Preparing for my financial future with MS...any suggestions?

[trevvian]

A year after dx, it's time to get serious about planning for the finacial impact of MS.

I'm meeting with a financial planner next month--referred by NMSS--his brother has MS & he has some experience with the chronic illness planning. Want to make sure I ask the right questions.

I would love to get the thoughts of those here who have lived through it, especially transition from working to disability.

(If this is too long, stop there. The rest is just details)

To give you something to go on, here's a basic background. I know that many of my assumptions will be wrong, but I'm hoping that adjusting some plan will be easier than having no plan.

1. I'm in my mid-30s & expect to remain single
2. I have a good job, but I live in a high cost of living area, so my expenses are high as well
3. Statistically, I expect to work for another 10-15 years (hopefully the new DMD will extend that, but better safe than sorry)
4. My current LTD pays 60% of income, less any govt payments, until I'm 65
5. I have RRMS and am generally fine, though working 2 jobs would be a stretch
6. For now, healthcare is affordable between insurance and maxing out the flexible spending plan

Here's my general plan:

1. Finish paying off consumer debt (soon!)
2. Continue contributing to my 401k
3. Save about 8% of my monthly income in non-retirement vehicles
4. Quit smoking (AAARRGGGHHH)
5. Create a budget that forces me to save for future purchases
6. Over the next 2 years, work to get my standard-of-living within whatever disability pmts could be and start banking the rest

Beyond that, I get a bit lost as to what to do next.

Does anyone have any input into how much time they had ZERO income between working & getting approved for either LTD or SSDI? Is LTD taxed if I'm the one paying the premiums now?

Any thoughts on Roth vs. Trad'tl IRAs and retirement savings vs. what I may need before I'm old enough? I have this fear of being unable to work, but not officially disabled, too young to pull from retirement and no access even to what I've saved.

I know a couple of you have mentioned being fortunate enough to plan ahead--I'd love to follow your lead if you have any advice to pass on.


Thanks in advance!

[AriD]

Although I'm still working now a couple of years ago I was on LTD for awhile. My work does not have STD but I had 14 weeks of sick/vacation time built up so used that while waiting for LTD to start. Then I had a few weeks of no pay before disability payments. When I started back to work after more than 20 weeks off it was just 4-8 hours a week ( no benefits) and over next year and a half built up to 36 hours. Some of my coworkers donated their sick time to me which gave me about three extra weeks of pay which was so nice and appreciated

The hardest part was paying COBRA level family health insurance until I got to 20 hour benefit eligible again. That cost was astronomical and wiped out my LTD payments.

The portion of my LTD that I contributed to was not taxed, only the portion my employer contributed was. I didn't realize any was taxed and didn't have enough taxes taken out monthly. So I had another big financial surprise when I did my taxes and owed thousands.

Hope this helps and you won't need this info since you'll stay healthy and be able to work until you are ready to retire!

[Jules A]

OMG this might be my most favorite MSWorld thread ever!! I'm always harping on the financial concerns about having a miserable disease like MS and often feel like it falls on deaf ears. I am thrilled to read your thoughtful and very insightful thread.

Personally I love a Roth IRA because it builds interest tax free and it is my understanding that since you have already paid taxes on it you are able to remove the amount you have put in without penalty if needed.

Real Estate, although not liquid, has been a wonderful investment for me both in the form the homes I have lived in and a couple of rental properties that I have purchased. Buying a ugly but manageable home at a reasonable price has made me quite a bit of money over the years. Although none of the places I own are fancy the security of not having a mortgage makes me feel comfortable that I would be able to cut back on frills and live fairly cheaply should my health hit the crapper.

I was diagnosed at nearly 40 and now at nearly 50 I have been blessed to be able to continue working like crazy and banking a fair amount of money. I'm getting greedy now and hope I can do another 10 years. I will happily retire at 60. I totally don't want to be one of those who should have retired years earlier and are still hobbling around in their late 60's early 70s MS or not, lol.

Here's hoping you are able to continue working for as long as you want!

[trevvian]

Thanks

Very helpful info. I'll have to think about saving for COBRA too.

I hadn't factored in the (obvious) health insurance increase. And my LTD policy states that it only pays if 'You are currently under the care of a doctor and participating in all recommended therapy". So I'll have to be insured.

Jules, I was hoping you'd weigh in ...I enjoy your posts. Interesting perspective on Real Estate ...do you manage your own properties? Did you buy before the bubble burst?

I bought my house at the height of the prices. I was thinking about selling (though it'll be a few years before I can, with prices here.) But maybe I should hang in there & try to pay it off. Then I could sell later if needed. I just wonder about capital gains, because I probably wouldn't be capable of sinking into another house at that point.

I feel like becoming a frugalista & learning to live on less now is probably the best first step. Then it won't seem like such a blow when it hits.

And like you said, hopefully I can work until retirement age. But the odds are stacked against me, I fear.

Anyone else have insight, or tips on living cheap & saving? With interest rates now, saving seems so futile.

