Most parents recognize the need for an estate plan to look after the welfare of their children. But when the child has physical, emotional or mental challenges, careful estate planning can be even more crucial. One major reason to create a proper estate plan is to preserve a special needs child’s eligibility for government benefits and other programs.
There are traps that could jeopardize eligibility for those benefits. One of those is beneficiary designations in retirement plans. Beneficiary designations in retirement savings plans can provide great flexibility for passing on an inheritance: You can designate primary, secondary, and contingent beneficiaries, or even designate groups of people like “surviving children” or “surviving grandchildren.” However, the convenience and flexibility provided by leaving funds in retirement plans – or other tangible assets – to children with special needs can have a dramatic unintended financial impact on those receiving needs-based government benefits.
For example, say your son requires special care. He qualifies for Medicaid and receives aid to help with daily living and medical needs. You want to leave him money to help make his life better; but if your retirement funds pass directly to your son, receiving those assets may disqualify him for Medicaid benefits. Since in general terms only a home, a car used as transportation for medical care, and a small amount of cash are exempt from Medicaid calculations, inheriting a large sum of money could negatively impact his Medicaid benefits.
The best way to avoid this is to create a Special Needs Trust and place or leave the assets intended for that child in the Trust. A Special Needs Trust is designed to supplement benefits received from government programs. Instead of paying for medical care, for example, the trustee can then use those funds for the best use and comfort of the beneficiary and pays for things Medicaid will not pay for.
Setting up a Special Needs Trust requires the assistance of a qualified Estate Planning Attorney. Retirement plans and gifts can then be left directly to the Trust, which could be used for clothing, entertainment, vacations, and other discretionary spending for the benefit of the child.
Properly formed Special Needs Trust can be used to pass on retirement funds or other assets without creating negative repercussions. Your goal is to help your child with special needs without compromising his or her benefits, so make sure your best intentions are actually realized.
Investment Advice is offered through Belpointe Asset Management, LLC. Insurance products are offered through Belpointe Insurance, LLC. Additional disclosures are available at: http://belpointe.com/disclosures This information provided herein is educational in nature and not designed to be a recommendation for any specific investment product, strategy, plan feature or other purposes. It should not be considered legal or financial advice. This is not suggesting a specific course of action or any action at all. Communications such as this are not impartial and are provided in connection with advertising and marketing. Prior to making any investment or financial decisions, an investor should seek individualized advice from a personal financial, legal, tax and other and other professional advisors that take into account all of the particular facts and circumstances of an investor's own situation.
Retirement has the potential to be a relaxing and fulfilling stage of life. As with any major change, though, it presents a new set of challenges that may cause anxiety. How do you manage health care costs? How do you keep from outliving your money? What if you still have debt?
By laying some financial groundwork now, you can ensure a smooth transition to retirement. Here are the four biggest financial concerns (on average) about retirement.
Health Care Costs
Health care costs are the top retirement concern for Americans. According to the survey, 28 percent of people are worried their medical expenses will be too high. But fewer than 15 percent of those nearing retirement age have estimated how much they will spend on health care in retirement, according to a 2014 survey by Merrill Lynch and Age Wave.
What to do about it: Unanticipated medical expenses can derail years of retirement preparation. Our process will help you to prepare for these expenses.
Saving Enough Money
Today, nearly 25 percent of all 65-year-olds will live to age 90, according to the Social Security Administration, and almost as many worry that they will outlive their money.
What to do about it: You may be able to reduce retirement anxiety by estimating how much you need to save to cover a long retirement. Look for ways to boost savings, including taking advantage of catch-up contributions to retirement accounts (if you haven’t already) and adjusting your asset allocation to meet your changing circumstances.
Maintaining an Income Stream
Eighteen percent of Americans are worried that they won’t be able to afford daily expenses in retirement—and they’re concerned that Social Security income either won’t be available or won’t cover enough of their expenses.
What to do about it: When it comes to income planning in retirement, keep in mind that working for even just a few more years may help you suspend drawing income from Social Security and savings while taking advantage of available pensions and benefits.
Having too Much Debt
More than 1 in 10 Americans worry about having too much debt in retirement. In 2015, the average 65-year-old had more than $48,000 in debt, compared to less than $34,000 in 2003, according to data from the New York Fed Consumer Credit Panel. During this time frame, debt increased by about 60 percent for all borrowers between 50 and 80 years old.
What to do about it: There are different ways to tackle debt and many strategies for paying it off. If debt feels overwhelming, a credit counselor might be able to help.
Retirement can be about having the time to enjoy the things you have always wanted to do. Put your retirement concerns at ease by planning ahead and laying a good foundation for your financial security.
Fixed Indexed Annuities (FIA) may have the potential to outperform bonds in the near future and smooth the return pattern of a portfolio.
