7 Key Considerations for Getting Your Retirement Timing Right
Despite receiving high ratings and a lucrative offer of $5 million per episode, comedian Jerry Seinfeld chose to retire Seinfeld after its ninth season. Citing that it was “all about timing,” he explained at the time, “I wanted the end to be from a point of strength. I wanted the end to be graceful.”
Likewise, many aspire for a graceful transition from their careers. When it comes to retirement, timing can have a significant impact on our well-being. A study from the Center for Retirement Research at Boston College revealed that individuals who opted for retirement felt happier than those who involuntarily left their jobs.
Timing retirement “just right” is a nuanced decision and varies for each individual. However, several general principles can guide individuals in making an informed decision. Here’s a compilation of key considerations for getting the timing right.
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When it comes to retirement, timing can have a significant impact on your well-being.
A Guide to Debt: Good vs. Bad and Tips to Better Manage It
In 2022, the average American owed almost $102,000 and paid more than 9.5% of their disposable income on debt. That same year, American households owed approximately $17 trillion in total debt, up $2.75 trillion from 2019.
Let's face it: America has a debt problem. I believe that bad debt habits persist due to our country's financial illiteracy. This guide is aimed to help you understand the differences between good and bad debt and give you basic techniques and recommendations for managing and paying off your debt.
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Debt might help or hurt your long-term finances, so be mindful of its use.
Long-Term Care Planning Protects You and Your Family
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Preservation Retirement Services
From high-quality security cameras to elaborate alarm systems, people spare no expense to keep their home safe. But what are you doing to protect your retirement home?
You worked hard to build a solid foundation with good saving and spending habits, and years of investing have helped the walls of your retirement home take shape. Protecting that home is critical. While you may have a strategy to lower your taxable income or a portfolio that protects against market risk, have you thought about your long-term care (LTC) plan?
More likely than not, you’ll need some form of long-term care in retirement. Figuring out now how to handle the costs would be like building a fence around your retirement home.
14 Rapid-Fire Estate Planning Tips
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Have you ever attended a conference in which a panel took turns pronouncing tips for best practices or “life hacks” to improve your lifestyle or finances? Well, this article is a smorgasbord of 14 tips you should find useful in understanding or revising your estate planning and in your relationships with your trustee, estate planner, accounting firm and other advisers.
There’s a lot to keep up with when estate planning. These tips could help, from updating beneficiaries after changing your plan to understanding will-substitute options like transfer on death.
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Taking a day or a week off from spending not only frees up cash to pay down debt or add to savings, but can also help you reinvest in your relationships. Here’s how to do it.
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Having a solid retirement plan is key to a happy retirement. But knowing where to start or how to stay on track can be a challenge. For NYSUT Members, the NYSUT Member Benefits Corporation-endorsed Financial Counseling Program offers access to a team of Certified Financial Planners® that provide members with financial counseling services. These advisors can provide you with unbiased advice that is customized for all of your retirement planning needs. For more information or to enroll, visit the member website today.
Is Your Home as Protected as You Think? It’s Time for a Policy Review
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Across my 20+ years of helping business owners with their personal and business finances, I’ve gained many valuable insights on a variety of topics. I’ve come to realize that people often pay too little attention to their insurance coverages. In particular, many people fail to understand the importance of regularly reviewing their policies. This is especially true of homeowners insurance. If you haven’t taken a recent look at your policy, you could be setting yourself up for disastrous consequences.
Although you likely purchased an appropriate amount of coverage when you first took out your policy, property values tend to rise. The coverage you had on your home 10 years ago probably won’t cut it, today. Because real estate tends to ebb and flow, it’s a good practice to review your homeowners insurance coverage annually to ensure you’re adequately covered. So, what should you look for?
It’s better to find out your coverage falls short before something happens rather than after. Here’s how to get started and what to look for as you review your policy.
What Is Life Insurance?
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Life insurance is a legally binding contract between you and an insurance company. In exchange for premium payments (and if your policy is active when you die), the insurance company will pay a lump sum of money, referred to as a death benefit, to your chosen beneficiaries. However, not all life insurance policies are the same.
There are two main types of life insurance: term and permanent.
Term life insurance covers you for a set period of time, usually 10, 20 or 30 years. If you die within this time frame, your beneficiaries will be paid the amount specified in the policy. However, if you outlive your policy, no one receives a pay out. Term life insurance is typically the cheapest option for life insurance, and has no cash value component. There are a few types of term life insurance policies.
Renewable term insurance: According to the National Association of Insurance Commissioners (NAIC), "renewable term insurance guarantees the policyholder the right to renew at the end of the contract period without evidence of insurability as long as the premium is paid."
Decreasing term insurance: With a decreasing term policy, coverage decreases over the life of the policy at a set rate. This form of insurance can be useful for paying down loans, like a mortgage, that decrease over time.
Convertible term insurance: A convertible term insurance policy allows an individual to convert a term policy to a permanent policy.
Permanent life insurance as the name suggests, covers you for the remainder of your life — as long as you keep up with the premium payments. Although more expensive than term life policies, permanent life insurance policies build cash value over time. The most well-known form of permanent life insurance is whole life insurance.
Whole life insurance: Whole life insurance offers a fixed death benefit when the policyholder dies. Both the death benefit and the premium are designed to remain constant throughout the life of the loan. With a whole life policy, a portion of each premium payment is put into a savings component referred to as the cash value. According to the National Association of Insurance Commissioners (NAIC), "Whole life policies are designed to build tax deferred cash value, which is the accumulation of premiums collected less applicable expenses and applicable insurance charges and they allow for borrowing against the cash value of the policy."
Cost: Several factors go into how much your life insurance premium will cost.
Age: The sooner you purchase life insurance, the cheaper it is. This is because when you’re young, you pose less of a risk to insurance companies due to your good health. For this reason, purchasing life insurance in your 20s, as opposed to your 50s, can save you thousands of dollars over the course of the policy.
Current health: Your health plays a big factor in determining how much your health insurance policy will cost. Are you a smoker? What's your family medical history like? Past, current and potential health issues will be considered.
Lifestyle: Do you have any high risk hobbies, like auto racing or sky diving? What about a dangerous job? These can all raise your life insurance premiums.
You'll also need to calculate how much coverage you'll need. To do so, add up all the expenses you intend to cover. In addition to funeral costs, you'll want to consider mortgages, debts, college tuitions and income replacement for your loved ones.
Life insurance can financially protect your loved ones after you pass away.
Withholding Tax From Your Social Security Benefits
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Managing your tax liability effectively during retirement is important, especially since up to 85% of Social Security benefits can be taxed depending on your income. So, how can you avoid the surprise of owing the IRS more than you expected when tax season arrives? While not required, choosing to have taxes withheld from your Social Security checks is an option.
Here's what else you need to know.
Having taxes withheld from Social Security benefits can help retirees avoid a surprise when tax season arrives.
How Is Your Post-Retirement Stacking Up? Three Key Questions
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If you have successfully transitioned into retirement, congratulations! While it’s an exciting new chapter, it’s important to avoid taking shortcuts and to set yourself up for success through scenario planning to ensure that your monthly income and overall savings will cover you through all possible events.
Running out of money is a top concern for many retirees. To make sure that your post-retirement plan is stacking up, ask yourself these three key questions:
What Retirees Must Know About Telehealth
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© 2020 The Kiplinger Washington Editors Inc.
529 Plan Contribution Deadlines
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If you are saving for college, it’s important to have information about making 529 contributions that can maximize available state tax breaks. So, here are a few reminders to help you take advantage of tax benefits associated with your 529 college savings plan—beginning with a quick overview of how 529 plans work.
Many states have year-end deadlines for making 529 college savings plan contributions.
© 2020 The Kiplinger Washington Editors Inc.
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There’s Medicare Part A, Part B, Part D, Medigap plans, Medicare Advantage plans and so on. We sort out the confusion about signing up for Medicare—and much more.
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How Can I Prepare for an Unexpected Financial Emergency?
Oh, the dreaded financial emergency. It crops up when you least expect it — usually late on a Friday, right? That’s when our options for resolving the issue are the most limited, whether its air conditioning on the fritz (an especially big concern during all these heat waves) or a plumbing disaster. We’re left scrambling to both secure expert help and pay for it. Or maybe you have an unexpected medical bill or lose your job. What can you do to make ends meet?
While there’s no way to know what’s going to happen or take steps, beyond the usual preventive ones, to head it off, you can at least be prepared in other ways. To find out what our options could be during a financial emergency, we at Kiplinger.com asked some of the financial experts among our Building Wealth contributors and Kiplinger Advisor Collective members to answer this question:
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We asked some of our contributing financial experts what to do to cover emergencies, in addition to having an emergency fund. They give some great suggestions.
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Smart Ways to Handle an Inheritance
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We asked some of our contributing financial experts what to do to cover emergencies, in addition to having an emergency fund. They give some great suggestions.
PERSONAL FINANCE
How Can I Prepare for an Unexpected Financial Emergency?
Finance Fundamentals
Debt might help or hurt your long-term finances, so be mindful of its use.
A Guide to Debt: Good vs. Bad and Tips to Better Manage It
More likely than not, you’ll need some form of long-term care in retirement. Figuring out now how to handle the costs would be like building a fence around your retirement home.
Long-Term Care Planning Protects You and Your Family
Taking a day or a week off from spending not only frees up cash to pay down debt or add to savings, but can also help you reinvest in your relationships. Here’s how to do it.
Financial Fasting Can Trim the Fat From Your Spending
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LONG-TERM CARE INSURANCE
PERSONAL FINANCE
LIFE INSURANCE
INSURANCE
Car insurance protects you against financial loss in the case of an accident or theft. Here's a look at the different types of coverage you can choose.
What Does Car Insurance Cover?
Life insurance can financially protect your loved ones after you pass away.
What Is Life Insurance?
HEALTH CARE
Medicare can be complicated but we've got you covered. Here is a quick guide to the different benefits provided through each part.
What You Must Know About the Different Parts of Medicare
When it comes to retirement, timing can have a significant impact on your well-being.
RETIREMENT PLANNING
7 Key Considerations for Getting Your Retirement Timing Right
HOME INSURANCE
It’s better to find out your coverage falls short before something happens rather than after. Here’s how to get started and what to look for as you review your policy.
Is Your Home as Protected as You Think? It’s Time for a Policy Review
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Many states have year-end deadlines for making 529 college savings plan contributions.
529 Plan Contribution Deadlines
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A guide for spouses, ex-spouses, widows and widowers on Social Security spousal and survivor benefits and how to make the most of them.
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Financial planning doesn’t stop at retirement, so it’s important to keep track of how much income you actually need, what your income sources are and more.
How Is Your Post-Retirement Stacking Up? Three Key Questions
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Having taxes withheld from Social Security benefits can help retirees avoid a surprise when tax season arrives.
Withholding Tax From Your Social Security Benefits
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It’s critical to consider these core aspects of a successful retirement, both financial- and lifestyle-related, before you walk away from your career.
RETIREMENT Planning
Are You Ready to Retire? Find Out With This 10-Item Checklist
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There’s a lot to keep up with when estate planning. These tips could help, from updating beneficiaries after changing your plan to understanding will-substitute options like transfer on death.
ESTATE PLANNING
14 Rapid-Fire Estate Planning Tips
Financial Learning Center Resources
Need a Financial Planner?
Financial planning doesn’t stop at retirement, so it’s important to keep track of how much income you actually need, what your income sources are and more.
Financial Learning Center
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There’s Medicare Part A, Part B, Part D, Medigap plans, Medicare Advantage plans and so on. We sort out the confusion about signing up for Medicare—and much more.
There’s no one-size-fits-all formula for how much you’ll need.
Emergency Funds: How to Get Started
You worked hard to build your retirement nest egg. But do you know how to minimize taxes on your savings?
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10 Questions Retirees Often Get Wrong About Taxes in Retirement
It’s often smart to borrow to boost your income and your assets.
Good Debt, Bad Debt: Knowing the Difference
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Medicare Basics: 11 Things You Need to Know
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Why visit a government office to get your Social Security business done? You can do much of that online.
14 Social Security Tasks You Can Do Online
Finding the lowest rate to protect you and your vehicle can be a challenge.
Reshop Your Car Insurance
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Parents may now use money from their 529 college-savings plans to help their children pay off student loans.
A New Way to Pay College Loans
STUDENT LOANS
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People have lots of questions about the new $3,000 or $3,600 child tax credit and the advance payments that the IRS will send to most families in 2021. Here are answers to some of those questions.
CORONAVIRUS AND YOUR MONEY
MOBILE VERSION TO BE COMPLETED AFTER DESKTOP APPROVAL
There are limits on what debt collectors can do to recoup what you owe. If you have medical debts, you have even more rights.
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How to Keep Tabs on Your Credit Reports
Free weekly access is ending, but several services let you view your credit files more than once a year.
CORONAVIRUS AND YOUR MONEY
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You might be surprised to see some of the things you'll find yourself spending less or more on in your golden years.
10 Things You'll Spend Less and More on in Retirement
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CORONAVIRUS AND YOUR MONEY
The pandemic has created significant challenges for all types of senior living communities.
A COVID Storm Hits Senior Living
TRAVEL
Retirees wanting to take a cruise should plan for additional safety measures, such as temperature checks and wearing a mask in public areas.
How Cruise Ships Are Setting Sail During COVID
Use our road map to find an advisor who will truly look out for your best interests.
Financial Planning
How to Find a Financial Planner You Trust
Financial Learning Center Resources
Need a Financial Planner?
Long-Term Care Insurance
Auto and Home Insurance
Mortgage Discount Program
Synchrony Bank
Savings Program
403(b) Field Guide
Half of Americans Don't Know What a 529 Plan Is. Are You Missing Out?
Smart Ways to Handle an Inheritance
Despite the rising cost of college, half of Americans don't know what a 529 plan is, missing out on the chance to take advantage of this valuable savings tool.
Here's how to handle an inheritance like a pro. A bequest could change your life, but don’t quit your day job.
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These important issues are all connected and can affect your taxes, likely setting them at a certain level for the rest of your retirement.
estate planning
COLLEGE
RETIREMENT
These Are the Key Decisions You Need to Make for Retirement
Kiplinger Today
How to Qualify for Social Security Spousal and Survivor Benefits
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If you never paid into Social Security or didn’t work long enough to qualify, you may need to rely on Social Security spousal and survivor benefits for your retirement. That also may be true for those who stopped working to care for their children and/or older relatives.
Even if you’ve paid into the system and qualify for Social Security based on your own work record, you might qualify for a higher benefit through your spouse or even an ex-spouse.
Depending on your situation, there are some requirements you must meet to qualify for spousal or survivor benefits.
A guide for spouses, ex-spouses, widows and widowers on Social Security spousal and survivor benefits and how to make the most of them.
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Inflation tops health care costs as the biggest concern, and many preretirees are boosting their saving rate.
The pandemic has altered retirement plans for some Americans, and inflation has emerged as a top concern, according to a new national poll of retirees and near-retirees by Kiplinger and wealth management firm Personal Capital.
One-third of respondents in the poll say the pandemic has convinced them that they will need a bigger nest egg for retirement. And 36% believe it has lowered their current (or anticipated) standard of living. Nevertheless, most respondents say they are still confident that they will have enough income to live comfortably throughout retirement.
Among those who are planning to retire within the next five years, more than four out of 10 have already started saving more. Nearly one-fourth have delayed their retirement date, and a similar percentage say they now plan to work part-time in retirement.
Investors have largely stayed the course since early 2020, despite a volatile stock market. Most respondents (63%) say their investment outlook has not changed since early 2020, even after a sudden but short-lived bear market that was followed by stocks scaling to new heights. But more than one-fifth say they have become more risk averse after seeing how quickly the market can change. Only 13% report feeling more bullish about stocks.
Higher-income investors ($200,000+) were almost three times more likely than less-affluent investors to say they became increasingly bullish in 2020 and added stocks to their portfolio. They were also more likely to report a “significant” increase in the value of their portfolio during the pandemic compared with investors who have lower income. The asset allocation of investors remains conservative across genders and ages and regardless of whether investors are retired or not. On average, portfolios were made up of 35% stocks, 26% cash, 15% bonds, 9% real estate and 15% other. (Figures are medians unless otherwise indicated.)
Living a Life of Purpose after Retirement: 3 Action Steps to Take
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When someone asks about what you do, the answer shouldn’t be, “I’m retired.” There is more to the second half of your life … a lot more.
Action #1: Reinvent Yourself
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3 Strategies to Avoid Running
Out of Money in Retirement
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For a financially sustainable retirement that could last 30 years or more, here are three ways to help manage your risks and avoid financial roadblocks in your golden years.
The trend of increasing life expectancy means that Americans are much more likely to live 25, 30 or even 35 years in retirement. The benefits of this trend include spending more time with your family and a higher chance of meeting your great-grandchildren. The downsides include the increased potential for running out of money close to the end of this retirement.
Today’s retirees can expect to live 40% longer than those who retired 70 years ago. Recent research reveals that affluent Americans are likely to live longer. This means that if you’ve had consistent access to health care and high income, you are more likely to enjoy a longer lifespan. Men in the top quintile of income born in 1960 will live on average 12.7 years longer than men who are in the lowest quintile of income; for women the equivalent is 13.6 years.
These raw numbers can be headache-inducing. However, the implications are profound. What they mean basically is that those who have recently retired or who are getting ready to retire, one out of three women and one in five men can expect to live to 90 years or beyond.
As retirements lengthen, they require more financial resources to support not only day-to-day expenses, but also the increased health care expenses that can crop up due to aging. It’s no surprise then, that 60% of pre-retirees surveyed by Allianz fear running out of money in retirement.
Fortunately, holistic retirement planning built around three strategies — minimizing taxes, managing savings and reducing market downside risks — can mitigate the risk of running out of money in retirement.
Good debt can help your long-term finances, whereas bad debt hurts or ruins it. Good debt examples include:
Mortgages: Whether for your home or an investment property, mortgages buy assets. As a mortgage is paid down, equity (the difference between the property’s fair market value and the loan total) builds and can be used to sell or borrow from.
Student loans: Data shows that a college degree can significantly boost a graduate's lifetime wages, making student loans acceptable debt.
Home equity loans and lines of credit: If you own real estate, you can borrow against your equity for long-term financial gain. Home equity debt can be used to upgrade a home, buy another property or pay off higher-interest debt.
It’s important to note that good debt is still debt, so use it wisely. A few helpful tips include:
• Keep mortgage payments below 36% of income.
• Keep student loan payments below 10% of estimated monthly after-tax income.
• Home equity loans and lines of credit often require a minimum loan-to-value ratio of 80%.
• The idea is to ensure you still pay off good debt over time and manage it cash flow-wise.
Bad debt should be avoided or used with good financial habits. Bad debt includes:
Credit cards: Credit cards allow you to spend money you don’t have and carry hefty interest rates. Credit cards can simplify cash flow management, but you should use them only if you can pay them off every month.
Personal loans: Personal loans are a good alternative for consolidating and paying off high-interest debt because they have a fixed duration and payment and lower interest rates than credit cards. Avoid using them for unnecessary things such as pricey vacations or new outfits.
Buy now, pay later loans: Online retailers provide BNPL loans at the moment of sale. These loans let you make numerous interest-free payments for a charge. This idea seems great in theory, but if you make many BNPL purchases through different services or merchants in a short time, that could result in more debt than you initially meant or can afford.
Good vs. bad debt
Their responses range from setting up an emergency fund to cutting unnecessary expenses right away or tapping a home equity line of credit or your workplace benefits. They also have some ideas about what not to do, such as turn to predatory payday lenders.
Perhaps while you peruse their suggestions, you’ll be inspired to check out some of the other stellar financial advice these experts offer Kiplinger.com readers on a regular basis (just click on their name to see their contributions and learn more about them).
Here’s what our experts had to say about dealing with financial emergencies…
How can I best prepare for unexpected financial emergencies, such as job loss, medical bills or major home repairs?
“Before disaster strikes, be aware of your financial options; be proactive instead of reactive. If you should be faced with an expensive emergency repair, what lines of credit do you have access to? Borrowing from your 401(k) or 403(b) can be a way to get needed money quickly, and since you’re essentially making loan payments to yourself, interest rates are more favorable. Don’t forget to check your homeowner’s insurance policy — it may cover more home repairs than you realize. If you need quick access to money after an unexpected job loss, a home equity line of credit can be helpful to make ends meet while you look for work.” — Brianna Gutierrez, a Building Wealth contributor
‘Be proactive instead of reactive’
The most evident consideration for retirement is financial preparedness. Clearly, one can’t think of retiring if they can't afford it. But what’s the magic number?
According to Northwestern Mutual’s 2023 Planning & Progress Study, working Americans believe they need an average of $1.27 million to retire. However, many can lead a comfortable retired life with less. The ideal savings benchmark varies based on individual circumstances. Fidelity recommends targeting 10 times your pre-retirement income by age 67 to sustain your current lifestyle in retirement.
1. Consider your financial readiness
Tip 1
Consider bringing a professional trustee into your estate planning process. Effective collaboration will result in a more effective plan and more efficient administration.
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You’ve scrimped and saved, but are you really ready to retire? Here are some helpful calculations that could help you decide whether you can actually take the plunge.
See if you can relate to this … You have contributed to a 401(k), 403(b) or other employer-sponsored account at work, maybe you’re paying extra on the mortgage or have already paid it off, you keep cash on hand for those unexpected expenses or upcoming big-ticket purchases and you often wish there was a way to pay less in taxes.
You have worked for 30 or 40 years and are at or approaching Social Security eligibility and are now looking at when to take Social Security to maximize your benefits.
Sound familiar? Now, here’s what often comes next … You look at the account statements and begin to wonder whether the investments you have are the right ones to own for where you are in life. You begin weighing your options for making withdrawals from your retirement accounts. You aren’t sure exactly how this is done, and you’re nervous about the risk of a stock market pullback and the possibility of running out of money. And then it happens, you begin searching the internet for answers. (That may even be how you ended up here!) After a lot of searching and reading you realize that there are just too many opinions to choose from, and you resort to simply eliminating options that you’re not as familiar with or have heard negative things about. Then you take what’s left and try to put together a coherent strategy while continuing a search to find information that supports what you have contrived.
This is an all-too-common situation. Maybe this is exactly where you are or perhaps it describes something similar, but either way, you wouldn’t be reading this far into the article without some truth to what I am describing.
Regardless of the details, what you do next is critical to your long-term success. The decisions you make will determine the trajectory of your financial future, and it’s imperative to have a good plan to follow.
How to Know When You Can Retire
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You’ve scrimped and saved, but are you really ready to retire? Here are some helpful calculations that could help you decide whether you can actually take the plunge.
See if you can relate to this … You have contributed to a 401(k), 403(b) or other employer-sponsored account at work, maybe you’re paying extra on the mortgage or have already paid it off, you keep cash on hand for those unexpected expenses or upcoming big-ticket purchases and you often wish there was a way to pay less in taxes.
You have worked for 30 or 40 years and are at or approaching Social Security eligibility and are now looking at when to take Social Security to maximize your benefits.
Sound familiar? Now, here’s what often comes next … You look at the account statements and begin to wonder whether the investments you have are the right ones to own for where you are in life. You begin weighing your options for making withdrawals from your retirement accounts. You aren’t sure exactly how this is done, and you’re nervous about the risk of a stock market pullback and the possibility of running out of money. And then it happens, you begin searching the internet for answers. (That may even be how you ended up here!) After a lot of searching and reading you realize that there are just too many opinions to choose from, and you resort to simply eliminating options that you’re not as familiar with or have heard negative things about. Then you take what’s left and try to put together a coherent strategy while continuing a search to find information that supports what you have contrived.
This is an all-too-common situation. Maybe this is exactly where you are or perhaps it describes something similar, but either way, you wouldn’t be reading this far into the article without some truth to what I am describing.
Regardless of the details, what you do next is critical to your long-term success. The decisions you make will determine the trajectory of your financial future, and it’s imperative to have a good plan to follow.
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How to Know When You Can Retire
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You’ve scrimped and saved, but are you really ready to retire? Here are some helpful calculations that could help you decide whether you can actually take the plunge.
See if you can relate to this … You have contributed to a 401(k), 403(b) or other employer-sponsored account at work, maybe you’re paying extra on the mortgage or have already paid it off, you keep cash on hand for those unexpected expenses or upcoming big-ticket purchases and you often wish there was a way to pay less in taxes.
You have worked for 30 or 40 years and are at or approaching Social Security eligibility and are now looking at when to take Social Security to maximize your benefits.
Sound familiar? Now, here’s what often comes next … You look at the account statements and begin to wonder whether the investments you have are the right ones to own for where you are in life. You begin weighing your options for making withdrawals from your retirement accounts. You aren’t sure exactly how this is done, and you’re nervous about the risk of a stock market pullback and the possibility of running out of money. And then it happens, you begin searching the internet for answers. (That may even be how you ended up here!) After a lot of searching and reading you realize that there are just too many opinions to choose from, and you resort to simply eliminating options that you’re not as familiar with or have heard negative things about. Then you take what’s left and try to put together a coherent strategy while continuing a search to find information that supports what you have contrived.
This is an all-too-common situation. Maybe this is exactly where you are or perhaps it describes something similar, but either way, you wouldn’t be reading this far into the article without some truth to what I am describing.
Regardless of the details, what you do next is critical to your long-term success. The decisions you make will determine the trajectory of your financial future, and it’s imperative to have a good plan to follow.
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How to Know When You Can Retire
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You’ve scrimped and saved, but are you really ready to retire? Here are some helpful calculations that could help you decide whether you can actually take the plunge.
See if you can relate to this … You have contributed to a 401(k), 403(b) or other employer-sponsored account at work, maybe you’re paying extra on the mortgage or have already paid it off, you keep cash on hand for those unexpected expenses or upcoming big-ticket purchases and you often wish there was a way to pay less in taxes.
