Category: Retirement

5 Questions to Ask When Dealing With a Family Health Crisis

12/11/2019

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Facing a family health crisis, here are first 5 steps to take:

Here are 5 key questions everyone should ask:

Who will be the financial caregiver?
Who can handle the short-term, day-to-day medical needs and caregiving?
What are the housing options?
How will we communicate as a family?
How will we navigate the eventuality of death?

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MoneyGuard - the Hybrid LTC Solution From Lincoln National

12/2/2019

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Q. What's a good long term care product that if I don's use it, my premiums are not wasted?

A. Lincoln National has a hybrid funding solution may be the best way to protect you and your loved ones from long-term care expenses. Here’s how:

1. If you do need care, you have a tax-efficient, dedicated funding source, designed to meet your needs.1

2. However, should you not need care, you’re able to give your family a legacy through a death benefit.2

3. And, if you change your mind, you’re able to get money back.3

1 LTC reimbursements are generally income tax-free under IRC Section 104(a)(3). Funding is through reimbursements, subject to the monthly/annual maximum amount.
2 Beneficiaries may receive an income tax-free death benefit under IRC Section 101(a)(1).
3 The return of premium is provided through the Value Protection Endorsement available at issue on all policies. The amount returned will be reduced by any loans, withdrawals and benefits paid. The Value Protection Endorsement contains complete terms and conditions.

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2020 IRS Contribution Limits

11/28/2019

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Federal tax law places limits on the dollar amount of contributions to retirement plans and the amount of benefits under a pension plan. IRC Section 415 requires the limits to be adjusted annually for cost-of-living increases.

Starting Jan. 1, 2020, you can invest more thanks to an increase in the dollar limitations for some retirement-related items for the 2020 tax year.

The contribution limit for employees who participate in 401(k), 403(b) and most 457 plans, will increase from $19,000 to $19,500. Other changes please see table below.

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5 Steps To Create and Ensure a Diversified and Secure Retirement Income Plan

11/25/2019

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Q. What are the steps I should take in order to create a diversified and secure retirement income plan?

A. Here are 5 steps to consider taking to help create a diversified income plan:

Identify your personal and financial goals.
Complete a retirement income plan to determine the probability that you will have enough money to last throughout retirement.
Determine when to take Social Security; how much of your investment portfolio you want to allocate to an emergency fund, income protection (via annuities), and growth potential; and who will manage your investment portfolio.
Implement your plan with the right mix of income-producing investments to balance your financial needs and investment priorities in retirement.
Regularly review your plan's progress to make sure your investment plan is on track to meet your lifestyle and income needs.

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Costs and Savings When Downsize

11/24/2019

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Q. What are the major costs and savings when downsizing?

A. The table below shows the major costs and savings in downsizing.

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Long Term Care and Critical Illness Planning For Every Life Stage

11/21/2019

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Every life stage brings different financial priorities and concerns — Securian Financial’s educational document below discusses priorities and solutions for consumers' Long Term Care and Critical Illness concerns at different life stages. Its target is for insurance professionals, but consumers will find it helpful too.

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5 Questions to Ask Yourself 5 Years Before Your Retirement - Part V

11/18/2019

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We discussed the fourth question here, now the last question to answer.

5. How does your home factor into your retirement?

Your home is likely one of your most valuables assets. If either downsizing or relocating is in your plans, you may want to start plotting the move now. If moving isn't in the cards, you may still want to think through whether it makes sense to pay down your mortgage faster—thereby saving on interest payments and improving cash flow in retirement.

Alternatively, consider how to use some of your home equity to help finance your retirement. If tapping home equity is only a temporary solution to bridge the gap until you start to draw down your retirement assets or start receiving guaranteed income payments, consider applying for a home equity line of credit while you're still employed and more likely to qualify for the best rates. If home equity factors into your long-term planning, you could also consider a reverse mortgage. But proceed with care and be sure you understand all the associated costs and requirements. Before considering any of these ideas, make sure you consult a tax professional or attorney.

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5 Questions to Ask Yourself 5 Years Before Your Retirement - Part IV

11/17/2019

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We discussed the third question here, now the fourth question.

4. Where will your retirement income come from?

At the same time you think about shoring up your retirement nest egg, you need to begin thinking about how you'll convert some of these savings into retirement income. For many people, it's helpful to start by grouping potential sources of income into 2 basic buckets: guaranteed income from sources such as Social Security, pensions, and annuities, and variable income from a job, retirement savings, and other sources such as rental real estate.

Next, estimate your retirement expenses and then map out ways to meet essential expenses with guaranteed income sources, and discretionary expenses with nonguaranteed income. If you plan to work a bit during retirement, that may provide a conservative boost to your retirement income. But be cautious here. Survey data shows that many people are not able to work as long as they wanted. Finally, before you rush out to file for your Social Security benefits at age 62, consider the big picture: Generally, the longer you wait, the higher the potential lifetime benefits.

