See how you can make your RMD's work for you here.
September is Life Insurance Awareness Month! Unfortunately, life insurance myths can be some of the most persistent misleading misinformation affecting people planning retirement. These findings can commonly lack adequate research to back up the popular perceptions. Consequentially, a few have fallen into avoidable financial traps. Insurance has the potential to be the strongest plan with the right guidance.
Benefits of Utilizing Life Insurance
1. Protection of income in an untimely death to help the survivors.
2. Insurance of savings.
3. Ease tax management.
4. Maximize investments and returns.
1. It is pricey
The chief executive officer of Life Happens stated that peoples biggest concern is if the insurance is worth the dollars. Additionally, a study by LIMRA and Life Happens indicated that people missed the average insurance costs by overpricing the packages. Millennials hiked the price by 213 percent while the predecessor generation X believed it was worth 119 percent more. While both groups averagely quoted the annual price to be $500 annually, the real figure is $160.
2. There is an overwhelming number of available packages
This insurance varies in grading in tens of ways. Analytics indicate that most people settle for term insurance. An advisor can help you understand what product could be best suited for you. If a person passes on in the period agreed for paying monthly premiums, such as ten or twenty years, the money is granted to the beneficiary.
3. It is unnecessary for singles
It is easy to dismiss the insurance when no one will be left overweighed by your passing. As such, older retirees with no immediate families may opt out of signing up for one. The children of the candidate who would otherwise consider to put them on the insurance also find no sense in purchasing it. These notions do not cover the facts that the insurance is convenient in covering for burial expenditures, co-signed debts and business operations of the deceased.
4. It is not available to the sickly
A comparison report generated using NerdWallet indicates that a fifty-year-old man with a genetic heart diseases can acquire a 20-year insurance with a $250,000 policy and a monthly bill of $46. Ailments that attract higher costs include arthritis, diabetes, and high cholesterol. The myth that high-risk patients are closed out of the insurance misses the fact that only chronic fatal and advanced illnesses disqualify one from the insurance plan.
5. Older people cannot receive the insurance
A 60-year-old should never believe the hype that they are unfit for the insurance packages. Insurance companies understand that their age group has different life goals than a retiree at 30 years old. Most have customized packages to help elderly retirees acquire short term insurance products. Insurance for the elderly is useful to cover the family in estate planning, payment of debts and burial costs.
6. Savings are preferable
Savings can be a sensible plan in the face of retiring, but insurance packages can be equally considerable for their low rates. It is possible to save for other life demands such as vacations while simultaneously paying for insurance.
7. The insurance is rarely honored
A matured insurance policy has excellent returns. In the case of the applicant passing one, the beneficiary enlisted receives the cash without glitches in the transaction. The insurances primary role is to protect the well-being of the family of a retiree.
Shopping for a retirement insurance is not an exciting chore. It is even more difficult when 54 percent of Americans do not partake in purchasing the product according to a 2015 analysis by LIMRA. It is prudent to personally research on the select insurance policies before purchasing to prevent falling for ungrounded myths. As a trusted Advisor, we can also help you appropriately plan for these stages of your life.
When it comes to retiring, experts are pretty unanimous, Americans are not as prepared as they should be. There are many smalls steps that people should take to have the lives that they want in their golden years. These steps also tend to coincide with certain milestones that you should mark on your calendar.
This date marks the end of the year each and every year. It's also the date that allows you to maximize the tax benefit of any tax-deferred savings that you might make during the year. Many people will make big donations or contributions on this date to cut the amount of taxes that they have to pay each year.
This is the date that the tax man expects his money. It's also the last day that you can make contributions in your retirement accounts for the previous year. There are limits to how much you can put into an IRA in any given tax year. The limit for individuals below 50 years of age is $5,500 per year. You can add in an extra $1,000 if you're over 50. Should you be a bit short of this limit come December 31, you can designate any contributions until April 15 for the previous year, at least until you hit the annual contribution limit. This can help you when it comes to your tax bill.
