Friday, April 20, 2012 The Good News and The Bad News About Retirement
The good news is that Americans are living longer, the bad news is that it costs a whole lot more to retire than it used to. But the rising cost of retirement has more to do with just longer life expectancy. As this recent article in the New York Times points out, “Social Security and Medicare are being eyed for cutbacks and 401(k)’s produce ever-varying lump sums.” This means that people are learning to think differently about saving, to think differently about planning for the future, and especially to think differently about when and how they will retire.
Another related article from U.S. News and World Report mentions that “the average expected retirement age and been gradually increasing over the past seventeen years from age 60 in 1995 to 64 in 2005,” and most recently to 67 in 2012. In addition to influencing your financial planning, this shift in the retirement age can also influence your estate planning in some of the following ways:
1. Gift-giving. Parents and grandparents may now choose to hold off on giving significant cash gifts to their heirs; socking that cash away for a longer retirement, if necessary.
2. If your estate plan includes a Retirement Trust you will absolutely want to talk to your estate planning attorney before making any significant decisions regarding your plans for retirement
3. Long-Term Care Insurance. The longer you’re working, the longer you may be able to contribute to a long-term care insurance policy. Consider adjusting your contributions accordingly.
Everybody’s happy about a longer life expectancy, and there are many people who are happy to push off retirement a few years as well, but it does require a little extra planning. “If life expectancy continues its upward curve, you’ll have your work cut out for you, because you may need to think about what you want to do in your 10th and 11th decades.”
Friday, January 13, 2012 What Will You Be Doing With This Year’s IRA Withdrawal?
Many of our clients who are 70 ½ or older have chosen in the past to give a certain portion of their required IRA withdrawal to charity each year; doing so has allowed them to take the required withdrawal, keep their taxable income down, and give to a cause they care about all at the same time. Unfortunately, the individual-retirement-account donation rule expired at the end of 2011 and has yet to be restored by Congress.
This recent article in the Wall Street Journal explains that “under current rules, the first dollars out of an IRA count as the required withdrawal. So if an IRA owner makes a withdrawal before Congress extends the law, he or she can't redeposit the funds and make a donation of IRA funds after lawmakers act.”
The expiration of this rule may not be a big deal for many of our readers who intend to make charitable donations as they always have, regardless of retirement-account donation benefits; but for some, not knowing what Congress may choose to do is making it hard to design a financial plan for the year, and causing increasing stress. “The problem arises for IRA owners [who are] over 70½ and must take an annual payout from the account. They want to withdraw as little as possible in order to let the assets expand but also want to donate some or all of the required payout directly to charity.”
Your best bet right now may be to consider your ultimate goal both for your IRA payout and for your charitable giving for the year, and then talk to a trusted advisor. One thing any estate or financial planner will tell you is that there is almost always more than one way to accomplish your goals. We cannot stress enough, however, how important it is to stay on top of any legal requirements or changes in the law when it comes to IRAs and retirement savings.
Friday, December 09, 2011 Long Term Care Insurance Is Tax Deductible for Business Owners
By now most people, when planning for their “Golden Years”, know that they need to consider the possibility that they may need long-term care at some point in time, and that long-term care insurance is a logical option for this purpose. What most people don’t know is that if you are self-employed or own your own business the cost of your insurance premiums could be tax deductible.
A recent article in Forbes reveals that “self-employed folks with business income that passes through onto their personal returns... can deduct 100% of the premiums paid for themselves (and spouse) as a business expense, just like health insurance. These folks are still subject to the age-related premium limits, but that doesn’t necessarily limit [their] deduction.”
This could be a HUGE incentive for self-employed business owners who tend to lag behind their traditionally-employed counterparts in saving for future retirement expenses. It’s not that business owners are less concerned about their futures than their peers, but that as entrepreneurs struggle to get their small business off the ground in the early years they are more likely to put any extra income back into their business, rather than investing it for retirement. This tax-deduction for long-term care insurance can be just what entrepreneurs need to put them back on equal footing.
In today’s economy traditional employees and entrepreneurs alike need all the help they can get saving for the future and protecting the assets they have. To find out more about this, or other strategies to prepare yourself and your family for what we hope will be a long and prosperous retirement, please contact our office.
Friday, November 11, 2011 NOW is the Time to Think About Long-Term Care
As Baby Boomers begin to retire and to think about life after retirement, many find that one of their primary concerns is that of long-term care. Some news sources seem to think that paying for long-term care is going to be a number one issue in the coming years, not only for elderly individuals and their families, but for our society as a whole.
“The cost of long-term-care itself is not trivial. Nursing homes cost on average $87,235 annually... One year in an assisted-living facility is now $41,724. Adult day services are $70 per day, and home health aides cost $21 per hour... How can the country deliver and finance long-term-care for its rapidly aging population?”
It is comforting to know that AARP takes a somewhat less dramatic view of the issue. While they do agree that most seniors will at some point face the need for long-term care—“even if you're in good health today, there's a good chance that you'll eventually need some type of long-term care, at least for awhile”— they urge people to take a pragmatic approach... and to start planning as early as possible. “The cost goes up with age, but it's still affordable for many people over age 65. Once you hit the mid-70s, though, the cost of a good long-term care policy becomes very expensive, and it may be difficult to qualify for [it].”
An elder law or estate planning attorney is another resource for seniors and their families who are trying to plan ahead for the possibility of paying for long-term care. We specialize in helping you sort through your options, get your financial ducks in a row (right now and years down the line), and apply for government benefits, if necessary.
Don’t let the need for long-term care catch you by surprise. Contact our office to start planning now.
