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.

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.