You can download it here.
The Social Security Administration has a Retirement Calculator that you can download and enter your detailed personal data, you can play with it by entering different scenarios, such as when you will stop working, and when you will start taking social security benefits, etc, this Retirement Calculator will tells you the expected monthly social security benefits based on your input.
You can download it here.
This easy to use yet comprehensive (and free) online retirement calculator helps answer the following essential retirement planning questions that everyone must ask:
A 401(k) can be one of your best tools for creating a secure retirement. It provides you with two important advantages. First, all contributions and earnings to your 401(k) are tax-deferred. You only pay taxes on contributions and earnings when the money is withdrawn. Second, some employers provide matching contributions to your 401(k) account which can range from 0% to 100% of your contributions. The combined result is a retirement savings plan you can not afford to pass up.
Use this online calculator to see how much your 401(k) balance will be at the beginning of your retirement time.
The Internal Revenue Code section 72(t) and 72(q) can allow for penalty free early withdrawals from retirement accounts under certain circumstances. These sections can allow you to begin receiving money from your retirement accounts before you turn age 59½ generally without the normal 10% premature distribution penalty.
You can use this online calculator to determine your allowable 72(t)/(q) Distribution and how it maybe able to help fund your early retirement. The IRS rules regarding 72(t)/(q) Distributions are complex. Please consult a qualified professional when making decisions about your personal finances. Please note that your financial institution may or may not support all the methods displayed via this calculator.
Do you know what it takes to work towards a secure retirement?
You can use this online calculator to create your retirement plan. With this calculator, you can view your retirement savings balance and your withdrawals for each year until the end of your retirement. Social Security is calculated on a sliding scale based on your income.
Key inputs needed from you are:
Based on your input, the calculator will tell you how much will be your balance at the end of your retirement.
To make the process manageable, it helps to think of your finances in sections—and then set small goals for each.
Saving and investing
Protecting what you have
Below are steps you could consider if you plan to clean your financial closet at the beginning of a new year:
Legacy planning takes on greater importance in unexpected times such as these. To plan ahead and put ambitions into action with protected strategies, you could explore the many purposeful, proven distribution planning options available with fixed annuities.
Qualified / IRA
Spouse beneficiary or beneficiary not more than 10 years younger
■ Inherited IRA: (All fixed products less Indextra)
■ Lump Sum
■ 10-Year Deferral
■ Spousal continuation for spouses (all fixed products)
All other designated beneficiaries
■ 10-Year Deferral
- (SPIA 10-year certain or less) last payment due by 12-31 of 10th anniversary
- For annuity claims: Holding account for up to 10 years with an annual renewal rate
■ Lump Sum
To fully prepare for all your retirement years, one tactic is to consider dividing your assets into three buckets, each representing about 10 years of your potential 30-year retirement.
The Money Now Bucket
This will cover the first 10 years of your retirement, when you’re most likely to lead an active lifestyle. You may want the assets held in this bucket to be accessible—more liquid — so you can take advantage of your newfound freedom to pursue the things you’ve always wanted to do, such as travelling, focusing on favorite pastimes, or new hobbies.
Your asset allocation may follow a conservative approach, with a higher portion of your assets in cash or cash equivalents.
The Money Later Bucket
This will hold money you may spend during the second 10 years of retirement, when you begin to slow down and settle into routines closer to home. You may want the assets held in this bucket to provide a targeted return on investments. The income generated from these assets should strive to at least keep pace with inflation.
Your asset allocation may follow a more balanced approach, with a focus on securities that may provide a fixed return and an opportunity for growth.
The Money Much Later Bucket
This will hold the money you may spend during the third 10 years of retirement, when you’ll most likely be focused on healthcare needs or providing care for a loved one.
You may want these assets to be growth-oriented as you may not need to access them for 10 to 20 years depending on when you retired. Growth of assets over a longer-term period may be critical to be prepared for the often necessary, and ever-increasing, health care expenses associated with living a long life. Your asset allocation may follow a more moderate-to-aggressive investment approach that provides growth, but still gives you peace of mind.
By taking the long view now, you may find yourself on stronger financial footing as you move through each stage of retirement.
For retirees, it's reported that enrollees in Medical spent an average of about $6,000 on premiums and medical care in 2017. However, there are choices that can make Medicare costs lower and more predictable.
Here are 3 ways you can protect yourself from large out-of-pocket costs and even lower your ongoing monthly costs:
If you enroll in Medicare, then consider a supplemental policy, aka Medigap. You will have to pay a monthly premium, but Medigap plans pay for much of what Medicare doesn't, and you will be protected if you have a health emergency or get really sick and your out-of-pocket costs surge.
