Tag: Retirement

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IRA Estate Planning Strategies In Light of the SECURE Act

On December 20, 2019, the Setting Every Community Up for Retirement Enhancement Act of 2019 (the “SECURE Act”) was signed into law as part of the government’s Further Consolidated Appropriations Act of 2020. As the law’s name implies, the SECURE Act sets forth reforms to existing rules that impact retirement plans. In a partial summary, the SECURE Act promulgates the following changes to retirement plans (particularly IRAs) as follows:

– RMDs start age increased to 72 – The age at which required minimum distributions (“RMDs”) begin changed from 70½ to 72;

– No Age Limit on IRA Contributions – Contributions to traditional IRAs can now occur after the age of 70½ to match the unlimited age limit on ROTH contributions;

– Qualified Charitable Contributions (“QCD”) are offset by post-70½ Tax-Deductible IRA contributions – Without getting into the minutiae of calculations, QCDs are allowed to be made at 70 ½ instead of 72 with one caveat – the contributions no longer avoid tax recognition to the extent of cumulative post-70½ made by the taxpayer; and

– Death of the “Stretch IRA” – Prior to the SECURE Act, IRA beneficiaries were allowed, if they chose, to “stretch” RMDs from inherited IRAs over their respective lifetimes. Under the new rules per the SECURE Act, with certain exceptions, the stretch provision is now replaced with a 10-year window for completely distributing the contents of the account.

(Note: There are many more provisions of the SECURE Act that reform retirement plans and the way that they are governed and operated. For the purposes of this article, we are focusing on the provisions of the law that have significant estate planning implications. Please consult the law at https://www.congress.gov/bill/116th-congress/house-bill/1994 for more information.)

With the changes to the stretch provisions for traditional IRAs, a valued strategy that many families relied upon as part of their estate plans was essentially erased with the stroke of President Trump’s pen. Having the rug pulled out from under them seems to be apropo in this instance.

In light of the law change, many clients are now wondering what actions should be taken to ensure that the estate plans that they developed prior to the SECURE Act, are still effective. With a focus on Inherited IRAs and the dissolution of the stretch provision, we focus on the following strategies as potential estate planning strategies for revising their estate plans in the wake of the SECURE Act:

  1. Accelerating ROTH conversions and utilizing a testamentary trust to create your own inherited “stretch” IRA;
  2. Make testamentary transfers to a charitable remainder trust (“CRT”);
  3. Utilize Multi-beneficiary Trusts;
  4. Utilizing Life Insurance as an alternative to planning for passing down an IRA; and
  5. Do nothing and revise your estate plan within the framework of the new IRA rules.

The “Death of the Stretch” – A Brief Summary

Pre-SECURE Act

IRA owners are allowed to name beneficiaries for their accounts. This can be anyone – a spouse (or ex-spouse), children, parents, siblings, grandparents, friends, etc. IRA owners can also name entities as beneficiaries to their accounts too, such as charitable organizations, alma maters, houses of worship, etc. Lastly, IRA owners can name entities they create, such as a trust for the benefit of a loved one, like children or siblings. Upon death, the beneficiary has the following options available when deciding what to do with the inheritance:

– Rename the IRA as their own (this option is only available to spouses)

– Take a lump-sum distribution

– Empty the account contents within 5 yrs of the year of death

– Open a new IRA account titled in both the name of the deceased IRA owner and the beneficiary (an “Inherited IRA”) and defer taking distributions by only taking RMDs based on the life expectancy of the aforementioned beneficiary (assuming that the beneficiary is younger than the deceased IRA owner, otherwise the RMDs would be based on the deceased IRA owner). This is referred to as “stretching the IRA”.

