Answers to readers’ financial questions
Q: I have a long-term care health policy with Genworth. I understand that these policies may be taken over by a Chinese company. Should I continue to pay the premiums, or should I cancel this policy and obtain a new policy from another company?
A: You should not cancel your policy. If you do try to obtain a new long-term care policy, you may not be approved if your health condition has changed, and a new policy will probably be more expensive if your existing policy was obtained several years ago.
I have touched base with Jack Lenenberg, an LTC insurance consultant and president of LTC Partner. He has an excellent reputation and specializes in the long-term healthcare industry.
He said: “The merger of Genworth and China Oceanwide has been in discussion for over four years and may never go through. The policyholders’ rights in their contracts will not be impacted whatsoever.
“The Genworth traditional LTC policies are excellent contracts. Genworth policyholders should always continue to pay their premiums.”
Q: I am almost 65 and will be eligible for Medicare shortly. However, I am still working, and my wife, who is not close to 65, is being covered under my health policy with my existing employer. Should I be applying for Medicare or postpone my coverage?
A: If you already are receiving a Social Security benefit, you will be automatically registered in Medicare Part A, hospital insurance. There is no cost for Part A if you have worked under Social Security with sufficient benefits.
You do not have to enroll in Part B, medical insurance, if you choose not to. There is a monthly fee for part B; the premium is based on your income.
If you are not receiving a Social Security benefit, you can enroll in Part A and wait to enroll in Part B after you stop working. In order to avoid a penalty, with higher part B premiums for the rest of your life, you are required to enroll in Part B during the “special enrollment period” consisting of the eight months beginning the month after your employment ends or the coverage ends, whichever happens first.
Because your wife is not yet eligible for Medicare, I recommend that you retain your healthcare coverage with your employer and postpone applying for Part B until after your employment ends.
I also recommend that you request from the Centers for Medicare and Medicaid Services (cms.gov) the free government handbook, “Medicare and You 2021.”
Q: Recently I have been paying the nursing home costs for my mother-in-law from a traditional IRA account, over which I have power of attorney.
My accountant indicated that because of the high nursing costs, there would be no income tax liability on the IRA withdrawals because of the medical cost deductibility of the nursing costs.
It occurred to me that there is an argument for not converting all of one’s traditional IRA assets into a Roth because of this possibility. Do you agree?
A: I do agree, but I wanted to run the query by IRA expert Ed Slott (www.IRAhelp.com) for confirmation. He agreed also. He indicated that he has covered this issue in the past. His comments follow.
“If large medical expenses are expected, it would be best not to convert any funds needed to pay those bills [to a Roth]. This way they can be paid from pre-tax IRA distributions.
“If the medical expense is large enough, the itemized deduction can offset some of the income on the taxable IRA distribution. In this case, it would be wise to hold some traditional IRA funds since it’s best tax-wise to pay these medical expenses with pre-tax funds.”
Elliot Raphaelson welcomes your questions and comments at firstname.lastname@example.org.
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