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.

Elder financial abuse can be a complicated subject, but at its most basic level it involves taking advantage of an older adult through manipulation or intimidation to steal their money or property.

Elderly adults are some of the most vulnerable to financial abuse. Some of the biggest risk factors for older adults include:
Isolation
Isolation can cause extreme loneliness in seniors, leaving them desperate for any sort of social connection. Many abusers target elder adults for this reason.
Lack of knowledge of financial matters
Elder adults who don’t pay much attention to or don’t understand financial issues can be tricked into giving over secure information.
Disability
Whether the older adult has a physical or mental disability, they are dependent on others to take care of themselves. This leaves them vulnerable to manipulation and intimidation by caregivers. Disability can also make an elder adult seem less likely to take action against the abuser.

Who is most likely to abuse?
Unfortunately, abusers are rarely unknown to the abused. In fact, those who are most likely to abuse are the ones who are closest to the elder individual or someone that he or she trusts. The most common financial abusers include:
Family members
Family members can have different motivations for committing financial abuse. They may feel entitled to their relative’s money or property, especially if they are due to inherit from the elder or are in a caretaking position.
Caretakers
A caretaker can be a family member or someone who is paid to provide care to an older adult in the elder’s own home. As such, a caretaker is the person who has the most access to the elder.
Professionals are people that elder adult depends on to take care of the things he or she is not capable of handling alone anymore. These services can range from attorneys to someone your relative hires to take care of the lawn. Abusers can take advantage of older adults by overcharging for services or manipulating them into signing documents that they don’t understand.
Scammers and con artists
Some predators prey specifically on elder adults, counting on their social isolation and lack of knowledge about financial matters to be able to gain access to their victim and their financial assets.

What types of financial abuse exist?
Financial abuse can take different forms, depending on the relation of the abuser to the elder adult. Common tactics include (but are not limited to):
• Theft of money or property
• Using manipulation or intimidation to force him or her to sign legal/financial documents
• Forging his or her signature
• Fraud
• Telemarketing and email scams

How can you prevent financial abuse of elders?
The best thing that you can do to prevent elder financial abuse is to keep your older relative or friend from being isolated. Check in regularly, make sure you know who has access to him or her, and know the signs of financial abuse. Keep an eye out for suspicious signatures on checks, suddenly unpaid bills, and new and unexplained “friends.” By knowing the signs, you can help prevent the financial abuse of your loved one.

(Source: https://www.nia.nih.gov/health/elder-abuse)

The divorce is being called the most expensive divorce in recent history, the divorce of Amazon CEO & Founder, Jeff Bezos and his wife.  While his divorce could be expensive, he will financially be able to survive the transition.  Some of us are not so lucky.  

Divorce is always hard on many levels. One of the things that is most important is the financial split of the couple’s assets. These assets include retirement benefits and investments. Figuring out how benefits should be divided, or if they are even able to be divided, can be a minefield if not navigated properly.

It is often that one of the spouses becomes the couple’s treasurer, but it is important that both partners are aware of the couple’s financial situation. This is especially true when it comes to investments. If one spouse was not as attentive to the tax responsibilities, it could affect the other spouse’s share. If the spouse was deceptive about the couple’s investments, this could make issues between the couple even worse. Hiring a forensic accountant can help find discrepancies or deceptive practices by the responsible spouse.

When it comes to retirement benefits, there are only certain things eligible to be split during a divorce. Those eligible are considered community property, and include things like military pensions, GI Bill benefits, IRAs, employee stock option plans, and 401(k) plans. Benefits that are not considered community property are Social Security benefits, Worker’s compensation, and any military injury compensation. It is often advised that if the spouse’s benefits are sizable that the other spouse should petition to split the benefits. Benefits are usually split by percentage instead of a money value in case the value of some of the benefits fluctuates between the time of evaluation and actual settlement.

There are some other exceptions and considerations when it comes to benefits. For instance, if a spouse invested money or started a 401(k) before the marriage and continued to pay into them during the marriage, the amount invested before the marriage must be deducted from the total amount before any valuation can be made.

When it comes to Social Security benefits, a couple must have been married at least 10 years for one spouse to have a claim to them. However, the claiming spouse cannot have their own Social Security benefit value exceed half of their spouse’s. If there is a possibility that a spouse will have a claim to the other’s Social Security benefits, they may request a delay in proceedings in order to pass the 10 year threshold. If the length of marriage is close to 10 years, the court may issue a continuance. If the spouse with the Social Security benefits dies after the proceedings are over, the surviving former spouse can collect 100 percent of their Social Security.