You have worked for 30 or 40 years and are at or approaching Social Security eligibility and are now looking at when to take Social Security to maximize your benefits.
Sound familiar? Now, here’s what often comes next … You look at the account statements and begin to wonder whether the investments you have are the right ones to own for where you are in life. You begin weighing your options for making withdrawals from your retirement accounts. You aren’t sure exactly how this is done, and you’re nervous about the risk of a stock market pullback and the possibility of running out of money. And then it happens, you begin searching the internet for answers. (That may even be how you ended up here!) After a lot of searching and reading you realize that there are just too many opinions to choose from, and you resort to simply eliminating options that you’re not as familiar with or have heard negative things about. Then you take what’s left and try to put together a coherent strategy while continuing a search to find information that supports what you have contrived.
This is an all-too-common situation. Maybe this is exactly where you are or perhaps it describes something similar, but either way, you wouldn’t be reading this far into the article without some truth to what I am describing.
Regardless of the details, what you do next is critical to your long-term success. The decisions you make will determine the trajectory of your financial future, and it’s imperative to have a good plan to follow.
Learning Center Home
How to Know When You Can Retire
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You’ve scrimped and saved, but are you really ready to retire? Here are some helpful calculations that could help you decide whether you can actually take the plunge.
See if you can relate to this … You have contributed to a 401(k), 403(b) or other employer-sponsored account at work, maybe you’re paying extra on the mortgage or have already paid it off, you keep cash on hand for those unexpected expenses or upcoming big-ticket purchases and you often wish there was a way to pay less in taxes.
You have worked for 30 or 40 years and are at or approaching Social Security eligibility and are now looking at when to take Social Security to maximize your benefits.
Sound familiar? Now, here’s what often comes next … You look at the account statements and begin to wonder whether the investments you have are the right ones to own for where you are in life. You begin weighing your options for making withdrawals from your retirement accounts. You aren’t sure exactly how this is done, and you’re nervous about the risk of a stock market pullback and the possibility of running out of money. And then it happens, you begin searching the internet for answers. (That may even be how you ended up here!) After a lot of searching and reading you realize that there are just too many opinions to choose from, and you resort to simply eliminating options that you’re not as familiar with or have heard negative things about. Then you take what’s left and try to put together a coherent strategy while continuing a search to find information that supports what you have contrived.
This is an all-too-common situation. Maybe this is exactly where you are or perhaps it describes something similar, but either way, you wouldn’t be reading this far into the article without some truth to what I am describing.
Regardless of the details, what you do next is critical to your long-term success. The decisions you make will determine the trajectory of your financial future, and it’s imperative to have a good plan to follow.
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How to Know When You Can Retire
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You’ve scrimped and saved, but are you really ready to retire? Here are some helpful calculations that could help you decide whether you can actually take the plunge.
See if you can relate to this … You have contributed to a 401(k), 403(b) or other employer-sponsored account at work, maybe you’re paying extra on the mortgage or have already paid it off, you keep cash on hand for those unexpected expenses or upcoming big-ticket purchases and you often wish there was a way to pay less in taxes.
You have worked for 30 or 40 years and are at or approaching Social Security eligibility and are now looking at when to take Social Security to maximize your benefits.
Sound familiar? Now, here’s what often comes next … You look at the account statements and begin to wonder whether the investments you have are the right ones to own for where you are in life. You begin weighing your options for making withdrawals from your retirement accounts. You aren’t sure exactly how this is done, and you’re nervous about the risk of a stock market pullback and the possibility of running out of money. And then it happens, you begin searching the internet for answers. (That may even be how you ended up here!) After a lot of searching and reading you realize that there are just too many opinions to choose from, and you resort to simply eliminating options that you’re not as familiar with or have heard negative things about. Then you take what’s left and try to put together a coherent strategy while continuing a search to find information that supports what you have contrived.
This is an all-too-common situation. Maybe this is exactly where you are or perhaps it describes something similar, but either way, you wouldn’t be reading this far into the article without some truth to what I am describing.
Regardless of the details, what you do next is critical to your long-term success. The decisions you make will determine the trajectory of your financial future, and it’s imperative to have a good plan to follow.
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Find Income-Producing Assets
When you’re looking to fill your income gap, the obvious solution is to generate more income to fill it. How this is done can vary from person to person, but the primary outcome you’re looking for is income regardless of how you go about it.
If you’re wanting to remain active, you can consider taking on a part-time job, start or buy a business, acquire some rental properties or work another full-time job that you enjoy.
If you prefer not to work and want passive income, then you’re going to have to rely on income-oriented investments. This would be through specific types of income annuities or select alternative investments that are designed specifically for income.
When doing this, be sure you are working with a qualified professional who is properly licensed and who can education you on your options.
Get A Checklist
It is always a good idea to work off of a checklist, and regardless of where you are in this process, there are likely a few tweaks that can help increase your probability for a successful retirement. I encourage you to formulate a plan that articulates where you are, where you’re going and what needs to be done to start receiving the income you need.
You can download a retirement checklist for free and use it as a guide as you prepare for your retirement. In addition, taking a retirement readiness quiz can be a good idea, too. A quiz is a useful tool to measure your level of understanding about a topic or your readiness for progressing toward something.
This article was written by and presents the views of our contributing adviser(s), not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.
About The Author
Brian Skrobonja, Investment Adviser Representative
Founder & President, Skrobonja Financial Group LLC
Brian Skrobonja is an author, blogger, podcaster and speaker. He is the founder of St. Louis Mo.-based wealth management firm Skrobonja Financial Group LLC. His goal is to help his audience discover the root of their beliefs about money and challenge them to think differently. Brian is the author of three books, and his Common Sense podcast was named one of the Top 10 by Forbes. In 2017, 2019 and 2020 Brian was awarded Best Wealth Manager and the Future 50 in 2018 from St. Louis Small Business.
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NYSUT NOTE: Are you considering professional financial planning guidance? The NYSUT Member Benefits Corporation-endorsed Financial Counseling Program offers access to a team of Certified Financial Planners® and Registered Investment Advisors that provide members with fee-based financial counseling services. Get unbiased advice that is customized specifically for you and your financial situation. Visit the website for more information or to enroll.
© 2022 The Kiplinger Washington Editors Inc.
How to Know When You Can Retire
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You’ve scrimped and saved, but are you really ready to retire? Here are some helpful calculations that could help you decide whether you can actually take the plunge.
See if you can relate to this … You have contributed to a 401(k), 403(b) or other employer-sponsored account at work, maybe you’re paying extra on the mortgage or have already paid it off, you keep cash on hand for those unexpected expenses or upcoming big-ticket purchases and you often wish there was a way to pay less in taxes.
You have worked for 30 or 40 years and are at or approaching Social Security eligibility and are now looking at when to take Social Security to maximize your benefits.
Sound familiar? Now, here’s what often comes next … You look at the account statements and begin to wonder whether the investments you have are the right ones to own for where you are in life. You begin weighing your options for making withdrawals from your retirement accounts. You aren’t sure exactly how this is done, and you’re nervous about the risk of a stock market pullback and the possibility of running out of money. And then it happens, you begin searching the internet for answers. (That may even be how you ended up here!) After a lot of searching and reading you realize that there are just too many opinions to choose from, and you resort to simply eliminating options that you’re not as familiar with or have heard negative things about. Then you take what’s left and try to put together a coherent strategy while continuing a search to find information that supports what you have contrived.
This is an all-too-common situation. Maybe this is exactly where you are or perhaps it describes something similar, but either way, you wouldn’t be reading this far into the article without some truth to what I am describing.
Regardless of the details, what you do next is critical to your long-term success. The decisions you make will determine the trajectory of your financial future, and it’s imperative to have a good plan to follow.
What to Do and How to Know When You Can Retire
There is a lot to this if done correctly, and at some point you’re probably going to want some professional help, but there are a few things you can do to get moving in the right direction.
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How to Know When You Can Retire
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You’ve scrimped and saved, but are you really ready to retire? Here are some helpful calculations that could help you decide whether you can actually take the plunge.
See if you can relate to this … You have contributed to a 401(k), 403(b) or other employer-sponsored account at work, maybe you’re paying extra on the mortgage or have already paid it off, you keep cash on hand for those unexpected expenses or upcoming big-ticket purchases and you often wish there was a way to pay less in taxes.
You have worked for 30 or 40 years and are at or approaching Social Security eligibility and are now looking at when to take Social Security to maximize your benefits.
Sound familiar? Now, here’s what often comes next … You look at the account statements and begin to wonder whether the investments you have are the right ones to own for where you are in life. You begin weighing your options for making withdrawals from your retirement accounts. You aren’t sure exactly how this is done, and you’re nervous about the risk of a stock market pullback and the possibility of running out of money. And then it happens, you begin searching the internet for answers. (That may even be how you ended up here!) After a lot of searching and reading you realize that there are just too many opinions to choose from, and you resort to simply eliminating options that you’re not as familiar with or have heard negative things about. Then you take what’s left and try to put together a coherent strategy while continuing a search to find information that supports what you have contrived.
This is an all-too-common situation. Maybe this is exactly where you are or perhaps it describes something similar, but either way, you wouldn’t be reading this far into the article without some truth to what I am describing.
Regardless of the details, what you do next is critical to your long-term success. The decisions you make will determine the trajectory of your financial future, and it’s imperative to have a good plan to follow.
Learning Center Home
How to Know When You Can Retire
Getty Images
You’ve scrimped and saved, but are you really ready to retire? Here are some helpful calculations that could help you decide whether you can actually take the plunge.
See if you can relate to this … You have contributed to a 401(k), 403(b) or other employer-sponsored account at work, maybe you’re paying extra on the mortgage or have already paid it off, you keep cash on hand for those unexpected expenses or upcoming big-ticket purchases and you often wish there was a way to pay less in taxes.
You have worked for 30 or 40 years and are at or approaching Social Security eligibility and are now looking at when to take Social Security to maximize your benefits.
Sound familiar? Now, here’s what often comes next … You look at the account statements and begin to wonder whether the investments you have are the right ones to own for where you are in life. You begin weighing your options for making withdrawals from your retirement accounts. You aren’t sure exactly how this is done, and you’re nervous about the risk of a stock market pullback and the possibility of running out of money. And then it happens, you begin searching the internet for answers. (That may even be how you ended up here!) After a lot of searching and reading you realize that there are just too many opinions to choose from, and you resort to simply eliminating options that you’re not as familiar with or have heard negative things about. Then you take what’s left and try to put together a coherent strategy while continuing a search to find information that supports what you have contrived.
This is an all-too-common situation. Maybe this is exactly where you are or perhaps it describes something similar, but either way, you wouldn’t be reading this far into the article without some truth to what I am describing.
Regardless of the details, what you do next is critical to your long-term success. The decisions you make will determine the trajectory of your financial future, and it’s imperative to have a good plan to follow.
Learning Center Home
How to Know When You Can Retire
Getty Images
You’ve scrimped and saved, but are you really ready to retire? Here are some helpful calculations that could help you decide whether you can actually take the plunge.
See if you can relate to this … You have contributed to a 401(k), 403(b) or other employer-sponsored account at work, maybe you’re paying extra on the mortgage or have already paid it off, you keep cash on hand for those unexpected expenses or upcoming big-ticket purchases and you often wish there was a way to pay less in taxes.
You have worked for 30 or 40 years and are at or approaching Social Security eligibility and are now looking at when to take Social Security to maximize your benefits.
Sound familiar? Now, here’s what often comes next … You look at the account statements and begin to wonder whether the investments you have are the right ones to own for where you are in life. You begin weighing your options for making withdrawals from your retirement accounts. You aren’t sure exactly how this is done, and you’re nervous about the risk of a stock market pullback and the possibility of running out of money. And then it happens, you begin searching the internet for answers. (That may even be how you ended up here!) After a lot of searching and reading you realize that there are just too many opinions to choose from, and you resort to simply eliminating options that you’re not as familiar with or have heard negative things about. Then you take what’s left and try to put together a coherent strategy while continuing a search to find information that supports what you have contrived.
This is an all-too-common situation. Maybe this is exactly where you are or perhaps it describes something similar, but either way, you wouldn’t be reading this far into the article without some truth to what I am describing.
Regardless of the details, what you do next is critical to your long-term success. The decisions you make will determine the trajectory of your financial future, and it’s imperative to have a good plan to follow.
Learning Center Home
How to Know When You Can Retire
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You’ve scrimped and saved, but are you really ready to retire? Here are some helpful calculations that could help you decide whether you can actually take the plunge.
See if you can relate to this … You have contributed to a 401(k), 403(b) or other employer-sponsored account at work, maybe you’re paying extra on the mortgage or have already paid it off, you keep cash on hand for those unexpected expenses or upcoming big-ticket purchases and you often wish there was a way to pay less in taxes.
You have worked for 30 or 40 years and are at or approaching Social Security eligibility and are now looking at when to take Social Security to maximize your benefits.
Sound familiar? Now, here’s what often comes next … You look at the account statements and begin to wonder whether the investments you have are the right ones to own for where you are in life. You begin weighing your options for making withdrawals from your retirement accounts. You aren’t sure exactly how this is done, and you’re nervous about the risk of a stock market pullback and the possibility of running out of money. And then it happens, you begin searching the internet for answers. (That may even be how you ended up here!) After a lot of searching and reading you realize that there are just too many opinions to choose from, and you resort to simply eliminating options that you’re not as familiar with or have heard negative things about. Then you take what’s left and try to put together a coherent strategy while continuing a search to find information that supports what you have contrived.
This is an all-too-common situation. Maybe this is exactly where you are or perhaps it describes something similar, but either way, you wouldn’t be reading this far into the article without some truth to what I am describing.
Regardless of the details, what you do next is critical to your long-term success. The decisions you make will determine the trajectory of your financial future, and it’s imperative to have a good plan to follow.
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Important Planning Considerations: Insurance & Long-Term Care
LONG TERM CARE INSURANCE
Your retirement plan isn’t complete until you’ve looked into getting the insurance you need, including a plan for long-term care.
LIFE INSURANCE
Millennials are feeling the need for life insurance due to COVID-19, and the way they’re shopping for it is different than in the past.
How Millennials Are Changing the Life Insurance Game
ESTATE PLANNING
The COVID-19 pandemic isn’t going away soon. This health crisis is dangerous for older Americans. Here is an overview of what you need to cover.
Estate Planning During a Pandemic
Saving for a rainy day can be a tall order, especially if you have recently experienced a financial setback. Taking even small steps can help you work toward the larger goal of building up your emergency savings.
SAVINGS
Rebuilding Emergency Savings: Take a Realistic Approach
HAPPY RETIREMENT
Finance Fundamentals
Conversation Starter 1: Money talks pay off
Fidelity Investment's 2021 Couples & Money Survey highlights that couples who make decisions about their finances together experience positive benefits. These are heartening statistics in contrast to the 2014 American Psychological Association's survey revealing that 31% of adults with partners cite money as a major source of conflict in a relationship.
In light of these findings, consider these talking points:
Taxes: Is Your New State a Friend or Foe?
Even in retirement, you can expect to pay taxes. Some states are friendlier on this count than others, so it pays to know the situation before you load up the moving van.
Florida, for example, doesn’t have a state income tax. Neither does Alaska, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, or Wyoming. All other states do.
So, if you move in retirement from New York to Florida, you rid yourself of a state income tax, but if you move from New Hampshire to North Carolina, you gain a tax.
Another consideration is that 33 states have neither an estate tax or an inheritance tax (on the other hand, several states are much less tax friendly). Let’s revisit our previous example states. New York has an estate tax, but Florida has neither an estate nor an inheritance tax, so once again, a retiree could ditch a tax with a Florida move. New Hampshire and North Carolina have neither of these taxes, so that’s a wash.
Heading into retirement brings a slew of new topics to grapple with, and one of the most maddening may be Medicare. Figuring out when to enroll in Medicare and which parts to enroll in can be daunting even for the savviest retirees. There's Part A, Part B, Part D, Medigap plans, Medicare Advantage plans and so on.
And what is a doughnut hole, anyway? To help you wade into the waters of this complicated federal health insurance program for retirement-age Americans, here are 11 essential things you must know about Medicare.
Medicare Basics: 11 Things You Need to Know
Advance Health Care Directive
Every adult needs an advance health care directive, and it becomes even more important as we grow older and experience more health issues. An advance health care directive is a written plan so your wishes are known if a time comes when you cannot speak for yourself.
Start by thinking about different treatments you do or do not want in a medical emergency. Consider talking with your doctor about your family medical history and how your current health conditions might influence your health in the future. Your wishes need to be in writing, and the document should be updated as your health changes.
Review your advance health care directive with your doctor and the person you are naming as your health care proxy to be sure all forms are filled out correctly. Give each party a copy, and keep a record of who has these forms.
Keep your completed documents in a safe but easily accessible place, such as a desk drawer. You might also consider carrying a card that states you have directives and where they can be found.
Rebuilding Emergency Savings: Take a Realistic Approach
What if I need money fast but don’t have enough in my emergency fund?
If you find yourself in the midst of an emergency and haven’t built up sufficient savings, the guidance above may feel like too little, too late. Fortunately, there are short-term sources of funding and relief available, from temporary loan forbearance and debt relief, to lines of credit and new credit cards with zero-interest promotional periods, to employer assistance and unemployment.
Here’s how to handle an inheritance like a pro. A bequest could change your life, but don’t quit your day job.
Whether you’re currently married or divorced determines how you can qualify for spousal benefits.
Married
You can qualify for spousal benefits if you meet all these requirements:
• Your spouse is already receiving retirement benefits.
• You have been married for at least one year.
• You are at least 62 years old, or you are caring for a child who is under age 16 or disabled.
Divorced
If you are divorced, you can receive Social Security spousal benefits based on your ex-spouse’s earnings record if you meet all these requirements:
• You were married for at least 10 years.
• You never remarried.
• You are age 62 or older.
• Your ex-spouse is entitled to Social Security retirement or disability benefits.
• The benefit that you would receive would be more than what you’d get based on your own work record.
Note: It’s not necessary for your ex to be taking his or her benefits for you to receive spousal benefits, but if he or she isn’t, there is one additional requirement to qualify for spousal benefits. In this case, you must have been divorced for at least two years.
How to Qualify for Social Security Spousal Benefits
Student Loan Counseling
Credit/Debt Counseling
Need an Attorney?
Level Term Life Insurance
Term Life Insurance
Disability Insurance
Long-Term Care Insurance
Auto and Home Insurance
Mortgage Discount Program
Synchrony Bank Savings Program
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Student Loan Counseling
Credit/Debt Counseling
Need an Attorney?
Level Term Life Insurance
Term Life Insurance
Disability Insurance
Getting a bill for a medical procedure or an appointment you thought your insurance would cover can throw you for a loop. But if you think the bill was sent to you in error or you believe the amount listed is wrong, you can—and should—fight back. First, though, you need to know common mistakes to look for, as well as what your insurance plan does and does not cover.
Start by reviewing your insurer’s explanation of benefits. Was the service in network—that is, from providers that have typically agreed to reduced reimbursement from your insurance company? Next, call your insurer and ask the insurance representative to explain why the claim was denied (in part or in full), why certain services weren’t covered and what you need to do to fix it.
Denials of claims for in-network procedures are usually the easiest to resolve, says Katalin Goencz, a medical insurance and reimbursement specialist in Stamford, Conn. (Goencz also serves as the president of the nonprofit group Alliance of Claims Assistance Professionals.) If a provider sends incorrect information, it is required to resubmit corrected info directly to the insurance company once the provider has been alerted, she says. For example, an error in how a procedure was coded could lead to a denial, as could an outdated insurance card.
In some cases, you could simply be billed erroneously. For example, the Coronavirus Aid, Relief and Economic Security (CARES) Act mandated that providers offer COVID-19 vaccines and boosters at no charge. Providers are prohibited from charging co-payments or administrative fees. However, you could receive a bill for a COVID-19 vaccination if the provider bills you directly instead of your insurer or due to human error in medical billing systems. If you’re charged for a vaccine, call your provider and dispute the charges. Your insurer may also be willing to help you get the bill waived.
Likewise, the Affordable Care Act requires your insurance to cover all of the costs of annual physical exams and other preventive care. However, if your doctor decides to order extra tests, such as an electro-cardiogram to track heart issues, your insurance company may conclude that the service isn’t a necessary part of your physical exam and send you a bill.
How to Get Your Grown Children to Move Out
The number of adults who live with their parents has been increasing for decades. For many, that’s a good thing. But if you’d like to uproot yours, here’s how.
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How to Get Your Grown Children to Move Out
Whether you’re getting married or just moving in together, every couple needs to come to an understanding about how they will handle money and learn what benefits their coupledom may afford them.
Wedding season is in full swing, and along with all the beauty and joy that it can bring, it’s also important to keep in mind that with marriage comes a fair amount of financial decisions and plans to be made. To be sure these are not always the first things we think about, but given my career in finance, I can’t help but bring them front and center.
Whether you are already part of a “we” or are forging a new connection, you’ll need a strong financial foundation for a meaningful and sustainable future. It may not sound romantic at first, but if you’re on the verge of moving your relationship forward in a big way, these three steps can help you deepen one of the most important bonds a couple can share: your finances.
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Wedding Season: 3 Steps to Empower Your Finances as a New Couple
It's essential to plan if you know some of your Social Security benefits will be taxed. As a general rule, if Social Security is the only source of income, it might not be taxable. However, the IRS will likely tax some of your Social Security benefits if you have additional retirement income from pensions, another job, retirement account distributions, etc.
The amount of Social Security benefits subject to tax depends on an IRS formula. That formula is based on “combined income” and considers your adjusted gross income, nontaxable interest, and half of your Social Security benefits.
Generally, if your combined income (50% of your benefit plus any other earned income) exceeds $25,000/year filing individually or $32,000/year filing jointly, you may have to pay federal taxes on your benefits.
Taxes on Social Security
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Distributions from your 529 will no longer reduce your grandchild’s financial aid
In the near term, there’s a welcome change that grandparents can begin taking advantage of for financial planning purposes.
Under the old FAFSA rules, students were required to report distributions from grandparent-owned 529 savings plans as untaxed student income, which had the potential of reducing a student’s aid eligibility by up to half of the distributed amount from the college savings plan.
In other words, a $15,000 distribution from a grandparent’s 529 plan could reduce aid eligibility by $7,500. This has led some families to do some tricky planning — where grandparents would delay 529 distributions until the grandchild was in their last few years of college to avoid the potential financial aid eligibility pitfalls.
Fortunately, with the FAFSA simplification come new rules regarding how grandparent 529 assets are treated. The new rules, effective for the 2023-2024 school year, will no longer count distributions from grandparent-owned 529 college savings plans as untaxed student income, and they will not have a detrimental impact on aid eligibility.
But grandparents can take advantage of the new 529 rules now. Why? The FAFSA looks back at the prior two years of a student’s income tax returns.
If you want to retain control over your college savings for one or more grandchildren, you can now do so without having to worry about it hurting their financial aid eligibility. And you can say goodbye to the complexities of planning distributions in future calendar years to avoid potential problems.
St. Augustine said that asking yourself the question of your own legacy — “What do I wish to be remembered for?” — is the beginning of adulthood.
In Bob Buford’s book Halftime, Bob quotes Matthew 13:5-9, which illustrates the eventual harvest of a farmer who sows his seed. Bob uses this verse to point toward his own epitaph of 100x. He says, “I want to be remembered as the seed that was planted in good soil and multiplied a hundred-fold. It is how I wish to live…how I attempt to envision my own legacy…to be a symbol of higher yields, in life and in death.”
The theme of the book is what the title suggests: that wherever you are right now, you are at halftime in your life, and the second half should be the better half.
Every day up until your retirement transition, you dedicated eight or more of the 24 hours a day that you had to someone or something to earn a living. That commitment of time and what you were responsible for during that time manifests into a sense of purpose. When that time commitment goes away, so can that sense of purpose.
Your purpose while working may have been closely associated with your daily projects, leading a team, fulfilling a role or other responsibilities. It could have been a sense of belonging to a team, a brotherhood (or sisterhood), a company or group that gave you motivation each day to go to work. This is all left behind once you retire, and what often happens after the “retirement party” is over is the onset of feeling lost, unfulfilled, bored or even depressed.
This underscores the importance of viewing retirement as a transition, not as your new reality.
When I consult with clients who are retiring, I often encourage them to begin thinking about how they will spend their time once they make the transition. This conversation is not only important for cash flow planning, but it is the first step in helping them begin to think beyond the transition of retirement and about their purpose.
Playing golf, traveling and spending time with grandkids are all great things, but they are not anyone’s purpose. When asked what someone does, unless they are a professional golfer, they aren’t going to say they golf. They may play golf, but it is not their purpose.
Author and futurist Buckminster Fuller has a question designed for finding your life’s mission: “What is it on this planet that needs doing that I know something about, that probably won’t happen unless I take responsibility for it?”
The transition of retirement is not the destination; it is the transition to what is next. It is your opportunity to reinvent yourself and live out the second half of your life with purpose.
Now Is the Time to Protect Your
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What Does Car Insurance Cover?
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Liability coverage, required by law in most states, is the foundation of car insurance policies. It’s designed to protect you financially if you’re found at fault in an accident and cause injury or property damage to others. Liability coverage encompasses two components: bodily injury liability coverage and property damage liability coverage.
Bodily injury (BI) liability covers injuries that you cause to someone else. Generally, it pays for the other person’s medical bills, recovery costs, and lost wages.
Property damage (PD) liability covers the cost of repairing or replacing another person’s property that you damaged. Typically, this covers damage to another driver’s vehicle, but it can also cover damage to fences, lamp posts, telephone poles, buildings, or other structures your car hits.
Liability
If your car is damaged in a collision with another vehicle or a stationary object, such as a streetlight or a tree, collision coverage pays to fix or replace it. If you’re leasing or financing your vehicle, your lender may require you to purchase collision coverage.
