Level 5 Financial Blog
As we consider the tensions driving recent market movements, a Korean folk saying seems apt: “When whales fight, the shrimp’s back is broken.”
The idea is that bystanders get hurt when big folks duke it out. What are the tensions? Who are the bystanders? Let’s discuss.
Our December 7, 2021 posting discussed an attempt by the state of Washington to reduce the stresses on their Medicaid program being caused by long term care costs. The article outlined the WA Cares Fund which is a mandatory tax of 0.58% on W-2 wage earners in the Evergreen state. The program, which was designed to seed a Long-Term Care benefit for its contributors, was scheduled to go into effect on January 1, 2022. The blog credited the state of Washington with attempting to address a serious societal problem, but at the same time, pointed out its many shortcomings.
Much like the Qualified Longevity Annuity Contracts discussed last week, umbrella liability insurance can be an effective form of protection. Umbrella insurance is a type of personal liability insurance that covers claims in excess of regular homeowners, auto or watercraft policy coverage. One might think of this type of insurance as a “supplement” to these other types of policies and it is called an “umbrella” policy because it “wraps around” all of them to augment the protection which is already in place.
Despite sounding like a creature from a Star Wars movie, a QLAC is actually a tool that can be very helpful in funding a prolonged retirement. QLAC is an acronym for a Qualified Longevity Annuity Contract. QLAC’s provide guaranteed monthly payments until death and like many other annuity contracts are shielded from the fluctuations of the stock market. Further, a properly designed QLAC can help to manage one’s Required Minimum Distributions from Individual Retirement Arrangements (IRA’s). In doing so, the QLAC may also allow its owner to reduce his/her lifetime income tax bill.
Our most recent posting discussed the looming long term care crisis within our society. This article noted that due to our collective failures to plan, Medicaid has become the default provider and pays for more than 50% of the needed care for America’s elderly and disabled. Medicaid is a federal program which is administered by the individual states, so not surprisingly, this current situation has created enormous strains on state budgets. The state of Washington has initiated the “WA Cares Fund” in an attempt to address the problem. It was rejected twice by voters but came into being via action by the state legislature.