After your review your current investment mix, you may also want to consider shifting a portion of your investment portfolio into income-producing assets, such as bonds or dividend-paying stocks. A guaranteed income annuity is another option to consider if you're interested in converting your assets to income. Generally, the older you are when you buy an annuity, the higher the monthly payout, but there may be advantages to purchasing an annuity before you reach retirement age. But these potential moves should still be done within the context of maintaining an appropriate overall asset mix across stocks, bonds, and cash. Remember, your retirement income will likely need to last for 30 years or more, which typically requires some exposure to stocks.

Read the last question here.

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5 Questions to Ask Yourself 5 Years Before Your Retirement - Part III

11/16/2019

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You can read the second question here, now the third question to answer.

3. Are you invested properly?

As you round the bend toward retirement, it’s not a good idea to take on any more investment risk than necessary for your time frame, financial circumstances, and risk tolerance. But remember that this does not mean the answer is always to become more conservative. The consequences of being too conservative can be just as worrisome when you account for inflation and the possibility that you could outlive your savings. That is why it is important to think about an appropriate asset allocation.

Although you can't control market behavior, you can help manage its long-term effect on your portfolio through investment choices and by modifying portfolios so they have an age-appropriate mix.

An ideal investment mix will depend on a number of factors, including your age, time horizon, financial situation, and risk tolerance. Retirement is often the time to take some risks off the table, but some people are tempted to become too conservative. Don't forget that your goal is for your retirement savings to last for a 30-plus-year retirement time horizon. This usually means some longer-term growth potential is needed in the portfolio.

Keep reading the fourth question here.

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5 Questions to Ask Yourself 5 Years Before Your Retirement - Part II

11/15/2019

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First question - what are your expectations here. Now the second question.

2. Will you have enough?

This is the most important question that many preretirees need to answer.

With 5 years to go, you'll want to run some real numbers. If the numbers aren't encouraging, you may need to rethink your plans, step up your savings, or both. The good news: If you're age 50 or older, you may be able to make up for a savings shortfall with additional catch-up contributions to your 401(k) or IRA. If you are age 55 or older, you can also make an additional $1,000 catch-up contribution annually to your health savings account
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For baby boomers who are nearing retirement, saving more and adjusting their asset mix has less impact for the simple reason that they have less time for those changes to impact accumulated wealth—though it may still help. For them, postponing retirement is generally the most effective step. Delaying retirement from 65 to full Social Security retirement age (between 66 and 67, depending on birth year) may be the best way for most preretirees to boost their retirement savings and increase their retirement income levels. If you delay claiming, you’ll have more time to build your retirement nest egg and a shorter retirement to fund.

Check out the third question here.

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5 Questions to Ask Yourself 5 Years Before Your Retirement - Part I

11/14/2019

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1. What are your expectations?

It seems like a simple question, but many people have no idea how much they expect to receive in monthly retirement income, and most either don't know or are unsure of what their Social Security payments may be in retirement.

This lack of planning and understanding may affect more than just your happiness in retirement; it could also affect when and how you'll be able to retire. Five years before you plan to retire may be a good time to refine your retirement planning estimates and reprioritize your goals.

Where do you plan to live?
If you plan to move, make sure you also consider how that will impact your cost of living, including the cost of health care and your access to it. If you have your eyes on moving to another state, be sure you understand any differences in taxes (e.g., state, income, estate, local, sales, and property taxes) as well as differences in the cost of living. If you plan to stay put, you'll want to consider how your home equity factors into your plans.

What do you want to do?
The early stages of retirement can be an expensive time. Many people overestimate how much they'll be able to work in retirement, and underestimate how much they'll spend. Take a hard, realistic look at both fronts.

How will you pay for health care?
After food, health care is likely to be your second largest expense in retirement. According to the Fidelity Retiree Health Care Cost Estimate, an average retired couple age 65 in 2019 may need approximately $285,000 saved (after tax) to cover health care expenses in retirement.

While many preretirees are thinking ahead and factoring health care costs into their retirement savings plan, almost 4 in 10 are not.2 In fact, 48% of preretirees estimated that their individual health care costs in retirement would be less than $100,000—far lower than Fidelity's current estimates.

If you've relied on your employer to pick up most of your health care tab, retirement could be a rude awakening: Only 18% of large companies offer health care benefits to retirees, according to a 2018 employer survey by the Kaiser Family Foundation. Although Medicare kicks in at age 65, you may need to buy supplemental insurance or, at the very least, budget for higher out-of-pocket health care expenses than you had while you were working.

Continue for next question here.

