Estate Planning and Tax Lawyer Blog

Teaching your children and grandchildren about money is one of the greatest gifts you can give.

And that instruction should go well beyond simply telling them that “money doesn’t grow on trees."

An article in the Wall Street Journal provides some good guidelines with The 15 Money Rules Kids Should Learn:

1. Spending money happens only after you earn it.
2. When kids start asking parents to drive to the toy store to buy some plastic whatnot, it’s time to consider an allowance.
3. The size of an allowance shouldn’t be so meager that your child is a pauper among peers, nor so generous that your child can easily afford all wants with little financial planning.
4. Good grades are expected and help around the house is simply the price of family life.
5. While 16 is generally the legal age of employment, encourage kids starting around age 13 to think of ways they can earn an income.
6. Guide and advise your kids about money, but don’t dictate.
7. Failure to balance the debit-card bank account monthly means losing access to the debit card for a week or more; failure to repay an entire month’s credit card balance means the loss of the card until the balance is fully paid off, plus one additional month.
8. Only 50% of the money put into a piggybank can be taken out to buy something.  At least half must remain inside the pig.
9. Children should have the right to screw up financially so they can learn from their mistakes.
10. When it comes to investing in stocks, kids should understand a company at such a basic level that they can draw a picture of the business model with a crayon.
11. You don’t need to be wealthy to begin teaching your children about the stock market.
12. If a child’s charitable interests lie outside your special interests, so be it.
13. Parents don’t have to save every last dime a child will need for college expenses.  You only have to save up to your ability or desire to pay.
14. One of the greatest gifts you can give your child is your own financial self-sufficiency when you’re old.
15. At some point, you have to tell your kids that the Bank of Mom & Dad is officially closed.

I have started using some of the above tips at home with my 10 year old.  He has an envelope that he keeps in his room which he puts his allowance into and any gifted money into and several times a year he will count it to see if he has saved enough money to buy something that he really wants.  Its a small step to take in teaching him responsibility. Afterall, before I know it he will be in college and then it will be too late to teach him.

Need to learn some of these lessons yourself? 

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Like many, Don Spivack never planned to retire early, but planned to remain in his career and continue doing work he viewed as important. Retirement packages and pensions were offered according to individuals by age and seniority. The retirement offers were generous, and the agency would begin to lay off people if not enough accepted the proposal offered. Not wanting to take the chance to be in the group of individuals to be let go, he begrudgingly accepted the offer and retired.

However, soon after leaving, he began to do things he enjoyed. He created a syllabus for graduate students taking urban planning and economic development and investigated volunteer opportunities. Shortly after leaving the Community Redevelopment Agency of Los Angeles, he was offered a contract to return as a consultant due to the lack of training provided when over forty employees left the organization. While the initial return was an adjustment by not having employees under him, it was a change to be able to decide the schedule to work and be able to volunteer. So while retiring early may be a change that was unexpected, do not look at it as negative, but a way for opportunities you were not expecting.

To read more on this article, visit Retired, but Doing the Work You Love.

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Planning for retirement is very important. When you reach your 40s, you have roughly 20 years of your career behind you. Many individuals love their career choice and plan to work until they drop, but the sad fact is that you may not be healthy enough to work that long, or may be forced to retire involuntarily. During your 40s, you have about 20 years left of your career and have time to save for your retirement. There are many reasons you can give for not increasing the amount you put into your retirement savings, but you cannot afford to not save now. It will be too late if you wait until later.

To learn more about this article, visit In Your 40s? Assess Your Retirement Savings.

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Planning for your retirement is not only about the amount of savings you put aside. While putting aside enough money for retirement is important, it is also important to determine how you would like to spend your time later in life. By doing this, you can determine how much money you will need to save and how fulfilling your retirement will be for you. Following is a five-year timeline prior to retirement to determine what you need to do. Five years, if not before, you will need to start thinking about what you and your spouse wish to spend your time in retirement doing. Look at your current hobbies and activities. Also look at your finances and determine if you will have saved enough in the next five years to realistically retire. If you have not done so, create a will, appoint a power-of-attorney, create a health-care directive and make an estate plan. Four years from retirement, you should start researching ideas of what you would like to do for retirement and whether it includes moving into another community. It is also a good idea to start thinking about when to claim social security; the longer you wait to receive it, the bigger the monthly payout. Three years before retirement, you will want to start visiting other communities if seriously planning on moving, determine the benefits you are eligible for, and become knowledgeable about Medicare. Two years out, you will need to determine if you will want or need to work for pay in retirement and research interim health insurance if you plan to retire before becoming eligible for Medicare. A year before retirement, you will want to adapt your retirement savings into a stream of income that will last your lifetime. You can consult financial advisors to help create a budget that would be ideal for your circumstances and savings.

To learn more about this article, visit Ready to Retire? Here's a Five-Year Pre-Retirement Plan.