[onlyairfare]

Rising health care costs are my major concern, and I do not see much to be done about that, other than making maximum efforts to "live healthy." If you have savings and assets, you will have to deplete those before being eligible for programs such as Medicaid, and until that point, serious illness in the absence of excellent private health insurance coverage will drain you dry. Sometimes serious illness will drain you dry anyway, since there is so much expense not covered by insurance.

So be sure to factor those health care costs into your planning, and expect the amount you pay to continue to rise much faster than what your employer or the insurer pays. And yes, factor in the cost of COBRA (or the equivalent now available in the marketplace). Mine cost over $1,600 per month for my husband and myself when we were in the midst of job changes and geographical moves. I think $800 per person per month is quite typical for those over 45 years of age, though the premium may be subsidized under ACA nowadays.

The book "Your Money or Your Life," which I first read years ago, was helpful in fostering my attitude toward a frugal lifestyle. And I am interested in the "Tiny House" lifestyle - not only living in a small home, but having a small footprint lifestyle.

I own two homes, one a rental property and the other probably my "permanent home." I'll sell one when I retire, then if needed, do a reverse mortgage on the other. Or I can build a tiny house and place it on one of the properties I own while renting both houses out for income.

I am also considering moving and living outside the US, particularly in retirement, as there are locations with excellent lifestyles available at a much lower cost - including lower health costs.

However, I don't want to be so careful about expenditures that I can't afford some fun and adventures now. My MS has so far been fairly "benign," but I have had other life-threatening illnesses which have served to remind me that I want to take advantage of each day I have now.

It's a balancing act, but we should all be considering how we plan for future financial realities.

[4boysmom]

My husband and I have always planned for the future, even before my diagnosis. I'll say one thing that has been helpful in having peace is owning our home. Getting that paid off in 15 years has been a blessing.

And I agree you need to enjoy life while you can, but that doesn't mean going crazy! Today my husband and I took a beautiful ATV ride, high up a mountain, where on one side you could see the Snake River Valley, and the other side a gorgeous view of the Tetons from the Idaho side. We got caught in a little rainstorm, saw a beautiful hidden lake, and then finished off in a "hole-in-the-wall" restaurant that has the best prime rib and shrimp to rival the fanciest restaurants!

It wasn't that expensive of a day, but was worth its weight in gold in lightening spirits and making one appreciative of all this beautiful earth has to offer! I look like I'm drunk getting off of the ATV, and I have to be careful with my balance, but I can still enjoy so many things.

You are wise to plan. You will probably make it to retirement.I was diagnosed at 45, am now 53, and will be able to retire at 59. But even as I know the working days will soon come to an end, I was telling my DH of the possibility of working a few hours a week for a local college after I retire. You'd be surprised what you can do with the right attitude.

[onlyairfare]

You are so right about owning your own home! It can be rather surprising how a little bit more paid each month pays off the mortgage so much sooner. If you haven't stretched your budget too much to buy a big house in the first place, it's easier to make those extra payments.

As for selling your home, Trevvian, there are some capital gains exclusions pertaining to sale of your residence. You'll have to ask an expert for the specifics for your situation.

[Jules A]

Unless things have changed it is my understanding that you don't pay capital gains on your primary residence if you have lived there 2 of the past 5 years.

Bank interest sucks so I do like real estate however remember it isn't liquid and can take some money to purchase and maintain. I have to replace a heating/air system this year which will cost a couple of bucks.

I bought most of my properties before the bubble, sold a few at close to the top and then took a break simply because I couldn't afford anything at the prices they were getting. Like with the stock market bubble it just didn't make sense to me especially when everyone was buying with no money down, above their actual ability to pay and OMG remember those interest only loans.

My last rental property was purchased 4 years ago when I thought the bubble had burst, well it had sort of, lol. Unfortunately it is now worth about $30,000 less than what I have in it however the good news is while I'm not making any extra my tenants pay the mortgage and this property is in an area that I am confident in 5 or so years will return to a profitable sale as well as having paid for itself through the rent.

I only have the 1 rental property now and I handle it myself, meaning I call the plumber or electrician etc when needed. My rental properties have always been in excellent neighborhoods so I have been fortunate to be able to be extremely particular with regard to tenants. Knock wood I have always had wonderful renters. When things go wrong, always at the most inopportune time, it is very stressful but over all I try to remember I'm making almost $17,000 a year in rental income and it doesn't sting as much, lol.

[Temagami]

Your best bet is to use your current ins. benefits to quit smoking. Smoking is bad enough, but it makes MS worse. You will reap the greatest rewards in tackling that.

The regulations for reinvesting to take advantage of capital gains on real estate is no longer in effect. You are covered for the first 500k in gains if it has been your primary residence- check for the timing with the irs.gov site.

If you are into the rental thing and can stomach nearby tenants, having a property with two residences on the SAME property lets you deduct a lot of maintenance costs- trash, landscaping, snow plowing, taxes, etc. So if you are going to have a rental, might as well reap that benefit.

IRAs/401ks- I contribute the max for my age to my work acct. b/c if disabled, I will be able to tap it without penalty before reaching retirement age. This way, I get the maximum tax benefit and it basically gives me 4k more a year in tax savings. Also forces me to live on less.

LTD benefits that YOU pay for are not taxed. Luck you that you have this set up.