Effects of the SECURE Act

The SECURE act changed the IRA rules by allowing the same options for taking ownership of an Inherited IRA, with the exception that:

– The timeline for emptying accounts is now 10 years instead of 5 (the “10-year rule”); and

– With respect to stretching the IRA, only certain “eligible designated beneficiaries” are allowed to stretch payments over their respective lives, which include:

Spouses

Minor Children (only until such minor reaches the age of majority, after which such minor children become “Designated Beneficiaries”, as defined below)

Beneficiaries that are not more than 10 years younger than the deceased

Disabled Persons (per Code Section 72(m)(7) 

Chronically Ill Persons (per Code Section 7702B(c)(2)

Certain Trusts  for the benefit of Eligible Designated Beneficiaries

– “Designated Beneficiaries” cannot stretch the IRA and must adhere to the 10-year rule:

Non-Spouse Beneficiaries

Certain Trusts established for the benefit of Designated Beneficiaries

Prior to the SECURE Act, many estate plans could simply rely on the IRA stretch provision as a means to allow such assets to grow while minimizing the tax impacts of the inheritance. In addition, certain vehicles such as conduit trusts were instrumental in bequeathing assets while establishing a spendthrift to help protect beneficiaries preserve the windfalls that they inherited.

With the rule changes, primarily with the modification of IRA stretch rules, clients are now concerned about the efficacy of their previously established plans, and need education, guidance, and assistance in making sure their plans are adjusted accordingly. In addition, with a strong government mandate to raise income with a view towards taxing the projected massive transfer of wealth  (estimated at $68 trillion over the next 25-30 years), smart estate planning will be key to ensure that future generations don’t lose significant wealth to potential higher tax bills.

Estate Planning Strategies

Accelerating ROTH conversions

One strategy that can be utilized that can be utilized to mitigate the adverse effects of SECURE Act Inherited IRA changes is to begin converting such traditional IRA holdings into a ROTH IRA and bequeath it outright, or name an accumulation testamentary trust as the beneficiary of the ROTH (for the benefit of the Designated Beneficiary), and through such trust, dictate tax-free distributions per the deceased owner’s wishes. The IRA owner can use the IRS life expectancy tables to create their own stretch IRA for the trust beneficiary (or beneficiaries, if applicable).

Charitable Remainder Trusts (CRT)

Another strategy for consideration involves the tax free, lump-sum distribution of Inherited IRA into an irrevocable CRT that names Designated Beneficiaries as income beneficiaries and a charitable organization as the remainder beneficiary. Conceptually, the CRT will make distributions to the beneficiaries of an IRA for up to 20 years (or the life of the beneficiary, whichever is shorter) with the remainder going to the charity named as the remainderman. There are complexities in structuring the CRT and maintaining its IRS compliance (i.e., the 10% remainder test) as well as potential drawbacks  such as (1) distributions being limited to income (principal distributions not permitted) and (2) the disinheritance of successor beneficiaries due to the mandatory payment of the trust assets to the charity upon the death of the beneficiary.

Mutli-beneficiary Trusts

Multi-beneficiary trusts can be utilized to allow Designated Beneficiaries potentially benefit from Inherited IRAs bequeathed to both them and am Eligible Designated Beneficiary, such as a Disabled or Chronically Ill Person. The structures could be in the form of (a) a bifurcated trust, where the conduit trust (and stretch portion) pays out to the Eligible Designated Beneficiary, and the accumulation trust pays out to the Designated Beneficiary under the 10-yr rule, or (b) a sequential trust, where payments are made first to the Eligible Designated Beneficiary under the stretch provisions, and then to the Designated Beneficiary under the 10-yr rule upon the death of the first beneficiary.  For example, let’s say Michael is a Chronically Ill 50 year old with a life expectancy of 15 years. His sister, Janet is 45 and is in good health. Both Michael and Janet inherit their father’s IRA of $1 million. As Michael meets the definition of an Eligible Designated Beneficiary, the IRA can name the multi-beneficiary trust for the benefit of Michael as the beneficiary and pay funds out under the stretch provision. Janet, the Designated Beneficiary can be named as a successor beneficiary to the trust, and upon Michael’s death receive payments under the 10-yr rule.

