July 3, 2023 Weekly Update

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We do love it when someone refers a family member or friend to us.  Sometimes the question is, “How can we introduce them to you?”   Well, there are multiple ways but a very easy way is to simply forward them a link to this webpage.

Here are this week’s items:

This Week’s Podcast – You Have Enough to Retire, but How Do You Create an Income.

Listen in to learn the importance of starting a withdrawal strategy in the first few years of retirement to avoid a sequence of return risks. You will also learn about all the things you should be thinking about if you want to retire early or at any age to keep your life fun and exciting in retirement.

What’s the importance of having a financial professional to help you with the withdrawal strategy to avoid the stress of the deaccumulation phase? Learn here…

CLICK HERE TO LISTEN TO THE PODCAST

 

CLICK HERE TO WATCH ON YOUTUBE

This Week’s Blog – You Have Enough to Retire, but How Do You Create an Income.

In this scenario, the couple wants to retire at 55 – one year from now. They want to know the best way to take their distributions. The couple plans not to touch the qualified money until they hit age 59.5.

They go on to say that they understand the 4% rule, but they don’t…

CLICK HERE TO READ THE BLOG

You Have Enough to Retire, but How Do You Create an Income?

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An article came across our desk from MarketWatch about a couple in their 50s who want to retire early. They have $4.5 million in savings and don’t know what to do to withdraw the money in retirement. 

Breaking down the couple’s assets, they have:

  • $2.3 million in taxable accounts
  • $2.2 million in retirement assets

The couple has the assets to retire, but this article resonates strongly with us at Peace of Mind Wealth Management. How do you build a plan that will last 20 – 30 years and take care of your family?

The article’s response was pretty standard: seek professional advice instead of trying to do it yourself because everyone and their circumstances are different.

With that setup, let’s dive into the meat of the topic and explain how we recommend you create an income stream.

What the Couple Lets Us Know About Their Situation and Ideas

First, the couple wants to retire at 55 – one year from now. They want to know the best way to take their distributions. The couple plans not to touch the qualified money until they hit age 59.5.

They go on to say that they understand the 4% rule, but they don’t know whether to take money monthly, quarterly, or annually. The couple planned to take money off the table after the 2021 peak, but waited until 2022 for tax purposes, and that backfired.

They also want to know how often they should withdraw money from their accounts.

From our perspective, we love the idea of a retirement focused financial plan. As you grow up you are told to save. Save as much as you can, and dump the money into 401(k), IRA, life insurance, brokerage accounts, emergency funds, and so much more.

Suddenly, you’ll exit the accumulation phase of life and need to enter the distribution phase.

The money you’ve built up needs to last the rest of your lifetime. This is where the anxiety phase seems to kick in:

  • Did I save enough?
  • Did I plan enough?
  • Do I have enough money to last the rest of my life?

We see clients that have less than $4.5 million for retirement and some with substantially more.

How Do You Start Withdrawing?

Based on the article, we know that the individual who wrote into MarketWatch understands the 4% rule. This rule is simple: if you withdraw 4% of your assets annually, you should maintain your assets throughout retirement.

Let’s say that you have $1 million in an account and take $40,000 out of the account annually. In a “predictable” market, this means you’ll replenish the money you take out each year.

We saw in 2022 that the market fell 20% – 30%, depending on the index. In 2020, the market fell over 30% in just a few weeks.

Markets are not predictable. Every few years, we do see volatility and corrections.

While the 4% rule is slightly off and is more like 3.3%, meaning for every $1 million you have in retirement accounts, you can confidently take out $33,000. Rates of returns have gone down, and inflation has gone up.

The times when 7% – 10% gains were almost certain in the markets are, in our opinion, not in our future. You’ll have years of gains in this range or higher, but on average, the market fluctuates too much for it to be predictable.

Based on this information, you should speak to a financial professional and look at all the pieces of retirement and how they fit together.

The person who responded to the question mentioned something else that was important: sequence of returns risk.

What is Sequence of Returns Risk?

If you start your retirement in a down scenario, your return risk goes up. For example, if you wanted to retire in January 2022 and wanted to withdraw $5,000 a month for retirement, it was a bad time.

The markets went on a steady 12-month decline with no recovery phases in the middle.

A person may have had $1 million at the start of the year, but when the year experiences a downturn like 2022, the $5,000 you take out is turning into a higher percentage of your portfolio.

The portfolio stress becomes higher when you withdraw on a down asset.

If the first early years were down 10% or 20%, you could get into a very tricky situation where you might receive 7% returns a year now. However, those initial down years really hurt your chances of the account lasting through retirement.

For us, it makes more sense to consider where you’re withdrawing the money and think about withdrawing money from accounts with less risk.

You may even need to adjust the number of withdrawals you have during down years.

Gap Between the 55 and 59.5 and Funding Retirement

Since the person is retiring before 59.5, they do risk being penalized if they touch their retirement accounts before the age of 59.5. The person writing in understood this fact, but they will need to fund retirement for 4.5 years in some other way.

You can tap into your non-retirement accounts, and there are strategies to tap into a 401(k) at age 55.

The other thing to identify if you’re retiring early is:

  • How much do you need to spend every month? These are “needs”, including food, utilities, mortgage and so on.
  • How much do you want to spend every month? “Wants” include things like vacations, visiting grandkids and so on.

We also need to think about pensions and any income that may be coming in that is not tied to your retirement account. Since the person is 55, we’re not considering Social Security. Early retirement age means thinking about heightened health insurance costs of around 10 years until the person reaches age 65.

When retiring at 55, the person also has opportunities to understand where to withdraw money from to make their money last.

Between the age of 55 and 75, when the person needs to take required minimum distributions, they have 20 years where they can do some pretty cool stuff. For example, they can:

  • Convert pretax to tax-free accounts
  • Reduce taxes through conversions

If the person has all their money in a traditional 401(k), they can start converting these assets through Roth conversions over these years. The ability to grow assets tax-free is a beautiful concept.

We recommend the person spend time understanding where money is coming in, where money is going out, and when various milestones in retirement will be hit.

A person can begin taking Social Security early, at retirement age or at age 70. The additional income may help pad their income needs later in retirement.

Medicare also needs to be considered and is a massive topic because of IRMAA, or surcharges for making too much money in retirement. You may take out more money from one account, but you’ll be penalized in some way:

  • Tax bracket change
  • Taxable Social Security
  • Medicare surcharges

When it comes to a withdrawal strategy, we follow a bucket approach that follows a “why” scenario for spending by breaking your money into:

  • Cash
  • Safety
  • Growth

Bank money and emergency funds are cash. This money is easy to access and will not impact retirement. Safety buckets speak to the idea of the safety of return risks. If we have a safety bucket with low risk and make a return, it brings predictability to our plan.