Wednesday, November 09, 2011 What Kind of Support Will You Have During Your Retirement?
Planning your retirement can seem fairly easy at first. As long as you’re careful to live within your means retirement can be a time of freedom, and the ability to explore interests you didn’t have time for before. But as this article in U.S. News and World Report reminds us, that freedom can eventually run out. “Most people retire when they are still healthy and can take care of themselves in their 60s, but you need to plan for a time when you might need more support.”
The article has some good suggestions about how older retirees can plan ahead to set up support systems when they need them. Some of the suggestions are time-honored solutions, such as living with family in a multi-generational household, but others are less obvious—although just as valuable.
One of these less obvious solutions is group living, or cohousing. “A cohousing building caters to community-minded residents who usually share many common rooms including a big communal kitchen, dining area, play room, and family room where residents can get together and socialize. This kind of community is much more close-knit and the neighbors will notice if you need help. . . Cohousing units generally have no staff and the residents take care of themselves and each other.”
Cohousing may be an ideal solution which offers freedom and support at the same time. But if you do decide that cohousing is the route you want to take, you may want to consult with your estate planner or elder law attorney ahead of time. Group living situations may require a buy-in or financial partnership and is not something to be entered into lightly. Any deeds or contracts should be reviewed by a legal professional before permanent steps are taken.
For more information about senior living options please contact our office. We are here to help.
Friday, October 28, 2011 Good News for Retirement Savings in 2012
The past few years have been very hard on retirement savings. As if the devastating impact of the economic crash on retirement assets wasn’t enough, many people weren’t able to sock away nearly as much as they’d like during the lean years that followed the crash. But a new article in U.S. News and World Report announces that things are looking up for retirement accounts in 2012!
According to the article, savers can look forward to 4 beneficial changes in the new year:
Higher income limits for contributions to your Roth IRA. “The income limits for making contributions to a Roth IRA will be between $110,000 and $125,000 for singles and heads of household in 2012, up $3,000 from 2011.” Married couples will reap the benefits as well, as their income limits will increase from $173,000 to $183,000 in 2012.
The ability to contribute more to your 401(k). “The contribution limit for 401(k), 403(b), and the federal government’s Thrift Savings Plan will increase to $17,000 in 2012, up from $16,500 in 2011.” This is great news for anyone who lost money when the economy crashed and is trying to slowly build up their savings again.
Tax breaks for more households who contribute to a traditional IRA. While IRA contribution limits will remain the same in 2012, and while there will be no change to the fact that “only workers who earn below certain income levels get a tax break for contributing to a traditional IRA.” The good news is that “those income limits will relax slightly next year.”
The tax-saver’s credit is expected to be expanded in 2012 as well, with “income limits [increased] by $1,000 to $57,500 for married couples filing jointly and by $750 to $43,125 for heads of households.”
While these may be baby steps as far as many savers and tax-payers are concerned, even small steps are good news for those trying to recoup their losses and get back on track for retirement. For more information about how these changes (or others) may benefit you or your loved ones please contact our office.
Wednesday, October 26, 2011 Entrepreneurs, Family Business, and Estate Planning
If you’re an entrepreneur, or a small or family business owner, you have more to lose if you don’t have an estate plan. An estate plan help you protect not only your family and your assets, but also the business you’ve spent years (or decades) building. A recent article at Entrepreneur.com, entitled What Entrepreneurs Should Know About Estate Planning, describes some of the main components of an estate plan and how they can be useful to a business owner.
That article covers eight estate planning components, beginning with a will and a living trust and ending with long term care insurance and disability insurance. All of these components are extremely useful (and in some cases absolutely necessary) and we highly recommend reading through the entire article. We would also suggest that there are three more documents that an entrepreneur should consider to help preserve business and wealth for future generations.
Family Limited Partnership (FLP): A Family Limited Partnership is an asset protection tool which allows parents to take business assets out of their taxable estate and transfer the value of that asset to their children while still remaining in control of the business.
Buy-Sell Agreement: A buy-sell agreement is a formal plan or contract between business partners establishing what will happen to the business should one of the partners die. This document specifies whether a partner may or may not buy your ownership shares for your heirs and for what price, or if you want to block certain family members or individuals from having any ownership share in the business.
Succession Plan: A succession plan should be a key element in any business plan, but especially for small or family businesses. A succession plan is exactly what it sounds like, a formal plan outlining your wishes for passing your business on to your successors. You may design a succession plan to facilitate your retirement, or to provide a smooth transition in the event of your death. In any case, a succession plan is essential for any business owner.
Don’t leave your business—or your family—out in the cold. Take the necessary steps to protect them both in the event of your death with a well-designed estate plan.
Friday, September 23, 2011 There’s More than One Way to Name IRA Beneficiaries
Do you know the best way to pass your IRA savings on to your loved ones when you die? It sounds like a simple question, but naming beneficiaries for your IRA is not always as straightforward as it sounds. This article in CBS MoneyWatch explains: “Without proper estate planning, you may be reducing your family’s future wealth potential. That’s because improper planning can mean not only a premature end to your IRA at your death, but also assets being inherited by the wrong individuals or entities.”
Deciding who should inherit your retirement savings is fairly simple (although it is not uncommon for an ex-spouse to receive IRA benefits because beneficiary designation forms are not updated after significant life events such as a divorce,) it’s figuring out how the assets should be distributed that poses the problem. If done correctly, inherited IRA assets can be rolled over and stretched out by beneficiaries for years. But without the correct planning your heirs may find themselves paying significant taxes on their inheritance or worse yet, unable to access the funds at all.
