Category Archives: Financial

Senior Living Costs on the Rise, Outpacing Inflation

According to a newly released nationwide survey, costs for rent at senior living facilities across the U.S. are on the rise, with the West and South seeing the biggest increases. That’s the news from an article we recently discovered on the website www.NextAvenue.org.

You can click here to read the article. We think this is important information for seniors to have as they make their plans for a financially sound retirement, since the cost of senior housing can often be an unpleasant surprise.

The new data from the firm A Place for Mom shows that, from 2014 to 2015, median costs for rent and care at communities for older adults rose at a rate that’s 1.5 times the rate of inflation, an average hike of just under $100 per month. At the same time the study showed a wide variation in charges, with average monthly costs differing by more than $1,000 between, for example, Chicago and Tallahassee, Florida.

As a helpful feature, the article includes a link to an interactive tool that families can use to compare costs in various geographic areas. Consumers can also track how costs are trending in various areas of the country.

Here in Seattle, we rank about in the middle of the Top 15 cities based on 55-plus population. The median monthly cost for assisted living in Seattle, according to the survey, is nearly $4,400. This is almost $1,000 less than highest-priced Washington, D.C., but at least $1,000 more expensive than lowest-priced Tampa, Florida. On average our region is costlier for seniors than Chicago, Los Angeles, or Phoenix, but less expensive than Boston, Philadelphia or Minneapolis, for example.

“What we’re trying to do is put this information in consumers’ hands so that they can better plan for the future,” said Charlie Severn, vice president of brand marketing for A Place for Mom. “This is such a highly emotional subject for families, and when they have the ability to do the research up front and plan, ultimately it’s a better outcome for families.”

We think this information is important as you look ahead to your retirement future, especially because many seniors underestimate the cost of senior housing. Here at AgingOptions we counsel our clients to plan carefully for all aspects of retirement, including housing choices, financial plans, legal affairs, family relationships and health care needs. By taking all these into account, your retirement plan can help you protect your assets and avoid becoming a burden to your loved ones.

But where do you begin? The best suggestion we can make is to invite you to attend one of our free LifePlanning Seminars. These information-packed sessions take place at convenient times, in locations throughout the area. A LifePlanning Seminar will provide a valuable overview of all the key aspects of a solid retirement plan. However, space at these popular LifePlanning Seminars is limited, so we urge you to register today for the date and time of your choice.

Click on the Upcoming Events tab on this website for all the details. Then come with your questions about retirement. We assure you that you’ll come away armed with a fresh new approach to retirement planning, and a newfound confidence as you consider your future years. It will be a pleasure meeting you!

(originally reported at www.nextavenue.org)

What Spouses Should Know About Social Security

Because we work in the retirement field, we deal with Social Security rules and regulations every day. But for most retirees, Social Security still contains a great deal of mystery. That’s why we’re always happy to suggest helpful resources like this article about Social Security from the financial website Motley Fool (www.fool.com).

The article is called “What Spouses Should Know about Social Security,” and it explains in clear language how spousal benefits for Social Security work. These benefits can make a big, big difference in a retiree’s income. As Motley Fool explains, “Depending on the age at which you claim spousal benefits, the amount could be worth a maximum of half of your spouse’s full retirement benefit, so it’s important to know the details of how it works.”

We won’t go into all of those details here. The article explains some of the stipulations, and of course we’re always ready to answer your specific questions, either at one of our LifePlanning Seminars (see below) or during a visit here at our office. But there are a few basics that are helpful to know.

For example, in order to qualify for spousal benefits, you need to be at least 62 years old and your spouse needs to be collecting his or her Social Security benefits. (The only exception to the 62-year-old age threshold involves certain dependent care situations.) If you qualify for spousal benefits, Social Security will first calculate how much of your own earned payment you’re entitled to receive, and then add the difference between your own earned benefit and the spousal benefit. You’ll always receive the higher amount.

How much is the full spousal benefit? It’s one-half of your spouse’s full retirement benefit. For couples where one spouse has earned significantly more than the other, this can make a significant difference in household income, so it’s highly important to your future financial planning.

