Category: Retirement
Keep healthcare in mind when planning your retirement
If you're anything like most Americans, healthcare costs can be a big concern when you're planning for retirement. That's why it's essential to keep them in mind as you're getting ready for your golden years. One common error we notice is people assuming their healthcare expenses will be covered by Medicare in retirement. The truth is, a single 65-year-old could need approximately $157,500 saved after tax to cover health care expenses in retirement, according to a report by Fidelity. And that number jumps to $315,000 for an average retired couple age 65.1 Those figures hinge on various factors such as your work duration, retirement timing and location, health condition, and life expectancy. Nonetheless, it could serve as a valuable target to strive towards. Another common pitfall we notice is the consistent underestimation of the need and the costs associated with long-term care. Although the extent of long-term care required varies for everyone, data from the Administration on Aging paints a striking picture: at least 70% of individuals aged 65 or older today will inevitably find themselves in need of some level of care. Every year, Americans are shelling out a whopping $475.1 billion for long-term care. Surprisingly, Medicaid only covers 42% of these costs. This means you'll probably be responsible for a significant portion of the bill, making it crucial to plan ahead. Another important thing to note is Ohio's latest updates regarding
Don’t be afraid to spend in retirement
Navigating the financial landscape in retirement can be a daunting task. It's like trying to pass through a jungle of expenses – health care, taxes, and long-term care costs all taking a piece of the hard-earned nest egg you've been building for ages. And just when you think you've got it all figured out, here comes the rollercoaster of economic uncertainty. In the face of such high stakes, it's no wonder the prospect of spending in retirement can be overwhelming. But with our team of financial professionals behind you, you can take steps to help you reclaim control and ease the anxiety associated with post-retirement expenditures. Embarking on the journey toward retirement becomes much smoother when you proactively create a budget beforehand. This invaluable tool allows you to gauge your anticipated expenditures and income streams once the daily grind is behind you. It's crucial to take stock of the various income sources at your disposal, such as Social Security, pensions, and 401(k)s, while also factoring in inevitable expenses like taxes, health care, and long-term care. When you're getting budget-savvy for retirement, start by figuring out what's a must-have and what you can let slide. Let's say you're dreaming of a retirement filled with jet-setting adventures. Well, that travel fund needs to be part of the grand budget plan. And let's not forget the inevitable: taxes. It's a good idea to give taxes a special seat
Maximizing the hidden tax strategy behind Net Unrealized Appreciation
The idea of saving as much as possible during your career while making wise investments to have a comfortable retirement is nothing new for workers. But if you don’t consider a tax strategy with that plan, it can derail any retirement. Many workers are able to get company stock either as part of their compensation or through the company’s 401(k) program and these are the stocks you want to pay attention to so you don’t lose money in taxes. Typically, when people retire, they roll all of their 401(k) to an IRA and everything you paid for that company stock inside the 401(k) and all the appreciation through your working years will be taxed at your personal income rate when you take money out to supplement your retirement. Instead, if you use the Net Unrealized Appreciation – or NUA – rules, you can roll the stock out of the 401(k) and pay ordinary income taxes only on the cost basis, or what you paid for the stock through the years. Then, if done correctly, you can have the appreciation of the stock taxed at the much lower capital gains rates. For most people, this could cut your tax bill almost in half. For example, let’s say that you have $300,000 of company stock in your 401(k), that you paid $100,000 for. You roll the stock out of your 401(k) to a non-IRA account. You will pay taxes on the first $100,000 at your ordinary income rate, but the additional $200,000 would be taxed at your capital gain rate, which ca
How to prepare to retire in a slowing economy
With a slumping stock market and a slowing economy, early retirees and people looking to retire in the near future need to make intelligent decisions to avoid jeopardizing a successful retirement. Here are a few actions our trusted financial planners recommend to help make the transition into retirement as seamless as possible. The first thing a retiree should do is examine their spending history to help build a budget. They can do this by adding up all of their annual spendings over the last three years to look at macro trends in spending patterns. Once that’s determined, they’ll want to make investments that can support that budget. Another way retirees can prepare for retirement income is to create a bond ladder. We’re able to help retirees invest their money while bond yields are back up and high-quality corporate rates reach as high as 4.75%1. High-quality bonds held to maturity can also provide a household with a steady income for the next few years. And there are a lot of different types of bonds – corporate bonds, municipal bonds, and even United States Treasuries – each with their own benefit. For example, one of the advantages of municipal bonds is the tax status since they are exempted from federal, state, and local taxes, which helps minimize taxes during retirement. Another strategy that could be helpful during retirement is to take action to stay ahead of inflation. One way to do that is with dividend-producing sto
How should you prepare for retirement?
