Don’t Forget the Medical Expenses

You have saved your money for years and the day has finally come, you are retiring. You have saved your money for years, and now you have a nice nest egg to live on. What would happen to the nest egg if you or your spouse gets sick? Will that nest egg be enough? While Medicare is the cornerstone of medical coverage, covering 60% of all healthcare expenses, it does not cover long-term care and a few other healthcare expenses. That leaves the other 40% of medical expenses and other major healthcare expenses including dental, vision, prescription and long-term care expenses coming out of your hard-earned savings.

What steps should pre-retirees take to ensure that there is enough money for medical expenses? The first step is to make sure you have a plan. By having a plan, retirees can be prepared for the unexpected expenses, avoiding the problems that are associated with reacting to unexpected events. According to Healthview Services 2015 retirement Health Care Cost Data Report, the average out-of-pocket expenses for a couple age 65 id $395,000. Long-term costs can average $140,000 per person, but these costs can be misleading.

The next step is to prepare for your needs. Don’t rely on averages to determine what you will need for medical expenses come retirement. The best plan is to run a health assessment to estimate what the cost will be for you. The health assessment will consider gender, family history, and life expectancy to estimate the cost during retirement. Once you have your assessment, study up on Medicare coverage. It is complicated and not free. Each part covers something different, and there are traps you will need to navigate to find the right coverage for you.

Another step is to max out your health savings account. If you have a high deductible health insurance plan, you may have an option to start a health care savings plan. The money is tax deductible and grows tax-free. Once you have looked at all you options, talk to your family. They need to know what you expect and how you want your needs met should an illness interrupt your retirement.


Have You Failed

It’s that time again. Time to put away your summer fun and return to the classroom. When you send you kids, back to school it is usually the time we think about how much they have grown and where they will be in a few more years. Are your kids (or grandkids) getting close to graduation? Are they still in elementary school? Do you know if they are going to be ready for college when the times comes? Now is the time to start planning for college. It is never too late to start a 529 Savings Plan.

I know we have talked about this before, but I bring it up again because in a recent survey conducted by the financial service firm Edward Jones, 66% of people surveyed still do not know about 529 Plans, despite them being around for almost 20 years. What is slightly up from last year is 34% could correctly identify a 529 plan from four options given to them, but still do not understand how they work.

We all know that college is increasing in cost every year. Some people are at a loss on how to pay for college. We know that loans are an option, but some people do not like to have enough debt that they will be paying off into their thirties. The 529 Plan allows families to start early. You can set up a plan for your child when they are born or any time before they are in college. The soon you start the account the more chances you will have to save.

Each state has different rules for the 529 Plan, but most have the same key features. You set up an account. It does not who sets up the account. It can be a parent, grandparent, etc. The account is similar to a retirement plan, once it is time to send your kids to college, they can withdraw money from the account to pay for fees, books, tuition, and housing. If you would like more information talk to your financial advisor, or visit:

We all know the value of a college education. Let’s be proactive and help our children develop their future. By setting up a 529 Plan, you are helping your child manage the cost that will lead them on the path to higher learning and set them up for success.


Avoiding Probate? What Clients Should Know

When going through estate planning, there is always an inevitable question. Should I avoid probate? Let’s start by defining probate. The legal prospective of probate is, the process of clearing title to certain property when someone dies, so that ownership can be transferred to those receiving the inheritance. Probate can be costly, and avoiding it takes time and energy to accomplish the task. It is important to analyze whether this is the best choice for you.

Reducing Cost

Avoiding probate can save money. The cost associated with probate are generally attorney fee, filing fees, and compensation for personal representatives (known as executors). Some states such as California, Florida, and New York impose fee based on the value of the asset subjected to probate. However, in other states, such as Massachusetts, the cost is determines on the types of papers the court requires. It is important to understand the laws that govern assets in your state.

Reducing Complexity

Many people express the desire to simplify things for their family during the estate planning process. IF this desire is expressed it is important for them to avoid probate. This will lessen the time it will take the heirs to gain access to the assets and lessens the steps to transfer ownership of assets.