Collision
Personal injury protection (PIP) coverage — not available in all states — helps pay for you and your passengers’ medical expenses resulting from an accident, regardless of who is at fault, meaning you don’t have to wait for your insurance company to determine blame to be compensated. It also typically covers rehabilitation, lost wages, and funeral costs. PIP coverage is required in 18 “no-fault” insurance states, including Arkansas, Delaware, Minnesota, New York, Texas, and others.
Personal injury protection
It’s a question all drivers should know the answer to: What does car insurance cover?
While auto insurance policies can vary in terms of premiums, deductibles, and coverage limits, basic car insurance typically provides these types of coverage.
Car insurance protects you against financial loss in the case of an accident or theft. Here's a look at the different types of coverage you can choose.
NYSUT NOTE: Determine the right car insurance policy for you by using the NYSUT Member Benefits Corporation-endorsed Farmers Insurance Choice platform. Offered by Farmers GroupSelectSM, this platform allows NYSUT members to choose from multiple insurance carriers and features competitive prices and savings for stand-alone or bundled auto and home policies. For more information or to start comparing policies, visit the website today.
Before taking on debt, plan ahead. What is your debt goal? Will it help or hurt your finances?
A debt-to-income ratio under 35% is considered healthy. Keeping your debt-to-income ratio in this range ensures your monthly income can meet your debts. If your debt-to-income ratio is higher than that, then now’s a good time to plan repayment.
Here are some generally healthy habits and best practices to establish with your debt:
Healthy debt management
NYSUT NOTE: Do you have personal debt or money concerns that you need help managing? NYSUT members are able to enroll in the NYSUT Member Benefits Corporation-endorsed Cambridge Credit Counseling program. This program has been assisting consumers with eliminating debt for more than 20 years, and NYSUT members are eligible to receive a free, no-obligation, debt consultation with one of Cambridge's certified counselors. These counselors can help you better understand your situation, help you set financial goals, determine your budget and more, to help you get out of debt in a fraction of the time. Visit the member website for more information.
Everyone hopes to pass away peacefully after a long, healthy retirement. Unfortunately, life rarely plays out that way. My family could never have predicted the impact LTC would have on our finances.
When my father stopped to help someone with a flat tire on the side of a road, he was tragically sideswiped by a passing car. He spent the rest of his life recovering from the accident and never left the nursing home. Paying for 27 years of LTC cost my parents everything they had, including their 401(k) plans and the home they raised their family in.
We never saw this tragedy coming, and the same could be true for you. We don’t know what life has in store for us, but you’ll be thankful for the security LTC protection can provide.
The cost of LTC adds up quickly. On average, a semiprivate nursing home room costs over $80,000 per year, according to LongTermCare.gov. Keep in mind, the need for LTC is typically a progression: You may need in-home care to start, eventually transition into assisted living and then a nursing home. Those phases can stretch out over many years, even decades.
While traditional health care coverage and Medicare may cover some short-term services, most long-term assistance is not covered, such as an extended nursing home stay or in-home assistance. Paying for these services on your own may hinder your ability to meet day-to-day expenses in retirement, and you run the risk of depleting any legacy you were hoping to leave to your loved ones.
Planning for the worst matters
The Assistant Secretary for Planning and Evaluation (ASPE) estimates that 70% of today’s 65-year-olds will need some type of LTC in retirement. Since traditional health care coverage and Medicare do not cover any ongoing assistance, those who need LTC are left with four options:
Self-funding. You can pay for LTC out of pocket, dollar-for-dollar. If you end up being a part of the 30% who won’t need LTC in retirement, this option could work in your favor. But that’s a major gamble! There’s no way to know if you’ll need LTC or not, and being forced to self-fund your LTC needs can quickly deplete your retirement savings that were earmarked for other retirement expenditures.
Long-term care insurance. In exchange for a monthly premium, long-term care insurance policyholders can receive coverage for their LTC needs. Depending on the terms of your policy, you may pay a premium for 10, 15 or 20 years. No matter how much money you pay in premiums, most policies do not offer a payout if the policy goes unused, and there is no death benefit to your beneficiaries. Many people are uncomfortable with that risk.
Long-term care plan options
Life insurance. Most people know about term and whole, but there are other types of life insurance with features designed to protect you from LTC risk. Some indexed universal life insurance (UIL) and universal life (UL) insurance policies allow you to tap into the death benefit during your lifetime to cover any LTC costs. Unlike an LTC insurance policy, if the LTC features of a IUL or UL insurance policy go unused, your beneficiaries will receive the full tax-free death benefit when you pass away.
Talk to a retirement planner during your lifetime about the insurance options available to you. Life insurance coverage is dependent on a medical exam, so if you have certain health issues, it may not be a viable solution for you.
Fixed indexed annuities. A fixed indexed annuity (FIA) with an income rider can include LTC benefits. If you purchase an FIA, you’ll pay an insurance company a lump sum of money, and after a certain number of years, you’ll receive an income stream that pays out monthly for the rest of your life. If you add LTC benefits to your contract, you can receive a double payout when an LTC need arises. Let’s say your FIA pays out $2,000 every month. If you need to pay for any LTC, that monthly payout will increase to $4,000.
An accelerated benefit stream can usually only kick in once you’ve held the policy for five years, and the benefit is typically capped at five years, although some policies are only three years. However, the normal income stream from an FIA will continue throughout the lifetime of the policyholder.
Financial fasting can be a reset button — not only for your finances, but for your values, sense of purpose and even your relationships. Here are a few ways that limiting your spending can change your financial well-being for the better.
1. Pay down debt faster.
The most obvious benefit of financial fasting is that it frees up cash flow fairly quickly. But that doesn’t mean that you should simply spend all that money once you break your financial fast. Consider using that moment as an opportunity to pay down debt at an accelerated rate — especially high-interest obligations like credit card debt and car loans.
2. Break the cycle of senseless spending.
We spend for different reasons. Some people lavish their grandkids with expensive gifts, while others continually chase the latest fashion trends, no matter the cost. The problem is, many people don’t recognize why they’re purchasing certain things — and that the reasons for buying them may fall apart under scrutiny.
Buying possessions, for instance, tends to provide happiness for only a short period time, but a meaningful experience can be more rewarding over the long term.
Because financial fasting pushes the pause button on spending, it can make you think longer about why you wanted to buy something in the first place.
In time, you’ll become more adept at fulfilling those needs without spending, or realize when those impulses are not needs at all. For example, if you want to spend time with your significant other, a walk along the beach or in a park may be a better, expense-free way to do that, vs going to the movies.
3. Align your purchase decisions with your values.
Financial fasting is also an opportunity to bring your spending in line with your own personal values. Growing up, many Baby Boomers like me just went to work. We put our heads down. Spending wasn’t necessarily connected to purpose or passion but providing for ourselves or others.
This can be a time to take a page from younger generations and think about the impact of your purchase decisions. If you are passionate about social awareness and responsibility, consider the many items you purchase from large companies. Should you redirect those dollars to other businesses that may have a greater impact on your local community?
As you come out of a financial fast, you’ll find yourself at a crossroads, asking: Do I continue spending the way I have in the past, or try to be the change I want to see in the world?
4. Create a space to reconnect in our relationships.
Some instinctually feel that in order to do something, you need to spend something. But when it comes to our relationships, quality time is what matters most. Some types of spending can disconnect you from those important connections, instead of creating space for you to engage with your loved ones in a meaningful way.
For example, some leisure activities — like attending plays, visiting theme parks or going to concerts — don’t actually require people to talk to each other. And costly gifts are hardly a substitute for personal connection. Unfortunately, many of our spending habits, while well-meaning and born out of kindness, fail to deepen our relationships.
Planning free activities, on the other hand, requires you to creatively collaborate with your family members and friends, fostering a sense of spontaneity and adventure. And many of the activities that don’t involve spending require us to remain in the moment, listen to others respectfully and appreciate their presence.
Financial fasting can be as stringent as abstaining from spending for a week, or as measured as skipping lunch during the workweek. What’s most important to recognize is that financial fasting can be accomplished in degrees to accommodate your comfort level and needs.
Go through your budget. Start by identifying the areas where you’re spending the most — eating out, going to movies — and the days in which you’re spending the most. This will help you target your fast and also give you ideas about how to occupy your time during a fast. Someone who regularly goes to an art museum on Sunday, for example, may instead choose to attend free art exhibitions in the area.
Plan to start small. Just like physical fasting, financial fasting is a muscle. Begin by cutting out expenses that are easy to track. That regular Friday date night at the local bistro could turn into dinner and a movie at home, for instance. Once you’ve mastered those smaller targets, then you can take a stab at an entire day without spending and, ultimately, even an entire week.
Don’t expect an overnight change. At first, you may feel as if you’re needlessly depriving yourself. But after fasting for a while, you’ll start to come out of each fast with a renewed appreciation for what money is — its purpose, significance and impact on the lives of others. That sense of connection will change how you spend that first dollar coming out of a fast.
How to plan a financial fast
Financial Fasting Can Trim the Fat From Your Spending
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One common concern among folks in their 60s is determining a prudent time to retire. After decades in the workforce, many people are understandably uncomfortable with the idea of no longer receiving a paycheck. While the top concerns are usually related to finances, there are also lifestyle adjustments that must be considered to ensure a fulfilling and secure retirement.
Before handing in your resignation letter, it’s important to consider the core aspects of a successful retirement. Below is a “retirement readiness checklist” to assess whether you are ready to retire:
It’s critical to consider these core aspects of a successful retirement, both financial- and lifestyle-related, before you walk away from your career.
Are You Ready to Retire? Find Out With This 10-Item Checklist
Debt can be a useful tool in many aspects of life, like buying a home, affording a car or growing your business. As long as a person acts responsibly and has a long runway to pay back that loan, it can enhance their life and take their career to the next level.
However, as folks enter their retirement years, many shift to living on a fixed income. Being saddled with debt, and its associated extra expenses, can be burdensome and make retirement life much more stressful. That is why I advise all retirees to eliminate all debt before retirement.
1. Wipe out all your debt.
Social Security is a crucial income source for many retired Americans. Getting it right is critical for a financially successful retirement.
If you are in good health and don’t currently need the cash flow, holding off on claiming Social Security is a smart strategy to mitigate the impact of inflation. Today, full retirement age (FRA) for a retiree to get their full benefit ranges from 66 to 67, depending on the year you were born. One can claim Social Security as early as age 62, but anything before FRA comes with a reduction in benefits up to 30%.
Conversely, Social Security will add an additional 8% delayed retirement credit to your monthly payout for each year, up until age 70, that you hold off on claiming the benefits. That’s a guaranteed annual return of 8% for deferral after your FRA.
2. Consider your Social Security claiming strategy.
Creating a budget for a multidecade retirement is not practical. Prices change, unforeseen expenses arise, and life takes unpredictable turns. However, there needs to be a general calculation to determine if you can afford a particular lifestyle.
This computation doesn’t need to involve anything fancy. Start by listing all your income sources such as Social Security, pension and portfolio or rental income. Next, tally your living expenses, like food, rent, taxes and transportation costs.
Make sure to also factor in any other costs associated with living the retirement you envision, including travel or hobbies. Finally, ask yourself two questions:
• Does my income exceed my expenses?
• Can I afford to live this lifestyle for the rest of my life?
If the answer to either of these questions is “no,” then changes must be made. You can consider working longer, even part time, moving to a cheaper locale or adjusting your retirement lifestyle.
3. Assess your income sources and expenses.
This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.
Securities offered through Kestra Investment Services, LLC (Kestra IS), Member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Kestra IS or Kestra AS are not affiliated with Shenkman Wealth Management. Shenkman Wealth Management does not offer tax or legal advice.
About the Author
Jonathan I. Shenkman, AIF®
President and Chief Investment Officer, ParkBridge Wealth Management
Jonathan I. Shenkman, AIF®, is the President and Chief Investment Officer of ParkBridge Wealth Management and serves as a financial adviser and portfolio manager for his clients. In this role, he acts in a fiduciary capacity to help his clients achieve their financial goals.
NYSUT NOTE: Retirement planning can be overwhelming, which is why having a solid plan in place is crucial. The NYSUT Member Benefits Corporation-endorsed Financial Counseling Program can help. As a NYSUT member, you can get customized advice from a team of Certified Financial Planners® that can offer advice based specifically on your financial situation. And it’s all fee-based, which means no commissions from mutual funds, brokerage firms, insurance companies or any other third party. Visit the member website for more information or to get started.
A typical woman suffers a 73% drop in her standard of living post-divorce. However, her ex-husband enjoys an on-average 42% improved standard of living, according to Lenore Weitzman, a George Mason University sociology and law professor.
"Women are more likely to feel divorce's financial burden,” says Shweta Lawande, CFP ®, CDFA® and lead adviser with Francis Financial, a firm specializing in divorce financial planning. “A woman can pretty much see her retirement savings in IRAs, 401(k)s, pension plans, 457s and 403(b) plans cut in half, which can be devastating. In addition, she is unable to recover because she tends to earn less in her career and may have also taken time out of the workforce to care for children."
The divorce gap also creates inequalities between married and divorced women. For example, the Retirement Confidence Survey released in March 2020 revealed that 76% of married women voiced being very or somewhat confident they will have enough money to live comfortably throughout their retirement years. Yet only 43% of divorced women feel the same. But, of course, since that time, pandemic-related stock-market volatility has most likely caused divorced women to feel even more financially vulnerable, along with most Americans.
The Solution for Divorcing Women
According to Zeiderman, who in addition to her law degree is also a Certified Divorce Financial Analyst™, "There is no room for error at this stage of your life. Mistakes can be costly, and most women over age 50 do not have the time to recover. Therefore, hiring the right divorce team that includes a seasoned divorce lawyer and divorce financial expert is critical.”
Lawande chimes in, "The women who fare best post-divorce are those who not only have the right divorce team but have also 'leaned into' the finances. They work with their expert divorce advisers to better understand the implications of the property division, Social Security and pension payout options, spousal support payments, and health insurance coverage."
NYSUT NOTE: Now is the time to get your legal documents in order, and as a NYSUT member you can enlist the help of the NYSUT Member Benefits Trust-endorsed Legal Service Plan. This plan can assist you with all your personal legal issues – from preparing crucial legal documents to traffic violations. Provided by the law firm of Feldman, Kramer & Monaco, P.C., this plan provides unlimited access to toll-free legal advice from a national network of lawyers. For more information or to enroll, click here.
Divorce is not easy, but you do not have to do it on your own. The divorce industry has stepped up to the plate with numerous legal, financial and emotional support structures to help empower those moving from coupledom to single life with the right legal advice and financial security.
Be sure to reach out to a divorce attorney who is highly recommended in your state as well as a Certified Divorce Financial Analyst™ to ensure that you understand all the legal and financial issues of your divorce.
This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.
What Is a 529 Plan?
Hands down, the 529 plan is a great way to save for college. The tax benefits are key. With a 529 plan, you pay no annual taxes on the investment gains inside the account, plus distributions for qualified expenses like tuition, certain fees and qualified room-and-board expenses are tax-free.
A relatively new provision allows account owners to withdraw $10,000 a year per student for private primary or secondary education.
Each state administers its own plan, and you are free to use any state’s plan. However, some states offer a state-tax deduction if you are a resident and use its in-state plan. That’s the basics, there is much more to know, but today I want to focus on five ways parents can maximize their 529 plan.
The Time Horizon Is Not Freshman Year
Parents of teenagers often ask me if they should open a 529. They wonder if it makes sense given how close the child may be to needing the money for college. While there are a variety of factors to consider, I remind parents the time horizon for needing the money for college is not freshman year, but by senior year. So, for instance, a parent with a 13-year-old may think they have only four years till they’ll need the 529 money, when in reality the time horizon could be eight years, since not all the money is withdrawn in the freshman year. If that is the case, then yes, eight years may still be enough time to invest in a 529. (There may be some financial aid considerations.)
Having said that, I probably wouldn’t invest all the 529 money in equity mutual funds, given the time horizon is only eight years — that is too risky. But perhaps the tuition payment earmarked for the eighth year, or senior year, could be invested in a dividend-paying mutual fund or a balanced mutual fund, since that has the longest time horizon. I suggest consulting with a qualified financial adviser who can help ensure your investment mix is aligned properly with your risk tolerance and time horizon.
Paying Private K-12 With a 529 Plan
Parents can use up to $10,000 a year from their 529 plan to pay for private K-12 tuition. If you are paying for private school out of a cash or checking account, you may want to consider first routing the payment to the 529 for the state tax deduction. This is a good idea for parents who are already contributing to a 529 plan but not up to the amount for the state tax deduction — they’d have more room to contribute.
For example, if a family is contributing $5,000 a year to their state’s 529 plan, but the state tax deduction is up to $10,000 in annual contributions, they can contribute the additional K-12 tuition payment to the 529 plan to get them to the $10,000 cap. (The $10,000 cap is an example — each state’s rules vary.) This assumes your state offers a state tax deduction for contributions, your state considers K-12 tuition a qualified expense, and there is no minimum waiting period for withdraws. It’s best to check with the 529 administrator first.
There may be some drawbacks to this approach. Namely, it can be a hassle to move money around. Also, it could lead to commingling college funds and K-12 money, which should be invested differently, given their different time horizons, but this trick could also save you a few bucks on your state taxes.
Make a List
Start by making a list of your debts. A list of liabilities includes:
Determine Responsibility
Some debts are easier to divide than others. Student loan debt is usually handled by the student. An auto loan might be assumed by the person who takes ownership of the vehicle.
Credit card debt is more difficult. Some cards may have joint responsibility, but many of us also use our individual cards for expenses for the entire family. Division of those debts may be a key financial issue in some cases.
Debt incurred during a marriage is generally the joint responsibility of both parties, as long as both are co-signers on the credit cards. In community property states, both are responsible, even for debt incurred by one partner.
Set a Deadline
It will be nearly impossible to divide your debts if they continue to grow. Set a date after which there will be no new joint debt. This will likely be the date of separation (physical or legal). Note debt balances as of that date.
After separation, debt incurred on credit cards is the responsibility of the spouse who made the purchases charged on the card. However, you can prevent any room for disagreement by using completely separate cards.
If possible, close your joint credit card accounts. Closing joint accounts will help you avoid the possibility of your ex-spouse incurring debt in your name. Open up a new credit card after you’ve separated and use it for your personal expenses going forward. This will keep your non-marital debt independent of the debts you accumulated while you were still married.
At the very least, have your name removed from any joint accounts that will continue to be used by your spouse. This will not end your liability for debts incurred up to that point, but it should end your responsibility for any new debts incurred on those accounts by your spouse. If you hold any accounts in your own name for which your spouse is an authorized signer, revoke the authorization. Keep detailed records of your charges.
Even if you disagree on responsibility for a debt, continue to pay all minimum payments on credit card accounts that bear your name. Failing to do that could compromise your credit score and adversely affect your credit history down the road.
NYSUT NOTE: Divorce can be complicated, but when you have the right team in place it can help simplify the process. The NYSUT Member Benefits Trust-endorsed Legal Service Plan is available to help provide legal assistance for many of the issues that may be affected by divorce. Provided by the law firm of Feldman, Kramer & Monaco, P.C., NYSUT members can get unlimited access to toll-free legal advice from a national network of lawyers. For more information or to enroll, click here.
1. Figure out your expenses
If you make more than you spend, you have earned the luxury of not having to budget. Budgeting is not an exercise that people enjoy. Unlike your working years, budgeting in retirement is not optional. Pull out too little money and you’ve unintentionally paid for your kids’ country club memberships. Pull out too much and you’ll run out.
Here’s a simple trick: Look at two years of annual statements from your bank accounts. Divide the total debits by 24. That’s it. This is an accurate portrayal of your monthly expenses. This should encompass everything except what you pay for before it hits your bank account (taxes, health insurance premiums, group life insurance, etc.).
2. Gross up the monthly amount to account for taxes
It’s likely that the majority of your retirement savings will be taxed in some shape or form. Roth IRAs and municipal bonds are notable exceptions.
If your monthly expenses are $10,000 and your effective tax rate (how many cents you lose on the dollar to taxes) is 20%, divide $10,000/0.8, to arrive at $12,500 per month. That’s the gross amount you’ll need every month to end up with $10,000 in your bank account to cover your expenses.
NYSUT NOTE: Getting a plan in place to manage your debt isn’t always easy. But with the help of the NYSUT Member Benefits Corporation-endorsed Cambridge Credit Counseling program, NYSUT members have the opportunity to work with a certified counselor on possible debt elimination options. With over 20 years of experience assisting consumers with debt, Cambridge can work with you to determine the most appropriate course of action for your specific debt situation. Get a better understanding of debt consolidation, student loan repayment options and more by visiting the website today.
1. Figure out your expenses
If you make more than you spend, you have earned the luxury of not having to budget. Budgeting is not an exercise that people enjoy. Unlike your working years, budgeting in retirement is not optional. Pull out too little money and you’ve unintentionally paid for your kids’ country club memberships. Pull out too much and you’ll run out.
Here’s a simple trick: Look at two years of annual statements from your bank accounts. Divide the total debits by 24. That’s it. This is an accurate portrayal of your monthly expenses. This should encompass everything except what you pay for before it hits your bank account (taxes, health insurance premiums, group life insurance, etc.).
NYSUT NOTE: Divorce can be complicated, but when you have the right team in place it can help simplify the process. The NYSUT Member Benefits Trust-endorsed Legal Service Plan is available to help provide legal assistance for many of the issues that may be affected by divorce. Provided by the law firm of Feldman, Kramer & Monaco, P.C., NYSUT members can get unlimited access to toll-free legal advice from a national network of lawyers. For more information or to enroll, click here.
Medicare can be complicated, especially if you are a new enrollee or someone checking their plan during the Medicare open enrollment period, which is underway only for less than two more weeks.
But it's important to understand what benefits you will receive so you can decide if you want prescription drug coverage, an Advantage plan or additional coverage through Medigap. Below is a quick explanation of each part of Medicare.
If you're in a Medicare Advantage Plan or other Medicare plan, your plan may have different rules. But, your plan must give you at least the same coverage as Original Medicare. Some services may only be covered in certain facilities or for patients with certain conditions.
Part A covers inpatient care at hospitals and skilled nursing facilities as well as hospice and some home health care. If you paid Medicare payroll taxes for at least 40 quarters, the Part A premium is free. For 2024, there is a deductible of $1,632. You also must pay coinsurance for hospital stays longer than 60 days. For more details, read What You’ll Pay for Medicare in 2024.
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Medicare Part A
Medicare can be complicated but we've got you covered. Here is a quick guide to the different benefits provided through each part.
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What You Must Know About the Different Parts of Medicare
NYSUT NOTE: The NYSUT Member Benefits Corporation-endorsed Financial Counseling Program offers NYSUT members customized advice for all their financial planning needs. Whether it’s paying for college, tax planning, refinancing a mortgage, budgeting and managing debt or planning for retirement, NYSUT members can get customized advice from a team of Certified Financial Planners®. Plus it’s all fee-based — which means no commissions from mutual funds, brokerage firms, insurance companies or any other third party. Get unbiased advice from a financial expert by visiting the member website.
NYSUT NOTE: Protecting your home is a top priority for most homeowners, and finding the right policy is a crucial step. The NYSUT Member Benefits Trust-endorsed Farmers Insurance Choice platform can be a great tool for NYSUT members. Offered by Farmers GroupSelectSM, members can choose from multiple insurance carriers and receive competitive prices and savings for stand-alone or bundled auto and home policies. Find the right policy for your individual needs and make sure your home is fully covered. Visit the website today for more information.
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How the Life Insurance Game Is Changing
Millennial consumers love customization. With so much information readily available, there is quite a bit you can do on your own if you choose to. And when you are ready and have questions or want a more guided experience, there is a financial professional who will be able to help. Whether by phone, by video, online or the good old-fashioned face-to-face meeting, a financial professional is always a great stop on this journey to be sure you have considered your needs and options. There are nuances to the features and benefits of life insurance, and an experienced professional can help you sort it all out. Among millennials who purchased life insurance in the pandemic, more than half used a live adviser, and 30% used both a live adviser and online elements in their purchase, according to Boston Consulting Group.
In addition to helping provide financial security for your loved ones in case you pass away, many life insurance policies now also offer optional riders (sometimes at additional cost) that can help address other concerns, like chronic illness or longevity risk.
Your move, millennials: Choose the method that works best for you. That may be an online-only purchase, using a live adviser, or some combination of the two. If you’re not sure where to turn for help, your employer may provide access to an adviser. It is also likely that friends or family members may have a referral for you. This is one of the most common ways advisers acquire new clients. Finally, many states have registration requirements and often have online directories of licensed financial professionals. Without a referral from someone you trust, it is a good rule of thumb to select two to three people to interview so that you can find the best person for you.
As millennials become more likely to purchase life insurance, insurers have evolved their offerings to create new products and innovations to meet their needs. That’s great news for first-time applicants who may find a much more painless process than expected.
This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.
About The Author
Salene Hitchcock-Gear, President of Prudential Individual Life Insurance
President of Prudential Individual Life Insurance, Prudential Financial
Salene Hitchcock-Gear represents Prudential as a director on the Women Presidents’ Organization Advisory Board and also serves on the board of trustees of the American College of Financial Services. In addition, Hitchcock-Gear has a bachelor’s degree from the University of Michigan, a Juris Doctor degree from New York University School of Law, as well as FINRA Series 7 and 24 securities licenses. She is a member of the New York State Bar Association.
Good news: You can have it your way!
NYSUT NOTE: The NYSUT Member Benefits Trust-endorsed WrapPlan® II Universal Life Insurance Plan underwritten by Transamerica Financial Life Insurance Company allows you to purchase life insurance coverage that increases as your term life coverage decreases or terminates. For more information on requirements and how it works, visit the NYSUT Member Benefits website today.