Finally, the growth bucket is the long-term bucket that is in the stock market and will go through ups and downs. If we can avoid tapping into this bucket, it will be allowed to grow long-term and can circumvent volatility because you don’t need to take money out of the account during down periods.

You can tap into the growth bucket when you need it for things like a vacation. It is a liquid bucket but allowing it to grow over time makes sense for our clients.

We aim to create a withdrawal strategy that minimizes risks and allows you to live comfortably through retirement. Everyone’s retirement plays out differently because your needs are unique and will change over time.

Working with someone who lives and breathes retirement strategies can help you create a withdrawal plan that minimizes risks and tax burdens, and considers volatility in ways that “general” rules, like the 4% rule, do not.

Do you have questions about retirement and want to speak to a professional?

Click here to schedule a 15-minute call with us today to discuss your retirement concerns.

June 26, 2023 Weekly Update

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We do love it when someone refers a family member or friend to us.  Sometimes the question is, “How can we introduce them to you?”   Well, there are multiple ways but a very easy way is to simply forward them a link to this webpage.

Here are this week’s items:

Portfolio Update:  Murs and I have recorded our portfolio update for June 26, 2023

CLICK HERE TO WATCH THE UPDATE

This Week’s Podcast – What To Consider If Your Spouse Has Passed Away After Retirement.

Listen in to learn the importance of knowing how much you’re spending, where that money comes from, and what changes will happen after a spouse’s death. You will also learn the importance of getting an attorney to help you through the probate process if your deceased spouse didn’t have a will executor.

We explain how to approach cash flow, estate settlement, insurance, tax, and investment and assets issues…

CLICK HERE TO LISTEN TO THE PODCAST

 

CLICK HERE TO WATCH ON YOUTUBE

This Week’s Blog – What To Consider If Your Spouse Has Passed Away.

Losing a spouse – or any loved one – is not something that people want to think about. However, we know from experience that our clients are not in the headspace to know exactly what to do if their spouse passes away.

Getting things in order today is going to be much easier than “figuring it out” in a worst-case scenario.

We’ve created a checklist….

CLICK HERE TO READ THE BLOG

What To Consider If Your Spouse Has Passed Away

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Losing a spouse – or any loved one – is not something that people want to think about. However, we know from experience that our clients are not in the headspace to know exactly what to do if their spouse passes away.

Getting things in order today is going to be much easier than “figuring it out” in a worst-case scenario.

We’ve created a checklist that we can send to you to go through that will make some decisions a little easier if your loved one passes away.

Do you want the checklist? Give our office a call at: (919) 787-8866.

Note: We do want to mention that we took the approach of a spouse passing on, but these are very similar steps that you would take with other loved ones, such as a parent.

We’re going to go through quite a bit of topics, but we’re going to start with: cash flow.

Things to Consider If Your Spouse Has Passed Away

Cash Flow

Cash flow really makes you look at where income is coming from and what you need to do now that your spouse has passed away. For example, you need to think through income sources, such as:

  • Pension
  • Rental properties
  • Social Security
  • Investment income

There is a lot to consider on these items, including:

Social Security

Often, we see cash flow issues with Social Security. You won’t receive both your own and your spouse’s Social Security, but you will receive the higher of the two. You may also be entitled to Survivor’s Benefits, but you can experience a drop in income on this end.

Required Minimum Distribution

Was the deceased spouse at the age of 73 (the age to take a required minimum distribution)?

In this case, you’ll need to take the required minimum distribution on behalf of your spouse if they didn’t take it before their passing.

Pension

If a pension was involved, was there a survivorship on the pension? Often, when you have a pension, there are multiple options. A single option is on the person’s life, but your spouse may have a survivorship benefit, too.

Normally, if a survivor benefit is available, your spouse will take a lower pension with the agreement that their benefits will pass on to their surviving spouse upon their demise. Survivorship benefits may be:

  • 100% of the benefit
  • 75% or 50% of the benefit
  • For a predetermined number of years

Inquire about the pension and what your entitlements would be as a survivor.

Rental Income

If rental income exists, you need to know if there’s a manager involved and how to take control of these properties.

Investment Income

Investment income may have been taken out to add to your cash flow, and this is a source of income that we’ll be discussing in more detail below.

Expenses

What expenses do you have each month? Where is the money coming from to cover these costs? You may need to adjust these expenses because losing a loved one is a major life-changing event.

Estate Settlement Issues

Many estate settlement issues exist and need to be thought through. First, did your spouse die with a will? If so, was there a living executor appointed? The executor will need to contact the attorney who wrote the estate plan or hire another attorney if the person is no longer practicing or alive.

An attorney will help you go through probate and make sure everything is done correctly.

If the only thing that is going to go through probate is a home that you own jointly, you really don’t need to worry much about this. Joint ownership makes it easy to transfer full ownership of the house to you.

Anyone reading this will want to make their surviving spouse’s or family’s lives easier by:

If you set beneficiaries, you can avoid probate.

Anyone who doesn’t have an executor listed for their assets will need to have one appointed to them to divide them properly.

What if you have more assets than you typically need?

If your spouse leaves you sizable assets, you can disclaim some of these assets to a child or grandchild. Why? These individuals may be in a lower tax bracket, so they’ll be taxed far less on the assets than you will be.

Retirement accounts that have ownership changes

Certain accounts will need an ownership change, which is something that you’ll need get done. For example, if you’re taking over your spouse’s 401(k) account, you’ll need to have the ownership of the account changed to your name.

Do you exceed estate tax guidelines?

Right now, as an individual, if you have $12.5 million from the estate, you’ll need to pay estate taxes. This figure is revised up to $25.8 million for a couple.

Possible unknown assets

If your spouse had credit card points or miles, you could have them changed over. Safety deposit boxes often can’t be opened until you’ve followed all probate rules, and don’t forget to search estate agencies and unclaimed property sites.

Update your estate plan

Normally, an estate plan ends up giving most or some of the assets to your spouse. You’ll need to review your plan and make changes now that your spouse is no longer living.

Digital asset considerations

Your spouse may have had digital assets, perhaps they owned digital currency, and this can be transferred to you.

Insurance

Insurance is the next big category to consider because you need to know if your spouse had life insurance. This type of insurance is a tax-free transfer and is one of the nicest forms of assets to receive. You need to know if your spouse had life insurance, and the amount of life insurance your spouse carried.

If your spouse was still working, they may have life insurance through their employer. This benefit often goes away if your spouse has retired. 

Veterans may have death or burial benefits.

Was the death accidental or work-related?

Often, benefits may be received or lawsuits filed if the death occurred on the job or was accidental.

Is there a minor involved?

