Category: Retirement
Cracking the Medicare Code
Open enrollment for Medicare and Medicare Supplements is right around the corner. Medicare programs are notoriously challenging to navigate, but it’s a crucial decision that most of us will have to make at some point in our lives. The question most people start with is one of eligibility. There are two essential parts to Traditional Medicare, Parts A and B. Part A has to do with hospitalization, and you become eligible on the first of the month for your 65th birthday. If you become eligible for Part A, it’s recommended to enroll immediately because there is no premium. This remains true even if you are still working and have health insurance through your job. It will get you into the system, and you’ll start receiving “Medicare & You.” On the other hand, part B has to do with doctor visits and bills, including medically necessary services or preventive care. It’s recommended that you enroll with the Social Security office about 2-3 months prior to when you’ll be looking to receive the full Medicare enrollment benefits. When it comes to enrolling for Part B, this can be particularly tricky and could cost you. If you are already retired or will retire right at 65, the answer is simple: sign up for Part B at the same time you enroll in Part A. If you are still working, it’s something that you must figure out when the right time is to enroll. It’s essential to enroll at the right time. If you
5 Steps to Transitioning into a Successful Retirement
Are you looking to start the transition into retirement? If so, we have prepared 5 critical steps to take into consideration when transitioning into this new chapter of your life. When preparing for retirement there are plenty of important decisions running through your mind. We have compiled these steps in order to help guide you along the way. Step 1: Plan for Increasing Healthcare Cost When it comes to healthcare, you have to be prepared for what could happen in the future. Fidelity does a study every year into the average cost of healthcare for a couple who is aged 65 and retiring. In 2019 it was estimated they will need $285,000 for healthcare and healthcare-related costs. This cost, unfortunately, will only increase significantly each year. Step 2: Consider Long-Term Care According to the U.S. Department of Health and Human Services, 70% of people aged 65 or older are likely to need long term care at some point. With such a high percentage of people in need of long-term care, it’s something to keep in mind when making the transition into retirement. Step 3: Change Your Money Mindset After retirement, the way you invest will also begin to change. What this entails is changing your mindset from saving to spending and preservation. This means that making contributions and growing your assets becomes investing for protection, aiming to safeguard your wealth, and making sure that you will have a good, steady income stream. It’s often dif
Planning for Long-Term Care
Many people don’t know that over 69% of people turning 65 this year will need some sort of long-term care at some point in their retirement. Our firm specializes in planning for and managing retirement for private and institutional clients, and our clients often require advanced planning to protect their assets. First of all, it’s important that you have an elder law attorney. Elder law is a niche area of legal practice covering estate planning, wills, trusts, retirement healthcare planning and protection of assets. A good elder law attorney can help advise you on all these areas. The right planning starts with the right documents, especially the Power of Attorney. The power of attorney law changed in Ohio in 2012 to the Uniform Power of Attorney Act, and many powers of attorney documents don’t conform with this legislative change. We highly recommend for anyone with a power of attorney written prior to March of 2012, that you have that document reviewed to determine if it meets the new criteria. Another important aspect of elder law is retirement health care planning. For example, most people under 80 don’t have pensions, and their net worth is primarily invested in IRA’s and 401(k)’s. These assets present a difficult challenge when planning. For those individuals, a leverage strategy using annuities and/or life insurance with long term care benefits can be very effective. Traditional long-term care insurance is no longer the on
Bipartisan Support in Congress to Make Retirement More Secure
by LFG Tax Director, Mark Sipos On May 23rd, 2019, the U.S. House of Representatives voted overwhelmingly in favor of the SECURE Act, which stands for "Setting Every Community Up for Retirement Enhancement." Most of the provisions in the act are designed to make it easier for more people to save for retirement, and for more employers to offer retirement plans for their employees. One notable provision in the bill would essentially end what's known as the "stretch IRA." Under the current law, when a beneficiary inherits an IRA, the beneficiary can choose to have the IRA balance distributed in two ways: either in required minimum distributions based on his or her life expectancy, or during the five years after the original account holder passes. Making maximum use of the IRA's taxdeferred compounding like this is known as a "stretch IRA." Under SECURE, in most instances an inherited IRA would have to be fully distributed within 10 years of the original owner's death, although there are some exceptions. Some additional areas the bill covers are as follows: • The repeal of the maximum age for traditional IRA contributions, which is currently 70½ • An increase of the required minimum distribution age for retirement accounts to 72 (up from 70½) • Allowing long-term part-time workers to participate in 401(k) plans • Increase of the auto-enrollment safe harbor cap to 15% from 10% • Allowing more annuities
The Power of Coordination
At the Lineweaver Companies, we believe a team approach to coordinating all your financial, legal, tax, and insurance needs helps save you time, money and worry. For example, we had clients who were both close to retirement, and unfortunately the husband had been diagnosed with terminal cancer. The first thing we did was to work with them to make sure his pension was triggered in such a way that the wife could receive a greater lifetime benefit - almost a million more dollars than she would have otherwise received. At the same time, in this sort of situation, you have to consider powers of attorney – and other basic estate planning documents that everyone should have, like wills, and even if trusts make sense for your particular situation. There were also huge student loan balances of more than $120,000. But, because they kept the loans entirely in the father’s name, when he passed, the debt was forgiven. But what many people don’t know is that the forgiveness of debt – in this case student loan debt - is considered income by the IRS – and therefore taxable. As you can imagine, in this case it was significant: an additional $40,000. However, we were able to work with the family and the IRS to get the entire amount forgiven as well – so they ended up having the debt and the tax bill forgiven. Given the pension payouts and their savings, they had significant assets that needed to be managed eff