There’s another important point in the article: taking spousal benefits after you turn 62 but before full retirement age permanently reduces your spousal benefit. In general, the longer you wait to draw Social Security benefits, the better: every year between age 66 and age 70, for instance, benefits rise 8%. But the decision about when to take benefits is a highly personal one, dependent in part on your financial needs and the state of your health, among other considerations. We can review those options with you.

It’s true that planning for retirement can seem confusing, even daunting. Retirees ask, “How can I protect my assets in retirement? What housing choices are best for me? Will I be able to afford health care? Does my family understand my wishes? How do I make sure my legal affairs are in order?” We can help you find answers to these and a host of other pertinent questions. Why not start by attending one of our free LifePlanning Seminars? These information-packed sessions take place at locations throughout the region. Click on the Upcoming Events tab on this website and register for the LifePlanning Seminar of your choice.

At any time if you would like to contact us to discuss Social Security – or any other aspects of retirement – please call for an appointment. It will be a pleasure working with you.

(originally reported at www.fool.com)

If You’re About to Re-Marry, Here are Four Money Moves to Make Now

Are you about to embark on a second marriage? Congratulations! It’s wonderful to rediscover wedded bliss after divorce or the loss of a spouse.

However, in the midst of planning for the celebration, there’s another plan you need to make – a financial plan. Protecting your assets, for yourself and your heirs, is vital, and a second marriage can create a host of unexpected pitfalls if you don’t prepare.

We highly recommend this helpful article published some months ago on the website MarketWatch.com. It’s called “Smart Money Moves to Make Before a Second Marriage.” As the writer puts it, having an open and honest financial conversation before you marry is especially important for second marriages. “The requisite prenuptial financial meeting can be even more important the second time around,” the article says, “when both spouses may be more advanced in their careers, with significant assets and, perhaps, children to plan for.”

The author lists four specific financial actions to take before you walk down the aisle. These tips are simple, but essential if you want to protect the assets you’re counting on in your senior years – and perhaps those you plan to pass along to your heirs.

The first suggestion: before you re-marry, put all your financial cards on the table. This includes “coming clean” about assets, liabilities, tax returns and investment statements. You may even need to arrange a pre-marital meeting between your respective financial advisers, depending on your situation. Openness now builds trust later.

The second idea is to explore what the article calls “your money personalities.” If you’re the frugal one, you don’t want to be surprised to learn that your new spouse is a spender. “Merging your financial philosophies can be especially difficult,” says MarketWatch. “The key to success is gaining some appreciation for each others perspective and strengths.” Then you can design your household financial management around each spouse’s fiscal strong suits.

Suggestion number three involves setting joint financial priorities, something that some couples assume but never adequately explore until conflict arises. Again, these issues can be especially acute in a second marriage where both spouses are older, usually with more assets on the line and adult children to consider. You’ve got to figure out how to work together as a financial team. Says MarketWatch, “Disagreements can range from the size of a mortgage to carry to the amount of risk to take with your investments to how much you’ll each contribute to your children’s college education.” Decide what the new rules and guidelines will be and then stick to them!

Finally, the article concludes with a suggestion we heartily endorse: update your wills and other legal documents. There are many ways to provide legal protection for yourself, your new spouse and your adult children, but if you fail to plan you open yourself and your heirs up to serious pain and potential disputes that can tear families apart. We discussed this on our AgingOptions blog in a recent article about updating your beneficiaries, something many retirees in second marriages fail to do.

Yes, it’s great to celebrate this new relationship! But don’t let bad planning turn your celebration into a nightmare. And don’t let failure to plan ruin your dreams of a fruitful retirement. To start creating your own retirement plan, we invite you to attend a free LifePlanning Seminar at a location near you. We’ll review all aspects of a solid LifePlan: legal, financial, housing, health and family. It’s a fast-paced, information-packed session we know you’ll enjoy. To reserve your place at a free seminar, click on the Upcoming Events tab on this website. We hope to meet you soon.

