FINANCE

CONFUSION REIGNS IN ESTIMATING HEALTH CARE COSTS IN RETIREMENT

Is Medicare free? According to a Putnam Investments study, one person in seven believes it is. Nothing could be further from the truth and at least one person in seven is destined to get a rude surprise at retirement. In fact, Medicare Part A covers the first 100 days of hospitalization. Only the first 60 days are free. The next 40 days cost $289 per day. The first 20 days of nursing home care are free, but the next 80 cost $145 per day.

THERE IS NO FREE HOSPITAL LUNCH.

For people who want to estimate how much they will need to cover health care costs this presents a puzzle for planning. In fact, it is a puzzle few online calculator tools attempt to answer.

Putnam Investments has introduced an innovative tool to help its 401(k) plan participants estimate health care costs. The new Health Cost Estimator makes an estimate of your costs based on some health criteria. It breaks out insurance premiums and out of pocket expenses including copayments and drug costs.

Putnam investment experts say that as a general starting point you can estimate that a 65 year old man in excellent health with a life expectancy of 88 years will have to spend $286,000 in retirement. That means he would have to go into retirement with $169,000. 

But that calculation is not true for everyone. Suppose the man has type 2 diabetes or cardiovascular disease. The hard fact is that this person would need less for medical expenses at retirement. Why? Because he would be expected to die sooner.

Although it is an advance in retirement planning, the health care estimation tool is not perfect. Critics say all similar tools have many assumptions built into them including a crucial one: rate of return on investments.

STATES WILL TAX GREEN CAR OWNERS TO PAY FOR ROADS

Nationwide, gas tax revenue has declined every year. It was $40.7 billion in 2004 and 37.9 billion in 2010, according to inflation adjusted data from the Institute on Taxation and Economic Policy, a research group in Washington. People are buying less gas and that means they are also paying less taxes on gas.

One reason gas taxes are down (besides consumers economizing on travel) is that more green cars on the road use very little gasoline.

Two states, Virginia and Washington, are considering levying green car taxes to make green car owners pay their share in financing roads and bridges. New Jersey, North Carolina, Indiana and several other states are considering doing the same. 

Virginia will charge electric car owners $65 a year to offset lost gas taxes. Washington State will charge $100 a year. Oregon lawmakers are considering charging the owners of green cars, and any car that gets more than 55 miles per gallon, a flat annual fee of $542, or a usage fee of 1.55 cents per mile. 

The real issue is that conventional cars are more efficient, says John DeCicco, a professor at the University of Michigan Energy Institute. He was quoted in Bloomber Businesssweek. Green cars made up only 3.3 percent of cars sold last year, according to WardsAuto which tracks industry performance. They say it's not enough to significantly reduce gas taxes.

TERM LIFE IS CHEAP ...

Gen X people plan to protect their families with term life insurance

Gen Xers are considered to be 37 to 48 years old. Since the financial crisis of 2008, many individuals felt their financial situation was somewhat shaky. They thought that, for the present, life insurance is something they could do without. According to a New York Life Insurance study 20 percent of Gen Xers report having zero life insurance even if they have a family.

Some people in this age group are lucky enough to have life insurance through their jobs. But if they consider the long term needs of their families that leaves them far short.

Think about how these costs would add up: the mortgage, living expenses for the next 10 or more years, college loans owed by you and your spouse, and the expense of a college education for their children. 

Quoted in USA Today, Larry Rosenthal of Rosenthal Wealth Management says, "As a rule of thumb, a person should have five to 10 times their normal income in life insurance." At that rate, a person making $25,000 a year should have a $250,000 plan. One making $50,000 should have $500,000 in life insurance.

Term life is relatively inexpensive for $250,000 or $500,000. The sooner you get insurance the less it will cost. Check these rates by MetLife for a 10-year term:

• Men, age 30-35: $16 per month for $250,000, $26 per month for $500,000. Price is the same for women at this age.
  
  
• Men, age 40: $21 per month for $250,000 and $36 for $500,000. For women the cost is $18 for $250,000 and $31 for $500,000.
  
  
• Men, age 45: $23 for $250,000 and $41 for $500,000. For women the cost is $21 for $250,000 and $36 for $500,000. For age 50 add $10 each.
  

The price of 20 year term life is somewhat higher, but the 10 year plan is a good start and almost anyone can afford it.

CHECK MILEAGE BEFORE ACCEPTING A RENTAL CAR

Rental cars with up to 50,000 miles on their odometers have become more common. Travelers are complaining about worn tires, weak brakes, dead batteries, ineffective wiper blades and other middle aged auto problems.

According to the FlyerTalk forum for frequent travelers, rental car companies have moved away from leasing new cars from manufacturers every few months. In recent years, they've been more likely to buy and hold cars for up to two years. The companies say vehicles today last longer and that their fleets are carefully maintained so even those with relatively high mileage drive well and are in good condition. They say they will try to provide a replacement car if a customer asks for it.

FLAT OUT SLEEP ON THE PLANE

For those willing to pay a premium, both United and Delta Airlines provide seats that collapse into flat beds for business class customers flying between New York and Los Angeles. American and JetBlue will provide them next year and hope to make them even better than those available now.

© 2014 TLC Magazine Online, Inc.