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Designate beneficiaries for your Will
Executor - An executor is responsible for valuing assets, paying off debts and taxes, and distributing what's left in accordance with the Will. They should:
Still Breathing? - What if you're alive but unable to make decisions?
Know your rights when you're planning a funeral.
If you have questions regarding beneficiaries, distributions, company plans or investment choices it would be prudent to consult a retirement specialist before making critical decisions.
Sue Ricker is President of Ricker Retirement Specialists and a Registered Principal of Securities America, Inc. Member FINRA/SIPC . Her office can be reached at 972-840-3764 or at www rickerretirement.com.
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You've heard the bad news about retirement; traditional pensions are disappearing and Social Security could be headed for trouble. Some of the biggest threats to your golden years aren't the ones getting the headlines. Some 40% of retirees left the workforce sooner than they had planned, often due to job loss, illness or disability. Many studies convey an important truth about retirement planning; you can't assume everything will go right.
Don't delay saving and planning for retirement. The more money you have piled up by your 50s, the better you'll be able to survive whatever surprises life throws your way. People who put off retirement to save for other goals, or simply spend more, are missing out on critical time that can help them grow their wealth. Take advantage of any workplace retirement plans or, if you don't have access to any, start setting aside money on your own.
Get covered.Health and disability insurance can help insulate you from the financial fallout of illness or accident. If you can't get this coverage through an employer, consider buying individual policies.
Continuously update your job skills and contacts. Keep yourself marketable by taking on new responsibilities or learning new skills through courses or seminars. Network to improve your contacts at other companies.
Mind your health.We can't make ourselves immune from disease, but we can better our odds for a long, healthy life by eating right, exercising, getting regular checkups and finding appropriate ways to deal with stress.
Mind your marriage.Easier said than done, but if an investment in counseling or a couples retreat can stave off a costly breakup, then make it happen.
Advertise on a car, deduct the car - Putting the name of your business on your car doesn't allow you to deduct all of your vehicle expenses.
Life insurance premiums - The proceeds of insurance come to the beneficiary tax-free, so there's no deduction for any premiums paid.
Brokers' commissions - Not deductible, as an investment expense either.
Tax and insurance reserves - Your lender may require you to set up a reserve at the closing for property taxes and homeowners insurance, these reserves are not deductible. You'll get an annual Form 1098 that tells you how much to deduct in interest and taxes. Homeowners insurance is not deductible unless the property is used for business or is a rental.
Homeowners association fees - Homeowners association fees for maintaining common areas, fees specifically identified as your portion of taxes and/or interest would be allowable, but a bill without a breakdown is not deductible.
Credit card interest - Personal credit card interest is not deductible. There is an exception: If you use your credit card for business, pay interest on business purchases and can document what those purchases are, then that interest is allowable.
Moving expenses - You can deduct the cost of moving your goods and personal effects, and the cost of your travel to the new home, including lodging. You can't deduct the cost of the meals in traveling and if your employer puts you up in temporary housing before you move into your home, that's income to you, not a deduction!
Losses inside an IRA - Because you deferred the tax on those dollars, losses inside a 401(k), IRA, qualified pension and the like are never deductible.
Sewer, trash and garbage collection fees - If you're billed separately for these fees, there's no deduction, but if your real-estate tax bill includes these costs as part of the tax, then they're allowable.
College students don't necessarily need to exist on Ramen Noodles, but every student and family can trim college expenses. Students and parents agree that car upkeep was their biggest expense other than tuition, books, and room and board. You'll save a bundle if your kids hoof it or buy a bus pass.
Buying Books - The price of textbooks is the most shocking expense to many, the College Board estimates students spend an average of $988 per year on books. To save money, students often share texts or use reserve library copies. The Internet is also a great place to find textbook bargains. Before you start shopping, get the title, author and international standard book number (ISBN) of each book needed.Review return policies before buying, some sellers give a full refund if a book is returned within 30 days. Keep in mind that textbook prices are highest online in August, September, January and February, so if your kids know they will be taking a class the following semester, they should confirm the text with the professor and buy it online in mid-semester.
