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September 10th, 2012
02:53 PM ET
Suze Orman's $25,000 mistake part 1
CNN's Suzanne Malveaux talks with Suze Orman on the cost of retirement, long-term care insurance, and the economy.
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I appreciate Suze's candor and trust her opinions. She has always told the truth about how the ecomony affects real Americans, no matter which political party may be exposed.
Once again, Suze is wrong.
Long Term Care insurance has caps. No policy would have covered a $25,000/month bill, especially a policy that had only a $300/month premium, starting at age 66.
I am in the industry and suze is almost always wrong.. We laugh everytime she speaks. The average american isn't disciplined enough to do what she says, and half the time, suze doesn't take her own advice. Suze teach me how to be wrong more than 75% of the time and make the amount of money you do per year. Whats your secret??
Josh's comments are spot on. In addition, many companies are now dramatically increasing premiums for LTC insurance or dropping coverage becuase the expenses is greatly outpacing the actuarial calc's the companies used. I'm 53 and signed up for LTC coverage several years ago on the theory that getting in younger would keep the premiums affordable. Year after year increases, and recently a 25% increase, have made me rethink this coverage.
Based on talking with various professionals, it seems the consensus that, yes, most folks will need assisted living some time in their lives. But, nursing home care is apparently generally to believed to not last more than 1 year (in other words, at the point you need actual nursing home care - not independent living, but true nursing home - you likely won't be around more than a year).
I kept my LTC and lowered the benefits to keep the premium more affordable, but I really wonder if this coverage will be around when I need it. BTW, there life insurance policies that allow some of the death benefit to be used for LTC, but these policies tend to be "single premium" policies meaning you pay the entire premium in one lump sum - and the premiums tend to be around 15-20% of the coverage (so a $250K policy can require a check for $50K up front).
what most people do not realize is that suze has no financial training. people need to use common sense and get a second opinion before following any of her advise.
Suze is not only wrong on the LTC, but at the end she says that a power of attorney is not valid upon incapacity. Most if not all states allow a durable power of attorney which will continue to be in effect after incapacity. Time and time again, she preaches about the importance of living trusts so she can promote her own legal document kit "created by her own personal attorney." Instead of advising her followers to seek the help of a professional who can help a comprehensive estate plan suited for their particular situation, she promotes her online product. Recently I assisted a family where the dad created his own trust using an online company to save money. He died and when the family went to sell his home, the documents he filed missed some key provisions. It nearly killed the deal and ended costing the family a lot more in time and expenses than it would have if it was done correctly. She's in the business of selling products, not offering sound advice! Come on, she sells a pre-paid credit card that has a $3 per month fee!
A lot of the time, even if I were inclined to take Suze's advice, it seems to be for people with money, not the average person.
But as with television personalities and political candidates, people see what they want to believe and go for appearances and charisma, not substance and fact. Good luck with that. I listen to people I know and see what works and what doesn't work, and go with that. I'm doing just fine thank you. I paid off my house even though mortgage money is the cheapest money you can borrow, or so say the "experts".. I carry no debt. I have savings, pension, investments and yes, social security. Slow, steady and solid. My life is quietly boring 🙂 No financial drama here.
Your mother was worth a million dollars, Suze. And you made more than enough to be able to pay it. Some of us would gladly pay a million dollars to have our mothers for as long as you did.... just sayin'...be grateful for it all.
$4000 a year for 24 years (66 to 90) is $96,000 which would pay for 4 months. Even with interest from investments it would pay maybe for 6 months. If even a small fraction of the policy holders would need this expensive care for 7 years the rates would have to go through the roof without things like caps which others have pointed out!
Just saw this video. $25k per month in assisted living? what did you spend it on? my mother is in an assisted living facility in florida and with extra help, it costs me $4k to $5k per month. If you assume base services , rent, and meals are $5k per month, you could buy alot of help for $20k. In this market, skilled help is still running less than $20 per hour. At that rate, an extra person round the clock would only be about $10k per month. Where did you get hour numbers Suze? maybe I should become a talk show financial advisor.
