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.

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.