2. Medicare Advantage (MA)
Consider a Medicare Advantage (MA) private insurance plan. You will trade some choices in doctors for usually lower costs. More importantly, MA plans set a limit on out-of-pocket costs (for 2021, Medicare says that limit cannot exceed $7,550).
3. State Programs
There are savings programs that help pay for Medicare or out-of-pocket health costs. State Health Insurance Assistance Programs provide free counseling for Medicare beneficiaries. Go to shiptacenter.org to find contact info for your state's office, then make an appointment to discuss your situation and options.
You can always use your HSA to pay for qualiﬁed medical expenses like vision and dental care, hearing aids and nursing services. Once you retire, there are additional ways you can use the money:
1. Help bridge to Medicare
If you retired prior to age 65, you may still need health care coverage to help you bridge the gap to Medicare eligibility at 65. Generally, HSAs cannot be used to pay private health insurance premiums, but there are 2 exceptions: paying for health care coverage purchased through an employer-sponsored plan under COBRA, and paying premiums while receiving unemployment compensation. This is true at any age, but may be helpful if you lose your job or decide to stop working before turning 65.
2. Cover Medicare premiums
You can use your HSA to pay certain Medicare expenses, including premiums for Part B and Part D prescription-drug coverage, but not supplemental (Medigap) policy premiums. For retirees over age 65 who have employer-sponsored health coverage, an HSA can be used to pay your share of those costs as well.
3. Long-term care expenses
Your HSA can be used to cover part of the cost for a "tax-qualified" long-term care insurance policy. You can do this at any age, but the amount you can use increases as you get older.
4. Pay everyday expenses
After age 65, there is no penalty if you use HSA money for anything other than health care. But you will have to pay income tax, similar to pre-tax withdrawals from your 401(k).
Durable General Power of Attorney and Durable Power of Attorney for Health Care are two documents that you name an individual (called your “attorney in fact”) who you authorize to manage your financial affairs on your behalf. This person can sign contracts for you, pay your bills, make deposits to and withdrawals from your accounts, and file your tax return, among other services. You decide the powers your attorney in fact shall have.
It is important to note that POAs are valid only if you are unavailable, not if you are incapable. For example, if you are out of town on the day you must sign the papers to close on a real estate transaction, your attorney in fact can sign the papers for you. But your POA becomes invalid upon your incapacity. For example, if you are in a coma, your POA would be void, and your attorney in fact would no longer be able to act on your behalf. To solve this problem, your POA should be durable. This means the document survives your incapacity and allows your attorney in fact to continue representing you.
The durable general power of attorney allows your attorney in fact to manage all areas you designated, including your financial affairs if you choose. The durable power of attorney for health care allows your attorney in fact to give instructions regarding your treatment to your health care providers (who are legally obligated to comply) – instructions that honor what you’ve stated in your advance medical directive.
It’s rare for these two POAs to be combined into a single document. You might want different people to serve in these two roles.
If you check any of the following boxes, you should talk to an estate attorney to see if you need a Trust or not:
In last blogpost, we discussed what is asset titling. Now we will show some of the details in asset titling.
Here is a brief description of how assets pass to heirs:
Held Solely in Your Name
Asset passes to your heirs via your will (see section below) and is subject to the probate process.
Transfer on Death (for brokerage accounts) / Payable on Death (for bank accounts)
You are sole owner of the asset, but upon death, the asset passes immediately to the named individuals registered on the Payable on Death account outside of probate. For example, “John Doe POD James Doe” is an account owned by John that passes to James upon John’s passing.
Joint Tenancy With Rights of Survivorship (JTWROS)
All owners have an equal share of the asset; when you die, your share passes to the surviving owners. This continues until there is only one survivor, at which point it becomes an asset held solely in that person’s name (see above).
Tenants in Common
All owners have an equal share of the asset; when you die, your share passes to your heirs as stipulated in your will (via probate).
Tenants by the Entirety (TbyE)
Available only to married couples in certain states. Both spouses (TbyE) are considered to own 100 percent of the asset, protecting the asset from creditors if only one of them is sued. At the first death, the asset passes to the surviving spouse, at which point it becomes an asset solely in that person’s name (see above).
If you are married and live in Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington or Wisconsin, most assets acquired during your marriage are considered community property, unless you and your spouse strike a separate agreement. Assets obtained prior to the marriage might also be included; implications are complex and beyond the scope of this checklist. Legal advice is strongly recommended for residents of these states who are (or may become) married or divorced.
