lifestyle – Safe Retirement Income

January 8, 2019 by Tim Barton Leave a Comment

What is a Qualified Retirement Plan?

questions — What is a Qualified Retirement Plan?

A qualified retirement plan is a program implemented and maintained by an employer or individual for the primary purpose of providing retirement benefits and which meets specific rules spelled out in the Internal Revenue Code. For an employer-sponsored qualified retirement plan, these rules include:

The plan must be established by the employer for the exclusive benefit of the employees and their beneficiaries, the plan must be in writing and it must be communicated to all company employees.
Plan assets cannot be used for purposes other than the exclusive benefit of the employees or their beneficiaries until the plan is terminated and all obligations to employees and their beneficiaries have been satisfied.
Plan contributions or benefits cannot exceed specified amounts.
The plan benefits and/or contributions cannot discriminate in favor of highly-compensated employees.
The plan must meet certain eligibility, coverage, vesting and/or minimum funding standards.
The plan must provide for distributions that meet specified distribution requirements.
The plan must prohibit the assignment or alienation of plan benefits.
Death benefits may be included in the plan, but only to the extent that they are “incidental,” as defined by law.

Question	Why do employers comply with these requirements and establish qualified retirement plans?
Answer	To benefit from the tax advantages offered by qualified retirement plans.

Qualified Retirement Plan Tax Advantages:

In order to encourage saving for retirement, qualified retirement plans offer a variety of tax advantages to businesses and their employees. The most significant tax breaks offered by all qualified retirement plans are:

Contributions by an employer to a qualified retirement plan are immediately tax deductible as a business expense, up to specified maximum amounts.
Employer contributions are not taxed to the employee until actually distributed.
Investment earnings and gains on qualified retirement plan contributions grow on a tax-deferred basis, meaning that they are not taxed until distributed from the plan.

Depending on the type of qualified retirement plan used, other tax incentives may also be available:

Certain types of qualified retirement plans allow employees to defer a portion of their compensation, which the employer then contributes to the qualified retirement plan. Unless the Roth 401(k) option is selected, these elective employee deferrals are not included in the employee’s taxable income, meaning that they are made with before-tax dollars (see page 13 for information on the Roth 401(k) option).
Qualified retirement plan distributions may qualify for special tax treatment.
Depending on the type of qualified retirement plan, employees age 50 and over may be able to make additional “catch-up” contributions.
Low- and moderate-income employees who make contributions to certain qualified retirement plans may be eligible for a tax credit.
Small employers may be able to claim a tax credit for part of the costs in establishing certain types of qualified retirement plans.

The bottom line is that the primary qualified retirement plan tax advantages – before-tax contributions and tax-deferred growth – provide the opportunity to accumulate substantially more money for retirement when compared to saving with after-tax contributions, the earnings on which are taxed each year

November 25, 2018 by Tim Barton Leave a Comment

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”

Money Does Not Grow on Trees Teaching Kids about Money — Download Teaching Kids about Money booklet here

October 13, 2018 by Tim Barton Leave a Comment

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

May 4, 2016 by Tim Barton Leave a Comment

About Advanced Directives

Advance Directives are a way to “have your say” about the type of care you receive (or don’t receive) in the event you suffer a catastrophic medical event, such as a stroke or an accident, that leaves you unable to communicate your wishes. Every adult should plan ahead by completing an Advance Directive that specifies his or her personal preferences in regard to acceptable and unacceptable medical treatments. There are two types of Advance Directives:

Living Will

A Living Will states your preferences regarding the type of medical care you want to receive (or don’t want to receive) if you are incapacitated and cannot communicate. You specify the treatment you want to receive or not receive in different scenarios.

Medical Power of Attorney

Also known as a durable power of attorney for health care or a health care proxy, a Medical Power of Attorney names another person, such as your spouse, daughter or son, to make medical decisions for you if you are no longer able to make medical decisions for yourself, or you are unable to communicate your preferences.

Note that a Medical Power of Attorney is not the same as a Power of Attorney, which gives another person the authority to act on your behalf on matters you specify, such as handling your financial affairs.

Important Points to Remember

Each state regulates Advance Directives differently. As a result, you may wish to involve an attorney in the preparation of your Advance Directive
You can modify, update or cancel an Advance Directive at any time, in accordance with state law.
If you spend a good deal of time in several states, you may want to have an Advance Directive for each state.
Make sure that the person you name to act for you – your health care proxy – has current copies of your Advance Directive.
Give a copy of your Advance Directive to your physician and, if appropriate, your long-term care facility.

April 28, 2016 by Tim Barton Leave a Comment

Gifts of Life Insurance

Regardless of your reasons for giving, a gift of life insurance can represent a substantial future gift to a favorite charity at relatively little cost to you. You can:

Make a Charity the Beneficiary of an Existing Policy: If you have a life insurance policy you no longer need, you can name the charity as the beneficiary of the policy, meaning that the charity will receive the policy’s death benefit after you die. While there are no current tax benefits to this approach, the value of the policy will be removed from your estate for federal estate tax purposes.