A question that comes around often is not only how much you should save for retirement, but how much you should spend in retirement. When it comes to talking about how much to save, many times the rule of thumb is 10-15%. However, that assumes that you have saved that same amount for your entire career, and many of us haven’t. Instead of just assuming a single savings rate, many financial advisors will suggest that you start by working backward. That means deciding when you want to retire and how much you’ll spend each year in retirement. Once you set those targets, you can work backward to get the number you’ll need and then divide that by your remaining years and figure in market return. This will help you figure out how much you need to save. While this is a valid strategy many advisors use, an issue that arises here is that situations change. If you do this in your 20s, 30s or 50s, your priorities can be completely different when you’re in your 60s. Working backward can work, but you may want to check that the plan you made 20 or 30 years ago will still appeal to you when it comes to the time of retirement. When it comes to figuring out how much to spend in retirement, many investors and advisors use the 4% rule, which says you can take about 4% of your portfolio in distributions every year. But as we’ve seen this year, inflation doesn’t always cooperate. If you don’t have strategies in your portfolio
Lineweaver Financial Group completes CEFEX certification for retirement planning
To demonstrate our commitment to the fiduciary responsibility we have when it comes to both personal and business financial planning, we recently completed the rigorous CEFEX certification for our retirement planning service division. The CEFEX certification is a global fiduciary standard of excellence. It’s based on the international standard, ISO 19011: Guideline for quality management system auditing. The assessment is evidence-based, and all work is reviewed by the CEFEX Registration Committee to ensure impartiality and consistency. The assessment typically includes document review, client file sampling, on-site visits, and interviews with senior representatives at the firm. To be able to work with CEFEX means we’ve completed rigorous training and have been able to audit and provide feedback on our systems. The CEFEX analyst we worked with holds not only the Accredited Fiduciary Credential, but also the Fiduciary Analyst Credential and a Qualified 401(k) Administrator designation. The point of holding these advanced credentials and training is to help provide fiduciary guidance, best practices, and overall accountability to firms like ours. Going forward, these best practices will be verified by annual audits and are intended to ensure that those who hold the certification place clients’ interests first, and this will continue to build trust with clients, along with fostering a culture of continuous improvement. This is an important
Cracking the Medicare Code
Open enrollment for Medicare and Medicare Supplements is right around the corner. Medicare programs are notoriously challenging to navigate, but it’s a crucial decision that most of us will have to make at some point in our lives. The question most people start with is one of eligibility. There are two essential parts to Traditional Medicare, Parts A and B. Part A has to do with hospitalization, and you become eligible on the first of the month for your 65th birthday. If you become eligible for Part A, it’s recommended to enroll immediately because there is no premium. This remains true even if you are still working and have health insurance through your job. It will get you into the system, and you’ll start receiving “Medicare & You.” On the other hand, part B has to do with doctor visits and bills, including medically necessary services or preventive care. It’s recommended that you enroll with the Social Security office about 2-3 months prior to when you’ll be looking to receive the full Medicare enrollment benefits. When it comes to enrolling for Part B, this can be particularly tricky and could cost you. If you are already retired or will retire right at 65, the answer is simple: sign up for Part B at the same time you enroll in Part A. If you are still working, it’s something that you must figure out when the right time is to enroll. It’s essential to enroll at the right time. If you
5 Steps to Transitioning into a Successful Retirement
