Thursday, October 31, 2019

14 Retirement Mistakes You Will Regret Forever

By Bob Niedt, Online Editor | June 19, 2018
As more and more baby boomers start eyeing retirement, thoughts turn from worry over the workday commute to concerns about how to fund the golden years.
How prepared are you? How much money do you really need to retire? Do you know the ins and outs of your pension (if you're lucky enough to have one)? How about your 401(k), IRA and other retirement accounts that make up your nest egg? Do you have a good handle on when to claim Social Security benefits? These are some of the questions to contemplate as retirement approaches. But long before you punch out, make sure you are making the right choices.
We've compiled a list of the biggest retirement planning mistakes and how to avoid making them. Take a look to see if any sound familiar.
Relocating on a Whim
The lure of warmer climates has long been the siren call of many who are approaching retirement. So you're cooking up a plan to head south to Florida or one of the many other great places to retire if you hate the cold. Our advice: Test the waters before you make a permanent move.
Too many folks have trudged off willy-nilly to what they thought was a dream destination only to find that it's more akin to a nightmare. The pace of life is too slow, everyone is a stranger, and endless rounds of golf and walks on the beach grow tiresome. Well before your retirement date, spend extended vacation time in your anointed destination to get a feel for the people and lifestyle. This is especially true if you're thinking about retiring overseas, where new languages, laws and customs can overwhelm even the hardiest retirees.
Once you do make the plunge, consider renting before buying. A couple I know circled Savannah, Ga., for their retirement nest. But wisely, as it turned out, they decided to lease an apartment downtown for a year before building or buying a new home in the suburbs. Turns out the Deep South didn't suit their Northern Virginia get-it-done-now temperament. They are instead thinking of joining the ranks of "halfback retirees" – people who head south, find they don't like it, and move halfway back toward their former home up north.
Falling for Too-Good-To-Be-True Offers
Hard work, careful planning and decades' worth of wealth-building are the foundations of financial security in retirement. There are no short cuts. Yet, Americans lose hundreds of millions of dollars a year to get-rich-quick and other scams, according to the FTC. Of the more than 3 million complaints received in 2016, 37% were filed by people ages 60 and over. Fraud victims reported paying $744 million to scammers. My parents, both in their mid-80s and of sound mind, constantly receive calls on their land line from scammers trying to make them part with their hard-earned retirement dollars.
States' Attorney General offices and the FTC offer tips for spotting too-good-to-be-true offers. Tell-tale signs include guarantees of spectacular profits in a short time frame without risk; requests to wire money or pay a fee before you can receive a prize; or unnecessary demands to provide bank account and credit card numbers, Social Security numbers or other sensitive financial information. Also be wary of — in fact, run away from — anyone pressuring you to make an immediate decision or discouraging you from getting advice from an impartial third party.
What do you do if you suspect a scam? The FTC advises running the company or product name, along with "review," "complaint" or "scam," through Google or another search engine. You can also check with your local consumer protection office or your state attorney general to see if it has fielded any complaints. If it has, add yours to the list. Be sure to file a complaint with the FTC, too.
Planning to Work Indefinitely
Many baby boomers like me have every intention of staying on the job beyond age 65, either because we want to, we have to, or we desire to maximize our Social Security checks. But that plan could backfire.
Consider this: 53% of workers expect to work beyond age 65 to make ends meet, according to the Transamerica Center for Retirement Studies. Yet, you can't count on being able to bring in a paycheck if you need it. While more than half of today's workers plan to continue working in retirement, just 1 in 5 Americans age 65 and over are actually employed, according to U.S. Department of Labor statistics.
You could be forced to stop working and retire early for any number of reasons, according to the Transamerica Center for Retirement Studies. Health-related issues — either your own or those of a loved one — are a major factor. So, too, are employer-related issues such as downsizing, layoffs and buyouts. Failing to keep skills up to date is another reason older workers can struggle to get hired. The actionable advice: Assume the worst, and save early and often. Only 28% of baby boomers surveyed by Transamerica have a backup plan to replace retirement income if unable to continue working.
Putting Off Saving for Retirement
The single biggest financial regret of Americans surveyed by Bankrate was waiting too long to start saving for retirement. Not surprisingly, respondents 50 and older expressed this regret at a much higher rate than younger respondents.
"Many people do not start to aggressively save for retirement until they reach their 40s or 50s," says Ajay Kaisth, a certified financial planner with KAI Advisors in Princeton Junction, N.J. "The good news for these investors is that they may still have enough time to change their savings behavior and achieve their goals, but they will need to take action quickly and be extremely disciplined about their savings."
