The Yearly Journey of 1,000 Steps: It’s Tax Season and I Can Do Better

journeyAh, mid-February- that time of year when my postman provides a daily barrage of tax documents, and scolds me for not retrieving them quickly enough. When it finally becomes apparent that he can no longer jam another rumpled envelope into my overflowing mail slot I know it’s time to file my taxes. While this annual ritual often yields a financial reward in the form of a tax refund, there is clearly a higher purpose for the enormous pile of paper. Note to self: my inner guilt will be quelled; this year I will make better use of tax time, and so can you. Continue reading


Which type of IRA is right for you?

roth_or_traditional_iraAsk a financial planner whether to save for retirement using a Traditional IRA or a Roth IRA and you may receive an unsatisfying answer: it depends. While the Roth IRA is a much-loved planning tool, whether it’s the best option for you will depend on several factors, but math is not one of them. Continue reading

Ready to Retire? 7 Things You Need to Do Now – As Seen in the Fiscal Times!

Ready to Retire? 7 Things You Need to Do Now


The Fiscal Times

May 31, 2013

You’ve worked hard over many years and finally your retirement finish line is 3-to-6 months away.

But don’t start exhaling just yet – there’s  still plenty of race left to run. Before you take one of the biggest steps of your life, make sure you read this list to understand what you need to do and why:

1. Do the math.
When you first thought of retirement years back, you probably had  a vague idea of what your spending would amount to by the time you actually took this step. But at this point, you should have a much clearer picture of your monthly budget. Be sure to laser in on your fixed expenses as well as on your lifestyle expenses to determine your financial needs.

RELATED: Why Boomers Are Ditching Retirement to Go to Work

Look at your anticipated income to clearly identify how much you’ll be taking in and from what sources.  As part of this step, develop a Social Security strategy. Determining when to start taking Social Security is a pivotal decision that will impact all your other retirement income sources.

While you can start taking Social Security benefits at age 62, your payments will be reduced based on the number of months you take those benefits before you reach full retirement age. And if you take a part-time job in retirement, that could reduce your Social Security payments, says Katie Libbe, vice president of consumer insights at Allianz Life. 

For example, if you’re under 66, you can only earn up to $15,120 in 2013 without it impacting your Social Security. Once  you exceed that, you’ll lose $1 in benefits for every $2 in wages you earn (which doesn’t include investment income like dividends or capital gains), according to Jonathan Gassman, CPA with The Gassman Financial Group. But if you wait until full retirement age, you can earn as much as you want and your benefit won’t be affected.

Either way, meet with a representative at your local Social Security office as well as your financial planner to discuss your options.

If the numbers don’t add up in your favor when you’re doing your budget – you  may need to delay retirement by a year or two in order to ramp up savings.

2. Tell your employer.
There’s no set rule for when it’s best to tell your employer you plan to retire.

Some employers have the advance notice time you must give written into your contract, so read over company policies carefully. If you’re high up on the corporate ladder or occupy a critical role in the company,  it’s typically recommended to give your boss at least six months notice, according to Joyce Goila a management consultant with The Herman Group. But  for most people, one to three months will suffice. “It’s important to look at what others have done [in your company] when giving notice for retirement,” she says.

3. Meet with your human resources department.
If you’re lucky enough to have a pension in 2013, understand it. What is it going to pay you? Are there any advantages to waiting to take your money? While most employers offer a lump sum option, for many people an annuity might be better if it is coordinated with overall retirement income. Furthermore, consider any possible rollover options to IRAs or Roth IRAs, depending on your retirement income goals, advises Jamie Patrick Hopkins, a professor of taxation at American College.

If you have a 401(k), what are your distribution options? What benefits may be portable or convertible, such as health, life, or long-term care insurance? Look through all of your benefits and compensation information – some employees find they have deferred compensation they never knew about. Verify everything to prevent any surprises.

4. Get a handle on health care costs.
Health care is a wild card in retirement. A recent Fidelity Investments survey estimates that a couple retiring at age 65 this year will need $220,000 to cover health care expenses – and that’s with traditional Medicare coverage.

Well before you leave your job, research Medicare and look at all your health care options. Are you  and your spouse eligible for Medicare, and what supplemental insurance might be best for you? You might need to continue private insurance if you aren’t  eligible for Medicare yet. Or  perhaps your spouse is under 65 and separate decisions will need to be made, says Roy Laux, president of Synergy Financial Services.

Do a thorough analysis of your current health care needs as well as potential future needs based on your health history and your family’s history. Look into long-term health care insurance and see if it’s right for you. This will help you determine how much of your savings to set aside for potential medical expenses. Schedule your dental, vision and annual visits while you still have employer-sponsored health care.