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Basic Questions About Medicare Part D

11/13/2019

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While Medicare Part A and Part B provide coverage for hospital and routine health care services for those 65 and older and those with certain medical conditions or disabilities, Medicare Part D covers the high costs associated with prescriptions..

3 key things to know about Medicare Part D

Part D helps you pay for self-administered prescription drugs. You can sign up for Part D when you enroll in Medicare Part A and/or Part B. Alternatively, you can skip Part D and go with a Medicare Advantage plan with drug coverage included.
Part D is optional. While prescription drug coverage through Part D (or Medicare Advantage with drug coverage) isn't mandatory, there are no other options with traditional Medicare for help with prescription drugs after age 65.
If you don't sign up for a prescription drug plan (PDP) on time, it can cost you. Sign up after your initial enrollment period or after a special enrollment period ends, and you can face a permanent late penalty.

What Part D does not cover?

Drugs used for weight loss/gain, fertility, erectile dysfunction, and cosmetic effects
Non-prescription drugs (over the counter medications)
Vitamins
Insulin (when used with an insulin pump)
Inpatient drugs (these may be covered by Part A)
Drugs not listed on a PDP's formulary (list of covered drugs)

How and when do I sign up for Medicare Part D?
You can sign up for a prescription drug plan with a private health insurance company that offers them through their website, over the phone, or with a licensed agent. When you can sign up is a little more complicated.

Just like Medicare Part A and Part B, you can enroll in Part D during your Initial Enrollment Period (IEP). That's up to 3 months before and up to 3 months after your 65th birthday. You can also enroll during a qualifying Special Enrollment Period (SEP), such as when you or your spouse’s employer-based health coverage ends.

How to avoid Part D penalties?
If you sign up for a Part D plan after your IEP or SEP, a permanent penalty—potentially adding up to thousands of dollars over your lifetime— gets tacked on to your monthly premium. The penalty amount can change each year as well.

You can avoid the penalty if you show proof of creditable drug coverage during the time you were supposed to sign up. If you had acceptable coverage includes a prescription drug plan through an employer (yours or your spouse's).

If you don't sign up for a prescription drug plan on time, and you don't have proof of creditable drug coverage, you also have to wait until the next open enrollment period (October 15–December 7 each year) to sign up. Your coverage starts shortly after you enroll (on January 1) and will include the premium penalty.

How Part D penalties are calculated?
Medicare doesn't charge a flat rate penalty for enrolling late. Instead, the amount is determined by multiplying the number of months an individual went without a Medicare drug plan (or creditable drug coverage) by 1% of the national base premium, the premium rate Medicare establishes for Part D each year.

For example, if you delayed signing up for Part D for 5 years, you would face a 60% penalty (60 months × 1%). The penalty amount is rounded to the nearest $0.10 and added to your monthly Part D premium. There is no cap on the Part D penalty.

Since the national base premium changes every year, so does the Part D penalty. For more about Part D penalties, visit Medicare.gov.

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Long Term Care and U.S. Government: What You Need to Know

11/10/2019

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Americans are living longer, and that raises the question of how to pay for long term care. Can you count U.S. government for help? What are the government benefits program? How about the eligibility requirements?

This Securian Financial article explains this topic very well, it's a good educational read!

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5 Questions to Ask About Long Term Care Insurance

11/9/2019

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Start thinking about long-term care insurance options while you’re healthy
It’s important to begin the process and make some crucial decisions now — before an unexpected health change could suddenly change your needs.2 And the chances of needing health care down the road are likely.

Americans turning 65 have almost a 70 percent chance of needing some form of long-term care in their lives. And about 8 percent of those between ages 40 and 50 have a disability that could require long-term care services.

Plus long-term health care can be expensive. The annual cost for a private, one-bedroom in an assisted-living facility is $43,536. The hourly rate for a home health aide is $20.50.

Questions to ask your financial professional
It’s always a good idea to consult a financial professional as you plan for the future. But whether or not you speak to a financial professional, here are five questions to consider as you think about your long-term care insurance options:

1. What are my insurance options for covering long-term care?
There are several kinds of long-term care (LTC) insurance policies, including traditional and hybrid options. And because Medicare doesn’t pay for LTC, it’s important to understand the pros and cons of each type so you can choose the policy that’s best for you.

Traditional LTC
This insurance can help pay for your future care — and in the event you go on claim, depending on the policy structure and benefits, may provide some of the most robust benefits to cover the costs for LTC. These policies stay in force as long as you keep paying the premiums, and although they may be affordable and less expensive than a hybrid policy initially, over time, the cumulative out-of-pocket costs can add up. Also, if you don’t need LTC, you generally won’t receive any benefits from your policy. Traditional LTC policies sold today do not offer guaranteed premiums or benefits so premiums may increase over time.