Here's how much you need to sock away monthly to build a $1 million nest egg by age 65, based on Morningstar calculations. Assuming a 7% annual rate of return, you'd need to save $381 a month if you start at age 25; $820 monthly, starting at 35; $1,920, starting at 45; and $5,778, starting at 55.
Uncle Sam offers incentives to procrastinators. Once you turn 50, you can start making catch-up contributions to your retirement accounts. In 2018, that means older savers can contribute an extra $6,000 to a 401(k) on top of the standard $18,500. The catch-up amount for IRAs is $1,000 on top of the standard $5,500.
Claiming Social Security Too Early
You're entitled to start taking retirement benefits at 62, but you might want to wait if you can afford it. Most financial planners recommend holding off at least until your full retirement age — 67 for anyone born after 1959 — before tapping Social Security. Waiting until 70 can be even better.
Let's say your full retirement age, the point at which you would receive 100% of your benefit amount, is 67. If you claim Social Security at 62, your monthly check will be reduced by 30% for the rest of your life. But if you hold off, you'll get an 8% boost in benefits each year between ages 67 and 70 thanks to delayed retirement credits. There are no additional retirement credits after you turn 70. Claiming strategies can differ for couples, widows and divorced spouses, so weigh your options and consult a professional if you need help.
"If you can live off your portfolio for a few years to delay claiming, do so," says Natalie Colley, a financial analyst at Francis Financial in New York City. "Where else will you get guaranteed returns of 8% from the market?" Alternatively, stay on the job longer, if feasible, or start a side gig to help bridge the financial gap. There are plenty of interesting ways to earn extra cash these days.
Borrowing From Your 401(k)
Taking a loan from your 401(k) retirement-savings account can be tempting. After all, it's your money. As long as your plan sponsor permits borrowing, you'll usually have five years to pay it back with interest.
But short of an emergency, tapping your 401(k) is a bad idea. According to Meghan Murphy, vice president of thought leadership at Fidelity Investments, you're likely to reduce or suspend new contributions during the period you're repaying the loan. That means you're short-changing your retirement account for months or even years and sacrificing employer matches. You're also missing out on the investment growth from the missed contributions and the cash that was borrowed.
Keep in mind, too, that you'll be paying the interest on that 401(k) loan with after-tax dollars — then paying taxes on those funds again when retirement rolls around. And if you leave your job, the loan usually must be paid back win as little as 30 days. Otherwise, it's considered a distribution and taxed as income.
Before borrowing from a 401(k), explore other loan options. College tuition, for instance, can be covered with student loans and PLUS loans for parents. Major home repairs can be financed with a home equity line of credit.
Decluttering to the Extreme
My parents are in their mid-80s and have been living in the same house for decades. In recent years they have started getting rid of all the bric-a-brac they've accumulated. Their goal is either to sell and move into a retirement community or, at the least, make it easier for my brother and I down the road when we inherit the home.
There hasn't been much junk among the items they've parted with save for the wall clock they gave me and swore it worked (it doesn't). But there were also items my father wisely ran past his lawyer before dumping: Bookkeeping records from the business he owned for years. He was cleared.
Still, that's fair warning: Be careful about what you throw out in haste. Sentimental value aside, certain professionals including doctors, dentists, lawyers and accountants can be required by law to retain records for years after retirement. As for tax records, the IRS generally has three years to initiate an audit, but you might want to hold on to certain records including your actual returns indefinitely. Same goes for records related to the purchase and capital improvement of your home; purchases of stocks and funds in taxable investment accounts; and contributions to retirement accounts (in particular nondeductible IRA contributions reported on IRS Form 8606). All can be used to determine the correct tax basis on assets to avoid paying more in taxes than you owe.
Putting Your Kids First
Sure, you want your children to have the best — best education, best wedding, best everything. And if you can afford it, by all means open your wallet. But footing the bill for private tuition and lavish nuptials at the expense of your own retirement savings could come back to haunt all of you.
"You cannot borrow for your retirement living," says Joe Ready, director of Wells Fargo Institutional Retirement and Trust. "[But] you may have other avenues beyond [borrowing from] your 401(k) plan to help fund a child's education." Instead, Ready says parents and their kids should explore scholarships, grants, student loans and less expensive in-state schools in lieu of raiding the retirement nest egg. Another money-saving recommendation: community college for two years followed by a transfer to a four-year college. (There are many smart ways to save on weddings, too.)
No one plans to go broke in retirement, but it can happen for many reasons. One of the biggest reasons, of course, is not saving enough to begin with. If you're not prudent now, you might end up being the one moving into your kid's basement later.