When married couples split up, the financial quandaries can be messy. Knowing the law, and getting advice from a financial expert is a good idea for both spouses involved. It is beneficial for both spouses to be well aware of the collective financial situation so surprising issues like back taxes or hidden assets can be avoided. Maintaining the financial futures of both former spouses is key to making sure the separation is a clean one with no resentment or animosity between those involved.

Congratulations you are closing in on your target retirement date!  While the bulk of your retirement prep work and heavy lifting should be completed by the time you’re still a couple of years from retirement, there’s still a few boxes you’ll want to check off before finally saying adios to the workforce. Let’s go through them.

1. Social Security Decision

You should decide when to collect Social Security benefits. The earliest age is 62. Unless you’re retiring early and need the benefits to help cover expenses like health insurance, it’s advantageous to wait. At 62, your benefits would be reduced by 25% or more. You won’t collect 100% of your benefits until you’re 66 or 67, depending on what year you were born. When you wait to collect, keep in mind that benefits increase by 8 percent/per year up until you’re age 70.

2. Get Your Finances Simplified

Do you have multiple brokerage accounts, savings accounts, checking accounts, 401(k)s, IRAs, and other retirement savings accounts? Perhaps, you’ve lost track of an account?

First, simplifying and consolidating your various small financial accounts into a larger one will make it easier for your heirs to step into control if you had a medical emergency, needed long-term care, or passed away.

Second, you can reduce paperwork, possibly save some cash, and better keep track of your set income to expenses ratio by having everything neatly confined. For example, aggregation with a single provider can offer some economies of scale like cheaper expense ratios.

Lastly, if you’ve lost track of an account, then you’re missing a piece of your financial pie that could make a big change in how retirement tastes. missingmoney.org and unclaimed.org are good places to start tracking lost and unclaimed funds.

3. Give Your Portfolio A Health Checkup

Ideally, your portfolio at this point should be moderate-risk.  If the stock market is causing you any worry, then talk to a Financial Advisor and be sure you are set up to protect your retirement.

4. Make A Plan With HR

Schedule a time to speak with your company’s human resources department about your retirement. Topics you’ll want to ask about include:

• Are unused vacation days paid upon retirement?

• Is receiving profit-sharing payouts, bonuses, 401(k) match, or any other income aspect impacted by your planned retirement date?

• If retiring before Medicare-age, what retiree health benefits are offered?

• If a 401(k) is left as-is verses rolling it over into an IRA, can distributions still be taken? How? Is there a fee?

• If a pension is available, what are the options for payout?

One note on lump-sum pensions to keep in mind is that extending your retirement may not increase your pension. Lump-sum pensions are calculated based on interest rates. The higher the interest rate, the lower the pension. Extending your retirement when interest rates are rising can actually result in your pension going down, not up.

5. Study Medicare Closely

Medicare is a difficult beast to navigate, and the sales pitches you get from supplement insurers only adds to the confusion. So, you’ll want to start studying now, understanding how it works, what coverage gaps exist for you, and what you need verses don’t need in supplements. Here are some highlights you’ll want to consider:

• Upon turning 65, Social Security beneficiaries are automatically enrolled in Medicare parts A (hospital care) & B (doctor and outpatient visits.) If you’re delaying your SS payment, then it’s up to you to enroll on your own.

• If delaying your SS claim and still covered by your employer’s health plan, then you’ll likely find it beneficial to go ahead and sign up for part A at age 65 since there’s usually not a premium.

• You may want to opt out of part B since it charges you a monthly premium for service.
You may also want to opt out of part D, which covers prescriptions. The caveat here is your employer’s offered insurance being as good as what Medicare offers. If not, and you select to opt out, then you’ll face penalties when you sign up in the future.

• To ensure you’re not left without coverage, plan to sign up for part B around six weeks prior to retirement. You have eight months after leaving your job to sign up for part B without penalty.

• Be deciding if you want Medicare Advantage. This is basically a combination of parts B & D with a supplemental medigap plan to cover the copayments, deductibles, and other traditional healthcare costs that Medicare doesn’t include. These plans provide private insurer medical and drug coverage within a network, meaning you’ll need to carefully research your plan options and determine if your preferred health care providers are in the offered network of a plan.

The finish line is just around the corner, but now isn’t the time to slack just yet. You’ll want to make sure these important boxes are checked so that you can retire in peace and confident you’ve worked all these years to afford.  Contact us to discuss your plan.

