Safe Retirement Income

Your Retirement Depends on It

Tim Barton, Chartered Financial Consultant

Pepin Wisconsin
715-220-4866

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Where to Keep Important Documents

Where to Keep Important Documents

 It would help if you kept the following documents in a secure location in your home:

  • Copies of wills and trusts
  • Copies of living wills and powers of attorneys
  • Income tax returns

These documents kept in a bank safety deposit box:

  • Original wills, trusts, and powers of attorney
  • Marriage certificates, birth certificates, divorce decrees, death certificates
  • Deeds and car titles
  • Military discharge papers
  • Any stock or bond certificates
  • Citizenship papers
  • Insurance policies

Consider giving these items to your attorney, executor and/or spouse:

  • A living will/medical power of attorney (the original should to the agent named in the document)
  • Copies of wills, trust agreements, powers of attorney
  • Inventory of insurance and investments
  • List of professional advisors (attorney, accountant, insurance agent, etc.)
  • Access information to the safety deposit box
  • Funeral instructions

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Teaching Grandkids about Money… Money Does Not Grow on Trees

At this point in our lives we’ve raised our own kids and hopefully, the values we struggled to impart before they left home have become part of their family lives.  Now they’re raising our grandchildren and like us when we were new parents our kids will try to bring all of their life lessons into the mix.  The hard part, at times,  at least for me, is to keep my mouth shut not give unasked for advice.  Does anyone else have that problem?

This narrows my options to just setting the best example I can no matter the subject matter.  When it comes to money and finances.  Money does not grow on trees.

  • Young children can understand the concept of money.  When I take them out and we’re going to buy a little something like an ice cream I give them the money to pay for it.   This teaches them money is exchanged for things we want.
  • Save all my “change” for grandkids. I split up this money into 3 coin purses for each kid marked 20% for savings,  10% sharing, and all the rest for whatever they want. (with parent’s permission of course)   The savings are used for their bigger desires/wants. The sharing can be used to buy things like ice cream, candy bars and other treats for the family on outings or they will deposit it into Salvation Army kettles or other charitable containers found at the checkouts.  Elementary school age is a good time to start.
  • Demonstrate to the grandkids how to reach a savings goal.  Show them how saving X amount of their money each month and in how many months this money will equal an amount needed to buy a computer game, book or whatever.
  • When the grandkids are coming for a barbeque, a couple like to help cook.  We plan a menu, make a list of needed ingredients, figure out the budget (money to purchase listed items) and go to the store.  As we pick things out we discuss pricing,  brand names and how to evaluate the best deal.
  • Needs versus wants concept is very important throughout life for all of us.  As they age and gain understanding there are things associated with my hobbies that reflect needs versus wants which make good subject matter for discussion with my grandkids. Particularly an activity they have an interest in, like fishing for example.

These are just a few examples of actions and conversation points  I use to demonstrate how to use money with my grandkids.  Actually, I did the same things with their parents as they grew up and remember how I appreciated any support from other adults.  As a grandpa, I just wait for the “teachable” moment or when the conversation flows that way.  To be effective today’s kids are no different than yesterday’s kids- the brains shut off during “the talk”.

Need more ideas?  Download my PDF booklet

“Money Doesn’t Grow on Trees…  Teaching Kids about Money”

Download Teaching Kids about Money booklet here

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She Solved Her Retirement Needs. And So Can You

Need retirement income you can’t outlive? Have coffee with Meg. Take a video break and learn how Meg uses a single premium immediate annuity (SPIA) to alleviate concerns about outliving her retirement assets and being unable to meet monthly expenses.

Retire with Confidence

People are living longer than ever before, meaning that unpredictable market performance, higher health care costs, and rising inflation could impact your retirement nest egg. Social Security is in question, and you may or may not have a pension.
The reality is, many individuals may not be able to maintain their standard of living — or worse  — may run out of money during retirement.

Live Comfortably with Retirement Income- Consider the risks that can affect your retirement and life:

  • Lifespan – Living longer and outliving your retirement money.
  • Inflation – Cost of living increases that erode your retirement buying power.
  • Fluctuation – Market volatility that impacts your retirement assets.
  • Experience – Life events that require retirement plan flexibility.

At what rate can you safely withdraw from your portfolio to address these risks?

  • According to the Journal of Financial Planning, the safe withdrawal is 2.52%.

Contact www.TimBarton.net

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Enhancing Dollars through Tax Bracket Planning

Enhancing Dollars through Tax Bracket Planning

Did You Know That…

Tax brackets have an impact on funding insurance solutions to the needs of closely-held corporations and their shareholders?

For example, a corporation in the 21% tax bracket gets to keep 79 cents of every taxable dollar it makes, while an individual in the 35% tax bracket gets to keep only 65 cents of every taxable dollar he or she makes. Since life insurance purchased to fund a buy-sell plan must be paid for with after-tax dollars, it may make more sense to pay the premiums with 79 cent dollars as compared to 65 cent dollars.