If your spouse has a minor child or dependent, Survivor Benefits may kick in earlier for the minor.

You should take an inventory of all insurances that your spouse may have had because they can provide substantial financial relief.

Tax-related Issues

Taxation never seems to go away, and can potentially impact you in the following ways after the loss of a spouse.

Home

On your primary home, you can have up to $500,000 in capital gains. If you sell a home for $1 million, only $500,000 is hit with capital gains. However, if you’re single, the capital gains exemption falls to $250,000.

If you want to sell your home, you’ll want to be sure that you follow the rules.

Joint-owned Properties

If you had a joint-owned rental property, you’d receive a step-up in basis for the portion that your spouse owned. We have a nice flowchart that outlines this.

Did your spouse pay taxes on all their income for the year?

If not, you’ll need to make sure that these debts are satisfied.

Did you file taxes as married filing jointly?

You can continue to file like this in the year of your spouse’s death.

Do you have any dependent children?

If so, you might be able to qualify for widower’s tax filing status for up to two years after your spouse’s death.

Investment and Asset Issues

You may come into issues with investments and assets that were in your spouse’s name. It’s important to know:

  • Where were these accounts or assets held?
  • Did your spouse have 401(k) or IRA accounts? If so, were there any beneficiaries attached to them?

Spouses have options, which often allow you to combine your spouse’s retirement accounts with your own. 

If your spouse owned a business, you need to learn about buy sell agreements or buyout agreements that exist. There may be other assets, such as annuities, which may be transferred to your name.

Working with an accountant to help you through all these tedious tasks is recommended.

Final Things to Think About

While the list above is not exhaustive, it does provide you with a good starting point for your checklist of things consider now to have a better idea of what to do after your spouse’s death. A few additional things that you’ll want to think about are your spouse’s:

  • Email accounts
  • Social media accounts
  • Driver’s licenses

You’ll also want to notify the credit bureau that your spouse has passed away.

You don’t want someone to steal your spouse’s identity. It also makes sense to change their passwords on accounts that you do keep open.If you have any questions about the topics above or want to receive our full checklist, feel free to reach out to us at (919) 787-8866 or schedule a call with us.

June 20, 2023 Weekly Update

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We do love it when someone refers a family member or friend to us.  Sometimes the question is, “How can we introduce them to you?”   Well, there are multiple ways but a very easy way is to simply forward them a link to this webpage.

Here are this week’s items:

Portfolio Update:  Murs and I have recorded our portfolio update for June 20, 2023

CLICK HERE TO WATCH THE UPDATE

This Week’s Podcast – Mid-Year Tax Planning – Why So Important in Retirement?

It’s important to look at the previous year’s tax situation because some things, like Roth conversions and qualified charitable distributions, need to be done before the end of the year in order to be reported on your tax returns.

Listen in to learn the importance of coming up with a good tax withholding strategy to avoid tax liabilities and bills during tax season. You will also learn about the tax benefits of donor-advised funds and qualified charitable distributions.

CLICK HERE TO LISTEN TO THE PODCAST

 

CLICK HERE TO WATCH ON YOUTUBE

This Week’s Blog – Mid-Year Tax Planning – Why So Important?

Why are we talking about tax planning in the middle of the year? Mid-year tax planning allows you to get everything in order before the end of the year to lower your tax obligation as much as possible.

In June of 2023, we’re doing a lot of work to get ready for our tax planning and strategy meetings we’ll be having later this year. A lot of prep work goes into these meetings because it’s one of the most intense that we’ll have all year.

CLICK HERE TO READ THE BLOG

Mid-Year Tax Planning – Why is it So Important?

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Why are we talking about tax planning in the middle of the year? Mid-year tax planning allows you to get everything in order before the end of the year to lower your tax obligation as much as possible.

Note: We are not giving specific advice. We’re talking in general terms and advise you to discuss your own tax planning with a professional who can recommend the best method to reduce your tax burden.

In our most recent podcast (listen to it here), we have two members of our team with us, Nick Hymanson, CFP® and Taylor Wolverton. 

In June of 2023, we’re doing a lot of work to get ready for our tax planning and strategy meetings we’ll be having later this year. A lot of prep work goes into these meetings because it’s one of the most intense that we’ll have all year.

Why Do We Do Tax Planning and Tax Strategy Before the Beginning of the Year?

First, we want to review your tax situation from last year so we can understand potential moves we can make before the end of this year.

For example, Roth conversions or qualified charitable distributions (QCDs) need to be made before the end of the year to be reported on your tax return. Changes to your contributions or account conversions must be completed before December 31st of the year to be claimed on your taxes.

Mid-year tax planning helps us get everything in order to have a discussion with our clients on which strategies we can employ to lower your tax burden.

How Financial Planning Ties into Tax Planning

Financial, tax, and retirement planning are all linked together, or they should be if they’re done professionally. We have clients who first retire and live on cash in the bank, and then they start taking money from an IRA or a required minimum distribution.

In our process, at the beginning of the year, we have a financial planning meeting to update where their income is coming in this year, and we review what happened in 2022 (or the year prior).

From an income perspective, we want to understand where your income came from last year. We want to understand any unique changes that may have transpired this year and your income last year.

During the year, you may have income coming in from multiple sources, and it’s crucial that you have a good tax withholding strategy in place.

Proper tax withholding will allow you to avoid any unexpected tax surprises the following year. Having conversations throughout the year allows us to position our clients to pay less taxes by making smart financial decisions.

For example, if you want to sell a highly appreciated stock, we may recommend holding off until the beginning of the coming year because there are tax advantages.

We perform a full software analysis of our clients’ past year taxes to look for:

  • Filing status
  • Social Security number accuracy
  • Sources of income (interest, dividends, etc)
  • Withholdings 

We look through all these figures with our clients to help you better understand the tax obligations of each form of income. If you want to adjust your withholdings or make income changes, we’ll walk you through this process.

For example, you may not want a refund at the end of the year and want to withhold just enough taxes to be tax-neutral. You won’t pay or receive anything at the end of the year from the IRS.

With a mid-year tax plan, we have a better understanding of the steps that must be taken to reach your goals in the coming year.

Things to Do Before December 31st

Retirees must do a few things before the end of the year by law. Here’s what you need to know:

Donor-advised Funds

Sometimes we learn from a tax return or through a conversation with our clients that they give $10,000 to charity per year. Can you itemize? Sure, but the standard deduction is so high that it often doesn’t make sense to do this.

What’s the Standard Deduction

For your reference, the standard deduction in 2023 is:

  • Single: $13,850
  • Married filing jointly: $27,700 (65+ goes up by $1,500 per spouse)

Itemization won’t make sense if you have less than the standard deduction amount in contributions.

If you do a donor-advised fund, you can stack charitable contributions and use the multi-year contributions as a deduction this year.

