Senior Affected by Financial Collapse

Last week, the stock market was down more 1,363 over a three-day period. Although many of you may not own stocks, this still affects you.

Henry Paulson, the U.S. Treasury Secretary has asked for $700 billion to purchase troubled mortgages to restore confidence in the stock markets. This falls on the heels of the $85 billion loan to American International Group (AIG), the bankruptcy of Lehman Brothers and the bail out of mortgage giants Fredie Mac and Fannie May.

Did the fact that the “gorilla”, Lehman Brothers CEO Richard Fuld, received a $22 million bonus in March 2008, or AIG’s CEO receiving a multi-million dollar compensation package affect the down turn of these companies? You, as a taxpayer, are now being asked to bail out these companies.

In addition to the $700 billion bailout, the Security and Exchange Commission has stopped a practice know as short sales of 800 financial companies, to try and help end the downward trend in these financial companies. A short sale is a transaction that you enter in betting that a certain stock will go down in price. You pay a fee for the right to sell a certain stock at today’s price, even though you never own the stock.

Example: In the last year GE has dropped from $42 to $22 per share. Let’s say that when it was $42 you were sure that GE was headed for tough times because of it’s risky mortgage holdings. You call your broker and tell him you want to short 1,000 shares of GE. Later when the stock drops to $22, you decide to sell all 1,000 shares at $42. To complete the deal you have to cover your position by buying 1,000 shares at $22. This short sale results in a profit of $20,000.

Last Wednesday, something very strange happened in the financial markets. Money market account managers were dumping risky investments and buying U.S. Treasury Bills so quickly that there was a negative return. Generally, you purchase a Treasury Bill at a discount and in 30, 60 or 90 days it matures at full value. But last Wednesday, people were paying $101 to receive $100 at maturity — crazy, but true.

Currently, the Treasury Bills are earning .94 percent and the two-year Treasury Notes are at 2.14 percent. This is better than the zero percent Treasury Bills were earning last week but not much help to seniors who rely upon interest income to supplement their social security during their retirement years.

For most people, the general rule is that as you approach retirement, you should shift from risky to stable investments. So, given the fact that last week, even money market accounts lost value, where’s the safest place to put your money?

For most seniors, keeping your funds in either a FDIC insured bank or investing in US obligations probably makes sense. Bank accounts are FDIC insured for up to $100,000. Can you have more than $100,000 protection at any one bank? Yes, joint accounts are treated as owned equally by each of the joint account holders. So, if a married couple with one child has all three names on the account, they will each have $100,000 FDIC insurance and will be protected up to $300,000. US Treasury Notes and Bills are backed by the full faith and credit of the United States and are widely regarded as safe as a bank account with FDIC insurance.

Diversification of your portfolio and accepting some amount of risk is the right thing to do for wealthy seniors and those who have not reached retirement age yet. A Certified Financial Planner can help these individuals by evaluating their tolerance for risk and selecting a portfolio of investments. Retired seniors with limited funds should stick to the safe investments, even though rates of return are at all time lows.

This article gives general information and not specific advice on individual matters. Persons wanting individualized advice on matters discussed should contact an advisor experienced in those matters. To the extent this article provides information on legal matters, it is based on law in effect in Massachusetts on the date of posting (laws in effect in other states are often quite different).

Ronald H. Surabian is a CPA and attorney who works at the Elder Law Center in Saugus, Massachusetts. If you have any questions please call me at the Elder Law Center, One Essex Street, Saugus, MA 01906 (781-233-4444). To view this or any prior article, visit www.elderlawcenter.org



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tmn754 days ago
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Oddly enough, the financial collapse has affected all people, of all ages, in all income brackets, in some way. So why is it that our advice and assistance from the federal level all the way down to the local levels only focuses on certain portions of our populations (i.e. those already living under the federal poverty line [which, coincidentally, includes many Senior Citizens], those who lost a great deal but had a great deal to lose and homeowners alone)?

There was a relatively recent editorial in another Boston news outlet, penned by a Harvard-ite, that noted while news and financial focus in the foreclosure crisis homed in exclusively on the homeowners themselves, it completely ignored the plight of renters - renters in all income brackets - who suddenly find themselves displaced because their landlord lost the building in foreclosure and neglected to tell those tenants.

What of employees of all ages who invested in 401(k) plans? This is where we've been hit the hardest in our household. Over 70% of a moderate investment 401(k) was lost in the crash.

And what of the average person who is teetering on the edge of collapse, in any age group? There are many who are just hanging on, who are still too well off (insert chuckle here) to qualify for any form of assistance but are facing total collapse with one more ill-directed wind.

