Should We Reconsider What “Retirement” Means?

Posted by on Nov 26, 2017 in 401k, 403b, atuos, bank statements, Boomers. Millenials, cars, college planning, Consumer Tools, credit card statements, Deflation, Elder Care, estate planning, family finances, financial planning, Fixed Income Investing, Inflation, insurance, Investing, IRA, IRS, Medicaid Planning, Medicaid Recovery, Medicare Planning, Retire Happy Now, Retirement, retirement planning, sales, social security, tax returns, taxes, TSA | 0 comments

The notion that we separate from work in our sixties may have to go.   Provided by Frederick Saide, Ph.D.   An executive transitions into a consulting role at age 62 and stops working altogether at 65; then, he becomes a buyer for a church network at 69. A corporate IT professional decides to conclude her career at age 58; she serves as a city council member in her sixties, then opens an art studio at 70. Are these people retired? Not by the old definition of the word. Our definition of “retirement” is changing. Retirement is now a time of activity and opportunity. Generations ago, Americans never retired – at least not voluntarily. American life was either agrarian or industrialized, and people toiled until they died or physically broke down. Their “social security” was their children. Society had a low opinion of able-bodied adults who preferred leisure to work.  German Chancellor Otto von Bismarck often gets credit for “inventing” the idea of retirement. In the late 1800s, the German government set up the first pension plan for those 65 and older. (Life expectancy was around 45 at the time.) When our Social Security program began in 1935, it defined 65 as the U.S. retirement age; back then, the average American lived about 62 years. Social Security was perceived as a reward given to seniors during the final years of their lives, a financial compliment for their hard work.1  After World War II, the concept of retirement changed. The model American worker was now the “organization man” destined to spend decades at one large company, taken care of by his (or her) employer in a way many people would welcome today. Americans began to associate retirement with pleasure and leisure. By the 1970s, the definition of retirement had become rigid. You retired in your early sixties, because your best years were behind you and it was time to go. You died at about 72 or 75 (depending on your gender). In between, you relaxed. You lived comfortably on an employee pension and Social Security checks, and the risk of outliving your money was low. If you lived to 81 or 82, that was a good run. Turning 90 was remarkable. Today, baby boomers cannot settle for these kinds of retirement assumptions. This is partly due to economic uncertainty and partly due to ambition. Retirement planning today is all about self-reliance, and to die at 65 today is to die young with the potential of one’s “second act” unfulfilled.  One factor has altered our view of retirement more than any other. That factor is the increase in longevity. When Social Security started, retirement was seen as the quiet final years...

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Can We Afford to Live to 100?

Posted by on Nov 17, 2017 in 401k, 403b, atuos, bank statements, Boomers. Millenials, cars, college planning, Consumer Tools, credit card statements, Deflation, Elder Care, estate planning, family finances, financial planning, Fixed Income Investing, Inflation, insurance, Investing, IRA, IRS, Medicaid Planning, Medicaid Recovery, Medicare Planning, Retire Happy Now, Retirement, retirement planning, sales, social security, tax returns, taxes, TSA | 0 comments

Our increased longevity poses a retirement planning challenge.   Provided by Frederick Saide, Ph.D.   Some of us may retire at 65 and live to 100 or 105. Advances in health care may make this a strong possibility. The corresponding question is: will we outlive our money? More people are spending more of their lives in retirement. According to the actuaries at Social Security, today’s 65-year-olds have roughly a 25% chance of living into their nineties, and about one in ten will live to 100 or longer. Clearly, this puts a strain on Social Security. When it first sent out retirement benefits in 1940, the average life expectancy for a 65-year-old was 79. It was not designed to fund 30-year retirements.1,2 Social Security aside, many Americans are retiring with inadequate savings. A Vanguard study says that retirement savers aged 65 or older have average balances of just $197,000 in their workplace retirement accounts. IRA distributions, home or business sale proceeds, and pension and Social Security income may help them out in the first decade of retirement, but what about the decades that might follow?3 Three factors may lead us into a gigantic retirement crisis. People are not saving enough, they are living longer than ever, and the retirement planning process now emphasizes self-reliance. These challenges amount to a “perfect storm” for the financially underprepared and unfortunate – a population that threatens to grow. There are three ways pre-retirees can respond to these challenges. One, retire later. Two, save and invest more and spend less. Three, consult a financial professional about retirement planning rather than going it alone. If Gen Xers and baby boomers are lucky, they may see a fourth response in the form of legislative changes to help retirees. Retiring after age 70 could become the norm in 10-15 years. Pair healthier seniors and new technologies, and you could see millions of septuagenarians working 40-hour weeks. Retiring at 75 could leave us with ten fewer years of retirement to fund. Retirement saving is not a top priority for many households, especially given today’s economic pressures. That does not mean it can be ignored. We used to save more than we do now: the U.S. personal saving rate routinely exceeded 7% until the mid-1990s. During the Great Recession, it reached 8.1%; in September 2017, it was down to 3.1%, with personal saving levels mirroring those seen right before the Great Recession.4 How many pre-retirees chat with a financial professional about their goals and investment approach? How many have defined goals and investment approaches? Yes, this sort of consultation is not free – but it may be worth every penny, just in terms of offering insight as well as possibly...