Impact of Tax Brackets on Buy-Sell PlanningLower bracket corporation — If the corporation is in a lower tax bracket than the shareholders, a stock redemption buy-sell plan can be funded with enhanced dollars since the corporation pays premiums. Higher bracket corporation — If the corporation is in a higher tax bracket than the shareholders, a cross-purchase buy-sell plan may be more cost effective since premiums are paid with enhanced dollars by each shareholder.

Conversely, the marginal tax brackets of the corporation and shareholder-employees can have an impact on the total cost of a selective benefit plan. Benefits provided to corporate employees on a selective basis generally are either tax-deductible by the corporation or are not currently taxable to the employee, but not both. As a result, the relative impact of tax brackets should be considered in selecting an executive benefit plan that produces the most advantageous overall tax results.

Impact of Tax Brackets on Executive Benefit PlanningLower bracket corporation — When the corporation is in a lower tax bracket, selective benefits that are nondeductible by the corporation and non-taxable to the shareholder-employee generally produce the better overall tax results.Higher bracket corporation — When the corporation is in a higher tax bracket, selective benefits that involve tax-deductible corporate payments are generally more advantageous, even if taxable to shareholder-employees.

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Will IRA Payouts be Mandated?

Will IRA Payouts be Mandated?

Will there soon be a law mandating how a retiree must take money from their IRAs?  Perhaps. Since 2006 some congressional members and government agencies have discussed the idea of encouraging personal 401 (k) and IRA funds be converted into lifetime annuities.

In June 2015 Dr. Mark Warshawsky, visiting scholar at Mercatus Center of George Mason published a study designed to influence government policy on individual retirement accounts (IRA).  The title is Government Policy on Distribution Methods for Assets in Individual Accounts for Retirees.

Study’s conclusion;

“I judge the life annuity an effective instrument to produce lifetime retirement income–generally somewhat better than the commonly used withdrawal rules” 

Proposes government policy be used to:

  • Mandate minimum level in dollars or percentage of all qualified plans be automatically converted to life annuity payments for all qualified plans.
  • Make lifetime annuity payments the default option for defined contribution plans.  (401 k and IRAs)
  • Mandate that retirement plan sponsors offer a life annuity option.
  • Encourage retirees to take a lifetime annuity option through favorable tax treatment.  For example, a portion of the annuity income payment would be free from taxation.
  • Create a government-sponsored source of life annuities provided by private insurers. Similar to Healthcare.gov.

 

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75% Want Certainty

When it comes to retirement 75% want income certainty

Volatility Concerns.  Market swings can upset plans.

A market correction can wipe out trillions of dollars of the global markets value and in the process, it can impact the plans of current and future retirees. 

Income Solutions.  Get a retirement income strategy in an unpredictable world.   Three-fourths of retirees rate income certainty higher than portfolio performance.  One vehicle that can guarantee retirement income for a lifetime is an annuity.

Less Worry.  More stability.

Annuities are a predictable strategy in an unpredictable world.  Volatility risk need not be a worry related to retirement.  If you’re among the 75% who want a reliable, repeatable, sustainable retirement income you can count on, consider the certainty of a fixed annuity.

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8 Ways to Payday

Retirees like income. So they want to know the many ways an annuity may pay. Confidence comes with knowing how an annuity may pay to help meet your financial needs.

  1. Withdrawals. You can access your money any time.  Beginning immediately, up to 10% of the accumulated value annually without a surrender charge.
  2. Annuitization. Convert a lump sum into income guaranteed for your life, or your life and another person’s.
  3. Payout Options. Immediate annuities offer payout options for specific amounts or periods; plus, increasing payout options to help address inflation over time.
  4. SEPPs. Substantially Equal Periodic Payments taken at least annually for 5 years and to the age of 59 1/2 are not subject to the 10% IRS penalty tax on withdrawals before age 59 1/2.
  5. Combination Plans. Pair two annuities–one generates immediate income, one pursues accumulation.
  6. RMDs. Required Minimum Distribution programs pay the amount IRA owners and qualified plan participants must take yearly from accounts starting by age 70 1/2.
  7. Death Benefit. Distributions upon death provide payouts and may extend tax-deferral benefits for a beneficiary’s life.

Commutation. Provides a lump sum from an immediate annuity for unforeseen life events while continuing reduced regular payments.

For confidence, it pays to plan for retirement with an annuity.

 

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Avoid Probate Strategies

Avoid Probate Strategies

Probate = the Latin word for proving, which means that the estate probate process is the process by which your will is brought before a court to determine that it is a valid will. The courts charged with this responsibility are generally known as probate courts, which may supervise the administration or settlement of your estate.