(originally reported at www.marketwatch.com)

Retirement May Not Be What You Think –Some Surprises to Expect

What do you think “retirement” will be like? As we’ve discovered in our interaction with thousands of retirees, the answers vary widely. But a recent research report done by the financial firm Merrill Edge revealed that retirement can definitely hold some surprises – not all of them happy ones.

We discovered this interesting article on the financial website Market Watch (www.marketwatch.com). According to the author, the Merrill Edge study reveals that “what retirement is really like may surprise you – and not always in a good way.” The study essentially asked retirees the question, “What have you done in retirement that surprised you?” For nearly one retiree in three, the top answer was clear: they spent more money in retirement than they had planned or expected.

A few years ago a similar study by the financial firm Mass Mutual showed the same thing, although not quite so dramatically. This 2014 study revealed that one retiree in six was surprised by their financial problems in retirement. That’s still a significant number.

What other surprises did the Merrill Edge study point out? About one retiree in five had to make an unexpected move to a new location, possibly for financial reasons and possibly for health-related reasons. This number seems surprisingly high to us, since here at AgingOptions we spend quite a bit of time counseling our clients on how to plan for their housing needs as they age. From this study it would seem that, while many retirees do choose to move, nearly 20% of those who do relocate did not anticipate doing so.

Returning to the question of finances, we wondered why so many retirees find themselves surprised by their spending. According to the Market Watch piece, the chief answer is simple: the higher than expected cost of health care. “A couple, both 65, that retired in 2015 will end up shelling out roughly $245,000 — that’s up nearly 30% over the past decade – on health care throughout retirement,” says Market Watch, even though they have Medicare health coverage.

And in light of that “sticker shock,” here’s a related statistic that amazed us: Market Watch states that less than one person in four has factored health care costs into their retirement planning! In today’s environment of skyrocketing out-of-pocket medical costs, that number may indicate that traditional financial planners simply aren’t doing an adequate job of preparing their clients for the true cost of growing older. Bottom line: your retirement plan needs to be comprehensive in scope, covering all aspects of your future life.

What are these elements of a good plan – or a LifePlan, as we call it? Medical needs rank high on the list, as does a good financial plan. Your legal affairs must also be in order and carefully thought out. You need to consider your many housing options and plan for the one that best suits your needs and desires. And finally, one element many plans overlook is your family: you need to make certain they’re aware of your desires. No one wants to burden their family unnecessarily as they grow older! A LifePlan includes this entire range of considerations, allowing to you approach retirement with confidence.

Here’s how to begin the planning process: simply click on the Upcoming Events tab above and register for a free LifePlanning Seminar. These take place frequently at locations throughout the area. There’s no obligation whatsoever, and we assure you that you’ll come away with valuable knowledge and insight that will help you get started on the road toward a happy and fulfilling retirement. Following a carefully conceived LifePlan is one excellent way to ensure that all your “retirement surprises” will be happy ones.

We’ll look forward to meeting you at a LifePlanning Seminar soon.

(originally reported at www.marketwatch.com)

Surprise! Ten Services Medicare Part A and B Probably Won’t Cover

The popular financial website Motley Fool (www.fool.com) always covers a wide range of stories in a clever, sometimes irreverent style. We like how the site tries to put things in down-to-earth terms, which is why we were drawn to a just published article about Medicare. Not only does the article briefly (and helpfully) describe each of Medicare’s four parts, it also lists ten common medical services that – generally speaking – original Medicare does not cover.

Clearly this is important information for retirees who may be operating under the wrong assumptions about their future medical insurance needs. Click here to access the Motley Fool article.

It’s no secret that medical costs keep rising, and so does the value of Medicare benefits – benefits which affect virtually every senior adult in America. The Urban Institute recently released a study estimating that, by 2030, the value of Medicare’s lifetime benefits to the average 65 year old couple will exceed $650,000. But in spite of its critical importance in the lives of seniors, much about Medicare remains misunderstood. As the Motley Fool article puts it, “if consumers don’t understand a program, they won’t be able to take full advantage of it.”