Let’s assume that you put $40,000 into a donor-advised fund. You can still make $10,000 contributions to your favorite charity, but you can then take a $40,000 deduction this year to negate your tax burden. Itemizing is the best course of action if you have more deductions than the current standard deduction amount.

We may recommend this strategy if you expect a very high tax burden and want to lower your tax obligation.

Opening a Donor-advised Fund

We use Charles Schwab for our funds, but you can use a custodian of your choosing. A donor-advised fund looks just like any other account held at Charles Schwab, except for a few differences. Checks are written directly to a Schwab charitable account and funds are held directly in this charitable account. You can assign contributions to charities of your choice.

Funds remain in the account and can be withdrawn and moved to the charities in the future. Once you put money into the fund, you cannot reclaim it in the future. You can decide annually on who you want to distribute contributions to.

However, it is very important that Charles Schwab has information on the charity that you want to disperse the money to and that everything is in order for the distribution to be made problem-free.

Qualified Charitable Distribution

Qualified charitable distributions (QCDs) are another tactic that you can use if you’re over the age of 70-and-a-half. Age requirements and the time of your distribution are crucial and one of the reasons that people often work with a financial planner.

We can make sure that you’re making the QCD properly and get all the tax benefits that go along with it.

Note. If you have a required minimum distribution (RMD), you can set up the QCD to be taken directly from this. A key benefit is that if the RMD never hits your bank account, you don’t have to pay taxes on it.

Making Out Your QCD Check

In terms of Charles Schwab, we want to make sure that the QCD check is made out directly to the charity and not the account owner. If the check is written to the tax owner, it is considered taxable income.

We need a few things when writing out the QCD check:

  • Name of charity
  • Charity’s tax ID
  • Charity address
  • QCD amount

One important thing to note is that there’s an option to send the check directly to the charity or to the account owner, who can then hand-deliver the check to the charity.

The most important thing is to have the check written to the charity itself with the tax ID.

What You Need to Gather for a Tax Planning Strategy Meeting

Whether you work with us or someone else on a tax planning strategy meeting, you’ll need a few documents to get started:

  • Last year’s tax returns
  • Income for the coming year
  • Changes to income in this year
  • Change to cost of living on Social Security

We really need to know your sources of income and if any changes to this income have occurred in the last year. Cost of living adjustments are a big one and will impact your taxes, but all of this is information necessary for a tax planning strategy meeting.

IRMAA is another thing that we want to consider, and we have a great guide on the topic, which you can read here: IRMAA Medicare Surcharges.

Medicare looks back two years to determine your surcharges, which is something we can plan for with enough time and a strategy in place. We want to manage your Medicare surcharges so that you don’t need to pay more than necessary for your Medicare.

Tax strategy can help you better prepare for your taxes and make strategic moves that will save you a lot of money in the future.

We have a team of people working with us to handle all these moving parts and walk our clients through the process.

Want to learn more about retirement planning?

Click here to view our latest book titled: Secure Your Retirement.

June 12, 2023 Weekly Update

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We do love it when someone refers a family member or friend to us.  Sometimes the question is, “How can we introduce them to you?”   Well, there are multiple ways but a very easy way is to simply forward them a link to this webpage.

Here are this week’s items:

Portfolio Update:  Murs and I have recorded our portfolio update for June 12, 2023

CLICK HERE TO WATCH THE UPDATE

This Week’s Podcast – What If You Need Long-Term Care in Retirement?

If you want to know and understand what long-term care may cost you in the future, you must first understand the actual cost of long-term care.

Listen in to learn about assisted living services for long-term care that involve more than a nursing home. You will also learn about long-term care insurance methods/plans, how they work, plus the pros and cons of each.

CLICK HERE TO LISTEN TO THE PODCAST

 

CLICK HERE TO WATCH ON YOUTUBE

This Week’s Blog – What If You Need Long-Term Care?

One of the biggest topics today is the policies people took out in their 40s and 50s are having their prices increase. When signing up for policies, insurers do mention that the rates for premiums can rise, and it’s something that we’re seeing happen right now. Many of our clients receive a notice in the mail that their premiums are rising 50% or more, but there’s usually a list of ways to offset these costs by cutting benefits.

CLICK HERE TO READ THE BLOG

What If You Need Long Term Care?

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Long term care (LTC) is a part of retirement planning, but it’s surely not as fun and exciting as planning vacations or taking up hobbies. Twenty years or so ago, Radon worked exclusively with long term care policies.

Back then, people often asked:

  • What if I need long term care?
  • How do I pay for it?
  • What are my options?

One of the biggest topics today is the policies people took out in their 40s and 50s are having their prices increase. When signing up for policies, insurers do mention that the rates for premiums can rise, and it’s something that we’re seeing happen right now.

Many of our clients receive a notice in the mail that their premiums are rising 50% or more, but there’s usually a list of ways to offset these costs by cutting benefits.

Unfortunately, people who receive these notices are already in retirement and it’s just too costly to switch plans. The older you get, the more you’ll pay for this type of insurance, and it leads to a person feeling almost forced to pay the higher rates.

We also have people come into our office who mention long term care and do not want to go the typical insurance route because premiums are always rising.

The goal of this article (you can listen to the podcast here) is to:

  • Outline your options
  • Explain how long-term care works
  • Things to think about when considering LTC

If you’re trying to secure your retirement, you need to have something in place for your future long term care needs.

What are the Risks and Numbers Surrounding LTC?

LTC is costly, and it’s something you need to consider in the same way that you do a mortgage or car loan. You need to learn the numbers and care options that you have available so that you can feel more comfortable with the idea of long-term care.

As of June 2023, we know that:

  • 69.6 million baby boomers are alive right now
  • Around 70% of Americans 65+ will need some LTC

Considering these figures, there’s a good chance that you or your spouse will be in an LTC situation during your lifetime.

We know that the cost of insurance is high, and this is because LTC is expensive.

How expensive?

  • In 2021, the private-room nursing home costs were $108,405 annually
  • In 20 years, the costs are expected to be $195,791 annually

If you’re fit and healthy now, it’s difficult to imagine that one day you may need to cover these costs either through insurance or out of pocket.

The average LTC stay is 3.5 years, so just think about having to pay $379,000 – $685,000 to cover your care. Some people are in long term care for memory care, and they don’t have any other medical issues, so they can be in a care situation for even longer.

What is Long Term Care?

Go back 20 years and there was nursing home insurance. Then, home health care started to pop up. Long term care itself is more than staying in a nursing home. My mom right now is in assisted living because she’s able to do much of her everyday routine on her own.