Buying into a Time-Share
t's easy to see the appeal of a time-share during retirement. Now that you're free from the 9-to-5 grind, you can visit a favorite vacation spot more frequently. And if you get bored, simply swap for slots at other destinations within the time-share network. Great deal, right? Not always.
Buyers who don't grasp the full financial implications of a time-share can quickly come to regret the purchase. In addition to thousands paid upfront, maintenance fees average upward of $660 a year, and special assessments can be levied for major renovations. There are also travel costs, which run high to vacation hotspots such as Hawaii, Mexico or the Bahamas.
And good luck if you develop buyer's remorse. The real estate market is flush with used time-shares, which means you probably won't get the price you want for yours — if you can sell it at all, according to Ron Kelemen, a retired Salem, Ore.-based financial planner. Even if you do find a potential buyer, beware: The time-share market is rife with scammers.
Experts advise owners first to contact their time-share management company about resale options. If that leads nowhere, list your time-share for sale or rent on established websites such as redweek.com and tug2.net. Alternatively, hire a reputable broker. The Licensed Timeshare Resale Brokers Association has an online directory of its members. If all else fails look into donating your time-share to charity for the tax write-off.
Avoiding the Stock Market
Shying away from stocks because they seem too risky is one of the biggest mistakes investors can make when saving for retirement. True, the market has plenty of ups and downs, but since 1926 stocks have returned an average of about 10% a year. Bonds, CDs, bank accounts and mattresses don't come close.
"Conventional wisdom may indicate the stock market is 'risky' and therefore should be avoided if your goal is to keep your money safe," says Elizabeth Muldowney, a financial adviser with Savant Capital Management in Rockford, Ill. "However, this comes at the expense of low returns and, in fact, you have not eliminated your risk by avoiding the stock market, but rather shifted your risk to the possibility of your money not keeping up with inflation."
We favor low-cost mutual funds and exchange-traded funds because they offer an affordable way to own a piece of hundreds or even thousands of companies without having to buy individual stocks. And don't even think about retiring your stock portfolio once you reach retirement age, says Murphy, of Fidelity Investments. Nest eggs need to keep growing to finance a retirement that might last 30 years. You do, however, need to ratchet down risk as you age by gradually reducing your exposure to stocks.
Ignoring Long-Term Care
We all want to believe we'll stay healthy and motoring long into our retirement years. A good diet, plenty of exercise and regular medical check-ups help. But even the hardiest of retirees can fall ill, and absent a serious illness time will take its inevitable toll on mind and body as you progress through your 70s, 80s and 90s.
When the day arrives that you or a loved one does require long-term care, be prepared for sticker shock. A 2017 Genworth survey found that the national median cost of assisted living is $45,000 a year; a private room in a nursing home, $97,455 a year. Even a sizable retirement nest egg can be wiped out in a hurry. And remember, Medicare doesn't cover most of the costs associated with long-term care.
There are options for funding long-term care, but they're pricey. If you can afford the high premiums, consider long-term care insurance, which covers some but not necessarily all nursing home costs. A typical policy for a 55-year-old male might start at $2,000 a year, according to Genworth. The annual premium jumps to $3,000 if the man waits until 65 to buy a policy. You can also look into purchasing a qualified longevity annuity contract, known as a QLAC. In exchange for investing a hefty lump sum up front when you're younger, the QLAC will pay out a steady stream of income for the rest of your life once you hit a certain age, typically 85.
Neglecting Estate Planning
Estate planning isn't just for the wealthy. Even if your assets are modest — perhaps just a car, a home and a bank account — you want to have a valid will to specify who gets what and who will be in charge of dispersing your money and possessions (a.k.a. the executor). Die without a will and your estate is subject to your state's probate laws. Not only could your assets get tied up in court, possibly creating financial hardship for your heirs, but absent a will a judge might ultimately award your assets to an unintended party such as an estranged spouse or a relative you never liked.
Retirement is an ideal time to review existing estate-planning documents and create the ones you've long ignored. Start with the aforementioned will. You might have had one drawn up years ago when your kids were young. Decades later, what's changed? Are you divorced? Remarried? Richer? Poorer? Maybe you prefer for your grandkids or a favorite charity to inherit what you originally earmarked for your now-grown children? Remember, too, that some assets, such as retirement accounts, fall outside your will. Be sure the beneficiaries you have on file with financial institutions are up to date.