Why do we focus so exclusively on cerain populations? Why do we wait until the worst happens before we step in to lend advice or a helping hand?
MaldenseniorWe try to help the most vulnerable of our population the Seniors and disabled who need help because they have been forced to spend down to be a pauper before they can get assisstance. They make the mistake of living too long (ouliving their savings) Many survived the Depression era the World War II
Korean Conflict and up and down of unemployment and the cycle of inflation. The money was not easily flowing in the past years as it is in recent time. Wait your time is at hand.
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MaldenseniorNot many Seniors in Malden have to worry about FDIC insurance for the meager savings.

Long Term Health Care I

Deb Whitman, staff director of the Senate Special Committee on Aging and an adviser to the Obama for President campaign, told the symposium that the Democratic candidate would:

Support prevention efforts to help avoid chronic diseases
Strengthen Medicare and Medicaid
Amend the Family Medical Leave Act, which allows for 10 weeks of leave to care for an ailing family member, to apply to companies with 25 or more employees, rather than the current 50 employees
Fully fund the Respite Care Program, which gives federal dollars to states to run short-term care programs to give primary caregivers a break from their daily routine
Increase funding for loan repayment to attract and retain more home healthcare workers
Push for legislation that would require nursing homes to report staffing levels
Double funding for the NIH for research into treatments and cures for old-age diseases such as Alzheimer's
Jay Khosla, healthcare policy adviser to the John McCain for President campaign and former health counsel for then-Senate majority leader Bill Frist, M.D., said the GOP candidate would:

Allow for the purchase of long-term life insurance through health savings accounts
Encourage young people to purchase long-term care insurance
Promote scholarship programs for those pursuing careers as caregivers
Make the purchase of long-term care a tax-deductible expense
Other panelists agreed that individuals must take personal responsibility for the eventuality of paying for long-term care for themselves or a loved one.

Read Full Article (medpage TODAY)

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Empowered at Home Act Introduced

Cosponsors Needed
August 4, 2008: The Empowered at Home Act, S. 3327, would increase the number of older adults and people with disabilities who are eligible for Medicaid coverage for adult day services and home care. Just introduced by Sens. Charles Grassley (R-IA) and John Kerry (D-MA), it now needs more cosponsors to move it forward in the Senate.

The legislation strengthens the Medicaid home and community-based state plan option under Section 1915(i) waivers by making income eligibility standards the same for Medicaid coverage of home- and community-based services and institutional care (300% of SSI). Limitations on the scope of services allowable under 1915(i) waivers would disappear, and states would no longer be able to limit the number of individuals eligible for home and community-based services. A new 1915(k) waiver would concentrate services and funding for individuals who are high risk of institutionalization. State grants also would be available for consumer-directed care. We are especially pleased that the bill promotes and protects community living with spousal impoverishment protections for home- and community-based services recipients.

Please urge your senators to sign onto this legislation to make home- and community-based services more available under the Medicaid program.
Take Action Now!

Medicare DoNut hole

September 2, 2008
Editorial
Medicare’s Troubling Drug Gap
Probably no aspect of the new Medicare drug program has caused more confusion and irritation than the notorious “doughnut hole,” a gap in coverage that forces people who had been getting their drugs cheaply to suddenly pay the full price out of pocket. Now, for the first time, an analysis has quantified what happened last year when millions of beneficiaries fell into the gap. For patients with serious chronic conditions, the medical implications were very troubling.

Congress crafted the “doughnut hole” to limit federal spending on the drug benefit. Beneficiaries pay only deductibles and co-payments, with the rest covered by their insurance plan, until their drug purchases reach a specified limit. Last year, the gap began when beneficiaries purchased $2,400 worth of drugs. Then they fell into the doughnut hole and had to pay the full cost until their out-of-pocket spending reached $3,850, at which point they qualified for catastrophic coverage.

Last year, an estimated 3.4 million beneficiaries reached the coverage gap, according to a study by researchers at the Kaiser Family Foundation, Georgetown University and the National Opinion Research Center, or NORC, at the University of Chicago. Beneficiaries taking drugs to treat such chronic conditions as Alzheimer’s disease, diabetes, depression, osteoporosis and high blood pressure were especially likely to reach the gap.

What’s disturbing is that 15 percent of the beneficiaries taking drugs in eight categories said they stopped taking their medications when they reached the gap. Another 1 percent reduced their use by skipping doses, and 5 percent switched to another drug that was cheaper but might or might not be as effective.

For the 10 percent of diabetics who stopped taking their medication after reaching the gap, the health consequences could be immediate and serious. For those with high cholesterol or osteoporosis, the harm could take longer to show up but could still be serious.

There is no easy solution short of increasing federal spending or finding a way to drive down the cost of drugs. The program has helped millions of older Americans. The next administration and Congress will have to revisit the wisdom and need for the gap.



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