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As baby boomers are nearing retirement age, they are finding themselves financially unprepared for the future. On average, a household headed by someone 60 to 62 has less than a fourth of what is needed for their retirement. Of those households nearing retirement age, about 60% rely at least in part on 401(k) plans. However, 401(k) plans should be used as a retirement supplement, not as a full retirement plan, especially for baby boomers who were not exposed to them for long enough. Those who are using 401(k)s as their retirement are not contributing enough each year to obtain the amount of savings that will be needed for retirement. If you have fallen behind on saving for retirement, now is the time to save more. Another way to help with retirement is to delay taking Social Security. If a person entitled to benefits at age 66 starts to withdraw at 62, they will only receive 75% of their benefits. But if that person was to wait until age 70, they would receive 32% more than their full benefits. Older individuals are also able to contribute more to their 401(k)s without it being taxed. Rising health care costs also affect how much an individual should save for retirement. Some advisors suggest that 85% or your working income is needed in retirement, while others say 100% needed. With the rising health care costs and unstable housing market, it may be advisable to save 100%. The worst thing that could happen is that you outlive your retirement savings. The sooner you start saving for retirement, the better you will be.

To read more on this article, visit 401k Planning: Tips to Keep Your Retirement Plan on Track.

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Many neglect to save for their retirement and have a multitude of excuses to defend this decision. Some excuses are better than others, but saving for retirement should not be something that is put off.
Many people do not save for retirement because they are paying for their kid’s college education. While higher education costs money, your retirement costs money as well. There are options available for those pursuing higher education, such as student loans and scholarships, but nothing for retirees. Some also believe that, since their parents died young, they too can expect to die young. However, what would happen if you die earlier than you expect? Nothing from a retirement standpoint. Planning for the possibility of living longer is a smart idea because people are living longer.
Others believe that they will live on Social Security. Social Security may be available now, but it is reported that the Social Security reserves will run out in 2037 and that date is changing every year. Next time you get your Social Security report in the mail, read it. Those seniors who currently rely solely on Social Security benefits barely surpass the poverty line.
An increasing amount of people are continuing to work longer and believe that they will be able to work well into their retirement years. However, most retire early due to their health. The state of the job market is also unknown. Others frivolously spend their money in the present and do not think about the future. “Getting back to the basics in terms of budgeting can help someone find the resources for saving for retirement.” Watching your expenses will help save the money needed for retirement. Retirement planning can sometimes be delayed due to unemployment. While this is unfortunate, once employed, you should begin saving for retirement again.

To read more on this article, visit 6 Excuses for Not Saving for Retirement.

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At this moment in time, retirement for those lower income households is not good. Anyone and everyone who is not wealthy are at risk of not achieving a financially secure retirement. Not everyone has this mindset, but if you had more to put away for your future, you would probably take the chance. This year there are three ways to help do just that.

Under the 2010 Tax Relief Act, taxes on employee payroll are reduced by two percentage points for 2011. Taking this extra cash in each paycheck and putting it into a 401(k) plan can reduce your taxable income, while receiving any company matching funds. This little difference could lead to real money when it comes time for retirement. Under the Saver’s Credit, individuals with incomes less than a certain amount can lower federal tax liability if they contribute to an IRA or a workplace savings plan. To receive the maximum 50 percent credit for retirement-plan contributions, income for an individual cannot exceed $16,750 OR $33,500 if married and filing jointly. To get any credit, an individual cannot exceed $27,750 or $55,500 if married and filing jointly.

Also, housing assistance is being offered for low income seniors, lowering what is the biggest expense for many in retirement. Congress passed legislation in December in an effort to modernize housing facilities that provide an estimated 300,000 seniors under Department of Housing and Urban Development Section 202 housing. Someone in the household must be 62 years old or older and meet income retirement to qualify. The owners of the properties will receive funding to make improvements. Because of this program, those in retirement are able to spend less of their retirement savings, allowing it to last longer.

To read more on this article, visit Lower-income workers gain new savings options.

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While employers may think that some of the heat is off with Baby Boomers entering into retirement, employee benefits are still of importance because of the Generation Y employers entering into the work place. Generation Y, which is the youngest generation now entering the workforce, is taking an interest into building and protecting their financial lives. Rivaling the number of Baby Boomers at 80 million, Generation Y is nearly 75 million strong. Generation Y, individuals ages 18 to 32, is displaying an interest in planning for the future. The amount of individuals from Generation Y who said they are extremely/very familiar with life insurance increased from 31 percent in 2008 to 44 percent in 2010. Those who stated they are extremely/very familiar with retirement accounts increased from 31 percent to 43 percent. Twenty-four percent of this generation said it is extremely/very familiar with disability insurance, which increased from 16 percent.

During this time of economic uncertainty, members of Generation Y are entering into the work force and building careers. This large and influential group is coming of age when benefits in the workplace are changing rapidly. Barbara Nash, vice president of corporate research for Unum, states that “this generation of workers is a large and influential group coming of age at a time when the benefits landscape is changing quickly. Understanding what drives their decision-making and how we can meet their benefits needs on their terms is critical.”

To read more on this article, visit Gen Y Not Too Young for Retirement Planning .

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Saving for retirement is critical for everyone. It is especially important for women. Women tend to live longer and make less than men but save, on average, 40% less than men. Women’s defined contribution (DC) plan balances tend to be 60% of men’s balances, which can be concerning due to the longevity of life and disruptions for caregiving. Capitalizing on savings opportunities is of great importance while working. On average, working women 50 or older have a DC plan balance that is almost $63,000 below working men of the same age.

