Retirement Planning Blog

Medicare 101 – Understanding the Basics

If you are 65 years old or older, then you are eligible to enroll in Medicare. Medicare is the federally subsidized healthcare program for senior citizens. It’s run by the Centers for Medicare and Medicaid Services (CMS).

Funding for this program comes from three separate sources. One is the taxes you pay for Social Security and Medicare. Another is the premiums that you pay for your Medicare coverage. The third part of the funding comes directly from the federal government.

Here’s a quick rundown of the basics of Medicare. Call it “Medicare 101” — the essentials of what you need to know about this federal program for your retirement or other financial circumstances.

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What Retirement Expenses Are You Most Likely to Face?

What Retirement Expenses Are You Most Likely to Face?

When planning for retirement income, the devil is in the details. Once you are retired, you want to be sure that you have more than enough income for your lifestyle expectations.

One way to get a good grip on this is by mapping and estimating what you expect your future spending to be.

This can give you a high-level perspective of how much income you will need for your idea of a comfortable retirement. Everyone has a different situation. Because of that, the amount of annual income that you will need will likely differ from others.

That being said, you can still have more clarity in your income planning and decisions by seeing what others’ financial experiences are in retirement. One helpful metric in this regard is understanding which expenses can dominate your retirement spending.

Here are four expenses that can take a bundle out of your retirement money if you don’t plan for them. Having strategies for these costs, and your overall expenses, can go a long way toward keeping your retirement goals on track. Read More

Is a Survivor Annuity Death Benefit Taxable?

You may have heard of annuities and how they are the only thing besides Social Security that can pay you guaranteed lifetime income. But what happens to an annuity when someone passes away? The tax rules surrounding survivor or inherited annuities are already complex, but the SECURE Act, a federal law passed in 2019, has made them even more complicated.

The proceeds in a survivor annuity are generally taxable when the heirs receive them. If the recipient isn’t a spouse of the original annuity owner who passed, that recipient will pay taxes on the money they receive from the annuity.

If the surviving recipient is a spouse, then there are some steps that they can take to defer the taxes on the annuity proceeds. How much of the proceeds are taxable will depend on what type of account the annuity was housed in.

Most annuities are bought with pre-tax qualified money, meaning the premiums often come from a traditional IRA, a 401(k) plan, or another qualified plan. Since most annuities are bought with this pre-tax money, we will talk about how the SECURE Act can affect an heir’s tax burden now.

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Capital Preservation and Why It Matters

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You may have heard of capital preservation strategies at some point or another when planning for retirement. But what is capital preservation exactly? What could it mean for your overall financial plan?  

Here’s a quick look at what capital preservation involves – and why it becomes more important as people move into retirement and beyond.

What Is Capital Preservation?

In a nutshell, capital preservation is a kind of financial strategy that aims to minimize the risk of loss in your investments. It emphasizes the protection of your money, or “principal protection,” as it’s known in more formal terms.  

A well-known rule of thumb in finance is how there is an inverse relationship between risk and reward – or how much risk you take on in order for your money to have more growth potential.

Since capital preservation is focused on protecting your money, this brings up certain questions. By adopting a capital preservation strategy, does this mean that your portfolio won’t grow any more over time?

Thankfully, the answer to that is no. That said, the rate of growth will vary depending on what makes sense for your risk tolerance, personal situation, and timeline until retirement.

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A Guide to Different Types of Trusts and Understanding Them

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If you are at or near retirement, then you probably have thought somewhat about your estate plan. But what about different types of trusts, or other estate planning strategies for that matter, that you might use as part of your plan?

It’s natural to aim for as efficient and tax-advantaged of a wealth transfer to your loved ones as is possible. Of course, you may already have a will and even some powers of attorney. However, there is still the probate process to contend with, and some type of trust is one way to help your assets avoid this.

A trust can allow your assets to be passed directly to your heirs without going through the publicity and expense of probate. It can accomplish many other legal purposes as well. Note that this doesn’t mean that a trust necessarily is the best option for your situation.

You will want to review different estate planning options and types of trust with experienced estate planning counsel and other experts in this area. They can help guide you on the legal implications of various options available, each one’s pros and cons, and what might make sense for your situation and goals.

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What Is a Wealth Transfer?

What is a Wealth Transfer?

When thinking about retirement, it’s common to ponder about how we will want to leave something for loved ones once we are no longer here. Of course, there are many aspects to this issue: lowering taxes for heirs to pay, protecting assets from legal risk, keeping family conflict to a nil, and more.

