How Many Legs Does Your Retirement Stool Have?

How Many Legs Does Your Retirement Stool Have?

The three-legged stool is a metaphor that retirement planners use to describe the three most common sources of income for retirees. At one point in time, the three legs referred to Social Security, pension and personal savings — the multiple sources of income generally needed to achieve a financially secure retirement. More recently, however, fewer and fewer companies have offered pensions, replacing them with deferred contribution plans — the most common of which is a 401(k) plan.

Personal savings rates have rebounded since a low of 2.5% in 2005, right before the Great Recession, which was the lowest since 1938 following the Great Depression. By the end 0f 2019, it stood at 7.6%. Today, however, too many families still struggle to save money with the rising costs of living, healthcare and higher education.

Social Security is also a concern for many Americans as they wonder whether this program will be sustainable with rising deficits in the federal budget. It’s important not to panic, however, as there is considerable political pressure for lawmakers to solve this important problem.

You have more control when it comes to the 401(k) leg of your stool — and potentially significant advantages compared to putting money into personal savings. With a traditional 401(k), your contributions are made with pretax dollars and earnings grow tax free until retirement.

Additionally, many employers offer a company match, where they’ll match your contributions up to a certain percentage and a certain amount. The precise formula used to determine the match varies by employer. A company match is like earning free money, which is why it’s critically important to try to at least contribute enough to your 401(k) to earn the maximum company match that your employer offers.

Faced with rising costs and the burden of consumer debt, many families struggle to contribute to their retirement savings enough to achieve a comfortable retirement — leaving many with a “wobbly” stool.

Luckily, there are a number of things you can do to help get your stool on more solid ground. If you’re over 50, then you’re eligible to make catch-up contributions to your 401(k). According to the IRS, Individuals who are age 50 or over at the end of the calendar year are eligible to make annual catch-up contributions. Annual catch-up contributions up to $6,500 in 2020 ($6,000 in 2015 - 2019) may be permitted by these plans:

  • 401(k) (other than a SIMPLE 401(k))

  • 403(b)


  • governmental 457(b)”

If you’ve already maxed out allowable contributions for your 401(k), You can also set up an IRA and make catch-up contributions to that retirement account as well if you meet the age requirement.

And, although it may sound counterintuitive, it may make sense to delay filing for Social Security benefits. This is because filing early leads to a reduction in monthly benefits, while delaying will increase your monthly payments.

According to the Social Security Administration, for those born between 1943 and 1954, 66 is considered full retirement age, the age at which you’ll receive 100% of your monthly benefit. However, by age 67, you'll get 108% of the monthly benefit, and by age 70, your benefit increases to 132%. Any monthly benefit increases stops after that, so there is no further advantage to delaying.

If you’re feeling a little “wobbly” on your retirement stool, it’s probably a good idea to schedule a meeting with your financial advisor in order to discuss your situation and come up with a plan to get back on track.

#retirementincome #retirement #wellcents






ACR# 342323 02/20

Are You Underinsured?

Are You Underinsured?

Adequate insurance coverage is the foundation of a sound financial plan. No matter how well your investments perform, an unforeseen emergency such as a fire, theft or natural disaster may leave you completely unprepared not only to meet the financial needs of your retirement, but your immediate needs as well. This is why it’s vitally important that you review your homeowners and other insurance policies on at least an annual basis (and when your circumstances change) to make sure they’ll provide the coverage you need should such an event occur.

All too often, we take out a policy when we first purchase our home only to “set it and forget it” and continue to pay premiums year after year without ever stopping to understand what we’re actually paying for. The following are some questions you should ask yourself to see if you might be underinsured:

  1. Have building costs gone up since I took out my policy? If labor and material costs have increased since that time, you might find yourself underinsured should you have to file a claim to repair or rebuild your home.

  2. Have I made substantial home improvements? Maybe you’ve added on a master suite, a deck or home theater. If so, your policy should reflect the building costs to repair or replace such improvements should you ever have to file a claim.

  3. Have the value of my possessions increased? Things like new furniture, kitchen appliances or electronics may require increases to the coverage on your contents, which is usually determined by a percentage of home value. If your home value has stayed the same, but you have more valuable stuff in it, then you may need to raise your coverage.