It seems that younger women are saving more for retirement, which could partially be accounted to the earnings gap decreasing from what it used to be. It could also be due to the increasing number of women who are gaining financial knowledge. However, the lack of financial knowledge can be an impediment to both women and men, with only 29% of men and 14% of women feeling knowledgeable about their finances. Those who tend to be more informed tend to save more and manage their savings better. Even though more men seem to be knowledgeable about finances, there is still a disparity of those overall that need to be more educated when it comes to finances.

To read more on this article, visit Retirement Conundrum: Why Are Women Saving Less Than Men?.

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A Consumer Report’s Survey has found that among those 55 and older and nearing retirement, only 21 percent are satisfied with their retirement plans. So do not worry that you are alone in thinking that you have not put enough aside to retire comfortably. For those who were satisfied, living modestly and saving a lot were both listed as steps toward their retirement.

The best retirement strategies make a difference, even if you are over 55. Contributing the maximum amount to 401(k) or IRA, paying down debt, and postponing receiving Social Security as long as possible for higher payouts are all ways to strategize for retirement. Also, do not rule our possibly working past 65, even if just part time. After retiring, it is advisable to follow the 4 percent rule. Only withdraw 4 percent of your savings annually.

To read more on this article, visit Smart planning for comfortable retirement saving.

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Retirement should be a time that people can enjoy life without the stresses of employment or money. However, about 39 percent of Americans do not save enough for their retirement when they participate in 401(k) plans. Some ways to avoid the worries associated with money all begins with a plan.

Avoid a mid-life crisis by saving money early. Many people do not start saving money for retirement until later in life. Although retirement may seem like it is far away, it comes quicker than most think. Do not wait to save until you are middle-aged. Start early. Do not invest and then never look at those investments again. The market is always changing. Make sure to look at, or acquire an advisor to look at, the various intervals throughout the year and make adjustments according to the economy and market.

Do no invest just the minimum amount. Instead of always investing the amount your company will match, increase contributions into retirement account according to the progression of your career and income. Do not make the mistake of spending most of your retirement savings early in retirement. Remember that without a job there is now more time to spend money. Also, be realistic. The money in a retirement savings account is the money that you will have for the remainder of your life. Do not forget about factoring in an increased amount of medical bills as well.

To read more on this article, visit Four fool-proof tips on planning the perfect retirement from Smart401k.

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According to The Humane Society, Americans own 77.5 million dogs and 93.6 million cats. So chances are pretty good that if you are caring for an aging parent, you are probably helping to care for their pet as well.

Pets play an important role in the lives of the elderly, helping to ease loneliness and providing a limitless source of affection. An article at Forbes.com gave some tips on helping aging parents care for their pets, while also minimizing their own risks of injury:

1. Do what you can to keep the pet-parent connection strong, but be sure to pay attention to potential problems, like an active dog your parent can no longer handle on a walk.

2. If your parent does have a problem walking the dog now, hire a dog walker. They are plentiful and affordable just about everywhere these days.

3. Is your parent still capable and willing to take a pet to the vet for regular check-ups? If not, you should make arrangements to do so.

4. If your aging parent is forgetting to eat or take medication, chances are that a pet is not getting fed or medicated properly either. You may need to supervise.

5. If it’s time to move a parent to a retirement home, make every effort to find one that takes pets.

6. If a parent has to be moved to assisted living or a nursing home that does not allow pets, then look for one that allows pet visits and take your parent’s pet to visit often.

7. If your parent is in a facility that does not allow pets – or if your parent has recently lost a pet – see if the facility offers animal visitation programs where pets are brought in regularly to visit residents.

8. Be on the lookout for signs of aging or illness in your parent’s pet.

9. When a parent’s pet dies, be respectful of the very real grief they feel.

10. Have respect for the importance of a pet to your parent, even if you do not feel the same way.

For more information on retirement and long-term care planning, contact our Jacksonville estate planning law firm.

With retirement nest eggs having endured a pummeling in the past few years, many pre-retirees are wondering what they can do to still ensure they have a retirement in their future. A U.S. News & World Report Money article provides these tips for retirement planning:

Get rid of debt. Compound interest on debt is money that could be socked away for retirement, so paying down debt is essential to growing that nest egg again.

Increase savings. By increasing 401(k) contributions and maxing out your IRA, you can boost your retirement savings and enjoy tax breaks as well. Those over the age of 50 can add an additional $5,000 annually to their 401(k) and $1,000 to an IRA.

Delay retirement. Putting off that retirement date not only helps you save more, it also means you spend less and shorten the number of years that you will need to draw on retirement savings. Just a few years of additional income can make a big difference.

Postpone Social Security benefits. By holding off on taking Social Security benefits, you can get a bigger payout down the road. Delaying benefits until your full entitlement age (between 65 and 67) will increase the size of your monthly checks.

Reduce expenses. Refinancing a mortgage, downsizing into a smaller home, cleaning out your clutter and putting it for sale on eBay or a garage sale, buying a used car instead of new or even eating out less can create more income for you to put toward retirement.

A new study conducted by The Hartford Financial Services Group shows that more Americans – especially women – are paying more attention to their retirement savings plans and are participating more in employer-sponsored retirement plans in 2010 than they did one year earlier.

