How Can I Plan for a Strategic Retirement?

Are you approaching retirement? Not sure how you can ensure a smooth transition from working life to retired life?  Walking away from regular paychecks and employer-provided benefits can feel a little nerve wracking. Minimize the impact of these major life changes by planning accordingly.

Time It

Get your timing right. Review and understand your employer’s policies on 401(k) matching and profit sharing. Make sure you plan to retire at a time when you can reap all the vested benefits you have coming to you before they expire. Sit down with your company’s HR department to maximize your retirement benefits.

Bridge the Insurance Gap

If you are retiring before the age of 65, you could have a lapse in insurance coverage before you are eligible for Medicare. If your employer doesn’t offer retiree health insurance benefits (and most don’t), look into COBRA insurance to extend your current coverage or an individual insurance plan to carry you over until Medicare kicks in. Don’t forget about life insurance and long-term care insurance either. If you do not have an insurance advisor you trust, we can refer you to someone, and we can also provide an objective backstop review on any insurance you do have in place to make sure it’s the right amounts and right types for you.

Petition for Your Pension

Apply for your pension at least five months before you retire. Get a benefits statement, and consider your payout options if you have them (e.g. lump sum vs. annuity). Coordinate your pension payout to minimize your tax liability while still meeting your financial needs.

Rearrange Your Retirement Funds

Consider consolidating accounts and rolling 401(k) funds into an IRA for more investment freedom and easier management. Conversely, some retirees find the investment options with employer-provided 401(k)s are cheaper than those bought independently. Make sure you discuss your options with a financial professional and choose the option that maximizes your income and gives you the flexibility you need. And, of course, ensure your beneficiary designations are set up to make sure your retirement benefits go exactly where you choose

Planning a strategic retirement takes forethought, and don’t short sell yourself on all the perks you may be owed. Make sure you take advantage of all the benefits your employer offers and carefully plan how you will manage your retirement income to minimize tax liabilities. Following these simple steps can help ensure you are financially prepared for retirement.

If you are nearing retirement, consider sitting down with a Personal Family Lawyer®. As your Personal Family Lawyer®, we can help you strategize your retirement to reap maximum benefit before you retire. Before the session, we’ll send you a Family Wealth Inventory and Assessment to complete that will get you thinking about what you own, what matters most to you, and what you need to do to preserve your financial well-being and retire comfortably.

At GP Schoemakers, we don’t just draft documents, we ensure you make informed and empowered decisions about life and death, for yourself and the people you love.  That’s why we offer a Family Wealth Planning Session™ during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love. Begin by calling our office today to schedule a, no-pressure, Family Wealth Planning Session.

Think Your 401(k) Is Flexible? 6 IRA Benefits Your 401(k) Doesn’t Have

When it comes to retirement plans, IRAs and 401(k)s provide many of the same benefits. But in certain situations, an IRA can outperform a 401(k). IRAs aren’t right for everyone, so you should become familiar with the advantages IRAs have over 401(k)s before you transfer funds or set up a new account. To help you do this, here are a few benefits you can reap from an IRA not available in a 401(k).

  1. Qualified Charitable Distributions (QCDs)

IRAs allow you to take QCDs and send them directly to the charity without including the distribution amount in your taxable income. This often results in a lower tax bill. You can also use your QCDs to offset your required minimum distribution.

  1. Penalty-Free Distribution for Higher Education

A 401(k) distribution for higher education expenses will incur both a tax and a penalty. Taking an early IRA distribution to pay for higher education expenses for you or certain family members is penalty-free.

  1. Freedom from Distribution Restrictions

Opportunities for early distributions of 401(k)s are limited at best. Subject to the plan administrator’s rules as well as the tax code, 401(k)s require a compelling reason such as a hardship, to receive an early distribution. Conversely, IRA distributions are restriction free. You can take an IRA distribution at any time and do not need an approved reason like 401(k)s.

  1. Aggregate Required Minimum Distributions (RMDs) From Multiple Accounts

If you have multiple IRAS, you can aggregate the RMDs for your accounts and then take that amount out of one or any combination of your IRAs. Doing this with your 401(k)s results in steep penalties.

  1. No Withholding

You can opt-out of tax withholding from an IRA distribution but not with a 401(k) distribution. This is a great benefit for those who end up with little or no tax liability at the end of the year.