A will is just the start. You should also draft a durable power of attorney that names someone to manage your financial affairs if you need help or become incapacitated. And your health-care wishes should come into sharper focus now that you're older. Advance directives such as a living will, which spells out the treatments you do and don't want if you become seriously ill, and a power of attorney for health care, which names someone to make medical decisions for you if you can't make them yourself, are essential.
Borrowing Against Your Home
It's tempting for retirees who are house rich but cash poor to tap the equity that's built up in a home. This is especially true if the mortgage is paid off and the property has appreciated substantially in value. But tempting as it might be, think hard before taking on more debt and monthly payments at precisely the time when you've stopped working and your income is fixed.
Rather than borrow against the value of your home, explore ways to lower your housing costs. Start with downsizing. Sell your current home, buy a smaller place in the same area, and put your profits toward living expenses. For the ultimate in downsizing, consider a tiny home for retirement — seriously. Tiny homes are inexpensive, upkeep is easy, and utility bills are low. If you're willing to relocate, sell and move to a cheaper city that's well-suited for retirees. Or, stay put and find a roommate. The rental income will supplement your Social Security and savings.
If you must tap your home equity, tread carefully. If you still have a mortgage, look into a cashout refi. Just try to keep the length of the refinanced mortgage to a minimum to avoid making repayments deep into retirement. Otherwise, investigate a home equity loan or home equity line of credit (HELOC). However, be forewarned that under the new tax law you won't be able to deduct the interest on these loans unless the money is used to substantially improve your home, such as replacing the roof. In the past the interest could be deducted even if you spent the money on, say, a vacation or a new car. Yet another option for retirees is a reverse mortgage. You'll receive a lump sum of money or access to a line of credit that in most cases doesn't need to be repaid until you or your heirs sell the home.
Failing to Plan How You'll Fill Your Free Time
A friend of mine had a nice government job. One of the perks was early retirement. He went for it. But not long after, he informed me he was going back to his old position, albeit two days a week. "There's only so many movies to see alone during the day in an empty theater," he said. "That got old fast."
Our careers provide structure to our lives five days a week, and weekends can be consumed by chores and rest. The cycle starts all over again Monday morning. But once you leave your job for good, there's suddenly a lot of time to fill. Have you truly thought through how you will fill it in retirement?
It's critical to plan your free time in retirement as thoroughly as you plan your finances. How about a part-time job doing something you love? My happy place the summer between high school and college was working at a theme park in New Jersey. No one was unhappy there. I've always kept "theme park job in retirement" in my back pocket. You could also take a casual hobby to new levels now that you have the time to devote to it. Or, you could return to school. Many public colleges and universities (and some private ones) offer free or reduced tuition to residents of a certain age, often starting at 60. Check a school's website for details, or call the registrar's office.

https://www.kiplinger.com/slideshow/retirement/T047-S001-retirement-mistakes-you-will-regret-forever/index.html

5 Financial Challenges Your Kids Will Face With Your Estate

By Matt Hausman, Registered Investment Adviser, Founder and President | April 3, 2018
Many parents fail to get their financial affairs in order, neglecting to take care of such things as wills, living wills and powers of attorney. But even those who think they’ve covered all of their bases often leave one of the most important tasks undone: They fail to talk to their adult children about the money they’ll be leaving them someday.
For many, I’ve found, it’s because it’s a private topic — and an uncomfortable one. But passing an estate on in the most efficient manner possible is a tough thing to manage. Especially if you haven’t had at least a general conversation about where your money is, how to get to it and — just as critical — how to minimize the taxes on various types of investments when they’re inherited. Therein lies the potential issues, because not all assets are inherited the same and, therefore, are not taxed the same.
Unfortunately, I’ve found many parents don’t know the answers themselves to be able to discuss with their kids. It may be necessary to educate yourself before you can share this information with your family. Here are some things you and your kids should know about.
Written by Matt Hausman, founder and president of Old Security Trust Corp. and Old Security Group, a Registered Investment Advisory Firm.
1. What are the tax ramifications of inherited IRAs?
Your children may not be aware that if they inherit your IRA, they’ll be paying taxes on withdrawals, just as you were. Your beneficiaries can choose a “stretch” IRA option, leaving the funds in the IRA for as long as possible while taking required minimum distributions based on their life expectancy (their RMDs would begin the year after your death, not by age 70½), or they must liquidate the account within five years.
The stretch option is smart, but try telling that to a kid who sees the money as a one-time windfall that could pay for a new car or even a house. At the very least, talk about the potentially devastating tax consequences of taking a lump sum: Beneficiaries could lose up to 40% or more of the account.