Community Property With Rights of Survivorship (CPWROS)
The surviving spouse inherits the deceased’s share of assets. The above cautions apply here as well.
Limited Liability Company
This is used to shield you from liability, and your share of the entity is usually dictated by the above options.
Trusts allow you to manage, control and distribute your assets with greater specificity than you can with a will. Trusts also allow you to address tax, legal and liability problems.
A trust is nothing more than a set of rules governing the management of assets. As the grantor (the person creating the trust), you get to make those rules. You’ll appoint someone to manage the trust (the trustee). You can be the trustee in some cases; regardless, you should also name a successor trustee, who will manage the trust if the trustee dies or becomes incapacitated. You’ll also designate beneficiaries of the trust.
Some trusts are revocable (meaning you can change the rules as often as you wish, and you add or remove assets from the trust at any time), while others are irrevocable (meaning you can never change the rules or withdraw assets from the trust unless permitted by its rules). Revocable trusts are generally ignored by the IRS (meaning all tax aspects of the trust pass to you personally) while irrevocable trusts generally obtain their own tax ID number and file their own tax returns. (Be aware that such trusts are taxed at the highest tax bracket; whether the trust should pay taxes on its income or distribute that income to beneficiaries so they can pay the taxes instead – at their lower tax brackets – is a question for your financial advisor and tax advisor. The age(s) of the beneficiary(ies) and other aspects of their situation must be considered.)
Revocable trusts also do not offer liability protection; irrevocable trusts do.
The trust that’s right for you depends on the problem you’re trying to fix – and since your life might be complicated, you might need more than one trust.
What is Asset Titling?
You get to select the asset’s legal owner whenever you buy or obtain an asset such as a house, car or financial account (held at a bank, brokerage firm, investment management or financial advisory firm, mutual fund or annuity company, or securities custodian).
Will you own the property in your name, jointly with another person (such as a spouse or child), or will the asset be owned by a trust, LLC, or S or C corporation?
Your decision has tax implications (important, but beyond the scope of this discussion) as well as crucial estate planning implications. There are significant considerations, such as liability exposure and other factors, but for our purposes here, your selection determines who will inherit a given asset following your death – and how that asset will pass to the selected heirs.
Watch out for unintended consequences when choosing account registrations. For example, if you name only one child as TOD or JTWROS, you’ve disinherited all your other children. You could also create adverse tax and liability risks by converting “heirs” into “owners” of your assets. This is why estate attorneys often discourage their clients from using some of the ownership structures described above.
In next blogpost, we will discuss how various assets pass to heirs under different conditions.
Producing reliable, sustainable retirement income can be a considerable challenge. And doing so when the market works against you can make it even more difficult. Taking constant withdrawals at the same time in effect locks in losses and makes recovering portfolio value even more challenging.
The chart below shows you how much return your portfolio needs when it has a loss ...
In last blogpost, we discussed some of the basics of beneficiary designations. Below is a list of assets you should designate beneficiaries.
When you buy certain assets, you are asked to state (or designate) who is to get the asset upon your passing (called your beneficiary). When the financial institution managing the asset is informed of your passing, it distributes the asset to the beneficiary immediately. You can name as many beneficiaries as you wish, and you can choose how much of each asset each beneficiary is to receive. You may also designate charities as your beneficiaries as well as people.
Beneficiary designations supersede all other estate planning documents. Assets with designated beneficiaries do not pass through probate court (and courts are generally reluctant to overrule the designations). Beneficiary designations should be considered final. Thus, failure to designate any beneficiaries causes the asset to become part of your probate estate – meaning it will pass to heirs in accordance to your will – but only after going through the lengthy, expensive and public probate process.
For each type of asset that allows you to name beneficiaries, you can name a primary and a secondary beneficiary. The primary beneficiary inherits the asset upon your death. If all the primary beneficiaries predecease you, the asset will pass to all the surviving secondary beneficiaries. If all have died, the asset will become part of your estate and pass to your other heirs via your will.
It is common, but by no means required, for people to name their spouse as their primary beneficiary and their children as their secondary beneficiaries. Indeed, you may designate more than one primary and secondary beneficiary.
In next blogpost, we will show you the list of assets that you need to have beneficiary designations.
Taxable municipal bonds are the fastest growing sector in U.S. fixed income right now, they offer an attractive alternative to corporate bonds, with higher yields and lower historical default rates.