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Why Life Insurance Will Always Matter in Estate Planning

Posted by on Nov 12, 2017 in 401k, 403b, atuos, bank statements, Boomers. Millenials, cars, college planning, Consumer Tools, credit card statements, Deflation, Elder Care, estate planning, family finances, financial planning, Fixed Income Investing, Inflation, insurance, Investing, IRA, IRS, Medicaid Planning, Medicaid Recovery, Medicare Planning, Retire Happy Now, Retirement, retirement planning, sales, social security, tax returns, taxes, TSA | 0 comments

With or without the estate tax, it addresses several key priorities. Provided by Frederick Saide, Ph.D.   Every few years, predictions emerge that the estate tax will sunset. Even if it does, that will not remove the need for life insurance in estate planning. Why? The reasons are numerous. You can use life insurance proceeds to equalize inheritances. If sizable, illiquid assets make it difficult to leave the same amount of wealth to each heir, then the cash from a life insurance death benefit may financially compensate. You can plan for a life insurance payout to replace assets gifted to charity. You often see this move in the planning of charitable remainder trusts (CRTs). People use CRTs to accomplish three objectives. One, they can remove an asset from their taxable estate by placing it into the CRT. Two, they can derive a retirement income stream from the trust’s invested assets. Three, upon their death, they can donate a percentage of the assets left in the CRT to charities or non-profit organizations.1 When a CRT is fashioned, an irrevocable life insurance trust (ILIT) is often created to complement it. The life insurance trust can be funded with income from the invested assets in the CRT and tax savings realized at the CRT’s creation. (The trustor can take an immediate charitable income tax deduction in the year that an appreciated asset is transferred into the CRT.) Basically, the value of the life insurance death benefit makes up for the loss of the CRT assets bound for charity.1 Life insurance can help business owners with succession. It can fund buy-sell agreements to help facilitate a transfer of ownership, regardless of how an owner or co-owner leaves a company. It can also insure key employees – the policy can help the business attract and retain first-rate managers and creatives, and its death benefit could help lessen financial hardship if the employee unexpectedly passes away.2 Life insurance products can also figure into executive benefits. Indeed, corporate-owned life insurance is integral to supplemental executive retirement plans (SERPs), the varieties of which include bonus plans and non-qualified deferred compensation arrangements.3 Lastly, a life insurance policy death benefit transfers quickly to a beneficiary. The funds are paid out within weeks, even days. A beneficiary form directs the process, rather than a will – so the asset distribution occurs apart from the public scrutiny of probate. Life insurance is also a backbone of trust planning, and assets held inside a trust can be distributed directly to heirs by a trustee according to trust terms, privately and away from predators and creditors.4   Frederick Saide may be reached at 908-791-3831 or freds@foundationinsuranceservcies.com and www.wealthensure.com   Disclosure: MoneyMattersUSA, Advisory LLC...

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The Republican Tax Reform Plan

Posted by on Nov 5, 2017 in 401k, 403b, atuos, bank statements, Boomers. Millenials, cars, college planning, Consumer Tools, credit card statements, Deflation, Elder Care, estate planning, family finances, financial planning, Fixed Income Investing, Inflation, insurance, Investing, IRA, IRS, Medicaid Planning, Medicaid Recovery, Medicare Planning, Retire Happy Now, Retirement, retirement planning, sales, social security, tax returns, taxes, TSA, Uncategorized | 0 comments

