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Retirement Benefits

Monday, June 13, 2016

Retitling Assets and Designating Proper Beneficiaries


You may have completed a Will and a Power of Attorney (all by yourself). You may think that your estate plan is in order and you can rest easily. However, you are likely less than half way done!

In general, over half of all assets in the United States pass outside of probate. These include assets that are jointly titled (i.e.
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Monday, March 14, 2016

What are the current methods of maximizing one’s social security payments?

Now that the “file and suspend” loophole has been eliminated (effective April 30, 2016), what other strategies remain for maximizing one’s social security payments?

1.   The main strategy is, of course, to delay the receipt of social security. At full retirement age, a worker is entitled to receive 100% of his Social Security retirement benefits. However, for each year that the worker delays the receipt of his benefits, he will receive an 8% delayed retirement credit. At age 70, however, one cannot delay any further and is obligated to receive the income. As a result, if the worker delays the receipt of his benefits until age 70 his benefit will increase by a total of 32%.

Of course, the downside of this strategy is that during the years that the worker delayed the receipt of his benefit, he was not receiving any payments from Social Security.  As a result, this strategy only works for people who have an alternative source of income during these years of deferment, either through continued employment or through savings.

Furthermore, this strategy works only for workers who are in relatively good health and expected to live for a long period in retirement.  If the worker develops an unexpected illness and dies sooner than he expected, the overall receipt of money will be significantly less than if he had chosen to receive full retirement benefits at full retirement age.

2.   Another strategy involves survivor benefits. Depending on the survivor’s work record, the survivor has a choice. She can either (i) receive full survivor benefits at age 60 and delay the receipt of her own larger benefit at the age of 70 or (ii) take her own benefits at the age of 62 and then switch over to survivor benefits at full retirement age.

3.   Yet another strategy involves benefits for divorced spouse. As long as the spouses were married for at least 10 years prior to divorce, and the individual has not remarried, the ex-spouse may claim spousal benefits based on an ex-spouse’s earning records. This strategy may be very beneficial, as the ex-spouse may claim her spousal benefits at full retirement age and delay the receipt of her own retirement benefits until the age of 70.

 

Disclaimer: This article only offers general information.  Each situation is unique. It is always helpful to talk to a specialized attorney, to figure out your various options and ramifications of actions.  As every case has subtle differences, please do not use this article for legal advice. Only a signed engagement letter will create an attorney-client relationship. ATTORNEY ADVERTISING


 


Thursday, November 5, 2015

What is a Continuing Care Retirement Community?

These are alternative housing options for seniors, in which multiple levels of care, including independent living, assisted living and long term nursing home care are contained within one community. The number of these communities is growing rapidly in New York State.

An initial entrance fee is required. These entrance fees can range from $100,000 to $1MM, depending on the health of the resident, the type of housing, and the type of service contract. In addition to the down payment, the resident must pay a monthly maintenance fee, which can range from $3,000 to $5,000 a month. Additional fees may be incurred for housekeeping, social activities and transportation. The resident must maintain a Medicare and a Medigap insurance policy.

The advantage of these communities is having multiple levels of care prearranged in a single place, without a need for multiple moves. Since home care and nursing home care is arranged, Medicaid planning will not be necessary. There will be no need to transfer assets and the individual can retain control of all of his assets. Furthermore, depending on the contract, the down payment may be protected from an unexpected death. If a resident enters the community and dies 3 months later, the contract may provide for a refund to the family of a percentage of a down payment

Saturday, February 21, 2015

Common retirement assumptions people make that could result in an unexpected shortfall.

Making incorrect or overly optimistic assumptions about your retirement portfolio and plans can lead to disastrous results. Some of the most common retirement assumptions that may not turn out to be true are:

 

  1. Assuming that stock market returns will always be high.

     
    Investing in the market at the wrong time can lead to a ‘lost decade’ or even a longer period of no returns, as people who invested in the stock market in the 1930s and in the late 1990s realized to their great sadness. Solution: To be comfortable, you should assume relative low returns for the long term projections. And save accordingly.
     
  2. Assuming that inflation will always be low.
     
    It is hard to imagine now, but in the late 1970s, inflation rate was over 10%. A high inflation rate can erode the purchasing power of your fixed retirement income, such as a pension or an annuity. Solution: You should invest at least a portion of your portfolio in a way that protects against inflation, such as stocks and real estate.
     
  3. Assuming that you will be able to work past the retirement age.
     
    Some people never want to quit. They love their job and they want to work for as long as possible. Unfortunately, however, working past a certain age may not be an option for everyone. Some professional fields move so fast that you may not be able to keep up cognitively. You may lose your job and not be able to find another one (age discrimination is a reality that you may not be able to combat). You may not have the health and stamina to continue working. Solution: do not make an assumption that you will be able to make a high income after retirement age. Save more now and view any money earned after retirement as an unexpected bonus.
     
  4. Assuming that you will get an inheritance.
     
    Increasing longevity and rising long term care cost mean that many parents may not be in a position to leave any money to their children. In addition, many parents may simply not want to leave any money to their children or to a particular child (no matter how hurtful it will be). Solution: do not count on money from the parents. Count only on yourself and your own saving.
     
  5. Assuming that the government will help.
     
    Many people rely on Social Security, Medicare and Medicaid as their sole or primary source of income and health care after retirement. However, all of these programs have significant financial problems and may be insolvent by the time you hit the retirement age or may become insolvent while you are already retired.  Even if these programs are not bankrupt, they usually do not provide sufficient money to live on. Without additional savings, a Social Security check can barely cover the rent. Medicare now demands significant co-payments for doctor visits and medicine. Solution: have a plan B, which involves additional savings and income.
     
     
     
    http://news.morningstar.com/articlenet/article.aspx?id=682944

This article only offers general information.  Each situation is unique. It is always helpful to talk to a specialized attorney, to figure out your various options and ramifications of actions.  As every case has subtle differences, please do not use this article for legal advice. Only a signed engagement letter will create an attorney client relationship.


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