The article explains that each of the many options for IRA beneficiaries requires a different kind of planning. Naming a spouse as a beneficiary is fairly straightforward, your spouse can either “Roll the funds into his or her own IRA” or “Open an inherited IRA and take distributions based upon his or her remaining life expectancy.” Planning to leave your IRA to a single child is somewhat similar to planning to leave it to a spouse.
But if you would like to leave your IRA to more than one child, or to a trust for the benefit of multiple individuals or charities, you’ll likely want to contact an attorney or accountant for more significant planning. As beneficial as these options can be, there are regulations and requirements involved with multiple beneficiaries, and “there are a lot of complexities with naming trusts as beneficiaries, so seek a competent estate planner for assistance.” Wednesday, September 21, 2011 Is Planning for the Future Easier if You’re Single?
“The grass is always greener on the other side of the fence.” It seems that this old adage is appropriate for married people planning for retirement, who look over the fence at their single counterparts and imagine how much easier it must be for them. According to a recent article in the New York Times, “More than half of married Americans, and more than two-thirds of singles, say they believe it is easier to make major financial decisions for retirement when there is no spouse in the picture.”
We all know, however, that the wisdom of this adage comes from the fact that things are not always as they appear. The same is true, it seems, when it comes to perceptions about the difficulty of retirement planning for married couples vs. single individuals. The findings of the Charles Schwab & Company survey quoted by the NY Times article reveal that “85 percent of married Americans were saving for retirement, compared with 67 percent of singles, across all age groups. Thirty-eight percent of married Americans expressed confidence in their retirement readiness, compared with 32 percent of those who were single.”
The numbers aren’t all that surprising when you consider that while it may be easier to make decisions about money when you’re on your own, it’s easier to sock money away in a savings or retirement account when you have two incomes to draw from.
Furthermore, having a second person in the picture can actually serve as an incentive to stick to your savings plan. “While everyone wishes they didn’t have to compromise, a spouse is also a sort of ‘buddy system,’ in terms of staying on track for savings... If one person tends to be a spender, a spouse who has the opposite tendency may help the couple stay on track toward savings goals.”
The important thing—whether you’re single or married—is that you’re ready for whatever the future may be. Having a retirement savings plan, and protecting that plan for yourself and your family, is of the utmost importance. Friday, September 09, 2011 How Does Your State Rank on the Long-Term Care Scorecard?
One of the primary concerns of the aging population is long-term care. As the life expectancy of Americans goes up so does the expectation that they will someday need some form of long-term care. You may not know whether that care will happen in a hospital, a nursing home, or in your own home, but you can be sure that it will be expensive.
How expensive will long term care be? It turns out the answer to this question depends a great deal on where you live. The AARP, The Commonwealth Fund, and The SCAN Foundation recently released a report which they call “The Long Term Scorecard,” which compares states and ranks them according to categories. The website Web MD has an article explaining how to use the scorecard and what it means.
The article in Web MD states that “Long-term care is unaffordable for middle income families, according to [The Long Term Scorecard report.] Even in states where nursing home care is most affordable, such care averages 171% of an older person's household income. The national average is 241%.”
Some states, however, have been making the issue of long-term care a priority, and have been wrestling with questions such as how to make it more affordable to residents and how to provide support to family caregivers. According to the article in Web MD, they’ve broken down the information in “The Scorecard” to help readers understand which states provide the best support (either financial, social, emotional or legal) for the elderly and their caregivers.
The article “ranks states' performance according to four categories: 1. Affordability and access, 2. Patient choice of both provider and setting, 3. Quality of life and care, and 4. Support for family caregivers.” The states ranked highest overall were Minnesota, Washington, Oregon, Hawaii and Wisconsin; while the lowest ranking states turned out to be Mississippi, Alabama, West Virginia, Oklahoma and Indiana. (For more information on how the states were ranked and what each ranking means please read the article here.)
Perhaps the most important lesson to take from all this is that no matter where you live, or what your health is like right now, it is very likely that you will need some kind of long-term care in the future, and that that care will be expensive. Burying your head in the sand or choosing to “think about it when the time comes” will only make things worse for you and for your family. Call our office and let us help you prepare now for whatever the future may bring. Wednesday, August 31, 2011 An Inside Look at Retirement and Long-Term Care
What can we expect from our retirement years? We have financial advisors to help us look ahead and plan, but sometimes financial advisors can only take us so far; how does retirement look to someone who has been there?
The author of this article in Reuters writes that she learned quite a bit about retirement from her 91 year old mother, the first lesson being that “Retirement spending is a roller coaster, not a flat line.” According to the article the author’s mother chose to spend a lot of money on golf, travel and fun in the first few years of her retirement, but was later happy to settle down into a calmer, less expensive lifestyle later on. Her expenses didn’t go up again until near the end of her life when “her health deteriorated and she ended up spending thousands of dollars every month to cover her care.”
Preparing for long-term care can be essential to having a pleasant and affordable retirement; whether this means finding the right long-term care insurance or setting money aside in another vehicle and earmarking it for long-term care needs. “In the last year of my mother's life, we were spending almost $7,000 a month of her money so that she could live in a nice place and get good care. If she had annuitized too much of her money or was living simply on pension checks, she wouldn't have had the cash to do that. On the other hand, if she had a good long-term care policy, that might have helped.”
The last thing the author mentions in her article is that “The right paperwork really is helpful.” Having an updated will or trust, power of attorney, and healthcare directive or living will may not make it any less painful for you or your loved ones if you are diagnosed with Alzheimer’s or dementia, but it can make it easier for the people who care about you to spend quality time with you rather than with lawyers or accountants. The author’s mother had all her paperwork in order, which “made it very easy for me to manage her care and pay her bills when I had to. It was emotionally difficult to watch my mother give up her health and her spirit and her life, but I didn't have to waste any of my time and worry on those bureaucratic details.” Friday, August 26, 2011 Are You Hurting Your Own Chances At Retirement?