I am just reading her recent book 2012 on financial soundness but it is filled with emotional issues like "fear" that is it. I didn't purchase the book, so I'm going to read it with a grain of salt. What I've realized about finances that you can't trust anyone or one source because everyone is always wanting your money. Lawyers are the same way don't ever let a lawyer know how much you have or how well off you are because of remediation experience shows me that they are only in the business for hemselves. Hell they wanted to cut me out of the pie enirely greedy bastards.
Suze doesn't have to be correct, it's not like CNN is going to call her on it, they're just looking to fill dead air space with colorful guests and conversation, you can't take CNN serious folks.
Wow! Her mother must have been in the most expensive living facility in the world. Long Term Care Insurance is a great thing. However, check your local costs for nursing homes and assited living facilities in your area. Purchase a plan based on those figures and be sure to get an inflation rider to protect you from the drastically increasing cost. The current cost of care for a private room in a nursing home facility in my hometown is around $70,000 yr. Also, the longest period that our company has had someone on claim for is 8 yrs, so a policy for more than that maybe over kill.The average is stay is around 2yrs in a nursing facility. If you can't afford to cover your entire cost, get a plan that you can afford that will give you some assistance for the cost of ltc. Finally, choose a well know company that has good experience in the ltc market. These companies have been doing this long enough to have a good idea of how to price ltc insurance. If you go with a smaller company or a comapny with less experience, you may pay for it in the future with drastic rate increases again and again. Do your homework but don't over look this important protection.
People here are really missing the point. Suze gives advice for folks who don't have money so that in the future they will have some. She did not really make a mistake, her mother did. Thank God Suze has the money she does or her mother would not have had that level of care. Most of us can't pay $25,000 per month to pay to keep our family member in care which is why she is reminding us to make sure to get long term care insurance for ourselves and our parents. The reason others won't spend that type of money is because they can't. I hope I don't end up in that position but if I had it and could get my parents around the clock care that I chose, I would gladly pay that money just as Suze did. She didn't begrudge, it. The love she had for her mother is obvious.
This really is about making good financial choices for your future, not a throw Suze under the bus moment because you can't stand that she has a lot of money. She gives away more money and products than most of us make in a year (or a many years). Stop hating on her
I'm sorry, but from all that I can see, Suze has absolutely NO CLUE about the realities of being a senior, regardless of how much they might have saved during their working life. And... even worse, she overlooks minor inconveniences like the tax consequences of her advice. Example: she was absolutely unbending in her assertion that you NEVER EVER EVER extend the terms of your mortgage. Sorry, Suze – lose your job at nearly full retirement age and need better cash flow? Do you realize what you'd do to your retirement savings were you to liquidate enough to pay off said mortgage AND the taxes on that liquidation AND, if you opt to start taking your SS benefits (which actually makes sense because 100% of your retirement savings/IRA/etc is taxable income while at most 85% of your SS benefit is taxable), you would probably hit that 85% taxable income of that SS benefit while pushing yourself into a higher tax bracket? Sorry, I ignored your advice, and between being able to itemize my deductions and improving my monthly cash flow, my retirement savings have GROWN since I retired! Put that in your pipe and smoke it.
Suze is not wrong. In the early 80's, if her mother had purchased a plan for $300 a month, it would have been a top of the line plan, at that time. With a 5 % Compound COLA, a plan that started out at $300 per day would pay benefits of $1016 per month after 25 years. So it is entirely possible. And while many LTC companies have raised rates, some companies (like NY Life) have not raised rates at all (I do not work for NY Life). It all depends on the company you purchased a policy from. I saw many people buy their policies from a company that was the cheapest back in the 90's – and what happened? Yep – the rates have been raised quite a few times. What did you expect? Even though – as an LTC professional – I would try to point out that the company was using questionable tactics and sales methods, had a bad track record and less than stellar ratings- folks still bought based solely on price. No one to blame there except yourself. For some reason, people seem to think this is an insurance product that they can research on their own, compare on their own and then make an intelligent decision. Kind of like being your own laeyer. I've been in this business almost 25 years and I'm here to tell you – if you don't work with an experienced LTC professional – you too will be telling horror stories down the line. I have hundred of very happy clients and plenty of them are thrilled because their polices are paying exactly as they are supposed to.