2. What about an IRA rollover?
A non-spouse beneficiary can’t roll your IRA money directly into his or her own IRA or 401(k). Doing so could trigger a major tax bill because now the whole amount will become taxable income — and there’s no do-over. Be sure your IRA custodian will administer inherited IRAs for your children and will automatically take care of any required minimum distributions so your loved ones don’t have to worry about it, because if they don’t take the required amount, the tax penalty is 50% of whatever they were supposed to take, plus whatever their ordinary income tax rate would be on that amount. (Distributions from an inherited Roth IRA have similar rules but are tax-free unless the account was established less than five years before.)
3. What tax strings can come with an inherited annuity?
Keep in mind that other non-retirement tax-deferred assets, such as annuities, also can come with a tax time bomb when they are inherited. The insurance company will issue a Form 1099 for any untaxed growth to your child, and that amount must be included as gross income when they file their taxes.
That might be OK, if you’ve discussed it ahead of time and your child is in a lower tax bracket than you are. But I’ve seen more than one beneficiary who considered it an unpleasant and unwelcome surprise.
4. How does a step-up in basis work?
You and your kids also should understand the term “step-up in basis” and how it will affect some non-retirement account appreciated assets they inherit, including stocks, bonds and real estate. The value of the asset on the day you die will be your heir’s cost basis, not what you paid for it.
So, for example, if you paid $300,000 for your vacation home, but it’s worth $500,000 when you die, that becomes the cost basis for your heirs. If your child sells the home for more than $500,000 in the future, any capital gains tax will be calculated based on the “stepped-up basis” of $500,000, not your original basis of $300,000.
5. Who has the financial details that can help?
Think about setting up an appointment for your beneficiaries to meet your adviser with you there. If everyone is spread out in various locations, maybe a video or phone conference would work. If that isn’t possible, at a minimum be sure to leave contact information with everyone, so they can reach each other after your death. Even if you shared the basics with your children, you’ll want them to have this person on their side to advise them as soon as possible.
I’ve seen parents who have done a pretty good job of talking to their kids about other money matters — budgeting, saving, building good credit, etc. — but drop the ball completely when it comes to preparing them for an inheritance.

https://www.kiplinger.com/slideshow/retirement/T021-S014-5-challenges-your-kids-will-face-with-your-estate/index.html

10 Surprising (or Surprisingly Common) Estate Planning Mistakes

By T. Eric Reich, CIMA®, CFP®, CLU®, ChFC®, President and Founder | May 22, 2018
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When it comes to wills, as a financial planner, I’ve seen a lot of sad, unfortunate or just plain weird things happen over the years. Poor estate documents can lead to people accidentally cutting loved ones out of inheritances, paying big tax bills unnecessarily and saddling families with expensive, head-scratching legal battles.
Here are 10 mistakes — some you can probably guess, but others you’ve probably never heard of — people tend to make when planning their estates.
Written by T. Eric Reich, President of Reich Asset Management, LLC. Reich is a Certified Financial Planner™ professional who holds his Certified Investment Management Analyst certification, Chartered Life Underwriter® and Chartered Financial
1. Beneficiary blunders.
Not naming a contingent beneficiary on retirement accounts and insurance policies — or failing to review beneficiaries often enough — is my clients’ No. 1 mistake. The default if no contingent is picked is likely your estate, which may be subject to probate, creditors, delays, etc. No contingent beneficiary on an IRA means NO stretch IRA — a valuable tax break that enables someone who inherits an IRA to draw out distributions over his or her own life expectancy — if your original beneficiary has died.
Only a person with a life expectancy can do a stretch. An estate has no life expectancy, therefore, no stretch to minimize taxes and potentially receive significantly more income over your beneficiary’s lifetime.
Forgetting to change an ex-spouse on an IRA can have disastrous consequences for your new spouse or family! (Note, in a retirement plan your new spouse becomes your beneficiary the day you get married, but NOT in an IRA!) If you don’t want your current spouse to be the beneficiary of your retirement plan, then they must agree to you naming someone else. And no, your prenuptial agreement doesn’t matter in this case, because only a spouse can waive those rights, and a fiancée isn’t a spouse yet!  
2. “Selling” property for $1.
This was popular years ago in areas that saw very rapid land appreciation. For example, when my grandfather moved to Avalon, N.J., he paid $50 a lot for property. Today those lots would sell for $2 million each. The theory was that you could sell it for a very low price and not have to pay taxes on the gain and remove it from your estate. You can sell property for whatever you want but:
·         The IRS will deem it a gift if it is less than market value, and
·         Your heirs will lose the “step up” in value.