According to
a
recent article in the Wall Street Journal, many Baby Boomers are no longer
worried about when they will be able
to retire, but if they will be able to
retire at all. In many cases the reason for this worry stems not so much
from any kind of selfish inability to save, but from a tendency to be too generous.
In addition
to a growing trend (hinted at in the WSJ article above) of Baby Boomers tapping
their own retirement funds to help pay for the care of their elderly parents, this
article in USA Today warns of the all-too-common danger of Boomers shorting
their own retirements to pay for their children’s college educations.
“People are
willing to go to extreme measures because they value a college education so
highly... Among parents who are planning for their children's college, 24% say
that they tap their retirement accounts. And that doesn't reflect people who reduce
or halt retirement contributions [to make tuition payments.]”
One thing
that both of these articles agree on is that when it comes to saving money,
Boomers need to put their own needs first. While the immediate financial needs
of an elderly parent or college-bound child may feel more pressing, it’s a very bad idea to short your own
retirement account (and your future) to cover their costs. If you have an
elderly parent in need, before you dip into your own savings contact a good
elder law attorney who can help you review your (and your parent’s) options,
and help navigate the VA Benefits or Medicaid system if applicable.
As far as
college tuition goes, by neglecting your own retirement to pay for your
children’s college education you may simply be perpetuating a dangerous cycle,
putting your children in the position of having to pay for your expenses when your savings runs out in the future. Financial
advisors, college admissions counselors, and the school’s financial services
center may be able to help you explore your options for paying for tuition. Wednesday, August 03, 2011 Addressing the Growing Financial Concerns of Baby Boomers
The “golden years” are supposed to be a time to retire and relax after a life of working hard for yourself and your family, but according to a recent story on NPR, Baby Boomers have some big financial concerns about the future, many of which involve how they will pay for health care in their golden years.
“The struggling economy, a longer life expectancy, ever-increasing health care costs and challenges facing Social Security are putting added pressure on the boomers, those born between 1946 and 1964.”
An Associated Press LifeGoesStrong.org poll questioned almost 1,500 adults, over 1,000 of whom were Baby Boomers, and found that while ALL Boomers had some concerns about financial comfort and survival as they aged, the younger Boomers in particular (those born in the ‘60s) had the strongest—and the most all-encompassing—concerns.
This discrepancy in fear makes sense when you consider that “Many older boomers still have a defined benefit pension plan, probably some decent retiree medical insurance and Social Security,” whereas “the youngest boomers... face more uncertainty about their pensions, their Social Security, their housing and their medical care.”
The NPR article does not offer any easy fixes or instant comforts to these financial concerns—indeed there are no easy fixes—but it does offer a few suggestions to help Boomers ease their minds about those things that worry them the most:
-
Push retirement back as long as you can to put off drawing on your savings until absolutely necessary.
-
Start investing in long term care insurance, and do so as early as possible. “Costs for long-term care insurance can range from $1,000 to $8,000 a year, depending on age, health conditions, policy term and other factors.” As you get older the cost goes up—sometimes very steeply.
-
Don’t neglect your estate planning. According to the poll, “Forty-percent of the boomers polled said they had a legal will to spell out how their possessions should be distributed after death,” and even fewer had health care directives, proxies, or living wills. A health care directive “allows people to document their wishes concerning medical treatment, and the proxy is a medical power of attorney that allows for the appointment of a trusted person to make medical decisions in case an individual is unable to do so.”
Our office can help you address any concerns you might have about your own (or a loved one’s) golden years. Don’t hesitate to contact us. Friday, July 29, 2011 Retirement Assets May Be Unpleasant Surprise for Heirs
You’ll often read news articles or blog posts about saving for retirement—when to start, how much to save, what savings or investment plan is best—but there’s an important retirement topic which often goes underreported: How these retirement accounts impact your heirs.
As noted by this article in the Wall Street Journal, “The new, higher threshold for the federal estate tax has many heirs happily thinking they won’t have to surrender a big piece of their inheritance.” But these heirs “may need to think again if they’re in line to receive a lot of money from tax-protected retirement accounts like 401(k)s and IRAs.”
Many (if not most) retirement assets these days are IRD assets, this is “income in respect of a decedent,” and it means that the assets are income earned by a person, but not taxed or received before that person passed away. These IRD assets can be wonderfully beneficial to the investor... but they can be an unpleasant surprise for heirs, who will end up paying the taxes on these assets.
“Heirs who receive retirement accounts often pay far more tax on IRD than they have to, collecting payments from the plan but failing to take an annual deduction that is available to beneficiaries. Sometimes that’s because the tax attorney who planned the estate knew about the deduction, but the accountant who prepares the heir’s taxes doesn’t.”
Some of the solutions suggested in the article are to take advantage of a recent rule change which allows many IRD savings accounts to be converted to Roth 401(k)s. Taking advantage of this and converting the money to a Roth allows the owner to pay any applicable taxes now, so that heirs won’t be liable. Another option is to move money from the IRD retirement account into an irrevocable life insurance trust, thus removing it from the taxable estate.
