air Act. In order to limit smog, refiners have to make a special blend of gasoline that doesn't evaporate easily in the warm summer air. This is aimed at reducing pollution and smog.
    • Because of the cost of raw materials, this fuel costs $0.05 to $0.15 a gallon more to make.
  • To keep the vapor pressure down in your car's engine during the summer, special components are added to the summer-grade gasoline mixture. These components are expensive. In winter, when a higher vapor pressure is allowed, oil refineries can use butane, which is inexpensive and plentiful. This contributes to the seasonal change in prices.

How can you save despite the seasonal transition to summer-grade fuel?
There are several actions you can take to save on gas costs, including:

  • Check your air filter. A clean air filter can improve gas mileage by as much as 10 percent.
  • Have your tires aligned and inflated. Poor alignment causes tires to wear out more quickly and your engine to work harder.
  • Maintain your car with regular services to run efficiently. A properly maintained engine can improve mileage by up to 4 percent.
  • Drive more slowly. Every 5 mph reduction in highway speed leads to a 7-percent reduction in fuel consumption.
  • Don't rest your foot on your brakes. Riding with your foot on the brake pedal will not only wear out the brake pads, but it can also increase gas consumption.
  • Reduce the weight of your car. Empty your trunk, remove any unnecessary items on the seats, and pack as lightly as possible for vacations.
  • Stay cool using your windows. Use your windows instead of your air conditioner at slower speeds, but consider rolling up your windows in favor of A/C on the highway to minimize drag.
  • Don't idle for more than 30 seconds. Avoid using the drive-through, and turn off your car in heavy traffic or long stops.
  • Stay informed. Check out one of the many websites that post gas prices at surrounding stations to find the lowest prices in your area. Some include Gas Buddy ( or Gas Price Watch (

Also consider cutting your gas bill by using public transportation, telecommuting, or walking/bike riding where distance and time permit.

What will you do with the dollars you save?
Even small changes and savings can result in big payoffs when it comes to long-term investment and planning goals. If you are unsure about how to best pursue your financial goals or simply want a second opinion, please do not hesitate to contact me.

©2012 Commonwealth Financial Network®



Protecting Your Elderly Family Members from Scams

By Commonwealth

As the number of aging Americans continues to grow, more and more scams are targeting people 60 and older, who are often perceived as more trusting and polite.

What kinds of scams are out there?
One of the most common frauds is known as the "grandparent scam," in which con artists scare their elderly suspects with a phone call in the middle of the night, catching them off guard with a heartbreaking story about a loved one. The "grandchild" is always in need of cash, asking the victim to wire funds through a money-transfer service and repeatedly mentioning not to tell anyone.

Besides the grandparent scam, those who prey on the elderly have plenty of other tricks up their sleeves. For example:

  • Scammers posing as telemarketers ask for donations to civic causes, attempting to appeal to the older generation's patriotism.
  • Imposters pretending to be with a government agency, such as the Social Security Administration or Internal Revenue Service, try to convince their targets that they must pay an exorbitant sum to comply with new regulations.
  • Crooks claiming to represent a well-known company, such as Wal-Mart, inform their targets that they've won a sweepstakes and need to make a payment to obtain the supposed prize.

How can you protect yourself and your older family members?

  • Never wire or send money to someone you don't know, no matter what the circumstances may be or how convincing the person is. Once you wire money, you cannot get it back. Also remember that legal sweepstakes don't require you to pay taxes or other fees in order to claim your winnings.
  • Don't forget your common sense. Fraudsters call at times when they think they can catch you off guard. They also create a sense of urgency, pressuring you to send them money before you find out who they really are. As disturbing as the call may be, remember to keep calm and rely on your common sense.
  • Question the caller. If someone contacts you claiming to be a family member, friend, or someone else you know, ask the caller questions to confirm his or her identity. You could quiz him or her on the date of a family's member birthday, the name of a pet, or the restaurant you last went to together.
  • Confirm the emergency situation. To determine if the situation is real, call sources who can verify where the person in question is. If someone calls claiming to be your grandchild, contact your actual grandchild's parents immediately.
  • Be wary of strange messages. Usually, these scams don't involve meeting anyone personally; rather, the scammers will keep their distance, contacting you by phone, letter, fax, e-mail, or even text message.
  • Know that scammers don't always ask for sizable amounts of cash. In most cases, it's between $500 and $5,000. If you wire money once, the scammer may continue to contact you in the hope that you'll keep sending money, upping the requested amount each time.
  • Protect your computer, tablet, and smartphone information. Don't let scammers get their hands on your e-mail account, phone contacts, or passwords stored on your electronic devices.
  • Contact your local law enforcement department if you're concerned that a con artist is targeting you.