It’s not so uncommon when you hear someone who retired wanting to pack up their things and move. While it can be an exhilarating time, it can also be rather difficult, especially if their planning on buying a new house altogether.  Did you know that lenders are barred from discriminating against older people who are trying to apply for a loan? Despite having the advantage of not having to worry about discrimination, retirees are still going to face some difficult challenges in obtaining a mortgage.

Read on to learn a few tips about securing a mortgage while in retirement.

Purchasing a New Home Isn’t Always the Best Decision
Purchasing a mortgage is a huge undertaking for anyone, regardless of whether they work or not. Should someone even get approved for one, it’s not always the smartest financial decision to make. A lot of retirees these days have a lower income than they did while they were working. Due to this, many people tend to underestimate how long the money needs to last for them. Adding a mortgage payment can deplete what little money is there even faster, which can make it difficult to live comfortably.

Regardless of age potential home buyers need to do their homework.  Make sure you carefully evaluate your finances before applying for a mortgage. Buying a home involves a lot more than just the monthly payment. You also need to consider property tax and homeowner insurance. In addition, you need to plan for other monthly expenses, which include power, water and even unexpected medical bills.

In addition, remember to evaluate whatever debts you have as well. Having debt not only lowers your credit score, it can significantly hurt your chances of securing a mortgage. Finally, having too much credit can also work against you. It’s recommended that you utilize only 20 percent of your total credit. Lenders like to see that you know how to manage your credit responsibly.

Showing the Right Amount of Income
Having a job is not a requirement for applying for a mortgage and here’s why; any income that is received from pensions or a social security account will count. In addition to that, withdrawing from a retirement account is also counted. Aside from showing a stable income, retirees must also show a low debt-to-income ratio. It may not be a challenge for some people as this depends on how much they have to their name and how much income they have during their retirement.

Talk to a few lenders about the requirements they have when it comes to income and debt-to-income ratios before signing a mortgage application.

It’s important to keep in mind lenders look at a number of factors when you apply for a mortgage. They’ll want to look at your credit score, down payments and occupancy status. If you’re retired and looking to purchase a mortgage, make sure you’re prepared for it. 

2018 was an up-and-down year for many Americans. The stock market boomed, and then it busted. No one knows what is on the horizon for 2019, but it doesn’t hurt to set goals. Here are some financial goals that could help you get off to a great start in 2019.

Start an Emergency Fund
Whether you’ve retired or you’re a professional with many years of experience under your belt, you need an emergency fund. This is the first point of emphasis that many financial experts point to. If you have no emergency fund, you’ll likely have to go into debt when an unexpected expense pops up. A fund of $1,000 is a good start, but many of the same financial gurus that recommend having an emergency fund recommend building it up to between three and six months worth of expenses.

Get out of Debt
If setting up an emergency fund is the first recommendation from most financial experts, getting out of debt is a close second. Whether you look to pay off debt with the debt snowball that encourages people to pay off debts from the smallest to the largest balance or with the debt avalanche that takes interest rates into consideration, paying off debt can pay some serious dividends. If you’re able to retire debt early, you effectively get a rate of return that equals the interest rate that you might have been paying. For credit cards with interest rates of 15 percent or more, paying off the debt can be one of the best investments that you can make.

Read Five Personal Finance Books
This recommendation might be surprising, but those who want to learn about science in college have to read books on science. If you’re looking to improve your personal financial literacy, it’s a good idea to learn as much as possible about the topic. Much of the heavy lifting has already been done. There are financial experts who have gotten where you want to be, and many of them have written books. It’s a good idea to pick up a few and read them. If you have a local library, checking these books out for free would be the smartest option.  Don’t want to read or have the time to dive in to several paperbacks?   Start working with an experienced Financial Advisor to help guide you along the way.  We are here to help you.

Start Side Jobs
Side hustles are all the rage, and there’s a great reason why. The labor market has improved over recent years, but many people no longer have jobs that will comfortably pay their bills each month. One of the best ways to improve your financial standing is through a side job that brings in a few hundred dollars each month. A few hundred bucks could mean the difference between living paycheck-to-paycheck and building up a healthy emergency fund and paying off debt. All side job income should go toward improving your balance sheet each month. That means paying off debt or saving for retirement.

Improve Your Health
Surprised?  You shouldn’t be.  Americans are some of the least healthy people in the developed world. Exercise and healthy diets are not really the norm in the USA. This means that the United States has one of the lowest life expectancy levels in the developed world. Healthcare in the US is also more expensive than anywhere else in the world. For those who are looking to save money and build wealth, avoiding costly healthcare bills is an important step to take. Just deciding to incorporate a few minutes of exercise into your day can make a difference and can cut down on your risk of serious diseases that can cost a load of money.