“People need to refocus their thinking on what heirs are truly inheriting.” Our office can help you do just that. A little bit of thought and action now can save your heirs a lot of taxes and confusion down the line, and this is especially true if you are lucky enough to have a significant amount of savings that you anticipate passing on to your children or grandchildren. Friday, May 20, 2011 The Entrepreneur’s Guide to Retirement
Everyone knows that entrepreneurs and small business owners often march to the beat of a different drum. After all, in order to start (and keep) a successful business you have to have a somewhat different and dynamic way of looking at the world and its possibilities. But this different way of looking at the world doesn’t always work in their favor.
This article in Entrepreneur.com points out that “In some ways, planning and saving for retirement runs contrary to the typical characteristics of successful entrepreneurs... Does planning for retirement make you a pessimist who assumes your business will never grow big enough to be sold for millions of dollars, making retirement savings irrelevant? Does relying on a retirement nest egg mean you've lost the entrepreneurial confidence you once had?”
Entrepreneurs and small business owners often feel the best investment in their future is to invest in themselves. Where an employee in a large corporation is likely to take any investment income and put it in stocks or savings, a small business owner is more likely to turn around and put that money back into growing her own company.
Contrary to what the dedicated business owner may think, it’s not pessimism to save for retirement—even as an entrepreneur; it’s just plain common sense. Luckily, there are ways for entrepreneurs to invest and save that don’t feel as if they’re taking away from their investment in their business. The article mentions cash balance pension plans, zero coupon bonds, individual retirement accounts and 401(k) plans.
But in addition to planning for your own future, you need to plan for the future of your business as well. After all, you won’t be around forever, and your successful business should be the legacy you leave for generations to come. Planning the successful transition of your business requires a comprehensive, well thought out, and flexible business succession plan. This is where our office can help. Whether you plan to leave the business to your heirs, sell it to pay for your children’s futures, or transfer your shares to a partner, our firm will be there to guide you every step of the way. Wednesday, May 11, 2011 Retirement Planning Goes Back to its Roots
When it comes to retirement planning you can find suggestions, rules and guidelines of just about every shade, but it wasn’t until this article in the U.S. News and World Report that we’ve seen the biblical “7 Deadly Sins” applied to retirement planning. The tone of the article is light and tongue-in-cheek, but the advice it contains is serious and spot on.
Planning for retirement can often feel overwhelming to anybody without a background in economics or investing, but the use of the well-known and easily remembered religious/literary reference makes planning for your retirement a little more relatable. For example, the concept of diversifying your portfolio becomes easier to understand when related to the sin of greed:
“Greed is a killer when it comes to your investment portfolio. Greedy investors often chase past results, choose higher risk investments, or don’t do their research before investing. This can lead to falling for scams, buying at the top of the investment bubble, and other problems. Solution: Start with a balanced portfolio, research all investments thoroughly before buying, and remember that if an investment sounds too good to be true, it probably is.”
And of course who could ever forget the ever-popular sin of lust: “Lust can be equated to extravagance and longing to the point it becomes all-consuming. Signs of giving in to lust include spending too much on luxury items and living beyond your means. It could also mean having champagne taste on a beer budget. Excessive spending can lead to unmanageable debt if left unchecked. Solution: You need a budget and you need to stick to it.”
The article tackles sloth, pride, envy, wrath and gluttony in the same helpful and informative manner, reminding us that although retirement planning today—with our Roth IRAs, 401(k)s and online investment portfolios—may at times be complex, convoluted and fast moving, the principles behind it are well known and ages old. Monday, May 02, 2011 The Benefits of a Retirement Trust
Most of us start thinking about retirement as soon as we get our first job. Even if we can’t start saving as much as we’d like right away, we know it’s there, looming on the horizon, and we think about it. The closer we get to retirement age the more we begin to consider our options and make specific plans. But even with all these years of thought and planning, U.S. News and World Report thinks that there may be a few things you haven’t considered in regards to your retirement. Although not specifically mentioned in the article, one of the things you probably haven’t considered is how your retirement savings will fit into your estate plan.
The first and most common option for distributing your retirement benefits upon your death is simply to name your spouse or children as the beneficiary (beneficiaries) of your retirement benefit plan; however, there is another way. A Retirement Benefit Trust (or Irrevocable Retirement Trust) can be used to keep retirement assets out of your spouse’s taxable estate upon your death. This may not be a big deal if your retirement assets are waning, but if retirement assets comprise a large portion of your estate then this can be a huge benefit.
A Retirement Trust also has the advantage of allowing your beneficiaries to stretch out the financial opportunities of your retirement assets. Instead of withdrawing the entire amount of your retirement savings right away (and paying taxes on the income) a trust allows your beneficiaries to make withdrawals over the course of their entire lives; not only stretching out the investment opportunity, but also helping to keep them in a lower tax bracket.
For more information on Retirement Trusts, and whether one could benefit you and your family, contact our office today. Friday, April 29, 2011 How Successful CEOs Keep the Family Business in the Family
How long will your family business stay in the family? One generation? Two generations? How about 4 generations down the line?
The truth is that very few family business stay in the family beyond the first generation. Statistically, Only 40% of family owned businesses survive to the second generation, 12% to the third, and 3% to the fourth. There are many possible reasons for this, such as lack of interest by subsequent generations or the evolving market and economy, but one of the main reasons that family businesses don’t survive to the second and third generation is lack of planning.
Which families have been successful with succession planning for their businesses? This article in Business Week profiles the famous families of business, and includes some interesting discussion of why certain families are successful where others aren’t. Parent-child relationships often become fraught with tension when the time comes to pass the baton, but history has shown that succession transitions are much smoother when the occur gradually, and according to a plan created and agreed upon by ALL interested parties.
Business succession planning is a key element to owning your business at any step of the game, not just at retirement age. This is because it is not merely about exit strategy, but about making goals and planning for future success. Leaving the business to your children is not your only option. You may decide to sell your business, or leave it to a partner. The options are out there, if you only know where to find them.
