Estate Planning and Tax Lawyer Blog

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.

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."

A recent 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 soon-to-be 9 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.

Need to learn some of these lessons yourself?  Contact our Jacksonville Florida estate planning law firm.