For example, a study by United Healthcare in 2013 showed that at least one fifth of American seniors called Medicare “confusing.” People still don’t fully understand which of Medicare’s parts (A, B, C and D) covers what, and which ones carry a premium. With typical understatement, the Motley Fool says, “It would appear that the biggest obstacle the program faces is an educational shortfall.”

The article then briefly describes which part covers what. We won’t go into further detail here, but if this is something you’ve wondered about – as many of our clients have – this article is a good place to start.

Then the Motley Fool piece lists ten medical services seniors may have thought would be covered by “basic” Medicare (parts A and B) but which in most cases will not be. (There are some exceptions.) For example:

• If you’re traveling or living outside the U.S. your medical needs will almost certainly not be covered by Medicare A or B.
• For hearing aids and routine eye exams and glasses you’ll be on your own – these are not generally covered by original Medicare.
• Don’t count on Medicare A or B for routine dental care or foot care.
• If you prefer alternative treatments such as acupuncture or homeopathy, those services will not be covered by Medicare A or B.
• Cosmetic surgery is generally not covered if it’s elective. It may be covered as a result of disease or accident.
• Unless you’re recuperating in a skilled nursing facility, you shouldn’t expect Medicare A or B to cover custodial care – in other words, the kind of care an assisted living facility or home health care worker might provide. Odds are you’ll be responsible for these costs.
• Some diabetes supplies may not be covered, or may be covered only partially.

The point is clear: if you haven’t thought about medical costs as you age, you may be in for a shock. So our question is, have you considered how to meet your medical needs in retirement? A surprising number of seniors have not – which is why we strongly urge you to attend one of our LifePlanning Seminars where we review all five of the essential facets of a solid retirement plan. We’ll help you consider medical needs, financial plans, legal affairs, housing options and family relationships, so you can protect your assets and avoid becoming a burden to those you love.

Space at our LifePlanning Seminars is limited, so register today. Click on the Upcoming Events tab on this website. LifePlanning Seminars are offered at no cost, but the information is priceless. We’ll look forward to meeting you at a future seminar.

(originally reported at www.fool.com)

Part of Your Financial Plan: Remember to Update Your Beneficiaries!

Here’s a question: if you’ve made it clear in your will which one of your heirs should inherit money from your estate, how it is possible those funds will end up going to someone else?

The answer is simple: if you’ve forgotten to update the beneficiary information on a life insurance policy, retirement plan, or other financial instrument. It sounds absolutely basic, but, as a recent article in USA Today puts it, “Your ex could get rich if you don’t update your beneficiaries.” We suggest you click here to read this helpful piece.

As the article states, when it comes to keeping their estate plan current, most people think first about what goes into their Last Will and Testament. But they often neglect something even more obvious by failing to make sure their beneficiary designations are up to date. And here’s something you may not have known: beneficiary designations on a 401(k) or IRA are legally binding. As a result, states the USA Today article, they “often take precedence over wishes you’ve put in your will. And that can result in some unpleasant situations if your beneficiary information isn’t updated.”

The article goes on to quote a Dallas financial analyst, Charles Sizemore, who points out a scenario that’s fairly common: an employee establishes a retirement plan beneficiary on the first day of a new job, and never updates the form for ten, fifteen, twenty years or more. Sizemore says, “Your life [today] could look a lot different. You might have divorced and remarried, or you might have kids or grandkids that weren’t around back then.” The big downside is clear: you could end up “accidentally leaving your estate to an ex-spouse or disinheriting stepchildren.” If you fail to update your beneficiaries, your financial plans might go out the window.

Here’s a list from the USA Today article of significant life events that should cause you to double check your beneficiary designation:

  • Marriage or divorce
  • Birth of a child or grandchild
  • Death of a previous beneficiary
  • When a minor beneficiary comes of legal age to inherit

Which financial products are most likely to require updates on beneficiary designation? According to USA Today, here’s a basic list:

  • Retirement accounts like a 401(k) or IRA
  • 529 college saving plans
  • Life insurance
  • Annuities with a death benefit
  • Corporate profit-sharing plans
  • Pension plans
  • CDs, checking accounts or other bank accounts
  • Some stocks, bonds or mutual funds

Protecting your assets in retirement is a key part of a sound retirement strategy – and part of that protection involves making certain your wishes are carried out at every stage of your life as well as after you’re gone. We work with our clients to help them establish a comprehensive retirement plan, called a LifePlan, dealing with all five pillars of planning for a sound future: finances, legal affairs, health care, housing choices and family relationships. With a LifePlan in place, you and your loved ones will face the future with greater confidence and peace of mind.