This is where an estate planning attorney can help.
Whether your business is in its first generation or its fifth, whether you intend to pass it on to your children or sell it, planning is essential if you want your business to survive. Our firm can help you do just that. Whether through wills and trusts, or the succession planning described in this blog, it is our business to look to the future. Trust us to help you do the same. Wednesday, March 02, 2011 Coming in 2012: Change for Retirees
Last month the Obama administration released their budget for the 2012 fiscal year, and included in that budget were a few things that retirees (or those close to retiring) will want to be aware of. If you own a business you may want to keep reading as well, as some of the proposals within the budget would affect not only retirees, but also small business owners. This article in the US News and World Report describes some of the proposals included in the budget, including:
Automatic workplace pensions.This would require employers (with the exception of very small businesses) that do not currently offer a retirement plan to enroll their employees in a direct-deposit IRA account. Employees would have the ability to opt-out if desired.
Tax incentives to create retirement plans.This proposal would increase the value of the tax credit to small businesses that start new retirement plans. The current maximum credit is $500/year for up to 3 years, the new proposal would increase that to $1000/year.
More Social-Security funding.Obama’s budget would allocate $12.5 billion to the Social Security Administration, up $1 billion since 2010. The primary aim of this increase would be to “reduce the backlog of disability claims and decrease Social Security fraud.”
But not all of the proposals included in the budget are beneficial to retirees. Here are a few things you may want to watch out for:
Pension insurance premium increases.“The budget proposes giving the Pension Benefit Guaranty Corporation... the authority to adjust premiums and take into account a company’s financial condition when setting premiums.” Although this is certain to result in premium increases, the increases would be gradually phased in.
Senior Community Service Employment Program funding cut.The proposed budget would reduce funding for the Senior Community Service Employment Program by 45 percent, and would transfer the program from the Department of Labor to the Department of Health and Human Services. Seniors who hope to retrain for new jobs in their retirement years may find this more difficult to do than they expected. Monday, February 14, 2011 Retirement Advice for EVERY Age
“Retirement”—It’s a word that goes hand-in-hand with “Baby Boomer” these days. After all, as has been pointed out over and over again, retirement is the issue of the hour as the first round of Baby Boomers hits that magic age. But what about the younger set? Is there anything that twenty- or thirty-somethings should be considering regarding retirement at this point in their lives?
Actually, according to this article by Steve Vernon at MoneyWatch.com, it is never too early to start thinking about retirement; and there is plenty for adults in their twenties or thirties to consider right now that can help them get a jump on retirement a couple decades down the line.
According to the article, “The challenge facing most people in their 20s and 30s is juggling competing priorities — usually there isn’t enough money in the budget to do it all... ‘Should I save money for retirement, a down payment on a house, or for my kid’s college education?’... How do you prioritize?” While all of these things are important, Vernon suggests that your first priority in your twenties should be yourself. He suggests that the best investments you can make at this time are in your career, your home, your health, and your spending habits.
What our firm would like to point out is that a large part of investing in those things mentioned above is protecting those things. An estate planner can help you decide how to best protect your home from taxes, lawsuits, or divorce; an estate planner can also help you protect your health with a living will or healthcare directive. Additionally, many young adults (frustrated with the current state of the job market) have decided to take employment into their own hands by starting their own businesses—and many have been very successful! An estate planner can help you with the overwhelming but necessary task of protecting and planning for the future of your small business.
The news may be flush with stories about (and advice for) Baby Boomers entering or nearing retirement, but we know that everybody can use help and advice when it comes to planning for the future. Our office can help you prepare for your best future—regardless of your age. Call us today. Friday, February 11, 2011 Long-Term Care; Be Prepared in an Area of Uncertain Options
It’s flu season again, and the strain going around this year has been a difficult one, mainly because of how long it keeps its victims out of commission. So the article we recently found on Time.com about Long-Term Careseems particularly timely and relevant, if only because this year’s flu could be seen as an omen of what’s to come as Baby Boomers age into their golden years.
According to the article, “A huge wave of baby boomers may need long-term care in their golden years — and yet fewer than half have taken steps to prepare for it... two-thirds of Americans believe it's important to plan for long-term care, but only 44% have taken steps to protect themselves.” Part of the reason for this lack of preparedness is that Baby Boomers underestimate the likelihood that they’ll need long-term care, or they overestimate the likelihood that their children or families will be able (or willing) to provide that care.
But there’s another reason why Baby Boomers are statistically unprepared for the crisis of old age; to put it simply, there aren’t any clear avenues to solid and reliable financial preparedness. “While it's clear that not enough people are thinking about preparing for their long-term-care needs, it's not at all clear what, if any, the best solutions are.”
Some think that extra savings in the bank will cover the cost of long-term care; others believe that government programs such as Medicaid or Medicare will take care of them. Unfortunately, both of these beliefs are mistaken. “The average cost of a nursing home ranges from $85,000 to $120,000 a year, while hiring an aide to spend six hours a day on average in the home starts around $40,000 a year... Medicare, meanwhile, only covers up to 100 days of long-term care and often involves co-payments. Medicaid will cover long-term nursing-home care but only after the person has drained his or her savings account.”
The only other obvious solution is long-term care insurance; but even with long-term care insurance, nothing is clear cut, and too many people have found themselves paying into a policy and ending up with no return on their investment. This isn’t to say that long-term care insurance shouldn’t be an option, only that it’s one to be well-researched. Long-term care insurance is still one of the best options out there, but “There have been horror stories of people paying premiums on long-term-care insurance policies for years, only to find the benefits won't cover their needs 20 or 30 years down the road when health care and long-term-care costs are significantly higher.”