Kiplinger is part of Future plc, an international media group and leading digital publisher
© 2023 Future US LLC
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Heading into retirement brings a slew of new topics to grapple with, and one of the most maddening may be Medicare. Figuring out when to enroll in Medicare and which parts to enroll in can be daunting even for the savviest retirees. There's Part A, Part B, Part D, Medigap plans, Medicare Advantage plans and so on.
And what is a doughnut hole, anyway? To help you wade into the waters of this complicated federal health insurance program for retirement-age Americans, here are 11 essential things you must know about Medicare.
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Beneficiaries of traditional Medicare will likely want to sign up for a Medigap supplemental insurance plan offered by private insurance companies to help cover deductibles, co-payments and other gaps. You can switch Medigap plans at any time, but you could be charged more or denied coverage based on your health if you choose or change plans more than six months after you first signed up for Part B. Medigap policies are identified by letters A through N. Each policy that goes by the same letter must offer the same basic benefits, and usually the only difference between same-letter policies is the cost. Plan F has been very popular because of its comprehensive coverage, but as of 2020, Plan F (along with Plan C) is unavailable for new enrollees. The closest substitute for Plan F is Plan G, which pays for everything that Plan F did except the Medicare Part B deductible. Anyone enrolled in Medicare before 2020 can still sign up for plans F and C.
Fill Medicare's Coverage Gaps With a Medigap Plan
There’s Medicare Part A, Part B, Part D, Medigap plans, Medicare Advantage plans and so on. We sort out the confusion about signing up for Medicare—and much more.
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Medicare Basics: 11 Things You Need to Know
NYSUT NOTE: As interest rates continue to increase, there is no better time to address outstanding credit card debt. The NYSUT Member Benefits Corporation-endorsed Cam-bridge Credit Counseling program can help members get a better understanding of their debt consolidation and repayment options. NYSUT members are eligible for a free, no-obligation, debt and student loan consultation with one of Cambridge's certified counselors, who will help determine the most appropriate course of action for your spe-cific debt situation. To find out how to speak to a counselor, visit the website for more information.
NYSUT NOTE: As interest rates continue to increase, there is no better time to address outstanding credit card debt. The NYSUT Member Benefits Corporation-endorsed Cam-bridge Credit Counseling program can help members get a better understanding of their debt consolidation and repayment options. NYSUT members are eligible for a free, no-obligation, debt and student loan consultation with one of Cambridge's certified counselors, who will help determine the most appropriate course of action for your spe-cific debt situation. To find out how to speak to a counselor, visit the website for more information.
NYSUT NOTE: The NYSUT Member Benefits Trust-endorsed Level Term Life Insurance Plan — provided by Metropolitan Life Insurance Company — offers level term life insurance coverage for you or your spouse/certified domestic partner. Terms are available for 10-year, 15-year and 20-year periods. For more information on requirements and term details, visit the NYSUT Member Benefits website today.
NYSUT NOTE: As a NYSUT member, you have access to a national network of attorneys that deal with personal legal matters through the NYSUT Member Benefits Trust-endorsed Legal Service Plan. Provided by the law firm of Feldman, Kramer & Monaco, P.C., these experts offer legal assistance with everything from preparing crucial estate planning documents to dealing with traffic violations. For more information or to enroll click here.
Half of Americans Don't Know What a 529 Plan Is. Are You Missing Out?
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A 529 plan can be a valuable tool to save for college, but many Americans aren’t utilizing this tax-advantaged savings account. In fact, a surprising number of people don't even know what a 529 plan is, even as college gets more and more expensive with each passing year. If you’re saving for your children’s or grandchildren's higher education, take the time to learn about a 529 plan and how it can benefit you and your family.
Despite the rising cost of college, half of Americans don't know what a 529 plan is, missing out on the chance to take advantage of this valuable savings tool.
Question #1: How much income do I actually need?
Now that you’ve entered retirement, you may realize that your needs and goals differ from what you originally planned. When every day feels like a Saturday, it is easy for your spending to go up. I know a large percentage of my personal discretionary spending occurs during the weekends!
Between travel, health care, home renovations and supporting family members, there are many ways that people choose to spend their income in retirement. To make sure you can maintain your desired lifestyle, take time to recalculate your cost of living to reflect these expenditures and determine the amount of income you actually need.
Keep in mind, due to inflation, this number is likely going to grow over time to account for price increases for food, clothing, energy and health care. The cost of health care can grow faster than consumer prices and may become a major expenditure.
During retirement, it helps to arrange enough fixed sources of income — such as Social Security, defined benefit pension plans and retirement plan required minimum distributions (RMDs) — to cover all your essential costs. That way, if your portfolio is affected by a stock market decline, you can be fairly confident that you will still be able to pay for your core expenses.
If you’re looking to further supplement your income, you can consider more flexible sources of revenue, like stock dividends and interest from bonds and CDs; the income from these sources may change due to market fluctuations and interest rates. Part-time work is also an option that many retirees consider. In fact, a recent survey by the Employee Benefit Research Institute reported that 27% of retirees chose to continue working to generate additional income.
Some may also consider an annuity to help increase cash flow. Annuities are insurance products designed to provide a stream of income and can be used to bridge the gap between your fixed income and the amount of money needed to cover monthly living expenses in retirement.
There are various annuities you can choose from — fixed, indexed, buffer, single premium immediate or variable annuity — and each comes with its own mix of risks and rewards, including different fees, features and benefits. In addition to being a source of retirement income, a subset of annuities offers tax-deferred growth. Of these, some enable you to participate in market growth, while providing downside protection of your principal. A financial adviser can help you determine what annuity, if any, will best serve your needs.
Question #2: Where will my money come from?
Life doesn’t always go as planned, and you need to be prepared for the unexpected. Thinking about sickness and death can be uncomfortable, but planning for these scenarios before they arise is essential to preventing family stress and financial complications.
Original Medicare is federal health insurance for people 65 and older. It typically requires payment of coinsurance and doesn’t cover all health care costs. Some people purchase Medigap insurance together with their Original Medicare insurance, and others may buy Medicare Advantage bundled plans instead that provide additional coverage like vision, hearing and dental services and sometimes prescription drug coverage. For most people, they should start looking into Medicare coverage three months before turning 65. Managing these medical costs will go a long way to protecting your retirement nest egg.
Retirees can also face substantial long-term care costs such as assisted living or a nursing home. Unfortunately, most people don’t realize that Medicare won’t cover most long-term care costs. Many individuals have to pay out of pocket or tap into investments to pay for long-term care.
When thinking of potential coverage options for long-term care needs, you may want to consider a hybrid long-term care insurance policy. These policies can help protect your savings from long-term care costs like assisted living while protecting your family’s future inheritance. Although a hybrid long-term care policy can be more expensive than standalone long-term care insurance, some policies may offer guaranteed premiums, or premiums that will not rise in the absence of certain distributions from the policy. Plus, if the insurance is not needed, your beneficiaries will typically receive a death benefit. Using a long-term care calculator can help you determine if you’re financially prepared for this potentially impending cost.
You should also consider setting up an estate plan to protect your wishes for the distribution of your assets to your family and loved ones when you are no longer around. Your will, trusts and power of attorney are three key components of the overall estate planning process. Additionally, you can prepare essential documents that address issues like guardianship of your children and how your loved ones should approach your medical decisions if you’re incapacitated.
If you have not done so already, work with your tax and financial professionals to start discussing your post-retirement financial plan and meet with your legal adviser about drafting or updating your estate plan today.
Question #3: How will I protect and manage my assets?
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If you haven’t used it in the past year or so and don’t expect you’ll need it in the near future, it's probably safe to get rid of it, says Aaron Traub, the Dallas organizer.
6. Ask yourself the last time you used something
How to Declutter Your Home If You're Moving or Downsizing — 8 Tips to Avoid Overwhelm
Reach out to your family and ask them to go through any possessions they may have left behind. Then invite family members over for a “give and take” visit, suggests Darcy Speed. “Explain that you are looking to declutter and encourage them to choose their favorite items. The "giver" can share the story behind the keepsake, making it even more meaningful, and then it can be taken out of the home.”
You may think about keeping this stuff for your heirs, but keep in mind that “very rarely do your children have the same attachments to items that you have,” says Jil McDonald, an interior designer with Jil Sonia Interior Designs in Vancouver, Canada, who recently downsized significantly. “They want to create their own new memories.” Instead, discard the items, but “take pictures and videos to keep the memories alive,” suggests John Linden, a Los Angeles-based interior designer.
7. Involve your family
Finally, be sure that your old habits don’t return “Keep up with the organization,” says Linden. “Make sure to declutter on a regular basis, and be conscious of what new items you are bringing into your home.”
For Jakob Miller, in New York, “Decluttering was a challenging but rewarding task. Not only did it make my home more organized and functional, but it also gave me a sense of peace and clarity,” he says. “Just start small, take it one step at a time. And you'll be amazed at the results.”
8. Declutter on a regular basis
These Are the Key Decisions You Need to Make for Retirement
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These important issues are all connected and can affect your taxes, likely setting them at a certain level for the rest of your retirement.
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Kiplinger is part of Future plc, an international media group and leading digital publisher
© 2024 Future US LLC
Kiplinger is part of Future plc, an international media group and leading digital publisher
© 2024 Future US LLC
When you’re preparing to retire, you’re most likely looking forward to relaxing. But instead of the relaxing interlude you were imagining, retirement plunges you into making possibly some of the most complex decisions you’ve ever made in your life.
Think about it — during what I call the Dynamic Decade+, the period between ages 62 and 75 — there are consequential decisions associated with retirement that should be made. That includes deciding when to stop working, choosing when to claim Social Security, starting Medicare, planning for required minimum distributions (RMDs), considering when to start withdrawing money from your retirement accounts — and more.
What’s more, these decisions are intimately connected, with one decision affecting the next like a row of dominos falling. These decisions are also closely correlated to your tax situation. Essentially, the decisions you make before and during retirement about these issues will likely set your taxes at a certain level for the rest of your retirement, barring major changes in federal tax laws.
These are not decisions that you want to make without a good deal of thought, because they can be so consequential and complex. While complexity can be annoying, it also creates opportunity. If you’re like many pre-retirees or retirees, you may have little idea about how complicated these matters are until you start investigating them.
In this article, you’ll gain an appreciation for the opportunity that retirement creates to control your financial destiny and tax situation through the decisions I’m going to walk you through — some that are irrevocable. These are all decisions that you’ll need to make between ages 62 and 75.
NYSUT NOTE: NYSUT members have access to quality, competitive insurance programs, including for long-term care, that have been endorsed by NYSUT Member Benefits Trust. Plus, you can get expert legal advice for all your estate planning needs through the NYSUT Member Benefits Trust-endorsed Legal Service Plan.
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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.
About the Author
Chuck Cavanaugh
Head of Financial Planning for Citi U.S. Consumer Wealth Management
Chuck Cavanaugh is responsible for leading the financial planning team for Citi U.S. Consumer Wealth Management. The team works with clients to develop and implement financial plans, including estate & trust planning, charitable giving, intergenerational planning, business succession, secured retirement income, risk mitigation and wealth protection.
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How does Social Security work?
Despite the popularity of Social Security, the program can be complicated. It has so many twists that it’s hard for the average person to get their arms around it.
In a nutshell, Social Security replaces a portion of your pre-retirement income. The amount of your benefit depends on your lifetime earnings. To qualify for Social Security, you must have at least 40 “credits,” which you earn by working at least 10 years. Your benefit is based on your 35 highest-earning years.
That’s where things get complicated. Despite the many gains women have made in education and the workplace, the burden of childrearing and elder care still primarily falls on them. As a result, they are more likely to have gaps in their work history. According to the Brookings Institution, motherhood reduces women’s Social Security benefits by 16% for the first child and then an additional 2% for each subsequent child. Women’s average Social Security benefits are 80% that of men, the SSA says.
2. Start with easy wins
Gather all trash, clean the fridge and pantry and then collect and organize receipts and paperwork, which likely have minimal sentimental value. Next, “look for things that are out of place, like piles of books, clothes, shoes, small appliances,” says Diane Quintana. “Can you put these things away? If you can’t put them away, can you make room for them by decluttering where they would go?”
Then move on to other smaller areas. Consider tackling individual drawers before moving up to something slightly larger, such as a closet or a spare room, suggests Darcy Speed, who trains other organizers and home stagers at Ultimate Academy. “There are usually fewer decisions to be made regarding what to keep and what to donate,” she says.
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NYSUT NOTE: Navigating the complexities of a long retirement can be a challenge. But NYSUT members can get guidance from the NYSUT Member Benefits Corporation-endorsed Financial Counseling Program. With access to a team of Certified Financial Planners®, NYSUT members can get tailored advice that will help create a flexible retirement approach designed to last their extended life-span. Get more information or enroll by visiting the member website.
This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.
About the Author
Josh Sailar, CFP®, CPFA
Partner, Blue Zone Wealth Advisors
Josh Sailar is an investment adviser and partner at Blue Zone Wealth Advisors, an independent registered investment adviser in Los Angeles. He specializes in constructing and managing customized advanced plans for business owners, executives and high net worth individuals. He holds the designations of Certified Financial Planner (CFP®) and Certified Plan Fiduciary Advisor (CPFA), the FINRA Series 7, 63, 65 licenses, as well as tax preparer license.
Seeking passion and purpose in retirement
An excellent place to start looking for your second act is by considering what you're passionate about and what drives you to give back. In fact, even seniors who need a steady income stream will also benefit from starting here.
For example, many retirees find fulfillment in teaching, such as a college professor instructing students in the field in which they spent their career. Others might consider retail positions involving their career, hobbies, or pursuits that they wished they had more time for while they were working full time. For example, Billy Ozzello, bass player for the 1980s-era band Survivor, now owns a guitar shop in Indiana.
Meeting your needs
When people retire today, it doesn't necessarily mean they're done working. Today's definition of retirement often includes a second act. After all, people are generally living longer, which could put some in danger of outliving their savings. Additionally, many seniors find that keeping themselves occupied makes life more enjoyable in their golden years.
Whatever you decide to do in retirement, you can often find purpose and fulfillment by staying active, whether that involves working for a paycheck, volunteering full time at a non-profit, or occupying yourself with another activity.
This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.
About the Author
Jacob Wolinsky
Jacob is the founder and CEO of ValueWalk. What started as a hobby 10 years ago turned into a well-known financial media empire focusing in particular on simplifying the opaque world of the hedge fund world. Before doing ValueWalk full time, Jacob worked as an equity analyst specializing in mid and small-cap stocks. Jacob also worked in business development for hedge funds. He lives with his wife and five children in New Jersey. Full Disclosure: Jacob only invests in broad-based ETFs and mutual funds to avoid any conflict of interest.
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© 2024 Future US LLC
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Kiplinger is part of Future plc, an international media group and leading digital publisher
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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.
About the Author
Chad Rixse
Chad Rixse, CRPS®, is the Director of Financial Planning and a Wealth Advisor at Forefront, a privately-owned financial services firm.
Budget your household to understand your cash flow.
Pay credit cards off in full every month.
Autopay recurring debt installments to avoid late payments.
Plan to repay high-interest debt.
Avoid using debt for lifestyle expenses.
Always have three to six months of living expenses in financial reserves for emergencies.
Track your loan balances, interest rates and minimum payments, and refinance to a cheaper rate when possible.
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Life happens, and we sometimes get into lousy debt despite our best efforts. A plan helps discipline these situations. Three main debt payment strategies include:
Debt snowball method: This method prioritizes smaller balances over interest rates. Mathematically, this strategy is not the most cost-effective or time-saving, but it might feel simpler to attain psychologically with smaller wins gained earlier on and can often free up cash flow faster by removing those lowest sums.
Debt avalanche method: This method promotes paying off highest-interest-rate balances first regardless of balance size. By paying off the higher-interest-rate balances, debt is paid down faster, and more costs are saved on interest.
Debt consolidation method: Managing various loans, credit cards and other debt can be difficult with all the different payments and due dates. For these situations, debt consolidation may be the most preferable option.
The most typical debt consolidation technique is to use a personal or home equity loan to pay down higher-interest debt. In general, the goal of debt consolidation is to lower your monthly payment to free up cash, convert your variable-interest debt to a fixed rate and/or lower your interest rate to simplify repayment and get out of debt faster.
Strategies to pay off debt
Debt might help or hurt your long-term finances and can have serious implications, so be mindful of its use. In today's world, it's tempting to utilize debt to finance purchases or make investments, but it's important to assess the pros and cons to avoid any long-term damage. Debt can help you reach your financial objectives, but only if you understand its implications and make informed decisions first.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
Wrapping up
NYSUT NOTE: Securing a long-term care policy is an essential step in retirement planning, but deciding what policy is right for you and your family can be difficult. Which is why NYSUT members have access to a team of dedicated long-term care planning specialists through the NYSUT Member Benefits Trust-endorsed New York Long-Term Care Brokers (NYLTCB) program. NYLTCB is a nationally-recognized insurance intermediary that offers access to discounted long-term care insurance plans from highly-rated insurance companies, and their specialists can provide insight into different long-term care insurance providers and products, so you can choose the best coverage for you. Visit the member website for more information.
NYSUT NOTE: A life insurance policy with a living benefit can be a great option for long-term care planning. And NYSUT members now have access to the Universal Life Insurance program offering a Convalescent Care Benefit. The NYSUT Member Benefits Trust-endorsed Universal Life Insurance with Convalescent Care Benefit plus YourCare360® Care Planning Services offers added financial protection, along with access to long-term care resources. This is a great way to protect you and your loved ones. For more information and to get started, visit the member website.
Deciding what kind of fence to build around your retirement home is a personal decision. There are benefits and drawbacks to every LTC option, and what’s right for one person may not work for another.
While it’s important to be proactive, buying LTC insurance or life insurance at a young age could get very expensive after years of paying premiums. On the other hand, waiting to purchase a policy could put you at risk of paying high premiums because of any health problems you may have developed in your 50s and 60s.
It’s important to meet with a trusted financial adviser who can help you determine the right time to buy and what type of protection your family needs. No two situations are alike, but an adviser can help you weigh the pros and cons specific to your assets, family history, medical history, tax plan and beneficiary needs. I recommend working with a professional who has the experience and industry knowledge needed to keep you and your loved ones safe from the potential burden of LTC.
Finding the right fit
NYSUT NOTE: Planning and managing your finances can be a lengthy, complicated process, which can often require professional help. That’s where the NYSUT Member Benefits Corporation-endorsed Financial Counseling Program comes in. NYSUT members have access to a team of Certified Financial Planners® that can offer unbiased advice for your specific financial situation. And it’s all fee-based, which means no commissions from mutual funds, brokerage firms, insurance companies or any other third party, just unbiased advice from a financial expert. Enroll today by visiting the member website.
This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.
About the Author
Tim Schultz, NSSA®
Founder and President, Preservation Retirement Services
After losing both his mother to breast cancer and a significant amount of money that she left him, Tim became a Licensed Financial Professional to help people never feel as helpless as he did. As the Founder of Preservation Retirement Services, one of his joys in life is spending one-on-one time with clients to help them create safe retirement income strategies and preserve the money they worked so hard to earn.
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“Build up an emergency fund that you keep in a high-yield, FDIC-insured cash savings account. Your minimum target should be at least three to six months of essential living expenses. You can use a line of credit or credit card as a backup, but debt should be a last resort for unexpected financial emergencies, unless you are certain you can pay it off quickly or finance it at a low cost.” — Chad Rixse, a Kiplinger Advisor Collective member
Build an emergency fund in a high-yield savings account
NYSUT NOTE: Start building your emergency fund with the help of the NYSUT Member Benefits Corporation-endorsed Synchrony Bank Savings Program. This program offers online savings accounts with competitive interest rates and 24/7 online and mobile banking. Visit the member website for more information and to get NYSUT member-exclusive rates.
“While building an emergency fund or savings account is always an important step in being prepared for financial emergencies, it’s equally important to have emergency cash on hand. Consider keeping a small amount of cash locked in a safe at home where it is protected. Another important step is being proactive. Do you have a high amount of debt that is holding you back? Build a strategy to pay it off and commit to putting any extra funds into your savings account. For example, let’s say you commit 10% of your paycheck toward paying down your debt, and as it starts to decrease, you can start to put more money toward saving for an unexpected emergency.” — Tony Drake, a Building Wealth contributor
Emergency cash on hand is important, too
“Financial emergencies can make us feel out of control, which is why it’s so important to have a plan in place you can fall back on to protect your goals and money even in times of uncertainty. Your plans can adapt for changing needs and circumstances, but if you’re struggling with an unexpected expense or event, reach out for guidance before you reach into money you have set aside for other things like retirement. Your workplace benefits can potentially serve as a resource for professional guidance, financial education and support through a financial adviser or coach, who may be able to help you respond to your financial emergency from a more objective and strategic standpoint while also keeping your other financial goals on track.” — Kate Winget, a Building Wealth contributor
Have a plan in place and consider workplace benefits
“While having an emergency fund set aside is something I’ll always advocate for, another way to prepare for tough times is to create an emergency network for yourself of trusted individuals with diverse skill sets. By having this network, you have firsthand access to trusted resources when unexpected situations arise. Likewise, you can also offer your expertise to them in their times of need.” — Justin Donald, a Kiplinger Advisor Collective member
Build an emergency network of resources
“Just as important as having access to funds is cutting expenses. Many people wait too long to start cutting expenses. They assume the job loss, medical expenses or emergency is short-lived. Cutting unnecessary expenses as quickly as possible lowers the amount of income needed to cover expenses. Ending all subscriptions, gym memberships, lowering premiums on car insurance by driving less miles or even adjusting tax withholding (if your family income is going to be lower) can all help minimize the funds needed in an emergency.” — Erin Wood, a Building Wealth contributor
Start cutting unnecessary expenses right away
“One of the best ways to prepare for unexpected financial emergencies is to have an emergency fund. If possible, I recommend building up savings for 12 to 15 months in order to pay for medical bills or major home repairs and not be rushed into a new job. An emergency fund can be achieved through better monthly budgeting. However, aside from traditional advice, collectibles such as sports memorabilia and other items such as jewelry might be sold quickly to make up the difference. Also, stay away from predatory payday lenders.” — Carlos Dias Jr., a Building Wealth contributor
Consider selling collectibles or jewelry
“Develop muscles for spending less / beating as much as possible the inflation all around you. This will allow you to build that emergency fund, but also to get by on a smaller emergency fund when it’s needed. This may be unorthodox, and only partly get you there, but watching the documentary on minimalism (Minimalism: A Documentary About the Important Things) or doing a Marie Kondo reorg of our stuff can give you ideas on where you can spend less.” — Robert Ribciuc, a Kiplinger Advisor Collective member
Embrace spending less, minimalism, tidying up
“It always pays to be prepared, and daresay even a little paranoid about unexpected changes that life may bring. I would advocate running through some hypothetical scenarios in your head to bring some peace of mind that you can adjust to major unexpected events in life. If you have to deal with a job loss, it’s good to have an inventory of your best professional contacts that you can network with and may be able to provide introductions to new employers. You might want to research and keep track of top employers in your area that would be your first targets should you need to look for new work. Similarly, in addition to having an emergency fund, preparing for unexpected financial issues might mean keeping separate assets earmarked for paying off large bills like a home repair or medical bill. It might not warrant keeping extra cash on hand, but alternatively you might set up a lending facility like a HELOC (home equity line of credit) or credit line at your bank that is available should you need to borrow at a reasonable interest rate vs scrambling with high interest rate loans. In short, going through the thought exercises ahead of time for issues you may encounter and being prepared with solutions beforehand will save a lot of heartburn and money down the road.” — Shane W. Cummings, a Building Wealth contributor
Doesn’t hurt to be paranoid
“With a budget of essential and discretionary expenses in place, you’ll be equipped to assess which portion of an unexpected event can be managed through expense reductions and which part may need to be covered by your reserves. Additionally, I recommend exploring unconventional methods to bolster your short-term cash flow. Consider evaluating any automated savings that could potentially be deferred temporarily. Similarly, you might contemplate adjusting your tax withholdings, bearing in mind that any shortfalls must be addressed later. Occasionally, the penalties associated with safe harbor withholding minimums could be outweighed by the potential costs of selling an asset at a loss or resorting to borrowing at unfavorable terms. This strategic approach can help you navigate financial challenges more effectively.” — Thomas C. West, a Building Wealth contributor
Kiplinger Advisor Collective is the premier criteria-based professional organization for personal finance advisers, managers and executives.
This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.
Explore unconventional methods of cash flow
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Once you’ve incorporated financial fasting into your daily life, you’ll realize how much the world has to offer outside of indiscriminate spending. It can help refocus your financial priorities, reel in addictive spending habits and even inspire you to financially support causes you believe in.
The difficulties associated with financial fasting are not unsubstantial — but the joys it can bring to your life, and those around you, are well worth the effort.
Reshaping your relationship with money
NYSUT NOTE: Getting your finances in order is not always a simple task, which is why establishing a strategy to manage and eliminate your debt is an important first step. NYSUT members have help from the NYSUT Member Benefits Corporation-endorsed Cambridge Credit Counseling program. Whether it’s paying off student loans, learning tips for creating and sticking to a budget, or paying down personal debt, Cambridge certified counselors can help you set financial goals to help you get out of debt in a fraction of the time. Visit the member website to get your free, no-obligation, debt consultation today.
This article has been obtained and is provided as a courtesy by Stephen B. Dunbar III, JD, CLU, Executive Vice President of the Georgia Alabama Gulf Coast Branch of Equitable Advisors, LLC. Equitable Advisors and its associates and affiliates make no representation as to the accuracy or completeness of this information, nor do they endorse, approve, or make any representations as to the accuracy, completeness, or appropriateness of any part of any content linked to from this article. You should consult your own financial professional regarding your particular circumstances.
This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.