Life Insurance

Generally, life insurance can be used to act as an hedge against the adverse effects of the SECURE Act. By taking distributions and using part of those proceeds to pay life insurance premiums on permanent life insurance (which can be housed in an irrevocable life insurance trust, or “ILIT”) with a face amount that covers at a minimum the account size set aside for bequeathment, the IRA owner can not only gain peace of mind with the fact that the asset won’t fluctuate in value, he or she will also be pleased that such an asset is being passed on to heirs without the burden of taxes.

Keeping the Status Quo

In some situations, things might be just fine with the new rules in place. The 10 yr rule might work as an alternative to the stretch provision of the IRA, and certain alternative planning may work for clients. This due to the fact that (a) many IRA beneficiaries do not stretch their inherited funds, (b) for those that do stretch their IRAs, many exhaust their accounts within 10 years anyway, and (c) given, the size of the account, taxes, and expenses of certain strategies, the status quo is considered to be the path of least resistance.

Regardless of the strategy chosen, it makes sense to sit down with competent, licensed, and credentialed professionals to ensure that your plan contemplates all relevant variables to ensure that the strategy makes sense in light of the client’s financial goals, wishes, and financial situation.

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Building Wealth on a “Foundation of Protection”

Do you have a solid foundation upon which you can build wealth?

The other day, I received a call from a young 40-something client about retirement planning. “I have two little ones and my wife and I want to make sure that we are doing what we’re supposed to do in getting ready for retirement.” The client also expressed a desire to invest ~$6,000/yr towards college savings via 529 accounts ($250 per month, per child).

While this all sounded respectable and fair, I stopped him in his tracks and said “(Client), I am so happy that you’re being proactive in reaching out to me to discuss and address these issues, but I think we need to step back for a second. We need to look at the foundation upon which you’re looking to build.”

I could tell that my client was puzzled. He proceeded to ask me what I meant. I explained that as an advisor, I strive to develop plans with the strongest chance of succeeding. I am not interested in laying out colorful pages full of rosy assumptions, pretty graphs and a product push on the back-end. I am a professional that breaks down your goal as you communicated it to me, designs a plan to achieve that goal, identifies the risks that can throw a monkey-wrench in that plan, and finally presents solutions that eliminate or mitigate those aforementioned risks. “If we have a plan that ignores risk, we don’t have a plan. We have a pretty looking wish list.”

To develop this foundation of protection, I proceeded to describe to the client a foundation on a home. It has a simple, Pyramid-like shape with protection at the base. These are the four areas of your life that need protection – (1) health, (2) financial, (3) personal property and (4) wealth.

Health – To protect your health, you need health insurance and adequate reserves to handle extreme medical emergencies such as max out-of pocket deductibles and co-insurance. Having those funds in liquid cash, in a Health Savings Account are ways to manage this risk. Insurers like AFLAC also have special products to mitigate this risk for middle to low income earners that find it challenging to accumulate such funds.

Financial – Protecting your financial situation is a multi-faceted strategy. At the base of the plan, one should secure adequate Disability insurance. This coverage “protects the paycheck” and insures that you have the funds needed to meet financial obligations in the event that you can’t earn an income due to accident, illness or affliction. Next, would be adequate life insurance. Having a plan for your family is useless if you die and the resources needed to support surviving family is not there. Insurance is the best way to leverage relative lower dollars to generate a legacy for years to come. Building up an emergency fund and paring down debt are also methods of insuring that a savings/investment plan has a maximum chance of success.

Personal Property – Most of these items are required to be protected – auto insurance, homeowners’ insurance, apartment insurance, umbrella coverage, etc. it’s funny how the powers that be (banks, landlords, auto finance companies) make it required for you to protect their things, but we fail to require ourselves to protect our own valued assets.

Wealth – Strategies like proper asset allocations, utilization of protection-focused instruments like annuities and structured products are all ways to help minimize risks to retirement portfolios. In addition, forward-looking asset protecting vehicles like Long-Term Care help retires keep their assets from being decimated by custodial needs that may arise later in life.