Your 59th Birthday
This is the date that you can start withdrawing from an IRA or 401k without having to pay a penalty for early withdrawals. Once you hit this age, you can start to access some of the money that you've saved over the years.
Your 62nd Birthday
Once you hit 62, you can start drawing Social Security benefits. Whether you want to start taking your benefits at this age might be related to your health and your job situation. If you're looking to continue working, it might be best to wait a while before starting to draw your benefits. On the other hand, if you have bad health or a family history that has a lower life expectancy, you might want to draw as early as possible.
Your 65th Birthday
This is the date that you become eligible for Medicare. There's no reason not to sign up immediately, and you can actually start the process of signing up three months before you turn 65. If you decline to sign up at age 65, you might wind up paying more for the rest of your life.
October 15 to December 7
This is the open enrollment period for Medicare each year. You might want to make some changes to your coverage or sign up for a Medicare supplement during this period. Once the window is closed, your options also close until the next open enrollment period.
Your 70th Birthday
If you've not already signed up for Social Security, this is the point at which it no longer makes any sense to wait. Your payment will not go up after you turn 70, so you might as well make it a part of your planning process to sign up.
Age 70 1/2
This is the age at which you need to start making the minimum required distributions from any traditional IRA or 401k plans. If you fail to start taking the RMDs, you'll actually wind up with a pretty hefty tax penalty. Your distributions need to start by April 1 of the year that you hit 70.5 years of age.
By keeping these ages in mind, you'll be able to maximize your retirement planning. Consult a financial professional if you have any questions as you approach these milestones, there are many ways to increase your retirement income and protect your nest egg. We are here to help.
Wills and trusts are both invaluable estate planning documents but they serve very different functions and are used at different times. Used in combination, they can help provide a comprehensive estate plan and both should be addressed when planning for retirement.
A will goes into effect after an individual has died. It delineates the distribution of assets according to the testator's wishes and typically designates an executor who will ensure that the distribution is correctly made.
Only sole and separate property can be included in a will; property that is jointly held or held in trust cannot be included in a will. Wills can detail items such as the testator's funeral arrangements, guardianship of minor children, managers for assets belonging to minors, and debt forgiveness; these items cannot be included in a trust.
A will must pass through probate after the testator's death. This ensures that:
-The will is valid
-The executor has correctly and honestly executed his or her duties
-The terms of the will are satisfied
Some states recognize a holographic will, some don't, and a will doesn't have to be notarized in all states. Part of the probate process is determining that the will is valid, particularly if it has been privately kept. Some states allow a will to be filed prior to death but won't open probate until after the testator has died.
After the will has been probated, it then becomes a matter of public record and can be accessed by anyone. Probate can be expensive and can become a protracted procedure; it isn't necessary for all estates. Depending on the estate, inheritance taxes can be steep for assets inherited from a will; an estate attorney can provide advice on the best methods to reduce the tax liability from a sizeable estate.
A trust is a legal instrument that enables an entity to hold title to assets that belong to another; title to the assets become the property of the trust. The entity can be an individual, a financial institution, a law firm, or other legal entity and is designated as the trustee for the trust. Some trusts appoint a successor trustee to take over in the event the trustee becomes incapacitated.
A trust has two types of beneficiaries; the primary beneficiaries receive income or benefits during their lifetime, the other receives income or benefits after the death of the first set of beneficiaries.
Unlike a will, a trust becomes effective as soon as it's created. A trust can be revocable or irrevocable; the type used will depend on the individual estate and circumstances. A revocable trust can be changed until the trustor dies. An irrevocable trust can't be changed after it's become finalized, it's a complex document that needs to be created by an attorney who specializes in them.
Some items that can't be included in a will can be included in a trust, such as jointly held property and life insurance policies. A trust can provide for physical and/or mental incapacitation or other disability, which can eliminate the need for a court-appointed conservator. A trust is often used as a tax shelter for the beneficiaries, which isn't possible with a will.
Unlike a will, a trust is a private document, so its contents aren't available to the general public, either before or after the death of the trustor. Since a trust doesn't pass through probate, there's a savings of both time and money.