However, she needs assistance in some of her Activities of Daily Living, which is something that falls into one or more of six main categories:

  1. Bathing
  2. Dressing
  3. Continence
  4. Eating
  5. Toileting
  6. Transferring (getting in and out of bed, etc.)

Insurance policies start to kick in when you need assistance with at least two of the activities of daily living. A doctor will determine that these activities are difficult for you, and you can go into long term care.

However, if you have a little issue with bathing and dressing, you may want to go into what’s known as assisted living.

Assisted living allows you to have someone close to you to help you with your activities of daily living and then progress to greater care in the future if you need it. Assisted living also allows you to maintain your independence for as long as you can.

Even assisted living is quite expensive.

Costs for homemaker services (someone who helps with food and bathing), and a home health aide both have different costs. Annual costs for these are:

  • Homemaker Services Home: $59,488/annually at 44 hours a week
  • Home Health Aide: $61,776/annually for 5 days a week
  • Adult Day Health Care: $20,280 per year
  • Assisted Living Facility: $54,000 per year (private room with one bed)
  • Nursing Home Semi-Private Room: $94,900/annually
  • Nursing Home Private Room: $108,405/annually

These are hefty numbers, but the super high expenses come from the nursing home part of long term care.

If you’re freaking out, let’s discuss your options for LTC.

Long Term Care Options

LTC is expensive and a major concern when you’re trying to secure your retirement. You can opt to:

Self-insure

If you have the assets, you can self-insure, where you pay for these costs out of your own pocket. This may bring about some anxiety for you and there are pros and cons to consider:

  • Pros: You’re not transferring assets to an insurer and can avoid premium rate hikes.
  • Cons: You’re taking on the risk of not knowing what LTC will look like for you or how long you’ll need it. Can you afford to self-insure?

Self-insuring changes drastically, as you’ve seen from the 20-year projection. We help our clients visualize by using questions and scenarios where we determine how much the LTC will cost and how much will be left for your survivors.

Many people do not want to deplete their assets to the point that their survivors will struggle.

Medicare

Medicare does not provide what is known as “long term care insurance.” However, the first 20 days of a stay in a rehab facility are covered. For example, if you fall and need rehab, the first 20 days will fall into this category.

Day 21 – 100, the coverage will require an expensive copay.

After the 100-day mark, there is no coverage available.

Medicaid

Medicaid is a government program for low-income folks or people without assets. If you fall into this category, the pros are that you can get the care you need. Any money that you do make will go to the facility, but anything above what you make in “income” will be paid by Medicaid.

For example, if you receive Social Security, your check will go to the facility to cover as much of the bill as possible.

The total assets that you can have on Medicaid are very low.

Qualifications for Medicaid vary from state to state, and there’s not an easy way to get into the program. You can get assets out of your name to qualify, but you can’t just give everything to your kids or play the system in this way.

Traditional Long Term Care Insurance

Traditional LTC insurance is the one that most people are familiar with. You pay for insurance and if you don’t use it, you lose it. You pay an annual premium that is put towards a policy that will kick in if you need help with two or more activities of daily living.

Insurance will reimburse you daily based on the amount that you built your plan around.

Perhaps you receive $300 or $400 a day to cover costs. The plan may:

  • Increase based on inflation
  • Limit the length of coverage

If you transfer more risk to the insurer, you can be confident that you’ll pay more for your long-term care premiums.

LTC does take the risk out of the hands of the 70% of adults who will end up in this long-term care plan. You’ll pay for this insurance, and you may never need it, which is a concern. We’re also seeing annual increases in LTC, meaning that premiums will jump substantially.

Underwriting and qualifications are required to be approved for your insurance.

Much like your homeowner’s insurance, if you never use your long term care insurance, the money you put into it is never returned. This brings us to the next couple of categories and things to consider.

Asset-based LTC Insurance or a Life Insurance Policy Combined With LTC

One of our favorite options is the combination of life insurance and long term care insurance. 

Why?

It allows you to:

  • Take money from the policy if you need care
  • Leave the remaining balance as life insurance to the beneficiaries

Your premiums go into an account of sorts. You can use the money for your LTC, and your premiums do not disappear. Premiums are fixed and will not go up. You can pay in cash and fund the premium in one lump sum.

Some plans also allow a 10- or 15-year pay period to fund the account.

Underwriting is necessary to qualify for these plans, but with just a few questions, we can help you understand if you qualify for this type of insurance or not.

Riders

There are long term care riders you can attach to your life insurance.

When you add a rider, it adds an option to have LTC insurance and your premiums for the rider are fixed. The drawback of a rider is that premiums are not tax-deductible, and you’ll need to pay more on top of your life insurance premium for the rider.

Chronic Illness Rider

A chronic illness rider is very similar to a normal rider, but it’s for chronic illnesses. You can use your benefit payments for things limited to chronic illness, or a non-recoverable illness that you have.

Asset-based Long-term Care Through an Annuity

With this LTC option, you’ll attach the long term care benefit to an annuity that you have. This is a special annuity that can double or triple. For example, you put $100,000 into an annuity and it will add $200,000 or $300,000 for your care needs.

You have leverage and do not need to pay premiums because you fund it upfront.

If you want, you can even take money out of the annuity, although it will reduce the amount of money that you have for LTC if you ever need it.

We find that it is convenient for our clients who are above 68 years of age because there is baseline underwriting, but it’s not as strict. You also don’t need to worry about premiums rising, which is perfect for anyone who is in retirement and on a fixed income.

Income-based Annuities Asset Doubler

The final option for long term care on our list involves income-based annuities. A doubler kicks in when you can’t perform two of the six activities of daily living and will double your income for a certain number of years.

You don’t need to qualify for a doubler and it will provide you with additional cash flow for a certain period of time.

We do have a great resource available that breaks down everything we’ve just talked about and goes a bit further into the pros and cons of each option that we mentioned.

Please reach out to us if you would like us to send you this document.

Click here to request our document covering all of this information in greater detail or schedule a call with us if you want help going through your own long term care options.

June 5, 2023 Weekly Update

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We do love it when someone refers a family member or friend to us.  Sometimes the question is, “How can we introduce them to you?”   Well, there are multiple ways but a very easy way is to simply forward them a link to this webpage.

Here are this week’s items:

Portfolio Update:  Murs and I have recorded our portfolio update for June 5, 2023

CLICK HERE TO WATCH THE UPDATE

This Week’s Podcast – Does The Rule 100 Work in Retirement?

The conversation around risk is extremely important for you to have an investment structure you’re comfortable with.

Listen in to learn why investment risk is subjective and should be looked at as an individual. You will also hear us perform an exercise to help you understand our numerically driven system that measures risk comfort.

CLICK HERE TO LISTEN TO THE PODCAST

 

CLICK HERE TO WATCH ON YOUTUBE

This Week’s Blog – Does The Rule 100 Work in Retirement?

