Two years ago, the current government built their own mark on the United States with what some call the most necessary and important tax reform. The retirement reform that they are planning might be the long shot of 2019 since there are four important pieces of retirement reform in legislation before Congress. Every single piece tends to have been supported by both sides in their latest drafts, on the other hand there are various regulatory advancements and state level when it comes to retirement savings that are also moving onward and upward.

The Four Extensive Retirement Acts

• Retirement Enhancement and Savings Act
• Retirement Parity for Student Loans Act of 2018
• Retirement Security and Savings Act of 2019
• Social Security 2100 Act

The RESA or the Retirement Enhancement and Savings Act was originally introduced almost four years ago, however, it was reintroduced once again this year. The Director of Economic Policy at the Bipartisan Policy Center, Shai Akbas, said this bill has been the primary objective in Congress for years.  He also said that Washington has been expecting the bill to move on at a binary level and basis. The current Congress simply thinks that this bill has the capacity to create numerous changes to the current retirement system by making it more accessible to workers in various employer contribution plans, eliminating the limitation of age on their Individual Retirement Account for contributions, eliminating several restrictions on the enrollment for 401k plans, and making it easier for them to acquire the available options of lifetime income from their retirement plan that has been qualified and accepted.

The Retirement Party for Student Loans Act of 2018 (or the RPSLA) was originally introduced last year and was referred to the Finance Committee of the Senate. In relation to the Retirement Security and Savings Act, the introduction of this act also requires to be reintroduced. The RPSLA has the ability to allow 403b and 401k plans (and other straightforward retirement plans) to build contributions that match the retirement account of an employee by dealing with student loan payments just like salary deferral contributions. An employee would focus on paying off any student debts while having their current employer contribute to the retirement plan that they selected. The strategy of the bill tends to be wide and strong in support but it is still not clear whether or not the bill can proceed as a stand-alone since it has the possibility to become attached as a provision or to combine with another retirement bill.

On the other hand, the Retirement Security and Savings Act of 2019 was initially introduced to the Senate of the United States during their final session last December. The RSSA or the Retirement Security and Savings Act is a bill that currently has some controversial factors such as increasing the savings in 401k plans and Individual Retirement Account.  This would  assist with a small employer coverage for those who work part-time, a change in required minimum distribution laws for individuals who are planning to work after the age of 71, and eliminating the hurdles for the inclusion of lifetime income options when it comes to retirement plans.

Last but not least, the Social Security 2100 Act was first introduced in the Senate this year and the Act currently has more than two hundred cosponsors in the House. Shai Akabas stated that the Act has the power to increase benefits in Social Security and to resolve the issues in funding and the affected system through an increase in taxes.

2019 could be quite a year for current and future retirees.  We are here to help you navigate through your journey.

Taxes are on the minds of many as we just passed the 2019 tax deadline.   Unfortunately, many retirees every year fail to properly account for taxes when deciding things such as budgets, withdrawal rates, and whether or not they have the flexibility to make larger purchases. So, what are a variety of techniques that can be employed which help to limit the amount of taxes you pay in retirement and keep more of your hard earned money in your wallet?

• Consider Relocating To States With Lower Taxes
• Continue To Maintain A Budget
• Consult A Tax Professional
• Don’t Forget About Quarterly Estimated Taxes
  

Consider Relocating To States With Lower Taxes

High cost of living areas often breed some of the highest salaries that allow many to retire comfortably. Unfortunately, these areas also often breed some of the highest taxes in the country. Consider moving to a more tax friendly state so that you will be able to enjoy more of your hard earned dollars throughout your golden years.

Continue To Maintain A Budget

Many of those who are fortunate enough to retire were able to do so by maintaining a strict budget over the years. While retirement means you’ll no longer have to punch a time card, it does not mean you should no longer play an active role in your finances. Budgets are perhaps more important during retirement than they are during your working years as they may need to be adjusted based on the performance of your investments.

