Retirement is a major life event that individuals can be unprepared for mentally, socially, and financially. Indeed a person’s identity itself is also, oftentimes, tied to an occupation. Change, when not properly prepared for, seems to come quickly and at times, with unexpectedly harsh results. Transitioning to retirement is a dramatic change in circumstances which requires a change in thinking on the part of the retiree. This is especially true of the financial aspects of retirement.
Individuals are ‘trained’ during their working years to save for retirement. They are encouraged to invest in risky assets because over time these assets will outperform the markets. As you build them, during downturns, the growth will compound - leading to a large balance available to fund retirement. The key element to this strategy is ‘over time’. It is common to observe individuals participating in, and understanding well, these accumulation strategies. But it is the rare individual indeed that has given thought to how these accumulated assets will be disbursed during the course of one’s retirement years. The lack of planning surrounding these disbursement years leads to many unexpected, negative, results – taxes being one of the big ones. Another ‘change in thinking’ that many individuals grapple with in retirement is the ‘over time’ aspect of investment choices. Retirees don’t have time to recover from major market downturns! They are using the money now to supplement their income. We find most retirees are far too aggressively invested for their present circumstances. This is learned behavior, developed over their many years of working – the circumstances have now changed and so must the thinking and the investment strategy.
The financial aspect of retirement can be viewed as a three legged stool: The first leg is social security, the second is company pension plans, and the third is personal savings. In the United States today we have witnessed most companies eliminate the defined benefit pension plan in favor of 401K matching schemes. Another sad aspect has been the lack of retirement savings on the part of the individual. The result has been an unhealthy reliance on social security to fund one’s retirement.
‘Help to Retire Now’ specializes in helping individuals plan for retirement. We provide our clients with, social security maximization strategies, private pension plans, investment vehicles, and tax & estate planning. Please fill out the contact information below or call us for an initial consultation to discuss your retirement.
How Do I...
Maximize Social Security Benefits:
A variety of maximization strategies exist – which one is best depends on individual circumstances. One thing is certain the longer you wait to take your benefits the more you will get on a monthly basis.
A couple of things to consider: 1) will you continue working: Social security benefits are taxable income as is your income from work. If you raise your taxable income up by having work income and social security you in effect are receiving the social security from the government and handing some of it right back to them in the form of taxes. 2) What will I leave to my spouse: If you have a spouse that is younger then you are (who will probably out live you for a considerable time) your spouse will receive a percentage of your benefits after you pass. The longer you defer receiving your benefits the more your spouse will get. 3) If you defer from your full retirement age to age 70, your monthly income will increase at an 8% annual rate – guaranteed – this is a fantastic investment! Will your savings grow 8% guaranteed over the same stretch? Consider drawing down your savings to maximize your monthly benefit from Social Security.
The Social Security program is the topic of many discussions in terms of spending cuts; this leads many people to start withdrawing their benefits as soon as possible. It is important to calculate where your break-even point would be on those three options to ensure you are receiving enough income for the rest of your life. ‘Help to Retire Now’ provides each client a complimentary Social Security maximization strategy to ensure a solid ‘first leg’ of the retirement stool.
Create my own private pension program:
Over the next 12 years, more than 10,000 baby boomers will retire each day, yet a large portion of these people consider themselves unprepared for life after work. Company defined benefit pension plans are increasingly becoming a thing of the past as more and more organizations move to a defined contribution model. It is estimated that over 58% of workers aged 55+ have less than $100,000 saved to last throughout their golden years.
Our clients are often seeking guidance on developing a plan that can guarantee sufficient income for healthcare and other long-term costs, as well as normal month to month expenses. They long for the security that a pension plan used to provide – namely that they would receive a monthly check until they passed. Retirees of this generation are going to have to develop their own solution for establishing a significant and lasting source of income.