I bought a book via Amazon on financial planning with chronic illness- still in the pkg. so I guess I´m not ready to face it.

For living more frugally: check out thesimpledollar website. A crock pot and a pressure cooker can save you lots of money as long as you are willing to eat leftovers. I save oodles on clothing by going to the thrift store on the $5 a bag day. You would be amazed at what I find- name brand items. It comes out to about 25 cents per item. Can´t beat that with a stick.

Being gluten free and dairy free saves money b/c I don´t eat out much. Most GF products in the grocery store are expensive and not that healthy so I avoid them most of the time.

Check out qigong on youtube- puts your body into the relaxed mode.

Let us know what the advisor recommends.

[dyin_myelin]

I have a Roth which I max out. I don't know of anyone else who has a retirement account, they are all waiting for this pension. I am sooo glad that I didn't put all the eggs in that basket since I may not make it to being vested. Mostly mutual funds, some TIPS bonds to peg against inflation, and some individual stocks. My big winner was FNMA, bought at .30 and now hovering at 4. I regret not getting LTD, but that boat has sailed.

I am also totally liquid which I like. I own the car flat out and rent a home which I could leave at any time. I pay off CC every month and paid off my student loans in 2009.

I would have been pretty comfortable if this hadn't happened. I don't really know what I could be doing differently except denying myself things like Whole Foods. I don't really go out anymore due to feeling poorly. Healthcare wise COBRA will be close to 1,000. The platinum plans in FL seem to average $300 per month so much better and maybe just do COBRA for a month or two to bridge the gap. What I don't understand is that I am told I would qualify for assistance in the form of a tax credit. Working in education I don't make enough to itemize, do they mean deduction?? I just got rejected for Tecfidera with this "wonderful" BCBS plan, but probably will begrudgingly do COBRA in case I wind up in the ER or something. Can you pre-pay a month or two for COBRA?

[Pipes123]

Hope for the best, prepare for the worst. We may have to retire involuntarily, and getting disability approved is often a long process.

For Americans, while thinking about where to store an emergency fund, consider that IRAs and 401k retirement accounts are exempt in bankruptcy in every state. Exempt means the total value is protected and you get to keep it. Other assets can be distributed to creditors by the court, in whole or in part, depending on the specific state exemptions and the circumstances of the individual.

It is common for people in financial trouble to spend down their retirement accounts in a desperate attempt to pay off creditors, then go bankrupt anyway. Their financial recovery is harder because they didn't protect those funds while they had the chance.

It is a very good idea to learn what your state homestead exemption is also. It varies from 100% of the value of the house to just a few thousand dollars, depending on state law.

I think we all should plan for the likelihood of years ahead without much income. Many of us live with that already.

[Seasha]

trevvian - thank you for starting this thread! So many of us do research on medications and on managing our symptoms, that we forget this important piece as part of our MS journey.

You have gotten many important suggestions, and here is something from the NMSS for financial planning. Probably a lot has already been discussed here, but just in case....

http://www.nationalmssociety.org/Nat...fe-with-MS.pdf

Hope this helps for further education

[dyin_myelin]

http://www.nationalmssociety.org/Nat...fe-with-MS.pdf

Hope this helps for further education

This is a very dated publication that claims your out of pocket expenses will be capped and you can be discriminated against as having a pre-existing condition.

[MSW1963]

LTD

Is LTD taxed if I'm the one paying the premiums now?

trevvian, since you are participating in IRS Sec. 125 plan via your flexible spending plan, one step you should take ASAP is to verify that you are paying your portion of LTD premium payments with after tax income.

Paying monthly LTD premiums of $15 or $20mo with pre-tax income results in LTD replacement income being taxable when LTD benefit payment is made. According to IRS, your LTD benefits are not taxable if you pay taxes on the premium via payroll deduction.

Any portion of the LTD premium paid by your employer results in taxable income benefit payments. (Employers receive corporate tax exemptions on the cost of benefits paid on behalf of employees. Employees pay no tax on the premiums paid by the employer, the basis for the tax law.)

Also, be aware of any changes you make, (or changes made by your employer) to your existing LTD coverage. Changes such as a 'buy up' option that allows you to increase LTD coverage/benefit payments.

The 'buy up' option typically results in 'surender' of your existing policy and is considered a new application and new policy, with new 2 year pre-existing condition payment exclusions.

Any changes made by your employer, such as a new LTD carrier, typically results in the same consequences, a new LTD policy with new 2yr exclusion for a pre-existing condition.

One exception is if the employer includes a 'grandfather' clause, that specifically states pre-existing condition exclusion periods met under a previous policy will be honored under the replacement LTD policy.

Most of the same tax rules apply to STD premium payments.

Because of IRS Sec. 125 plan rules, employee
'election' changes can only be made during annual open enrollment.

Best of luck and hope you never have to use LTD.

[JerryD]

My suggestion is to bend over, put your head between your knees ( if you are able ) and kiss your butt goodbye. Unless the medical establishment gets its *hit together, and solves the MS mystery, we are all 'up the creek'. 'A rising tide lifts all boats'. Without a 'cure', we are all under water.