Consult A Tax Professional

Filing your taxes post retirement can look very different than it did pre-retirement. This is because your main sources of income have drastically changed. Whereas you were once drawing your money from a weekly or monthly paycheck, you may now be withdrawing from a variety of accounts such as a 401(k), IRA, annuity and even Social Security. Each of these retirement vehicles contains its own subsection within the federal tax code and is taxed at varying rates based on many different factors. Rather than struggling through the monotony of tax code, simply place your trust in a certified tax professional that does this for a living. This way, you can rest assured everything is filed correctly which can help you avoid paying penalties over time.

Don’t Forget About Quarterly Estimated Taxes

One of the most frequent mistakes that some newly retired people make is failing to file quarterly estimated taxes. This is largely because, when you are working, taxes are taken out of every paycheck for you by your employer and filed on your behalf. This lulls some recent retirees into the false sense of security that can have them stuck with a large penalty when they attempt to file annually by the regular April 15th deadline. Some retirees should estimate the taxes they are liable for once every quarter so as to satisfy their federal, state, and local tax obligations. To keep you from forgetting, either set a quarterly reminder on a phone or computer or, if you care to keep your schedule by hand, make a note in your calendar at least two weeks prior to each quarterly deadline. The quarterly deadlines can all be found on the website of the Internal Revenue Service. 

Regardless of your current tax situation, retirement should be something that is celebrated. Stressing is something that should be left behind with your working years. BY properly planning to address any and all tax liabilities that may pop up in retirement, you can be better prepared for what’s to come and pay the minimum necessary taxes so that your hard earned money doesn’t go to waste.

Retirement income is not a one size fits all calculation as wants and needs vary significantly from one person to the next. Several factors such as life expectancy inflation, and balances do play a huge part but considering your retirement expectations for the “golden years” will help in the planning process to make the most of your retirement.
Remember your first payday? How excited were you to get that hard-earned cash in your hands? You opened the envelope and found all sorts of deductions from your pay, federal taxes, social security, and healthcare expenses. You officially started paying bills and contributing to your retirement years with that first paycheck. You continued to work hard and grew in your career, you were given opportunities for employee stock purchase plans, profit sharing, and retirement plans, including pensions and 401Ks. You on your way and building your nest egg.

As you get closer to the retirement years, you need to start making plans. Whether it be traveling, a summer home purchase, or just relaxing with family, your plans are important to your retirement income needs. Some people retire right at 62 when they can collect social security benefits. Did you know if you continue to work till 66 you will receive the full benefit payout? And if you work till 70, you will receive a 32% bonus!

Sadly, but understandably, many new retirees worry they haven’t saved enough. Sometimes life happens and plans become changed. You may hesitate and not do the things you looked forward to during your working years due to fear of over spending or running out of money. When this happens, retirees often realize they had enough funds for their plans when it’s too late. Their health deteriorated, and that can make it hard for us to enjoy the things we were looking most forward to in our retirement years.

How can we prevent emotions from controlling our spending? By planning. Part of your retirement plan should include setting an amount for your retirement paycheck. Much like the paycheck received from work, a retirement paycheck is an amount you set to cover all monthly expenses and include the costs of your retirement activities, like traveling or moving.

It’s generally safe to assume you will need 80% of your current salary. This should serve as a good starting point. Then, you can look at your plans. Is there a big wedding or healthcare costs that may incur a large payment? Where will you be living? Many retirees may move into a retirement community while others may just downsize their home or stay put where they are.

As you look at your plans, be flexible but realistic. Your income needs may vary from year to year. You may buy a new car ever 5 years or so and vacations may be every other year. Some people will continue to work after retiring. Adjust accordingly. There is no need to take more money than out of your retirement vehicles than required. Allow those long-term savings to grow until it’s necessary to retrieve them. You will find confidence in knowing you have a steady income stream with consistent retirement paychecks to meet your spending needs.

If you’re looking for planning help, we are here to guide you to and through your retirement years.