Hybrid LTC
Hybrid policies (typically a combination of life insurance or an annuity with long-term care insurance) guarantee premiums will never increase and benefits will never decrease. They also may offer a return of premium option so you can get your money back if you decide to give up your policy. They offer an income tax free death benefit and inflation protection options to help your LTC benefit keep up with rising health care costs.

Some hybrid policies are available with a single-pay (up front) or multi-pay (various payment periods may be available). Due to the shorter premium durations, Hybrids may be more expensive in the short-term compared to traditional policies.
Hybrid LTC policies are becoming increasingly popular — some 404,000 policies were sold in the United States in 2018.

2. What does LTC insurance generally cover?
Long-term care insurance may cover expenses related to assisting chronically ill people with their personal care needs, such as bathing, dressing, and moving between a bed or chair. It can also involve helping them accomplish everyday tasks, such as housework, managing money, preparing meals, shopping, and caring for pets.

Policies may also help pay for home- and community-based services, such as adult day care, caregiver training, home health care options, and respite care. They generally cover facility-based services, like assisted living, hospice, and nursing home care.

3. How will I receive benefits?
Your benefits will typically begin when you8 are certified as being chronically ill by a licensed health care practitioner and have satisfied your elimination period. This means you can’t perform at least two daily living activities due to a loss of function, or you need supervised protection due to severe cognitive impairment.

You can receive your benefits in one of two ways, either as a reimbursement for expenses incurred, or through a set monthly benefit amount often referred to as cash indemnity. With a reimbursement policy, you must first pay for qualifying medical expenses out-of-pocket, and then submit a receipt to the carrier to be reimbursed. On the other hand, a cash indemnity policy automatically sends you a monthly cash benefit that you can use to cover any of your care expenses, such as informal care, medical equipment, prescriptions, and even housekeeping and home maintenance needs.

4. What happens if I buy a policy but don’t need long-term care?
Traditional LTC insurance is generally “use it or lose it”, which means you typically won’t get any benefits from your policy if you don’t need LTC. Some traditional LTC insurance may allow you to get your money back if you decide you no longer want the policy, but this feature tends to be very expensive.

Hybrid LTC insurance will typically pay a death benefit if the policy is not used for long-term care costs. Also, many hybrid LTC policies offer a “return of premium” feature, which means if you give up your policy you can get back some or all of the money you have paid in.

5. Are there tax benefits to long-term care insurance?
For traditional LTC insurance, all or a portion of the premium may be tax-deductible based on some IRS limitations and qualifications. However, other than a handful of hybrid policies, the premiums associated with these plans are generally not tax deductible.

When it comes to how your LTC benefit may be taxed, LTC benefit payments are not taxable so long as:

Your benefit is equal to the actual expenses incurred, or
Your benefit is less than the IRS per diem ($370 in 2019)9

A rewarding life is really about being present in the here and now. Planning for your future health care can help you and your family do that. So you can enjoy the everyday moments — and confidently look forward to the major milestones, like retirement.

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How to Include Medicare In Your Retirement Planning

11/8/2019

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First off, know what Medicare’s different letters mean:

Medicare Part A covers hospital visits
Medicare Part B entails doctor visits
Medicare Part D is for prescriptions

What about Part C?
Medicare Part C (also known as Medicare Advantage plans) is all-in-one coverage (hospital, doctor, and prescription coverage) that is sold through private insurers that contract with Medicare. It may also include dental and vision coverage.

When does Medicare become available to me?
You’re automatically enrolled in Medicare Parts A and B at the age of 65, if you’re already earning Social Security, Or you’ll have the option to receive it when you get disability benefits from the Social Security Administration or Railroad Retirement Board.

Perhaps you’re eligible for Medicare Parts A and B, but need supplemental insurance for costs not covered by “original Medicare” (i.e., dental, vision, hearing aids, eye glasses, long-term care, and private-duty nursing)
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There is a six month initial open enrollment period for Medigap coverage that starts the month you turn 65.5

How are Medicare premiums paid?
For Part A, no additional premium is paid. For Part B, the premium is paid through a reduction in Social Security benefits. And for Parts C and D, it all depends on the kind of private insurance you have.

How much will Medicare cost me?
It all depends. Just know that health care costs could be your biggest expense post-retirement. For a preview of what your costs could be, go to Medicare.com, enter your zip code and select a plan. Then, consider your health history (and your family’s), what your future finances will be, and other factors that could affect your money in retirement.

And remember that Medicare doesn’t cover dental, vision, hearing conditions or long-term care. You’ll need a separate insurance plan if you don’t want to pay for these medical expenses out-of-pocket. And, oftentimes, you might still need to pay deductibles and copayments on services covered by Medicare.

Do I need to save for Medicare when planning for retirement?
Yes, you should do what you can now to help plan for your costs due to Medicare.