Increasing Privacy

Most paperwork filed in courts is considered public record. This means that anyone is able to view the will and information about the value of the estate. If the estate goes through probate then a notice has to go out to all interested parties. If you would like to keep the terms of your estate private, then it is a good idea to avoid probate. This allows you to disinherit certain relatives, keep certain aspects of the estate private, and determine how the estate is divided.

Avoid a Will Contest

This goes back to privacy a little. By avoid probate, you can avoid disinherited relatives from contesting the will. If the assets go into probate, a court ordered notice is sent out and assets are transferred into a trust (or something similar). Depending on the state, challenging the non-probate estates can be considerably more difficult, then if the estate went through probate.

Accepting Paperwork

Avoiding probate comes with certain administrative responsibilities. Many times, ownership of accounts need to be changed, beneficiaries need to be updated, and real estate conveyed through deeds. These tasks require time and energy. Some even have fees associated with them. This can be a burden for many people making the idea of avoid probate unattainable, but with the help of a good financial advisor, many of the burdens are eased and you are guided through the paperwork.


Don’t Make These Retirement Mistakes

Most of the people that retire at 65 can expect to spend about 20 years in retirement, however about one quarter of them will reach the age of 90 and about 10% will make it past age 95. Those numbers add up to a lot of time spent in retirement. If you want to live comfortably in retirement, no matter how many years you live after you punch that clock for the final time, financial experts say you should avoid these retirement blunders.

  1. 1.       Not having a plan for retirement money. It is important to plan what you will do with your retirement money. How much will be used toward paying bills and everyday expenses, etc. Experts say this is the biggest blunder that most retirees make. To avoid this create a cash flow scenario. This will show you how much money you will need for everyday living and how long it will last.
  2. 2.       Forgetting about inflation when planning. Another mistake is forgetting that the dollar today will not be the same dollar twenty years from now. Inflation can erode the money you have saved by not giving you enough purchasing power. Retiree should put this into their cash flow scenario when determining what to invest for retirement.
  3. 3.       Failing to save enough money. There really is not much more to say. You can’t compensate for what you don’t save. It is better to save more than you think you will need, then not enough.
  4. 4.       Raiding retirement accounts early. Many retirement accounts will allow you to take a loan against the account balance, but in reality, this is just taking away from what you have worked hard to save. That money needs to stay in that account to accumulate interest that compounds annually. You could be losing out on tens of thousands of dollars by pulling money from the account early.
  5. 5.       Poor investment behavior. Over the course of 30 years, the market is bound to take a down turn. It is important to pick reliable stocks and mutual funds to help grow your investments. Don’t stock jump, and remember it is all in the timing. This can also be said for the opposite. If you are too conservative in your investments, then you may not make enough money over the 30-year period.
  6. 6.       Missing out on employer’s 401(k) match. It is estimated that American workers miss out on $24 billion per year in matching funds for their 401(k)s. This money is what employers would be depositing into retirement accounts if the workers would have made their own contributions. You are missing out on free money.
  7. 7.       Letting all money be taxable. Take advantage of retirement accounts that allow your money to be tax free later in life. Roth accounts is taxable, but grows to be tax-free. Explore account opportunities that may cost you more up front, but allow you to enjoy the benefit later.
  8. 8.       Underestimating health care expenses. People don’t always plan for the “What ifs” life can throw your way. Medical care can be one of the ‘what ifs’ frequently overlooked. Review the Medicare options and make sure you have enough money to cover any gaps.
  9. 9.       Filing for Social Security too early. You can begin to withdrawal social security as 62, but if you leave it until the full retirement age of 66 you can maximize the money in your social security. The government gives retirees an extra 8% for every year they leave their benefits unclaimed, up to age 70. Married retirees can coordinate spousal benefits to maximize their social security.

Planning for Life Events Part II

In the last part, we started a list of life events that require financial planning. Here are a few more events that will require help financially.

  1. 1.       You just got an inheritance. Unexpected money cannot only bring you a large sum, but questions on how to spend it, charitable donations, or tax payments. Getting professional help in figuring out what to do with it can be important when dealing with a large sum of money. Remember it is a large responsibility to take on any sum of money. Make sure you put it to work for you, instead of you working for it.