When planning for retirement, both types of these documents should be included in most estates. Both serve a valuable function and can be most effective when used together.
Retiring is the goal of every worker who dreams of leisurely breakfasts and time in the garden. However, getting to retirement takes some financial effort and strategic planning. The reality of having no job means that you're on your own when it comes to every facet of your financial life. Before you send in that letter of resignation, get familiar with the top questions that you need to ask yourself before retiring. You'll have less stress as a result of these well-answered questions.
What's Your Plan For Healthcare?
When you're working, your employer's coverage keeps you healthy with reasonably affordable policies. All of that changes when you retire, however. Ask yourself if you have a plan for healthcare coverage. It's ironic that the time of your life when you really need healthcare coincides with the lack of an employer's policy.
Luckily, the federal government offers Medicare. From the moment that you turn 65 years of age, you can take advantage of this program. It covers the bulk of your medical needs, and there are supplemental programs for options that you care to invest in.
COBRA insurance coverage is possible between your employment period and signing up for Medicare, but it only lasts for up to 18 months. It can also be very expensive because the employer isn't paying for part of the cost. Ideally, you'll want to rely solely on Medicare while looking for supplemental programs to cover specialty items, such as vision.
What Will Your Income Include?
On average, Social Security will cover about 40 percent of your income in the golden years. You can start payouts as early as age 67, but many retirees choose age 70 because there's a higher monthly payout as a result of waiting. Your retirement savings must cover the bulk of the remaining shortage.
Many financial experts teach the concept of the 4-percent rule. In essence, you can take 4 percent of your funds from a retiring account each year, and you should still have enough money to cover your remaining years. There are other calculations to consider, such as understanding how much money you'll need each month in these relaxing years. Although some experts believe that you can live off of 70 or 80 percent of your previous earnings, it's ideal to shoot for a comparable income as earned during your working days. With this tabulation, you have extra funds for hobbies and traveling.
Do You Have Plans For Your Time Off?
Planning for your golden years also means that you need to fill the time that is now open to you. Isolating yourself from your social network at work can actually be detrimental to your health. Make rough plans for your golden years because filling the time can be a rewarding prospect. Volunteer with charities, help out the family or get a part-time job. Working as a consultant with your previous employer might be an option that keeps you connected while still enjoying the spoils of retiring in your 60s.
It's natural to try new things, but then you're not too thrilled with them. Continue to explore as you grow older because you might find a hobby or talent that sparks creativity in your mind. Many retirees find themselves starting a business as they learn how to offer a product or service that counts in the neighborhood.
Stay updated with your retiring plan by logging into your funds on a regular basis. By knowing how much you have and where it will be allocated gives you a clear view of your retirement pathway. Retire with confidence that your plans will stand the test of time as opportunities spread out ahead of you.
We meet with pre-retirees and retirees every day to create a plan or offer a second opinion on their current plan. Call us to schedule your visit, today.
Retirement Investing And Risk Tolerance
Investing for retirement is the ultimate display of human patience and ability to overcome natural human instincts. This is because it is difficult for people to overcome their desire for instant gratification. In other words, it is a lot more fun to go spend some money at the mall than it is to save that money in an account for something that may seem like a long time away.
Those who do manage to get past their tendency for spending and do invest should know about a term called "risk tolerance". This is the idea that one has a set amount of a gamble that they are willing to take with their investment dollars. Everyone has a level that they are comfortable with, but that level can vary wildly from one person to another. It is important in your planning that you know what your level is.
What Is The Appropriate Level For Me?
Determining your own tolerance for investment volatility is the first step to take when thinking about investing. You need to know this in order to select investments that are appropriate for your portfolio. Part of the equation to consider is your age and how far away retirement is for you.
Investopedia discusses this concept by saying that younger investors generally should have an appetite for more risk in their investments. This is the general theory because it is said that younger investors can take a hit to their account and still have plenty of time to regroup and get back those losses over time. They have the time horizon to be able to get back money they may lose by taking on investments that are too risky.