The best advice we can give is to do your research and ask for the help of an advisor with experience in elder law, elder care, and senior financial planning. Whatever you do, don’t throw the baby out with the bathwater—we may have no clear and easy answers yet, but that’s no excuse to remain completely unprepared. Friday, December 03, 2010 Are Misconceptions Keeping You From Planning for Retirement?
Planning for retirement can be tricky business. When we discuss our clients’ estate plans and assets with them we can’t help touching on retirement plans, so we hear a lot about the worries that go along with preparing for an uncertain future. There are many variables and unknowns that can crop up between starting out in your 20s or 30s and your eventual retirement at 60 or 70; and there are a lot of myths about retirement which are daunting, discouraging, or just plain misleading.
U.S. News and World Report recently published an article which attempts to address some of these myths and set readers back on the right track to retirement. We hope that all of our readers are already saving for retirement, but because we know just how important it is to save early and save often we’d like to list some of the myths here for our readers:
#1 You don’t make enough money to save for retirement.
#6 You need to be debt free before you can invest for retirement.
#8 Social Security benefits will be enough to retire on.
#9 You have to retire at age ___.
These are only 4 of the 10 myths covered in the article. Click on the link above for a full list of commonly-held assumptions about retirement that may be preventing you from making the most of your retirement savings.
At our office we help our clients protect and plan for the future, retirement is often a part of that future. If you have any questions about how to protect your retirement investments, or how to ensure that they transfer properly to your heirs if anything should happen to you, please call our office. Wednesday, November 10, 2010 Preparing Boomers for the Finance Sandwich Squeeze
Baby-boomers are called the sandwich generation—and with good reason. They were expecting to pay for their own retirement and their children’s college education; but now recession upon recession has toppled their elderly parents’ savings, and Boomers find that they are faced with the prospect of shouldering the financial burden of their parents’ final years as well. The pressure of providing for so many people at once can quickly become overwhelming, and using one’s own savings or retirement fund can begin to look like an easy solution to immediate financial concerns.
Although it may seem like an easy fix to looming financial debt, don’t give in to the temptation to use your own savings. Before you give in to fear and drain your retirement, get some professional financial advice. This special edition recently released in the New York Times shows that it is possible to prepare for what’s coming—both for your parents and yourself.
Our first recommendation is to discuss your situation with a trusted financial advisor. After that, one of the primary suggestions offered in the Times is to talk to your parents about their situation. It may not be easy; be prepared for your initial advances to be met with resistance. Aging parents often worry that they will lose control of their own finances, or that giving decision-making capacity to one child will lead to anger or hurt feelings among their other children. Instead of gearing up for a fight, the article mentions a few ways to gently lead into the conversation (including talking about family philanthropic projects.)
Another discussion you won’t want to skip is one about Long-Term Care Insurance. This article by Ron Leiber discusses different kinds of insurance, whether or not you’ll need it (you will), and how to pay for it.
The world of “old age” is changing. People are living longer, experiencing more long-term health issues, and without the same ability to rely on government “entitlement” programs as their predecessors. Serious discussion and serious planning are essential to surviving the challenges of the “new” old age. Wednesday, November 03, 2010 Facing the Future with Long Term Care
November 2010 is Long Term Care Awareness Month, which means it’s the perfect time to talk about your thoughts, concerns, and plans for your own long term care. According to this article by Ken Dychtwald, PhD, “average life expectancy is now at 78 and rising. And, if you’re already 55 or more, life expectancy has soared to around 84.” Furthermore, “Two-thirds of people over age 65 will need some kind of long term care.” This means that it can never be too early to start planning for your future.
Dychtwald points out in his article that “Uninsured medical expenses are the top financial worry among men and women age 55 and over. People… worry most about these expenses’ unpredictability and potential for high costs.” People know that their health is likely to decline slowly as they age, and people know that they will need care—possibly a lot of it—that the cost of this care is rising steadily, and that they will need a way to pay for it. In spite of this, “many Americans are confused about what long term care actually is, and they’re surprised to learn that Medicare and/or traditional health insurance do not cover most long term care needs.”
Life expectancy is rising, and the nature of “old age” is changing quickly. We live longer, but we don’t necessarily live better; and what we’re headed for is an entire generation of people who are unprepared for the rigors and expense of “the new” old-age. Luckily, this doesn’t have to be the case.
The article above suggests that “There are three core topics in family conversations about long term care: (1) what care options are most preferred (e.g. if you needed some help, would you prefer to be cared for at home, in an assisted living facility or in a nursing home?); (2) potential roles and responsibilities of different family members’ (and possibly, help from a professional care coordinator, aid or nurse), should it ever be necessary to manage care; and (3) how to pay for any required long term care (with your or a family members’ savings, through Medicaid or with a long term care insurance policy?).”
We urge our readers to talk about these issues with their loved ones. The conversations may be uncomfortable at first; but fear of the future—lack of preparation for the future—is far worse. Discuss long term care with your loved ones and your trusted advisors. Be ready for whatever the future may bring.
Wednesday, October 27, 2010 How to Find the Best Long-Term Care Policy
As the average life-span increases—and the cost of medical care along with it—more and more people are beginning to see the need for long-term care insurance. Simply having a retirement plan isn’t enough anymore. Saving for retirement now means not only saving for your living expenses, it means preparing and saving for your health care expenses as well; expenses which will most likely include major medical procedures, eventual in-home care, and perhaps even long-term nursing care.