  4. Have I acquired valuables excluded under my homeowners policy? Perhaps you’ve developed a new-found appreciation for modern art or antiques. These types of items and others often are excluded from your regular coverage and require additional riders to protect them. Be sure to ask if your policy covers reimbursement for full replacement value on all your possessions.

  5. Has my net worth significantly increased? Having greater assets may leave you more vulnerable in the event of a lawsuit or other loss. If this is the case, you may want to ask your insurance agent about a personal umbrella policy that provides additional coverage beyond what is offered in home and auto policies. Such coverage is often relatively inexpensive for the additional protection it provides.

  6. Is my home vulnerable to flooding? Many assume that flood damage is covered under their regular homeowners insurance, when it actually requires a special policy issued by FEMA. Your agent can help you determine whether your house is located in a flood zone.

Being underinsured can put you and your family in a precarious situation should the unthinkable happen. Be sure to review your current policies with a qualified insurance agent periodically, or when your circumstances change so that you can make the necessary adjustments to protect you and the ones you love.

#insurance #retirement #wellcents #policies #lifeinsurance #disabilityinsurance.

6 Insurance Policies You May Need and Not Have

6 Insurance Policies You May Need and Not Have

You probably already have homeowners and auto insurance. But there are many other types of policies that can help safeguard you and your family from unforeseen financial disasters. Speaking to a qualified insurance agent and reviewing your coverage and personal circumstances is a prudent course of action to help ensure that you and your family have adequate protection. Here are some often-overlooked common types of coverage that can make recovery easier in the event of an insured loss:

  1. Flood insuranceMany mistakenly assume that flood damage is covered under a traditional homeowners insurance policy. Sadly, it is not, and the worst way to learn this is after a flood. Speak to a qualified insurance agent to find out if your home might be vulnerable to floods and how to obtain coverage through FEMA to help protect to.

  2. Disability insurance.Sometimes this is available as a benefit through your employer. But if it isn’t, you can still purchase private coverage that will pay should you become disabled and unable to work.

  3. Personal umbrella policy. Did you know that you can purchase additional coverage that picks up where your homeowners and auto policies leave off? A personal umbrella policy might be a wise choice, especially if you have a lot of assets. You can often purchase $1 million or more of additional coverage at a relatively inexpensive rate.

  4. Unemployment insurance.While most are familiar with the government-sponsored program, you can also purchase insurance privately that could help pay the mortgage for a period of time should you unexpectedly lose your job. Coverage such as this can provide extra security, especially in an uncertain job market, and when you have dependents to support.

  5. Long-term care insurance.Many mistakenly assume that Medicare will pay for assisted living, nursing home or private care should you become incapacitated as a result of old age or a chronic medical condition. Medicare limits coverage for such care, usually restricting it to a short period of time after a hospitalization. The type of care that many Americans require as they age is typically excluded and requires coverage under long-term care policy.

  6. Riders for excluded items.You might assume that all of your belongings are covered under your homeowners insurance policy in the of event of theft, fire or some other loss. However, certain types of items are often excluded depending on your policy, such as artwork, musical instruments, jewelry, guns, cash and certain electronics. Depending on your policy, you might need to take out riders to specifically cover such items. You should speak to your insurance agent to see what is and is not covered under your policy.

The worst time to find out that you lack the coverage you need is after disaster strikes. Be proactive and take the time to review your current policies — and purchase the insurance you need to protect what matters most.

#insurance #retirement #wellcents #policies

Estate Planning Basics

Estate Planning Basics

Estate planning can be simple or complex depending on your particular circumstances. However, there are certain basic documents that everyone should consider preparing to ensure their wishes are carried out should they become incapacitated and in the event of their passing.

Will or Trust. Both of these documents specify who will receive various assets upon your death. They can include homes, savings and investment accounts, personal effects (like collectibles, jewelry and furnishings), businesses and even intellectual property. You can use either a last will and testament or a trust to accomplish this, although there are important differences in terms of privacy considerations and probate depending on which option you choose. It’s also important to specify guardians for any minor children.