  1. 2.       And baby make three, or more. When you finally decide to start a family, you know that for the next eighteen years you have a responsibility to provide and care for that baby as it grows. You might want to think about starting a 529 account to help them pay for college, or post high school education. You will need to consider taking out insurance policies on the children and maybe start a savings account for them. There is much more to having children then picking out baby names and shopping for blue or pink. Planning for their future will help you plan for yours.


  1. 3.       You’re hired. Whether it is your first job, or fifth job, it is important to make adjustments each time you take on a new job. For you first job, you might want to consider paying for a onetime fee to a financial planner to help guide you during this key life transition. It may even be a good idea if you will experience a large pay raise with the new job.


  1. 4.       You are offered a generous severance package. Emotion can run wild when your employer offers a big severance package. It can be heart breaking to know that you put so much time into a company and they are wanting to cut ties, but at the same time, there are so many possibilities to consider. It is important to understand the complex financial issues associated with severances packages. Talking to a financial advisor before signing on the dotted line could be very beneficial. You need to understand if the package will be taxed immediately or if you will be responsible for moving the money in your retirement you’ve accumulated to another account. Understanding the fine print will make everything easier for you.


  1. 5.       You retire. Retirement is considered a pivotal financial moment in a person’s life. It is vital to plan for this moment. Financial planner encourage people to start planning for retirement in their 20’s and 30’ to ensure that you have enough money to make this major life transition. You spend your peak earning years saving for the last third of your life. Some people want to spend their retirement traveling; others will find themselves doing something they never planned for. Make sure you have enough money to cover what you want to do and the unpredictable life likes to throw you way. 

Planning for Life Events Part I

Last month we talked about how people are delaying life events because they do not have the money to afford a change. This month we are listing several life events that need planning. As we age and mature we find that our priorities change, reflecting where we are and where we want to go instead of where we have been. Many life-changing events require financial planning to make the dreams a reality, and with the right guidance from a financial planner, your dreams are within your grasp.

  1. 1.       Buying a vacation home. For many people this may not even be on the radar, but think of the endless summer nights that will be spent relaxing and enjoying family and friends. Many times buying a vacation home is often wrapped up with the emotional ending of summer. With careful planning with a real estate agent and a financial planner, you can plan, allowing you to choose the perfect home to spend those fabulous days with your family and friends.


  1. 2.       Wedding bells are ringing, loudly. So you finally popped the question. You saved for a few months, found the perfect ring, and she said yes. Now comes the complicated part. Combining finances. Couples are take more time before they tie the knot, so combining finances can be complicated when brining in already established financials. Prenups may be a buzzkill, but they can be something that protects each person savings and prevent any misunderstandings if something should go wrong.


  1. 3.       You got the raise you’ve been counting on for years. Pay raises are usually small, so a big raise can be cause for celebration. This also means more responsibility financially. This is a good time to bump up the retirement savings, invest in stocks, pay off some bills, or put it away for a rainy day. Talking to a financial advisor to help you decide what to do and make a new budget.


  1. 4.       Congrats, you’ve graduated. Even though when you graduate college you don’t have a lot of money, but talking to a financial advisor can be helpful in guiding you in the right direction for your future. They can help you make choices in how to begin repaying your share of the $1 trillion in college debt students leave college with.


  1. 5.       You’ re relocating. Whether it is for a job or to be closer to family, moving can be an overwhelming experience. There are different tax rates, cost of living can vary greatly, moving expenses, finding a place to live, timing, etc. Talking to a financial advisor that has offices in your old and new place can be beneficial when helping you make the changes.