About the Author
Stephen B. Dunbar III, JD, CLU
Stephen Dunbar, Executive VP of Equitable, has built a thriving financial services practice where he empowers others to make informed decisions and take charge of their future. He and his team advise on over $3B in AUM and $1.5B in protection coverage. As a National Director of DEI for Equitable, Stephen acts as a change agent for the organization, creating a culture of diversity and inclusion. He earned a bachelor's in Finance from Rutgers and a J.D. from Stanford.
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A safe withdrawal rate is the percentage that retirees can withdraw from their accounts each year without running out of money before reaching the end of their lives. This is a key aspect in determining how long you can maintain your lifestyle. A popular guideline is the 4% rule, which suggests that an individual can withdraw 4% of their total portfolio value annually to sustain their lifestyle without running out of money.
One important factor when determining your safe withdrawal rate is your legacy goal and how it impacts your retirement goals. Your legacy goal involves estate planning and how much money you’d like to leave to your children or charity. This objective will directly impact how much money you can withdraw each year from your nest egg.
4. Determine a safe withdrawal rate from your portfolio.
Medicare is a federal health insurance program that can provide coverage beginning as early as the first day of the month in which you turn 65. At age 64 and 9 months, you have a seven-month initial Medicare sign-up window. If you miss this window, you may have to pay higher premiums for the rest of your life. An exception is if you still have medical insurance through your or your spouse’s employer. In that case, you can postpone enrolling in Medicare until that coverage ends without having to pay higher premiums later.
Medigap is Medicare supplemental insurance, which is a private insurance that covers some of the out-of-pocket costs not covered by Medicare. There is a six-month enrollment window for Medigap that begins on the first day of the month in which you turn 65. During this enrollment period, you can't be denied Medigap coverage or charged extra because of poor health. However, if you miss the enrollment deadline, you may pay higher premiums for life or even be denied coverage.
5. Consider Medicare and Medigap deadlines.
Long-term care involves needing assistance with the "activities of daily living," which include bathing, dressing, grooming, using the toilet, eating and moving around. These services are not covered by Medicare and can be prohibitively expensive. It is difficult to predict how much or what type of long-term care a person might need, but the best time to think about long-term care is well before you need it so you can consider all your options.
The main strategies for paying for long-term care are self-funding, insurance or Medicaid planning. Each one of these approaches has myriad considerations and should be discussed with a professional who can help assess which option is the most suitable for your needs.
6. Plan for long-term care needs.
Keeping your finances consolidated and organized is always sensible. This is even more important as people age. As a youngster, you may be able to more easily track your multitude of accounts at various brokerage firms. This will become increasingly more cumbersome and stressful as you get older.
I suggest to all my clients approaching retirement to consolidate their accounts wherever possible. This includes rolling over old 401(k)s and/or 403(b)s, consolidating various IRAs and taxable accounts where appropriate and managing all banking (i.e., checking) at one institution.
Furthermore, having a seamless process for a child or trusted family member to make decisions on your accounts in case you no longer have capacity will save a lot of heartache and frustration later.
7. Simplify your financial life.
Being frustrated at work or trying to get away from a difficult boss are not good reasons to retire. Situations at work change daily, and bosses come and go. Making an emotionally charged decision to stop working can be devastating if not thought through fully.
The reason to retire is because one has the burning desire to pursue other interests, goals and lifestyle choices. These new pursuits should be clearly defined and laid out. Not knowing what activities and challenges you’d like to engage in when you retire may lead to boredom and more rapid mental deterioration.
8. Plan to retire TO something, not FROM something.
Working provides many benefits, including daily structure, intellectual stimulation, social interaction and a sense of purpose. Sadly, many retirees discover what they lost from being out of the workforce only after they’ve retired.
It’s essential for retirees to re-create all the aforementioned benefits gained from working while in retirement. This may include consulting part time, volunteering, philanthropic work or various other projects that can be pursued every day for several hours a day throughout your retirement years.
Many people envision their retirement as a life of leisure, sipping cocktails by the beach, playing golf or visiting their grandchildren. Unfortunately, none of these activities is a full-time pursuit. Most hobbies can’t be done full time. It's imperative for folks to develop and even test out their daily retirement routine while they are still working. This aspect of retirement readiness is just as important as the financial considerations.
9. Develop a daily routine for retirement.
While working, people are told repeatedly to save and invest. However, few people are encouraged to spend their nest egg. This shift in psyche from saving to spending is a difficult transition for many. Retirees often have feelings of guilt about spending down their nest egg, thinking perhaps the money could be better used by the kids or a charity. This is the wrong approach!
As I remind my clients, money is not a scorecard to compare to others. Rather, it’s a tool to enhance one’s life. After decades of making money, saving and investing it, you have earned the right to spend it. As long as you are spending within your means, it should be done guilt-free.
Many of these concepts require years of planning, which is why I urge clients who are entering the final phase of their careers to start contemplating these points sooner rather than later. Taking the time to methodically plan for this new stage of life will allow you to make thoughtful decisions and adequately prepare for retirement. It will ensure your golden years are how you envisioned they would be.
10. Spend your money!
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Comprehensive coverage provides damage protection for your vehicle in situations other than collisions, such as damage caused by theft, vandalism, natural disasters, falling objects, and other incidents specified by your insurance policy.
Comprehensive
If you or your passengers are injured in an accident, medical payments (MedPay) coverage helps pay for healthcare costs associated with injuries, such as hospital visits, surgery, X-rays, and more. MedPay coverage is required in some states.
Medical payments
In cases where you’re involved in a car accident with a driver who doesn’t have car insurance or has insufficient coverage, uninsured motorist (UM) and underinsured motorist (UI) coverage steps in to cover your medical expenses and property damage.
Uninsured/underinsured motorist
Accident forgiveness. With this type of coverage, your insurance company will “forgive” you if you cause an accident, meaning it won’t raise your premiums. Typically, you can qualify for one forgiven accident for a set time frame, such as every three years.
Gap insurance. If you’re leasing or financing your car, gap insurance covers the difference between the current market value of your vehicle and the amount you owe on your lease or loan in the event of a total loss. Gap insurance could be a good option in the early years of a vehicle's ownership, when the amount of your loan may exceed the market value of the car. Gap insurance coverage only adds about $20, on average, to a car insurance policy’s annual premium, according to the Insurance Information Institute (III).
Rental car reimbursement. This coverage pays for a rental car while your vehicle is being repaired or replaced following an accident.
Towing and roadside assistance. Many insurance providers offer this type of insurance, which provides roadside in the case of a breakdown or covers the cost of towing your vehicle.
Custom parts and modifications. If you added aftermarket accessories or made modifications to your vehicle, this type of coverage can help protect the custom parts and equipment you installed.
Classic car. If you drive an antique or classic car, you may want to consider getting classic car insurance — also known as collector car insurance or antique car insurance — to help protect it. According to the III, a vehicle is considered a classic car when it’s at least 25- to 30-years old.
Additional car insurance coverage options
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Part B pays for doctor visits, outpatient care and some home health care. For 2024, the deductible is $240 and the base premium is $174.70 per month. After hitting the deductible, you pay 20% of expenses unless you have either Medicare Advantage or supplemental coverage.
The penalty for failing to enroll at age 65 is a permanent 10% of the monthly premium multiplied by the number of years you could have enrolled but didn't. Exceptions are made for those with coverage through a qualifying employer health plan.
Medicare Part B
Part C is commonly called Medicare Advantage. Beneficiaries are covered for Parts A and B through private insurers instead of traditional government-administered Medicare. Most Advantage plans include prescription drug coverage. For 2024, the average monthly premium is $18.50.
Medicare Part C
Part D refers to standalone prescription drug coverage through private insurers. If your Advantage plan includes prescription drugs, you don't need Part D. If you elect original Medicare and want medications covered, you will need a Part D plan. Modern Medigap plans don't cover prescription drugs, but if you purchased a policy before Jan. 1, 2006 and still have that plan, then your Medigap policy may include drug coverage.
The average total monthly premium for Medicare Part D coverage is projected to be approximately $55.50 in 2024.
If you decide after your initial enrollment period that you want Part D, you will pay a permanent 1% penalty of the base premium multiplied by the number of months that you went without the coverage.
Medicare Part D
Supplemental coverage is commonly referred to as Medigap. This is private insurance to supplement original Medicare coverage. The plans cover part or most of the cost sharing, such as coinsurance and co-payments, for Parts A and B, depending on which lettered Medigap plan you choose.
There are 10 plans but as of 2020, new Medicare enrollees are ineligible for Plans C and F. All plans with the same letter provide the same benefits but the cost could vary by insurance company.
Medigap plans typically have higher monthly premiums than Advantage plans but lower out-of-pocket expenses.
Medigap
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As you may know, a 529 plan is a state-sponsored, tax-advantaged college savings investment plan. When you enroll in a 529 plan, the money you invest grows on a tax deferred basis. When you withdraw from the 529 plan and use the money to pay for qualified education expenses, those withdrawals are tax free.
529 plans are designed to encourage saving for college and typically cover qualified education-related expenses like tuition, fees, books, computers, and other supplies. Certain room and board expenses are usually considered to be “qualified expenses.” But sometimes, whether 529 college savings can be used to pay for the cost of room and board will depend on whether those costs exceed certain amounts.
Additionally, 529 plan funds can generally be used to pay tuition for professional and trade schools and up to $10,000 per student, per year, can be used to pay for K-12 private school tuition. In any case, keep in mind that each 529 plans may have its own specific rules regarding what particular expenses are considered to be "qualified expenses."
How Do 529 Plans Work?
A 529 plan doesn’t offer a federal income tax benefit because 529 plans are sponsored by states. As a result, the contributions to your 529 plan are not tax deductible on your federal tax return. But some states offer a state tax credit or state tax deduction for 529 college savings plan contributions that are made in your home state.
And, as previously mentioned, your 529 plan funds grow tax free and withdrawals of 529 college savings account funds that are spent on qualified expenses, are also tax free.
But remember: if you withdraw 529 plan funds and don’t use that money for qualified education-related expenses, you could face a 10% federal income tax penalty.
Do You Get a Tax Break for Contributing to a 529 Plan?
In most states, you should contribute to your 529 college savings plan by the end of the year—i.e., December 31—to maximize any state tax breaks associated with those contributions.
But in other states, you can contribute until that state’s tax filing deadline next year. (The specific deadlines vary by state). For example, some of the states that don’t have a year-end contribution deadline for maximizing 529 plan contribution benefits are Iowa, Georgia, Mississippi, Oklahoma, South Carolina, and Wisconsin.
In all cases—and because you are not limited to choosing a 529 plan from your home state—it’s important to know which 529 plan contribution deadlines apply to you. Check your 529 plan rules or talk with a professional advisor who may be able to help you maximize your state tax benefits.
How Late Can I Contribute to a 529 Plan?
529 college savings plans do not have set individual annual contribution limits like 401(k) plans do. Instead, annual, and aggregate, contribution limits for 529 plans vary by state.
It’s also important to keep in mind that contributions to your 529 plan are treated as gifts for federal income tax purposes. In 2023, under the gift tax exclusion rules, you can contribute up to $17,000 tax free per donor. However, gifts over $17,000 must be reported on a federal gift tax return. That doesn’t necessarily mean that you will be subject to tax on your gift though, because the lifetime federal gift tax exemption amount is quite high.
How Much Can I Contribute to a College 529 Plan in 2023?
From a tax perspective, if your student doesn’t attend college and you withdraw 529 college savings plan funds for other than qualified education-related expenses, then the money you take out of the 529 plan would be subject to the 10% federal income tax penalty.
Additionally, the 529 plan funds that you withdraw for non-education-related expenses, would be considered taxable income — which could impact your federal and state taxes.
What if My Child Doesn’t Go to College?
Because so much about 529 plans varies by plan and by state, you should familiarize yourself with the specific rules governing your plan.
Also, consult a qualified financial planner or other trusted advisor if you are uncertain about those rules or about how to get the most tax benefit from your 529 college savings plan.
529 Plans: What You Can Do
Kiplinger is part of Future plc, an international media group and leading digital publisher
© 2024 Future US LLC
Kiplinger is part of Future plc, an international media group and leading digital publisher
© 2024 Future US LLC
As you know, homeowners insurance will cover the expenses (minus deductibles) to replace, repair or even rebuild your home, exterior structures and belongings in the event of a natural or man-made disaster. For example, if a hailstorm destroys your roof, homeowners insurance should cover the costs to replace or repair your roof. Similarly, homeowners insurance will help you rebuild if fire engulfs your house, detached garage or shed.
When you experience this type of catastrophe, you still need a place to stay while your home is being repaired or rebuilt. Homeowners insurance will cover the costs of your alternative living arrangements during that time. Additionally, homeowners insurance is there if your home is burglarized. Your homeowners policy helps to replace any valuables that are stolen.
It’s important to thoroughly examine which events your policy will cover and look for any gaps that might exist within your coverage. This is especially true in our current market. With recent price increases in real estate, it’s possible that the property replacement value on your homeowners policy won’t cover the increase to your property’s current value.
Property Damage and Loss
As a homeowner, you’re responsible for what takes place on your property. Unfortunately, that means you could be held liable if someone tripped and fell on your porch steps, causing personal injury. The good news is homeowners insurance provides you with liability coverage for such unfortunate occasions. The personal liability portion of your homeowners policy helps to cover their medical and legal expenses. Therefore, you want to understand exactly how much of those expenses your policy covers. If the neighbor breaks their ankle in some fantastical way and requires multiple surgeries to repair it, the expenses could add up very quickly. In such a scenario, you’re not just looking at medical expenses. More than likely, you’re going to be faced with legal expenses for a litigation that, at bare minimum, seeks to replace lost earnings.
These fees could very easily get out of control. So, you must know exactly how much your policy will pay in an event like this. Being proactive with your review could help you identify where you need to supplement your personal liability coverage.
Personal Liability
As you progress through your homeowners policy review, you’re probably going to uncover several exclusions. These are certain events or disasters that your policy will not cover. For instance, your policy may cover property damage caused by hurricanes, but it might not cover flood damage. That could create problems, as hurricanes often cause flooding.
It’s possible that your home could survive the hurricane but then undergo extensive damage from the subsequent flooding. As the floodwaters rushed into your home, they destroyed your floors, walls and belongings. However, since the floods caused the damage, not the hurricane itself, your homeowners policy wouldn’t cover your costs to clean up, replace, repair and rebuild.
You can see the problem with this, and unfortunately, many homeowners assume they’re covered in such a situation because the flooding was caused by the hurricane. As a result, they fail to add the additional coverage to their policy and find themselves completely ruined when disaster strikes. This is why you must carefully read through your policy, paying close attention to the wording that’s used. In the end, it could be the difference between a setback and total devastation.
Similarly, many homeowners policies don’t cover property damage caused by sinkholes or vandalism. So, check your policy to see what types of disaster damage it does cover. You may need additional coverage. That’s OK. Policies like flood insurance, vandalism insurance, etc. are available. Reviewing your coverage will ensure you can address the exclusions in your policy before it’s too late.
Exclusions
I’ve also seen clients struggle with their homeowners policies because of unique or expensive properties and collections in their homes. Standard homeowners insurance will replace your basic personal property worth a couple of thousand dollars. However, I know many people have property worth much more than that. In fact, my wife’s wedding and engagement rings are worth more than that. Additionally, some firearms collections, coin collections, fine art or antiques are worth more than the standard coverage will cover.
Therefore, if you have items of personal property worth more than a couple of thousand dollars, you’ll probably need to add a rider – “scheduled coverage” – to your policy. While you might pay higher premiums, oftentimes scheduled coverages don’t carry a deductible.
Additional Riders
All of this brings us to the crucial question: Just how much insurance coverage do you need? The only way you’re going to find your specific answer is through an annual review of your homeowners policy. Approach your review with the understanding that the value of your property might have changed since you purchased your homeowners policy. Because value goes both ways, it’s also possible that you could be paying for more insurance than you need. Compare the amount of your coverage to the current value of your home, personal belongings and assets.
So, how much coverage do you really need?
How Much Homeowners Insurance Coverage Do You Need?
Obviously, you need to cover the structure of the home. However, you’re not basing this on the value of the house when you purchased it. Instead, you’re looking at your home’s replacement value.
Let’s assume you purchased your home for $200,000, in 2008 when the housing market was suffering. However, the housing market is booming in 2021. Therefore, your home could be worth $400,000 or $600,000 now. This means you would need to pay someone between $400,000 and $600,000 to replace your home as it was if it were to burn down or get carried away by a tsunami. So, if your policy only covers the original $200,000 value, it will only cover 33%-50% of the home’s current replacement value. That would create a major problem for most people.
Enough to Replace Your Structure
Beyond replacing your home, you’ll need to replace the belongings that were in it. This includes everything inside your house. From clothes, towels and silverware to televisions, furnishings, books (this would be a huge line item in my home), etc. Therefore, it’s vital that you have enough coverage to replace everything in your home.
Many homeowners policies cover personal property up to 50% or 75% of the home’s value. This means, if you have a $100,000 home, your policy may only provide $50,000 to replace lost items.
Have you ever tried to figure out the replacement cost of all the things in your home? You may be surprised at how quickly you’d blow through your policy’s personal belonging limits. That’s why I often tell clients to inventory and archive everything in their homes. This is easy to do. Just take your phone and walk through every room, capturing each item on camera. Open every drawer, cabinet or door and describe everything you see. Once you’ve done this, you can get a homeowners policy that will cover the replacement value of what you own.
Enough to Replace Your Belongings
Finally, you must make sure you have enough liability protection to cover medical and/or legal expenses that could arise due to accidents in your home. You don’t want to owe anything out of your own pocket. Therefore, if your policy provides $100,000 to $300,000 in liability coverage, it may be wise to purchase $300,000 to $500,000 of protection. These expenses compound and can quickly get out of control. It’s much better to pay a little more on your insurance premiums than to find yourself footing the bulk of someone’s medical and legal bills because they exceeded your policy’s personal liability coverage.
Additionally, if you’re operating your business within your home, you may need to add a rider to your homeowners policy that will protect you if there’s an accident that happens while someone’s at your home for business purposes.
I know that life is busy. Conducting an annual review of your homeowners insurance policy might not be high on your list of priorities right now, but it should be. Oftentimes, it’s very easy to develop a sense of comfortability in doing things the way we’ve always done them. However, just because you bought a good policy from a decent insurance agent doesn’t mean it’s still the best one for you.
I review my own homeowners policy annually. Specifically, I look at my home's current value compared to the replacement value coverage I have on it. Likewise, I look at the value of my personal belongings compared to the replacement value coverage I have on them. As the value of my home and my belongings increases, I want to make sure my homeowners policy increases to cover it.
Enough to Protect Your Assets
This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.
Certified Financial Planner Board of Standards Inc. (CFP Board) owns the CFP® certification mark, the CERTIFIED FINANCIAL PLANNER™ certification mark, and the CFP® certification mark (with plaque design) logo in the United States, which it authorizes use of by individuals who successfully complete CFP Board’s initial and ongoing certification requirements.
About the Author
Justin Goodbread, CFP®, CEPA, CVGA
President, WealthSource Partners
Justin A. Goodbread is a CERTIFIED FINANCIAL PLANNER™ practitioner and an adviser with WealthSource® Knoxville. After years of working in a large firm, he ventured out on his own in 2009, starting Heritage Investors, and eventually joining WealthSource® Partners LLC in 2022. As a serial small-business owner, Goodbread has bought and sold multiple businesses. He uses this experience, along with his continuing education, to help business owners grow and sell what is often their largest asset.
NYSUT NOTE: Having a solid insurance policy in place can make a big difference when unexpected issues arise. And with so many choices, it’s difficult to determine which policy is right for you. Fortunately, NYSUT members have access to a number of quality, competitive insurance programs that are endorsed by The NYSUT Member Benefits Trust. From life insurance, home & auto, and long-term care to dental plans and pet insurance, NYSUT Member Benefits has you covered. Visit the website for more information about the programs currently available to you and your loved ones.
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© 2024 Future US LLC
Retirement isn’t solely about savings; age matters, too. For penalty-free withdrawals from traditional retirement accounts, you need to be at least 59 ½. However, the rule of 55 allows those leaving their job at 55 or older to withdraw from their current employer’s plan without penalties.
Given most retirees describe Social Security as a major income source, it's vital to plan this aspect of your retirement thoughtfully. The full retirement age is 67 for those born after 1960. By delaying until 70, you boost your benefit, though you’ll have to lean on other funds in the meantime. Starting claims early at 62 reduces your benefit, but you’ll get more checks over time.
If you’re lucky enough to receive a pension, keep in mind it might also be curtailed if age and service requirements aren't met.
2. Age matters in deciding when to retire
Your health can dictate the right time to retire. If work strains your well-being or if retirement offers better health prospects, it might be time to reconsider your career. According to the 2023 Transamerica Annual Retirement Survey, health concerns prompted 45% of retirees to retire earlier than planned.
Healthcare coverage is vital in this equation. With Medicare only starting at 65, ensure you’re protected. If you plan on retiring before this age, look into alternatives like securing a policy through the marketplace or opting into your spouse’s plan, if possible.
3. How your health plays into retirement timing
If you love your job and derive satisfaction and purpose from it, delaying retirement might be appealing. Transamerica reports that 56% of those who retired later than planned did so because they enjoyed their work and wanted to stay active and mentally sharp.
Conversely, if work-related stress is detrimental, an earlier retirement or career change might be beneficial. A report from the National Bureau of Economic Research found that retirement often leads to immediate and sustained boosts in life satisfaction and overall well-being.
4. How is your career satisfaction?
While it’s hard to predict market movements, you may want to tread carefully if you’re thinking of retiring during a major downturn. Significant losses or depletions to savings early in retirement – known as sequence risk – could derail your retirement plans by diminishing the longevity of your nest egg.
A poor economy may also be reason to think twice about your timing. Although, economic pressures may force some companies to offer appealing packages that make it better to retire sooner than later. These factors might be beyond your control, but they can present challenges or opportunities worth planning around.
5. Looking at market and economic conditions
Many retirees, according to a survey from Retire with Possibilities, said the biggest challenge of retirement was the loss of daily structure and routine. The transition to retirement often means a shift from established routines and social engagements.
To make this transition smoother, it’s essential to have a clear vision for your post-retirement life. Without concrete plans, retirement can feel overwhelming – or boring. Before you take the step, ensure you have activities and goals to pursue. Embrace new experiences, volunteer and remain open to various pursuits to keep retirement fulfilling and vibrant.
6. Did you forget to plan activities for retirement?
What value do retirement activities hold if you’re experiencing them alone? According to a Merrill Lynch/Age Wave study, a majority of retirees (61%) value the company they keep over the activities they do (39%).
While you shouldn’t rush into retirement just because your peers are, their decisions can influence your considerations. Notably, spouses play a significant role in each other’s retirement decisions. However, synchronizing retirement dates, even among spouses, isn’t always the best approach, given factors like age differences and financial needs.
But given our inherent desire for social connections, it’s apt to say that in retirement, teamwork really does make the dream work. Perhaps the central question isn't solely “When should I retire?” but rather “When should we retire?”
7. The company you keep can determine retirement timing
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Make sure your estate planner understands your business. Institute a Take Your Adviser to Work Day so your key advisers witness firsthand production, business practices and the roles of your key employees (including your children working for the company).
Tip 2
Discuss with your legal adviser the use of transfer on death (TOD) and payable on death (POD) options to pass accounts or other assets to your beneficiaries. Many banks are promoting designated TOD/POD beneficiaries without fully explaining possible adverse outcomes.
For example, when your selected payee dies, will the remaining funds on deposit belong to his/her estate, go to their heirs at law or lineal descendants, or will account custodians lock down the account until a court designates the proper payees? Finally, overuse of TOD/POD accounts can leave your executor with no liquidity to pay the estate’s debts and taxes because all the liquid assets have already been passed out.
Tip 3
If you control a closely held company, ensure that your estate planner reviews the terms of any buy-sell provisions in the shareholder and operating agreements to ensure that these terms are coordinated with liquidity available to your trust or estate.
Tip 4
Ask your estate planner to include substance abuse powers and protections for beneficiaries in your trust documents. Nonprescription drug use has risen to endemic levels in many states. Give the trustee powers to deal with any known or likely substance abuse issues, such as the power to:
Tip 5
Pay costs directly to vendors rather than to the beneficiary
Require testing and treatment programs and pay for them with trust funds
Withhold mandatory distributions until the beneficiary meets certain testing and treatment standards
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Ask your estate planner to use active voice in all your forms, communications and agreements. Active voice (subject, verb, object) identifies the person who is or will exercise the power or duty to avoid ambiguity and provide clarity.
“The Trustee shall distribute all the income…”
Passive voice (object, verb, subject or no subject) allows the actor to be less identified in order to emphasize only the authority but not identify responsibility.
“All income shall be distributed…”
Tip 6
Be careful with your personal information and documents. Today’s standards expect estate planners and financial advisers to never email sensitive information without encryption, to use secure systems to send documents and confidential/sensitive information and to use multifactor authentication on all remote access.
Please don’t open attachments from anyone you don’t know or even click on a suspicious email — even emails that appear to come from someone you know. If you didn’t expect an invitation, a document or a link to some article, pick up the phone and call the sender for guidance before opening the email.
Tip 7
Ask your estate planner to review the trust’s express standards of care with you. You need to understand the duties and liabilities of the trustee(s) and trust adviser, whether they are expressly fiduciaries or nonfiduciaries. When a trust states that a trust adviser is not a fiduciary and is not liable for actions taken in good faith, then any actions they take must be in good faith — this is a standard of care, and they are liable for actions taken in bad faith.
Trustees are wary of terms that allow advisers to direct the trustee with liability only for intentional misconduct while the trustee is liable for any breach of trust. The only source of restitution for following an imprudent direction is the trustee. Smart trustees will require separate indemnification for all directives under these circumstances, likely aggravating your beneficiaries.