While all of these issues may not be applicable to my client in the present sense, discussing these issues help clients see the big picture and plan accordingly. We identified (1) that his emergency fund only covered two months of expenses, (2) there were shortfalls in his life insurance and (3) that his long-term disability coverage didn’t cover his annual bonus (which made up nearly 40% of his annual compensation). So the plan right now was to secure the needed supplemental disability and life insurance immediately, cut back spending and build his emergency fund up to be a MINIMUM of three-month’s expenses (the 18-month goal is to build this up to 6 months of income), continue to responsibly manage debt, open two 529 with lower contributions (but reaching out to family and friends to contribute to help build up the account), and finally develop a risk- and time horizon-adjusted asset allocation analysis for the retirement portfolio. By engaging in actions to fortify his financial foundation, we are now both in a better position to work together to build wealth.

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Life Insurance – An Honest & Down-To-Earth Q&A Session – Pt. 2

Now, Where Were We?

Hello there. Thanks so much for reading my blog. As this post is a continuation from last week’s post, if you haven’t had a chance to read it, please take a look at it here. I will now continue my “self-interview” on all things involving life insurance.

We get it. You are a big proponent of having insurance – either in the form of term and/or permanent coverage.  But how much is enough?  How does one determine how much insurance he/she needs?  How much should be in term?  How much should be permanent?

Answering such a question is highly subjective.  I mean, life insurance is such a personal purchase, and it is the most unselfish thing that you can buy for the people you love, that I often struggle with the question regarding “how much is enough” or “how much should I buy”.  That is exactly why I engage clients in planning – so I can listen to them, understand their goals, get a sense of their value system, and try to serve as a guide and resource in helping them find the right balance of protection to meet their needs.  Simply saying “7-10 times salary” doesn’t do the planning process any justice.

How much do you need?

So, in trying to answer this question I often do my best to ascertain answers to the following two financial questions: (1) how much is financially needed immediately upon your death and (2) for the foreseeable future, how much is financially needed to meet the shortfall in financial needs due to your death.  Then you add (1) and (2) together and subtract the sum of: (3) existing life insurance, (4) social security benefits (if any), and (5) any assets that you currently have in place to meet the needs of (1) and/or (2).

Immediate Needs are financial needs/wants that you want to take care of within 12 months of your death.  These items include (1) final burial costs, (2) medical bills, (3) satisfaction of joint debts, (4) fully funding of college fund for children, (5) fully funding of emergency fund for family (i.e., one year of after-tax earnings), (6) optional pay-off of major family debt like a mortgage/student loans of surviving spouse, etc., and (7) funding a “surviving spouse grief fund” (funds adequate to pay for the surviving spouse’s time off from work or change in work, as applicable).

Future needs are a little more complex and oftentimes requires a financial calculator of some sort, but I will try my best to be simple.  In looking at future needs, I take the lost financial resources (salary, retirement savings, asset accumulation, etc.) and compare that to the resources needed under the new plan (one where a financial provider is gone, but there remains to be needed for household maintenance, child care, college planning, retirement planning, etc.).  This often entails multi-stage analyses when dealing with young children (where Social Security can be contemplated), teens and college-age children, and the surviving spouse as a pre-retiree and retiree).  Those needs are then computed into an amount needed now to fund the shortfall, which is the Future Needs component of life insurance.

Next, you add the Immediate and Future Needs to arrive at the Tentative Need.  Finally, you subtract the combination of Social Security your surviving family is expected to receive, existing life insurance, and existing assets (in place for the purposes that the insurance is intended to be used for) from the Tentative Need to arrive at your Insurance Need.  This is not the easiest stuff to come up with.  Thank goodness that there are calculators on the web and trusted professionals out there that can assist you in the process.