In estate planning, this is known as planning for a wealth transfer. If you haven’t heard of it before, wealth transfer simply refers to the process of passing wealth from someone who has died over to their beneficiaries.

Effective wealth transfer can be done through a variety of strategies, including annuity contracts or life insurance policies, wills, trusts, and gifts of cash or tangible assets prior to death. The typical goals for wealth transfer strategies are to maximize the estate assets that are left behind as a legacy to heirs and to make the transfer as tax-efficient as possible.

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Social Security Claiming Strategies

Are you trying to decide when to start drawing on your Social Security benefits? Knowing what your options are before you make an irreversible decision can really pay off.

It may be surprising to see the number of ways that you can increase your benefits, regardless of whether you take them early, on time, or late. There are several strategies that can provide you with a higher benefit, both now and later, if you play your cards right.

Read on to find out how you can get the most out of your benefits once you are ready to do something with them.

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Social Security Will Get a Boost of 5.9% for 2022

What sort of increase in Social Security benefits will benefits recipients see for 2022? The official word is out, and there will be a record-breaking 5.9% cost of living adjustment (COLA) to benefits for next year, according to the Social Security Administration.

In 2021, Social Security had a 1.3% COLA to benefits, which was slightly smaller than the 1.6% increase of 2020.

But in 2022, Social Security recipients will get a boost in benefit payments that is over four times the average COLA from these past two years. This coming COLA of 5.9% is also the largest increase in almost 40 years.

This has been done in an effort to keep up with the runaway inflation that has gripped America. The consumer price index shows that the price of retail goods has risen by an astounding 5.4% in 2021, at the time of this writing.

The pandemic has also disrupted much of the United States’ economic infrastructure and caused job losses. Retirees who depended on part-time work and other income sources were hit, so the COLA adjustment will help offset the decline in their incomes.

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A Guide to Professional Designations for Financial Advisors

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If you are looking for someone to help you with preparing for retirement, you might have come across financial professionals with alphabet soup after their name. What those letters generally represent are professional designations.

These designations are programs in which an advisor has completed certain studies and exams in order to have professional recognition of their expertise in a certain field. For example, some designations for financial advisors cover retirement income planning.

Other designations deal with high-level knowledge and planning concepts around life insurance products. Then some designation programs recognize an advisor for high-level knowledge of overall concepts, such as around investments, retirement, taxes, financial planning, insurance, risk management, and estate planning.

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Business Succession Planning: Most Small Business Owners Don’t Have a Plan for Retirement

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Any small business owner can tell you about how much they have given to building their companies. But what about business succession planning, when it comes to making their exit on the backend?

Whenever, and however, they decide to step away, are these entrepreneurs as ready as they could be to enjoy the hard-earned fruits of their life’s work? A survey by Wilmington Trust offers some answers.

It’s no exaggeration to say that small businesses play a big role in America. Both Project Equity, a non-profit group focused on economic security, and the U.S. Census Bureau estimate that there are approximately 2.34 million small businesses in the U.S. These companies employ about 25 million people and, pre-pandemic, generated roughly $5 billion annually in aggregate revenue.

Yet while small business owners are actively involved with their enterprises, a study by Wilmington Trust found that many of them don’t have transition plans. What’s more, a large percentage of these entrepreneurs haven’t even thought of any business succession planning.

According to Ernst & Young’s Family Business Center of Excellence, the average age at which small business owners start transitioning from their businesses is 62.

For a lot of entrepreneurs, succession planning will likely cover some sort of transition to retirement. Or it might be a lifestyle in which they remain plugged into their communities, but they might not be as active in their companies as they were in earlier years.

However, in the study, nearly 60% of small business owners didn’t have a formal business succession plan of any kind currently in place. Moreover, 11% of this group hadn’t even thought about having a transition plan at all.

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Next Steps to Consider

  • Start a Conversation About Your Retirement What-Ifs

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    Start a Conversation About Your Retirement What-Ifs

    Already working with someone or thinking about getting help? Ask us about what is on your mind. Learn More

  • What Independent Guidance
    Does for You

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    What Independent Guidance
    Does for You

    See how the crucial differences between independent and captive financial professionals add up. Learn More

  • Stories from Others
    Just Like You

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    Stories from Others
    Just Like You

    Hear from others who had financial challenges, were looking for answers, and how we helped them find solutions. Learn More

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