We invite you to begin the planning process by attending one of our free LifePlanning Seminars, held in locations all over the Puget Sound area. You’ll gain a valuable amount of very helpful information in one highly enjoyable, fast-paced evening. Simply click on the Upcoming Events tab on this website for dates and times. Space is limited, so register online today.

Of course, should you wish to make an appointment for an in-person consultation, contact us. It will be a pleasure to work with you to establish a solid plan for your retirement years!

(Originally reported at www.usatoday.com)

Protecting Your Elderly Parents against Financial Scams

In a new article on the financial website Market Watch, we read a shocking statistic: according to the AARP, the average older victim of financial scams and abuse loses over $120,000. Financial exploitation and deception robs senior Americans of some $3 billion every year. What’s even worse, because many scams go unreported, the real total is no doubt much higher.

If you’re personally involved in the lives of your aging parents, as many boomers are, you may be the first line of defense against the scams and rip-offs targeting the elderly. We encourage you to click here to read the Market Watch article. It not only sheds light on the scope of the problem, it also gives you helpful tips to make sure your parent’s bank is doing its job.

According to Market Watch, banks should be watching out for telltale signs that their senior customers might be victims of fraud. But according to a spokeswoman from the Consumer Financial Protection Bureau, financial institutions handle the issue very inconsistently. For that reason the Bureau recently issued guidelines to help banks and other financial institutions prevent and respond to elder financial abuse. This prevention can include steps as simple as training tellers to watch out for unusually large withdrawals by senior depositors, especially when their reasons for the big withdrawal don’t seem sound.

Market Watch also suggests relatives of seniors start asking questions to make sure their mom or dad’s bank is up to the task of protecting against scams. Start by visiting the bank and asking the manager what fraud protection is in place. (Taking Mom or Dad with you on this bank visit will help allay any privacy concerns the bank may have.) During this visit you can also find out what other types of safeguards might be available. In some locales, for instance, seniors can appoint a trusted family member and give the bank advanced permission to call that representative whenever fraud is suspected. This trusted adviser may even have permission to view account transactions, even if it’s not a joint account, to watch out for suspicious activity.

Of course, if you and Mom or Dad is ready for a joint account, you have several options available. Setting up some form of joint account may be advisable, even necessary, as your parents grows older and needs more assistance. But be ready for some pushback: as the Market Watch article points out, “older people can be resistant to the idea that they might need help with banking (or any other activity, for that matter).” You may need to tread lightly when broaching the subject of a joint account.

The bottom line for most seniors: it’s vital to protect one’s assets in retirement, starting with guarding against scams and fraud. This means adult children and financial institutions should be working aggressively with law enforcement to give seniors greater protection.

How about your own retirement plans? Do you have a blueprint in place to protect your financial independence as you age? Does your plan encompass your legal affairs, your family relationships and your housing choices? Here at Aging Options, we’ll work with you to develop a comprehensive LifePlan that covers all the facets of a fruitful future. Best of all, it doesn’t have to be complicated. In fact, getting started is easy: it begins when you attend a free LifePlanning Seminar – an information-packed session that will get you started building a plan of your own.

To find out the location of a seminar near you, and to reserve your space, click on the Upcoming Events tab on this website. We would love to work with you to help you build a more secure future.

(originally reported at www.marketwatch.com)

Are You a Family Caregiver? Save Money with these Important Tax Tips

A recent and very timely article on the website Next Avenue could save you a lot of money – and potentially a lot of trouble – at income tax time, if you are a caregiver for an older family member. The article is called “Tax Rules for Family Caregivers,” and you can read it by clicking here.