An annuity, quite simply, is an income stream. Social Security is an annuity. A pension plan is an annuity. If you do not get one in the form of a pension plan you can enter into a contract with an insurance company to create your own, guaranteed, stream of income. Annuities are insurance products filed with and approved by state insurance regulators. Fixed annuities have zero market risk, and owners of fixed annuities do not participate directly in any financial market. Whether interest is declared in advance or determined by the performance of a fixed market index, any interest, along with the premiums paid, is guaranteed to never go down when the markets do.
Insurance Protection: Unlike the money you save in your bank accounts, annuities do not have FDIC protection. Insurance companies display their financial strength by obtaining a rating from an objective rating firm like Standard & Poor’s, A.M Best, Duff & Phelps, or Moody’s.
Liquidity: Annuities have some provisions that allow money to be withdrawn. Generally, 10% of the account value is available for withdrawal each year, and many contracts allow earned interest to be withdrawn on a monthly basis. Additionally, there are contract provisions that allow access to all your funds in the event you are hospitalized, contract a life-threatening illness, are subjected to a permanent or extended stay in a nursing home, or experience another major calamity that affects you economically.
Annuities can also be structured to pay-out for the life of the owner for a fixed term, which can help to spread out your tax burden while providing enhanced income security. Annuities are long-term savings vehicles and may require a 10% federal tax penalty for withdrawal of funds that exceeds those discussed above prior to age 59 ½.
Tax Treatment: All annuities grow tax deferred however special actions must be taken with both qualified and non-qualified accounts. Taxes are only paid when money is withdrawn. The taxes that are being deferred remain in the account to earn you more money, rather than being paid to state and federal agencies every year.
Interest Rates: There are several variations of annuities; a fixed annuity provides a guaranteed minimum return by the issuing insurance company. A common guarantee on a fixed annuity is between 2% and 4%. An indexed annuity credits interest based on the performance of a particular index, such as the S&P 500. When the index is negative for the year you do not lose money. The annuity simply credits zero interest in a down year.
Insurance companies are constantly working to provide new products to meet the needs of clients. The industry is constantly evolving in response to preferences surrounding fees and various features designed to address circumstances. Issues involving death benefits, long term care, and estate planning can be incorporated into a contract in varying degrees. Help to Retire Now has relationships with all the major carriers to ensure that our clients get the best possible contract for their unique set of needs.
Looking for specific information about a particular product? Have an article you’ve read with information you need help clarifying? Not every annuity is right for every client. The long term nature of these products makes it very important that you do business with a highly rated carrier that has a strong track record of keeping promises to policyholders. To find out what makes sense for your situation fill out the contact information or call us to schedule an initial consultation.
Manage my savings to help it last during my retirement:
Professional Money Management:
Let’s be clear. We believe that active management of a client’s investments with the clients goals in mind is superior to a passive ‘set it and forget it’ strategy. The volatility in the financial markets can present opportunity for the actively managed portfolio to mitigate downside risk. This is important to retirees because they do not have time to recover from the frequent downturns evidenced in the markets today. We are focused on capital preservation. We strive to limit volatility and risk while maintaining decent return. The portfolios are managed to provide a positive risk reward profile for the client.
The customized portfolios we build for clients are primarily comprised of a diversified grouping of Exchange Traded Funds or “ETFs. An ETF is less expensive than a comparable mutual fund and allows us to be more tactical. The old “buy and hold” approach can potentially derail your long-term goals. As a tactical money manager, we have the ability to buy and sell with your interests in mind. As the market changes, we can react without the added cost of loads, penalties, or fees for transactions. Our focus is to diversify your portfolio based on a pre-determined level of risk / return instructions focused on achieving your goals.
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As part of the consultation each client’s current investments are analyzed. The client is often surprised to learn that the risk they are taking far exceeds the potential rewards they can expect – we work to reverse this profile. It is often also learned that the client is subjected to hidden fees that they were unaware of – we work to reduce fees and provide real value for the fees that are paid. Fill in the contact information or call us to set up an initial consultation.