  1. Self Direction

One of the best parts of having an IRA, instead of a 401k, is that you have the most flexibility in how your IRA assets are invested, whereas with a 401k, your investment options are limited to those provided by the 401k Administrator. With an IRA, you can move your entire retirement account into a self-directed IRA account and then invest the money anywhere you want, including in real estate and start-ups. Yes, it’s true! You get to choose.  And, we can help you set up a self-directed IRA and invest your retirement account where you want.

Deciding whether to maintain your retirement account as an IRA or a 401k is a critical decision, and requires that you understand the benefits and limitations of both.

Relying on generalized information found online is not enough to protect your best interests. Guidance from a Personal Family Lawyer® provides personalized, legal assistance when planning for the care of your retirement portfolio.

If you are serious about ensuring you make the best legal and financial decisions throughout your lifetime, meet with us as your Personal Family Lawyer®. We offer Family Wealth Planning Sessions that help you protect and preserve your wealth for future generations. Before the session, we’ll send you a Family Wealth Inventory and Assessment™ to complete that will get you thinking about your retirement goals, and we can help you achieve them.

 This article is a service of Gratia P. Schoemakers, Personal Family Lawyer®. We don’t just draft documents, we ensure you make informed and empowered decisions about life and death, for yourself and the people you love.  That’s why we offer a Family Wealth Planning Session™ during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love.

Call our office to schedule a time for a private conversation about your family wealth via a Family Wealth Planning Session, where we can identify the best ways for you to ensure your legacy of love and financial security for your family.

Conscious Money Challenge: Know How You Are Invested

If you have money invested in the stock market, whether through a retirement account or a straight brokerage account, I challenge you today to find out exactly what your money is invested in and make a conscious choice about what you are supporting in the world.

If you aren’t sure how to do this, grab your last account statement (or go online) and find the 5 letter code that indicates where your money is invested. Then, type that into Google and review the breakdown of holdings. For example, AGTHX, the Growth Fund of America, sure sounds nice, doesn’t it?

But, if you look a little closer …

After typing AGTHX into Google you will see that if you are invested in what they call the Growth Fund of America, you are actually investing in Phillip Morris (the tobacco company that hid data on nicotine’s addictive properties), EOG Resources (fracking), and Amgen (a company accused of suppressing a true cure for cancer to promote it’s own bottom line — unverified).

The process often goes like this, a new employee is told, “We’ve set up a 401k for you, now you need to pick your investments.”

The employee looks at the options offered, and picks something that looks safe or that has a positive sounding name such as “Growth Fund of America.”

Most employees simply don’t know any better. So the first question for all of us is, “Do I want to stay blind or am I ready to wake up?”

And if you are ready to wake up, the next logical question is, “Am I really desiring to support big tobacco, fracking and big pharma? Or do I want to do something else with my money?”

We can take control by not investing blindly just because we want that “safe” 5% return for our retirement.

What will retirement be like anyway if we are living in a world without clean water (fracking), where we cannot get access to our own natural healing (big pharma), and where lying to addict people is considered acceptable (big tobacco)?

We vote with our dollars, but not just through what we buy, but also with HOW WE INVEST. Using robo-funds, or financial advisors who only care about their own commissions or getting your money under management, or simply ignoring it because it’s too complex, is not conscious investing.

But we can change that.

As your Personal Family Lawyer we take a holistic look at you, and a big part of that means evaluating how you are using your resources. You can make a change. We can help.

This article is a service of Gratia P. Schoemakers, Personal Family Lawyer,®  who develops trusting relationships with families for life.  That’s why we offer a Family Wealth Planning Session,™ where we can review your family wealth needs and help identify the best strategies for you and your family. You can begin by calling our office today to schedule a time for us to sit down and talk because this planning is so important.

 

When Is the Purchase of Long-Term Care Insurance Worth It?

Elder Care is emerging as a significant issue for many people as life spans continue to increase. It is nice to know that because of health care advances, we can expect to live longer, but there are no included guarantees on the quality of life in the later years.

Many people eventually face a period in life when they can no longer do for themselves. Daily living tasks such as walking, bathing, cooking, and managing household affairs are beyond their physical and perhaps even mental capabilities. Frequently, that period has not been planned for by the person or family members. And sometimes, this period in life comes suddenly, such as when a debilitating fall takes place.

One thing which people and their families should consider before this difficult period is the purchase of long-term care insurance. This type of insurance provides coverage for the expense of daily living assistance. It can cover in-home assistance as well as assisted living or nursing home costs. Most people, however, buy it to cover in-home living expenses so as to avoid a nursing home.