These are just a few of the goals that could help you with your finances in 2019. Getting started with one or more could be the step that could radically change your life for the better in the coming year. There’s no time like the present to get started.

Arm yourself to save more for your retirement in 2019! The Treasury has announced inflation-adjusted numbers for retirement savings for 2019, as well as a lot of changes that will help investors stuff these accounts.

The amount which you could contribute to an Individual Retirement is being bumped from $5,500 up to $6,000 for 2019.  Also, the amount you can contribute to your 401(k) (or similar workplace) retirement plan goes up from $18,500 in 2018 to $19,000 in 2019.

That means that quite a few high earners and super-savers age 50-plus can sock away $32,000 during these tax-advantaged accounts. If your hiring manager allows after-tax contributions possibly you’re self-employed you can save double. The overall defined contribution product limit moves up to $56,000, from $55,1000. People who are over 50 and working can save up to $7,000 with the new contribution limit in place according to Market Watch.

Do these limits tend to be unreachable?  During 2017, 13% of employees with consideration plans at work saved the maximum of $18,000/$24,000, according to the Vanguard’s Strategies America Saves study. In opportunities offering catch-up contributions, 14% of those age 50 and older took advantage of the savings opportunity. The amount you should set aside will relate to how you want to live after retirement. Survive on the just the basics or play golf every day.  It‘s something each person will need to decide when setting up or making adjustments to their retirement account.

The annual contribution limit for workers who participate in 401(k), 403(b), most 457 plans, as well as federal government’s Thrift Reserves Plan, is $19,000 for 2019, a $500 increase over 2018.   You will need to elect the change to your 401(k) which some employers send you an indication to update your elections for the plan year. You should take that time to evaluate and make necessary changes as needed.

Strengthening the 401(k) contribution is great for savers, but not everyone takes advantage of it. About 10% of participants, according to Vanguard, maxed out their 401(k) in 2016.  

If you need guidance on your retirement plan or to get started, we are here to help.

Since 2008, stocks have rewarded investors with solid returns. Can equity investors count on a repeat of recent history? Well, precise predictions about the market are notoriously difficult to distinguish from luck, and very easy to justify in retrospect.

Risk Factors
This bull market started in 2009 and although it is an adage that “bull markets don’t die of old age”, it is also a bit foolish to assume things will go well simply because they have gone well.

Another factor to consider is industrial activity, often taken as a benchmark of economic health. Industry requires a healthy investment in capital as well as labor, it moves commodities and responds to widespread demand. Copper, being a widely used and necessary metal, provides another hint that things won’t go well for long with this stock market. As this reference shows, bouts of high copper prices sometimes correlate with recessions shortly afterward. This pattern held in the 2001 and 2008 recessions. Note how copper prices have hovered at around $3.15/pound since fall of 2017 and have fallen sharply to $2.66/pound in July 2018.  This sharp drop may be due to lax demand that hints at slowing construction and related business activity which heralds a stock market drop.

On the international stage, Chinese and European growth is becoming less and less impressive. Never-mind the tariff issue. Even without it there would be cause for concern as Chinese demand wavers in the face of ever-rising debt and inefficient use of capital by state-controlled agencies that are motivated by politics far more than by market-based rationality.

Lastly, note the low and flattening unemployment rate curve. Over time, one sees a pattern of a flattening dip that precedes recessions. The short and sweet explanation for this recurring phenomenon is that business costs are made of fundamental components: commodities or “parts” and labor. As more people are employed and job applicants have more bargaining power for wages and benefits, businesses, especially those operating on tight margins, have to either absorb the cost of rising wages, pass on the cost to consumers that are then dissuaded by rising prices, or forego the hire and skill sets/benefits that come with it. Every option is basically bad for profits, so, again, earnings and business activity slows down.

While stock markets don’t necessarily “die of old age”, prolonged economic expansions such as this one lower risk avoidance and encourage speculation by lenders and consumers who are assured that the good times will continue at least long enough for their purposes. The flattening yield curve, correlation with a copper peak and subsequent recessions, rising interest rates, and growing hiccups in the international markets could be enough to continue market volatility or tip the stock market down in 2019.  No one has a crystal ball to predict the future but it may be wise for some investors to plan for capital preservation as a priority over and above prospective gains.