According to a recent report, health care expenses are expected to increase by 5.5 percent every year, which is triple the inflation rate from 2012 to 2016. In 10 years, a retired couple will need up to 92 percent of their Social Security benefits to help cover health care costs.

Consider contributing to a health savings account (HSA), which has a triple tax advantage — meaning that contributions are pretax or tax-deductible, grow tax-free, and can be withdrawn without being taxed when used on qualified medical expenses and premiums. And any unspent funds roll over to the next year.

Long-term care insurance provides services (such as nursing home care) that Medicare doesn’t cover. To qualify, you likely will need to purchase while in good health. So make it something you consider when planning for your retirement.

Can I do anything now to make paying for Medicare later any easier?
You can also make healthy choices now to increase your chances of aging well and helping to mitigate extra health expenses down the road.8 It will help you feel better now – especially with all this talk about Medicare costs – and potentially in the long run.

Are there any unexpected taxes related to paying for Medicare?
Your modified adjusted gross income (which includes capital gains, Social Security, required minimum distributions from IRAs and 401(k)s, and more) determines the amount you pay for Medicare Part B premiums.

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How to Grow Protected Lifetime Income While You Defer RMDs?

11/6/2019

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The document below is a good description of QLAC and how to grow protected lifetime income while you defer RMDs.

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QLAC FAQs

11/5/2019

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What’s a QLAC?
It’s a special type of deferred income annuity (DIA). A DIA provides protected lifetime income starting in the future. A QLAC allows income from a traditional IRA to be deferred from taxation beyond age 70½ without running afoul of the RMD rules.

How does QLAC work?
A DIA, including a QLAC, works much like a qualified SPIA (single premium immediate annuity) — except that the payments do not begin for at least 13 months and may be deferred up to age 85. The income date is selected at issue. Income payments will be made provided the annuitant is alive at the income start date. (If no annuitant survives, no income payments will be made, and no other benefits provided, unless the owner has elected a return of premium (ROP) death benefit.) Funds in an IRA can be transferred tax-free to the insurance carrier for the purchase of a QLAC.

The account value of the QLAC is disregarded for purposes of calculating the client’s RMDs. A QLAC has to meet many requirements, but it can help address longevity risk by reducing the probability of outliving savings by providing an income stream in the later stages of retirement.

How long can income payments – and thus RMDs – be delayed?
Distributions must begin no later than the first day of the month following the annuitant’s 85th birthday. The longer the deferral period, the larger the income payout amount.

Can I access the funds?
No. A QLAC does not have any cash surrender value or commutation benefit. QLACs may allow limited changes to the income date and payment frequency.

What IRS reporting applies to QLACs?
Insurance carriers will report to purchasers and the IRS using Form 1098-Q, Qualifying Longevity Annuity Information. Form 1098-Q must be furnished to individuals by January 31 of the year following the first year of purchase and every following year while the QLAC is in existence.

How much can be contributed?
Contributions to a QLAC are limited to the lesser of either $130,000 (subject to annual cost-of-living adjustment) or 25% of qualified funds, less premiums for other QLACs.

The dollar limit – $130,000, as indexed for 2019 – applies across all qualified funds. The 25% limit applies to each qualified plan separately based on its most recent valuation date. It applies to IRAs on an aggregate basis as of the prior December 31. Roth IRAs and Inherited IRAs are excluded.

Example: Jesse had $260,000 in his 401(k) as of the latest valuation date and had $260,000 in his traditional IRA as of the prior December 31. He can only use 25% of his IRA or $65,000 to purchase a QLAC. If his 401(k) plan allowed for the purchase of a QLAC, he could purchase a QLAC for 25% of his 401(k) or $65,000. Many defined contribution plans do not yet provide for the purchase of QLACs. Thus, Jesse would need to have at least $520,000 in his IRA as of the prior December 31 if he wanted to purchase the maximum QLAC for $130,000. If Jesse elected to roll over any amounts from his 401(k) plan into his IRA, he would need to wait until the following year to purchase a QLAC with those rolled over funds. Remember, the 25% limit is applied to the fair market value of the IRA as of the prior December 31.

What happens if the contribution limit is exceeded?
Any excess premium must be returned by the end of the calendar year following the calendar year in which the excess premium was paid to avoid jeopardizing the contract’s QLAC status. If not returned in a timely manner, the annuity then fails to be a QLAC beginning on the date that the premium payment was made. The value of the annuity contract thereafter cannot be disregarded for purposes of calculating RMDs. It is the client’s responsibility to comply with the contribution limit. Clients should consult with their own tax and legal advisors before purchasing a QLAC.