Often, an elderly person will suffer intermediate health issues before needing permanent assisted daily living. Health insurance and Medicare cover costs of treatment for injuries and illness and typically pay for some daily living assistance as the person recovers or levels off at a permanent degree of recovery. When that recovery occurs, though, those services no longer pay, and the person is on their own.

A long-term care insurance policy will pick up the ball at this point and, depending on its terms, pay for daily living assistance for a period of time or for the life of the policyholder.

This type of insurance can be costly, depending on when it is purchased. The farther away you are from needing its coverage, the more affordable it is. Depending on the person’s age and health, companies may not be willing to sell a policy, or the premiums will be high, reflecting the amount of risk it is assuming.

The decision of whether to buy this insurance is a mix of one’s personal financial picture, health, family support network, and family history. For example, a healthy person whose parents lived long into life should be thinking about how he will be cared for in old age. Similarly, a person with no close family to rely on would want a safety net in place. In both of these situations, a proactive person might buy the insurance if she can afford it.

If the cost of the insurance seems beyond a person’s budget, a couple of things can be considered. One is to divert money being saved for retirement to finance the premiums. In a way, the goal is the same—money for retirement years. This approach would require balance between having enough money to fund healthy retirement years and enough to avoid being placed in a nursing home when you need healthcare support.

Another consideration is money being spent on life insurance. Some people carry life insurance early in life to provide for dependents who will survive them, then keep carrying it after that need has passed. The premiums being paid for life insurance could be applied to long-term care insurance, recognizing that the need for insurance still exists, just for a different purpose. A life policy that carries a cash value could be cashed in to pay a lump sum premium for a long-term care policy.

If one buys a long-term policy, caution should be exercised to make sure the coverage pays for what you anticipate needing. Bathing, for example, is one of the first personal activities that an aging person cannot perform; cooking is another. Also, if purchased a number of years before the anticipated need, be sure the policy provides for inflation in the cost of services. And watch out for a waiting period between disability and payments. Policies often include this feature.

The financial impact of living a long life should be a consideration in your estate planning.  That’s why we take a holistic approach to estate planning– so we can help you cover all the angles and live life to the fullest.

Contact us before buying a long-term care plan so we can support you to review your options objectively. Unlike insurance professionals, we are not paid a commission dependent on the product you buy, and it’s always the best idea to have objective trusted advisor legal counsel, like we provide, to support you and your family.

This article is a service of Gratia P. Schoemakers, Personal Family Lawyer,®  who develops trusting relationships with families for life.  It all starts with a Family Wealth Planning Session,™ where we can provide you with accurate information about how you can structure your finances to provide for your needs both now and in the future. You can begin by calling our office today to schedule a time for us to sit down and talk because this planning is so important.

 

Retirement Planning Reality Check

The National Institute on Retirement Security states that the funds American workers have set aside for retirement are inadequate to the tune of trillions of dollars. Why? Well as the old adage goes, Failing to plan is as good as planning to fail.

One of the first pitfalls in retirement planning is giving up before you ever start. Many people look at projections of what will be needed to retire and conclude it is simply out of reach, so why even try? In conjunction with this defeatist attitude about saving, they may also think Social Security will provide them with a safety net. But the cold hard reality is, Social Security provides nothing more than a meager income at best. It does, however, provide at least a part of what those projections tell you is going to be required.

Do You Already Have One?

A lot of employers provide retirement plans, which, together with Social Security, will get you closer to that projected number. Employer-funded programs these days are mostly what are known as defined contribution plans, which means the only certainty is the amount of money that will be contributed by the employer. Employees, normally, also contribute to the plan. Often these are in 401(k) plans, with which most people are familiar.

Your first objective with these plans should be to contribute enough of your earnings to build up a nest egg that meets your projected goal. The next objective is simply to invest wisely. These plans are administered by investment brokers that offer various investment strategies with varying degrees of risk. When you are a number of years away from retiring, you can take more risk and build the nest egg. As you approach retirement, however, money should be moved to more conservative investments that will hold value.

Other employers may offer defined benefit retirement plans. These plans specify a benefit that will be paid when a certain age and/or years of service plateau is reached. These plans are nice in that they relieve you of worrying about specific investments. They do not, however, typically pay a benefit that meets the projected retirement number.

Should You Do More?