Tip 8
Ask your estate planner to ensure that your trust absolves successor trustees of all prior acts of the predecessor trustee. When a trustee is named successor trustee, they will look for language in the document that absolves them of the predecessor trustee’s prior acts of commission or omission. If not in the document, the successor trustee will require that all qualified beneficiaries sign a release and indemnification.
Tip 9
Tip 10
Don’t allow any time to pass between finishing your new or updated estate plan to update your beneficiary designations. If you need assistance, ask your estate planner to review your existing deeds, titles, account details and beneficiary designations for any necessary changes. Your new estate plan may be worthless if your beneficiary designation forms are not completed correctly. Ensure that the beneficiary designations properly identify a qualified beneficiary, are properly structured for a conduit or accumulation trust and are compatible with the mandatory and discretionary distribution requirements of the trust.
Tip 11
If you are a beneficiary of a trust, you are allowed to review the trust administration and ask questions of the assigned trust officer. Make an appointment to discuss the terms in the trust regarding:
Tip 12
How often you get statements or an annual accounting
Whether you qualify for discretionary and/or mandatory income and principal distributions
The standards the trustee must follow for making such distributions (i.e., what can the trustee pay directly to you and what costs and goods can the trustee pay for?)
Whether your outside income and assets must be considered and to what extent
Your income tax liability for the trust and how the investment decisions contribute to “phantom” income
How your trustee’s use of the power to adjust between income and principal may be applied to your benefit
Whether distribution decisions need to consider the effect on generation-skipping tax-exempt and nonexempt trusts
Whether you have any control over the use of trust benefits during your lifetime or at your death (i.e., a power of appointment, a power to withdraw, a power to direct the trustee, etc.)
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When you update your estate, ask your attorney to consider drafting trust restatements and new wills rather than trust amendments and codicils. Modern word processing makes it just as easy to prepare complete restatements rather than multiple amendments. It eliminates the confusion of moving back and forth between documents.
Tip 13
It may make sense to use the same accounting firm to prepare your personal tax returns and the fiduciary tax returns for any trust related to your personal tax liability. Many trust companies have an arrangement with a CPA firm that will result in faster and cheaper preparation fees.
Tip 14
NYSUT NOTE: Building your estate plan can be complicated but it is a vital step in your retirement planning. Which is why enlisting help from a legal expert may be a good idea. NYSUT members are eligible to enroll in the NYSUT Member Benefits Trust-endorsed Legal Service Plan. This plan — provided by the law firm of Feldman, Kramer & Monaco, P.C. — offers expert advice on personal legal issues, including preparation of crucial estate planning documents. Visit the member website to ensure you and your loved ones are covered.
This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.
About the Author
Timothy Barrett, Trust Counsel
Timothy Barrett is a senior vice president and trust counsel with Argent Trust Company. Timothy is a graduate of the Louis D. Brandeis School of Law, 2016 Bingham Fellow, a board member of the Metro Louisville Estate Planning Council, and is a member of the Louisville, Kentucky and Indiana Bar Associations, and the University of Kentucky Estate Planning Institute Program Planning Committee.
Don’t rely on your recollection or summaries from your other advisers regarding gift and estate tax returns you have filed or your past use of your lifetime estate tax exemption, annual exclusion gifts, withdrawal notices and GSTT (generation-skipping transfer tax) allocations. Obtain and save actual copies of all these documents (with any required appraisals) in your own records to ensure they match up. Protect yourself by documenting your file with your contemporaneous notes and communications regarding such gifting. As the taxpayer, you and your estate bear the responsibility to maintain records and the burden of proof in any tax controversy.
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© 2024 Future US LLC
We’ve heard about the supposed benefits of fasting for physical health, but have you considered financial fasting to address your financial wellness?
The idea is simple: Don’t spend money during a set period of time, or in a particular expense category, such as entertainment or dining.
From the outset, financial fasting sounds easy. In practice, it can be anything but.
That’s because spending is often disconnected from the values and intentions of near-retirees. Unlike Millennials and Gen Zers, prior generations have generally had fewer qualms about purchasing products and services from companies that don’t align with their principles. The act of swiping a credit card can feel as routine and trivial as opening a door. And as Baby Boomers retire, some are tempted to treat every day like a Saturday — chockful of travel plans, reservations and shopping.
Financial fasting can put the value of a dollar back into perspective, shoring up your bank account and breaking the habit of mindless spending. By doing so, it can force you to reassess your values and reconnect with those closest to you.
In what follows, I’ll explain the many ways financial fasting can positively impact your lifestyle — and how to plan your first financial fast.
The benefits of financial fasting
What to Do and How to Know When You Can Retire
There is a lot to this if done correctly, and at some point you’re probably going to want some professional help, but there are a few things you can do to get moving in the right direction.
While divorced women workers stand out in the survey as having the lowest retirement confidence, they also lack knowledge about what they need for a financially secure future. For example, fewer than half of the divorced women were very or somewhat confident in knowing how much money they needed to save by retirement to live comfortably in their golden years. So not only do divorced women fret about having enough savings for their golden years, they are also struggling with even knowing how much they will need.
To help close the gap, Lawande suggests that women become more educated about their financial situation and work with a Certified Divorce Financial Analyst™ to understand better how they need to plan for retirement and even everyday money issues. She also recommends that they hire a lawyer who is well versed in their state's laws to ensure that they have a financially advantageous settlement agreement.
Matrimonial attorney Lisa Zeiderman of Miller Zeiderman LLP says women typically feel the financial repercussions of divorce more intensely than men. "Getting a divorce will absolutely impact how much money you will have for retirement. Divorce and the loss of retirement assets can hit you hard. This is especially true if you haven't hired a lawyer who will advocate for you and if you have not taken steps to protect you and your financial future."
Good debt can help your long-term finances, whereas bad debt hurts or ruins it. Good debt examples include:
Mortgages: Whether for your home or an investment property, mortgages buy assets. As a mortgage is paid down, equity (the difference between the property’s fair market value and the loan total) builds and can be used to sell or borrow from.
Student loans: Data shows that a college degree can significantly boost a graduate's lifetime wages, making student loans acceptable debt.
Home equity loans and lines of credit: If you own real estate, you can borrow against your equity for long-term financial gain. Home equity debt can be used to upgrade a home, buy another property or pay off higher-interest debt.
It’s important to note that good debt is still debt, so use it wisely. A few helpful tips include:
Good vs. bad debt
Good debt can help your long-term finances, whereas bad debt hurts or ruins it. Good debt examples include:
Mortgages: Whether for your home or an investment property, mortgages buy assets. As a mortgage is paid down, equity (the difference between the property’s fair market value and the loan total) builds and can be used to sell or borrow from.
Student loans: Data shows that a college degree can significantly boost a graduate's lifetime wages, making student loans acceptable debt.
Home equity loans and lines of credit: If you own real estate, you can borrow against your equity for long-term financial gain. Home equity debt can be used to upgrade a home, buy another property or pay off higher-interest debt.
It’s important to note that good debt is still debt, so use it wisely. A few helpful tips include:
Keep mortgage payments below 36% of income.
Keep student loan payments below 10% of estimated monthly after-tax income.
Home equity loans and lines of credit often require a minimum loan-to-value ratio of 80%.
The idea is to ensure you still pay off good debt over time and manage it cash flow-wise.
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Strategies to pay off debt
Life happens, and we sometimes get into lousy debt despite our best efforts. A plan helps discipline these situations. Three main debt payment strategies include:
Debt snowball method: This method prioritizes smaller balances over interest rates. Mathematically, this strategy is not the most cost-effective or time-saving, but it might feel simpler to attain psychologically with smaller wins gained earlier on and can often free up cash flow faster by removing those lowest sums.
Debt avalanche method: This method promotes paying off highest-interest-rate balances first regardless of balance size. By paying off the higher-interest-rate balances, debt is paid down faster, and more costs are saved on interest.
Debt consolidation method: Managing various loans, credit cards and other debt can be difficult with all the different payments and due dates. For these situations, debt consolidation may be the most preferable option.
The most typical debt consolidation technique is to use a personal or home equity loan to pay down higher-interest debt. In general, the goal of debt consolidation is to lower your monthly payment to free up cash, convert your variable-interest debt to a fixed rate and/or lower your interest rate to simplify repayment and get out of debt faster.
Kiplinger is part of Future plc, an international media group and leading digital publisher
© 2024 Future US LLC
Kiplinger is part of Future plc, an international media group and leading digital publisher
© 2024 Future US LLC
NYSUT NOTE: Do you have personal debt or money concerns that you need help managing? NYSUT members are able to enroll in the NYSUT Member Benefits Corporation-endorsed Cambridge Credit Counseling program. This program has been assisting consumers with eliminating debt for more than 20 years, and NYSUT members are eligible to receive a free, no-obligation, debt consultation with one of Cambridge's certified counselors. These counselors can help you better understand your situation, help you set financial goals, determine your budget and more, to help you get out of debt in a fraction of the time. Visit the member website for more information.
Parents can use up to $10,000 a year from their 529 plan to pay for private K-12 tuition. If you are paying for private school out of a cash or checking account, you may want to consider first routing the payment to the 529 for the state tax deduction. This is a good idea for parents who are already contributing to a 529 plan but not up to the amount for the state tax deduction — they’d have more room to contribute.
For example, if a family is contributing $5,000 a year to their state’s 529 plan, but the state tax deduction is up to $10,000 in annual contributions, they can contribute the additional K-12 tuition payment to the 529 plan to get them to the $10,000 cap. (The $10,000 cap is an example — each state’s rules vary.) This assumes your state offers a state tax deduction for contributions, your state considers K-12 tuition a qualified expense, and there is no minimum waiting period for withdraws. It’s best to check with the 529 administrator first.
There may be some drawbacks to this approach. Namely, it can be a hassle to move money around. Also, it could lead to commingling college funds and K-12 money, which should be invested differently, given their different time horizons, but this trick could also save you a few bucks on your state taxes.
NYSUT NOTE: Securing a long-term care policy is an essential step in retirement planning, but deciding what policy is right for you and your family can be difficult. Which is why NYSUT members have access to a team of dedicated long-term care planning specialists through the NYSUT Member Benefits Trust-endorsed New York Long-Term Care Brokers (NYLTCB) program. NYLTCB is a nationally-recognized insurance intermediary that offers access to discounted long-term care insurance plans from highly-rated insurance companies, and their specialists can provide insight into different long-term care insurance providers and products, so you can choose the best coverage for you. Visit the member website for more information.
Life insurance. Most people know about term and whole, but there are other types of life insurance with features designed to protect you from LTC risk. Some indexed universal life insurance (UIL) and universal life (UL) insurance policies allow you to tap into the death benefit during your lifetime to cover any LTC costs. Unlike an LTC insurance policy, if the LTC features of a IUL or UL insurance policy go unused, your beneficiaries will receive the full tax-free death benefit when you pass away.
Talk to a retirement planner during your lifetime about the insurance options available to you. Life insurance coverage is dependent on a medical exam, so if you have certain health issues, it may not be a viable solution for you.
NYSUT NOTE: A life insurance policy with a living benefit can be a great option for long-term care planning. And NYSUT members now have access to the Universal Life Insurance program offering a Convalescent Care Benefit. The NYSUT Member Benefits Trust-endorsed Universal Life Insurance with Convalescent Care Benefit plus YourCare360® Care Planning Services offers added financial protection, along with access to long-term care resources. This is a great way to protect you and your loved ones. For more information and to get started, visit the member website.
Deciding what kind of fence to build around your retirement home is a personal decision. There are benefits and drawbacks to every LTC option, and what’s right for one person may not work for another.
While it’s important to be proactive, buying LTC insurance or life insurance at a young age could get very expensive after years of paying premiums. On the other hand, waiting to purchase a policy could put you at risk of paying high premiums because of any health problems you may have developed in your 50s and 60s.
It’s important to meet with a trusted financial adviser who can help you determine the right time to buy and what type of protection your family needs. No two situations are alike, but an adviser can help you weigh the pros and cons specific to your assets, family history, medical history, tax plan and beneficiary needs. I recommend working with a professional who has the experience and industry knowledge needed to keep you and your loved ones safe from the potential burden of LTC.
Build an emergency fund in a high-yield savings account
“Build up an emergency fund that you keep in a high-yield, FDIC-insured cash savings account. Your minimum target should be at least three to six months of essential living expenses. You can use a line of credit or credit card as a backup, but debt should be a last resort for unexpected financial emergencies, unless you are certain you can pay it off quickly or finance it at a low cost.”
— Chad Rixse, a Kiplinger Advisor Collective member
Emergency cash on hand is important, too
“While building an emergency fund or savings account is always an important step in being prepared for financial emergencies, it’s equally important to have emergency cash on hand. Consider keeping a small amount of cash locked in a safe at home where it is protected. Another important step is being proactive. Do you have a high amount of debt that is holding you back? Build a strategy to pay it off and commit to putting any extra funds into your savings account. For example, let’s say you commit 10% of your paycheck toward paying down your debt, and as it starts to decrease, you can start to put more money toward saving for an unexpected emergency.”
— Tony Drake, a Building Wealth contributor
Have a plan in place and consider workplace benefits
“Financial emergencies can make us feel out of control, which is why it’s so important to have a plan in place you can fall back on to protect your goals and money even in times of uncertainty. Your plans can adapt for changing needs and circumstances, but if you’re struggling with an unexpected expense or event, reach out for guidance before you reach into money you have set aside for other things like retirement. Your workplace benefits can potentially serve as a resource for professional guidance, financial education and support through a financial adviser or coach, who may be able to help you respond to your financial emergency from a more objective and strategic standpoint while also keeping your other financial goals on track.”
— Kate Winget, a Building Wealth contributor
Build an emergency network of resources
“While having an emergency fund set aside is something I’ll always advocate for, another way to prepare for tough times is to create an emergency network for yourself of trusted individuals with diverse skill sets. By having this network, you have firsthand access to trusted resources when unexpected situations arise. Likewise, you can also offer your expertise to them in their times of need.”
— Justin Donald, a Kiplinger Advisor Collective member
Start cutting unnecessary expenses right away
“While having an emergency fund set aside is something I’ll always advocate for, another way to prepare for tough times is to create an emergency network for yourself of trusted individuals with diverse skill sets. By having this network, you have firsthand access to trusted resources when unexpected situations arise. Likewise, you can also offer your expertise to them in their times of need.”
— Justin Donald, a Kiplinger Advisor Collective member
Consider selling collectibles or jewelry
“One of the best ways to prepare for unexpected financial emergencies is to have an emergency fund. If possible, I recommend building up savings for 12 to 15 months in order to pay for medical bills or major home repairs and not be rushed into a new job. An emergency fund can be achieved through better monthly budgeting. However, aside from traditional advice, collectibles such as sports memorabilia and other items such as jewelry might be sold quickly to make up the difference. Also, stay away from predatory payday lenders.” — Carlos Dias Jr., a Building Wealth contributor
Embrace spending less, minimalism, tidying up
“Develop muscles for spending less / beating as much as possible the inflation all around you. This will allow you to build that emergency fund, but also to get by on a smaller emergency fund when it’s needed. This may be unorthodox, and only partly get you there, but watching the documentary on minimalism (Minimalism: A Documentary About the Important Things) or doing a Marie Kondo reorg of our stuff can give you ideas on where you can spend less.”
— Robert Ribciuc, a Kiplinger Advisor Collective member
Doesn’t hurt to be paranoid
“It always pays to be prepared, and daresay even a little paranoid about unexpected changes that life may bring. I would advocate running through some hypothetical scenarios in your head to bring some peace of mind that you can adjust to major unexpected events in life. If you have to deal with a job loss, it’s good to have an inventory of your best professional contacts that you can network with and may be able to provide introductions to new employers. You might want to research and keep track of top employers in your area that would be your first targets should you need to look for new work. Similarly, in addition to having an emergency fund, preparing for unexpected financial issues might mean keeping separate assets earmarked for paying off large bills like a home repair or medical bill. It might not warrant keeping extra cash on hand, but alternatively you might set up a lending facility like a HELOC (home equity line of credit) or credit line at your bank that is available should you need to borrow at a reasonable interest rate vs scrambling with high interest rate loans. In short, going through the thought exercises ahead of time for issues you may encounter and being prepared with solutions beforehand will save a lot of heartburn and money down the road.”
— Shane W. Cummings, a Building Wealth contributor
Kiplinger is part of Future plc, an international media group and leading digital publisher
© 2024 Future US LLC
The benefits of financial fasting
Financial fasting can be a reset button — not only for your finances, but for your values, sense of purpose and even your relationships. Here are a few ways that limiting your spending can change your financial well-being for the better.
1. Pay down debt faster.
The most obvious benefit of financial fasting is that it frees up cash flow fairly quickly. But that doesn’t mean that you should simply spend all that money once you break your financial fast. Consider using that moment as an opportunity to pay down debt at an accelerated rate — especially high-interest obligations like credit card debt and car loans.
2. Break the cycle of senseless spending.
We spend for different reasons. Some people lavish their grandkids with expensive gifts, while others continually chase the latest fashion trends, no matter the cost. The problem is, many people don’t recognize why they’re purchasing certain things — and that the reasons for buying them may fall apart under scrutiny.
Buying possessions, for instance, tends to provide happiness for only a short period time, but a meaningful experience can be more rewarding over the long term.
Because financial fasting pushes the pause button on spending, it can make you think longer about why you wanted to buy something in the first place.
In time, you’ll become more adept at fulfilling those needs without spending, or realize when those impulses are not needs at all. For example, if you want to spend time with your significant other, a walk along the beach or in a park may be a better, expense-free way to do that, vs going to the movies.
3. Align your purchase decisions with your values.
Financial fasting is also an opportunity to bring your spending in line with your own personal values. Growing up, many Baby Boomers like me just went to work. We put our heads down. Spending wasn’t necessarily connected to purpose or passion but providing for ourselves or others.
This can be a time to take a page from younger generations and think about the impact of your purchase decisions. If you are passionate about social awareness and responsibility, consider the many items you purchase from large companies. Should you redirect those dollars to other businesses that may have a greater impact on your local community?
As you come out of a financial fast, you’ll find yourself at a crossroads, asking: Do I continue spending the way I have in the past, or try to be the change I want to see in the world?
4. Create a space to reconnect in our relationships.
Some instinctually feel that in order to do something, you need to spend something. But when it comes to our relationships, quality time is what matters most. Some types of spending can disconnect you from those important connections, instead of creating space for you to engage with your loved ones in a meaningful way.
For example, some leisure activities — like attending plays, visiting theme parks or going to concerts — don’t actually require people to talk to each other. And costly gifts are hardly a substitute for personal connection. Unfortunately, many of our spending habits, while well-meaning and born out of kindness, fail to deepen our relationships.
Planning free activities, on the other hand, requires you to creatively collaborate with your family members and friends, fostering a sense of spontaneity and adventure. And many of the activities that don’t involve spending require us to remain in the moment, listen to others respectfully and appreciate their presence.
How to plan a financial fast
Financial fasting can be as stringent as abstaining from spending for a week, or as measured as skipping lunch during the workweek. What’s most important to recognize is that financial fasting can be accomplished in degrees to accommodate your comfort level and needs.
Go through your budget. Start by identifying the areas where you’re spending the most — eating out, going to movies — and the days in which you’re spending the most. This will help you target your fast and also give you ideas about how to occupy your time during a fast. Someone who regularly goes to an art museum on Sunday, for example, may instead choose to attend free art exhibitions in the area.
Plan to start small. Just like physical fasting, financial fasting is a muscle. Begin by cutting out expenses that are easy to track. That regular Friday date night at the local bistro could turn into dinner and a movie at home, for instance. Once you’ve mastered those smaller targets, then you can take a stab at an entire day without spending and, ultimately, even an entire week.
Don’t expect an overnight change. At first, you may feel as if you’re needlessly depriving yourself. But after fasting for a while, you’ll start to come out of each fast with a renewed appreciation for what money is — its purpose, significance and impact on the lives of others. That sense of connection will change how you spend that first dollar coming out of a fast.
NYSUT NOTE: Planning and managing your finances can be a lengthy, complicated process, which can often require professional help. That’s where the NYSUT Member Benefits Corporation-endorsed Financial Counseling Program comes in. NYSUT members have access to a team of Certified Financial Planners® that can offer unbiased advice for your specific financial situation. And it’s all fee-based, which means no commissions from mutual funds, brokerage firms, insurance companies or any other third party, just unbiased advice from a financial expert. Enroll today by visiting the member website.
Once you’ve incorporated financial fasting into your daily life, you’ll realize how much the world has to offer outside of indiscriminate spending. It can help refocus your financial priorities, reel in addictive spending habits and even inspire you to financially support causes you believe in.
The difficulties associated with financial fasting are not unsubstantial — but the joys it can bring to your life, and those around you, are well worth the effort.
Kiplinger is part of Future plc, an international media group and leading digital publisher
© 2024 Future US LLC
Kiplinger is part of Future plc, an international media group and leading digital publisher
© 2024 Future US LLC
3. Assess your income sources and expenses.
Creating a budget for a multidecade retirement is not practical. Prices change, unforeseen expenses arise, and life takes unpredictable turns. However, there needs to be a general calculation to determine if you can afford a particular lifestyle.
This computation doesn’t need to involve anything fancy. Start by listing all your income sources such as Social Security, pension and portfolio or rental income. Next, tally your living expenses, like food, rent, taxes and transportation costs.
Make sure to also factor in any other costs associated with living the retirement you envision, including travel or hobbies. Finally, ask yourself two questions:
• Does my income exceed my expenses?
• Can I afford to live this lifestyle for the rest of my life?
If the answer to either of these questions is “no,” then changes must be made. You can consider working longer, even part time, moving to a cheaper locale or adjusting your retirement lifestyle.
4. Determine a safe withdrawal rate from your portfolio.
A safe withdrawal rate is the percentage that retirees can withdraw from their accounts each year without running out of money before reaching the end of their lives. This is a key aspect in determining how long you can maintain your lifestyle. A popular guideline is the 4% rule, which suggests that an individual can withdraw 4% of their total portfolio value annually to sustain their lifestyle without running out of money.
One important factor when determining your safe withdrawal rate is your legacy goal and how it impacts your retirement goals. Your legacy goal involves estate planning and how much money you’d like to leave to your children or charity. This objective will directly impact how much money you can withdraw each year from your nest egg.
As I have repeatedly pointed out, this is just a back-of-the-envelope framework. Here are a few of the major things that could throw it off:
5. Consider Medicare and Medigap deadlines.
A safe withdrawal rate is the percentage that retirees can withdraw from their accounts each year without running out of money before reaching the end of their lives. This is a key aspect in determining how long you can maintain your lifestyle. A popular guideline is the 4% rule, which suggests that an individual can withdraw 4% of their total portfolio value annually to sustain their lifestyle without running out of money.
One important factor when determining your safe withdrawal rate is your legacy goal and how it impacts your retirement goals. Your legacy goal involves estate planning and how much money you’d like to leave to your children or charity. This objective will directly impact how much money you can withdraw each year from your nest egg.
6. Plan for long-term care needs.
Long-term care involves needing assistance with the "activities of daily living," which include bathing, dressing, grooming, using the toilet, eating and moving around. These services are not covered by Medicare and can be prohibitively expensive. It is difficult to predict how much or what type of long-term care a person might need, but the best time to think about long-term care is well before you need it so you can consider all your options.
The main strategies for paying for long-term care are self-funding, insurance or Medicaid planning. Each one of these approaches has myriad considerations and should be discussed with a professional who can help assess which option is the most suitable for your needs.
7. Simplify your financial life.
Keeping your finances consolidated and organized is always sensible. This is even more important as people age. As a youngster, you may be able to more easily track your multitude of accounts at various brokerage firms. This will become increasingly more cumbersome and stressful as you get older.
I suggest to all my clients approaching retirement to consolidate their accounts wherever possible. This includes rolling over old 401(k)s and/or 403(b)s, consolidating various IRAs and taxable accounts where appropriate and managing all banking (i.e., checking) at one institution.
Furthermore, having a seamless process for a child or trusted family member to make decisions on your accounts in case you no longer have capacity will save a lot of heartache and frustration later.
8. Plan to retire TO something, not FROM something.
Being frustrated at work or trying to get away from a difficult boss are not good reasons to retire. Situations at work change daily, and bosses come and go. Making an emotionally charged decision to stop working can be devastating if not thought through fully.
The reason to retire is because one has the burning desire to pursue other interests, goals and lifestyle choices. These new pursuits should be clearly defined and laid out. Not knowing what activities and challenges you’d like to engage in when you retire may lead to boredom and more rapid mental deterioration.
9. Develop a daily routine for retirement.
Working provides many benefits, including daily structure, intellectual stimulation, social interaction and a sense of purpose. Sadly, many retirees discover what they lost from being out of the workforce only after they’ve retired.
It’s essential for retirees to re-create all the aforementioned benefits gained from working while in retirement. This may include consulting part time, volunteering, philanthropic work or various other projects that can be pursued every day for several hours a day throughout your retirement years.
Many people envision their retirement as a life of leisure, sipping cocktails by the beach, playing golf or visiting their grandchildren. Unfortunately, none of these activities is a full-time pursuit. Most hobbies can’t be done full time. It's imperative for folks to develop and even test out their daily retirement routine while they are still working. This aspect of retirement readiness is just as important as the financial considerations.
Kiplinger is part of Future plc, an international media group and leading digital publisher
© 2024 Future US LLC
Liability
Liability coverage, required by law in most states, is the foundation of car insurance policies. It’s designed to protect you financially if you’re found at fault in an accident and cause injury or property damage to others. Liability coverage encompasses two components: bodily injury liability coverage and property damage liability coverage.
Bodily injury (BI) liability covers injuries that you cause to someone else. Generally, it pays for the other person’s medical bills, recovery costs, and lost wages.
Property damage (PD) liability covers the cost of repairing or replacing another person’s property that you damaged. Typically, this covers damage to another driver’s vehicle, but it can also cover damage to fences, lamp posts, telephone poles, buildings, or other structures your car hits.