A rule of thumb around risk is the “Rule of 100.”  If you haven’t heard of this rule before, we’ll outline everything for you below so that you have a better understanding of it. Keep in mind that risk in investing is somewhat subjective, and needs to be discussed on a case-by-case basis.

We have people ask, “What is my risk based on my age?” And this isn’t something that we really recommend. The “Rule of 100” is the rule of risk based on age.

CLICK HERE TO READ THE BLOG

Does The Rule of 100 Work in Retirement?

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A rule of thumb around risk is the “Rule of 100.”  If you haven’t heard of this rule before, we’ll outline everything for you below so that you have a better understanding of it. Keep in mind that risk in investing is somewhat subjective, and needs to be discussed on a case-by-case basis.

We have people ask, “What is my risk based on my age?” And this isn’t something that we really recommend. The “Rule of 100” is the rule of risk based on age.

What in the World is the “Rule of 100?”

The Rule of 100 takes your age and subtracts it to help you determine how much risk you can take when investing. For example, let’s assume that you’re 50. The equation would be: 100 – 50 = 50.

In this case, “50” is how much risk you can take.

So, based on this figure, you should keep 50% of your money at risk. If you’re like many 50-year-olds who feel like they have plenty of years left, it doesn’t make sense to stop 50% of your money from its growth potential. You can still have good risk control and keep this 50% of your money growing with relatively little risk.

Now, imagine you hit 70. You take 100 – 70 = 30, so 30% of your money can be at risk and in the market. For some people, this formula works well, but there are many people who want more risk.

You can have two people who earn the same money, accrued the same debts, and are the same age but have different risk tolerance based on their individual situations. One person may be fine with 4% growth per year, while another wants to achieve 12% growth and invest in riskier investments because they want to pay for their grandkids’ education.

What’s right for you?

We’ve adopted our own method of risk calculation that looks at the bigger picture to help you better understand your goals and what risks you must take to reach them.

Walking Through Our Conversation on Risk with Our Clients

Retirement planning is truly unique to each person. You may want to travel the world, while another person wants to spend their golden years tending to their garden. The goals and aspirations that you have for life in retirement must, in our belief, be a major contributing factor to your risk tolerance.

Our system is numerically driven and asks:

  • How do you feel about risk in a six-month window?
  • Say you have $1 million and lose 10%. Are you comfortable losing $100,000 in six months?

Many people believe that they’re comfortable with losing 10% of their investments until they see the hard figure in front of them. Let’s walk through an example of how we help our clients understand and determine their risks.

$1 million Retirement Roleplay

In this example, Radon has $1 million and has just walked into our office. 

Murs

Radon, you have $1 million to work with. We want to set you up for your retirement. We want to take risks and earn you money, but we want to create a portfolio that allows you to sleep well at night. We need to understand what that number is for you because everyone is different. 

If you look at the screen, Radon, we’ve put your million dollars here and have a slide rule in place that allows us to adjust your investment risks.

The slide starts in the middle here, and the middle is 14%. At this percentage, you have a risk of losing $140,000, but you can also have a nice gain, too.

Radon, I am going to move the slide all the way to the left, which is –4%, or $40,000. What I want you to do is, as I start moving the slider to the right, tell me where you think you feel uncomfortable with your losses.

We’re at 7%, or around $68,000 of loss. We’re now at 10%, or a $100,000 loss.”

Note

What we find happens during this example is that the client starts to talk to themselves. For example, they may say that they didn’t feel good about losing 20% in 2022. The person then weighs their risk on what happened last year.

We recommend trying to look forward because the losses last year may never happen again. We often see clients tend to stop at 10% because losing $100,000 is tough to swallow. However, most people realize they need to let the market breathe a bit and can sleep at night with a 10% loss.

We’ve established our baseline at 10% because that’s our initial gut reaction, where we become uncomfortable with any further losses. The screen that is in front of the client will have the 10% in the middle and then have numbers on the left and right, which show lower and higher risk figures.

Now, let’s get back to our example discussion from above.

Radon

Radon, during this discussion, determines that he’s comfortable with a 10% loss on his $1 million, and this is the figure he doesn’t want to pass. 

Murs

Radon, you told me 10% on the downside is your limit, but what if we can improve that? Let me tell you. It’s different for different families. 

  • One person may receive the same reward of 10% while only having a 6% loss potential, or $60,000. This would be the left side.
  • One person may be comfortable with a 10% loss, but what if I can increase my gain potential to 16%? This would be the right side.

Radon, what looks better to you?

Radon

In this case, I think I am comfortable with the risk. I feel confident with a 10% risk, and if I had more reward, I would move to the right.

Note

This exercise is thought-provoking because some people are comfortable with going to the right to have more reward, but others find it a no-brainer to lower their risk.

Keep in mind that Radon wouldn’t mind earning a little more at 10% risk. The software shows us that we can stay where we are at –10% downside, or we can go 16% – 19% growth. However, this would mean a 12% risk, or $120,000 potential loss.

Murs

Radon, which one looks better to you? Would you like to stay in the middle or take a little more risk for a lot more potential?

Radon

The rationale that I’m looking at right now is that I get quite a bit more upside for a little more risk, which is kind of in my comfortable range. Again, I am kind of nervous, but I think I can take it a little higher to make up for some of the losses in 2022. I don’t want to miss out on the potential that’s coming.

Let’s take it up one notch and see what happens.

Murs

Great. Pushing it up one notch, we’ve moved from a –10% to a –12% comfort level. Now, the last one is, what if we can earn better by going to –14% downside in a 6-month window?

Radon

I was already pushing it with the 12% risk, so I think I feel most comfortable staying in this range and not pushing my downside any higher.

Summing Up

These few questions and scenarios show a client the hard figures, which makes it possible to really identify their risk tolerance and the losses they feel most comfortable with in their portfolios.

Using these figures, we can create an investment plan that is within a risk category and create a growth plan that doesn’t exceed the client’s risk tolerance.

We will then use our bucket strategy to allocate all the clients’ funds to help them achieve the growth they want from their retirement accounts. The three buckets include: cash, income and safety, and then a growth bucket.

Risk tolerance allows us to create a one-page investment strategy that we give to our clients that helps them understand exactly how their portfolio will look.

We find that using this type of risk tolerance assessment works much better than saying a “moderately conservative” plan that may be losses of 10% or 20%. Moderately conservative is a subjective term, and we take the subjectiveness out of the equation with the assessment we create.

Click here to schedule a call with us to help you better understand your retirement risk tolerance.

May 30, 2023 Weekly Update

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We do love it when someone refers a family member or friend to us.  Sometimes the question is, “How can we introduce them to you?”   Well, there are multiple ways but a very easy way is to simply forward them a link to this webpage.