Advanced Directives. Also called a living will, this outlines what medical and supportive treatments you want administered and which you want withheld in the event you’re unable to communicate your wishes. While unpleasant to think about, consider the burden you’re lifting from loved ones if they ever have to consider removing a feeding tube or ventilator.

Durable Healthcare Power of Attorney. This document assigns a healthcare proxy and can be useful for decisions not specifically enumerated in the living will. The healthcare proxy is able to speak with doctors and access your private health information to make medical decisions on your behalf.

Durable Power of Attorney. You can use this document to appoint an agent to handle your financial affairs should you become incapacitated. This person can pay your bills, deposit or withdraw money from bank accounts and sign financial documents for you. Without one, your loved ones may face a lengthy and complicated court proceeding to petition for guardianship or conservatorship.

Beneficiary Designations. It’s important to designate beneficiaries for all retirement accounts (401(k)s, IRAs, etc.) and life insurance policies. Contingent beneficiaries are named in the event that the primary beneficiary is deceased at the time of your death. If there are no named beneficiaries, the court system will decide who will receive these assets.

Letter of Instruction. While this document does not carry the legal authority of a will, it can be a useful means of communicating your wishes to loved ones after you pass away. You can include your preferences for funeral arrangements, locations of important paperwork, recipients of sentimental items with little value and even just a final message to those you love.

How to Proceed

Ideally, you should engage an experienced estate planning attorney who is an expert in the laws and regulations of your state. He or she can also help you examine any particular aspects of your specific situation that might impact your plan. However, you can also use an online legal service like LegalZoom or Rocket Lawyer to prepare basic documents — but whichever manner you choose, the most important thing is that you tackle this critical task.

#estateplanning #estate #retirement #planning #wellcents


Revocable vs. Irrevocable Trusts: Which Is Right for You?

Revocable vs. Irrevocable Trusts: Which Is Right for You?

A trust is a legal instrument where one person (the trustor) grants another person (the trustee) the legal right to hold title of assets for the benefit of a third party (the beneficiary). Depending on the type of trust, they’re often set up for a number of purposes, including:

  • Creditor protection: Certain types of trusts can protect assets from creditors and lawsuits.

  • Asset safekeeping: A trust is a legal entity that holds property, and as such it can be a safer choice than simply giving assets to a relative or other individual who could lose them in a legal entanglement like a lawsuit or divorce.

  • Tax shelter benefits: Certain trusts allow assets to transfer to beneficiaries without being subject to estate taxes.

  • Privacy: The terms of a will may be public information depending on where you live, whereas the terms of a trust can remain private.

  • Estate planning: Trusts allow minor children to receive assets with the stipulation that a trustee manages those assets until the child reaches adulthood.

  • Incapacity. A trust can allow a person you designate to step in and manage your assets in the event you become incapacitated without having to petition the court for guardianship.

  • There are many different types of trusts, but one of the main differentiators that allows a trust to function for different purposes is whether that trust is revocable or irrevocable.

    One can alter the terms of a revocable trust at any time. The owner could decide to eliminate or add beneficiaries and modify the terms under which assets are managed.

    While this offers flexibility, it also greatly limits some of the benefits trusts can offer. Typically, revocable trusts do not confer tax shelter benefits or protection from creditors. In many cases, however, they can avoid the probate process and provide greater privacy than a will.

    An irrevocable trust, on the other hand, cannot be changed once it’s established except under very rare circumstances. And any changes generally require the intervention of a judge and the consent of all parties involved. You’re permanently giving up control of your assets by placing them in an irrevocable trust. This is why it’s important to be very certain that your needs or reasons for establishing an irrevocable trust are not likely to change over time.

    Irrevocable trusts require serious contemplation, but they can offer a number of advantages over revocable trusts, including protection from creditors and lawsuits, tax shelter benefits and asset protection from Medicaid. In essence, there is a direct tradeoff between control of assets and the benefits and protection a trust offers.

    An Important Decision, No Matter Which Type You Choose

    An Important Decision, No Matter Which Type You Choose

    #estateplanning #estate #retirement #planning #wellcents #trusts





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