Supervision of the estate settlement process by the probate court can result in additional expense, unwanted publicity and delays of a year or more before heirs receive their inheritance. The public hearings, delays, and cost of probate motivate many people to explore ways in which to avoid or minimize the impact of probating a will, including:

State Statute

  • Many states have made provision for certain estates to be administered without the supervision of the probate court, resulting in less cost and a speedier distribution to heirs. Assuming they meet the specific legal requirements.

A form of Property Ownership

  • The joint tenancy form of holding title to property allows ownership to pass automatically to the surviving joint tenant, who is usually the surviving spouse.

Transfer on Death

  • Many states have enacted Transfer on Death statutes that allow a person to name a successor owner at death on the property title certificate for certain types of property, including real estate, savings accounts, and securities.

Life Insurance

  • Unless payable to the estate, life insurance proceeds are rarely subject to the probate process.

Lifetime Giving

  • Gifts are given during life avoid the probate process, even if made shortly before death.

Trusts

  • A “Totten” trust, which is a bank savings account held in trust for a named individual, can be used to pass estate assets at death outside of the probate process.
  • A revocable living trust, created during the estate owner’s lifetime, can be an effective way to avoid the expense and delay of probate while retaining the estate owner’s control of his or her assets before death.

Proper planning may serve to minimize the impact of the probate process on your estate and heirs.

Any potential method of avoiding probate, however, should be evaluated regarding its income and tax consequences, as well as its potential impact on the estate owner’s overall estate planning goals and objectives.

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Tips for Managing an Inheritance

Tips for Managing an Inheritance

 

Take your time. This is an emotional time…not the best time to be making important financial decisions. Short of meeting any required tax or legal deadlines, don’t make hasty decisions concerning your inheritance.

Identify a team of reputable, trusted advisors (attorney, accountant, financial/insurance advisors). There are complicated tax laws and requirements related to certain inherited assets. Without accurate, reliable advice, you may find an unnecessarily large chunk of your inheritance going to pay taxes.

Park the money. Deposit any inherited money or investments in a bank or brokerage account until you’re in a position to make definitive decisions on what you want to do with your inheritance.

Understand the tax consequences of inherited assets. If your inheritance is from a spouse, there may be no estate or inheritance taxes due. Otherwise, your inheritance may be subject to federal estate tax or state inheritance tax. Income taxes are also a consideration.

Treat inherited retirement assets with care. The tax treatment of inherited retirement assets is a complex subject. Make sure the retirement plan administrator does not send you a check for the retirement plan proceeds until you have made a distribution decision. Get sound professional financial and tax advice before taking any money from an inherited retirement plan…otherwise you may find yourself liable for paying income taxes on the entire value of the retirement account.

If you received an interest in a trust, familiarize yourself with the trust document and the terms under which you receive distributions from the trust, as well as with the trustee and trust administration fees.

Take stock. Create a financial inventory of your assets and your debts. Start with a clean slate and reassess your financial needs, objectives and goals.

Develop a financial plan. Consider working with a financial advisor to “test drive” various scenarios and determine how your funds should be invested to accomplish your financial goals.

Evaluate your insurance needs. If you inherited valuable personal property, you will probably need to increase your property and casualty coverage or purchase new coverage. If your inheritance is substantial, consider increasing your liability insurance to protect against lawsuits. Finally, evaluate whether your life insurance needs have changed as a result of your inheritance.

Review your estate plan. Your inheritance, together with your experience in managing it, may lead you to make changes in your estate plan. Your experience in receiving an inheritance may prompt you to want to do a better job of how your estate is structured and administered for the benefit of your heirs.

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Considerations for a Reverse Mortgage

Considerations for a Reverse Mortgage

A reverse mortgage is a loan against the value of your home that does not have to be paid back for as long as you live in the home. Simply put, a reverse mortgage converts some of the equity in your home into income.

In Evaluating a Reverse Mortgage, Consider…

  • Typically, a reverse mortgage must be a “first” mortgage, meaning that if you still owe money on your home, you must pay off the existing mortgage before you can get a reverse mortgage (note: an initial lump sum payment from a reverse mortgage can be used to pay off an existing mortgage).
  • Keep in mind that, while you don’t have to repay a reverse mortgage for as long as you live in the house, the amount that ultimately has to be repaid does grow over time.
  • While the amount of debt grows over time, the reverse mortgage repayment cannot exceed the value of your home at the time it is ultimately sold.
  • If you take out a reverse mortgage, you continue to own your home. This means that you continue to be responsible for expenses such as property taxes, hazard insurance and home maintenance and repair.
  • Reverse mortgage proceeds may affect eligibility for assistance under state and federal programs.
  • The upfront costs associated with a reverse mortgage, such as an origination fee, closing costs and mortgage insurance premium, can be significant. This means that a reverse mortgage may be expensive if the loan is repaid within a few years of closing. As a result, if you anticipate moving within a few years, you should explore another alternative, such as a home equity loan.
  • Repayment of a reverse mortgage when your home is sold will mean less equity left to pass to your heirs.