According to the article, Pew Research has reported that about one in seven “Sandwich Generation” adults is financially assisting both an adult child and an aging parent. While these caregivers usually remember to claim their dependent children when they file their taxes, they are often unaware that the expenses incurred in caring for their parents may also be deductible. The article recommends – and we agree – that you talk over the specifics with a qualified tax preparer. But with Income Tax Day coming up soon (on April 18 for most Americans in 2016) this article contains some timely tips and helpful links. Here are a few guidelines from the Next Avenue piece:

• For starters, in order to deduct 2015 caregiving costs for a qualified family member, you must have paid at least 50 percent of the costs of his or her care. It’s also important to note that your loved one does not have to have been living with you in your home. The 50 percent figure refers to medical costs, not custodial expenses, and there is a list of qualifying services and other factors you’ll need to take into account in order for these costs to represent a deduction for you.
• The person you cared for cannot have been claimed as a dependent on someone else’s tax return.
• The person you cared for must meet stringent income requirements as well as requirements of citizenship and residency.

Here at Aging Options we will be happy to sit down with you and review your situation to see if it meets these and other necessary criteria. If it does, you may be surprised at some of the care costs you can deduct. Mileage, for example, is deductible at a current 2015 rate of 23 cents per mile. So is some of your travel expense, something of particular interest if you are among the estimated eight million caregivers who live at significant distance from those they are caring for. The cost of some required home improvements and the amount paid for long-term care services may also qualify for deductions. There are helpful links in the article that explain some of these stipulations.

There’s more to this article, including a few tax traps to avoid when hiring a family member as a caregiver. The important thing is to be aware of the possibility that some of your expenses incurred in caring for Mom or Dad may very likely be deductible. Even as you bear the emotional burden of being a caregiver, it’s good to know that at least some of the financial burden might be able to be lifted.

No one wants to be a burden to their loved ones as they age. Avoiding this unhappy fate is one reason we strongly recommend you have a LifePlan in place – a comprehensive plan for your retirement that will help you protect your assets, avoid burdening those you love, and avoid unplanned institutional care. To help you get started, we offer free LifePlanning Seminars at locations around the Puget Sound region. Space is limited, so click on the Upcoming Events tab on this website and register for a seminar near you. It will be a pleasure to work with you in planning for a fruitful and rewarding retirement.

(originally reported at www.nextavenue.org)

The Reverse Mortgage Has Won New Respect, says Wall St. Journal

What a difference a few years makes! “A decade ago, most financial advisers would roll their eyes at the mention of reverse mortgages,” writes the venerable Wall Street Journal. However, new safeguards and changes to laws governing these financial instruments “have led many advisers and researchers to change their minds about reverse mortgages.”

We recently discovered this article about reverse mortgages on the Wall Street Journal website, adding to the growing chorus of financial experts who have come around to the side of the Home Equity Conversion Mortgage (HECM), better known as the reverse mortgage. We encourage you to read this and other articles as you explore whether or not a reverse mortgage can be part of your retirement plan.

Part of the reason for earlier skepticism about HECM’s, the Journal article suggest, was rooted in what used to be a combination of lax regulation and high default rates. One sobering statistic in the article states that, as recently as 2014, almost one reverse mortgage borrower in eight (12%) was in default on their property taxes or homeowners insurance. New rules codified in the Reverse Mortgage Stabilization Act of 2o13 toughen some of the HECM requirements by preventing homeowners from taking all their equity out at once, and also by requiring borrowers to demonstrate their financial ability to stay current on insurance and taxes. The new rules also enact stronger protection for a non-borrowing spouse.

Now, thanks to these new regulations, reverse mortgages should be safer. The Journal article quotes Professor Stephanie Moulton from Ohio State University who suggests that these rules could cut the default rate on reverse mortgages in half. Moulton also speculates that “these changes may encourage larger banks to re-enter the market, further increasing the credibility of the product and potentially lowering costs.”