Why is this so bad? Because if I inherit a property worth $1 million and sell it for $1 million I may pay no tax. If I “buy” it for $1 and sell it for $1 million, I pay tax on the $999,999 gain!
3. Naming specific investments in your will.
Specific bequests are handled first, and the person who died might not even own that investment anymore. His estate might be required to go out and purchase it at a much higher price, which could hurt all of his other beneficiaries.
We had a client who once left shares of a particular stock, which at the time was worth $10,000, to a grandchild.
The problem was that the will was written 30 years earlier, and the same number of shares was worth $600,000 at his death, AND he didn’t own them anymore. His estate would have to go buy those shares and give them to the grandchild. This used up virtually all of the assets of the estate, and the remaining beneficiaries got very few assets.
4. Not thinking through a well-intended gift.
A client had three daughters and wanted to make sure after she passed away that they always had a home to go to in the town where she lived. Her will had stated that her children couldn’t sell her house unless everyone had a house in that particular shore town. Two of the three children did, in fact, live in that same town. The third, however, several years before her mother’s death, moved to San Diego (2,500 miles away!) and didn’t WANT to own a house in that town.
Because of the way the will was written, the heirs had to go through a lengthy process with the courts to finally get permission to sell their mother’s home. Worse, during this time period the home’s value declined dramatically. When the house was ultimately sold, the heirs lost over $500,000 in addition to the legal fees.
5. Leaving assets directly to a minor without dealing with guardianship issues.
Who will handle the money for them? Define “for their benefit.” Does a new Escalade count, because the kids won’t fit in my Honda Civic? That phrase welcomes a whole host of potentially abusive interpretations.
6. Not planning for the death of a beneficiary.
If one of my two beneficiaries dies, where does the money go? Is it the other one, or is it the family of the one who died? I could disinherit grandchildren by picking the first option and leave everything to the other beneficiary and their family!
This is known as per capita (Latin for “by heads,” meaning per person) vs. per stirpes (Latin for “by branch,” meaning each branch of the family would receive a share).
One way to word that might be that you leave your assets to “all lawful children equally — Per Stirpes.”
7. Ownership mistakes and imbalances.
If too many of the assets are in one spouse’s name, it could accelerate or increase some taxes (see your tax adviser).
Frequently, one spouse may have worked longer and will have a much larger IRA. They may also have a vacation home or investment accounts in their name only. By shifting the house or investment accounts to the other spouse, the estate becomes more equalized, and therefore reduces the possibility of owing taxes after the first death.
8. Not having a residuary clause.
A residuary clause deals with everything you didn’t specifically name in your will, forgot to put in your will/trust/etc., things you don’t yet own but will before your death, and things you might not know you own.
This happens more than you think! My family went to sell a property and found out there was a 4-foot by 25-foot strip of land as a part of it that wasn’t ours. When we asked the owner to sell it, he never even knew he owned it.
9. Not planning for the unexpected.
There could be a sudden decline in your or your spouse’s health, or there could be a change in your assets. What about the divorce of your kid? Your kid’s creditors? Can your heirs handle that much money? There are a multitude of things that you have probably never even thought about.
This is commonly addressed by having assets go to a trust where you can control how, to whom and when money gets distributed, unlike an outright inheritance from a will. Personally, mine goes to a trust and they get distributions at ages 25/35/45, unless my trustee deems them to be a danger to themselves. (The opioid epidemic has made people add this recently. The last thing you want to do is give an addict, gambler, debtor, etc. a large distribution of cash.)
10. Not dealing with your own mortality!
Yes, you are still going to die someday, whether you want to face that reality or not! Do not leave your family ruined because you don’t want to deal with an uncomfortable situation!
There are plenty of things that can go wrong after someone dies. Don’t make matters worse by failing to plan properly. If you’re worried about the cost of a qualified estate planning attorney, I can tell you it’s a lot cheaper than litigation!
This is for general information only and is not intended to provide specific advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax adviser with regard to your individual situation.

https://www.kiplinger.com/slideshow/retirement/T021-S014-10-sometimes-surprising-estate-planning-mistakes/index.html

6 Options to Fund Long-Term Care in Retirement

It's not fun to think about, but if you boil down your choices a bit, making a plan for what could easily cost several thousand per month becomes less daunting.
By Carlos Dias Jr., Wealth Adviser, Founder and President | Dias Wealth LLC February 28, 2018
For many retirees, the term "long-term care" is typically associated with a nursing home. As we age, there is a greater chance we will need some sort of long-term care in the future. According to the U.S. Department of Health and Human Services, 70% of people over 65 will need long-term care at some point in their lives.
