Robe col boule Retirement Security Issues

Transitioning into Retirement


Life is Long – That is great



Don’t underestimate your chance of living to a very old age and enjoying an active lifestyle.


Ø      A person who reaches age 65 has a life expectancy of 85.  What are the odds he/she will live beyond 85?  Answer: 50%


Ø       Consider a 65-year-old couple. What’s the likelihood that one or both will live to age 97? Answer: 25% Source: MetLife


Transitioning into Retirement

Transitioning into retirement is one of the most important times in our financial lives.  We’re faced with many decisions, and we’re more than likely dealing with the most money we’ve ever had to manage.


1)       Where do you stand financially? Are your retirement savings, 401k, IRA’s or other assets on track to meet your retirement goals?


We can give you a Retirement “Fiscal” looking at your resources, goals, and compare investment returns to our “benchmarks” we use to guide our clients portfolios. There are also many “Pension Plan Dos and Don’ts” we can advise you on.


2)       Plan your Lifetime Cash Flow - How to best generate your needed retirement cash flow needs? There are smart ways to tap your assets for the most tax advantages. For example, initially you may want to get cash flow from your non qualified assets, but once you reach age 701/2 you will have to take at least minimum distributions from traditional IRAs.  Inflation, rising medical costs etc, has to be taken into account since it will increase future cash flow needs.


3)        Evaluate Company Benefits – what can you expect from your employer once you retire.


4)       Evaluate Long-Term Care options.   We call this “Preparing for the Worst” which it is hoped you will not need. But if you do having a financial plan to pay for care costs can be very important for you and your spouse’s long-term financial security.


5)       Re-examine Your Asset Mix – Should you modify your asset mix when you retire? One of the biggest questions people ask at retirement is how should my portfolio change? As people live longer, it’s not unusual to see retirement periods span 20 to 35 years.  That’s a long time, and you’ll need to position your portfolio for continued growth yet provide needed income as well as protect to the extent possible from losses.


6)       Appraise Your Tax Situation – If your income is lower you may be able to claim more itemized deductions, as some of them are tied to your adjusted gross income.   Most retirees have to pay quarterly estimated taxes.  You should know where you stand with capital gains and losses in your non retirement plan portfolio.  Do you need to be concerned about Alternative Minimum Tax which is starting to hit more and more folks?  We can discuss with you a good article “Tax Blunders In or Near Retirement”.  We offer to work closely with your tax advisor.


7)       Review Insurance Coverage – Once the kids are grown, you may need less life insurance.  Or, if in good health this may be an ideal time to lock in low long-term term insurance rates.





If you don’t have a will, your state will decide who gets your inheritance after you’ve died. If you are going to set up a living trust (see below), you’ll want to set up a "pour-over will." This brief document says that all probate assets outside of your living trust will pour over into your trust.



The amount of assets that you can pass to your heirs estate-tax-free was $3.5 million in 2009 and if you are lucky enough to die in 2010 there is no estate tax at all.  But in 2011 and beyond the estate tax is reinstated with a $1,000,000 exemption and a top rate of 55% of income of over $2 million beyond the $1 million exemption. There will undoubtedly be changes as we draw nearer to 2011.  In 2010, the favorable basis step-up will also be eliminated for property worth more than $1.3 million for single individuals with an additional $3 million for married couples.


You can gift away up to $13,000 per person per year (or $26,000 jointly husband/wife if elect on Form 706) in 2010.



A living trust operates while you are alive. A living trust enables you to more quickly distribute assets in specific ways while avoiding having to probate a will, thus being faster with more privacy.  This trust does not save you any estate taxes. To fund the trust, you’ll need to retitle your assets in the name of your living trust. If you own property in more than one state, you can avoid "ancillary probate" (probate in more than one state) by putting your out-of-state property in a living trust. You also can name a successor trustee (you are the first trustee) to step in on your behalf if you are disabled or die.


Many people also use different forms of an "A/B Trust" arrangement. The "A" Trust is a marital trust and the "B" Trust is a Family Trust (or Credit Equivalent Trust).  The purpose of the “B” Trust is to not waste the exemption (technically a credit) by passing all the assets tax-free to the spouse.  The “B” Trust is used to receive the exemption amount that has not been used up by any prior lifetime gifts over $13,000 per year per donor per donee.


The marital trust is set up on behalf of your spouse. When you die, any amount of assets may flow into this trust. Since spouses aren't taxed on the transfer of assets to one another, there is no tax on this type of trust at the first death. At the second death, all of these assets would be taxable in the second-to-die’s estate. The marital trust pays out income to the spouse each year after your death. If you want your spouse to be able to direct where these assets go at his/her death, you can give them a general power of appointment.



Estate planning is not only about planning for what will happen at your death. It's also about planning for how to manage assets in life if you’re disabled. Powers of attorney protect you if you're not able to act on your own behalf



This is one area a lot of people forget about. You should review designations every few years, or whenever you have a major change in your life-the birth of a child, death of a spouse/parent, or divorce. Check on your IRA accounts, annuities, insurance policies, company retirement and benefit plans and any other assets where a direct beneficiary can be named.  


Consider adding beneficiary designations to non-retirement accounts in the form of Payable on Death (POD) or Transfer on Death (TOD) accounts. The Uniform Transfer on Death Security Registration Act allows anyone to designate a beneficiary on a non-retirement account. In doing so, you guarantee that these assets will not go through probate. They pass directly to the beneficiaries, just as IRA account assets do.



Having wills, trusts, and any other legal documents prepared by qualified attorneys may cost more up front then a do-it-yourself approach.  However, quality and value equal price when it comes to tax and estate planning issues.  Spending a little more for professional guidance and implementation will serve your unique needs best over time.        



Many families are at a loss beyond emotional grief when they lose a loved one. They have no clue where to look for important papers or last wishes. You’re giving your family a gift by organizing this information for them.  Or, letting them know who your trusted advisor is that has the information.  You are also providing those you leave behind the tools they will need to distribute your assets as you intended.


If you suspect a loved one had additional assets that you can’t locate, try The National Association of Unclaimed Property Administrators.


This information about the law is designed to help users be aware of some estate planning issues. But legal information is not the same as legal advice -- the application of law to an individual's specific circumstances. This general information is given with the understanding that we are not rendering legal or tax services. If legal advice or other expert assistance is required, the services of a competent lawyer or tax professional should be sought.

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