In determining what amount should be term coverage vs. permanent coverage.  It’s highly subjective, but I generally recommend that families use the “temporary need for term, ongoing and changing need for permanent” approach.  For instance, let’s say that my total insurance need is $1.5 million, made up of an immediate need of $500,000 and a future need of $1 million.  However, when I drill down deeper into my future need amount, I see that $700,000 is needed to fund financial shortfalls needed only while my daughter is a child up to and through her graduation from college.  After college, there is no longer such a need.  Therefore, in this instance, structure my $1.5 million life need as $1.2 million in 15- or 20-year term, and $300,000 in permanent life coverage.  Also, as term has conversion features, I might buy $1.5 million in 20-yr term and at the end of my childcare need period, convert $300,000 of my aforementioned term insurance into permanent coverage and drop the $1.2 million term coverage.  The point is, that once the need is determined, there are many ways to go about securing it.  No one way works best for everyone.

Lastly, this analysis is representative of how I derive insurance needs with a majority of clients that I service.  It should be said and made clear that everyone’s situation is different.  With that said, it is not my aim to tell you that the approach that I described is the best way that works for you and your family.  There are many different situations – families with children who have disabilities/special needs, breadwinners with generous pensions, or a married couple with no children, but provide for parents/other loved ones, etc.  The list goes on and on, but the point to drive home is that different facts, circumstances, makeup of net worth and makeup of existing coverages impact the calculation and derivation of the amount of insurance needed (if any) as well as the structuring of such coverage (i.e., the term life vs. permanent life, or combination of the two).

Stay Tuned. There’s more to come.

Please come back next week for the final part of this discussion on Life Insurance. I hope that the information shared is helpful to you and those that you love. As always, feel free to contact me via Facebook or Twitter to ask questions or discuss the topic in more detail. Thanks!

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10 Financial Pointers for Young Professionals Coming out (or about to come out) of College

Cut It     

Happy New Year!  I know that I have been busy, but I do come bearing gifts (of wisdom).

Graduating from college is a big deal.  Not just for the education obtained, but for the commitment of focusing oneself for 4-5 years on a goal.   All of those years of taking courses, managing your time, balancing assignments of varying priority, dealing with emergencies, and making it to the finish line.  It’s definitely more than an academic endeavor.  College in many ways shows prospective employers that you are ready to take on the rigors and responsibility that come with real work in the real world.

In my contemplation of graduates, I thought that it would be cool to share a few financial words of wisdom as they prepare to venture out into the real world.  Here are my ten pointers for young professionals coming out of college:

1. Save 25-35% of your net pay. You never had the money before, so you will never miss it.  Start building your war chest of savings now, because it will come in handy later.

2. If you have student loans, use every disposable dime (after saving per #1) to pay it off.  I’m serious.  Get rid of those loans.

3. INVEST money in 1-2 custom-made suits, custom-made shirts, some high-quality shoes, and a nice coat. It will cost some serious money, but if you are on the lookout for deals (i.e., finding a quality tailor, looking out for yearly deals from stores like NORDSTROM, tagging along to a friends and family event at a luxury retailer, etc.), you will be amazed by the money that you can save. There will be times when you need to look like you have a million bucks. Be ready.

4. Start developing a Secondary source of income. Start off with a Stock Dividend Fund, a Municipal Bond or Treasuries. Then, consider investing in an investment or rental property. Invest in a business or restaurant. Whatever. The point is, you will do yourself a favor by growing a source of income that is NOT from your job. Don’t be a slave to a paycheck.

5. Sign Up for Match – As in your 401(k) Match.  Since your income is expected to be relatively low, here’s a retirement savings trick that I would recommend – Contribute to your 401(k)/Roth 401(k) just enough to secure the company’s match (which is free money), stop contributing after that and max out a ROTH IRA. Many employer Retirement Savings Plans have mediocre investment options at best and are full of hidden fees. Having a Roth IRA allows you to build assets that you can control with many cost-effective, high performing investment options.