Can additional premiums be added as the account value increases and/or the indexed limit increases?
More premium may be added to flexible premium QLACs to take advantage of any unused portion of the then-current contribution limit. What if part of the IRA has already been used to purchase a qualified SPIA? Is that value included in determining the fair market value of the IRA? The fair market value of any IRA SPIAs should be included in determining the account value of all aggregated IRAs (except Roth and Inherited) as of the prior December 31 for purposes of calculating the 25% limitation for QLAC contributions. Insurance carriers annually send clients a fair market valuation letter for IRA SPIAs.

What are the QLAC payment options?
Options are limited to single or joint life only and single or joint life with cash refund. Payments, once begun, must satisfy RMD rules.

What happens if the last annuitant dies during the deferral period?
If the ROP death benefit option was not selected and no annuitant survives, no income payments will be made and no other benefits provided.

If the last annuitant dies during the deferral period, can the ROP death benefit be directly rolled over or transferred to an IRA?
It depends. If the annuitant dies after their required beginning date (RBD), the ROP payment is treated as an RMD and cannot be rolled over. Likewise, if the surviving joint annuitant dies after their RBD, the ROP payment will be an RMD and not eligible for rollover. If the annuitant or survivor annuitant dies before their RBD, however, the ROP payment may be rolled over.

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5 Estate Plan Pitfalls to Avoid

11/4/2019

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Below are 5 common pitfalls of an outdated estate plan. If any apply to you, take time to meet with your estate planning team to review and, perhaps, update your plan.

1. The wrong executor or trustee is named
Do you know who your fiduciaries are? A fiduciary is someone appointed to take legal control over assets for the benefit of another person (the beneficiary). It is a fiduciary's legal responsibility to act in the beneficiary's best interest. The two types of fiduciaries often seen in estate plans are executors and trustees.

Executors are typically appointed in a will and are given control of your assets until they are ultimately distributed to the beneficiaries. Executors are responsible for collecting all the assets of the deceased, paying final debts, paying expenses, and filing any estate tax returns.

Trustees control the assets held within trusts, which may have been set up during a person's life, or at death under the terms of a will. While an executor's role is typically for a finite period, a trustee's role may continue either forever or until the trust is terminated. A key role of the trustee is to make distributions to a beneficiary in accordance with the trust agreement.

Although fiduciaries are bound by certain standards of law, it is most important to name individuals you trust. Other important considerations are the age, maturity, and level of financial knowledge of the fiduciary. It is possible that the individuals who had fit most of these qualifications no longer do.

Tip: Check to see who you have named as fiduciaries in your estate planning documents to determine whether you need to revisit these choices.

2. Assets and beneficiaries change over time
When a child is young, a key estate planning decision parents often make is to determine a guardian. However if your child is now an adult, new considerations may come into play and you may feel differently about their ability to handle a large inheritance. Further, if the adult child is married, an inheritance can easily be commingled with the spouse's assets. An inheritance outside of the trust will also be subject to any existing or future creditor claims.

Tip: Periodically review the ways that assets will be left to your children and encourage them to have the appropriate estate planning documents in place.

3. Health care privacy rights are not understood
The Health Insurance Portability and Accountability Act (HIPAA) was passed in 1996, in part to establish national standards for protecting the confidentiality of every individual's medical records. Generally, health care powers of attorney, living wills, and advance health care directives should contain provisions waiving an individual's health care privacy rights with respect to their health care representatives.

These stipulations allow physicians and other health care professionals to share a patient's medical information with their representatives, empowering them to make informed health care decisions. Without these HIPAA authorizations, doctors may be unwilling to share medical information, which may impede decision-making regarding a patient's care and any end-of-life wishes.

Tip: Take stock of your family's health care powers of attorney, living wills, and advanced health care directives, to ensure that health care representatives can make informed decisions regarding your family's care.

4. Your state residency changes
Where were you living when you drafted your most recent estate plan? Each state has its own estate and income tax laws, and it is important to plan appropriately.

Some states are common law property states and others are community property states with significant differences when it comes to transferring assets. States also have different estate tax exemption amounts. And differences between state exemptions and the federal exclusion may mean certain estates are now subject to a state estate tax, even if they are exempt from the federal estate tax. And married couples may be surprised that some states levy estate taxes after the first spouse's death.

Tip: Review your estate plan with your attorney and tax professional, with an eye toward reducing federal and state estate taxes, and make sure to reevaluate and potentially update your plan if you establish residency in another state.

5. Changes in the federal tax laws impact estate taxes
Changes in the federal tax law make it increasingly important to focus on the income tax consequences of estate planning in addition to the estate tax consequences. For estates still subject to federal estate tax, the top federal estate tax rate is 40%. These rates must be compared with the top federal income tax rates of 37% on ordinary income and 20% on long-term capital gains and qualified dividends, plus a 3.8% Medicare net investment income tax.