Collision
If your car is damaged in a collision with another vehicle or a stationary object, such as a streetlight or a tree, collision coverage pays to fix or replace it. If you’re leasing or financing your vehicle, your lender may require you to purchase collision coverage.
Comprehensive
Comprehensive coverage provides damage protection for your vehicle in situations other than collisions, such as damage caused by theft, vandalism, natural disasters, falling objects, and other incidents specified by your insurance policy.
Medical payments
If you or your passengers are injured in an accident, medical payments (MedPay) coverage helps pay for healthcare costs associated with injuries, such as hospital visits, surgery, X-rays, and more. MedPay coverage is required in some states.
Personal injury protection
Personal injury protection (PIP) coverage — not available in all states — helps pay for you and your passengers’ medical expenses resulting from an accident, regardless of who is at fault, meaning you don’t have to wait for your insurance company to determine blame to be compensated. It also typically covers rehabilitation, lost wages, and funeral costs. PIP coverage is required in 18 “no-fault” insurance states, including Arkansas, Delaware, Minnesota, New York, Texas, and others.
Uninsured/underinsured motorist
In cases where you’re involved in a car accident with a driver who doesn’t have car insurance or has insufficient coverage, uninsured motorist (UM) and underinsured motorist (UI) coverage steps in to cover your medical expenses and property damage.
Part A covers inpatient care at hospitals and skilled nursing facilities as well as hospice and some home health care. If you paid Medicare payroll taxes for at least 40 quarters, the Part A premium is free. For 2024, there is a deductible of $1,632. You also must pay coinsurance for hospital stays longer than 60 days. For more details, read What You’ll Pay for Medicare in 2024.
Medicare Part A
Part B pays for doctor visits, outpatient care and some home health care. For 2024, the deductible is $240 and the base premium is $174.70 per month. After hitting the deductible, you pay 20% of expenses unless you have either Medicare Advantage or supplemental coverage.
The penalty for failing to enroll at age 65 is a permanent 10% of the monthly premium multiplied by the number of years you could have enrolled but didn't. Exceptions are made for those with coverage through a qualifying employer health plan.
Medicare Part B
Part C is commonly called Medicare Advantage. Beneficiaries are covered for Parts A and B through private insurers instead of traditional government-administered Medicare. Most Advantage plans include prescription drug coverage. For 2024, the average monthly premium is $18.50.
Medicare Part C
Part D refers to standalone prescription drug coverage through private insurers. If your Advantage plan includes prescription drugs, you don't need Part D. If you elect original Medicare and want medications covered, you will need a Part D plan. Modern Medigap plans don't cover prescription drugs, but if you purchased a policy before Jan. 1, 2006 and still have that plan, then your Medigap policy may include drug coverage.
The average total monthly premium for Medicare Part D coverage is projected to be approximately $55.50 in 2024.
If you decide after your initial enrollment period that you want Part D, you will pay a permanent 1% penalty of the base premium multiplied by the number of months that you went without the coverage.
Medicare Part D
Kiplinger is part of Future plc, an international media group and leading digital publisher
© 2024 Future US LLC
Kiplinger is part of Future plc, an international media group and leading digital publisher
© 2024 Future US LLC
1. Wipe out all your debt.
Debt can be a useful tool in many aspects of life, like buying a home, affording a car or growing your business. As long as a person acts responsibly and has a long runway to pay back that loan, it can enhance their life and take their career to the next level.
However, as folks enter their retirement years, many shift to living on a fixed income. Being saddled with debt, and its associated extra expenses, can be burdensome and make retirement life much more stressful. That is why I advise all retirees to eliminate all debt before retirement.
How Do 529 Plans Work?
As you may know, a 529 plan is a state-sponsored, tax-advantaged college savings investment plan. When you enroll in a 529 plan, the money you invest grows on a tax deferred basis. When you withdraw from the 529 plan and use the money to pay for qualified education expenses, those withdrawals are tax free.
529 plans are designed to encourage saving for college and typically cover qualified education-related expenses like tuition, fees, books, computers, and other supplies. Certain room and board expenses are usually considered to be “qualified expenses.” But sometimes, whether 529 college savings can be used to pay for the cost of room and board will depend on whether those costs exceed certain amounts.
Additionally, 529 plan funds can generally be used to pay tuition for professional and trade schools and up to $10,000 per student, per year, can be used to pay for K-12 private school tuition. In any case, keep in mind that each 529 plans may have its own specific rules regarding what particular expenses are considered to be "qualified expenses."
Do You Get a Tax Break for Contributing to a 529 Plan?
A 529 plan doesn’t offer a federal income tax benefit because 529 plans are sponsored by states. As a result, the contributions to your 529 plan are not tax deductible on your federal tax return. But some states offer a state tax credit or state tax deduction for 529 college savings plan contributions that are made in your home state.
And, as previously mentioned, your 529 plan funds grow tax free and withdrawals of 529 college savings account funds that are spent on qualified expenses, are also tax free.
But remember: if you withdraw 529 plan funds and don’t use that money for qualified education-related expenses, you could face a 10% federal income tax penalty.
How Late Can I Contribute to a 529 Plan?
A 529 plan doesn’t offer a federal income tax benefit because 529 plans are sponsored by states. As a result, the contributions to your 529 plan are not tax deductible on your federal tax return. But some states offer a state tax credit or state tax deduction for 529 college savings plan contributions that are made in your home state.
And, as previously mentioned, your 529 plan funds grow tax free and withdrawals of 529 college savings account funds that are spent on qualified expenses, are also tax free.
But remember: if you withdraw 529 plan funds and don’t use that money for qualified education-related expenses, you could face a 10% federal income tax penalty.
How Much Can I Contribute to a College 529 Plan in 2023?
529 college savings plans do not have set individual annual contribution limits like 401(k) plans do. Instead, annual, and aggregate, contribution limits for 529 plans vary by state.
It’s also important to keep in mind that contributions to your 529 plan are treated as gifts for federal income tax purposes. In 2023, under the gift tax exclusion rules, you can contribute up to $17,000 tax free per donor. However, gifts over $17,000 must be reported on a federal gift tax return. That doesn’t necessarily mean that you will be subject to tax on your gift though, because the lifetime federal gift tax exemption amount is quite high.
What if My Child Doesn’t Go to College?
From a tax perspective, if your student doesn’t attend college and you withdraw 529 college savings plan funds for other than qualified education-related expenses, then the money you take out of the 529 plan would be subject to the 10% federal income tax penalty.
Additionally, the 529 plan funds that you withdraw for non-education-related expenses, would be considered taxable income — which could impact your federal and state taxes.
Kiplinger is part of Future plc, an international media group and leading digital publisher
© 2024 Future US LLC
Do You Get a Tax Break for Contributing to a 529 Plan?
A 529 plan doesn’t offer a federal income tax benefit because 529 plans are sponsored by states. As a result, the contributions to your 529 plan are not tax deductible on your federal tax return. But some states offer a state tax credit or state tax deduction for 529 college savings plan contributions that are made in your home state.
And, as previously mentioned, your 529 plan funds grow tax free and withdrawals of 529 college savings account funds that are spent on qualified expenses, are also tax free.
But remember: if you withdraw 529 plan funds and don’t use that money for qualified education-related expenses, you could face a 10% federal income tax penalty.
Property Damage and Loss
As you know, homeowners insurance will cover the expenses (minus deductibles) to replace, repair or even rebuild your home, exterior structures and belongings in the event of a natural or man-made disaster. For example, if a hailstorm destroys your roof, homeowners insurance should cover the costs to replace or repair your roof. Similarly, homeowners insurance will help you rebuild if fire engulfs your house, detached garage or shed.
When you experience this type of catastrophe, you still need a place to stay while your home is being repaired or rebuilt. Homeowners insurance will cover the costs of your alternative living arrangements during that time. Additionally, homeowners insurance is there if your home is burglarized. Your homeowners policy helps to replace any valuables that are stolen.
It’s important to thoroughly examine which events your policy will cover and look for any gaps that might exist within your coverage. This is especially true in our current market. With recent price increases in real estate, it’s possible that the property replacement value on your homeowners policy won’t cover the increase to your property’s current value.
Personal Liability
As a homeowner, you’re responsible for what takes place on your property. Unfortunately, that means you could be held liable if someone tripped and fell on your porch steps, causing personal injury. The good news is homeowners insurance provides you with liability coverage for such unfortunate occasions. The personal liability portion of your homeowners policy helps to cover their medical and legal expenses. Therefore, you want to understand exactly how much of those expenses your policy covers. If the neighbor breaks their ankle in some fantastical way and requires multiple surgeries to repair it, the expenses could add up very quickly. In such a scenario, you’re not just looking at medical expenses. More than likely, you’re going to be faced with legal expenses for a litigation that, at bare minimum, seeks to replace lost earnings.
These fees could very easily get out of control. So, you must know exactly how much your policy will pay in an event like this. Being proactive with your review could help you identify where you need to supplement your personal liability coverage.
Exclusions
As you progress through your homeowners policy review, you’re probably going to uncover several exclusions. These are certain events or disasters that your policy will not cover. For instance, your policy may cover property damage caused by hurricanes, but it might not cover flood damage. That could create problems, as hurricanes often cause flooding.
It’s possible that your home could survive the hurricane but then undergo extensive damage from the subsequent flooding. As the floodwaters rushed into your home, they destroyed your floors, walls and belongings. However, since the floods caused the damage, not the hurricane itself, your homeowners policy wouldn’t cover your costs to clean up, replace, repair and rebuild.
You can see the problem with this, and unfortunately, many homeowners assume they’re covered in such a situation because the flooding was caused by the hurricane. As a result, they fail to add the additional coverage to their policy and find themselves completely ruined when disaster strikes. This is why you must carefully read through your policy, paying close attention to the wording that’s used. In the end, it could be the difference between a setback and total devastation.
Similarly, many homeowners policies don’t cover property damage caused by sinkholes or vandalism. So, check your policy to see what types of disaster damage it does cover. You may need additional coverage. That’s OK. Policies like flood insurance, vandalism insurance, etc. are available. Reviewing your coverage will ensure you can address the exclusions in your policy before it’s too late.
Additional Riders
I’ve also seen clients struggle with their homeowners policies because of unique or expensive properties and collections in their homes. Standard homeowners insurance will replace your basic personal property worth a couple of thousand dollars. However, I know many people have property worth much more than that. In fact, my wife’s wedding and engagement rings are worth more than that. Additionally, some firearms collections, coin collections, fine art or antiques are worth more than the standard coverage will cover.
Therefore, if you have items of personal property worth more than a couple of thousand dollars, you’ll probably need to add a rider – “scheduled coverage” – to your policy. While you might pay higher premiums, oftentimes scheduled coverages don’t carry a deductible.
How Much Homeowners Insurance Coverage Do You Need?
All of this brings us to the crucial question: Just how much insurance coverage do you need? The only way you’re going to find your specific answer is through an annual review of your homeowners policy. Approach your review with the understanding that the value of your property might have changed since you purchased your homeowners policy. Because value goes both ways, it’s also possible that you could be paying for more insurance than you need. Compare the amount of your coverage to the current value of your home, personal belongings and assets.
So, how much coverage do you really need?
Enough to Replace Your Structure
Obviously, you need to cover the structure of the home. However, you’re not basing this on the value of the house when you purchased it. Instead, you’re looking at your home’s replacement value.
Let’s assume you purchased your home for $200,000, in 2008 when the housing market was suffering. However, the housing market is booming in 2021. Therefore, your home could be worth $400,000 or $600,000 now. This means you would need to pay someone between $400,000 and $600,000 to replace your home as it was if it were to burn down or get carried away by a tsunami. So, if your policy only covers the original $200,000 value, it will only cover 33%-50% of the home’s current replacement value. That would create a major problem for most people.
Enough to Replace Your Belongings
Beyond replacing your home, you’ll need to replace the belongings that were in it. This includes everything inside your house. From clothes, towels and silverware to televisions, furnishings, books (this would be a huge line item in my home), etc. Therefore, it’s vital that you have enough coverage to replace everything in your home.
Many homeowners policies cover personal property up to 50% or 75% of the home’s value. This means, if you have a $100,000 home, your policy may only provide $50,000 to replace lost items.
Have you ever tried to figure out the replacement cost of all the things in your home? You may be surprised at how quickly you’d blow through your policy’s personal belonging limits. That’s why I often tell clients to inventory and archive everything in their homes. This is easy to do. Just take your phone and walk through every room, capturing each item on camera. Open every drawer, cabinet or door and describe everything you see. Once you’ve done this, you can get a homeowners policy that will cover the replacement value of what you own.
Finally, you must make sure you have enough liability protection to cover medical and/or legal expenses that could arise due to accidents in your home. You don’t want to owe anything out of your own pocket. Therefore, if your policy provides $100,000 to $300,000 in liability coverage, it may be wise to purchase $300,000 to $500,000 of protection. These expenses compound and can quickly get out of control. It’s much better to pay a little more on your insurance premiums than to find yourself footing the bulk of someone’s medical and legal bills because they exceeded your policy’s personal liability coverage.
Additionally, if you’re operating your business within your home, you may need to add a rider to your homeowners policy that will protect you if there’s an accident that happens while someone’s at your home for business purposes.
I know that life is busy. Conducting an annual review of your homeowners insurance policy might not be high on your list of priorities right now, but it should be. Oftentimes, it’s very easy to develop a sense of comfortability in doing things the way we’ve always done them. However, just because you bought a good policy from a decent insurance agent doesn’t mean it’s still the best one for you.
I review my own homeowners policy annually. Specifically, I look at my home's current value compared to the replacement value coverage I have on it. Likewise, I look at the value of my personal belongings compared to the replacement value coverage I have on them. As the value of my home and my belongings increases, I want to make sure my homeowners policy increases to cover it.
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© 2024 Future US LLC
1. Consider your financial readiness
The most evident consideration for retirement is financial preparedness. Clearly, one can’t think of retiring if they can't afford it. But what’s the magic number?
According to Northwestern Mutual’s 2023 Planning & Progress Study, working Americans believe they need an average of $1.27 million to retire. However, many can lead a comfortable retired life with less. The ideal savings benchmark varies based on individual circumstances. Fidelity recommends targeting 10 times your pre-retirement income by age 67 to sustain your current lifestyle in retirement.
2. Age matters in deciding when to retire
Retirement isn’t solely about savings; age matters, too. For penalty-free withdrawals from traditional retirement accounts, you need to be at least 59 ½. However, the rule of 55 allows those leaving their job at 55 or older to withdraw from their current employer’s plan without penalties.
Given most retirees describe Social Security as a major income source, it's vital to plan this aspect of your retirement thoughtfully. The full retirement age is 67 for those born after 1960. By delaying until 70, you boost your benefit, though you’ll have to lean on other funds in the meantime. Starting claims early at 62 reduces your benefit, but you’ll get more checks over time.
If you’re lucky enough to receive a pension, keep in mind it might also be curtailed if age and service requirements aren't met.
3. How your health plays into retirement timing
Your health can dictate the right time to retire. If work strains your well-being or if retirement offers better health prospects, it might be time to reconsider your career. According to the 2023 Transamerica Annual Retirement Survey, health concerns prompted 45% of retirees to retire earlier than planned.
Healthcare coverage is vital in this equation. With Medicare only starting at 65, ensure you’re protected. If you plan on retiring before this age, look into alternatives like securing a policy through the marketplace or opting into your spouse’s plan, if possible.
4. How is your career satisfaction?
If you love your job and derive satisfaction and purpose from it, delaying retirement might be appealing. Transamerica reports that 56% of those who retired later than planned did so because they enjoyed their work and wanted to stay active and mentally sharp.
Conversely, if work-related stress is detrimental, an earlier retirement or career change might be beneficial. A report from the National Bureau of Economic Research found that retirement often leads to immediate and sustained boosts in life satisfaction and overall well-being.
5. Looking at market and economic conditions
While it’s hard to predict market movements, you may want to tread carefully if you’re thinking of retiring during a major downturn. Significant losses or depletions to savings early in retirement – known as sequence risk – could derail your retirement plans by diminishing the longevity of your nest egg.
A poor economy may also be reason to think twice about your timing. Although, economic pressures may force some companies to offer appealing packages that make it better to retire sooner than later. These factors might be beyond your control, but they can present challenges or opportunities worth planning around.
6. Did you forget to plan activities for retirement?
Many retirees, according to a survey from Retire with Possibilities, said the biggest challenge of retirement was the loss of daily structure and routine. The transition to retirement often means a shift from established routines and social engagements.
To make this transition smoother, it’s essential to have a clear vision for your post-retirement life. Without concrete plans, retirement can feel overwhelming – or boring. Before you take the step, ensure you have activities and goals to pursue. Embrace new experiences, volunteer and remain open to various pursuits to keep retirement fulfilling and vibrant.
Kiplinger is part of Future plc, an international media group and leading digital publisher
© 2024 Future US LLC
Tip 1
onsider bringing a professional trustee into your estate planning process. Effective collaboration will result in a more effective plan and more efficient administration.
Tip 2
Make sure your estate planner understands your business. Institute a Take Your Adviser to Work Day so your key advisers witness firsthand production, business practices and the roles of your key employees (including your children working for the company).
Tip 3
Discuss with your legal adviser the use of transfer on death (TOD) and payable on death (POD) options to pass accounts or other assets to your beneficiaries. Many banks are promoting designated TOD/POD beneficiaries without fully explaining possible adverse outcomes.
For example, when your selected payee dies, will the remaining funds on deposit belong to his/her estate, go to their heirs at law or lineal descendants, or will account custodians lock down the account until a court designates the proper payees? Finally, overuse of TOD/POD accounts can leave your executor with no liquidity to pay the estate’s debts and taxes because all the liquid assets have already been passed out.
Tip 4
If you control a closely held company, ensure that your estate planner reviews the terms of any buy-sell provisions in the shareholder and operating agreements to ensure that these terms are coordinated with liquidity available to your trust or estate.
Ask your estate planner to include substance abuse powers and protections for beneficiaries in your trust documents. Nonprescription drug use has risen to endemic levels in many states. Give the trustee powers to deal with any known or likely substance abuse issues, such as the power to:
Ask your estate planner to include substance abuse powers and protections for beneficiaries in your trust documents. Nonprescription drug use has risen to endemic levels in many states. Give the trustee powers to deal with any known or likely substance abuse issues, such as the power to:
Tip 4
If you control a closely held company, ensure that your estate planner reviews the terms of any buy-sell provisions in the shareholder and operating agreements to ensure that these terms are coordinated with liquidity available to your trust or estate.
Tip 6
Ask your estate planner to use active voice in all your forms, communications and agreements. Active voice (subject, verb, object) identifies the person who is or will exercise the power or duty to avoid ambiguity and provide clarity.
“The Trustee shall distribute all the income…”
Passive voice (object, verb, subject or no subject) allows the actor to be less identified in order to emphasize only the authority but not identify responsibility.
“All income shall be distributed…”
Tip 7
Be careful with your personal information and documents. Today’s standards expect estate planners and financial advisers to never email sensitive information without encryption, to use secure systems to send documents and confidential/sensitive information and to use multifactor authentication on all remote access.
Please don’t open attachments from anyone you don’t know or even click on a suspicious email — even emails that appear to come from someone you know. If you didn’t expect an invitation, a document or a link to some article, pick up the phone and call the sender for guidance before opening the email.
Tip 8
Ask your estate planner to review the trust’s express standards of care with you. You need to understand the duties and liabilities of the trustee(s) and trust adviser, whether they are expressly fiduciaries or nonfiduciaries. When a trust states that a trust adviser is not a fiduciary and is not liable for actions taken in good faith, then any actions they take must be in good faith — this is a standard of care, and they are liable for actions taken in bad faith.
Trustees are wary of terms that allow advisers to direct the trustee with liability only for intentional misconduct while the trustee is liable for any breach of trust. The only source of restitution for following an imprudent direction is the trustee. Smart trustees will require separate indemnification for all directives under these circumstances, likely aggravating your beneficiaries.
Tip 9
Ask your estate planner to ensure that your trust absolves successor trustees of all prior acts of the predecessor trustee. When a trustee is named successor trustee, they will look for language in the document that absolves them of the predecessor trustee’s prior acts of commission or omission. If not in the document, the successor trustee will require that all qualified beneficiaries sign a release and indemnification.
Tip 9
Ask your estate planner to ensure that your trust absolves successor trustees of all prior acts of the predecessor trustee. When a trustee is named successor trustee, they will look for language in the document that absolves them of the predecessor trustee’s prior acts of commission or omission. If not in the document, the successor trustee will require that all qualified beneficiaries sign a release and indemnification.
Tip 11
Don’t allow any time to pass between finishing your new or updated estate plan to update your beneficiary designations. If you need assistance, ask your estate planner to review your existing deeds, titles, account details and beneficiary designations for any necessary changes. Your new estate plan may be worthless if your beneficiary designation forms are not completed correctly. Ensure that the beneficiary designations properly identify a qualified beneficiary, are properly structured for a conduit or accumulation trust and are compatible with the mandatory and discretionary distribution requirements of the trust.
If you are a beneficiary of a trust, you are allowed to review the trust administration and ask questions of the assigned trust officer. Make an appointment to discuss the terms in the trust regarding:
If you are a beneficiary of a trust, you are allowed to review the trust administration and ask questions of the assigned trust officer. Make an appointment to discuss the terms in the trust regarding:
Tip 12
If you are a beneficiary of a trust, you are allowed to review the trust administration and ask questions of the assigned trust officer. Make an appointment to discuss the terms in the trust regarding:
Tip 13
When you update your estate, ask your attorney to consider drafting trust restatements and new wills rather than trust amendments and codicils. Modern word processing makes it just as easy to prepare complete restatements rather than multiple amendments. It eliminates the confusion of moving back and forth between documents.
About the Author
Chad Rixse
Chad Rixse, CRPS®, is the Director of Financial Planning and a Wealth Advisor at Forefront, a privately-owned financial services firm.
NYSUT NOTE: Do you have personal debt or money concerns that you need help managing? NYSUT members are able to enroll in the NYSUT Member Benefits Corporation-endorsed Cambridge Credit Counseling program. This program has been assisting consumers with eliminating debt for more than 20 years, and NYSUT members are eligible to receive a free, no-obligation, debt consultation with one of Cambridge's certified counselors. These counselors can help you better understand your situation, help you set financial goals, determine your budget and more, to help you get out of debt in a fraction of the time. Visit the member website for more information.
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© 2024 Future US LLC
We’ve all heard stories about individuals who passed away quietly after a life of frugality, leaving a fortune to their unsuspecting heirs or, occasionally, a beloved pet.
The reality is a lot less riveting. According to the Washington Post, the average American has inherited only about $58,000 as of 2022, taking into account that most of us won't receive any form of inheritance. The Federal Reserve also reports that from 1989 to 2007, on average, only 21% of American households at a given point in time received a wealth transfer.
Complicating matters is the fact that many estate plans contain a smorgasbord of items, including real estate, investments, cash, retirement savings accounts and life insurance plans. It could take months to track down these assets and divide them among the estate’s heirs, and you could incur significant legal fees — particularly if the estate was large or your relative died without a will. There are also different rules for different heirs: Spouses, for example, enjoy some tax breaks and exemptions that aren’t available for adult children or other heirs.
For example, Brian Lee of Tacoma, Wash., got a crash course in estate law after his late father’s brother and sister died almost within a year of each other, in late 2015 and 2017. Neither of his father’s siblings had children when they died, so their estates were divided among their nieces, nephews and other surviving relatives.
Lee ended up with a six-figure inheritance, but because his uncle died without a will, settling the estate took months and cost thousands of dollars in legal fees. Lee’s aunt had a will, with Lee as the executor, which made “all the difference in the world in terms of the process,” Lee says.
Here's what you need to know in order to handle an inheritance like a pro.
NYSUT NOTE: The NYSUT Member Benefits Corporation-endorsed Financial Counseling Program provides access to a team of Certfined Financial Planners who can advise you on key retirement decisions as well as other financial planning needs.
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© 2024 Future US LLC
A 529 plan is a tax-advantaged savings account designed to be used for a beneficiary's education expenses. These plans allow a contributor to prepay a beneficiary's qualified higher education expenses at an eligible educational institution or to contribute to an account for paying those expenses. And while 529 contributions must be made with after-federal-tax money, the contributions grow free from federal or state tax. (Many states also offer a tax deduction to residents contributing to their own state’s plan.)
Andy Esser, an Edward Jones Financial Advisor in Durham, NC, said in a statement: “As a financial advisor and parent, I see first-hand the varying benefits of 529 funds – no matter what path a child may choose. Educating families on those benefits leads to more impactful results.”
But many are missing out on the benefits of a 529 plan, including tax-free growth, gift tax benefits, the opportunity to rollover unused funds into a Roth IRA and the ability to use the 529 grandparent loophole to fund a grandchild’s education without impacting their financial aid eligibility.
According to a study from Edward Jones, 50% of Americans don’t know what a 529 plan is. More specifically, out of all Americans who are actively saving for a child’s education, 32% are unaware of what a 529 plan is, and 60% do not feel they’re saving enough to reach their goals for future education expenses.
The study also found that to reach education savings goals, Americans have turned to several other strategies, including using a personal savings account (35%), scholarships (18%), federal or state financial aid (18%) and getting a job at a school or university for tuition benefits (9%). The rising cost of tuition, rulings about college admissions criteria and the increase in applicants at numerous colleges are all factors driving individuals to save for their children’s education.
Surprisingly, however, 84% have not or do not plan to invest in a 529 plan as part of their education savings strategy.
529 plans
Widowed
Spousal benefits and survivor benefits are calculated differently. If your spouse died, you could qualify for survivor benefits if:
How to Qualify for Social Security Survivor Benefits
You were married to the deceased person for at least nine months.