Career Changes

Is it time to change jobs? How do you know when is the best time to change jobs? Is there ever really a good time to change jobs? These questions have plagued everyone at some point in time. Some of them are prompted be major life changes, such as graduating college, moving, or even going back to school. Other times you feel stuck in the job you are currently hired for, and you are ready for a change. Either way it is important to look at few options before making the plunge into the deep waters of job searching. [Read more…]


Bridging Income for Early Retirees

If you invest your money wisely, maximized your savings, and diligently put money aside, you may be lucky enough to retire early. But how do you insure that you have enough money to live on comfortably for the duration of your retirement. This is the challenge of early retirement. How do you withdraw income from your investment portfolio, creating a steady stream of income until pensions and Social Security helps fill in the gaps. [Read more…]


Defined Contribution Plans Offer Options for Older Participants

Recently there is more information released on older participants with defined contribution plans. The information released refers to qualified plans that will be allowed to provide lifetime income to plan participants by offering funds that would include deferred annuities. The notice from the IRS explained how target date funds (TDFs) could offer deferred annuities without violating the nondiscrimination requirements.

Target date funds are funds offered to participants in a specific age groups designed to change the investment mix as the group ages. TDFs are usually restricted to particular age groups, usually older employees. This allows them to invest in deferred annuities allowing older participants to increase their portfolio quicker. The older participants have the potential to reach greater earning than someone who is younger doing the same thing.

Some TDFs also offer the deferred annuities. These are distributed when the participant reaches their target age. The target age usually come within a few years of the groups’ normal retirement age. As the group age increased, more of the portfolio is invested into deferred annuities. The IRS understands that most deferred annuities are based on the purchaser’s age, and do not expect participants outside that range to hold an interest in the TDF. The largest concern is that they favor highly compensated employees, but a TDF will not violate the nondiscrimination requirements if they:

  • Offer a series of TDFs under a defined contribution plan that serve as an integrated investment program in which the same investment manager manages each TDF and applies the same generally accepted investment theories across the series of investments.
  • Some of the TDFs available to the older participants offer deferred annuities and none of the annuities offer a guaranteed lifetime withdrawal benefit or guaranteed minimum withdrawal benefit.
  • None of the TDFs holds employer securities that are not tradable on an established securities market.
  • Each of the TDFs are treated in the same manner as any of the other TDFs. They all need to offer the same options.

Preparing for Tax-Time

It is still early to be thinking about tax time, but it is just around the corner. There is still plenty of things that you can do to prepare for the opening of tax season. It is better to start planning now then wait until the last minute. Below is a list of steps you can take to be better prepared to for tax time.

  1. Gather up work receipts: If you purchased any item for your job that your employer does not reimburse you for, that item is deductible. These items include but are not limited to uniforms, legal fees related to doing your job, licenses and regulatory fees, education that is required for employment, subscriptions to professional journals and magazines, medical exams required by your employer, etc. If you car self-employed you can also deduct  items such as computers, desks, manufacturing equipment, tools, advertising fees, electricity, gas, etc. It is important to save all your receipts and keep them in a safe place. Having them all in one location will help you find what you can deduct from your taxes that is work related.
  2. Save pictures, receipts or records of charitable donations: The holiday season is coming up shortly and it is also the time where many people chose to donate to organizations. One of the added benefits to donating to a charity is the ability to deduct the contributions on your taxes. Save all records of the donations. If donating a substantial amount or item to charity it is important to document that donation with a few pictures. Formal pictures are not required, but a picture is worth a thousand words. It will also substantiate your deduction to the IRS.
  3. Gather mortgage receipts: Even thought your mortgage company will provide you a 1099 detailing the interest you have paid on your house payment, it is important to keep the receipts to make sure that the bank is accurate while providing you will some sense of what the size of the deduction will be for the year.
  4. Proof of energy efficient goods: There is a deduction of 10% of the cost of the qualified energy efficient improvements. These improvements may include adding insulations, energy-efficient exterior windows and doors, and some roofs. The credit has a lifetime limit of $500, with $200 going towards windows. The qualifying residence must be the principal residence of the taxpayer and be located in the US. New construction and rental propertied do not apply to this deduction.
  5. Locating last year’s tax return: This is probably the most important step. Locating last year’s tax return allows you to review the return. This can provide you with a wealth of knowledge and valuable items that may need to be included on this year tax return. It can tell you tax loss carry forward information, withholding information, and information on how to treat certain income such as capital gains or traditional income.