The Hartford’s Retirement & Recession Study found that 76 percent of those surveyed said they completely or mostly understood their retirement benefits, an increase of seven percent over the previous year. Overall, the number of women focusing on retirement benefits increased by 13 percentage points, from 56 percent in 2009 to 69 percent in 2010. For men, the increase was eight percent, from 75 percent in 2009 to 83 percent in 2010.

Researchers said that Americans’ growing understanding of their retirement savings plans was one of the few benefits of the Great Recession, which seems to have increased the focus on the importance of retirement planning.

In addition, the study found that more Americans are participating in 401(k)s and other employer-sponsored plans. Participation rose to 84 percent in 2010, up from 80 percent in 2009.

Need to learn more about protecting your assets through careful estate planning? Contact our Jacksonville Florida estate planning law firm.

A provision of the Small Business Jobs Act of 2010 that passed in late September will soon allow investors to move savings from a regular 401(k) to a Roth 401(k) if the companies they work for offer it.

With income taxes expected to rise, many financial advisers are encouraging clients to find ways to reduce their tax exposure. Roth plan money – either as a IRA or 401(k) – grows tax-free.

Those who elect to make the move to a Roth 401(k) will pay taxes now instead of later, which had not been available previously with 401(K) plans. Total contribution limits will remain the same, at $16,500 per participant annually, or $21,500 for those over the age of 50. However, the contributions can be divided between regular and Roth 401(k)s.

The law was passed as an incentive to keep employees investing for retirement in their company 401(k) plans. Companies must determine who is eligible to move to a Roth 401(k) under IRS guidelines.

Experts say that the new law will be especially beneficial for high earners who have a million or more dollars in their 401(k) plans, enabling them to stay in the 401(k) system but get the tax advantages of a Roth.

For more information on retirement and tax saving strategies, contact our Jacksonville estate planning law firm.

The Department of Labor announced new regulations that will require companies providing 401(k) plans to employees to provide information on all fees and charges in plain language beginning in 2012.

Secretary of Labor Hilda Solis announced the new regulations, which she says will affect approximately 483,000 retirement plans of 72 million American workers. Solis said that currently, employees do not have access to enough information that would allow them to make informed decisions about their investment options.

Beginning Jan. 1, 2012, quarterly and online 401(k) statements must include information on plan administration expenses, including accounting and record keeping fees, as well as the charges that apply to the investment decisions made by the plan holder, including fees charged for loans. The fees and expenses must be expressed as a percentage of the assets held as well as a dollar amount for each $1,000 invested.

Performance data must also be provided on mutual funds, including one-, five- and 10-year returns. Individuals must be provided with benchmarks for each period so they can see how their funds are performing.

Plan owners must be provided with a glossary of common terms and their meanings so they can more easily understand their investment options and the fees and charges involved for each.

For help with understanding your best options for retirement, contact our Jacksonville estate planning law firm.

To keep Social Security benefits intact for the next generation, President Obama said recently that he favors raising more revenue rather than cutting benefits or raising the age of retirement.

In a town hall meeting, the President said that he thought increasing the amount of income subject to Social Security taxes above the current level of $106,800 might be the best approach, although he did not rule out other options.

A report issued two months ago said that Social Security would likely exhaust its reserves by 2037. President Obama appointed a fiscal commission to weigh options for Social Security, including limiting benefits or raising the age of retirement. The bipartisan commission is supposed to make its recommendations in December on Social Security reform as well as reducing the federal budget deficit.

The Social Security Administration has announced that for the second year in a row there will be no cost-of-living increase for benefits in 2011. This is primarily due to the current low rate of inflation.

President Obama said he would ask Congress to approve a $250 rebate for those currently on Social Security as an “economic recovery payment.” Seniors, veterans and those with disabilities would be eligible for the one-time payment if it is approved.

A new report by the American Institute for Economics Research (AIER) says baby boomers that apply for Medicare next year will pay more than those already in the system.

This disparity is the result of the little-known “hold-harmless provision” which says that those receiving Social Security benefits cannot be charged higher Medicare premiums if their benefits do not increase. And in 2011, they will not increase. But Medicare costs will. And under the law, Part B premiums must cover 25 percent of the program’s cost.

Those enrolling in Medicare for the first time in 2011 will reportedly pay a minimum of $24 a month more for Part B premiums than those who enrolled in 2009 or earlier. Higher income enrollees – individuals with annual incomes of $85,000 or more and couples that earn more than $170,000 a year – will pay even more.

AIER president Charles Murray said that he believes it is unfair for 2011 enrollees to pay more for the same coverage, especially at a time when older Americans are under great financial stress. He said, “Charging new enrollees higher Part B premiums for the same coverage raises serious ethical and legal questions.”

To ensure that you have enough income for a healthy retirement, contact our Jacksonville estate planning law firm about asset protection and retirement planning.

Barclays Wealth, a British wealth management firm, has issued a report entitled, How the Wealthy Are Redefining Their Retirement that provides retirement planning insights from interviews with 2,000 high net worth individuals around the world. Among the findings:

Many do not plan to stop working. Even with little or no financial reason to do so, many of the wealthy individuals interviewed plan to keep on working. This group – which Barclays calls the “nevertirees” – simply do not envision a future without tending to business, either part time or full time. Stopping is almost unthinkable.