What is in it? What could its changes mean for you, if they become law?   Provided by Frederick Saide, Ph.D.   Major changes may be ahead for federal tax law. At the start of November, House Republicans rolled out their plan for sweeping tax reforms. Negotiations may greatly alter the content of the bill, but here are the proposed adjustments, and who may and may not benefit from them if they become law.   The corporate tax rate would fall from 35% to 20%. Wall Street would cheer this development, perhaps with a significant rally. Sole proprietorships, partnerships, and S corporations would also see their top tax rate drop to 25% (although W-2 wages for business owners who invest in these pass-through entities would still be taxed at the owner’s marginal tax rate).1,2   The estate tax and Alternative Minimum Tax would be eliminated. The AMT would die immediately, saving more than 5 million high-earning taxpayers from an annual bother. Death taxes would sunset within six years, and in the interim, the estate tax exemption would be doubled, leaving the individual exemption at about $11 million. This would be a boon for many highly successful people and their heirs.2   Personal exemptions would go away, but the standard deduction would nearly double. The loss of the personal income tax exemption (currently $4,050 per individual claimed) would be countered by standard deductions of $12,000 for individuals and $24,000 for married couples. This could lessen the tax burden for many middle-class households. On the downside, the larger standard deduction might reduce the incentive to donate to charity.1,2   Only four income tax brackets would exist. While the top marginal tax rate would remain at 39.6%, the other brackets would be set at 12%, 25%, and 35%. Individuals earning $45,000 or less and spouses with combined earnings of $90,000 or less would fall into the 12% bracket. Households earning less than $260,000 would be in the 25% bracket. The individual threshold for the 39.6% bracket would be moved up to $501,000 from the current $418,401; it would apply to couples who earn more than $1 million.3    Some state and local tax deductions might vanish. Taxpayers who face higher state income tax rates – such as those living in New York, California, and New Jersey – could lose a big tax break here. The reform bill’s author, House Ways & Means Committee Chair Kevin Brady (R-TX), says that a new revision to the bill would at least let homeowners deduct state and local property taxes up to a $10,000 cap.3   Speaking of caps, the mortgage interest deduction would be halved to $500,000. Real estate investors, developers, and agents are unhappy...

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The Importance of a Life Insurance Audit

Posted by on Nov 1, 2017 in 401k, 403b, atuos, bank statements, Boomers. Millenials, cars, college planning, Consumer Tools, credit card statements, Deflation, Elder Care, estate planning, family finances, financial planning, Fixed Income Investing, Inflation, insurance, Investing, IRA, IRS, Medicaid Planning, Medicaid Recovery, Medicare Planning, Retire Happy Now, Retirement, retirement planning, sales, social security, tax returns, taxes, TSA | 0 comments

Is it time to review your policy?   Provided by Frederick Saide, Ph.D.   Life insurance is hard. It’s hard to know if you have the right kind. It’s hard to know if you have enough. And it’s hard to know if you need any at all. The insurance companies have made it even harder by coming up with bewildering names: whole life, term life, universal life. Some life insurance policies have a cash value, while others do not. Some invest that cash value in the stock market, while others pay a fixed rate of interest.  Some insurance policies combine all of these ideas. A recent study by life insurance advocacy group LIMRA discovered that 80% of Americans overestimate the cost of affordable term life insurance – especially millennials, some of whom think the premiums are 200% higher than they really are. How much would a healthy 30-year-old pay per year to keep up a 20-year, $250,000 term life policy? When LIMRA posed that question to consumers, the median response was $400. In reality, the annual premiums are commonly less than $200.1,2 This is why it is important for you to sit down annually with an insurance professional to review how your policy works and how it will help you to protect your family. When you’re young, a certain type of policy is needed. As you raise a family and take on more responsibilities, your needs change again. At some point, when the nest is empty or other life changes occur, you may not need life insurance at all – or alternately, you may desperately need it to protect your estate for your heirs. Reviewing your life insurance policies is one way to make sure you have the coverage that is right for you and your family now – not when you bought it. When is the last time you thought about your life insurance? Is it time to take another look? Frederick Saide, Ph.D. may be reached at 908-791-3831 or freds@foundationinsuranceservices.com and www.compareterm.com  Disclaimer: MoneyMattersUSA, Advisory LLC and Foundation Insurance Services, LLC are independent companies with common ownership. Advisory services are offered through MoneyMattersUSA, Advisory LLC and Insurance services are offered through Foundation Insurance Services, LLC; Frederick Saide Financial Advisor. Frederick Saide is not connected with or endorsed by the United States Government, the federal Medicare program, Medicaid program, or the Social Security Administration.    This material was prepared by a third party,does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering...

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