Make a Charity the Owner and Beneficiary of an Existing Policy: Instead of simply naming the charity as beneficiary of an existing life insurance policy, you transfer full ownership of the policy to the charity. The charity will then receive the policy’s death benefit after you die. In addition to removing the value of the policy from your estate for federal estate tax purposes, this approach also provides you with current federal income tax deductions.

Help a Charity Purchase a New Insurance Policy on Your Life: If you wish to make a substantial future gift to a charity at a relatively low cost to you, another alternative is to consider purchasing a new life insurance policy and name the charity as the policy owner and beneficiary. You then arrange to pay the premiums through gifts to the charity. This approach provides federal income tax deductions and the policy proceeds are not included in your estate for federal estate tax purposes.

Important Note: Most states through their “insurable interest” laws allow a charity to be the owner and/or beneficiary of an insurance policy on a donor’s life. Since state laws do vary, however, it is important to consult with a professional advisor before making a gift of life insurance to a charity. Please contact my office if we can be of assistance.

March 18, 2016 by Tim Barton Leave a Comment

Odds of Surviving Critical Illness Dramatically Increase

With advances in medical treatment and technology, many people now survive critical illnesses that would have been fatal in the past. As a result of this increased life expectancy senior Americans have the opportunity to watch grandkids grow into adulthood and start families of their own. Enjoying some great grandkids is a real possibility.

Some unhappy news; many retirees will at some point become critically ill as the following statistics demonstrate. The need for planning in order to avoid becoming destitute is more important than ever.

Cancer:

Men have a slightly less than 1 in 2 lifetime risk of developing some form of cancer. For women, the lifetime risk is a little more than 1 in 3.
Between 2002 and 2008, the 5-year relative survival rate for all cancers was 68%, up from 49% in 1975 – 1977.
It is estimated that over 1.6 million new cancer cases were diagnosed in 2013.

(Source: Cancer Facts and Figures 2013; American Cancer Society)

Heart Disease:

An estimated 80 million Americans have one or more types of heart disease.
Each year, an American will suffer a heart attack about every 34 seconds.
The lifetime risk for cardiovascular disease at age 40 is 2 in 3 for men and more than 1 in 2 for women.
It is estimated that the total costs of cardiovascular diseases in the U.S. was over $448 billion in 2008.

(Source: Heart Disease Facts, Centers for Disease Control and Prevention, July 2013)

Stroke:

Someone in the United States has a stroke every 40 seconds.
Stroke is a leading cause of serious, long-term disability in the U.S.
It is estimated that Americans paid about $38.6 billion in 2010 for stroke-related medical costs and lost productivity.

(Source: Stroke Fact Sheet, Centers for Disease Control and Prevention, July 2013)

Will you have sufficient funds available to pay for:

Any insurance co-payments and deductibles;
Alterations to your home and/or automobile to meet any special needs;
Out-of-town transportation and lodging for medical treatment;
Treatments not covered by traditional health insurance; and/or
Shorter-term home health care during your recuperation?

Surviving critical illnesses increase our life expectancies, we will live longer than ever before. At the same time, fortunately annuity ownership is rising An annuity is the only guaranteed financial hedge against longevity. More than ever a retiree’s goal should be lifetime income not just income for 20-30 years.

February 17, 2016 by Tim Barton Leave a Comment

Confirmed; Annuity Owners More Confident To Retire

The following IRI survey comes as no surprise to retirement income planners who witnessed their annuity client’s relief and security while they heard stories of large losses from their friends and associates in the aftermath of 2008’s financial meltdown. Not only did these clients not lose any money or income; they experienced strong growth as the market indexes slowly recovered.

Insured Retirement Institute survey, by IALC

According to a recent survey by the Insured Retirement Institute (IRI) of Americans aged 50-66, a majority (53%) of annuity owners are extremely or very confident that they will have adequate income in retirement, compared to less than a third (31%) of non-annuity owners who say the same.

And not only are these consumers more confident, they are also satisfied with their annuity purchases. A recent LIMRA study found that 83% of fixed indexed annuity buyers reported being satisfied with their annuities and five in six would recommend annuities to others.

So what’s driving people to buy fixed annuities, in particular? Certainly the 2008 crash taught consumers that their foundations are not as sturdy as they once thought. So in order to regain a sense of stability they are looking for sources that provide some minimum guaranteed income. In fact, when asked about the intended uses for indexed annuities in another recent LIMRA survey, respondents’ top three responses involved retirement planning, including supplementing Social Security or pension income, accumulating assets for retirement, and receiving guaranteed lifetime income.

For help you may ask questions in the comments

Or click here to contact me privately: Tim Barton Chartered Financial Consultant

January 12, 2016 by Tim Barton 35 Comments

Winners of $1.4 Billion Lotto: What now? How to get your money?