Here are this week’s items:

Portfolio Update:  Murs and I have recorded our portfolio update for May 30, 2023

CLICK HERE TO WATCH THE UPDATE

This Week’s Podcast – How To Manage Risk in Volatile Markets

Learn how we use data/numbers to identify and align with the best asset classes to be invested in. You will also learn why an active asset management strategy allows you to make a decent rate of return, not lose a bunch of money, and have peace of mind in your retirement.

CLICK HERE TO LISTEN TO THE PODCAST

 

CLICK HERE TO WATCH ON YOUTUBE

This Week’s Blog – How To Manage Risk in Volatile Markets

Growing your money to secure your retirement is something that everyone should do as part of their retirement planning. Active management, which is what we do, is something that clients come to us for because they want us to manage their portfolios.

CLICK HERE TO READ THE BLOG

How To Manage Risk in Volatile Markets

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Growing your money to secure your retirement is something that everyone should do as part of their retirement planning. Active management, which is what we do, is something that clients come to us for because they want us to manage their portfolios.

If you wanted a very low-risk investment you could keep your money in treasury bonds, CDs, or a savings account. However, growth opportunities with these types of investments are very limited. You might put some of your money in these accounts, but not 100%, because the potential to grow your money falls too much with a conservative investment portfolio.

Managing risks, especially in a volatile market, is more difficult for many investors because if you put all your money into an S&P 500 index, you take on all the associated risks in the process.

In the years 2000–2002, the S&P 500 was down 50%, meaning many retirees had their portfolios cut in half. Imagine if you’re withdrawing money from this portfolio at the time of a major decline, causing a compounded problem in the process.

Now, you could take 60% of your money and put it in the market and the other 40% into bonds. Come 2021 and 2022, and the bond market goes into a crisis, causing a lot of people to lose the money that they thought was very low risk.

Active Management to Lower Portfolio Risks

Managing your account actively helps negate these risks because we move within the market and take a very hands-on approach to growing your money.

Metrics and data points are used to help a person maximize their money within their own risk threshold. For example, hedge fund managers often try and make their clients the most money possible. The issue is that big returns also come with larger risks.

In an active management strategy like ours, our clients want safety and security and aren’t chasing the homerun gains that some of the other managers strive for with their clients. Instead, our active management approach maximizes returns while keeping risk at a minimum.

Many people are 10 years from retirement and have been through 2008 and 2020-2021, when the markets took a nosedive, and they don’t want to shoulder large risks any longer. As you get closer to retirement, earning and income potential begins to fall. At this point, you need to mitigate risks as well as you can.

When you have an active management strategy, the goal is to put your money into the best investment vehicles at the time.

Data allows an active management strategy to take place because we focus more about what the data is telling us and less about specific news on inflation and the debt ceiling.

Investing comes with pros and cons, but if you pick an investment strategy that works well for you, it can also help you secure your retirement.

Example from an Industry Podcast

Recently, on an industry podcast, they had a few financial advisors as guests to speak about how they manage their clients’ money. There was one response that stood out the most. This individual used to take part of the clients’ money and invest it actively, as we discussed above, and mentioned that the logistics of the approach were too complex and resource-intensive. Ultimately, they transitioned into a buy-and-hold strategy for their clients. The manager wasn’t set up for the trading involved in an active management environment, and a buy-and-hold strategy is easier to manage. 

With a buy-and-hold strategy, the most that needs to be done is balancing the portfolio on a monthly or quarterly basis. Technology makes this a touch-of-a-button scenario. Simply put in the wanted parameters, tap a few buttons, and rebalance a portfolio.

Instead, when we actively manage a portfolio, we check risk daily and will readjust a portfolio regularly. It’s unlikely that we need to perform a readjustment every day, but we’re ready to when it’s necessary.

At Peace of Mind Wealth Management, we like to manage our clients’ money in the same way that we invest our money: actively.

We find that an actively managed portfolio reduces risk greatly, which in turn reduces immense emotional tolls from portfolio losses.

Imagine losing 10% of your portfolio, realizing you lost $100,000 or $200,000. It doesn’t feel good. You can have a portion of your retirement savings in the market and another portion in safer investments that still offer plenty of opportunities.

This is why active management in a portfolio can be a powerful tool in retirement planning.

Asset Classes in a Portfolio

During any given year, some asset classes in a portfolio may be working and others are not. Asset classes can be a lot of things, such as:

  • Large-cap stocks
  • Mid-cap stocks
  • Small cap stocks
  • International markets
  • Emerging market investments
  • REITs
  • Investment bonds
  • Treasuries
  • Cash

Year-over-year asset classes move around, just like we saw in 2022 when the S&P 500 was down nearly 20%. Cash and treasuries were the leaders of asset classes in 2022 because they provided some level of return.

In 2021-2022, the 60/40 flaws started to show because a lot of the investment bond yields were down 11% – 13%. Bonds, for some people, were down as much as their market investments. At the time, many people thought it wasn’t possible to lose money in bonds.

Monitoring asset class movements and structuring a portfolio is how we like to invest our clients’ money. Monthly and quarterly data analysis and restructuring of asset allocation empower us to put investments in what’s performing well right now.

If the upswing and downswing of the market don’t bother you, then a buy-and-hold investment strategy may be better for you.

However, a lot of clients of ours love making a good return with minimal risk. Clients may sleep better at night and have peace of mind that they won’t wake up with a portfolio loss of 20%. This is what an actively managed portfolio provides.

Click here to schedule a 15-minute complimentary call with us to learn how your investment portfolio can be actively managed.

May 22, 2023 Weekly Update

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We do love it when someone refers a family member or friend to us.  Sometimes the question is, “How can we introduce them to you?”   Well, there are multiple ways but a very easy way is to simply forward them a link to this webpage.

Here are this week’s items:

Portfolio Update:  Murs and I have recorded our portfolio update for May 22, 2023

CLICK HERE TO WATCH THE UPDATE

This Week’s Podcast – Important Age Milestones in Retirement

Listen in to learn about the different financial milestones that happen in the life of a child from birth all the way to retirement. You will also learn when to work on your catch up contributions, the social security eligibility age, when to withdraw all your retirement assets and much more.

CLICK HERE TO LISTEN TO THE PODCAST

 

CLICK HERE TO WATCH ON YOUTUBE

This Week’s Blog – Important Age Milestones

Important age milestones seem to come in waves, especially once you secure your retirement.  A lot of rules around financial planning and tax issues impact people at different ages, which everyone should know about when retirement planning.

CLICK HERE TO READ THE BLOG

Important Age Milestones

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Important age milestones seem to come in waves, especially once you secure your retirement.  A lot of rules around financial planning and tax issues impact people at different ages, which everyone should know about when retirement planning.