Many think estate planning is challenging yet essential. The challenging economy and unpredictability of investments have conspired to make most of us – including the wealthy – look at our “golden years” in different ways. But however their plans for later life may vary, the wealthy believe in getting a firm grasp on their financial needs and how to fund them through careful estate planning.

A shift in attitudes. The report says that attitudes and expectations of the working older wealthy have not caught up with the fact that they are still economically productive – creating jobs, companies and tax revenues. While they should be regarded as a valuable resource, getting the “nevertirees” to eventually step down may be a source of concern by the corporate sector.

Some economics experts warn that Americans – particularly those under the age of 50 – should start preparing now for expected cuts in Social Security benefits, according to a recent New York Times story.

Because of the bad economy, Social Security will pay out more in 2010 than it takes in. According to the latest benefits report from Social Security trustees, it will be able to pay full benefits through 2037. If no changes are made to the program, it will only be able to pay out 75 percent of benefits through 2083.

Recently, House minority leader John Boehner (R-Ohio) proposed raising the age of retirement to 70 for those who are at least 20 years away from retirement. There have also been proposals to raise Social Security payroll taxes, cut cost-of-living increases and reduce initial benefits payments.

What this means for Americans in their 20s, 30s and 40s is that they will probably need to put more money away for retirement than they may have planned to, to offset any cuts in Social Security benefits.

One Boston University economics professor ran the numbers for the Times and found that if the retirement age was raised to 70, this would mean a nearly 20 percent cut in benefits.

If you are interested in developing a retirement plan that minimizes these kinds of potential risks to your financial future, contact our Jacksonville estate planning law firm.

Statistics show that women clearly have a number of disadvantages when it comes to saving for retirement. Not only do women earn less than men – about 79 cents for every dollar earned by a man in the same job – they also are much more likely to take off time during their peak earning years to care for children.

In fact, studies have shown that women retiring today have 13 years of missed income as well as a $300,000 income loss over the course of their careers due to the disparity in wages paid versus what men earn. Because of this, they receive less in Social Security and other retirement benefits. In fact, a woman’s average monthly Social Security benefit is currently $263 less than a man’s monthly benefit.

Women live longer, too, so their retirement savings must last longer.

Financial experts agree that women need to start financial planning early and stay on top of their finances. A spouse’s illness or divorce can wreak havoc with a woman’s finances, so engaging an estate planning attorney to help you create a plan that will protect and grow your assets is essential to a secure future.

For more information on retirement planning and estate planning for women, contact our Jacksonville estate planning law firm.

While the economy has made it necessary for many Floridians to delay retirement, there are many who are looking for ways to ease into retirement – cutting back on hours or finding a part-time job that will allow them enough time to enjoy some of the activities they have long anticipated enjoying once retired.

A recent U.S. News & World Report article provides the following tips for entering retirement in phases:

Rework your schedule. Some employers actually have a phased retirement schedule for older workers, but most are designed by workers and managers themselves. Talk to your human resources manager about what might be available to you, including mentoring younger workers who can benefit from your experience.

Rework your pay. Fewer hours generally means less pay. Be sure you consult with your estate planning attorney or financial planner to determine how much of a salary cut you can afford and still maintain the retirement lifestyle you want in the future.

Check pensions. If you have a pension, make sure it will not be adversely impacted by cutting back your schedule.

Health insurance. If you do not yet qualify for Medicare, you should check to see if your company’s health insurance policy will still cover you if you work part-time.

Social Security. You can still work and claim Social Security benefits at the same time, but some of those benefits will be withheld if you earn too much. Go here to determine how much of your benefits might be withheld.

If you would like more information on transitioning into retirement, contact our Jacksonville estate planning law firm.

8. Dependents. Will you still be caring for aging parents in your retirement, or helping children who are not yet financially on their feet? If so, you will need to figure these expenses into your retirement plan. In addition, an estate planning attorney can advise you about the establishment of tax-saving trusts that may help you meet these needs.

9. Your estate plan. As 2010 has so aptly demonstrated, estate tax laws change and so engaging an estate planning attorney to assist you with keep your estate plan up to date and in line with your wishes is an important part of the retirement planning process. Creating a will, setting up advanced directives for healthcare and/or financial matters, establishing trusts to benefit heirs (or even pets!) while avoiding estate taxes can all be handled by an estate planning attorney.

10. Your retirement budget. Most of us would not embark upon an important journey without a road map, and a retirement budget is an essential road map for meeting your retirement goals. Consulting with your estate planning attorney and/or a financial planner to establish a budget that aligns with your retirement income and how you want to live in retirement will go a long way to ensuring a more healthy, stress-free retirement.

For more information on successful retirement planning, contact our Jacksonville Florida estate planning law firm.10 Things You Need to Know Before Retiring – Part 3 of 3

4. Plan for staying healthy. Baby boomers are changing the face of retirement, making it a more active and engaging time of life than ever before. Most of us know that for a retirement to be enjoyable, you need to stay healthy so planning for a healthy and fit lifestyle throughout retirement should be a goal as well.