With bond yields at such low levels, people are looking for other ways to avoid the risks of the current market and the overall economy, especially as they approach retirement. In his latest research, Roger Ibbotson, the economist known for his Stock, Bonds, Bills and Inflation chart click here for article, argues that fixed indexed annuities have the potential to outperform bonds in the near future and smooth the return pattern of a portfolio, given their downside protection.
A fixed indexed annuity is a contract issued and guaranteed by an insurance company; it is a tax-deferred accumulation vehicle whose growth is benchmarked to a stock market index, rather than an interest rate. In good years, when the market has positive increases, you may realize positive growth; In part because, you are limiting your equity exposure due to the index. And when the stock market is very risky, you may limit downside risk by have the peace of mind knowing that the returns will never fall below 0%.
Ibbotson simulated different portfolios to demonstrate how they would perform in below median bond return environments—which he believes we’re heading into—versus above median bond return environments. During below median bond return environments from 1927 to 2016, a 60/40 (stocks and bonds) portfolio returned 7.6 percent, on average. That compares to 8.12 percent for a 60/20/20 (stocks, bonds, and fixed indexed annuities) portfolio and 8.63 percent for a 60/40 (stocks and fixed indexed annuities) portfolio .
Does a FIA make sense for your portfolio? It may, or it may not. The point is, everyone's needs, risk tolerance, and goals are different. Investment recommendations and decisions cannot be given or made until the whole picture is reviewed. Let’s start that conversation to allow us to help you determine what is best for you by examining where you currently are and where you want to be. Once we know that, we can assist you with putting a plan in action that fits you.
What if I was to tell you that you may have MORE OPTIONS than you are aware of in your 401(k)/403(b). You would think I was kidding, right? Unfortunately, most employees are unaware of an important opportunity within some 401(k)/403(b) plans called a “self-directed brokerage account”
Why leaving your 401(k)/403(b) in AUTO PILOT may not be beneficial
Most people set up their 401(k)/403(b) and then every once in a while, they glance at how it is performing. What’s worse is that most employees never make any material changes to their 401(k)/403(b) plan and don’t even use the automatic rebalancing button that is offered within their 401(k) systems. What if there was an option to have your 401(k)/403(b) funds professionally managed. Three reasons you should consider using a self-directed brokerage account if your employer plan allows:
1. The ability to increase your investment choices. The investment fund options provided by most companies are limited to a select group of mutual funds. A self-directed brokerage account may permit you to invest in a broader array of investments and portfolios.
2. Control and Flexibility. Most investors have an interest in exercising more control over investment selection.
3. Fluctuations in the Market. The challenges of the market favor actively managing your 401(k) and 403(b).
There is no better time than the present to take control of your future!
Free No-Obligation Meeting - Contact us today to help you determine if your 401(k)/403(b) allows for a self directed option.
This is both alarming and thought-provoking:
Individuals, as it stands, are drastically undersaved for retirement. Only a third of employees contribute to a 401(k) plan, and that’s if their employers even offer such an account (only 14% actually do, according to U.S. Census Bureau researchers). The typical working-age American couple only has $5,000 saved for retirement according to an analysis of the Federal Reserve’s 2013 Survey of Consumer Finances; and not many baby boomers are financially prepared for retirement.
The following milestones and recommendations are something I cannot personally affirm to, but it is a fascinating chart to inspect and make you think. (Who could possibly have at 30 saved up half of their annual salary?) Regardless of the actual numbers, it’s a thought provoking exercise to look at the full arc of time of a saver by decade regardless:
If you one of the many individuals out there saying things like “Yeah, I need to start doing something” or “I will take a look at this next month” then you need to stop the anxiety and procrastination. Find someone you trust and take a few minutes to get things on track. A little pain today can help to avoid a lot of pain down the road. We are here to help, with whatever questions you may have. Contact us today to set up a brief conversation!
Let’s talk for a minute about the different approaches to your savings. I would like you to think about how you came to the decision or if you haven’t yet put together a plan, where you go for advice?
I started thinking about this issue this morning after hearing about a client that passed away suddenly. We had put together the outline of what he was going to do but had not yet completed all the initial steps. This is not my first experience with this and I’m sure every financial person has a similar story. The point is…. until you have your foundation and frame built, you are running the risk of leaving those you care about with limited options.
The foundation and frame of your house (savings plan) is the essential part and needs to be established so you can finish your house with all the bells and whistles you can imagine. Think of it like this. The frame is the risk products (insurance) and what you fill your house with are all the other investment choices available to you. Yeah, the fun and sexy part of finance are the investments. But without a solid and concrete foundation, what good are the furnishings? If something were to throw you off, in other words, life happens, are you prepared?
This is part of our mission. To plan around life today and prepare for what tomorrow might bring. When we talk about lifestyle and financial planning, we are saying we need to look at the emotions and beliefs, some good and some bad. But when you can see clearly and understand why you are doing the things you do; a lot can be accomplished!