Your 401(K) Isn't Your Only Option
You’ve heard it over and over again, from many places – never, ever make an early withdrawal from your 401(k), unless it’s an emergency. And, we agree - that’s often good advice. But there are a few exceptions where an early withdrawal may be to your advantage. Some companies allow active employees participating in a qualified employer-sponsored retirement plan to withdraw a portion of their account balance upon request, without demonstrating a specific financial need, usually at age 59 ½. This is called an in-service, non-hardship withdrawal. One reason you may want to consider this option is that by rolling over a portion of employer-sponsored retirement plan assets to a rollover IRA, you may be able to significantly expand your investment choices, especially if you have limited choices in your employer-sponsored retirement plan. 401(k)s typically offer limited fund options to participants. Spreading the risk among a group of investments is generally a good thing when saving for the long term. But this usually means you miss the opportunity on select investments. Outside of your 401(k), you could invest in specific sectors that may have greater long-term growth potential, like healthcare. You could move into investments that will have lesser impact with anticipated rising interest rates, like limited-duration bond funds. You could look at alternative investments, like real estate, gold and other com
Why a Roth Conversion can be a Smart Retirement Strategy
There are many options when it comes to retirement, and it can be hard to know which is right for you. One of those options – a ROTH IRA conversion, can be a great strategy for some people. First, a quick refresher on how a ROTH IRA differs from a Traditional IRA. With a Traditional IRA: 1. You receive an upfront tax deduction on your annual contributions 2. Growth is tax-deferred growth until it’s withdrawn 3. Withdrawals are taxable as ordinary income 4. There are penalties if you take withdrawals before the age of 59 ½ 5. You have required minimum distributions (RMDs) that begin at age 70 ½ With a ROTH IRA 1. Your contributions are “front loaded” meaning you use after-tax dollars for your contributions 2. Growth is tax-free 3. Withdrawals are never taxed 4. Earnings can be taken income-tax-free if you are at least 59 ½ and have had the ROTH IRA for at least 5 years 5. There are no required minimum distributions – ever! If you currently have a Traditional IRA, but some of the benefits of a ROTH IRA sound appealing to you, there is a way to “convert” your traditional IRA into a ROTH IRA – this is
Is an Annuity the Right Retirement Option for You?
Annuities can be great tools. Often, fixed annuities can offer higher interest rates than your bank account, a CD, or even Treasury Bonds, and they do it all with comparatively low risk. But, there are many alternatives that may be far better options for some people. One of the downsides to some annuities is that your portfolio can’t grow if you’re taking the interest as distributions, and there can be surrender charges as well. The 65-year-old retiree will see the value of his or her $500,000 stay the same over 10 years, and if you factor in an annual inflation rate of 3%, your purchasing power for that same $500,0000 will only buy $350,000 worth of goods. If that scenario doesn’t seem ideal for you, here are a few alternatives you might consider. Dividend-paying stocks that pay monthly and quarterly dividends can be good annuity alternatives. With the help of an experienced advisor, you may be able to even buy a collection of dividend-paying stocks that will not only pay you more income every year, but even offer the possibility of making your investments grow. Keep in mind, however, that there will be more risk. It’s important to have someone help you choose a diversified, broad portfolio of stocks. Diversification can help ensure that, even as some stocks may decrease in value, they will hopefully be offset by other stocks that are rising in value. This also means that you’ll be less likely to be forced to sell, because even if the
How Much Money Do You Really Need To Retire?
Life is full of uncertainty. What your career will bring, changes in your family, your health, and the market. And these are just a few! So it’s hard for anyone to predict the future, but there are really only two ways to figure out how much you need for retirement. And, as you’ll see, one offers a better future for most. 1. Save What You Can It’s no secret that many people are putting off or avoiding saving for retirement. A recent article on CNN.com shared that about 26% of workers said they and their spouse have saved less than $1,000 for retirement, according to a report from the Employee Benefit Research Institute. Another 16% said they have between $1,000 and $10,000 stashed away for retirement. While some of those are no doubt younger workers who have time to save, some are likely not. It’s highly doubtful that they’d be able to retire at all on that! Some financial planners point out that planning retirement spending around your current income might not make sense. Many people drastically change their spending habits in retirement. Expenses might shrink, or they might increase. But, even if they stay the same or decrease, you have to consider what the markets might do, how inflation might affect your savings, or how healthy you will be. 2. Work Backward and Make a Plan This is the advice you’d likely hear most often. This involves some version of working b
Are You Spending Your Legacy?
Are You Spending Your Legacy? Retirement is supposed to be a well-earned reward – a time when you can stop worrying about the day-to-day struggles of your career, and everything that went with it. A time to enjoy your family, and to scratch a few things off your bucket list. Confronted with so much freedom, it can be tempting to do all those things without considering a plan going forward. While we find that most of our clients aren’t afraid of running out of money for themselves, many of them do want to leave a legacy to help their children or grandchildren. So how can you ensure that you’ll be able to have the retirement you want and still help your loved ones? It all comes down to your spending rate. To find your rate, start by adding up your expenses, and subtract that from any non-portfolio income you might be receiving in retirement. That can mean things like rental property income, annuity income, or even Social Security. The amount left over is what you’ll need to withdraw. You can divide that by your total portfolio, and there’s your spending rate! Most financial advisors will recommend a 4% spending rate. But keep in mind that financial professionals have arrived at this rate by making a number of assumptions. They are: 1. That you’ll want a steady and consistent income 2. That your portfolio asset allocation is aligned with your financial goals and ri
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