Whether you are in a defined contribution plan, a defined benefit plan, or have no employer plan, the key is to start saving. Do not put it off until you are out of debt. Chances are you will never start. Take advantage of whatever tax-deferred saving instruments are available, such as Individual Retirement Accounts. But don’t be lulled into thinking that those IRA’s are a panacea, because you still have to pay tax on the withdrawals.

Finally, do not underestimate how much you might actually need. These days, many parents are still supporting adult children. In addition, as life spans have increased, many retirees find themselves having to care for one or more parents whose own retirement income has become very dated. Health care costs are also volatile. Medicare will not cover all your health expenses, and you never know what your health care issues may be. Consider long-term care insurance to cover some of these gaps.

This article is a service of Gratia P. Schoemakers, Personal Family Lawyer®.  One of the main objectives of our law practice is to help families prepare a financial legacy for their family. We do this through a Family Wealth Planning Session,™ where we can identify the best ways for you to ensure your legacy of love and financial security for your family. Call our office to schedule a time for us to sit down and talk about retirement strategies and how you can get started planning for your future.

Think About Your Beneficiary Designations Over the Holidays

When you look around your holiday table this year, you will probably not be thinking about the beneficiary designations on your 401(k), IRAs or life insurance policies.  But perhaps you should.

Having the wrong beneficiary designated on these and other things like bank accounts, annuities and 529 college savings plans is probably one of the biggest estate planning goofs people make.  This is because most of us name those beneficiaries when we initiate a plan or open an account and then forget about them.

However, life changes and this is why you need to review and update your beneficiary designations at least once a year.  For example, here are six scenarios that could cause a change in beneficiary designation:

  • You got married, divorced or remarried
  • You changed jobs and moved your retirement account
  • One of your beneficiaries died
  • The birth of a child or grandchild
  • You moved your account to another financial institution
  • One of your beneficiaries became disabled

Not having the correct beneficiary designated (or designating a minor) can wreak havoc on your family when something happens to you as well as create tax issues for your heirs.  You could unintentionally disinherit the very people you care the most about and potentially tie up your estate in probate or, worse, litigation.

Enjoy your holiday with family, and after the holidays are over, make it a point to review your beneficiary designations and update, if necessary.

If you don’t already have an estate plan – or have one that needs to be reviewed and updated – make 2014 the year you get this done.  You can begin by calling our office today to schedule a time for us to sit down and talk because this planning is so important.

 

6 Tax Questions to Ask Before Year-End

Everyone’s “to-do” lists seem to grow longer at this time of year, but yours is incomplete until you ask your Personal Family Lawyer® to support you to get these six tax questions answered before the end of the year:

Should I defer or accelerate income?  If it looks like you’ll be in a higher tax bracket in 2014, ask if you should pull more income into this year.  Conversely, if you will be in a lower tax bracket next year, ask if you should defer income until January.  In addition, find out if you should accelerate deductions by paying any income or property taxes not due until 2014 this year.

Should I take any gains or losses this year?  If you are currently in a low tax bracket and have made gains on your investments this year, you may want to consider selling some investments to realize lower tax rates on those gains.

Should I do a Roth conversion?  If you have a traditional IRA, you may want to convert all or some of the assets to a Roth IRA, especially if your retirement is years away.  While you will pay taxes on those assets now, your earnings will grow tax-free in a Roth IRA.

Should I make any changes to my FSA or HSA for 2014?  If you have a flexible spending account or health savings account through your employer and anticipate bigger medical expenses in the new year, you may want to increase those funds to allow yourself to use pretax money for out-of-pocket medical costs.

Should I be making charitable contributions?  If you made more money this year, you may want to think about reducing your taxable income with charitable contributions.  Gifting appreciated securities will allow you to avoid the capital gains tax while still deducting the full amount of the donation.

Should I be making gifts to family?  In 2013, you can give up to $14,000 (or $28,000 if you are married and your spouse participates) to as many individuals as you want.  This allows you to assist family members while removing taxable assets from your estate.  It’s important that if you are going to be giving gifts, you call us because we can set it up so those gifts are protected from bankruptcy, divorce or other creditors forever.

If you would like more information about tax-saving strategies, call our office today to schedule a time for us to sit down and talk.

The 10 Keys to Planning and Living Your Best Retirement

Three-day weekends like the Labor Day just passed give us all the tiniest snippet of a glimpse into what retirement might be like…i.e., extra time to do what we want.  But to have a fulfilling and enriching retirement, you need to do more than just wait to stumble upon your retirement.  You need to plan!  And we’re not just talking about the financial planning side of things, although that is obviously critical.