Important Age Milestones for Parents or Grandparents

Some of the most important age milestones may or may not apply to you, so keep this in mind.

Age 0: Birth of a Child

If you have younger kids or grandkids, you can set up a 529 account for the child. These accounts are college savings accounts for the child. You can also set up a UTMA or UGMA account, which are types of custodial accounts that you can set up for minors.

Age 13: Child and Dependent Care Credit

At age 13, a child is no longer eligible for the child and dependent care credit.

Age 17: No Longer Eligible for a Child Tax Credit

When a child reaches age 17, the tax credit helps you deduct as much as $2,000 per child from your taxes if they’re a dependent.

Age 18: Age of Majority

Children reach the age of majority at age 18 in most states. The government now sees the child as an adult and the accounts you set up for them, such as the UTMA or UGMA, are now transferred to the “new adult.”

You’ll revoke your power over these accounts and need to go through the transfer process.

Age 21: Age of Majority

In some states, the age of majority is 21, and this is when all the custodial transfers for these accounts must take place.

Age 24: Full-Time Student Loses Kiddie Tax

A full-time student is no longer eligible for a “kiddie tax” at 24.

Age 26: Child No Longer Eligible for a Parent’s Health Insurance Coverage

When the adult child reaches age 26, they’re no longer eligible for their parent’s health insurance under the Affordable Care Act. We hear about this one a lot. Parents help get their kids through college, the child stays on the parent’s health insurance and then they’re shocked to learn that they’re no longer eligible to be on their parent’s plan.

Important Age Milestones for Retirement Planning

Age 50: Retirement Contribution Catch-ups

As young as age 50, there’s an important milestone that occurs. You can make “catch-up” contributions for your 401(k), 403(b) and 457 plans. In 2023, if you’re under 50, you can contribute $22,500 each year.

If you’re 50 or older you can add an additional $7,500 to the account, for a total of $30,000 per calendar year.

IRAs also have a catch-up contribution that you should consider.

Age 50: Social Security Benefits for Disabled Widows and Widowers

If you are a disabled widow or widower, you can file for Social Security benefits.

Age 55: HSA Catch-up Contribution

If you have a health savings account (HSA), you have catch-up contributions of an additional $1,000 on top of regular limits of $3,850 for a single person and $7,750 for a family.

Age 59 1/2: Reach the Age of Retirement Asset Withdrawal Without Penalties

In most cases, if you take money out of your retirement account before the age of 59 ½, you’ll be penalized for doing so. The early withdrawal penalty is 10%. Now that you’re 59 ½, you still pay taxes on many of these accounts, but you aren’t penalized for the withdrawals.

You also have the option, in most cases, to rollover from a 401(k) to an IRA. When you do a rollover, you now have the option to invest in stocks and ETFs. An IRA frees up the option of investing your retirement money in a way that is not possible with an employer retirement account. 

You can work with an advisor to help you with the retirement planning at this point.

Age 62: Social Security Eligibility at a Reduced Rate

You’ve paid into Social Security your entire life, and now you can begin taking from this account at a reduced rate. We are having major discussions with our clients on what to do at this critical age. In 2023, you have a limit of $21,240 in income.

If you make more than this amount, for every two dollars you make, one dollar in your Social Security is reduced. We don’t recommend that anyone making more than the $21,240 figure above take Social Security because of this reduction rule.

Age 65: Medicare Eligibility

You can receive Medicare at the age of 65, but you can apply for it at age 64 and 9 months. Now is the time to review plans and learn costs.

If you have an HSA that you’ve been funding, you can use your HSA for non-medical withdrawals because you’re eligible for Medicare. Before this age, any funds in your HSA are designated for medical and healthcare purposes.

Age 66 – 67: Full Retirement Age for Social Security

If you’re working and still bringing in income, you may want to wait until full retirement age to take Social Security. The income limit we mentioned at age 62 is now removed, allowing you to take your benefits while earning as much money as you can.

You can still work, receive good money, and still get 100% of your Social Security Benefits.

The full retirement age has changed a lot in the past decade or so, and the age for full retirement depends on the year you were born. The current ages are:

  • Born between 1943 and 1954: 66
  • Born in 1955: 66 and 2 months
  • Born in 1956: 66 and 4 months
  • Born in 1957: 66 and 6 months
  • Born in 1958: 66 and 8 months
  • Born in 1959: 66 and 10 months
  • Born in 1960 and beyond: 67

We believe that this age may be adjusted again in the future.

Age 70: Maximum Social Security Benefit

Deferring your Social Security until age 70 allows you to receive your maximum Social Security benefits. Your benefits will no longer increase after this age, even if you continue contributing to the system.

For 99.9% of people, this is the age when you want to take your benefits if you haven’t already.

Age 70 1/2: Charitable Contributions from Your Retirement Accounts

At the age of 70 and a half, you can begin taking contributions from your retirement accounts, such as your IRA, and then give them to charity using a qualified charitable distribution. If you use this method of charitable contributions, the key is that the money never hits your bank account.

The money goes from the retirement account directly to the charity, allowing you to avoid any taxes on it while also maximizing the amount you give to charity.

Age 73: Required Minimum Distributions (RMDs)

Age 73 is when you start taking your RMDs. This used to happen at age 70 and a half, but now you can wait until age 73 to take RMDs. You must begin taking RMDs at age 73 if you were born before 1960.

If you were born in or after 1960, the required age is 75.

For us, when it comes to retirement planning, these are some of the things that we like to discuss. A lot of milestones change and are easy to miss. If you would like to have a review of important milestones for you, be sure to reach out to us.Click here to talk to us about important age milestones.

May 15, 2023 Weekly Update

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We do love it when someone refers a family member or friend to us.  Sometimes the question is, “How can we introduce them to you?”   Well, there are multiple ways but a very easy way is to simply forward them a link to this webpage.

Here are this week’s items:

Portfolio Update:  Murs and I have recorded our portfolio update for May 15, 2023

CLICK HERE TO WATCH THE UPDATE

This Week’s Podcast -Why do You Need a HIPAA Authorization?

Listen in to learn how your HIPAA Authorization can connect with your living will or health care power of attorney for information to be shared. You will also learn about the medical information that can be released to an authorized person per HIPAA standards.

CLICK HERE TO LISTEN TO THE PODCAST

 

CLICK HERE TO WATCH ON YOUTUBE

This Week’s Blog – Why do You Need a HIPAA Authorization?

Estate plan packages are something we advise all of our clients to think about, and it often starts with a discussion of a will, power of attorney, and if the person needs a trust. However, there’s one element that should never be overlooked: HIPAA authorization forms.

CLICK HERE TO READ THE BLOG