5. Insurance needs. Unplanned – and uncovered – insurance expenses can totally derail your retirement plan, so you need to examine all your policies – homeowners’, auto, life, health, etc. – to be sure they dovetail with your retirement plans. If you plan to retire before you qualify for Medicare at age 65, you will need to have an individual health insurance policy in place and finding an affordable alternative can be difficult and, at the very least, take time. Plan for your insurance needs in retirement well in advance.

6. Know what Medicare covers. Visit www.medicare.gov to learn about Medicare benefits, what your monthly premium will be and any extra coverage you may need for the things that Medicare does not cover.

7. Social Security benefits. Visit www.ssa.gov/retire2/ to access the Social Security Retirement Planner. This tool will walk you through several scenarios so you can make an informed decision about the best time to apply for benefits. The longer you wait to apply, the larger monthly check you will receive, so it may be to your benefit to wait a few years to receive the maximum payout.

For more information on successful retirement planning, contact our Jacksonville Florida estate planning law firm.

With unemployment in Florida still in the double digits, some older workers who have lost their jobs during the economic crisis may be thinking more about retirement rather than finding a new job. Even those still too young to exit the workforce should think about retirement now – not just doing it, but planning for it.

The fact is, most Americans have no idea when or even if they can retire. In this three-part post, we’ll look at what you should be thinking about when it comes to planning your retirement:

1. How much money you will need to live on in retirement. In general, most experts agree that you should plan on using 70-80 percent of your current annual income for living expenses when you retire. To others, this figure seems high. The right answer is hardly the same for everyone, and depends on when and where you retire, what you plan to do in retirement, and other variables. Consulting an estate planning attorney to develop a comprehensive estate plan will enable you to come up with the figure that fits for you.

2. Sources of income. Once you figure out how much income you will need in retirement, you will need to identify the sources of that income – i.e., Social Security, IRAs, 401(k)s, pension plans, annuities, and so on.

3. Retirement quality of life goals. Most of us look forward to retirement as a time to enrich our lives, whether it is through spending more time with a spouse or other family, traveling, pursuing a sports passion, engaging in new hobbies and more. Write down all your personal goals for your retirement so you can be sure the funds are there to finance them.

For more information on successful retirement planning, contact our Jacksonville Florida estate planning law firm.

Everyone approaching retirement age has likely asked themselves, “If I could retire anywhere I wanted, where would I go?” This often leads to visions of grand beach homes or ski chalets, but realistically, what are the factors that will likely determine where you will live when you retire?

Money. It’s one thing to live a life of luxury and quite another to pay for it. Where you may want to live and where you can afford to live may be two different things.

Work. Are you going to fully retire, or “semi” retire? Studies show that many Boomers will both need and want to work at least part-time during their retirement, so will need to live where there are jobs available for their skill sets.

Budget. How good are you at living on a budget? And how different will that budget likely be if you move to a new place? The cost of living in a small town in Kansas is a lot different than a Florida beach resort community. Income and real estate taxes can vary greatly from state to state.

Healthcare. Access to quality healthcare should be part of your decision-making process when it comes to choosing a place to retire, especially if you currently have any health problems that dictate proximity to specialists or a hospital.

If you need to know more than you do right now about retirement planning, contact a Florida estate planning attorney.

While you may already be mentally and emotionally ready to retire, how can you tell if you are financially ready?

Guaranteed source of income. Are you already fully vested in your 401(k) or pension? Have you reached the age when you can begin making withdrawals? Before you can retire, you need to have a guaranteed source of income that is predictable.

Liquidity. Do you have a ready source of cash to take care of all your expenses as soon as you retire? If you need to sell stock or other assets to produce income for living expenses, you are probably not ready to retire.

Distribution strategy. Do you have a retirement distribution strategy in place that will provide you with enough income every year to cover your bills? If your retirement investments are still experiencing wide fluctuations, now is probably not the best time to retire.

Health insurance. If you are planning to retire before the age of 65, are you able to afford health insurance until Medicare kicks in?

Contingency planning. Have you done contingency planning so that some unforeseen circumstance like a major health problem doesn’t derail your retirement plan? Some experts suggest doing a “best case” and “worst case” retirement budget to determine if you would be able to survive a large complication.

Gut check. The longer you work, the better off you will be in retirement. Working longer gives you more time to save and less time to spend. However, if continuing to work is harming you emotionally or physically, the trade-off might not be worth it.

A Florida estate planning attorney can also help you determine the best time for you to retire by explaining all the options available to you.

If your phone contact list includes both a pediatrician and a gerontologist, welcome to the sandwich generation, that growing demographic segment of the population who are taking care of their parents and their kids at the same time.

Besides healthcare, many of us are also taking on more responsibility for helping older parents manage their finances.  If you are currently tasked with that responsibility – or will be at some point – here are some things to put on your checklist:

Prescription drug coverage. Is the Medicare drug program your parents chose a year or two ago still the right one for them?  Most seniors find the plethora of choices confusing, so defer making any changes they might need.  Mark Nov. 15 on your calendar, which is the start date for Medicare’s open enrollment program (it ends on Dec. 31).  Visit www.medicare.gov and use the online prescription drug plan finder to find the best plan for them.