6. CASH rules EVERYTHING around me (CREAM).  If you can’t pay for it with cash (and I’m not referring to your savings), don’t buy it. Credit is not an extension of your income. It is BORROWED MONEY.  Nothing is sadder than seeing a young adult paying on a credit card balance for clothes that he/she bought a year ago, or for a trip that you took two summers ago. Learn to live your life and pay your bills with cash. You will thank me for it later.

7. Be Pennywise… and I don’t mean that big-headed clown from It.  Live frugally. Notice that I did not say “cheap”. Being frugal is all about being an informed and vigilant consumer. You take the time to shop for the best deal possible, You take the time to research alternatives and options (rummage sales, goodwill stores, etc.). You make informed decisions. You set limits for how much you will spend and you try your best to stay within those limits. You budget and save for big purchases and you set aside funds for splurging. You understand who you are, what your attitude is about money and try to protect yourself from yourself. It takes practice, but you will be thankful that you did this now vs. later.

8. Understand that all things that glitter, isn’t gold. You will have friends that have a new car, bought those $100+ jeans, partied last weekend in VIP at ‘the club’. They’re living this fabulous lifestyle. However, they have no assets, bank account is just above the minimum (if not constantly incurring overdraft fees), and they’re barely making ends meet. This is not a judgement – just an observation. When you’re young, its natural to want to go out and have fun, but you have to be smart. If you need a car, buy a used one with cash (you will be amazed by what you can get for $5-10k). Budget for that fun and don’t get carried away. Leave charge cards at home and pay with cash. If you plan to do it up big, plan for it a month or two in advance and work it into your budget (Note: that you will have to cut back somewhere, so be prepared to paper bag your lunch for a few weeks). The point is, everything has a cost, so be considerate of what frivolous spending can have on your long-term goals.

9. Luxurious Living costs you big time. Thinking about moving to the “hot urban areas” with the brand new apartment complexes? With one bedrooms costing nearly $2,000/month ($24,000/year), you say “what the heck… you only live once, right?” That may be true, but if you were able to find a studio a few miles away at $1.250/mo ($15,000/year), you can save $9,000 year which could go towards, savings, investments or retirement. That same $9,000 saved in that one year could grow to $235,197 in 40 years towards your retirement (assumed the 30-yr return of the S&P 500 of 8.5%).

10. Speak to a professional. You may not necessarily be ready to work with a financial advisor year-round, but it doesn’t hurt to pay a few hundred dollars to meet with an accountant and a fee-only advisor to discuss tax, budgeting and investment strategies for the ensuing 6-12 months. Also, you can utilize tools like Mint.com , Betterment.com, Learnvest.com, if you feel comfortable and savvy enough to navigate through this with a little help.

Well, I hope that this information is useful to you.  Please provide me with feedback via twitter.  I would love to hear from you.  Thanks and watch those pennies!

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Your Expanding Waistline and Your Retirement. Not Perfect Together.

Into Fitness Meme

I have a confession.  I am overweight.

Like many Americans, I indulge a little more than I should when it comes to eating and nice cocktails.  I exercise regularly (which is why I look more like a bouncer than Fat Albert), but I know deep down that if I really want to change the way I look and feel, I need to address my diet and fitness with more attention and seriousness.

One of the skills that I credit from my mom is that I am a pretty good cook, so I am not a slave to fast food and casual dining establishments.  Here are a couple of my creations:

  • Asian-Styled Short Ribs

Asian-Styled Short Ribs

  • “Rif-Daddy” Wings

Rif-Daddy Wings

  • Slow-Cooker Turkey Chili

Turkey Chili

  • Kale Salad with a Tomato medley and Thumbelina Carrots

 

Kale Salad

So, preparing meals is not an issue.  Preparing the right ones in the right portions is the challenge.  I have dabbled in going meatless (but not strict vegan or vegetarian), juicing and hitting the gym like a mad man.  My typical results are a 20-pound drop here, a 30-pound drop there, and then I would shoot back up in weight when I stop the new routine.