Once the initial euphoria wears down and you are “Snoopy Danced” out. Sorry I have no idea how long that takes. The moment will come when you have to make some decisions about how to receive your lottery winnings.

Everyone seems to assume the winner or winners, (yes brace yourself you are likely going to have share the jackpot with other winners) will take the jackpot as a lump sum. The biggest winner of all is government at all levels. Each state involved gets a cut of the ticket sales and the state or states where the jackpot winners live get to tax the jackpot. Yesterday State Senator Tim Carpenter (D) WI put out a press release about his plans for spending the estimated $65,790,000 tax windfall if a Wisconsin resident won the $1.4 billion. This windfall of state income tax pales in comparison to federal tax take at 39.6% ($343,728,000).

If the winner is a Wisconsin resident who decides to take the estimated lump sum payout $868,000,000 they would realize a net after tax payment of $458 million ($458,482,000.) This is only 33% of the $1.4 Billion. That’s right if a winner takes the jackpot in a lump sum they only get a check for 33% of the winnings. Of course that is still a life changing amount of money.

Almost all financial advisors, lawyers, accountants, bankers and other investment advisors tell the winner to take the lump sum because they will quickly make back the annuity reduction and tax bite. A client with $458 million is big in the financial and legal industry. Inside they are referred to as whales or elephants. So it’s hard for many advisors to tell this potential client to take the larger $1.4 Billion as an annuity payment over 30 years.

Annual annuity payment is about $46.7 million ($46,666,666) State and federal tax each year is $22,049,999 this nets the winner $24.6 million ($24,616,667) after taxes each year for 30 years. That is a seriously nice income payment which would leave a substantial amount to invest each year after all the celebratory spending. Best of all the winner will receive a total $738,500,000 compared to $$458 million net lump sum.

Advantages of annuity payments

Minimize taxes
Guarantees $24.6 million income for 30 years
No investment risk, all investments come with the risk of loss.
Helps prevent fraud
Spend thrift tendencies will not wipe out winnings in one year

One of the biggest arguments against an annuity is “your money is tied up.” Wrong. Not these days. There are investor groups who buy annuities. They compete against each other because an annuity income is valuable. If a winner changes their mind later and wants a lump sum for whatever reason they can sell the annuity payments to the highest bidder. In the current economic conditions this would net the winner about 15-20% more than taking the lump sum payment immediately from the Powerball lottery.

A winner has 180 days to claim the Powerball before their ticket expires. Winner has 60 days from the date of their ticket claim to chose the lump sum. Then the annuity payment is mandatory and there is no changing that from the lottery. Historically only a handful of winners take the annuity option leaving a pile of cash on the table. If many of these had waited 61 days they could have sold their annuity and had more money in their account.

How to stay anonymous:

Good luck with that. These days it’s impossible to keep secrets. Thanks to the internet and other technology society gets more and more transparent everyday. So even in the handful of states have laws to allow jackpot winners to stay anonymous they’ll be found out. Most states require winners to go public.

Changing your name to claim the prize and then changing back again will not work. All states forbid changing a name when fraud is intended. If a state requires disclosure of the winner and they change their name… Sure looks like a fraud. No reason to go there. Many states require name changes be published in the local newspapers for a period of time. Where are newspapers published these days? Online.

No hope of anonymity so it’s best to make plans to deal with your rock stardom should fate see fit to pick you. And that will be the topic of a future post.

May 26, 2015 by Tim Barton Leave a Comment

7 Methods to Avoid Probate

Probate is simply the Latin word for prove, which means that the estate probate process is the process by which your will is brought before a court to prove that it is a valid will. The courts charged with this responsibility are generally known as probate courts, which may actually 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 publicity, 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 If specific requirements are met, 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.
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 normally 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 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 prior to 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 in terms of its income and/or estate tax consequences, as well as its potential impact on the estate owner’s overall estate planning goals and objectives.

May 18, 2015 by Tim Barton 2 Comments

Probate Process for Your Estate

The probate process is governed by state statutes that are intended to accomplish three primary objectives:

To preserve estate assets.
To protect the rights of creditors in the payment of their claims before the estate is distributed to the heirs.
To assure that the heirs receive their inheritance in accordance with the terms of the estate owner’s will.

Once the estate’s personal representative (executor or administrator if the estate owner died without naming a personal representative) is approved by the probate court and posts any bond that is required, the probate process generally proceeds as follows:

The personal representative must “prove up” the will — prove that it is a valid will signed by the estate owner who was competent and not under duress or influence at the time of signing.
Notice must be given by the personal representative to all creditors to make prompt claim for any money owned to them by the estate.
The personal representative must prepare and file an inventory and appraisal of estate assets.
The personal representative must manage and liquidate estate assets as appropriate to pay all debts, fees and taxes owed by the estate.
Finally, the remaining estate must be distributed to the heirs in accordance with the estate owner’s will (or the state laws of intestacy if there was no will).

It is not uncommon for the probate process to require a year or more and considerable expense before the estate is finally settled.

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