So, browse through our website, ask questions, and most importantly, take that first step – request a brief conversation. Don’t let another day go by and say to yourself “Yeah, sounds good, I’ll look into this soon.” Do it for yourself or more importantly, the loved ones around you!
How do you choose which advisor or firm you work with?
I would bet that many of you have thought about this at one point or another, when you started your savings or retirement planning. Although, maybe you haven’t started or maybe it was never a decision you had to make? Whatever the reasoning, I believe what it boils down to is TRUST. I will get into more detail but let me start by making a few observations and ask questions. How solid is your relationship with your advisor or planner? And no, I’m not talking about a stock broker or anything other than a long term financial planner. Are you 100% open about your current situation, your dreams or goals, or even your fears? Maybe you’re in the category of having to use someone because of a personal relationship? There are many different reasons but the reason I bring it up is it is something you need to ask yourself.
I am sure you have seen an advertisement or heard someone tell you that they are, or their firm is committed to you, a holistic approach, a comprehensive planning firm, etc. etc. All great keywords, if we were back in the early 90’s. But today, there has to be more. The big firms, whether they tell you or not, cater to a minimum– okay, to be fair, not everyone has a minimum or floor when talking to a prospective client. But, it is important to be mindful that this does occur, so take mental notes of your surroundings and what is said. Now remember, this is coming from someone who has worked at big firms and large broker-dealers. I know all sides and I can tell you, being independent and “fee-only” is by far the best platform I have used. Why is that? Well for starters, I can pick and choose who I work with and who I go to for advice, I can get products at lower fees to you, and I can be 100% transparent in what I advise and why I am doing it. The fiduciary factor is also a big reason I am confident in the service we provide.
TRUST – how much trust do you have in your current relationship? And not just the surface factors, but deep down, do you completely believe in the advice? Are you holding things back because you’re afraid of feeling embarrassed or showing your “lack” of knowledge? I’m here to tell you that without that information or those questions, I cannot recommend any plan of action that will make you feel any sense of comfort. The biggest value to working with me and Mantz Wealth Management Group is we account for your current situation and consider the reasons you are where you are – good or bad. No judgement! We plan around today and prepare for tomorrow.
Life is a wild ride with many twists and turns, and when you think about your money and savings, you need to take that into effect. Your plan should be fluid and you should know that it will change over time. Maybe it is a new product or investment available, maybe it is a major life event, or maybe it is a change just based on comfort. Whatever the reason, you want to understand the change and why it was introduced.
Which brings me back to the TRUST factor. If you choose a “comprehensive” or “holistic” planning firm: you might end up with a cookie cutter approach or treated just like everyone else in your similar situation. This is not what you should expect! You are hiring us, to listen to you, to educate you and to advise you with the best way to live now, while preparing for tomorrow. When you have that trust and reveal who you are under all those masks, then we will be truly at a point to help you. Maybe there is a mental block that no-one knows about or something in the way you were raised, that is keeping you from your true happiness. Ha, remember, it’s not all about numbers, everything needs to be on the table.
This is our process. Planning around today and preparing for tomorrow. Go to our website, www.mantzwealth.com and download the “10 steps to a successful retirement” and request a quick conversation. There is no charge and if we can help, even just a little, isn’t it worth your time.
Wondering where your income will come from in retirement? You may have a pension, a 401(k) or even an IRA or other personal savings. No matter your situation, however, Social Security is almost certainly going to be a part of your retirement income mix. Nearly 90 percent of all retirees rely on Social Security benefits for a portion of their income.1
Your Social Security benefit amount is based on a few factors. One of the biggest is when you file. You can file for benefits as early as age 62 or as late as age 70. Generally, the longer you wait, the higher your benefit amount will be.
Another big factor is your career earnings. Your Social Security benefit is based on the average of your 35 highest-earning years. Of course, that could be problematic if you have limited work history. For example, perhaps your spouse has a much higher earning history than you do.
Death and taxes. The old saying goes that they’re the only two certainties in life. Both will play a large role in your retirement planning. While you may not be able to control or predict when you will pass away, you can certainly implement a strategy to manage your taxes and reduce your exposure.
Many retirees fail to incorporate taxes into their budget or income strategy. They may feel that because they are no longer earning income, taxes are no longer an issue. Or they may simply assume that much of their income isn’t taxable.
Are you approaching Social Security age? If so, you may be facing a difficult decision about when and how to file for benefits. It could be an important decision. If you’re like many retirees, Social Security will play a large role in your retirement funding strategy.
Your decision on when and how to file will likely be permanent. In most cases, your Social Security benefits cannot be altered or adjusted after you file and begin receiving benefits. While your payment may increase in the future because of cost-of-living adjustments, you likely will not have the opportunity to change your filing status.