My current journey has me incorporating a “lifestyle change”, where I look at everything that I do well (regarding living healthier) and find a way to do things that work in my everyday lifestyle.  This includes (1) keeping eating out to a minimum (it was a remote occurrence when I was kid, so I am trying to get back to that paradigm), (2) increase water intake, (3) more FRESH fruits and vegetables incorporated into my daily diet, (4) keep processed foods to a minimum,  (5) take a break on the bottle and (6) doing more cardiovascular exercise on a daily basis.  The key is to try to find the combination of healthy behaviors that I can make into an overall healthier lifestyle, and do it before a doctor makes me do it.  I’ll keep you posted on my progress, but if you have any ideas or success stories to add/share, please reach out to me and share the information.  I would be eternally grateful.

Now on to the personal finance side to this post.  What does weight and living a healthier lifestyle have to do with finances?  Well, not be a buzzkill, while Americans today have better medical care and technologies, we are living more unhealthier lives (i.e., sedentary lifestyles and poor diets) vs. generations of the past.  With current medical advances, people are living longer in the US, but not necessarily healthier.  The costs associated with such unhealthy lives can be substantial, especially in retirement.  When planning for retirement, one should take care to take stock of their health, their family’s hereditary history and factor this information into their planning to ensure that their assets can handle the potential impact of rising health care costs.

Health and Retirement … What’s the Connection?

Per a white paper produced by Fidelity Investments titled “America’s Lifetime Income Challenge”, many retirees who venture into retirement face the challenge of dealing with “rising health care costs”.  These costs come to light for many, as they become solely responsible for their health care costs (vs. paying a fraction of the costs under an Employer Healthcare insurance plan or paying little to nothing under an Employer-provided Retirement Healthcare benefit).  Therefore, many retirees who retire at Medicare-eligible ages find themselves paying for Medicare Part B (medical insurance), Medicare Part D (for prescriptions), and Medicare Part F (Supplemental Coverage) (or Medicare Part C/Advantage Plans, which A&B coverage and other benefits under a private insurance company) can find themselves facing health care costs in excess of $15,000 – 20,000/ year (medical care costs be as high as a third of a retiree’s household budget) .  Per the report, “over a 30-year retirement, a couple may need $351,960 simply to cover maximum out-of pocket medical expenses not covered by Medicare”.  And that’s for healthy retirees.

See the attached article on the topic here.

Poor health not only causes medical costs to be higher (from a prescription and out-of-pocket medical cost perspective), the chances other catastrophic expenditures such as Long-Term Care Costs become very real as the risk of stroke, diabetes, or dementia become magnified.  Without Long-Term Care insurance, such an occurrence can decimate a family’s retirement nest egg and potentially place them at the mercy of state government programs such as Medicaid.

Helpful Hints

I am not a health professional, but I will do my best to provide some pointers to help you protect your retirement while making your life potentially more healthy in your golden years.  Here it goes.

  • Take a DNA test – With take-home tests that can map out your hereditary makeup, you can now get insight into sicknesses or diseases that you may be susceptible to and prepare accordingly.
  • Change your lifestyle NOW – Start today.  Seriously.  Start walking to local destinations vs. driving.  Crowd out your meals with fresh fruits and vegetables.  Eat a healthy meal before going out for drinks with friends.  Watch your alcohol intake (no more than 14 drinks a week spread out over the week) and keep fatty meats and seafood to a minimum.  Moderation is the name of the game, so make small changes every day until you create the habits needed to change your life.
  • Do a Retirement Financial Plan – Work with a financial advisor or financial planning software to estimate your planned income and expenses in retirement.  You may want to run different scenarios that show spikes in medical care costs and the potential mitigation of such costs with insurances such as Long-Term Care Insurance.  In any event, you should plan out the numbers and have a plan in place to deal with the outcome of such scenarios.

Thanks so much for tuning in.  I really appreciate it.

SAM

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