Leave a Legacy:
Many individuals desire to leave assets to the next generation upon their passing. Good financial planning can ensure that assets are preserved during retirement to ensure something is left to pass on to your heirs. Another way to create an instant estate would be to purchase a life insurance policy. It is also advisable to keep an updated will and, if circumstances warrant, creating a trust.
What is a Will?
A Will is a written document that allows you to dictate who will receive your property at the time of your death. It is revocable and subject to amendment at any time.
What is a Trust?
A Trust is a legal arrangement with trustees who hold power on behalf of designated beneficiaries. A trustee can be a person or an institution. A trust usually names two sets of beneficiaries: the first set of beneficiaries typically receives income from the trust, and the second set usually received whatever remains in the estate once the first set of beneficiaries dies.
What are the differences?
One of the primary differences between a will and a trust is that a will takes effect only upon death, whereas a trust goes into effect the moment it has been created. A will must go through probate which means a court will ensure the will is valid and that the property gets distributed in accordance with the decedent’s wishes. It is also a matter of public record. A trust, on the other hand, bypasses probate and is not required to be overseen by the courts nor does it have to be made public, thereby saving time and money and ensuring a level of privacy. Wills allow for you to name guardians for children and other dependents while trusts can be used to plan for disability and tax savings. A will covers property that is in your name only, and does not cover property that is jointly owned or has already been placed in a trust. A Trust covers any property that has been transferred to the trust, although the property must be put in the name of the trust in order to be covered.
Will vs Trust Considerations:
Do you have minor children? As mentioned before, a trust allows you to establish provisions that specify when a child is entitled to the assets within the trust.
Will your estate be subject to estate taxes? With frequently changing estate tax thresholds, you may want to consider establishing a trust with tax planning provisions.
Do you children or other dependents with special needs? A standard will allows your property to be passed on to your dependents heirs, but it doesn’t grant much control on how that property must be used.
So which option is best for you? When choosing between a will or a trust, it is important to know that one size doesn’t fit all. Your estate plan should always be prepared in the way that best meets your family’s needs, as trusts and wills can accomplish similar objectives.
Of course each individual situation presents its own set of challenges. To find out what makes sense for your situation fill out the contact information or call us to schedule an initial consultation.
Nobody can see, with certainty, into the future. But, we do believe that we will encounter higher tax rates in the not too distant future. The government faces growing deficits, a boom of retirees entitled to social security benefits, and growing demands for entitlements. Who will pay increased taxes? You guessed it retirees. Laws have recently been passed that accelerate the collection of income taxes on IRA accounts passed to non-spouse heirs. For years government has allowed individuals to build retirement nest eggs tax free. Make no mistake the government NEEDS to collect taxes on this money.
Careful planning is required to position assets to protect against this eventuality. Life insurance programs can be used creatively to ensure your heirs get a tax free estate, ROTH IRA conversions can be a useful tool to pay taxes at today's lower rates, Social Security maximization strategies can lower taxable income.
If you have the foresight and courage to address these potential eventualities ‘Help to Retire Now’ can help you. Those who fail to consider the tax implications of retirement will, no doubt, pay more than their fair share of taxes. Let us help you address these concerns and prepare you. Fill out the contact information or call us to schedule a consultation.
Cope with Health Care costs:
Health care costs currently rise at a much faster rate than the published rate of inflation. This cost primarily falls upon the retired. A successful retirement plan should include provisions to deal with these potential expenses. Health insurance is the primary vehicle used to address these issues. Medicare combined with supplemental insurance for those over 65 is a solution. There are cost effective options available for those under 65 as well. Individuals must protect themselves from a negative surprise brought on by an unexpected sickness that can derail a carefully laid out plan.
‘Help to Retire Now’ works with clients to ensure that the best, most cost effective, healthcare is in place to address the unexpected. Let us help you address these concerns and prepare you. Fill out the contact information or call us to schedule a consultation.
Each Person has a unique set of circumstances:
Please provide your contact information below for a complimentary consultation. We will guide you towards the right plan for you.