Caregivers are often so focused on managing their parent’s health and financial needs that they don’t even think about their own future needs. Although your focus is on providing care for your loved one, it’s important to think about and prepare for your own future financial and caregiving needs. If you haven’t done it already, now is the time to start planning for own your retirement.

“It’s hard to find the time, but planning for your financial future is a necessity,” says Erika Mielke, a Wells Fargo Private Bank senior wealth planning strategist. “Thinking about the dollars and cents of your own retirement is the best way to ensure you have the funds you need as you age.”

Mielke suggests these tips to help caregivers plan for their own financial future.

Take full advantage of employer programs

If you or your spouse is employed, make sure you are taking full advantage of the financial programs your employer offers. Some examples:

• 401(k) – The 401(k) is set up by your employer and is designed to help you save (and build) money for retirement. The money you contribute to your 401(k) is pooled and invested in stocks, bonds, mutual funds or other types of investments. You choose the type of investment from your company’s list of options. Usually your contribution is deducted from your paycheck before taxes and goes directly into your 401(k) account.
• Company matched contributions – Many companies will make a matching contribution to your 401(k). Your employer might match 10 percent, or even 100 percent of your contribution to your retirement account. This is like getting a bonus, so it pays to put in as much as you can afford. Understand how your employer is matching contributions. Some will match your contributions with company stock. As a result, a large portion of your investment will be in company stock. “Diversification is important. As a general rule, you don’t want more than 10 percent of your net worth in any one asset,” Mielke says. Check with your HR department on rules and restrictions for re-balancing your funds, which would enable you to sell some company stock and re-invest it.
• Flexible Spending Accounts (FSA) – Depending on the type of health plan you have, you may be eligible for a flexible spending account. An FSA lets you set aside money, and the funds are taken out of your paycheck before taxes. You can use the account throughout the year to get reimbursed for eligible health care and dependent care expenses (including elderly parent care expenses) However, FSAs are set up and owned by the employer, so how much you can contribute is determined by your employer. If you change jobs, you can’t take your FSA with you. Also, you must use all the money in the FSA by year-end, or you lose it.
• Health Spending Accounts (HSA) – If you have a high deductible health plan, you are eligible to create an HSA. An HSA has different rules than an FSA. The maximum a family can contribute annually is capped by the IRS at $6,250. It is a bank account that you own and you can invest it as you choose. You can only access the amount of money that’s in your account. When you start contributing – in January for example – you will have less money than you’ll have later in the year. An HSA is not “use it or lose it” meaning if you don’t spend all the money in the account by year-end, it rolls over to next year, and you can take it with you if you change jobs.

Explore alternatives

The IRS caps the amount you can contribute to your retirement plans at $16,500. That includes 401(k), 403(b), IRAs, etc. Once you have contributed the matching amount to your 401(k) and if you are able to contribute more, then you will want to explore whether to add more to your 401(k) or whether an IRA might be good for you. Depending on your income, a Roth IRA might be a good choice because the money goes in after you’ve paid taxes. The money grows over time, and when you take it out, you don’t pay taxes on it again.

Don’t “set it and forget it”

Whether you have your money in 401(k), IRA, company stock or any other investment option, keep tabs on where your money is being invested. Too many people make a choice when they sign up for the plan, then let it ride, and never make changes to it. “Don’t set it and forget it,” Mielke advices. “Be involved in how your money is allocated. In most cases, as you get closer to retirement, your portfolio should be shifted to include less risk.” She recommends having a conversation with a financial advisor. If your plan is administered by a financial firm, find out if they have advisors you can speak to. If not, hire one yourself. It’s a critical step in financial planning.

Think about long-term care now

“Caregivers are on the front lines of seeing first-hand how much long-term care facilities cost,” Mielke says. However, too many don’t think about their own long-term care needs. Long-term care is an insurance policy that covers costs that arise when a person needs on-going care including home care, hospice care, nursing home care or care in an assisted-living facility.

Mielke says the best time to buy long-term care insurance is usually in your 50s. That’s when the prices are the best, but it can still be affordable after that. Before you buy, know the terms, and fully understand the policy you choose. Some questions to ask about any long-term care policy you are considering: What are the maximum daily benefits? How long will coverage last? Is coverage transferable between spouses? If you don’t use it, does it turn into life insurance? Does the policy take inflation into account?

Insurance

Another aspect of financial planning is insurance. Do you have the right type of life insurance? There are many different options, such term or whole life available, and finding the right type depends on your personal situation.

Property and casualty is another insurance caregivers should consider. If other caregivers are caring for your parent inside the home, how are they insured? What if they are injured? What is the liability to the homeowner? “Getting umbrella coverage with your property and casualty that is equal to your net worth is relatively cheap, and it prevents against your net worth being wiped out due to an accident,” Mielke suggests.

Legal documents: Key to financial planning

In addition to building a solid financial base, caregivers must have legal documents in place, such as financial power of attorney, healthcare power of attorney, and a will. Each document serves a specific purpose. For example, POA indicates what will happen if you are incapacitated and unable to make decisions for yourself while you are alive. A will covers how your estate is handled when you die. The various financial documents work together to ensure your wishes are carried out.