With each passing year, more baby boomers are reaching retirement age. There is a lot of discussion surrounding the management of retirement savings and how to turn this money into an income stream. This conversation is becoming increasingly important as pensions are obsolete for many and the Medicare system is being squeezed for all it is worth.
According to the U.S. Census Bureau, the median retirement income for household age in 2019 is as follows:

AGE OF HOUSEHOLD MEDIAN INCOME

Households Aged 55-59 $73,645

Households Aged 60-64 $63,919

Households Aged 65-69 $54,124

Households Aged 70-74 $46,797

Households Aged 75 and Older: $31,893

Whether you fall below or above these average numbers, it is important to overview your potential or current retirement income. Here are the five areas from which retirees see the most income. We will also be discussing ways in which to boost your income from each.

1. Average Social Security Income:

Over 85% of retirees age 65 and older receive Social Security income. In 2019, these monthly payments were increased by 2.9% to adjust for the increased cost of living. The average monthly income was raised from $1,422 in 2018 to $1,461 in 2019. Other than occasional adjustments for inflation, the monthly payments from Social Security remain quite constant. The only way to receive more money is to postpone the time you start collecting the payments.

2. Average Asset Income:

Surveys and studies show that retirees in 2019 only receive an average of $164,000 from their assets such as 401(k)s and IRAs. Although this number is up from previous years, it is still not enough money to survive. The best way for a retiree to make this money last is by spending less money. Individuals who are younger should continue investing into their IRAs and other retirement funds.

3. Average Pension Income:

Pensions are quickly becoming obsolete, as only 31% of retirees track income from this source. Those retirees who do have pensions often have double the amount of income than their non-pensioned counterparts. While it is nearly impossible to increase the income of a pension, you can be diligent about taking out monthly payments versus a lump sum.

4. Average Work Income:

The percentage of elderly individuals in the workforce is expected to rise to 32% by 2020. Transamerica predicts that two-thirds of all baby boomers will be working past retirement age. Retirees can actually experience some social, financial and mental benefits by joining the workforce. It is recommendable to find a job you love doing or to find streams of passive income.

5. Veteran’s Benefits or Public Assistance:

According to the Pensions Rights Center, about 7% of all retirees are receiving financial help from the government. This public assistance ranges between $5,866 and $6,542 in median benefit. Low-income seniors can conduct research on all of the organizations that are willing to aid retirees in need. Veterans should also contact their local VA office for more information about the available benefits.

Important Trends for Retirees to Follow in 2019

The median income for retirees today was decided in part by the behavior of retirees in the past. However, there are also factors happening today that contribute to these averages.

Focus on De-accumulation: In retirement age, individuals should be focusing on how to spend their money wisely. The goal should be on de-accumulation, not on creating more income.

Rising Interest Rates: Interest rates are on a steady rise after some historic lows. This is bad news for people starting to pay back loans.

Stock Market and Home Prices: Both the stock and housing markets are experiencing a plateauing effect after years of great returns.

Tax season is once again in full swing. While many concerned taxpayers file tax returns to meet the required deadline, criminals work harder to cash in taking advantage of the hectic tax season. Tax fraud remains a growing concern nationally, and counterfeit scams cost millions of dollars. Individuals who take a proactive approach can deter fraud and protect their identity, information and their finances. Here are a few recent scams catching the watchful eye of the IRS.

TAX PREPARATION SCAMS
 
The IRS just released notice IR-2019-09 to alert taxpayers of unscrupulous tax preparers. Deceitful tax preparers file erroneous tax returns for many unknown taxpayers. The law requires all preparers who receive payment for preparation of federal tax returns to have a valid Preparer Tax Identification Number (PTIN). The tax preparer must include their PTIN and sign the return. For e-filed tax returns, a dishonest preparer will omit his electronic signature. Additionally, they may falsify tax information to increase the refund, while directing the refund into their bank account. Tax payers must review their tax returns for accuracy of income and deductions. Ensure the tax preparer signs the return and includes their PTIN. Make sure the bank account and routing numbers are correct. The IRS Directory of Federal Tax Return Preparers with Credentials and Select Qualifications provides an excellent resource to locate established tax preparers with the IRS.

CHARITABLE GIVING SCAMS

In the fall of 2018, the IRS posted notice IR-2018-188 to inform individuals of charitable giving scams. The 2018 hurricane season ended with Hurricane Florence and Michael wreaking destruction in its pathway, destroying homes and causing millions of dollars in damages. Natural disasters bring out the best in generous individuals seeking to aid donations to humanity in times of a national emergency. Sadly, criminals take advantage of benevolent individuals who desire to financially aid their fellow man in dire need. Counterfeit websites disguise themselves as other well-known established charities to deceive generous individuals to donate money to a dire cause. Additionally, some individuals receive solicitations from fraudulent charities, promising a nice tax deduction in return for your donation. Don’t fall victim to their schemes. Donors can prevent thousands of dollars from falling into the wrong hands. The IRS provides a tool to help prevent against charitable giving scams. Donors can verify if a charity is legitimate by utilizing the IRS search tool, Tax Exempt Organization Search. Never give to a charity who solicits a donation without first verifying the authenticity of their organization.

EMAIL PHISHING SCAMS

In IRS notice IR-2018-226, the IRS alerts taxpayers to a recent spike in email phishing scams. While fraudulent emails and phishing scams have been around awhile, data thieves continue working diligently to improve new tactics to steal valuable information. Emotet is the infected malware of choice in many email scams, and Emotet remains well-known as the most damaging and expensive to fix. Many of these scam emails display tax account transcript in the subject line of the email and include infected attachments with similar wording. These emails appear legitimate. They often disguise themselves as representatives with banks, financial institutions and the IRS. The IRS logo and other well-known bank logos appear real, and many unsuspecting individuals open the infected email attachment. The IRS does not contact individuals through email. The IRS warns individuals to not open suspecting emails. The IRS remains diligent to combat against fraud. If you suspect a suspicious email, you can also forward the email to phishing@irs.gov.

Democratic Congressman John B. Larson introduced the Social Security 2100 Act on January 30, 2019. The proposed legislation seeks to raise payroll taxes to keep Social Security solvent and expand benefits.

Payroll Tax Increases

Some say that Social Security is in crisis. The program has had a deficit every year since 2010. If Congress does not act, the Social Security Trust Fund is forecast to become insolvent by 2034. The Social Security 2100 Act would address that problem by raising the 12.4 percent payroll tax by 0.1 percent annually until the tax reaches 14.8 percent.

The bill increases payroll taxes in another way. Today, the Social Security payroll tax is levied on all earned income up to $132,900. The new legislation would subject earned income over $400,000 to the payroll tax. Initially, earned income between $132,900 to $400,000 would be exempt from the payroll tax. This exemption gradually would be phased out as long as the cost of living adjustment is going up. All of the bills combined tax increases are projected to keep the Social Security solvent for 75 years.

Benefits Expand

In addition to addressing the insolvency crisis, the other goal of the proposed bill is to expand Social Security benefits. The key measures to increase benefits follow.

• All recipients would see their benefits rise by about two percent.
  To accomplish this, the primary insurance amount factor would move from 90 percent to 93 percent starting in 2020.
• The cost of living adjustment would increase.
  Currently, the cost of living adjustment is calculated using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). Although the Social Security cost of living adjustment has been tied to CPI-W since 1975, the index doesn’t reflect the spending habits of the Social Security’s primary demographic group, the elderly. The Social Security 2100 Act would base the cost of living adjustment on the Consumer Price Index for the Elderly, which takes into account that the elderly spend more in certain categories such as healthcare.
• The minimum benefit would increase.
  Today’s benefit is below the poverty level. Starting in 2020, the bill would raise the minimum benefit to reduce poverty among new retirees and the newly disabled.
• Federal income tax would be reduced or eliminated on Social Security benefits for select recipients.
  Currently, Social Security benefits are taxed if the recipient’s overall income reaches certain income tiers. For example, single tax filers who have an adjusted gross income (AGI) plus one half of benefits of greater than $25,000 can have up to 50 percent of their Social Security benefit taxed. However, at greater than $34,000 of AGI plus one half of benefits, up to 85 percent of Social Security benefits are taxed. The Social Security 2100 Act would simplify taxation by eliminating the tiers and create one income threshold for each taxpayer filing status. The new threshold is up to 85 percent of benefits are taxed for single filers with an AGI over $50,000 and an AGI over $100,000 for joint filers.

Planning for your own retirement income will likely provide you with peace of mind.  Let us know, we can help.

If your retirement dream includes bouncing around between a beachfront condo in the winter and a mountain retreat in the summer, you are in good company. Perhaps you want to keep a small condo close to the kids while also maintaining a home in an area more conducive to how you plan to spend many of your weeks throughout the year. These are only a few of the many reasons why retirees often maintain a primary home as well as a secondary home. While this may seem like an idyllic retirement experience, understand that there are numerous factors to consider before you sign a contract on a second home.

The Financial Impact
One of the most significant factors that you need to review upfront is the financial impact that a second home will have. You may need to take on another mortgage payment. If not, paying cash for the full sales price may impact your ability to draw dividends or to generate other investment income from that money. You also must pay for repairs, utilities, maintenance, taxes, insurance and decorating costs for two homes rather than one. Because you may plan to spend ample time in both locations, your travel expenses should also be accounted for.

On the other hand, you may be able to use your properties to generate side income. For example, you can rent whichever home you are not currently in out to travelers as a furnished vacation rental. While this may generate a profit or at least help you to cover some expenses, keep in mind that you may need to hire a property management company to decrease the hassle avoided with managing the home on your own.

The Long-Term Outlook
Before making a major purchase like a vacation home, it makes sense to think about the long-term impact that this purchase will have on your life. What is the real estate market currently like in a desired area, and what is the market outlook? Do you eventually plan to move into the vacation home full-time in a few years? Do you want to be tied to a specific vacation destination, or do you want to travel frequently and explore other interesting and beautiful areas?

More than that, think about how the real estate purchase will impact your finances. You may accumulate a nice nest egg in your vacation home, but accessing that cash at a later date may require you to refinance or sell the property. Buying real estate ties your money up in a non-liquid asset. You may need your money to grow in an investment with a guaranteed return, such as in high-yield CDs, rather than in a real estate investment that may have a riskier financial outlook.

The Lifestyle Experience
Buying a vacation home can improve your lifestyle in retirement dramatically if this is a financially-sound move for you to make. It gives you a comfortable place to live while you are away from your primary home. Because you have carefully selected the right home for your needs and decorated it with our own furnishings and other items, you can feel truly relaxed and at home while you are in tis space. More than that, you can easily float from your primary home to your secondary home without having to make reservations. You may even keep some of your clothes at each location, and this eliminates the items that you may need to pack as you prepare to transition to the other home. Altogether, life may be much more comfortable and relaxed in retirement when you have two homes to live in.

While buying a retirement vacation home is seemingly ideal at first glance, you can see that numerous factors should be considered before deciding if it is right for you. Keep in mind that the actual location where you select your new vacation home may impact your finances, your use of the home and more. Therefore, analyze all options before finalizing your plans.  

Planning is what we do, we can help you achieve your goals, call us today.

The average American gets a tax refund each year. In fact, the average tax refund is more than $2,700. That’s a pretty nice infusion of cash. Windfalls can lead to temptation. For example, a nice vacation is something that many people will use their tax refunds for. This is only one way to spend a refund, however. One of the better options would be to invest some of that money for retirement.

Where To Save

There are several options for saving a tax refund. First is a regular savings account. This might not help much toward retirement, but for those who have little in the way of an emergency fund set up, it could be a good idea regardless of what their income level might be. Traditional or Roth IRAs are good options for saving toward retirement with a tax refund. Additionally, those who are self employed can opt for what’s called an SEP-IRA. These are quite easy to set up today. There are many online brokerages that allow for setting up retirement accounts with a few clicks of a mouse and five or 10 minutes of time. The average tax refund would go a long way toward getting into some mutual funds through Vanguard or Fidelity that charge very low management fees. From there, it’s possible to start saving even very small amounts each month.

There Are Tax Breaks

Saving in a retirement account comes with some pretty nice tax breaks. Those who are don’t make too much to invest in a Roth IRA pay with after-tax dollars, and there will be no taxes due on the contributions or the growth when it comes time to start withdrawing from the account. Those who decide to save with a Traditional IRA will see their tax bill go down in the contribution year. For example, investing the entire $2,700 average tax refund in a Traditional IRA would cut taxes by $594 for those who hit the very middle-class 22-percent tax bracket. The Traditional IRA allows for pre-tax savings, and those who invest in this vehicle will owe taxes when they withdraw the funds. Additionally, those who make less than $60,000 in taxable income and save within a qualified retirement plan will be able to take advantage of a special savers tax credit.

Don’t Forget To Have Some Fun

For those who have a hefty return that’s higher than the average, it’s still possible to save for retirement while having some fun. Instead of spending $5,000 on a vacation, why not stay closer to home and invest some of the refund for retirement.  Some could choose to opt for a weekend staycation depending upon where they call home. It’s important to remember that every dollar that’s saved today will likely be worth much more than a dollar a few decades down the road. Even those with relatively high incomes will frequently have little in savings for retirement or otherwise. A nice tax refund provides the perfect opportunity to save a bit toward retirement. It’s important to keep in mind that IRAs are available to many Americans even if they have 401(k) or other similar plans available through their places of employment. Even if they are not available, it’s possible to save in a taxable account.

Few times of year provide a windfall that’s as big as a tax refund. Rather than spending it all on a pricey vacation, putting some of the refund away can help toward retirement. The further away retirement is, the more the savings will pay off in the future as the funds will compound over a period of years or even decades.

If you are looking for additional guidance on your retirement plan and we have not talked with you recently or at all, give us a call.  Make 2019 the year you felt confident in your retirement plan.

Millions of people in the U.S. are unable to care for themselves and need long-term care services. These people need assistance in performing one or more self-care activities of daily living such as eating, bathing, dressing, and executing basic movements like walking, sitting, or standing. Services can be provided in the patient’s home, a residential care community, nursing home, assisted living facility, adult day service center, or at a hospice. Housework, money management, shopping, organizing medication, and helping with communication are some of the other long-term care services that are provided.

The need for long-term care services has grown as the life expectancy of the U.S. population increases. There is a 70% chance a person who is 65 years of age or older will need long-term care, and women are more likely to need this care because they live longer than men on average. It’s not just the elderly who are most likely to need long-term care services. People who have been in an accident or have a chronic illness or chronic condition due to poor eating habits, lack of exercise, or family history are more prone to need long-term care services. Also, people who live alone are likely to need long-term service if they don’t have family or a partner nearby to help take care of them.

Long-term care services are expensive for most people, and the longer a person needs servicing, the more expensive it gets. Some policies for long-term care went up by 58%!  The average national annual long-term care are as follows:

• Home health care: $45,760 – $46,332
• Adult day health care: $17,680
• Assisted living facility: $43,539
• Nursing home care: $82,125 – $92,378

Costs for some providers are all-inclusive, and other providers have a flat fee then add extra charges for services beyond room, food, and housekeeping.

Health insurance only provides limited coverage for specific types of long-term care medical needs, and disability insurance doesn’t provide any long-term care coverage. Health insurance, including Medicare, generally covers skilled nursing facility stays after a recent hospitalization and medically necessary skilled home care. Disability insurance is only designed to provide an income to a person when they become disabled and are unable to work.

Long-term care insurance is specifically designed to cover the cost of long-term care services that are provided in a variety of settings. This insurance is comprehensive, and it’s flexible enough to provide a person with individualized coverage. The monthly premiums for a long-term care insurance policy are based on a person’s age at the time they apply for a policy, the type of policy they apply for, and the type of coverage they select.

Long-term care is a complicated process that involves family, nursing care representatives, and in some cases, social workers, and legal counsel. It can be a delicate time for everyone involved. It’s important to take the time to make the right decision so that the person who needs these services can be satisfied with the decision.