Are you looking to start the transition into retirement? If so, we have prepared 5 critical steps to take into consideration when transitioning into this new chapter of your life. When preparing for retirement there are plenty of important decisions running through your mind. We have compiled these steps in order to help guide you along the way. Step 1: Plan for Increasing Healthcare Cost When it comes to healthcare, you have to be prepared for what could happen in the future. Fidelity does a study every year into the average cost of healthcare for a couple who is aged 65 and retiring. In 2019 it was estimated they will need $285,000 for healthcare and healthcare-related costs. This cost, unfortunately, will only increase significantly each year. Step 2: Consider Long-Term Care According to the U.S. Department of Health and Human Services, 70% of people aged 65 or older are likely to need long term care at some point. With such a high percentage of people in need of long-term care, it’s something to keep in mind when making the transition into retirement. Step 3: Change Your Money Mindset After retirement, the way you invest will also begin to change. What this entails is changing your mindset from saving to spending and preservation. This means that making contributions and growing your assets becomes investing for protection, aiming to safeguard your wealth, and making sure that you will have a good, steady income stream. It’s often dif
Planning for Long-Term Care
Many people don’t know that over 69% of people turning 65 this year will need some sort of long-term care at some point in their retirement. Our firm specializes in planning for and managing retirement for private and institutional clients, and our clients often require advanced planning to protect their assets. First of all, it’s important that you have an elder law attorney. Elder law is a niche area of legal practice covering estate planning, wills, trusts, retirement healthcare planning and protection of assets. A good elder law attorney can help advise you on all these areas. The right planning starts with the right documents, especially the Power of Attorney. The power of attorney law changed in Ohio in 2012 to the Uniform Power of Attorney Act, and many powers of attorney documents don’t conform with this legislative change. We highly recommend for anyone with a power of attorney written prior to March of 2012, that you have that document reviewed to determine if it meets the new criteria. Another important aspect of elder law is retirement health care planning. For example, most people under 80 don’t have pensions, and their net worth is primarily invested in IRA’s and 401(k)’s. These assets present a difficult challenge when planning. For those individuals, a leverage strategy using annuities and/or life insurance with long term care benefits can be very effective. Traditional long-term care insurance is no longer the on
Bipartisan Support in Congress to Make Retirement More Secure
by LFG Tax Director, Mark Sipos On May 23rd, 2019, the U.S. House of Representatives voted overwhelmingly in favor of the SECURE Act, which stands for "Setting Every Community Up for Retirement Enhancement." Most of the provisions in the act are designed to make it easier for more people to save for retirement, and for more employers to offer retirement plans for their employees. One notable provision in the bill would essentially end what's known as the "stretch IRA." Under the current law, when a beneficiary inherits an IRA, the beneficiary can choose to have the IRA balance distributed in two ways: either in required minimum distributions based on his or her life expectancy, or during the five years after the original account holder passes. Making maximum use of the IRA's taxdeferred compounding like this is known as a "stretch IRA." Under SECURE, in most instances an inherited IRA would have to be fully distributed within 10 years of the original owner's death, although there are some exceptions. Some additional areas the bill covers are as follows: • The repeal of the maximum age for traditional IRA contributions, which is currently 70½ • An increase of the required minimum distribution age for retirement accounts to 72 (up from 70½) • Allowing long-term part-time workers to participate in 401(k) plans • Increase of the auto-enrollment safe harbor cap to 15% from 10% • Allowing more annuities
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Case studies are intended to illustrate the types of financial issues faced by actual clients. They should not be construed as a testimonial for or endorsement of Lineweaver Wealth Advisors. They do not represent the experience of any advisory client. Each client’s situation is different, and their goals may not always be achieved. Lineweaver Wealth Advisors, LLC, is not engaged in the practice of law or accounting. Tax information provided is general in nature and should not be construed as legal or tax advice. Always consult an attorney or tax professional regarding your specific legal or tax situation. Tax rules and regulations are subject to change at any time.
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