My Survivorship A to Z Guide

You reported that you are having a financial crunch. To help, consider the following ideas:

• Work with creditors to decrease your debts (everyone would rather be paid something now than nothing later). Work out a realistic repayment plan. It's better to work out a payment plan than to put additional debt on your credit card with its high rate of interest. This is particularly true with medical bills. For information, see:
  • How To Negotiate With Creditors
  • Debt Collectors and Creditors: Your Rights
  • How To Negotiate A Doctor's Bill
  • How To Negotiate A Hospital Bill
  • Free Tax Counseling
• If you need help working out a plan with creditors, there are credit counseling firms available. 
  • Understand that most of credit counseling firms earn their income by receiving a percentage of what you pay creditors while working with them. This is a conflict with your interests. The key when choosing a credit counseling firm is to look for one that has a reputation for putting the interests of people like you first.
  • Also understand that credit counseling firms are unlikely to ever suggest bankruptcy, even when that may be the best step for you.  Bankruptcy wipes the slate clean of all debt except such debts as taxes and child support. (If you think that bankruptcy is an option to consider, speak with a bankruptcy attorney. The first, introductory visit, is often free.)
  • For information see:
    • Credit Counseling Services
    • Professionals Who Negotiate Medical Debt
• Create a budget. It will help you determine whether there are expenses you can reduce or eliminate.  Numbers don't have to be to the penny, only relative to your financial situation. Look at our article about budgeting, or create your own system. One of the purposes of creating a budget is to divide your expenses into the following areas which can help you reduce spending appropriately:
  • Core -- expenses you can't eliminate (such as your mortgage or rent).
  • Discretionary -- expenses that you have a choice over but are important to your life.
  • Unnecessary -- that cup of Latte that you're tempted to call "core".
• Once you have a budget, strictly sticking with it is not as important as being reasonably on target.  Keeping some fun in your life is important to your mental health. Consider whether there are less expensive ways to do it. Some of the best things in life really are free.
• Consider whether some of your expenses can slide a little. For example, most insurance policies have a grace period that permits payment of the premiums within a number of days after when they're due (such as 15 to 31 days.) It is dangerous to try to use those periods to hold up payment because you can slip a few days and lose the coverage -- particularly coverage you won't be able to get again.
• Look at your assets to see if there are new uses that provide cash while allowing you to keep the asset. If you do have to sell them, be sure to maximize what you receive for them. For an overview, see our article about new uses of assets. Also see our articles about: maximizing income from the sale of personal property and sale of real property
• Consider whether there are steps to take to increase your income. For example, by changing jobs for the same or another employer or possibly even by changing careers. As you will see in the Work Issues section, there is no longer job lock because of health history.

• Is there a better job or another job for which you qualify, that would pay more?

This suggestion is particularly important to note if your employer contributes to your retirement plan. Employer contributions are often made on a matching basis -- the employer only puts money into your plan equal tothe amount that you put into your plan. If are leaving money on the table if you don't take the matching money.

You can get to the money when needed either by borrowing it or withdrawing it.

The downside is that you may have to pay a penalty if you withdraw money from the plan before retirement age. There is no penalty for withdrawal if you are unable to work (disabled).

Credit can provide additional cash now, or be a ready source if you need money in the future for medical or other expenses. It can also be a source of life and disability insurance.

Consider the following steps:

• Learn what goes into a credit score. The factors are simple and can keep you from hurting your score unintentionally. There are side benefits: for instance, did you know that your credit score now affects insurance premiums? You can also get credit life insurance.
• Start to improve your score by checking what the 3 national credit bureaus say about you
• Once you make headway on paying creditors who supply essential services, work on paying those who report to the credit bureaus. You'll get an idea about which of your creditors report to the bureaus by looking at your free credit reports. (You need to look at all three because some creditors that report do not report to all three.)
• When you receive invitations to open new credit accounts in the mail, take advantage of them to see if you can increase your credit limits.

Move credit balances to the card with the lowest rate of interest. Also watch for late fees.

Protect your credit against identity theft. It only takes a few minutes every couple of months. Your computer or diary can remind you when to make the calls.

One way to protect against identity theft is: do not give your Social Security number to anyone who calls you -- no matter who they say they are or what company or government agency they're with. (If you believe the call is real, get their phone number. Then check it on your own through their website or a phone book). The last thing you need is to go through the awful, time-consuming, stressful, hassle of fixing this kind of problem - and possibly losing money.

Over 50% of the personal bankruptcies in this country involve health care costs, including people who have health insurance.

While this may sound scary, think of it as a call to action. Don't let general fear about money drain your energy. Push the thought aside with action.

As you will see, there are steps to take to help deal with a financial crunch.

This subject is likely to bring up all sorts of emotions, including "if only I had......." If emotions get overwhelming, put your Plan aside for the moment, but come back to it or ask someone to help you. Finances are important to your well-being.

Use credit instead of cash when possible, as discussed above.

A reasonable goal is to have enough life insurance so that if you die tomorrow your dependents can live the lifestyle they now enjoy until they finish school or can become independent. If the need decreases over time, there are policies in which the amount of the death benefit decreases over time. 

As you'll see in the category Insurance, life insurance can be an important asset if you need money while you're alive.

You can still get life insurance in spite of your health condition, for instance:

• Through work.
• "Guaranteed issue" -- policies which don't ask any health questions. These policies are usually for a smaller amount, but the amounts can add up quickly.
• "Simplified issue" -- where only a few health questions are asked, such as whether you've been hospitalized in the past 12 months.