The worst part is that many will not (or do not want) to discuss the need to plan until it is possibly too late. The good news is that you have many options, but you might need to get a little creative. Take one of my clients, as an example. Fifteen years ago, at age 60, she had purchased long-term care insurance policy, and over the years had paid about $45,000 in premiums for a $7,600-a-month long-term care benefit with a 90-day deductible (known as an "elimination period"). The policy had a five-year limit, for a total payout possibility of $456,000.
Now, at age 75, she was worried about the rising cost of her insurance coverage as well the possibility that she would never use the policy, getting nothing for all the money she paid on premiums. She had $200,000 in a bank CD that she didn't need for her living expenses, so we came up with an alternative plan. She ditched her old long-term care plan and used the $200,000 to replace it with an $8,800 monthly long-term care benefit with a 0-day elimination period for four years (a $422,000 total payout). On top of that, if she never uses the benefit, her kids would receive a $211,000 death benefit (a return of her deposit and minimal interest).
So, how can you prepare for long-term care costs? Here are six options:
1. Self-pay
The most obvious choice, but it comes with a hefty price tag. A Genworth Cost of Care Survey conducted in June 2017 revealed the national median for the following services:
·         Home health aide services: up 6.17% to $21.50/hour
·         Homemaker services: up 4.75% to $21/hour
·         Adult day health care services: up 2.94% to $70/day
·         Assisted living facilities: up 3.36% to $123/day or $3,750/month
·         Semi-private room nursing home care: up 4.44% to $235/day or $7,148/month
·         Private room nursing home care: up 5.50% to $267/day or $8,121/month.
Due to higher labor costs and stricter laws, expenses have and will continue to increase. Even though care received at home is more affordable than in a nursing home, you can never anticipate future needs.
2. Government benefits
Many retirees think that Medicare will pay for their long-term care. Unfortunately, this is not true and often one of the biggest misconceptions. Although Medicare covers some home and nursing home care, it is only for rehabilitation purposes and not categorized as long-term.
If you're a veteran, there is a pension with aid and attendance available. The amounts are contingent on if you're: single (up to $1,830 per month); married (up to $2,170 per month); or a surviving spouse of a veteran (up to $1,176 per month). There are certain conditions that need to be met, such as proof of service and a doctor's evaluation, in order to receive the benefit.
Retirees can also pursue their state-run Medicaid program to cover long-term care expenses. But qualifying for Medicaid is not easy since it is based on federal poverty guidelines. If you're single, depending on the state in which you live, the income limit is around $2,000 per month, and your assets (excluding the value of your home and vehicle) can't exceed around $2,000. Married couples can have assets as high as $120,900. Make sure to use an elder law attorney with experience if you decide to pursue this route.
Planning for long-term care through government benefits can be a challenging task, especially for couples.
3. Traditional long-term care insurance
This choice has been around for decades but is no longer as cost-effective as it once was. For a retiree choosing to purchase traditional long-term care insurance today, it may lead to regret in the future. Why? With rising policy premiums and stricter state reserve requirements, there aren't a plethora of insurance companies to choose from anymore.
In addition, unless a return-of-premium rider was purchased in the past—a feature not offered on newer policies—your traditional long-term care insurance policy would have no value today if it lapses or you pass away.
4. Combined life insurance with long-term care benefits
One option retirees are using is a combined life insurance policy with long-term care benefits (also known as a "rider"). Not only are there similar features available (e.g., inflation protection and different elimination periods to choose from), but if you pass away prematurely, your beneficiaries receive a tax-free death benefit.
The biggest difference you should be aware of is whether the policy has either a chronic illness or long-term care rider. A competent financial adviser well-versed in long-term care will know the difference between both.
5. Combined annuity with long-term care benefits
Similar to aforementioned, a combined annuity with long-term care benefits might offer a higher dollar amount or more lenient underwriting in lieu of a tax-free death benefit.
Currently offered by a select few insurance companies, the key is to make sure it is classified as long-term care. Some financial advisers are selling annuity policies with a double benefit (also known as a "home health care doubler") that pay at the most a maximum of five years and are not deemed long-term care.
6. Life settlement
If you have an existing life insurance policy—whether term or permanent—legally it is an asset with ownership rights. Life insurance policies contain some sort of value that often goes unrecognized. In fact, you might allow your life insurance to lapse because it's no longer needed, but could've converted it into a long-term care benefit. Many retirees, including one of my own clients, are using their existing life insurance policies as collateral to fund their future long-term care needs.