In 2020, issuance has exploded mainly because a 2017 change in the tax law that prevents state and local governments from refinancing older high-rate muni debt in advance of their maturities with new tax-exempt bonds. Such refundings must now be done in the taxable market.
For regular investors, 3 major options are available to play in this sector. Below are some good candidates:
Taxable munis are well suited to retirement accounts as an exposure to fixed income.
1. Start by contacting the local Area Agency on Aging.
There are over 600 “Triple As” that form a national network, connecting older people and their families throughout the country with local programs and services. Created under a Federal law, the Older Americans Act, they support services such as meals on wheels, transportation, adult day care, and senior centers, all available at no or low cost. They also sponsor an information telephone line for family caregivers and can provide general guidance on home care, assisted living, respite care and other public and private services. To find the Area Agency on Aging in your community, visit their website or call 1-800-677-1116.
2. Explore eldercare benefits offered through your employer.
Many employees of large or medium-sized companies are surprised to find that their employer makes resources available to assist working caregivers with eldercare issues. Employees at these companies are likely to have access to an internal website with a wealth of caregiving information, and the option to speak with a designated eldercare coordinator who ca answer questions, provide lists of local resources and help them think through what might be needed. Though not as common, some employers offer more robust services such as in-person consultations or paid leave. Check with the human resources department to see if these benefits are available.
3. Retain a care manager.
It may be a smart move for caregivers to hire a private geriatric care manager--usually a social worker or nurse--to help families with eldercare needs. They generally start with an in-home assessment, then meet with the family and put a car plan in place. Depending on the agreement, families may want them to implement the plan and take on more responsibility. As the onsite experts, coordinators and advocates, they provide services such as monitoring care, solving problems, dealing with health insurance issues, and handling crises as they occur. To locate a care manager, contact the Aging Life Care Association (ALCA). All 2,000+ members must meet strict criteria and sign a code of ethics.
4. Visit websites for caregivers.
There are a number of websites that focus on caregiving and it’s worth taking time to look into them. Their subject matte is extensive, and ranges from information on benefits and legal documents to tips for hiring private caregivers to caring f someone with Alzheimer’s Disease and suggestions for coping with the ups and downs of being a caregiver. Some have chat rooms that function as virtual support groups so caregivers can share their experiences. Others help you locate independent caregivers, home care agencies or assisted living facilities (although caregivers should note that they may b listed because they are advertisers). AARP has a robust section on its website for caregivers. Another helpful website Is sponsored by the Family Caregiver Alliance. You can google “caregiving” to find other good websites.
5. Understand more about financing care and protecting against financial abuse.
While caregivers begin their journey mainly concerned about parents’ health and safety, they soon find out that the financial and legal aspects of caregiving need to be dealt with too. They discover that home care, assisted living and nursing home care is very expensive and they may end up being the ones who will pay for Mom or Dad’s care. In the best of all worlds, their parents planned ahead, have all their legal and financial papers in order and purchased long-term car protection. No matter what the situation, a financial professional can play a valuable role by reviewing care options and the cost implications and by providing some strategies to help stretch caregiving dollars. Since elders are often victims o financial abuse, losing their financial nest e impacts their ability to pay for care. It’s a good idea to become familiar wit ways to prevent and report scams and fraud. Google “financial elder abuse” for descriptions of the causes, types of abuse and whom to contact if necessary, or go to the National Adult Protective Services Association website.
Age 75 to 85; has $150,000 from a large build up in a Non-Qualified Annuity not subject to surrender charges or money from a CD; views proceeds as lazy or emergency money.
Client is concerned about efficiently funding an extended health care or Long-Term Care (LTC) event. Has already identified assets to use but wants preservation of their capital, a reasonable rate of return and access and control over their money if they need it. The agent’s current BD doesn’t allow sale of Indexed Annuities.
To address the specific concerns of the client, a 1035 transfer to Annuity Care, base policy only, may be a possible solution.
This solution offers the client on $150,000:
• The ability to access gains tax-free for extended care or LTC events
• A 34.8% tax-free income stream for 36 months ($4,348 a month) for qualifying LTC expenses
• Can add a spouse or other insured giving both access to the full monthly benefit
• Retain access and control over the assets just like in their current annuity
• No medical underwriting or cognitive phone interview for base policy only
• Ability to add a rider doubling pool of assets or lifetime coverage (requires cognitive phone interview)
Good news for non-spouse beneficiaries of tax-deferred retirement accounts: thanks to the 10-year rule in the Secure Act passed into law in 2019, most will avoid annual required minimum distributions for deaths occurring after 2019.