So if an HECM is now safer, should you apply? The answer depends on your situation and what you intend to use the money for. Paying off an existing mortgage with proceeds from an HECM can be a good strategy, says the Journal, something more than 60% of reverse mortgage borrowers do. A better strategy may be to open the HECM as a line of credit, using it only for emergencies or in some cases to help during downturns in income from other investments. One advantage of this approach is that the available line of credit generally continues to grow over time, as long as it remains unused, acting as a valuable cushion for the future.

We also found a separate but related article from the CNBC website explaining why it’s a good idea to take out a reverse mortgage now while interest rates are low. Even a small rise in interest rates can dramatically reduce the amount of equity you’ll be allowed to borrow. Today’s low rate climate could provide further inducement to give an HECM prompt, serious consideration.

Whenever a client asks us about reverse mortgages – and this question comes up with increasing frequency – we typically give the same advice: talk with an expert who will walk you through the pros and cons and explore your own unique personal circumstances. Here at Aging Options we work with carefully selected, trusted professionals including Laura Kiel of Kiel Mortgage, a frequent guest on our radio programs. An experienced pro like Laura can tell you whether or not an HECM can be a solid part of your retirement strategy.

As for the rest of your retirement plan, or your LifePlan as we call it, we would love to help you develop a well-thought-out roadmap to guide you to the future you’ve dreamed of. Where will you live? How will you protect your assets? Can you avoid becoming a burden to your loved ones? Are your legal affairs in order? How do you talk with your adult children about your plans and your wishes as you age? These elements and more are part of your LifePlan.

We offer free seminars called LifePlanning Seminars at locations throughout the region, almost every month. Register for one near you by clicking the Upcoming Events tab on this website. We’ll look forward to meeting you! And if you wish you discuss reverse mortgages, call our office and we’ll put you in touch with an HECM specialist who will answer all your questions.

(originally reported at www.wsj.com)

In Your 60’s? Tapping Your 401(k) Now Could Save You on Taxes Later

In the March 2016 issue of AARP Bulletin, this article caught our attention. It’s called simply “Keep More of Your Savings” – but the subtitle is more provocative: “How to give less to the IRS after you turn 70 ½.” You can click here to read the AARP article.

What’s magic about age 70 ½? As most seniors know, that’s the age when the IRS requires people to begin taking the Required Minimum Distribution, or RMD, from tax-deferred retirement accounts. These include most 401(k) and 403(b) plans along with a host of traditional IRA’s. (The notable exception is a Roth IRA on which taxes have already been paid. Roth IRA’s are not subject to RMD rules.) Since Uncle Sam did not receive any income tax on your qualified deposits into those tax-deferred accounts, age 70 ½ is when it’s time to start paying the piper – or in this case the Tax Man.

Frequently our clients ask us about Required Minimum Distribution amounts, specifically how much they have to withdraw and when they have to do it. As to the amount, the IRS uses an RMD table to calculate your RMD based on the amount you have in your account and your age. The AARP article does a good job of explaining the basics.

But here’s the part that we found interesting, something we discuss frequently with our clients still in their 60’s: waiting until the last possible date to begin taking money from tax-deferred retirement accounts may not be your best strategy. That’s because, in the words of the AARP article, “RMDs can push you into a higher tax bracket. This occurs if you’re already on the cusp of the next bracket and the extra income from the RMD puts you over the top.”

AARP gives a hypothetical example. If your taxable income as a couple (based on present rates) is just below $75,300, that puts you in the 15 percent tax bracket. Every dollar of mandatory distribution you add to your income puts you over that threshold, and will be taxed at a rate of 25 percent. Depending on your situation, that can add significantly to the amount you send to the IRS. Again quoting from AARP, “Most people tend to delay taxes as long as possible, but this can backfire when it comes to RMDs.” The result of waiting can be a huge tax bite at a time when it’s too late to prevent it.

One way to reduce this tax risk is to begin taking out small amounts now (so long as you’re over age 59 ½ to avoid early withdrawal penalties). Depending on your situation, you could be better off making withdrawals in your 60’s and paying income taxes now rather than waiting. Another strategy many financial planners recommend is to consider converting your retirement accounts into Roth IRA’s. You’ll pay income taxes when you make the conversion, but once your funds are in a Roth IRA the rules for required minimum distribution no longer apply, and withdrawals are not taxed.

