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Long term care for you and your tax forms
Friday - 4/22/2011, 10:31am EDT
Senior Internet Editor
Tax day has come and gone. Federal News Radio's Amy Morris put the number one question of spring cleaners to Arthur Stein certified financial planner with SPC Financial in Rockville, Maryland: "What can I shred? I'm sick of the piles in the living room."
"Okay," replied Stein, "tax documents should be kept for at least six years and the reason is that, in certain cases the IRS can go back and look at returns that are six years old."
And then it's a question of which documents to keep other than tax records. "I would say once things hit seven years old, then the receipts and the back up files can be destroyed but I would always keep a copy of the tax return."
Then came the bolt from the blue: you can scan them! "Unless it's a signed document like a deed or something like that, but that's not really a tax record," said Stein. Scan them! Put them on a tiny little thumb drive. What a great idea! Think of the space you'll be saving now.
Stein said other types of documents like wills, powers of attorney, and the like should be kept in a safe deposit box or safe, and make sure a qualified relative or friend has access. While you're at it, make a list of insurance policies, investments, properties, trusts and keep those in there too where someone can access them just in case.
Long Term Care Insurance
Also under the "just in case" thinking, Stein said the current long term care insurance open season is a golden opportunity for some federal employees.
Stein said the open season benefits current employees, their spouses and same sex domestic partners and the benefit is that it's going to be easier for them to qualify. "They have to answer fewer medical questions during the open season than they will have to after the open season and than they did before the open season."
This can be critical for feds with health challenges like diabetes, cancer, HIV, said Stein, because otherwise many wouldn't be able to get a policy, "unless they're a new employee."
Long term care, explained Stein, can be very expensive. He said the average cost of a nursing home in the Washington area is about $260 a day or more, and the chances of needing care is "extremely high.
Approximately 70% of the people who reach age 65 are going to need long term care at some point before they die. It's not unusual for someone to need long term care for decades. It's not typical, but it's not unusual. So if you're spending $80 or $90,000 a year on long term care and you need to spend that for two or three or four or five years, for lots of people that would completely wipe out their savings and investments unless they're covered by a long term care insurance policy.
The amount you're going to pay is going to be based on the age at which you apply, said Stein, so buying insurance now is a lot cheaper and you're more likely to be approved "because most of us are never going to be as healthy as we are today."