The upside for a young investor to take on a risky investment is that it has the potential to pay off big. Sometimes the stocks of very small companies for example are a type of investment worth taking a look at. They could go bust and end up dropping to zero, but on the other hand they could hit it out of the park and allow the investor to get a huge return on his or her money.
Planning Out Your Future
The age factor is not the only consideration to put into the equation. It is a good starting point, but one has to consider themselves as a person as well. What do you feel when your investments drop by say ten percent? Are you willing to hold on and wait for better times? Would you consider putting even more money into an investment that has become cheaper like this?
Some people can handle the ups and downs of the market just fine. They don't even necessarily look at what the market is doing, they just focus on the long-term horizon that they have to consider for their investments. That is the type of person likely to do well in the market.
Trust Your Instincts
Instincts are a powerful thing. If you ever feel uncomfortable with a particular investment, it is probably best to avoid them altogether. If someone tries to sweet talk you into putting money into something that you are not interested in, they probably have only their own best interests at heart. You are the only person responsible for your financial situation, remember that when investing.
Less Risky Investments
Someone who has a lower level of tolerance for volatility might want to consider lower volatility investments. Socking some money away in low-volatility investments is not going to make a person fabulously rich, but it is going to help them feel a greater sense of security. That is just as important to some people to keep them going in this whole investing endeavor.
Before putting money into investments, think about getting out the pencil and paper to write some things out and try to figure out what your tolerance level is for volatility. That is perhaps the best homework you can do for yourself before you ever drop even a dollar into the market.
We plan for the road ahead with pre-retirees and retirees every day and understand that diversification, minimizing risk and not out living your money are important objectives to many. We are here to review what plan you have in place now or to look at a plan for tomorrow.
Retirement is not the end of your life. In fact, for many, it's the beginning of one of life's most exciting chapters. There is a choice one must make, though, between sitting around and letting life go by and embracing the life that one has always wanted to live. Those who do the former are passive, while those who do the latter are active in planning. If you wish to get the most out of your retirement, it's important that you begin to set goals as soon as possible. Only through goal setting is a fantastic retirement possible.
Why it Matters
It can be easy to get bogged down in one's mundane life. Far too often, retirees continue to live their old lives based on little more than inertia. They go to the same restaurants, the same stores, and experience days that are strangely similar to their working lives. Without being able to aim at something better, there's little impetus to accomplish anything new. Being retired, though, can give a person the freedom he or she needs to really make changes. So long as there is focus on something new, anyone can create a new, post-career life. A solid goal simply provides the focus one needs to succeed.
Understanding What You Want
The first step towards having a better post-work future is to start setting goals. As you begin your initial plans, start with goals. It's not important that you can achieve them or that they are particularly realistic. Instead, what's important is that you are willing to put something out there for your future. Your job here is to make sure that there is some kind of vision for your future, which should motivate you through the next few steps. Don't worry if your vision isn't quite within the realm of reality - you'll be able to adjust things as you go forward.
Determining What is Feasible
Next, you'll want to take a look at those plans and think about feasibility. Look at what you have in savings, what you can potentially invest, and factors that may or may not complicate your future. You may not, for example, be able to move abroad if you have something that will require you to stay in the country for the next twenty years. Your planning process will now be one that will be one of winnowing down. Don't necessarily discount things that are going to be hard to accomplish, but do try to remove those items that are utterly impossible.
Creating a New Life
The end goal of your plan will be the create a new life. This life may be no different than your current life, but it will be one that you have chosen. Once you know what's feasible, you'll be able to take the necessary steps towards creating a real future. There's absolutely nothing to stop you from taking the right steps, as long as you know what they need to be. This work can be done before you retire, but it's not too late for those who are recently retired and still have dreams they wish to pursue.
If you are approaching the end of your career, it's a good idea to set a new goal. You finally have the ability to live the life you've always wanted, but it's up to you to make sure you get there. Take some time, do some planning, and make sure you know what you can really do with your life. You might be surprised by the chances you can take, but you'll never know until you make a plan.