Insurance for your possessions, home etc is more important than ever. A large financial loss could be particularly devastating. Make sure your needs are covered, and at a reasonable price. To learn more, see Insurance category.

Understanding where you are financially is important. It doesn't have to take a lot of time. You can use ballpark numbers or guesstimates to get an idea of what could be ahead. Our calculators will help guide you through the process.

• Get a real picture of where you and your family are financially at this point in time by preparing a Net Worth Statement. Include all assets and all debts, including medically related debts which are not covered by insurance.
• Understand what is likely to happen financially if you stay on the track you're on. Prepare a Cash Flow Statement.
• Rework the numbers to get an idea of what would happen if you become unable to work, or your partner's income drops to take care of you. Include income from Social Security. (You can easily find out how much Social Security income you'll get, if any by going to www.SSA.gov and looking up your Social Security statement.) Also include increased expenses you're likely going to be paying, including for health care. Our worksheets will help you through the process. If the result is a short fall, use our calculator to find out how long your money will last.
• On the other hand, expect the best: do the calculations to find out how much money you need to reach your goals.
• If there's a shortfall, there are steps to take to help you get on a better financial footing described in the articles in To Learn More.

As a person with a diagnosis at Stage 2 or less, you could have years of health and gainful activity. In fact, you could live a normal lifetime.

Consider the following guidelines with respect to your investments:

• A strategy focused on growth, with built-in liquidity "just in case" - at least until you have sufficient cash available to tide you over no matter what happens.
• A plan that is somewhat less risky than that of the average person of your age who has no health concerns.
• Avoid complicated investments that are difficult to sell quickly in case your health changes and you need to change strategies without delay.
• If you have to spend principal when you are not earning income, keep in mind that your potential to realize interest income decreases.
• Keep in mind that, if necessary, cash may be available through the new uses of assets as described elsewhere in this guide.
• Consider consulting with an investment advisor about your investment plans.

The Threshold (basically the same as a deductible because what you pay under the threshold is not deductible)

The Health Care Reform law modifies the tax treatment of medical expenses. Until December 31, 2012, the threshold for the itemized deduction for unreimbursed medical expenses was 7.5% of the taxpayer’s Adjusted Gross Income (AGI). That threshold has been raised to 10% of AGI effective for tax years beginning after Dec. 31, 2012. However, in the years 2013–2016, if either the taxpayer or the taxpayer’s spouse has turned 65 before the close of the tax year, the increased threshold does not apply and the threshold remains at 7.5% of AGI. In 2017 the 10% threshold will apply to all taxpayers.

Planning

If you and your spouse file separate returns, it is preferable for the person with the lower income to pay the medical bills. Otherwise, there may be a deduction that would otherwise be lost. The following example uses a threshold of 7.5%.  The planning idea works the same for the 10% threshold.

• A' s Adjusted Gross Income is $100,000 a year 
• B's Adjusted Gross Income is $50,000 a year 
• A's medical expense for the year is expected to be around $7,000.

If A pays the medical bills, there is no deduction. On the other hand, if B pays the medical expenses, there is a deduction in the amount of $3,250.00 calculated as follows: $50,000 x 7.5% = $3,750. $7,000 less $3,750 = $3,250.

Just because a medical expense is not covered by health insurance, does not mean it's not deductible. For example:

• The cost of changing your home to accommodate any physical needs is deductible -- at least to the extent it does not increase the value of your property.
• A wig for hair falling out due to a treatment may be deductible if it is prescribed by your doctor as a cranial prosthesis.
• Transportation expenses:
  • Locally, to and from your doctor appointments and treatments in the area in which you live are deductible medical expenses. In addition to the costs of getting to your doctor's appointment or treatments, you can deduct the cost of transportation to pick up prescriptions at the pharmacy, and to pick up medically related items such as your eyeglasses. 
  • Travel outside of where you live may also be deductible if the trip is primarily for, and essential to, receiving medical services.
  • Transportation for qualified long-term care services is not a deductible medical expense.

Transportation expenses to obtain medical care in the area in which you live are deductible. In addition to the costs of getting to your doctor's appointment or treatments, you can deduct the cost of transportation to pick up prescriptions at the pharmacy, to pick up your eyeglasses. 

Travel outside of where you live may also be deductible.  if the trip is primarily for, and essential to, receiving medical services.

Transportation for qualified long-term care services is not a deductible medical expense.

With respect to hospital bills:

You and your patient advocate are the only pepeople besides the hospital staff who know what services you did and did not receive. Billing codes are complicated and studies show that many hospital bills have errors.

With respect to all other medical bills:

• It's worth the effort.
  • You'll know what's been paid and by whom so when you start getting phone calls from insistent collectors, you'll be able to respond quickly and accurately. It's much easier than avoiding phone calls or being put in an embarrassing situation.
  • You'll have less to do at tax time.
  • You can check for accuracy. Particularly hospital bills are notoriously full of errors.
• Your filing system can be very simple. Use your own system or see ours for an example of an easy system to use.
• It is advisable to stay up-to-date. Catching up can be overwhelming. This is a perfect chore to ask someone else who is organized to do for you.

Our founding fathers considered the chance to start over so important that they included it in the constitution. Any feelings of shame should not enter into the question about whether or not to declare bankruptcy. You didn't ask for your diagnosis or the accompanying bills.

In bankruptcy:

• Retirement accounts are largely protected.
• In most states, you can keep a limited amount of equity in your home. If the home is worth less than an amount equal to your outstanding mortgage plus the state exemption, you can keep it even though you go through bankruptcy.

Check with a bankruptcy lawyer if you are considering bankruptcy. You may be able to find one who will work for free or low cost.