Retirement account distributions. If you have parents over the age of 70 ½, they must take the required minimum distributions from their qualified retirement accounts by the end of each year.  If they don’t, whatever is left over on Dec. 31 is subject to a 50 percent penalty.  You can set up automatic deductions to solve this problem as well.

Estate planning.  If they have not done so already, your parents need to visit with an estate planning attorney.  Estate planning laws change constantly, so even if they do have an estate plan in place but haven’t updated it in awhile, they need to do so.

For more information on retirement and estate planning, contact our Jacksonville Florida estate planning law firm.

A new study released by the Employee Benefit Research Institute in Washington, D.C., shows that 47 percent of American workers who are currently 56 to 62 years old will not have enough money for retirement. For those who are now 36 to 45 years old, 44 percent are likely to run out of money in their retirement years.

According to EBRI researchers, the length of time someone has been invested in a 401(k) plan is the main factor in determining if they will have enough money for retirement. However, the study also showed that most 401(k) balances are still relatively low, which means that some older workers will likely need to keep working in retirement and adding an extra impetus for younger workers to plan for retirement.

Researchers said that putting an extra five to ten percent of your income toward savings would in many cases solve this problem for younger workers.

The EBRI research also showed that higher income workers are not necessarily immune to future financial troubles in retirement, either. Researchers said that higher earners are adversely affected by nursing home costs later in life, and still face a significant, if smaller, risk of being unable to meet medical expenses and other basic costs in retirement.

Continue reading "Study Shows 47 Percent of Baby Boomers Do Not Have Enough Money for Retirement" »

It used to be that you could decide at what age you wanted -- or were able -- to retire.  Not any more.

According to a recent NPR report, older Americans are being forced to take early retirement because of the high unemployment rate.  And the Social Security Administration confirms that more older Americans are applying for benefits early.

In fact, the average age of retirement for men and women has gone down steadily since 1945, when the average retirement age was 69.6.  In 2008, the average retirement age stood at 63.6.

From the NPR report:

The Social Security Administration had predicted there would be a 15 percent increase in retirement applications last year as baby boomers reached retirement age. Instead, the increase was 20 percent.

"That's a significant amount," says Jason Fichtner, chief economist at the Social Security Administration.

Fichtner says you might expect fewer people to retire early after the beating so many 401(k)s took when the markets crashed.

"But we also see that there are those people who at age 62 or 63 might have lost their jobs and find it harder to find new employment and decide to take retirement benefits earlier," says Fichtner. "On net, there seems to be more people filing for early benefits than delaying."

If you need help preparing a retirement plan that works for you, contact our Jacksonville Florida estate planning law firm.

The editors at Money Magazine have put together a good guide on Social Security and pension payouts:

The best age to start collecting Social Security -- You will receive a much larger benefit if you can afford to delay until you reach "full retirement age" or later - and working in retirement might allow you to do just that. For example, if you take an early benefit at 62 the payment will be 25% less than if you waited until your full retirement age. Hold off until you are age 70 and your benefit will be 25% to 30% more than the payout you would have received at full retirement age. So the difference between taking early retirement and waiting until you are 70 can be a benefit that is more than 50% higher.

Of course, the tradeoff is that when you take the earlier benefit you have that many more years of receiving a payout. Still, with much longer life expectancies today, delaying the payout as long as possible typically pays, assuming you make it to at least age 77. And according to the official actuary tables, if you are alive at 65 there's a high probability you will indeed still be around at age 77.

Will you receive your deceased spouse’s Social Security? -- Yes; you will be covered under the Social Security Survivor's Insurance program. And this being Social Security, there are the usual array of odd rules that determine how big a benefit you will receive.

If you have already reached full retirement age (somewhere between 65 and 67 based on your date of birth; if you aren't sure, check your latest Social Security annual statement), you're entitled to 100% of your deceased spouse's benefit.

If you're at least 60 but not yet at Social Security's definition of "full retirement age," your payout will be somewhere in the range of 71% to 99% of your deceased spouse's full benefit. Note that a widow or widower of any age with a child under age 16 is entitled to a 75% payout.

Will you receive a deceased spouse’s pension? -- Maybe. It depends on whether your spouse chose a monthly payout based solely on his/her life expectancy, or a monthly payout that continues through your life - that is, the "joint and survivor" benefit option. If you aren't sure what your spouse chose, get in touch with the company providing the pension.

As you might expect, with the "joint and survivor" option, the size of the monthly payout is smaller because the chances that one of you will live a long time are greater. Additionally, many plans offer different payout options: you may choose a setup that pays 100% to the surviving spouse, 75%, 50%, etc. The higher the promised payout to the surviving spouse, the lower the monthly payment will be.

Once the payout decision is made, it typically can't be changed. So if your spouse hasn't retired yet, your best bet is usually to make sure he or she chooses "joint and survivor" - or you may be in serious financial jeopardy if your spouse dies before you do. Alternatively, choose the bigger payment pegged to the retiree's lifespan, and invest the difference to build a bigger nest egg for you. If your spouse dies shortly after retiring, however, you're out of luck.

Are you up to speed on the latest developments concerning Social Security and pension benefits?  If not, contact our Jacksonville Florida estate planning law firm.