Selling Books - Students can recoup some money by selling their used books to other students or online. But if they plan to do so, they should use their books gently. Also keep in mind that college textbooks are updated frequently, so the faster you sell them, the more likely you are to find interested buyers.
Cell Phones - Cell phones are near-necessities on college campuses, and most students use them extensively. To avoid surprises, check web sites to compare cell-phone plans and to make sure there's good service on campus.
Don't neglect the details. Once you've begun growing your retirement assets, take stock of your investments every year and rebalance them as needed. Do you have the right asset allocation for your age, income expectations and risk tolerance? Research long-term-care insurance. Prepare for the inevitable, make a list of your assets, including brokerage accounts, employer retirement plans, bank accounts and life insurance, and be sure it's easily found in case you die. Keep your list of beneficiaries up to date. Have a durable power of attorney for health care and finances, a traditional will and a living will.
Before you hit your 60’s get professional advice from a retirement specialist committed to a fiduciary standard and focus on the reality of retirement. Pick a date, prepare a realistic budget, and practice living within it. Plan an investment strategy, then you can realistically figure out if you have the money to make it happen. If not, you may have to adjust the date or make other choices. If your fear is running through your retirement savings too early, consider using some of your assets to purchase an annuity or longevity insurance to guarantee a monthly check for life.
How do the existing rules governing IRA withdrawals work? Normally, IRA owners over age 70½ must withdraw money each year. For your first withdrawal, however, the deadline is extended until April 1 of the year after you turn 70½. People who turned 70½ in 2007, for example, had until April 1, 2008, to take their first required distribution.
In a typical year, to calculate how much to withdraw, you look at your account balance as of the previous Dec. 31 and then divide that figure by your remaining life expectancy. (Life-expectancy tables can be found in Internal Revenue Service Publication 590.) Most people who inherit IRAs or 401(k)s can spread withdrawals over their own life expectancies.
What impact will the new law have? The new law suspends required distributions in 2009. This gives those who can afford to leave their nest eggs alone a better chance of recovering some of the investment losses they sustained last year and have more dollars working for them in the event of a stock-market rebound.
If you don't need to pull money out of retirement accounts for living expenses, the new law will also delay the tax you would have owed on your 2009 distribution.
Unless Congress decides to extend the moratorium, those over age 70½ along with those who have inherited IRAs or 401(k)s will be forced to resume taking withdrawals in 2010.
It all sounds relatively simple but here are few examples of how the new law can be confusing:
If you turned 70½ in 2008 and had planned to take your first withdrawal by the April 1, 2009, deadline, the new law does not permit you to skip it, the law suspends only 2009 distributions.
If you turn 70½ in 2009 you will have until Dec. 31, 2010 to take your first withdrawal even though the IRS will consider that withdrawal to be your second distribution.
Let's say you never get around to saving for retirement. You don't work for a company that offers a traditional pension, so the best you can hope for in your old age is a Social Security check.
According to the Social Security Administration, if you didn't earn much before you retired and you're married, your lifestyle might not take a huge plunge, but it could be extremely tight.
Social Security Administration says about 33% of those age 65 or over depend on Social Security for 90% or more of their income. Social Security checks are the sole source of income for about one out of five people in that age group.
The "replacement rate" or how much of a worker's income is replaced by Social Security depends on how much you have earned. Social Security typically replaces 55.9% of working pay for a low-wage earner (average annual wage $16,739 ), 41.4% for a medium-wage earner ($37,198), and just 28.9% for a high-wage earner ($81,467).
Being married is better than being single since two checks are better than one. Spouses may receive a check based on their own work records or, if they didn't work or earned less, checks are worth 50% of what their spouses get. That boosts the replacement rate considerably: For a low-wage couple, Social Security typically replaces 83.5% of working pay; for a medium-wage couple, 61.9% of working pay; and for a high-wage couple, 43.3% of working pay. The average monthly check sent out to Social Security retirees is just $1,007 equating to $12,084 a year.
Food and Shelter - Calculate how much you spend on groceries each month and what you spend eating out. If you have pets, account for the cost of their food and care too. Look at rent or mortgage payments, gas, electric, water, phone, cable, internet.
Transportation -Set money aside for car payments, gas, and routine maintenance.