Legal documents coordinate with financials – which is why they are a key part of good financial planning. Make sure you work with an expert to ensure everything is titled appropriately and that the POA, will, and life insurance documents are examined in conjunction with financial planning documentation.

Not all financial planners are created equal

When it comes to financial planning, don’t go it alone. Every state has different rules; IRS regulations are constantly changing; and legalese can make even the savviest consumer’s head spin. It’s best to work with a professional who will take the time to understand your goals and individual situation and advise you accordingly.

However, not all financial planners are created equal. Some financial planners are tied to specific companies, products and services. These organizations tout “free financial planning assistance.” However the financial planner you work with is incented to sell you that company’s products and services. They are being compensated for the products they sell. A better option might be to find an independent financial planner that is not tied to a particular financial firm. They charge a fee for their services, but you will get unbiased advice, and find the right products for your needs.

Article courtesy of AgingCare.com, a leading website that connects people caring for elderly parents to other caregivers, personalized information and local resources. AgingCare.com has become the trusted resource for exchanging ideas, sharing conversations and finding credible information for those seeking elder care solutions.

Photo by Alan Turkus.

Helping the city’s new immigrants make their American dreams come true is a special mission that two New York City credit unions, LOMTO and Melrose, take very seriously.

The LOMTO Federal Credit Union, with more than $200 million in assets and locations on the Upper West Side and in Queens, began life with a very specific purpose: to help taxi and livery drivers to succeed in New York City.

Back in 1934, a group of owner/drivers banded together and formed the League of Mutual Taxi Owners Inc. In 1936, the group was granted a charter to form a federal credit union and later changed its name to LOMTO Federal Credit Union.

According to Richard Kay, LOMTO’s CEO, in the earliest days of New York City’s medallion system, owner/drivers found it nearly impossible to get bank loans. Today, the average New York City medallion cost averages about $700,000.

“Some of the old-timers who aren’t around anymore said that there were signs in some banks that said ‘no beggars, no solicitors and no taxi drivers,’” Kay recalled in an email.

Kay points out that the city’s taxi industry has always been an immigrant industry, which has seen waves of people from all parts of the world, most recently from the Middle East.

Melrose Credit Union, in existence since 1922, was originally established to serve residents and small business owners in the Bronx. Now a highly successful credit union with nearly $1 billion in assets and 20,000 members spread across the nation, it is also a major lender to taxi and black car livery drivers interested in purchasing New York City medallions.

Rob Nemeroff, director of marketing for Melrose Credit Union, estimates that immigrant taxi drivers are roughly 20 percent African and West African, 20 percent South Asian, 20 percent Caribbean, 20 percent Eastern European and Middle Eastern and 20 percent Hispanic and from the Pacific Rim.

He said lending to the New York City medallion industry is a very niche market that only experienced organizations can handle. “We’ve been lending to New York City’s immigrant communities since 1922. We know the borrowers and we know the business—that’s why they all come to us,” he said.

He went on to say that credit union officials implore the drivers to be financially responsible. “We remind them that they’re buying a business,” Nemeroff said.

The LOMTO website details how the first contributions to the credit union were able to assist members with taxi and livery car problems, such as buying a new set of tires, repairing faulty transmissions and even helping with medical bills.

Especially for taxi and livery drivers, LOMTO provides assistance when dealing with the city’s Taxi and Limousine Commission, providing a free representative when drivers get ticketed, towing reimbursement and discounted health and dental insurance.
Kay added that the organization also lends to owners of Chicago taxi medallions.

“For the most part, there’s almost a zero default rate on medallion loans,” explained Nemeroff. He also said Melrose has very few delinquencies related to their medallion financing.

“And if a borrower has repayment issues, we do what we can to help them get back on top,” he said. “The last thing we want to do is repo a medallion.”

LOMTO is open to anyone who lives, works, or worships in the Upper West Side. For more information, visit lomto.com.

The campaigns claim many thousands of people have moved their money out of larger institutions. Despite tales of customer losses, many of the big banks maintain that they have not been significantly affected by such movement. Still, some have bolstered community service and local outreach efforts over the last year.

Representatives at HSBC, which currently has 74 branches throughout Manhattan, said that they did not feel that the company has suffered from move your money campaigns.

“I would say that we haven’t been noticeably impacted,” said HSBC spokesperson Neil Brazil. “We have built extremely strong connections in the community.”

He added that the bank’s strategies for community outreach have “not really changed” with the economic downturn.

Heather Nesle, vice president of corporate sustainability at HSBC, said the company has expanded and bolstered its local philanthropy programs over the last few years. For instance, this year in New York City, HSBC launched Nontraditional Employment for Women, a workforce development effort that helps prepare low-income women for work in fields such as construction, transportation and facilities maintenance.

“As a company, we appreciate the fact that we’re doing something that benefits the community. I think that can only have a positive effect on our reputation and image and on our customers,” Nesle said.

And New York City Bank of America employees contributed more than 34,000 local volunteer hours in 2011, according T.J. Crawford, media relations coordinator.