But there’s a hitch: This RMD hall pass for surviving beneficiaries requires these inherited accounts to be emptied by Dec. 31 of the 10th year following the year of death. Failure to comply could trigger a 50% penalty; a full withdrawal after 10 years of compounding could produce a huge lump-sum of taxable income.
Financial Planning magazine has an article discusses various deft maneuvering to deal with such long term concerns, worth a read for someone face such a situation.
Although fewer individuals are participating in Defined Benefit Pension Plans, many individuals who participate in these plans for several years are starting to retire. The choices at retirement are limited to how the participant wants to take the income stream. The decision on how to take the income can have a dramatic impact on how much income the participant can receive.
Married couples have a much longer life expectancy than single individuals so pension administrators must provide a much smaller benefit to cover two lives. How much less depends on ages and whether a 50% survivor benefit, 75% survivor benefit, or a 100% survivor benefit is chosen. The higher the survivorship benefit, the lower the primary benefit will be.
At retirement, pension plan participants who are married must make a decision: Choose the maximum monthly income for the life of the retiring employee or choose a substantially reduced pension that will cover the lives of the employee and spouse whether Joint and 50% benefit, Joint and 75% benefit or Joint and 100% benefit.
For married individuals, the single life option is not viable, since the death of an employee will leave the surviving spouse with nothing. Any joint option will leave both spouses with less to live on. If the employee spouse dies soon after beginning benefits, the survivor will receive a lifetime of reduced benefits. If they both live long and die a year apart, they will have wasted the sacrifice of taking less. Whichever payout option they choose, there will be nothing left to pass onto children. Pension Maximization may provide a solution that allows for higher income for both and a legacy left for loved ones.
If the retiring employee lives for a long time, there will be money from the life insurance policy to pass on to children. If the employee does not live to their life expectancy leaving a surviving spouse, the spouse will have income from the death benefit to help fund their remaining retirement and may have some money left over to pass to children. If both live a long life they will have cash value available to borrow to further fund lifestyle needs when they are older.
The cash value of the policy is available for emergencies while living. If the employee’s spouse predeceases the retiring employee, the policy can be surrendered for the cash value. If the policy is surrendered, sold, or exchanged for an immediate income annuity, the money can be put to work generating additional retirement income.
The death benefit payout is income tax-free and the death benefit is available for unforeseen debts and medical bills. The death benefit can be annuitized and/or invested to provide income for the surviving spouse. This provides principal that can be passed on to loved ones.
Purchasing life insurance on the retiring employee and possibly purchasing a single life immediate annuity may result in more money available during retirement. Life insurance creates a fund which, if not fully utilized, provides a legacy to loved ones after they are gone. People planning retirement should consider obtaining life insurance prior to deciding on how to take pension benefits. This will ensure that a sufficient amount of insurance is purchased to cover the need.
If when evaluating a permanent policy, you find it does not generate a large enough death benefit to cover the surviving spouse, consider combining term insurance with a permanent policy to reach the needed death benefit.
Pension Maximization provides an opportunity in the right situation to improve a retiree's retirement and in some cases allows more assets to pass to children and grandchildren.
Each state has its own estate and income tax laws, and it is important to plan appropriately. Furthermore, some states are common law property states and others are community property states. There are significant differences between them when it comes to transferring assets, and a document drafted in a common law property state might not be appropriate in a community property state.
Are You Subject to State Estate Taxes?
As of 2020, 17 states and the District of Columbia* also impose some form of estate or inheritance tax. Additionally, each state has different exemption amounts, so it is vital to evaluate your current wealth and estate planning needs with your attorney, keeping both the federal and your state's exemption amounts in mind.
In addition, for many married couples in a state that imposes a state estate tax, this may have the effect of requiring payment of state estate tax after the first death, when none had been anticipated. Prior to 2001, because the "pick-up tax" was imposed only on estates that had to pay federal estate tax, estates below a certain threshold did not have to worry about such a tax. The threshold was the amount of the federal applicable exclusion amount. That is no longer the case.
The practical effect of the difference between a state's exemption amount and the federal applicable exclusion amount is that certain estates will now be subject to a state estate tax, despite the fact that the estate is exempt from federal estate tax. In some situations, establishing a trust as part of an estate plan can help counter state estate tax implications.
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 to establish residency in another state.
PFwise's goal is to help ordinary people make wise personal finance decisions.