The idea of long-term care insurance is no longer a new and strange one, but it’s still not a concept most people feel completely comfortable with. What kind of long-term care insurance should you be looking at? Can you get coverage for your entire life? (Probably not.) What types of care and services will be covered? (Each policy will vary.) Can you get a policy that goes into effect right away, or is there a waiting period? (There is often a waiting period.)
Not all long-term care policies are created equal. The U.S. News and World Report recently published an article advising 7 things to look at when choosing a long-term care policy. Some of the things you’ll want to pay attention to include the benefit amount, the benefit period, which services are covered, and inflation protection, just to name a few.
Choosing a long-term care policy is an important step, and not one to be taken blindly. If you are confused about long-term care policies, or unsure of which one may be right for you, don’t hesitate to ask the advice of a professional. Insurance agents, financial advisors and estate planners may all be able to help answer your questions or point you in the right direction. Wednesday, October 20, 2010 Plan Ahead to Avoid Financial Pitfalls in 2011
A recent article in U.S. News and World Report points out that although “the Great Recession may technically be over… Consumers [still] don’t want to spend and are still slowly digging their way out of the mountain of mortgage and personal debt that helped fuel the downturn.” Among those groups who are still struggling the most are seniors and retirees, many of whom took a devastating hit to their retirement investments and savings, and are still struggling to recover.
Unfortunately, according to the article, 2011 may bring with it some new financial concerns for seniors. Some of the “major money issues” seniors will have to think about in the coming year include a zero cost of living adjustment from the Social Security Administration, changes to certain Medicare policies, a rise in income and capital gains tax rates, and the return of the estate tax, among others.
Although the article itself offers no particular solutions to these financial concerns—it merely gives a warning of what’s to come—there are steps you can take to avoid some of the worst financial pitfalls. Because each individual situation will be different there is a danger to blindly following (or offering) standard advice across the board. However, with consultation and careful planning there are a number of strategies estate planners can recommend that may help your family protect your assets now, and when the estate tax returns. Forewarned is forearmed, and taking the time to consult with your estate or financial advisor and plan ahead may be the best action you can take. Friday, September 10, 2010 Women and Retirement: Your Money, Your Future, Your Plan
You have a longer life expectancy than a man, different ideas about what constitutes risk, often work for a different pay-scale… and if you’re a woman, you likely need a different kind of retirement plan as well.
You may think that the financial advisor recommended by your husband/father/brother will suit you just fine, but this new article in the Wall Street Journal suggests that what works financially for men doesn’t always work for women—and this includes old-school financial advisors. According to the article, when women start seriously planning for retirement, “many find that the financial-services industry is an obstacle, not an ally. In a recent Boston Consulting Group survey of women investors, respondents said they routinely feel underserved by the financial-services industry, with more than 70% expressing dissatisfaction with the service they’re getting. Among the complaints: disrespectful advisers, narrower investment choices based on the assumption that women can’t handle risks and patronizing pitches.”
This isn’t just a case of emotional discomfort; it also hits women in the pocket-book, where it’s likely to hurt the most. “A recent survey by financial-services company MassMutual found that women’s retirement accounts were, on average, just two-thirds the size of men’s.”
Not all of this can be blamed on financial advisors though. Women have a dangerous (if generous) tendency to put their spouses and families first, with little thought for their own financial security until it’s too late. In addition, married women often count on their husband’s retirement plan to take care of the both of them—only to find that his plan works for his life expectancy, leaving her without a plan when he’s no longer around.
What can women do? The first thing each woman should do is have is her own retirement account, and contribute to it each month. Make sure your financial advisor recognizes your unique needs and listens to your hopes and concerns. You can plan with your partner for golden years spent together, but it’s your responsibility to save for yourself. Friday, August 20, 2010 Women and Finances: How Estate Planning Can Help
hen it comes to family matters, women are often the head (and sometimes the sole member) of the planning committee. Vacations, dinner parties, school activities and celebrations… many of these wouldn’t happen at all if the women of the family didn’t take the lead. Estate Planning tends to be no different: Many first phone calls, appointments, and attendance at estate planning or elder law seminars are initiated by women. However, studies suggest that this tendency in women to plan ahead may not apply to financial planning.
A recent article from CBS news suggests that although women are actively involved in family and household finances, they are less likely to be involved in long-term financial decisions. According to the article, although many women “know how to spend and get by on a short term basis… they have a time getting a grip on their long term saving and planning.” Of course this is a generalization, and won’t apply to everyone; but considering the importance of the topic, it is definitely a worthwhile subject for discussion.
Here are a few statistics to consider that impact women and their long-term financial decisions:
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Older women (65+) outnumber older men by 22.4 million to 16.5 million. (Administration on Aging)
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Poverty rates are higher among older women than older men by 20.4 to 13.1. (U.S. Census Bureau)
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The median weekly earnings of full-time wage-earning women is $657, or 80 percent of men’s $819. (U.S. Dept. of Labor)
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Not to mention that on average, it is the woman of the family who will end up putting her career on hold for caregiving duties at various times in her life (either to care for young children or aging parents.)
Put all of this together and it means that women need to take control of their finances, not the other way around! Luckily, this may not be as difficult as you think. The CBS news article mentioned above has some suggestions on how to take charge of your finances; but beyond that, planning your estate can be a huge step toward planning for your financial future as well, because any estate planning includes taking stock of of your financial assets—including savings accounts, retirement assets, individually owned assets as well as those owned jointly by a married couple.
We encourage women (and their families) to let their estate planning contribute to their financial future—it’s not just about how your assets will be distributed after your death, but also what steps you’d like to take to preserve those assets during your lifetime. |