“Keep in mind that many of the thousands we employ in New York City don’t just work here, they live here too, and they want to see the city and its communities thrive,” Crawford said.

Photo by Andrew Schwartz.

Fueled by the financial crisis and prolonged economic downturn, increasing numbers of New Yorkers have been turning to financial institutions other than large commercial banks in an effort to obtain better rates on loans, higher account yields and relief from the seemingly endless string of fees that traditional banks rely upon to boost profits for shareholders.

Both credit unions and community banks—smaller banks with a more local focus—have been the main beneficiaries of consumers’ rising dissatisfaction with large, commercial banks.

In fact, recent statistics from the National Credit Union Administration reported that 1.3 million Americans opened new credit union accounts last year, an increase of just under 600,000 from 2010. The number of credit union members is now a record 91.8 million, while total assets at credit unions topped $1 trillion for the first time ever.

And despite the fact that credit union assets still pale in comparison to the banking system’s roughly $12.6 trillion in total assets, many believe that credit unions are making serious inroads.

Pat Keefe of the Credit Union National Association in Washington, D.C., says that among the numerous advantages of doing business at a credit union as opposed to banks is the fact that consumers get real financial benefits.

“Last year, credit unions provided $6.3 billion in direct financial benefit to their members—that is, in lower rates on loans, higher returns on savings and low or no fees for services,” Keefe said.

He added that broken down by members and households, those benefits equate to $68 per member, or $130 per member household.
“The main difference from commercial banks is that our credit union is a not-for-profit organization that gives us liberty to offer more meaningful services to the community we serve, services such as small business loans, financial counseling, financial literacy courses and free tax preparation,” said Alicia Portada, director of marketing for Lower East Side People’s Federal Credit Union, whose main branch is on Avenue B.

Portada outlined other key differences, including that credit unions have a volunteer board as opposed to a bank’s paid board and that credit unions work to meet the needs of their members as opposed to banks, which must satisfy shareholders.

She also pointed out that credit unions do not use deposits to speculate but rather use them to finance small business and grow the local economy.
Another point of differentiation, according to Portada, is in the area of helping small businesses access capital.

“Our small business program offers the technical support and access to capital that our members need. A small loan, which may not be profitable for a bank, is right on for our members,” Portada said.

She said her union’s development specialists will often speak to small business owners with no up-front fees and can provide access to capital for nontraditional loan applicants who might otherwise be excluded from the banking system.

“Credit unions exist to help people, not make a profit,” said Bonnie Sklar of the Credit Union Association of New York. “Their goal is to serve all members well, including those of modest means—every member counts. Credit union members are fiercely loyal for this reason.”

Sklar also noted that people know their credit union will see them through tough economic times.

Richard Kay, CEO of LOMTO Federal Credit Union, a credit union that specializes in serving taxi and black car livery drivers throughout the city, said members can take advantage of numerous benefits, including competitive new and used auto loans as well as high IRA yields and special low rates on taxi loans.

Speaking generally about the differences between credit unions and banks, Sklar said, “Members are not just customers, they are owners with a say in the future of the credit union. In addition, credit unions’ not-for-profit status means that all earnings are returned to the members in the form of attractive rates and low fees.”

Further, in an economic crisis that saw scores of financial institutions fail, credit union proponents can also point to better overall financial health. Keefe reported that four times more banks than credit unions have failed since the start of the economic crisis. “Since 2007, there have been 107 credit union failures to 429 bank failures,” Keefe said.

But thanks in part to the Occupy Wall Street movement, which staged a “Bank Transfer Day” Nov. 5 last year, smaller, more locally focused community banks and credit unions gained while larger banks lost the PR war—as well as some customers.

In general, community banks are more involved in the local community and make efforts to get to know members of their town or city. Ideally, community bank customers can easily contact officers at their bank, who are based in the community and not several states or cities away.

The loan approval process is also usually faster than it would be with a large bank. Some community banks will also consider the personal character of applicants.

Amalgamated Bank, a community bank that was founded in 1923 by the Amalgamated Clothing Workers of America, was New York City’s first labor bank and has maintained its ties to the labor movement.

On its website, a news release proudly proclaims the bank’s support for the Occupy movement as it describes how it welcomed Occupy protesters into the bank on April 13 as they encouraged bystanders and passersby to come into the bank’s branch at 52 Wall St. and move their money from large financial institutions to smaller community banks and credit unions.

Allison Powell, senior vice president and chief operating officer at The Berkshire Bank on Broadway, explained that the smaller environment of a community bank allows them to be more responsive to customers’ unique requests in an attempt to satisfy the direct needs of a customer.

“Customers have access to genuine personal attention and there is a stronger connection between our staff and our customers,” Powell said.

Another difference, explained Powell, is the lack of voicemail.

“We truly believe in direct communication with our customers. It is not uncommon to speak directly with the staff member who is charged with the responsibility of making the bank work for them.”

Powell said that Berkshire Bank works more closely with customers, especially in cases of competitive CD rates and premium rates on liquid accounts.

She said, “We are here to speak to our customers on the growth of businesses, property ownership or even regarding security concerns, including financial abuse related to the elderly.”