Correction to post above: I meant to say the plan would now plan $1016 per DAY – not per month......
The probability that a 66 year old will live to 97 is about 3%. So it wasn't so much a bad decision, as simply luck.
Suzie Orman's advice is spot-on as usual. Very intelligent woman when it comes to finances. I've read several of her books, any are worth getting and reading. I will take heed of this advice. Thanks for sharing it CNN.
Everyone wants your today's money for your tomorrow's benefits. But most people are struggling for their today's means. How can they afford tomorrow.
When i was in college one of my professors said he was doing financial planning for a woman and he told her she needed a specific form. The woman asked suzie orman for a second opinion and she told the woman no it wasn't required and the woman did not sign the form. Her nephew then left her broke and homeless within a year....... she is a fraud and should be sued everytime she speaks.
I've looked into LTC insurance and hated the waiting periods and all the exclusions they have. There seemed to be many loopholes. My retirement income is from a pension, and my expenses are lower than what I receive. So I decided to put away a large sum of money instead of paying for insurance that may or may not be there if/when I need it.
I have medical insurance to cover any medical treatment I may need and a steady retirement income. A large balance in an insured "rainy day" account will be there if I need it and be passed on to my heirs if I don't.
Protecting yourself is better than crossing your fingers and hoping that some insurance company will live up to what it promised!
I have long term coverage and it will pay $100 per day for 3 yrs so total pay off is about $108,000 and premium is about $450 /yr
Suze on politics, haha, that's funny.
Suze is a very pompous, flamboyant know-it-all. As a financial advisor with over 26 years in the biz, I find her giving advice that is usually common sense and telling us what is already obvious in the economy. When the economy changes, so do her predictions: after the fact. In a word, she is a joke. I can't imagine anyone really taking this waitress seriously.
Most Financial advisers are crooks. Read a book or two, people, money managing is paint by number. I like the way these crooks 'in the biz' complain on message-boards ! They realize that In the information age their time is running out.
Suze Orman's weekly show is the best on financial matters I have ever seen, its entertaining and at the same time educational. I wish we had somebody like Suze Orman in Canada , in particular lthe french speaking Province of Quebec, where people have no clue how to safe and prepare for retirement.
I watch her show once in a while and she does give good pointers; such as never buy something or do financial planning when you are feeling anxious about it. Excellent point. I read something elswhere that backs up her advice: people waste money when they buy out of anxiety...which is what retailers love, esp on Black Friday.
I took out a LTC insurance policy in 2006 which would pay $100.00 per day in a nursing home. At present it cost over $4,000 per month for nursing home care in my state. My insurance company has gone up 16% on my premium and 18% on my husband's, so that means we will pay almost $400.00 per quarter. I'm thinking my insurance company will go up on premiums again re information I saw online. In thinking about nursing home care going up every year my measly $100.00 per day won't be a drop in the bucket..I am 70 years old and if by some chance I have to go to a nursing home when I am in my 80's I'm wondering if the money will be there. I've been reading a lot about how most insurance companies are thinking about getting out of the LTC part of insurance. I have a option in paying more for the insurance or lowering the coverage. I will drop the policy, lesson learned!
I am annoyed at some of these comments re Suze not caring for people and only "in it for the money and fame". I've watched Suze on her t.v. show and you can tell when she is talking with needy people she is genuinely concerned about them, you can't hide your true facial expressions.
"Jones was a spectator at a training session when Roy Hodgson was in charge, and he was in attendance."
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