Furthermore, trust income tax rates must be taken into consideration. Trust income over $12,751 is taxed at the top federal income tax bracket of 37%. Therefore, when transferring assets to a trust for estate planning purposes, consideration should be given to the potentially negative consequences of higher income taxes. Outdated estate plans may not provide the flexibility required to shift the income tax burden from the trust to individuals in potentially lower tax brackets.

Successful estate planning requires more than just having signed the initial documents: Your plan should evolve as your circumstances do.

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Checklist for Your Social Security Claiming Strategy

10/28/2019

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Know your numbers. Find out your FRA, earnings history, and estimated benefits.
Stay current. Sign up for your most current statements on SSA.gov
Do the math. Use calculators on SSA.gov to check out your monthly benefit options.
Get the facts. Don't succumb to myths; use primary resources such as SSA.gov

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Top 25 Retirement Cities

10/26/2019

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WalletHub compared the retiree-friendliness of 182 U.S. cities across 46 key metrics, including affordability and health care costs. Here’s a look at the top 25 regions.

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6 Medical Expenses That Medicare Will Not Cover

10/17/2019

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Q. Does Medicare cover all medical expenses?

A. No. Here are 6 medical expenses that Medicare will not cover, and solutions you could consider -

1. Opticians and eye exams
While Original Medicare does cover ophthalmological expenses such as cataract surgery, it doesn’t cover routine eye exams, glasses or contact lenses. Nor do any Medigap plans, the supplemental insurance that is available from private insurers to augment Medicare coverage. Some Medicare Advantage plans cover routine vision care and glasses.

Solution: For some people, it makes sense to buy a vision insurance policy for a few hundred dollars a year to defray the costs of glasses or contact lenses.

2. Hearing aidsMedicare covers ear-related medical conditions, but Original Medicare and Medigap plans don’t pay for routine hearing tests or aids.

Solution: First, check if your Medicare Advantage plan covers hearing-related needs. If it doesn’t, or if you have Original Medicare, consider buying insurance or a membership in a discount plan that helps cover the cost of such devices. Also, some programs help people with lower incomes get needed hearing support. Or you can pay as you go. Congress has passed legislation allowing some hearing aids to be sold without a prescription. The devices could be available in a few years.

3. Dental work
Original Medicare and Medigap policies do not cover dental care such as routine checkups or big-ticket items, including dentures and root canals.

Solution: Some Medicare Advantage plans offer dental coverage. If yours does not, or if you opt for Original Medicare, consider buying an individual dental insurance plan or a dental discount plan.

4. Overseas care
Original Medicare and most Medicare Advantage plans offer virtually no coverage for medical costs incurred outside the U.S.

Solution: Some Medigap policies cover certain overseas medical costs. If you travel frequently, you might want such an option. In addition, some travel insurance policies provide basic health coverage; check the fine print. Finally, consider medevac insurance for your far-flung adventures. It’s a low-cost policy that will transport you to a nearby medical facility or back home in case of emergency.

5. Podiatry and cosmetic surgery
Medicare doesn’t generally cover routine medical care for your feet, such as callus removal. Nor does it cover elective cosmetic surgery, such as face-lifts or tummy tucks.

Solution: If you face these costs, you may want to set up a separate savings program for them.

6. Nursing home care
Medicare pays for limited stays in rehab facilities — for example, if you have a hip replacement and need inpatient physical therapy for several weeks. But if you become so frail or sick that you must move to an assisted living facility or nursing home, Medicare won’t cover your custodial costs. (Nursing homes average about $90,000 a year.)

Solution: Planning for nursing home care is a big issue, with lots of choices and decisions. But for those with limited income and savings, Medicaid might help fill in the gaps.

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How a Financial Planning Pro Planned His Own

10/11/2019

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David Littell is a Professor Emeritus at the American College of Financial Services, where he co-created the Retirement Income Certified Professional® designation. In other words, he’s a pro at one of the most complex tasks retirees face: turning a lump sum of savings into a reliable income stream that will last for life. And as he approached retirement himself, Littell discovered some key differences between what the textbooks say and the way things play out in real life.

Here’s what Littell has learned by finally living what he’s taught all these years:

Start with Something
Financial advisors love to ask their clients detailed questions about their future plans: When are you going to retire? Will you work in retirement? If so, how much?

In reality, “it’s hard to nail that down until you’re close to it,” Littell says. “I’ve changed my plans four or five times.”

For starters, you don’t know how your health will hold up. Some 43% of workers retire earlier than planned, and of those 35% stop working due to a health problem or disability, according to the Employee Benefit Research Institute.

Also, while you’re still working full-time, you’re probably not looking for a part-time job to supplement your retirement income. So you don’t know how feasible it is to get the kind of part-time work you want, or how much you might earn once you find it. Alternatively, if you’d rather continue working for your former employer on a part-time or consulting basis, you won’t likely broach the topic with them until you’ve given your notice. All this means that it’s hard to have real numbers to plug into retirement income calculations in advance.

Yet that doesn’t mean you shouldn’t try, Littell says. There’s a good reason advisors ask all these questions, to try to make accurate projections of your retirement income. It’s helpful to know how much you’ll have coming in, to make sure it’s enough to meet your needs. (To ballpark those needs, Littell suggests a simple method: use your most recent paycheck as a proxy for the retirement income you’ll need each month — assuming, of course, that you live within your means and aren’t racking up credit card debt to fund your lifestyle.)

So go ahead and make some assumptions, and do your calculations based on those. But understand that estimates are just that, and are subject to change. Revisit your plan regularly, and make sure the numbers are going to work before you give up your full-time gig. “People should think really carefully before they leave full-time work,” Littell says. Many people get tired of the grind and let their emotions govern the decision of when to quit, he says. But if you leave the workforce and then regret your decision, it’s very hard to re-enter at the same salary with the same benefits.

For his part, Littell recently cut back to working three days a week and plans to further reduce his hours as he shifts to a consulting role early next year.

Listen to Your Gut
Littell’s father lived to age 104. Aware he might have similar longevity, Littell didn’t want to risk outliving his savings. So he bought several annuities, insurance products that turn your lump sum into guaranteed income for life.

Financial advisors commonly recommend that clients use annuities to cover their essential spending. This way, all of your necessary needs will be covered by a “floor” of guaranteed income, and you can use your 401(k) or IRA withdrawals for discretionary fun. The logic behind this strategy is that, if stocks take a dive, you can always curtail your travel plans, but you can’t suddenly stop paying your mortgage or your Medicare premiums.

To determine your essential spending, you would tally up what you pay for housing, health care, food, and other necessary categories. Then, you calculate how much of the total would be covered by Social Security and any pensions you might have. An annuity or annuities would be used to cover any shortfall.

But Littell didn’t go through this exercise. Instead, bought annuities with the percentage of his portfolio that he felt comfortable parting with about 25% of the total. Many consumers balk at annuities because they reduce your liquidity. Littell was willing to give up control over a quarter of his portfolio in return for guaranteed income, and staying within that comfort zone — rather than imposing textbook calculations — helped him execute that strategy. “The intellectual and the reality didn’t match very well,” he says. “The reality for me was, how much are you willing to give up?”

He’s deferring claiming Social Security until age 70, and he estimates that once he reaches that age, about 75% of his essential and discretionary needs will be covered by guaranteed income. The annuities will help him sleep at night and not fret about outliving his savings. “I have no intention of worrying about that,” Littell says.

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Why It Is Important To Save Early For Retirement

10/9/2019

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Q. I just started working and don't have much money to save. How much difference does it make if Isave for retirement later?

A. Assume you save $475 a month, the following table shows you much much you would save when you reach age 67.

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How to Navigate the Medicare Maze?

10/7/2019

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What Happens If You Wait a Year to Cash a Retirement Plan Distribution Check?

10/5/2019

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Q. What if I wait a year to cash a retirement plan distribution check? Do I owe tax in previous year or the year the check was cashed?

A. IRS' ruling (2019-19) was addressed primarily to the plan administrators for company retirement plans who wanted clarification on when uncashed checks should be considered distributions.

The IRS ruled that a payment from a 401(a) tax-qualified retirement plan was taxable in the year distributed — even though the recipient failed to cash the check. The ruling does not indicate whether the same holding would apply if the check were actually received in a subsequent year. The IRS also did not say whether the ruling is limited to 401(a) plan distributions or whether it also applies to IRA distributions.

The IRS also ruled that the plan administrator’s obligations for withholding and reporting arose in the year of distribution, and those obligations were not altered by the recipient’s failure to cash the check during that year.

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5 Questions to Ask Yourself 5 Years Before Your Retirement - Part IV

5 Questions to Ask Yourself 5 Years Before Your Retirement - Part III

5 Questions to Ask Yourself 5 Years Before Your Retirement - Part II

5 Questions to Ask Yourself 5 Years Before Your Retirement - Part I

Basic Questions About Medicare Part D

Long Term Care and U.S. Government: What You Need to Know

5 Questions to Ask About Long Term Care Insurance

How to Include Medicare In Your Retirement Planning

How to Grow Protected Lifetime Income While You Defer RMDs?

QLAC FAQs

5 Estate Plan Pitfalls to Avoid

Checklist for Your Social Security Claiming Strategy

Top 25 Retirement Cities

6 Medical Expenses That Medicare Will Not Cover

How a Financial Planning Pro Planned His Own

Why It Is Important To Save Early For Retirement

How to Navigate the Medicare Maze?

What Happens If You Wait a Year to Cash a Retirement Plan Distribution Check?

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