A recent Forbes Next Avenue column, based on author Dave Bernard’s book, I Want to Retire!, provides 10 keys to planning and living your best retirement:

Make the best of it.  Accepting the realities of aging and making the best of whatever life throws in your path is the best mindset to approach your retirement with – and a sense of humor doesn’t hurt either.

Take it easy on yourself.  Give yourself permission to make mistakes, because you will.  Don’t feel guilty if you spend some time just doing nothing; instead, enjoy your good fortune at just being retired.

Live your legacy.  The legacy we all want to leave our families is much more than just money or things.  Be – or continue to be – the person you want to be remembered as by your children and grandchildren.

Take a chance.  Approach retirement with a goal of trying something new.  In other words, step our of your comfort zone.  Keep learning; it’s a key to staying young.

Be frugal.  Try to leave below your means, since it is highly likely you will encounter unexpected expenses at some time during your retirement.

Just do it.  Strive for a good balance between relaxation and activity – too much of either doesn’t usually work out too well.

Live in the now.  None of us knows for certain how much time we have; don’t let planning be the enemy of doing.

No regrets.  Make amends, clear the air, and do what is necessary so that you have no regrets that will haunt your retirement years.

Pursue a passion.  When you were working, you likely dreamed of following your passion in some area.  Retirement gives you the opportunity to do that; don’t waste it.

Family first.  Research shows that retirees with a rich family life enjoy their retirement much more, so spend some of that extra time you now have on fostering any neglected relationships and just being there for family and friends.

If you would like to have a talk about retirement planning, call our office today to schedule a time for us to sit down and talk.

 

5 Steps to Fix Your Battered Retirement Plan

It’s no secret that a majority of Americans are ill-prepared for retirement.  A recent Forbes.com post detailed the 5 steps you can take now to being repairing the hole in your retirement plan:

  1. Pay yourself first. Set up an account that is not easy for you to access and start filling it with a significant percentage of your pay (10% or above).  You can accomplish this by participating in your company’s 401(k) plan and making sure you contribute at least the minimum amount to get the employer match (free money!).
  1. Load up on tax breaks. Another benefit of participating in a 401(k) is that it lowers your taxes without you having to do all the paperwork.  A 401(k) is also portable if you change jobs.
  1. Estimate your retirement needs. Don’t believe that you will be able to sustain your current lifestyle on Social Security alone; it won’t happen.   Experts say you need to have enough saved to match at least 70% of your pre-retirement income.  Not sure how you will get there?  A Personal Family Lawyer can help advise you on strategies, depending on your current age, income and estimated retirement age.
  1. Plan conservatively. Don’t think you can count on a bull market to fund your retirement.  Estimate a reasonable return on your investments when planning your retirement, and balance risk and reward as you near your retirement date.
  1. Take charge. You need to take charge of your retirement plan by checking regularly to see if you’re on track to retire with the amount of income you need to support the lifestyle you want.  Know exactly how your plan is – or is not—working and adjust accordingly by considering how you can create an income stream for yourself that you can count on throughout the rest of your life, instead of relying on savings or your retirement account at all.

If you would like to learn more about retirement planning, call our office today to schedule a time for us to sit down and talk.

5 Key Decisions to Make With Your Spouse Before You Retire

Retirement decision-making for boomers is very different than it was for our parents, when it was usually just one spouse (Dad) who retired, with Mom sometimes reminding him that, “I married you for better or worse, but not for lunch!”

Now both working spouses must make a decision together on their retirement, and each may have very different ideas of what that retirement will look like.  Here are 5 key decisions you need to make as a couple before you retire:

Timing.  Financial needs and whether or not you enjoy your work are usually the main determining factors in when to retire.  Couples also need to consider how they can maximize Social Security benefits.

Finances.  If one spouse has been handling the family finances, it’s time for both to understand their financial situation and how retirement may impact it.

Lifestyle.  One spouse may want to travel more in retirement, while another just wants to putter around the house.  One may want to move, while the other wants to stay put.  You need to reach a decision together on your retirement lifestyle.

Healthcare.  Both spouses need to have good healthcare coverage, either from Medicare and supplemental plans or, if you will continue to work in retirement, from an employer’s plan.

Long-term care.  Studies show that most of us will need some long-term care during our lifetimes.  Your Personal Family Lawyer® can help you examine the options for long-term care coverage and put a plan together that suits your needs.

If you would like to learn more about retirement planning, call our office today to schedule a time for us to sit down and talk.