My 76-year-old client had a life insurance policy with a $1.2 million death benefit on which he was paying $35,000 in annual premiums. The policy had very minimal cash value, and he was contemplating letting it lapse. By using a Medicaid life settlement, he was able to exchange his life insurance policy for about $350,000 worth of long-term care to pay for home health, assisted living or nursing home expenses in the future.
It's never too early to plan for long-term care, so make sure to include it as part of your financial plan in retirement.
Carlos Dias Jr. is a financial adviser, public speaker and president of Dias Wealth LLC, in the Orlando, Florida, area, offering strategic financial planning services to business owners, executives, retirees and professional athletes. Carlos is a nationally syndicated columnist for Kiplinger and has contributed, been featured or quoted in over 100 publications, including Forbes, MarketWatch, Bloomberg, CNBC, The Wall Street Journal, U.S. News & World Report, USA Today and several others. He's also been interviewed on various radio and television stations. Carlos is trilingual, fluent in both Portuguese and Spanish.
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https://www.kiplinger.com/article/retirement/T036-C032-S014-6-options-to-fund-long-term-care-in-retirement.html

Caring for Your Aging Parents: How to Prepare


The time to get ready is well before the time comes. Here's how to approach some important talks and what you need to cover.
By Mike Piershale, ChFC | Piershale Financial Group September 21, 2018
Caring for aging parents is something you hope you can handle when the time comes, but it's the last thing you want to think about.
Whether the time is now or somewhere down the road, there are steps you can take to make your life — and their lives, too — a little easier.
It’s Time for a Chat
The first step is talking to your parents. How will you know when it's the right time to do this? Look for indicators like failure to take medication, new health concerns, diminished social interaction, general confusion or even fluctuations in weight.
What can make things more difficult is when the parents are unwilling or unable to talk about their future.
This can happen for a number of reasons, including fear of becoming dependent, resentment toward you for interfering, reluctance to burden you with their problems, or because they are already incapacitated. Without their cooperation, you may need to do as much planning as you can without them. However, if their safety or health is in danger, you may still need to step in as a caregiver.
If you're nervous about talking to your parents, make a list of topics that you need to discuss. This will help ease tension, and you will be less likely to forget anything.
If there is some reluctance on the part of your parents, it may be wise to cover your list over several visits so that it doesn’t sound so much like an interrogation.
Get Personal
Once you've opened the lines of communication, a good next step is to get as much information as you can to prepare a personal data record. This document lists information that you might need in case your parents become incapacitated or die.
Here is some information that should be included:
1.       Bank and investment accounts
2.       Estate documents like wills and trusts
3.       Funeral and burial plans
4.       Medical information
5.       Insurance information
6.       Names and phone numbers of professional advisers
7.       Real estate documents
Be sure to write down the location of documents and any relevant account numbers. It's also a good idea to make copies of all the documents you've gathered and keep them in a safe place.
Explore Living Arrangements
Eventually you’ll need to have discussions on more sensitive subjects like your parents’ wishes on medical care decisions and future living arrangements.
Where your parents eventually live will depend on how healthy they are. As they grow older, their health may deteriorate so much that they can no longer live on their own. At that point, you may need to find them in-home health care, health care within a retirement community or nursing home, or you may insist that they come to live with you.
If money is an issue, moving in with you may be the best or only option. Keep in mind this decision will impact your entire family, so talk about it as a family first.
Make It a Family Affair
The physical and financial responsibility of taking care of elderly parents may fall on several adult children, and usually not all are equally able to bear the burden. The result can be resentment, even hostility, and the breakdown of family cooperation.
The key to keeping harmony is communication. Family meetings on a regular basis are key to keeping tensions down and everyone informed. Families can talk over who can pay for care when it's needed, and who can do physical work for a parent.
Even if a family member lives at a distance, there are things they can do. Consolidating accounts in one bank, setting up online access to paying bills and overseeing financial management are areas that can be handled from anywhere in the U.S.
Ask for Help
The key is to not try to care for your parents alone. Besides getting the family involved, there are also many local and national caregiver support groups and community services available to help you cope with caring for aging parents.
If you don't know where to find help, contact your state department of elder care services, or call: 1-800-677-1116 to reach the Elder Care Locator, an information and referral service sponsored by the federal government that could direct you to resources available in your area.
Mike Piershale, ChFC, is president of Piershale Financial Group in Barrington, Illinois. He works directly with clients on retirement and estate planning, portfolio management and insurance needs.
Comments are suppressed in compliance with industry guidelines. Click here to learn more and read more articles from the author.
This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.