You are at least 60 years old, unless you are disabled or caring for the deceased person’s child, who is under age 16 or disabled.
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Divorced
If your ex-spouse died, you could qualify for survivor benefits as well, if:
You had been married for 10 years or more before divorcing.
You are at least 60 years old, or age 50 if you’re totally disabled or are caring for a child from the previous marriage who is under age 16 or disabled.
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Note: Unlike with spousal benefits, remarriage will not affect your eligibility for survivor benefits, as long as you remarried at age 60 or later, or age 50 if you’re totally disabled.
The size of your Social Security spousal benefit depends on your age, your spouse’s age, the maximum amount of your spouse's benefit and whether other benefits are available to you. The maximum amount you can claim is 50% of your spouse’s full benefit.
You might be eligible for a retirement benefit based on your own earnings history. If your retirement benefit is higher than the spousal benefit, then Social Security will pay your retirement benefit. If the spousal benefit is higher, then Social Security will pay you the spousal benefit. The good news is that Social Security will do these calculations for you.
For example, let’s say your spouse earned an average of $90,000 per year working full time for over 40 years, and you earned an average of $20,000 per year at various part-time jobs over 20 years, along with raising your children. You would take the spousal benefit because it would be higher than your retirement benefit.
It’s important to keep in mind that if you get a pension from your public-sector work that wasn’t subject to FICA taxes, Social Security will reduce the benefit you are eligible to receive as a spouse, ex-spouse or survivor. That reduction is two-thirds of your pension amount.
How Much You Can Expect from Social Security Spousal Benefits
Full retirement age varies from 65 to 67, depending on your birth year. If you were born after 1960, your full retirement age is 67.
You can begin receiving spousal benefits as early as age 62 — and survivor benefits as early as age 60 — but you will receive a reduced benefit, according to the number of months left until you reach full retirement age.
About Receiving Benefits Early
Some retirees delay claiming their Social Security benefits based on their own earnings record because the monthly payments will be larger for those who wait. To get your maximum benefit, you could wait until age 70 to claim. But spousal and survivor benefits work a little differently.
For spousal benefits and survivor benefits, it doesn’t pay to put off claiming past your full retirement age. Spousal benefits will never grow beyond the 50% of your spouse’s maximum benefit that you receive at your full retirement age. It’s similar with survivor benefits: You will receive 100% of your spouse’s benefit at your full retirement age, and waiting past then will not cause the benefit to grow any larger.
So, once you reach full retirement age, don’t delay claiming your spousal benefit or your survivor benefit any longer.
In general, you should pay close attention to the rules to know the right timing for you and your spouse or ex-spouse to start claiming Social Security benefits. You can maximize the benefit if you get the timing right.
This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.
About the Author
Rhian Horgan
Founder and CEO of Silvur
Rhian Horgan is the CEO of Silvur, an award-winning retirement platform that works with credit unions and community banks to support members age 50+. Horgan is a frequent contributor to top financial publications including Forbes, Kiplinger, Barrons, CNBC and Yahoo! Finance.
Delaying Benefits: It’s Best Not to Wait Too Long
As mentioned, one way to avoid tax surprises is to have federal income taxes withheld from your Social Security payments.
Federal withholding tax from Social Security
To do this, complete IRS Form W-4V, Voluntary Withholding Request, and submit it to your local Social Security office.
You can choose a withholding rate of 7%, 10%, 12%, or 22%.
You can change or stop withholding by completing and submitting a new W-4V.
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Note: Changes in your income, tax laws, and inflation-adjusted amounts such as the Social Security COLA, may necessitate withholding changes. Review your withholding elections periodically to determine the best withholding rate for you.
If you prefer not to have taxes deducted from your monthly Social Security payments, you can make quarterly estimated tax payments to the IRS. That can help you avoid underpayment penalties since the U.S. tax system operates on a "pay-as-you-go" basis. That means the IRS expects you to pay a portion of your income as soon as you earn it.
Regardless of the method you choose, withholding tax from Social Security and making estimated tax payments help ensure you have paid sufficient tax. You want to avoid an underpayment penalty from the IRS when you file your income tax return. According to the IRS, estimated tax underpayment penalties depend on several factors, including the amount of underpayment, the period when the underpayment was due, and the interest rate for underpayments that the agency publishes each quarter.
To avoid underpayment penalties, you will want to either withhold or make estimated payments equal to 90% of your tax liability for the current year or generally 100% of your tax liability for the previous year.
When paying estimated taxes, you usually make four equal payments and follow the IRS's yearly schedule.
People also call estimated tax payments "quarterly" payments, even though the payments might not necessarily be three months apart or cover three months of income.
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Estimated tax payments on Social Security income
While federal taxes may apply to Social Security benefits, not all states tax them. It helps to remain aware of state tax laws and state tax changes to understand if Social Security benefits are subject to state income tax. Also, see Kiplinger’s report on states that still tax Social Security.
Taxes in retirement can be complex, especially for retirees with multiple income sources. Staying informed and consulting with a tax professional can provide personalized advice. That guidance might help you make informed decisions regarding your Social Security withholding and overall tax strategy.
States that tax Social Security in 2024
Whether you’re currently married or divorced determines how you can qualify for spousal benefits.
Married
You can qualify for spousal benefits if you meet all these requirements:
Your spouse is already receiving retirement benefits.
You have been married for at least one year.
You are at least 62 years old, or you are caring for a child who is under age 16 or disabled.
Whether you’re currently married or divorced determines how you can qualify for spousal benefits.
Married
You can qualify for spousal benefits if you meet all these requirements:
Your spouse is already receiving retirement benefits.
You have been married for at least one year.
You are at least 62 years old, or you are caring for a child who is under age 16 or disabled.
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Whether you’re currently married or divorced determines how you can qualify for spousal benefits.
Divorced
If you are divorced, you can receive Social Security spousal benefits based on your ex-spouse’s earnings record if you meet all these requirements:
How to Qualify for Social Security Spousal Benefits
Whether you’re currently married or divorced determines how you can qualify for spousal benefits.
Married
You can qualify for spousal benefits if you meet all these requirements:
Whether you’re currently married or divorced determines how you can qualify for spousal benefits.
Divorced
If you are divorced, you can receive Social Security spousal benefits based on your ex-spouse’s earnings record if you meet all these requirements:
Note: It’s not necessary for your ex to be taking his or her benefits for you to receive spousal benefits, but if he or she isn’t, there is one additional requirement to qualify for spousal benefits. In this case, you must have been divorced for at least two years.
Your spouse is already receiving retirement benefits.
You have been married for at least one year.
You are at least 62 years old, or you are caring for a child who is under age 16 or disabled.
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You were married for at least 10 years.
You never remarried.
You are age 62 or older.
Your ex-spouse is entitled to Social Security retirement or disability benefits.
The benefit that you would receive would be more than what you’d get based on your own work record.
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About Receiving Benefits Early
Full retirement age varies from 65 to 67, depending on your birth year. If you were born after 1960, your full retirement age is 67.
You can begin receiving spousal benefits as early as age 62 — and survivor benefits as early as age 60 — but you will receive a reduced benefit, according to the number of months left until you reach full retirement age.
How to Qualify for Social Security Spousal Benefits
Whether you’re currently married or divorced determines how you can qualify for spousal benefits.
Married
You can qualify for spousal benefits if you meet all these requirements:
Taxes on Social Security
It's essential to plan if you know some of your Social Security benefits will be taxed. As a general rule, if Social Security is the only source of income, it might not be taxable. However, the IRS will likely tax some of your Social Security benefits if you have additional retirement income from pensions, another job, retirement account distributions, etc.
The amount of Social Security benefits subject to tax depends on an IRS formula. That formula is based on “combined income” and considers your adjusted gross income, nontaxable interest, and half of your Social Security benefits.
Generally, if your combined income (50% of your benefit plus any other earned income) exceeds $25,000/year filing individually or $32,000/year filing jointly, you may have to pay federal taxes on your benefits.
As mentioned, one way to avoid tax surprises is to have federal income taxes withheld from your Social Security payments.
As mentioned, one way to avoid tax surprises is to have federal income taxes withheld from your Social Security payments.
As mentioned, one way to avoid tax surprises is to have federal income taxes withheld from your Social Security payments.
Federal withholding tax from Social Security
As mentioned, one way to avoid tax surprises is to have federal income taxes withheld from your Social Security payments.
Note: Changes in your income, tax laws, and inflation-adjusted amounts such as the Social Security COLA, may necessitate withholding changes. Review your withholding elections periodically to determine the best withholding rate for you.
To do this, complete IRS Form W-4V, Voluntary Withholding Request, and submit it to your local Social Security office.
You can choose a withholding rate of 7%, 10%, 12%, or 22%.
You can change or stop withholding by completing and submitting a new W-4V.
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Estimated tax payments on Social Security income
If you prefer not to have taxes deducted from your monthly Social Security payments, you can make quarterly estimated tax payments to the IRS. That can help you avoid underpayment penalties since the U.S. tax system operates on a "pay-as-you-go" basis. That means the IRS expects you to pay a portion of your income as soon as you earn it.
What you’ll owe in taxes
Stocks: Unless your parents were fabulously wealthy, you won’t have to worry about federal estate taxes, but that doesn’t mean Uncle Sam has no interest in your inheritance. If you inherited stocks, mutual funds or other investments in a taxable account, you’ll be able to take advantage of a generous tax break known as a step-up in basis. The cost basis for taxable assets, such as stocks and mutual funds, is “stepped up” to the investment’s value on the day of the original owner’s death.
For example, if your father paid $50 for a share of stock and it was worth $250 on the day he died, your basis would be $250. If you sell the stock immediately, you won’t owe any taxes; if you hold on to it, you’ll only owe taxes (or be eligible to claim a loss) on the difference between $250 and the sale price.
It’s a good idea to notify the investment account custodian of the date of death to ensure that you get the step-up, said Annette Clearwaters, a certified financial planner in Mount Kisco, N.Y.
Because of this favorable tax treatment, a taxable-account inheritance could be a good source of cash for a short-term goal, such as paying off high-interest debt or making a down payment on a house, said Jayson Owens, a CFP in Anchorage, Alaska. If you’d rather keep the money invested, review your inherited investments to see whether they are appropriate for your portfolio. For example, you could sell individual stocks and invest the money in a diversified mutual fund without triggering a big tax bill.
Retirement accounts: If you inherited a tax-deferred retirement plan, such as a traditional IRA, you’ll have to pay taxes on the money. Spouses can roll the money into their own IRAs and postpone distributions — and taxes — until they’re 73.
However, the Setting Every Community Up for Retirement Enhancement (SECURE) Act, which took effect on Jan. 1, 2020, changed the inherited IRA rules for non-spouse heirs. Instead of taking required minimum distributions, based on their age and life expectancy, heirs must withdraw all assets from the inherited IRA, 403(b) or 401(k) within 10 years of the death of the owner.
If you were fortunate enough to inherit a Roth IRA, you’ll still be required to deplete the account in 10 years, but the withdrawals will be tax-free. If you inherit a traditional IRA, 403(b) or 401(k), you may want to consult with a financial planner or tax professional to determine the best time within the 10-year window to take taxable withdrawals. For example, if you’re close to retirement, it may make sense to postpone withdrawals until after you stop working, since your overall taxable income will probably decline.
Real estate: When you inherit a relative’s home (or other real estate), the value of the property will also be stepped up to its value on the date of the owner’s death. That can result in a large lump sum if the home is in a part of the country that has seen real estate prices skyrocket. Selling a home, however, is considerably more complex than unloading stocks. You’ll need to maintain the home, along with paying the mortgage, taxes, insurance and utilities, until it’s sold.
Life insurance: Proceeds from a life insurance policy aren’t taxable as income. However, the money may be included in your estate for purposes of determining whether you must pay federal or state estate taxes.
Briefly, here are some of the major milestones you’ll hit in the Dynamic Decade+ and their financial implications:
Quitting employment. At some point, you — and your spouse if you have one — will stop working. The average retirement age in the U.S. is 62. When you stop working, you’ll need to either begin Social Security, draw on your retirement savings or both, unless you have an alternative method to generate income.
Enrolling in Medicare. Initial Medicare enrollment begins three months before you turn 65 and ends three months after the month in which you turn 65. Medicare Part B costs $174.70 each month in 2024 — costs will increase if your income reaches certain levels. From there, you can select a Medicare Advantage plan or a Medicare supplemental plan, each with their own specific premiums, copays and deductibles. Medicare Part D, which is prescription drug coverage, also has costs, which can vary based on income. You can change Medicare Advantage, supplemental and Part D providers once a year during open enrollment, which occurs yearly October 15 through December 7.
Claiming Social Security. The earliest age to claim Social Security is 62, and the latest is 70. If you claim at 62 in 2024, your benefit will be about 30% less than if you waited to claim until your full retirement age of 67. In contrast, if you delay claiming past full retirement age, you will receive 8% in additional income for each year you wait. Up to 85% of your Social Security may be taxable if your individual income is above $34,000 a year. If your income is between $25,000 and $34,000, up to 50% may be taxable.
Receiving a defined benefit pension. When you stop working, you will need to decide when and how to take your defined benefit pension, if you have one. Most entities offering a defined benefit pension will allow you to take it either as a lump sum that you can roll over into an IRA, or you can receive monthly income instead. If you are married, you will have to decide whether to take a joint or single payout; the joint payout is less, but the single payout would mean your pension dies when you do. Defined benefit pensions are taxable at your household marginal tax rate.
Taking retirement distributions. The SECURE 2.0 Act further delayed the point at which you must take distributions from your traditional retirement accounts. If you turn 73 after Jan. 1, 2023, you will be required to take RMDs at age 73. However, if you turn 75 after Jan. 1, 2033, you must take RMDs by age 75. Traditional retirement benefits are taxable at your individual marginal tax rate.
Deciding how to invest retirement savings. At some point during this journey, you must decide how to invest your retirement savings to meet your retirement-specific needs. You can, of course, continue to invest the same way you did when you were working. However, considering that you need to replace the income that you no longer have from working, it’s worthwhile to consider a different approach. Many individuals find their risk tolerance is reduced in retirement, which is another consideration.
The Dynamic Decade+
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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.
About the Author
Justin Stivers, J.D.
Founder and CEO of Stivers Law
Justin Stivers is CEO of Stivers Law, a Miami-based law firm specializing in wealth and estate planning. With almost a decade of expertise, Stivers is dedicated to ensuring that clients’ estate plans seamlessly align with their financial aspirations through comprehensive wealth planning. Beyond estate planning, Stivers Law excels in probate and trust administration, elder law, Medicaid planning and special needs planning.
NYSUT NOTE: Participants in the NYSUT Member Benefits Trust-endorsed Group Legal Service Plan can access estate planning documents for their parents for free or at a heavily discounted cost as well as receive elder care legal services at reduced fees.
A certified, not-for-profit credit counselor can work with a consumer to help craft a debt management plan. But that’s not all — they can also provide services for improving credit scores and better managing personal finance, such as creating effective budgets or sitting down to review credit reports and offering tips for raising scores. Most nonprofit credit counseling services are available at no charge; lists of certified counselors can be found at www.NFCC.org or www.ConsumerCredit.com.
2. Work with nonprofit credit counselors.
What is covered by bodily injury liability insurance?
Bodily injury liability coverage helps pay the costs for anyone that is injured in a car accident where you're found liable. This may include a driver or passengers in another car, pedestrians or unrelated passengers in your own car. It covers medical expenses, compensation for lost wages and income and legal fees.
For instance, you run a red light, strike another car and injure the driver. Your liability coverage obliges the company to defend you — in court, if necessary — and pay claims to the other driver for vehicle damage and bodily injuries, including medical and hospital costs, rehabilitation, nursing care, and possibly lost income and money for pain and suffering.
Spending your windfall
Even a small inheritance can represent more money than you’ve ever received at one time. Go ahead and treat yourself to a modest splurge — a special vacation, for example — but avoid making costly changes in your lifestyle.
Brian Lee used his inheritance to pay off his wife’s student loans and a small credit card debt; the rest went into retirement savings. Lee says he wanted to honor the legacy of his uncle, a dedicated investor who worked for IBM in the custodial department for 30 years. Lee’s uncle spent most of his life in the same small house in Austin, Texas, and drove a 1967 Ford truck, but he was a wealthy man, with an estate valued at more than $3 million when he died. “There’s no way I would blow money someone spent a lifetime saving,” Lee says.
However, many people overestimate how long their newfound wealth will last. For this reason, consider stashing your inheritance in a money market account or CD account for six months to a year. You'll earn interest on your cash, and your money will be safe while you assemble a team of professionals, which typically should include a fee-only planner, a tax professional and an attorney.
Your team can help you look for ways to fortify your finances. Paying off credit cards and student loans will relieve you of high-interest debt and free up cash for other purposes. If you haven’t saved enough to cover several months’ worth of expenses, use your windfall to beef up your emergency fund. Once you’ve got that covered, consider using your inheritance to increase retirement savings.
Finally, if you don’t have an estate plan of your own, use some of the money to create one, including powers of attorney, health care directives, a will and, if necessary, a living trust. Your own heirs will thank you.
This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.
About the Author
Erik Bowman, RICP, NSSA
Wealth Advisor, Founder, Bowman Financial Strategies
As the firm’s owner and lead wealth advisor, Bowman supports the firm’s clients with custom financial planning solutions. He provides detailed retirement planning strategies, investment management, Social Security planning and tax-efficient retirement distribution strategies.
NYSUT NOTE: Did you know that NYSUT members’ children can receive financial counseling, with the member present, from a Certified Financial Planner through the NYSUT Member Benefits Corporation-endorsed Financial Counseling Program? The program provides access to a team of planners who offer objective financial advice for members and their families.
Fixtures
A real estate fixture is any object that’s permanently attached to a property. “The general rule is if you turned a house upside down, whatever sticks to the house is supposed to stay with the property,” Gelios explains. For example, built-in bookshelves, ceiling fans, and window treatments are typically seen as fixtures included with a home.
Some fixtures, however, are up for negotiation. These could include things like refrigerators, washer and dryer sets, chandeliers, outdoor furniture and playground sets.
“Your purchase agreement should state all of the specific fixtures that you want to stay,” Gelios recommends. To protect his buyers, Gelios typically writes in offers, “All appliances and fixtures, as shown, convey with the property.”
We see you, Generation X
Embedded in all of these decisions is the challenge of creating a sustainable income that will cover your expenses for the rest of your retirement, regardless of how long that lasts. You must take into account your projected expenses and income, which will flow from all of the decisions you’ll make between ages 62 and 75. If you’re like many people, you’ll want to make sure that you can maintain your standard of living throughout retirement.
You’ve also spent decades saving for this moment in time — the moment you retire. You likely have assets in a variety of different accounts. Additionally, they may be subject to different types of taxation. You and your spouse may have traditional IRAs, taxable brokerage accounts and a Roth IRA. You’ll draw monthly income from Social Security, but odds are that Social Security won’t be enough to pay all your bills and give you the standard of living that you want to maintain in retirement.
Determine distribution strategies
In the absence of an intentional plan, taxes can take a big bite out of your distribution strategy. As I mentioned above, Social Security is taxed for most people, as are defined benefit pensions and distributions from traditional IRAs. You must take those distributions when you turn 73 or 75, regardless of whether you need that money on or not. While delaying RMDs from 70½ to 72, 73 and ultimately 75 can seem like a gift, there’s also a downside. That’s because RMDs are calculated based on life expectancy, and when you are older, your life expectancy is shorter, which means higher RMDs. Higher RMDs mean more taxes.
Then there is the expense side. If your taxable income increases past a certain level, your Medicare Part B premiums can increase. For example, if you and your spouse have modified adjusted gross income greater than $206,000 and less than or equal to $258,000, your premiums would rise by $69.90 a month per person. That’s not unimaginable for many affluent individuals preparing to retire. If you have a joint Social Security benefit of $6,500 a month, bond income of $3,000 a month from a taxable brokerage account and a $2.5 million IRA with distributions of about $100,000 a year, you could easily hit that level.
But what if, instead, you engaged in intentional tax minimization planning so that you converted at least some of your traditional IRA to a Roth IRA before you turned 75 so that your RMDs were significantly reduced? This might involve retiring but waiting to claim Social Security so that you can have reduced income one year and convert funds from your traditional IRA at a lower tax rate. This is possible if you have money saved in a taxable brokerage account or cash in the bank that you could live on without tapping other sources of income.
This is just one potential strategy you could avail yourself through learning enough about the tax laws and potential distribution strategies or by partnering with a knowledgeable and tax-savvy retirement income financial planner.
However you do it, don’t wait. Many of the decisions you’ll make during the Dynamic Decade+ are irrevocable and time-sensitive. Before you get to the point of making a mistake that might create tax headaches for you later in retirement, investigate your options so that you can, to the greatest possible extent, optimize your retirement for taxes and sustainable income.
How taxes fit in
NYSUT NOTE: NYSUT Member Benefits Trust-endorsed Legal Service Plan offers legal advice and access to a national network of attorneys who can help with settling an estate or setting up documents for your own estate.
College tuition has indeed skyrocketed. According to Best Colleges, using data from the National Center for Education Statistics, the average cost of college tuition in the U.S. for undergraduate students has more than tripled over the last 58 years, rising from $4,648 in 1963 to $14,307 in 2021, after accounting for inflation. And from 2010 to 2021, tuition and fees rose by 17%, jumping from $12,214 to $14,307.
Furthermore, the College Board reports that in 2022-23, the average cost of tuition and fees for a full-time undergraduate student at a public four-year in-state college was $10,940, while the average cost for a student at a public four-year out-of-state school was $28,240.
Over 43 million Americans carry federal student loan debt, with an average balance of almost $40,000. By starting early and saving for your child's or grandchild's college in a 529 account, you can help them avoid the heavy burden of student loans later in life. The sooner you start, the better.
Rising cost of college
Briefly, here are some of the major milestones you’ll hit in the Dynamic Decade+ and their financial implications:
Quitting employment. At some point, you — and your spouse if you have one — will stop working. The average retirement age in the U.S. is 62. When you stop working, you’ll need to either begin Social Security, draw on your retirement savings or both, unless you have an alternative method to generate income.
Enrolling in Medicare. Initial Medicare enrollment begins three months before you turn 65 and ends three months after the month in which you turn 65. Medicare Part B costs $174.70 each month in 2024 — costs will increase if your income reaches certain levels. From there, you can select a Medicare Advantage plan or a Medicare supplemental plan, each with their own specific premiums, copays and deductibles. Medicare Part D, which is prescription drug coverage, also has costs, which can vary based on income. You can change Medicare Advantage, supplemental and Part D providers once a year during open enrollment, which occurs yearly October 15 through December 7.
Claiming Social Security. The earliest age to claim Social Security is 62, and the latest is 70. If you claim at 62 in 2024, your benefit will be about 30% less than if you waited to claim until your full retirement age of 67. In contrast, if you delay claiming past full retirement age, you will receive 8% in additional income for each year you wait. Up to 85% of your Social Security may be taxable if your individual income is above $34,000 a year. If your income is between $25,000 and $34,000, up to 50% may be taxable.
Receiving a defined benefit pension. When you stop working, you will need to decide when and how to take your defined benefit pension, if you have one. Most entities offering a defined benefit pension will allow you to take it either as a lump sum that you can roll over into an IRA, or you can receive monthly income instead. If you are married, you will have to decide whether to take a joint or single payout; the joint payout is less, but the single payout would mean your pension dies when you do. Defined benefit pensions are taxable at your household marginal tax rate.
Taking retirement distributions. The SECURE 2.0 Act further delayed the point at which you must take distributions from your traditional retirement accounts. If you turn 73 after Jan. 1, 2023, you will be required to take RMDs at age 73. However, if you turn 75 after Jan. 1, 2033, you must take RMDs by age 75. Traditional retirement benefits are taxable at your individual marginal tax rate.
Deciding how to invest retirement savings. At some point during this journey, you must decide how to invest your retirement savings to meet your retirement-specific needs. You can, of course, continue to invest the same way you did when you were working. However, considering that you need to replace the income that you no longer have from working, it’s worthwhile to consider a different approach. Many individuals find their risk tolerance is reduced in retirement, which is another consideration.
The Dynamic Decade+
Determine distribution strategies
In the absence of an intentional plan, taxes can take a big bite out of your distribution strategy. As I mentioned above, Social Security is taxed for most people, as are defined benefit pensions and distributions from traditional IRAs. You must take those distributions when you turn 73 or 75, regardless of whether you need that money on or not. While delaying RMDs from 70½ to 72, 73 and ultimately 75 can seem like a gift, there’s also a downside. That’s because RMDs are calculated based on life expectancy, and when you are older, your life expectancy is shorter, which means higher RMDs. Higher RMDs mean more taxes.
Then there is the expense side. If your taxable income increases past a certain level, your Medicare Part B premiums can increase. For example, if you and your spouse have modified adjusted gross income greater than $206,000 and less than or equal to $258,000, your premiums would rise by $69.90 a month per person. That’s not unimaginable for many affluent individuals preparing to retire. If you have a joint Social Security benefit of $6,500 a month, bond income of $3,000 a month from a taxable brokerage account and a $2.5 million IRA with distributions of about $100,000 a year, you could easily hit that level.
But what if, instead, you engaged in intentional tax minimization planning so that you converted at least some of your traditional IRA to a Roth IRA before you turned 75 so that your RMDs were significantly reduced? This might involve retiring but waiting to claim Social Security so that you can have reduced income one year and convert funds from your traditional IRA at a lower tax rate. This is possible if you have money saved in a taxable brokerage account or cash in the bank that you could live on without tapping other sources of income.
This is just one potential strategy you could avail yourself through learning enough about the tax laws and potential distribution strategies or by partnering with a knowledgeable and tax-savvy retirement income financial planner.
However you do it, don’t wait. Many of the decisions you’ll make during the Dynamic Decade+ are irrevocable and time-sensitive. