This topic is not comfortable for everyone to talk about but planning now can make a world of difference later.   More than a third of long-term care residents are younger than 65 years of age. This statistic reminds us that we should prepare for the future, and the earlier you start preparing, the better.  Here are some steps you should take to prepare for your golden years. 

Draw up a Will

You’ll want to decide how your estate gets divided up. If you don’t decide while you’re alive, the state will do it for you. That’s why it’s important to draw up a will. It’s estimated that only 40% of Americans have a will or estate plan set up. Not only will you avoid having the state decide how your estate is divided up, your family will not have to worry as much if you’ve given them clear instructions as to what should happen when you die. 

Draw up a Living Will

Another issue that the state or your family could decide is how to administer your end-of-life care. A living will gives directions as to how much medical care you’ll receive beforehand. You might not want to deal with heroic medical care if you’ve passed 80 years of age. You can let your family and medical providers know your wishes. Absent such a directive, doctors will frequently administer expensive and invasive treatments that are not likely to work on elderly patients. 

Buy Life Insurance

As noted above, no one knows when he or she will die. That’s why it’s important to buy life insurance. This insurance will provide a death benefit, and it can also build cash value over time. The presence of cash value associated with life insurance can be a tax-efficient way to build wealth over time. Additionally, if you die with dependents at home, you’ll be able to provide money to care for them in your absence. 

Buy Long-Term Care Insurance

Another option for avoiding major costs in your later years is the purchase of long-term care insurance. About one in eight Americans will wind up in a nursing home at some point. This cost can impact even fairly wealthy families. Long-term care insurance can take care of some of the expense that comes from staying in a nursing home or extended care facility. Medicare does not pay for long-term care, and these costs can definitely add up over time. 

Stay Healthy 

Staying healthy can be a good way to increase the likelihood you live to old age and avoid some of the costs that are common with aging. Maintaining your health will be easier if you eat well and exercise. Those who take care of themselves are able to stay in their homes longer and are less likely to die young. Also, because you’ll be able to hold off on many of the health issues that lead to long-term care, more of your nest egg will be available for your heirs.

Plan now, your spouse or your executor will be happy you took the time to prepare for your end-of-life details. Additionally, your heirs will be happy you took care of yourself because you can leave more of your nest egg for them.

With all of the day-to-day demands on your finances, sometimes it is difficult to have a strong grasp on what your overall financial picture really looks like. While many people may be very in tune with one segment of their financial life, you may be inadvertently neglecting other parts. One often-overlooked financial aspect is retirement savings. In fact, you may be surprised to know that according to the Motley Fool, 42% of baby boomers cannot answer the question of “How much have you saved for retirement?”. While this revelation may seem shocking, it is a reality that, for many, immediate financial needs tend to take priority and retirement savings get put on the back burner.

One reason for this may be that saving for retirement is complex. Many people know that they have spent their work life contributing to an employer-sponsored plan and/or IRAs, but they may set their monthly and quarterly statements aside, never really looking at how much their account has grown to. Others may have multiple 401(k)s and other plans with previous employers that they have never combined into a rollover IRA, or that they have lost track of. For this reason, it is imperative that those who are approaching retirement start taking control of their retirement savings by working to create a definitive retirement plan.

Retirement planning allows you to dig deep into what you have saved and calculate your total amount of retirement savings. It also allows you to get an educated estimate of what your expenses in retirement may be, as it would be impossible to know if you have saved enough if you don’t know what you will be spending. If you are an organized, motivated person, you may be able to easily calculate this information on your own using an online retirement calculator. If you need more assistance, or have a complicated financial picture that requires in-depth expertise, then working with a personal financial planner may be more appropriate for you.

Once you have an estimate of what you currently have in retirement savings and what your projected spending during retirement may look like, you will be able to determine if you are ahead of the game or far behind when it comes to additional savings required. You may see that the only way to retire on time is to start contributing more to a retirement plan now and cut back on some unnecessary expenditures. You may also find that you will need to stay in the work force longer than you had wanted or anticipated. Whatever your situation is, starting to work on your retirement plan earlier will give you more time to make up the difference that you need.

If you find yourself in the category of someone who responds with “Um..” or “I’m not sure” when asked how much you have saved for retirement, know that you aren’t alone. Many other people are in the same boat. Luckily, you can start taking control over your retirement savings today by beginning the retirement planning process and getting yourself on track to meet your retirement goals.  We are here to help!

You’ve put your time in and the day you’ve been waiting for has finally come. It’s time to retire! You’re done working 40+ hours a week and ready to enjoy the money you’ve been saving for years. Slow down for a minute, though. It can be tempting after working for so many years to start checking off all the items you’ve been adding to your bucket list throughout the years, but this can lead to some severe overspending. It’s a nice gesture to invite your entire extended family on vacation or help your children pay off some of their debt, but you need to focus on the future.

When you work, you have a steady stream of income along with a healthy savings account to fall back on when unexpected expenses pop up. When you retire, it’s like someone just threw a few hundred thousand or million dollars at your feet and said “have fun!

You can avoid overspending by cutting back on certain luxuries you’re used to having. The balance comes with developing a smart financial plan to ensure you live within your means while still enjoying the quality of life you’re used to. Here are some essential tips to get you started on the right path. 

Create a Budget

You should be no stranger to a budget by the time you retire, but you’ll need to start tweaking it to adjust to your new financial circumstances. Know how much money you’ll have coming in between social security, pensions, and your retirement plans such as a 401k. Split your expenses into those that are required, such as housing, food, and vehicle maintenance, and another category for discretionary purchases like vacations. 

Develop a Withdrawal Strategy

Once you know how much you need to live comfortably every month, you can determine how much you need to take from your retirement every month. A standard 4% withdrawal rate should tentatively last 30 years, but this can vary based on your savings, the financial market, interest, and hefty expenses such as healthcare. 

Cut Back on Expenses 

Cutting back on spending is painful if you’re used to getting what you want when you want it, but it’s a necessary part of smart financial planning. Evaluate whether you can make changes to the two highest expenses: housing and health care costs.

Healthcare: Retirees spend roughly 11.4% of all income on medical care because Medicare only covers 80% of costs. That 20% responsibility can swallow up your income. It also fails to include eye exams, orthotics, and dental care. Find a supplement plan to help ease your financial burden.

Housing: The average retiree 75 or older spends 43% of income on housing and related expenses. It’s beneficial for many to downsize to a smaller home or move to an area which a lower cost of living than where you currently are. The adjustment can free up income for discretionary purposes.

Other basic actions such as not eating out as often or capitalizing on discounts and specials for seniors can also keep your wallet a bit thicker. 

Hire a Financial Advisor

Seeing a financial advisor can put financial responsibility in someone else’s hands. They can look at your investments, determine an acceptable withdrawal schedule, and examine your current and past spending to give you helpful tips and advice. It’s smart to fix an overspending problem sooner rather than later, which financial advisors recognize and work quickly to remedy. Their goal should be to help you have the most money to enjoy the golden years that you’ve worked so long for. 

We are here to help, contact us, today.

Building your dream home for retirement is not an uncommon goal many Americans have. However, just because it’s a common dream doesn’t mean it’s an appropriate dream for a large portion of the population. Sure, you may have several hundred thousand or a couple million in your retirement accounts. You’ll still want to think before you build your retirement dream home. 

Think Location

Three of the most important considerations to take into account before building a dream home are location, location and location. You’ll want to ask whether the location you’re looking to build on is an up-and-coming destination or one that’s had a downturn for several years. No one knows what the future will hold, but a home in a desirable location is more likely to sell than one in a depressed area.

If your chosen destination, even if it’s near a beach or ski resort, has had stagnant or declining home prices for years, it’s a sign that it might not be a good place to build a home. Another concern would be the average length of time properties stay on the market in a given community. If there’s a low supply of houses and a short turnaround when they go on the market, your chosen location might be a good fit. If houses stay on the market for a year or more, it might be a good idea to look elsewhere. 

Think About the Kids

Most people who retire want to spend time with their kids and grandchildren. This might make it seem like buying or building a dream home near the kids would be a good idea. Think again. People move for jobs every day. Sometimes, that move will be from one building across the street to another. Other job moves will require a move across a state or across the country.

Building a dream home close to your kids today does not guarantee it will be close to your kids five years from now. Additionally, dream homes tend to be on the upper end of the price scale, and this can mean they’ll sell less quickly than more affordable homes. Therefore, if your main reason for building a dream home is to be close to your children, it might pay to ponder the decision a bit longer. 

Think About Cash Flow

No matter how big your nest egg happens to be, you always need to think about cash flow. This goes if you’re 30 years old or 60 years old. Overspending on a home is bad for cash flow whether you’re making $50,000 a year with no money in your nest egg or making $150,000 a year with $750,000 in your nest egg. If you have a nice chunk rolling in from a pension or Social Security, this might work in your favor for building your dream home. Keep in mind that you might want to downsize your dream home a bit to keep more cash working in your favor regardless of your current financial situation.

It’s also a good idea to remember that most people decline physically over time. This means that a multistory dream home will be less accessible in a few years. If you need to hire some help, that will put additional strain on your cash flow as well.

There’s nothing inherently wrong with building a dream home as long as you can afford it. However, there can be some pitfalls that come from building one for retirement. Most people will eventually have to downsize, and having too much equity tied up in a home can make it more difficult to do so quickly. Taking all facets of building a new home into account is an important step to take before you ever sign on the dotted line to start your build.

Remember, we are here to help you with all aspects of planning your retirement. Contact us, today.

When it comes to retirement savings, one of the best options available to those who don’t have a workplace retirement plan is an IRA. These savings vehicles allow for future retirees to save up to $6,000 per year in a tax-advantaged manner as of 2019. Those who have reached age 50 can add another $1,000 to their accounts each year. 

Types of IRAs

There are two main types of IRAs. The first is the traditional IRA, and it allows individuals to save on a tax-deferred basis. Effectively, a traditional IRA allows account holders to cut their adjusted gross income by the amount of their savings. This will cut a retirement saver’s taxes in the year the money gets saved. The second is the Roth IRA, and this account allows people to save after-tax income while allowing for tax-free growth and withdrawals as long as certain conditions are met. 

When Are Taxes Due?

The tax advantages of IRA accounts are their strongest characteristic. In a taxable account, savers would have to pay taxes on any dividends or capital gains earned within a given year. Within an IRA, those taxes are deferred in the case of a traditional IRA or nonexistent in the case of a Roth. Those who have a Roth IRA pay their tax bill up front, and the government will never tax the contributions or the withdrawals as long as the withdrawal of any gains comes after age 59.5.

On the other hand, those who save in a traditional IRA will have to pay taxes when they withdraw the money. The effective rate could be 0% as long as the taxpayer has enough deductions to avoid exceeding the standard deduction or any itemized deductions. Most people will not find themselves in this situation. The rate could theoretically go up to the top marginal rate the IRS charges at any given time. As of 2019, that rate is 37%, but a retiree would have to have an income of more than $500,000 to hit that rate.

With a Roth IRA, it’s possible to take out the contributions without penalty at any time as long as the account is at least five years old. This is not possible with a traditional account. Any withdrawal from a traditional IRA will be taxable because of the up-front tax deduction. The government wants the tax revenue at some point. Any withdrawals of contributions or growth from a traditional IRA would incur an early withdrawal penalty of 10% if the account holder is not yet 59.5 years old. Only the growth would see the early withdrawal penalty with a Roth. 

Which Is Better?

Like many personal finance decisions, the answer to the question of which IRA is better depends upon a person’s individual situation. Those who have higher incomes can lose the tax benefit on a traditional IRA if they have a workplace retirement plan like a 401(k). The ability to contribute to a Roth IRA phases out if a worker makes $137,000 as of 2019. Couples can make up to $203,000 and still contribute to a Roth. Those who are married with children and have a relatively low income would likely do better with a Roth because they would pay little in taxes even before any IRA savings. Those with a higher income can take advantage of the tax-deferred benefit of the traditional IRA.

It’s also possible to contribute to a “backdoor” Roth account. Families with higher incomes could transfer money from a traditional IRA to a Roth in years they have a low adjusted gross income due to deductions from business losses or other reasons. This allows for the tax-deferred deduction up front and the benefits of tax-free withdrawals from a Roth while minimizing taxable income throughout the process.

Another consideration when it comes to IRAs are the required minimum distributions, commonly known as RMDs. There are no RMDs with a Roth IRA, which could leave the money to compound for decades after retirement. Those who invest in a traditional IRA will have to take out a growing percentage of their accounts each year after hitting 70.5 years of age. The percentage grows each year based upon expected mortality rates. Again, the government wants the tax revenue at some point. Regardless, of which account a person decides to use, deciding to save for retirement is an important step to take to ensure financial stability in old age.

The Forty-hour work week paired with a busy schedule tends to be a recipe for stress and burn out. While practicing daily self-care in small increments is an important piece to preventing burn out, periodically taking a prolonged break from our responsibilities and stressors is equally as important. According to Dr. Krauss of Psychology Today, a vacation well-done can inspire self-reflection and rejuvenation, allowing us to seize the day upon return to our regular lives.

Experiencing high levels of stress on a daily basis can diminish a person’s physical, mental, and emotional health. Dr. Krauss points out that consequences include depression and a weakened immune system. Balancing our lives and setting boundaries for ourselves is important. Additionally, taking time off to simply enjoy life, explore, and step outside our comfort zones, are all crucial to staying healthy. Planning a successful vacation takes time, energy, and focus, but the reward is priceless. And, if you are taking a family trip then there is no better way to strengthen bonds than sharing time abroad or on a great American road trip.

Preparation is everything!

No one wants to find themselves scrambling for answers and information after their trip has begun. So prepare yourself by reviewing helpful information prior to starting your travels. This may include looking into air carrier rules if you are flying or checking your travel route for road work and tolls if you are driving.

Let go of the guilt!

Dr. Krauss sheds her wisdom when she points out that we need to let ourselves off the hook about feeling guilty about going vacation just because other people we care about aren’t going on their own vacation. Remember that you are autonomous from family, friends, or coworkers that won’t be traveling and it is more than okay for you to enjoy your vacation.

Staying connected is okay

Yes, you are on vacation to step away from your daily life. However, for everyone back home, life is not on hold. So, if you need to check in with the sitter or review a flight notification on your email then do so. Psychology Today supports taking this peace of mind. 

Take chances!

There is a time when you are on vacation to sit back and relax. However, there is also a time to take a leap of faith and venture outside of what is easy. Challenge yourself to try new things and make an effort to have experiences that you may not usually pursue. Within these unexpected moments and unforeseen plans, an opportunity to truly experience being alive arises. So, if you really want to turn off auto-pilot, take this approach by getting in touch with the local scenery of your destination or booking an activity that you find slightly intimidating. This approach is an excellent way to build your confidence and prove to yourself that you may be capable of more than you ever realized. 

Pack properly

Make lists and check those lists off when packing for your vacation. Wasting spending money on things that you forgot at home or didn’t foresee needing is not a smart way to travel. To help keep organized, try categorizing your lists. Also, remember what you may need that is specific to your travel destination. Additionally, pack for unexpected events like losing your passport or catching a cold. Anything can happen while traveling and being prepared for the unexpected is the difference between being inconvenienced or put in a crisis. While no amount of planning or preparing can prevent the inevitable, it can make life easier if things turn sour. Additionally, pack a list of emergency phone numbers and resources.

Source; https://www.psychologytoday.com/us/blog/fulfillment-any-age/201006/the-importance-vacations-our-physical-and-mental-health 

Is Your Pension at Risk?

Everyone faces the concept of retirement at some point. The closer an individual gets to retirement age, the more concerned he may become about his ability to live comfortably after retirement. It may also make him wonder whether his retirement benefits will be available when he is ready to collect.

The Future of Pensions

Those who expect to collect a pension when they reach retirement age may have become concerned about recent reports regarding pension-fund growth. Recent issues regarding pension fund investments such as:

• Modest economic growth
• Low interest rates
• Rich stock valuations

These factors have caused some economic experts to begin reevaluating previous assumptions they had concerning returns on pension funds. Keeping the above factors in mind, anyone whose retirement income includes a pension is encouraged to speak to a financial adviser to assess the effects these projections may have on his financial plans.

One problem is the benefits many state and local governments are committed to paying cost more than the availability of funds. This shortage of funds could result in decreased pensions for retirees, increases in taxes or decreases in other programs funded by various governmental agencies; this may be necessary to cover the deficit in the pension funds.

According to the National Association of State Retirement Administrators, the low interest rates that have been consistently in effect since 2009 has led to a re-evaluation of many public pension plans. This has been necessary for these entities to project potential long-term investment returns. In addition, they have been forced to reduce previous assumptions regarding plan investments This has been necessary to allow these entities to project potential long-term investment returns.

Public Pension Funding

Government-funded pension plans reported assets of $4.41 trillion during the period ending September 30, 2018. How are the assets used to fund the pensions? They are held in trust and invested so that they will be available to fund the cost of pension benefits. The return on those investments is essential since the earnings from those investments provide most of the financing for public pensions. Any shortage in projected long-term earnings from those investments must be replaced through increases in contributions or reductions in benefits. 

Projections are necessary to fund a pension benefit and make assumptions concerning future events. Public pension plans typically consist of two components: the real return rate and inflation. When these two components are added together, the result is what is called the nominal rate of return, the most common rate used in the industry.

The real rate of return is the second component of the return on investment projection. This component consists of the actual return on the investment after it is adjusted for inflation. The purpose of knowing the real rate of return is so those in charge of monitoring the pension funds know the return that the investment generated for the fund. This allows them to better assess the future of the fund and plans for future investments.

The risk an individual pension may face is contingent upon several factors: inflation, return on investments and rate of return. While currently corporate pension funds are doing better than government-funded pension funds, this continued growth could change at any time. Pension funding always carries an element of risk; the future retirees need to follow the news in order to make plans for their future income.

Planning for retirement allows for many considerations and avoiding Probate is one of them.  The good news is if own a retirement account and have named beneficiaries, the account does not have to go through the probate process in most cases. Avoiding probate should be one of the goals of proper estate and retirement planning. While probate is a good fail-safe to ensure the property of a deceased owner is distributed fairly, probate also introduces delays, expenses, and headaches that are not usually necessary.

What Is Probate?

Probate is the judicial process in which the property of the deceased is fairly distributed to creditors and heirs. In the United States, probate is based on the wishes of the deceased as laid out in a document called a will. The probate court will ignore any instruction in the will that is not legally binding. If no will exists, state laws of inheritance are followed.

As probate is a judicial process, there will be court fees and lawyer fees paid out from the holdings of the estate. Some lawyers base their fees on the value of the estate in probate, so minimizing the value of the estate will save money which can be distributed to the heirs. The probate process also takes time – for a non-contested will, probate typically takes from six to eighteen months to complete.

Why are Retirement Accounts Different?

A will cannot supersede instructions in other legally binding documents or contracts. In the case of retirement accounts, there is an agreement on how the money will be distributed to beneficiaries after the owner’s death. If valid beneficiaries are named on the retirement accounts, those beneficiaries will be entitled to the portion of the account as named. If the will directs how the retirement accounts should be settled, the court will ignore that part of the will during probate as long as the beneficiaries are valid.

Under What Circumstances Do Retirement Accounts Go Through Probate?

There are a few circumstances in which retirement accounts will go through probate. If the retirement account owner has named his or her estate as the beneficiary, the retirement account will go through probate. If the beneficiaries are not valid – such as a deceased person or a minor – the account will go through probate.

In some rare cases, a retirement account owner may want their retirement accounts to go through probate. If the owner has outlived everyone he or she would care to name as a beneficiary, the owner may wish to pass the account through probate. A more common reason why retirement accounts pass through probate is because the account owner did not keep the beneficiary list up to date. If the owner started a job before starting a family, it would make sense to name the estate as the beneficiary. The accounts would go through the probate process if the owner did not change the beneficiary list as his or her life circumstances changed.

In the community property states, a living spouse is entitled to at least half of the value of retirement accounts. If the spouse is not named as a 50% or greater beneficiary for the retirement account, the spouse can claim their share in probate court. In other states, surviving spouses are guaranteed something from the deceased’s estate. If there is no or little remaining value beyond retirement accounts, the probate court will consider retirement account money even if the spouse was not a named beneficiary.

When planning an estate, it is essential to know how property will be distributed upon the owner’s death. Different rules and laws apply to different assets. In general, it is best to avoid probate whenever possible. For retirement accounts, the time and expense of probate can be avoided by naming valid beneficiaries on the retirement account. Be sure to check your beneficiary designations every few years to make sure the money is distributed according to your wishes.

The Setting Every Community Up for Retirement Enhancement Act (SECURE Act) recently passed in the House of Representatives by a margin of 417-3 last Thursday. The bill is slated to be successfully ratified into law by the U.S. Senate later in the year in a rare moment of bipartisanship.

The SECURE Act marks the most momentous legislative change in retirement planning since the Pension Protection Act of 2006. That said, the SECURE Act that passed in the House of Representatives recently is a necessary and expected change to the U.S. retirement system. 

Why? Because the Tax Cuts and Jobs Act passed in President Trump’s first year in office effectively punted on retirement reform. The SECURE Act, by contrast, would allow for 29 fresh provisions or groundbreaking changes to existing retirement protocol. 

The way that all of this will play out legislatively is fairly predictable. The Senate has a sister bill called the Retirement Enhancement Securities Act (RESA), which will interplay with the U.S. House of Representatives SECURE Act. Aspects of the Senate bill will make their way into, and be modified by, the House bill and vice versa over the coming weeks. 

This reconciliation process is needed to harmonize the bills with each other and with what average Americans want out of their retirement plans. The bill that makes it out of reconciliation is expected to remove IRA age limits, expand the start of required minimum distributions (RMDs), and enhance the possibility that more employers set money aside for retirement plans. 

Both the SECURE Act and RESA are meant to address social security funding issues and out-of-control pharmaceutical costs in particular and healthcare expenses more generally. The Medicare system is thought to be under serious strain at present since about a third of Americans don’t set anything aside for retirement and rely on the system to the exclusion of everything else. 

So, how can the SECURE Act and RESA make things better? The first salient aspect of both of these plans is that each enhances the ability of small employers to create retirement plans for their employees. The bills make multi-employer plans easier to undertake, and each plan allows smaller employers the opportunity to create 401(k) retirement plans with fewer worries about fiduciary oversight. 

The SECURE Act will also delay the RMD (minimum distribution) requirement to at least 72 years of age. The current RMD cutoff is 70.5 years of age. The surprising thing about these upcoming retirement changes is that the Senate is attempting to push the RMD requirement to beyond the House’s ambitious uptick and set the RMD requirement to 75 years of age. 

Another positive aspect of these upcoming changes to retirement planning in the United States is a removal of age limits on IRA contributions. Previously, retirement savings were effectively discouraged insofar as individuals who continued to work into their seventies had a harder time making contributions. In the old system, once you hit the age of 70.5 years old you were disallowed any contribution to an IRA, though you could still contribute to a Roth IRA past this arbitrary cutoff. Section 114 of the House’s SECURE Act would shore up older workers’ ability to make regular IRA contributions by axing the aforementioned age limitation. 

But since every new piece of legislation has to include both a stick and a carrot in order to correctly balance incentives that Americans will face when planning for retirement, both the SECURE Act and Resa feature some kind of tax credit for automatic enrollment. These tax credits will redound to small employers. The aim is greater accessibility.

Source: https://www.wsj.com/articles/house-on-track-to-pass-bill-making-big-changes-to-u-s-retirement-system-11558625474