5. Eliminate as much debt as possible.
The fewer debts you have going into retirement, the better. If possible, it’s a good idea to pay off any lingering debt, says Rita Cheng, a certified financial planner with Ameriprise Financial. But you also don’t want to drain your retirement savings just to enter your golden years debt-free.

Start by paying off any credit card debt, since you’re likely paying a higher interest rate on the balance (the national average is 13 percent for fixed-rate credit card). Your mortgage is the last type of debt you should pay off. If you don’t have the luxury of paying it off before you retire, consider refinancing. It’s easier to qualify for a refinance while you’re still employed, and though mortgage rates are currently low, they’re likely to rise soon. Today’s 30-year fixed-rate mortgage is 3.77 percent, but they’ve been inching higher and are likely to continue doing so. By 2014, the rate is expected to be 4.5 percent, according to the Mortgage Bankers Association.

6. Review your investments.
“This close to the [retirement] finish line, you don’t want to leave your savings to chance. Moving investments out of volatile stocks and mutual funds into more stable options [like annuities] is a smart move when you don’t have time to recoup losses,” says Dan White, a certified financial planner with Daniel A. White & Associates.

Not only should you check to see if your asset allocation is appropriate as you enter this next life stage, you also want to take a good look at all fees associated with your investments. White recommends moving some funds into low or no-fee CDs. “While [interest rates] are low today, we’ll see them start to rise on these accounts sooner rather than later,” he says.

7. Develop a strategy for withdrawals.
Drawing down retirement savings can be incredibly complex – it requires a thorough analysis of all sources of income to ensure assets are utilized in the correct order, taking into account Social Security and tax implications, says Libbe at Allianz Life.

The trick is knowing how to turn those assets into income. “There’s a rule that says you can safely withdraw 4 percent of your assets annually, adjusting the amount upward for inflation each year,” says James Poe, founder of Texas Retirement Specialists. But that’s not engraved in stone, he says. Speak to your financial advisor to determine how much you’ll need to begin withdrawing from your portfolio to meet your needs, then set up a monthly disbursement.

Of course, as much as you can prepare, sometimes even the best-laid plans need to be changed.  Be ready to make big adjustments or small tweaks if there are developments in your life or the economy that warrant those changes. Six months or so into retirement, many people realize their financial needs are different than they expected. “While it’s never too late to start preparing, the sooner you start, the more choices you’ll have,” says White.

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Long-Term Care Insurance – Do You Need It?

“There are 4 kinds of people in the world.  Those who have been caregivers, those who are currently caregivers, those who will be care givers, and those who need care givers.” – Roslynn Carter

Which one will you be?

Financial planning focuses on building and accumulating wealth for your retirement and, ultimately, the transferring of your wealth to the people that you love.

When people think about the challenges and threats to their retirements, the most commonly thought of culprit is financial losses in the stock market.  However, people typically fail to consider the risks of other types of ‘retirement invaders’ such as health care costs and long-term care costs.  Both of those situations can cause costly problems, often much more so than volatility in the stock market.

Planning for long term care is more than just more than simply planning for how to pay your bills.  From a financial planning perspective, long term care insurance planning determines how much of the monetary risk a client wants to assume versus how much they are willing to shift to an insurance company.

So what does Long-Term Care Insurance do?

1. Long-Term Care Insurance is a tool that protects your lifestyle as well as your retirement nest egg and savings.

2. Long-Term Care Insurance provides and preserves the freedom of choice as to how and where care is to be received.

3. Long-Term Care Insurance gives your loved ones peace of mind to care about you and not care for you.

One of the greatest myths about Long-Term Care is as it relates to Medicare.  Generally, Medicare does not pay for Long-Term Care.  Under limited circumstances and for a limited period of time Medicare will pay for medically necessary skilled nursing facilities or home health care. You must meet the rigorous conditions to be eligible for Medicare to cover the costs.  Most Long-Term Care is to assist people with support services, for example: activities of daily living like dressing, bathing, or using a bathroom.  Medicare does not pay for this type of care called custodial care.

4.  Those who purchase qualified Long-Term Care Insurance can take a tax deduction for part of the premium.  The tax deductibility limits for 2013 and 2014 are:

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For those who live in certain states (for example, New York), your state may provide a special tax deduction or special tax credit.

Why is it important to consider Long-Term Care Insurance now?

“Old age is like everything else, to make a success of it, you’ve got to start young.” – Theodore Roosevelt

1. Eligibility for the purchase of long term care insurance: any change in health, can impact your ability to obtain Long-Term Care Insurance.  Waiting to apply could be a very costly mistake.

2. Potential $ Savings: The younger you start Long-Term Care Insurance, the more you can save on premiums.

If you want to learn more, contact us.