Making Sure Your Tools Still Make Your Plan Work

Jessica Lanning — Mon, 25 Apr 2011 22:40:20 +0000

The Los Angeles Times reported about a man in his 70s whose insurance policy premiums would have to increase to $510/month after 20 years of paying $25/month to keep the policy in force. The article is pretty well written, and I’ll cut the newspaper a break for the shock-value lead to bring you into the story. The message is this: Make sure you understand what you’re buying, and you have to re-evaluate whether what you bought is still the right tool in your toolbox.

Plan first, tools second, revisit often.

This adage applies to life insurance probably more than any other tool in your financial planning toolbox. In most cases, you bought it with the intention of keeping it for 20 years or more. A lot of life happens in five to 10 years, let alone 20. One of the biggest changes during that time is your own maturity – your thoughts and values change, your needs change, and your desire for security changes. What made perfect sense and what got your attention 5, 10, or 20 years ago is probably quite different than what you would notice and pay attention to today. And while you’re going about your life, the insurance industry has probably introduced new products and stopped selling others.

Remember to go back to your plan and then look at the tools (products) you’re using to make those plans happen. Evaluate whether a particular financial tool is still a viable part of that plan or no longer serving you. A life insurance review would be valuable. Most life insurance agents will do these for “free” as a way to sell you something else. Find an ethical one who will give you an honest answer, even if it means losing a commission. For life insurance, consider these questions:

• What might I need life insurance for?
• Do I have people who are financial dependent on me? For how much longer?
• Does the policy I have any cash value?
• How is my health?
• How much do I need?
• How might I use life insurance to meet multiple financial planning needs? (long-term care, cash reserves, retirement income supplementation, college education funding, etc.)
• How might I use pre-tax dollars to meet those premiums?
• What is the value of my estate and how much might my heirs have to pay in estate taxes?

Once you’ve explored some of these questions in present time, your answers from years ago may have changed. If so, time to choose a new tool.

The post Making Sure Your Tools Still Make Your Plan Work first appeared on Lanning Financial.

Use an HSA to Save on Health Care Costs

Jessica Lanning — Mon, 30 Aug 2010 01:00:21 +0000

I am a huge fan of Health Savings Accounts. I have one for me and my husband. (The kids were cheaper on their own plans. Go figure.) They bring consciousness to your well-being and your health care expenses. The basic concept is that you buy health insurance from a company (Blue Shield, for example) with a high deductible. You then put a lump sum of money into a Health Savings Account. This amount has increased a bit each year. You use the policy as you would any other policy, and you use the lump sum to meet the difference between what the policy pays and you pay with PRE-TAX DOLLARS. Of course, you have to use the money for medical expenses (or pay taxes and penalty for non-qualified withdraws) but you can use the money for a much greater variety of services and products (like dental visits and acupuncture). If you don’t use the money, it rolls over and grows tax-free through retirement. Save money and be healthy—what’s not to like?

Reasons to Use an HSA

While it takes a bit of time to get the hang of how to use the plan, once you understand it, it’s not a big deal. Complain, consternate, and confabulate all you want about national health care and the lack thereof. In the meantime, if you’re self-employed, consider an HSA. Look at these statistics, as provided by my account holder:

• People enrolled in HSA-type plans spend 5% to 10% more on preventive care, have 5% to 10% lower emergency room utilization, experience 10% lower medical costs, and are much more likely to use online health tools. (Source: Aetna national survey, April 2010)

• In a study of 2 million members enrolled in HSA-type plans, Cigna found that members used more generic drugs and that medication compliance improved while costs decreased. They also received recommended care at similar or better compliance rates. Members with chronic diseases such as hypertension, joint disease and diabetes experienced between 15% to 27% reduction in medical costs. (Source: Cigna study, January 2010)

HSA-type plan enrollment has increase 25% from January 2009 to 2010, and most of the enrollment was through employer-sponsored plans. Why? Because they’re cheaper for the employer, they give the employees more flexibility (which is seen as a huge benefit), and employees are healthier and at work as a result.

If you want to explore how an HSA might work for you and need a referral, give me a call or send an email. I’m happy to help.

The post Use an HSA to Save on Health Care Costs first appeared on Lanning Financial.

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Making Sure Your Tools Still Make Your Plan Work

Use an HSA to Save on Health Care Costs