Remember, scams are ever-changing, and fraudsters are constantly coming up with new ways to take advantage of unsuspecting victims. To stay up to date on the latest scam alerts, visit the Federal Trade Commission's website

©2012 Commonwealth Financial Network®



Work Hard, Invest Wisely…Retire Early? Putting the American Dream Back Within Reach

By Commonwealth

Many people dream of retiring early, but few are able to make that dream a reality thanks, in part, to costs associated with health insurance coverage. Medicare benefits kick in at age 65, but one must fill the gap in between. And if there is a younger spouse or dependent in the equation, they likely won't be covered by Medicare at all.

The Patient Protection and Affordable Care Act (PPACA), also known as the Health Care Reform Act, has changed the playing field somewhat; however, its provisions will take several years to be fully effective. So what can you do to find affordable care in the interim?

  • Enroll in the working spouse's group plan. This is probably the most common and least expensive way for a retired spouse to obtain health insurance. Note that:
    • Some companies offer family coverage for domestic partners.
    • There may be a limited time in which to enroll.
  • Qualify for retiree health insurance with your current employer. Employers seldom subsidize the cost of retiree health insurance, but such coverage still may be less expensive than an individual policy. If it's available, be aware that:
    • Premiums can increase.
    • Benefits can change.
    • Employers can discontinue coverage.

Determine whether the coverage will replace or supplement Medicare. Missing the enrollment date for Medicare could be an expensive oversight.

  • Continue group health insurance under the federal Early Retiree Reinsurance Program (ERRP). The new ERRP reimburses employers a percentage of the premiums for group insurance for retirees age 55 or older, their spouses, and their dependents. Be aware that the federal subsidies for the employer do not automatically reduce the retiree's premium cost.
  • Elect COBRA benefits. Retirees and their dependents may be eligible for continued employer benefits under COBRA. COBRA mandates that employers with 20 or more employees must continue group health insurance for terminating employees for a period of time. The number of months someone can retain group insurance coverage depends on the state. At a minimum, retirees can continue their coverage for an additional 18 months, but at an unsubsidized cost.

See the Kaiser Family Foundation website,, for more information about states' COBRA extension laws and guaranteed insurance protections.

  • Buy a state-sponsored guaranteed health insurance plan. These are called HIPAA-eligible plans or high-risk pools, depending on the program the state offers. Under PPACA, states must offer insurance coverage for qualified residents, regardless of preexisting conditions. By 2014, uninsured retirees who make too much to qualify for subsidized health plans will be able to buy coverage, regardless of health, through private insurers via a state-sponsored insurance exchange.

The cost for state-sponsored guaranteed health insurance will be higher than insurance purchased through private insurers.

  • Start a small business or work part-time. Some states require insurers to offer group plans to the self-employed. Small group plans are usually more cost-effective and offer better benefits than most individual health insurance contracts. If starting a business is unrealistic, retirees may get health insurance through part-time work.
  • Buy an individual insurance plan. Because premiums frequently increase along with age and health complications, insurance purchased from a private insurer is the retiree's most expensive option, if he or she can qualify at all.1

High-deductible plans combined with a Health Savings Account are becoming an increasingly popular solution. These plans usually have a $5,000 to $10,000 deductible with a limit on out-of-pocket costs. Be sure to read the fine print and understand what expenses meet the deductible.

Estimating costs
Estimating your future medical costs is challenging for several reasons:

  • Medical and drug costs are growing at a rate higher than inflation.
  • Long-term costs due to individual medical conditions are hard to predict.
  • Longevity is hard to pinpoint and may be a tough topic to come to terms with.

Your best move is to work with a financial professional to determine what may be appropriate for you. With proper planning, the ability to retire early may be more than just a dream.

1 After 2013, insurance companies cannot deny applicants due to preexisting conditions.

©2012 Commonwealth Financial Network®



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Robert Donaldson (CA Insurance License #0541081) is a Registered Representative and Investment Adviser Representative with/and offering securities and advisory services through Commonwealth Financial Network, Member FINRA / SIPC, a Registered Investment Adviser. Additional advisory services offered by Advisory Group West, a registered investment adviser, are separate and unrelated to Commonwealth.

This communication is strictly intended for individuals residing in the states of AZ, CA, FL, HI, LA, NY, TX, UT, WA.