Are you considering retirement in another country?  You’re certainly not alone.

A few years ago, American retirees were flocking south to Mexico, lured by cheap housing and a lower cost of living.  The recession and the Mexican drug wars have stemmed that tide, although a recent CNNMoney.com report noted that, “The housing markets down south may be starting to revive a little after being on life support the past couple of years.”

While the cost of living in many countries is lower than the U.S., there are several factors to consider when making your decision, including:

Healthcare – it stands to reason that some of the countries with the lowest cost of living also have sub-standard healthcare.  As Americans, we are used to good quality healthcare, even if it is expensive.  Also, Medicare coverage does not extend beyond the U.S. borders, so you may need to return to the U.S. for healthcare or plan to spend more out of your pocket in your adopted country.

Taxes – if you move to another country, you still have to file a U.S. tax return.  If you work in that country and make less than $91,400, you won’t have to pay taxes, thanks to the Foreign Earned Income Tax Credit.  However, pensions are taxable no matter where you live.

Money Management – in many countries it is very difficult for a U.S. citizen to open a local bank account.  In addition, most foreign banks cannot accept deposits in U.S. dollars, so gaining access to your Social Security or other direct deposit funds may require wire transfers from a U.S. account, which can be costly.  Your U.S. income could also suffer due to fluctuations in the exchange rate.

If you need help with your retirement plan, contact our Jacksonville Florida estate planning law firm.

Many retirees – and those planning for retirement – are taking a look at reverse mortgages to supplement their retirement income.  If you are 62 or older, a reverse mortgage allows you to use your home equity to receive a loan.  The loan does not have to be repaid until you die or sell the home.

Reverse mortgage income is tax-free income that you can receive either as a lump sum, monthly payments or as a line of credit to draw on as you need it.  If you are married and your home is owned by both spouses, then each of you must be at least 62 years of age to qualify.  Generally, a reverse mortgage loan does not require a credit or income test.

With a reverse mortgage, you can borrow up to 80% of the equity in your home.  If the value of your home increases in the future, you will be able to increase the amount of your loan as well.  Conversely, if the value of your home decreases, you could be incurring more debt than you want.

The most popular – and only government-insured – reverse mortgage loan is the FHA’s Home Equity Conversion Mortgage (HECM).  To qualify, you must:

• Be 62 years of age or older
• Own the property outright, or have a small mortgage balance
• Occupy the property as your principal residence
• Not be delinquent on any federal debt
• Participate in a consumer information session given by an approved HECM counselor

There are no income or credit qualifications for an HECM, no repayment as long as the property is your primary residence and you can finance the closing costs in the mortgage.

To determine is a reverse mortgage or any other financial instrument makes sense as part of your retirement plan, contact our Jacksonville Florida estate planning law firm.

The primary reason that people engage an estate planning attorney or financial planner is to ensure they have enough money for their retirement.  So how do you know how much is enough?

To get a realistic picture of what your retirement expenses will likely be, you should do the following:

Calculate your current expenses. If you currently operate with a good household budget, this should be simple.  To get a quick snapshot, consult your latest tax return.  Take your after-tax income, deduct your savings and charitable contributions and the total will generally tell you what your cost of living is now.

Subtract the expense you will no longer have in retirement. Perhaps your mortgage will be paid off by the time you retire.  Subtract any child-related expenses, expenses associated with a job (clothing, commute costs, etc.),  entertainment and leisure expenses (don’t forget you’ll have those senior discounts!) and any other expense you think you’ll leave behind once you retire.

Add expenses you may have in retirement. Your healthcare expenses may be more.  You may decide you want to spend more to travel.  Or you may have children or grandchildren that need financial assistance.

Once you’ve done this exercise, your next step will be to engage some professional help to develop a comprehensive retirement plan.

For more information on retirement and estate planning, contact our Jacksonville Florida estate planning law firm.

 

There are a number of myths surrounding retirement plans and when you are in the process of doing your estate planning, you should be able to sort truth from fiction.  So here, finally, are some unvarnished truths about retirement plans:

You can take money out of your 401(k) before you retire without penalty. Most 401(k) plans have exemptions to early withdrawal penalties.  You can take early withdrawals to pay medical expenses, if you lose your job and you are between the ages of 55 and 59 ½, if you set up substantially equal periodic payments (which you can do at any age) or if you are taking dividend distributions from employer stock within an employee stock ownership plan (ESOP).  You won’t have to pay early withdrawal penalties, but the IRS will be expecting you to pay income tax on those withdrawals.

You can take money out of your traditional IRA before retirement age without penalty. Yes, there are several ways you can take money out of a traditional IRA before you are 59 ½ without an early withdrawal penalty (but not without paying income tax!).  Your estate planning attorney can provide you with information on how to do this – including setting up installment payouts, paying for college or buying a first home.

You do not have to automatically take money out of an IRA or 401(k) when you turn 70 ½. You are required to take a minimum amount out of an IRA once you reach the age of 70 ½; however, if you own a number of IRAs you can subtotal the amount from each and take the grand total out of just one.  If you are still employed at age 70 ½, you do not have to take money out of your 401(k) unless you are the owner of a business.

If you need more information about retirement plans, contact our Jacksonville Florida estate planning law firm.