Clearly these can be complex decisions. All of this points to the need for good advice – and that’s where we come in. Here at Aging Options we have worked with clients in hundreds of different situations, advising them not only about their finances in retirement but also about their legal affairs, housing choices, health care needs and family communication plans. It’s all part of what we call a LifePlan, a customized retirement blueprint that allows our clients to protect more and more of their assets as they age. We also show our clients how to avoid unplanned institutional care, and how to ensure that they will not become a burden on their loved ones in the future.

Why not take the first step in developing a LifePlan for your retirement? Plan now to attend one of our free LifePlanning Seminars. These highly enjoyable and information-packed events are held throughout the area. Register for a seminar by clicking on the Upcoming Events tab on this website. We’ll see you there.

(originally reported at www.aarp.org)

Category Archives: Financial

Senior Living Costs on the Rise, Outpacing Inflation

According to a newly released nationwide survey, costs for rent at senior living facilities across the U.S. are on the rise, with the West and South seeing the biggest increases. That’s the news from an article we recently discovered on the website www.NextAvenue.org. You can click here to read the article. We think this is…

What Spouses Should Know About Social Security

Because we work in the retirement field, we deal with Social Security rules and regulations every day. But for most retirees, Social Security still contains a great deal of mystery. That’s why we’re always happy to suggest helpful resources like this article about Social Security from the financial website Motley Fool (www.fool.com). The article is…

If You’re About to Re-Marry, Here are Four Money Moves to Make Now

Are you about to embark on a second marriage? Congratulations! It’s wonderful to rediscover wedded bliss after divorce or the loss of a spouse. However, in the midst of planning for the celebration, there’s another plan you need to make – a financial plan. Protecting your assets, for yourself and your heirs, is vital, and…

Retirement May Not Be What You Think –Some Surprises to Expect

What do you think “retirement” will be like? As we’ve discovered in our interaction with thousands of retirees, the answers vary widely. But a recent research report done by the financial firm Merrill Edge revealed that retirement can definitely hold some surprises – not all of them happy ones. We discovered this interesting article on…

Surprise! Ten Services Medicare Part A and B Probably Won’t Cover

The popular financial website Motley Fool (www.fool.com) always covers a wide range of stories in a clever, sometimes irreverent style. We like how the site tries to put things in down-to-earth terms, which is why we were drawn to a just published article about Medicare. Not only does the article briefly (and helpfully) describe each…

Part of Your Financial Plan: Remember to Update Your Beneficiaries!

Here’s a question: if you’ve made it clear in your will which one of your heirs should inherit money from your estate, how it is possible those funds will end up going to someone else? The answer is simple: if you’ve forgotten to update the beneficiary information on a life insurance policy, retirement plan, or…

Protecting Your Elderly Parents against Financial Scams

In a new article on the financial website Market Watch, we read a shocking statistic: according to the AARP, the average older victim of financial scams and abuse loses over $120,000. Financial exploitation and deception robs senior Americans of some $3 billion every year. What’s even worse, because many scams go unreported, the real total…

Are You a Family Caregiver? Save Money with these Important Tax Tips

A recent and very timely article on the website Next Avenue could save you a lot of money – and potentially a lot of trouble – at income tax time, if you are a caregiver for an older family member. The article is called “Tax Rules for Family Caregivers,” and you can read it by…

The Reverse Mortgage Has Won New Respect, says Wall St. Journal

What a difference a few years makes! “A decade ago, most financial advisers would roll their eyes at the mention of reverse mortgages,” writes the venerable Wall Street Journal. However, new safeguards and changes to laws governing these financial instruments “have led many advisers and researchers to change their minds about reverse mortgages.” We recently…

In Your 60’s? Tapping Your 401(k) Now Could Save You on Taxes Later

In the March 2016 issue of AARP Bulletin, this article caught our attention. It’s called simply “Keep More of Your Savings” – but the subtitle is more provocative: “How to give less to the IRS after you turn 70 ½.” You can click here to read the AARP article. What’s magic about age 70 ½?…