Insurance and Health -Be prepared to meet your insurance payments including home, auto, life and health. Health insurance will most likely increase during unemployment. Don’t forget prescriptions and any other health expenses your insurance doesn't cover. Insurance premiums are often the first things to go when money gets tight and they shouldn't be.
Taxes -Uncle Sam still makes you pay income and property taxes when you're unemployed. Having an emergency fund will protect you from having to pay additional taxes if you have to resort to selling profitable investments.
Finding a new job -Consider the cost of producing and sending out resumes, meeting with career consultants, or even additional training.
How long should it last? It is recommend to set aside six months' worth of living expenses in your emergency fund. If your "emergency" ends up lasting longer than six months, payments collected from unemployment or disability insurance should help. You may not be able to pull all of your emergency-fund money together at once. Treat it as a goal. Maybe you can cover one or two months' expenses now, so add to it over time. Tax refunds or a bonus at work are great ways to boost emergency funds.
Where should I put it? Money-market mutual funds typically are the most conservative funds available and offer several features designed to help investors manage their cash reserves. Most offer limited check-writing privileges and many have low minimum investment requirements. It is not advisable to invest elsewhere until you have a full emergency fund. The exception to this may be your 401(k) plan if your employer offers matching funds. You should strongly consider contributing at least enough to maximize your company's match, otherwise you are leaving money on the table.
Estimate what you'll need - It’s a long list to compile, but there’s no better time than now to start tracking it. The good news is that you don't have to include every conceivable expense, track what you spend in the next few months and use that as your baseline.
Many regularly invest, squirreling away as much as they can, without knowing whether saving is enough to reach the goal or if the investments can help them achieve the goal.
Financial-planning experts estimate that 80% of our pre-retirement income is necessary to live comfortably once we stop working. In reality, some retirees make it on less, while others travel, or take up expensive hobbies and spend more in retirement.
Projecting YOUR retirement living expenses is more important than an estimate. It involves some dreaming and planning, that's for sure. First ask yourself and discuss with your spouse/family to confirm that your retirement dream is not a surprise to them. If your plan is to move to South Carolina and play golf every day, but your wife has no intention of moving away from the family and grandchildren, it’s back to the drawing board.
Most people would prefer to maintain their current standard of living while retired. So to truly get a grip on what you might spend, analyze what you currently spend each month and annually, then project how those expenses might change in retirement. It is important to understand that it might not be necessary to replace your current gross income to maintain your current lifestyle. Social Security benefits and some investment income are taxed differently and could significantly reduce your tax liability. An annual check up with a retirement specialist 5 to 7 years from your anticipated retirement date can confirm you are on track for your successful well deserved retirement.
Has the economy hit bottom or not? Investments are moving up, jobless rates remain unchanged and stimulus funds are making their way into the real world. It's probably safe to assume the sky is not falling!
So what have we learned?
The economic problems were predicted by very few people. Encouraging words from banks, brokerages and real estate companies didn't mean much when crunch time arrived. It will be many years before the trust in financial institutions and their leaders is restored. Never accept what you hear at face value, ask questions, do your homework, and make sure that your interests are protected.
The general public is spending less money than two years ago. Using credit cards that provide rebates and paying them off monthly, as well as sticking to a monthly budget are tools that will inch you closer to being prepared for retirement. These tools have made many feel the quality of life has improved.
Housing gains should be viewed as a cushion, not a resource for retirement income. Make sure your retirement plans aren't dependent on an appreciating piece of real estate.
Employees are receiving less help from employers and have to rely more on their own savings and investments to fund retirement. Understand the benefits your company offers and how changes in the plan can affect you. Contributions to a 401(k), especially if your employer offers a match, are more important than ever. If your employer offers you retirement benefits, an annual check up with a retirement specialist 5 to 7 years from your anticipated retirement date can make the difference in how successful your well deserved retirement will be. Many believe financial planning is only for the affluent when nothing could be further from the truth.
People who get regular exercise are healthier mentally as well as physically, they live longer, are happier and their brains work better than people who don’t. Exercise need not cost you a penny, where as poor health is very expensive. Your quality of life is largely up to you.
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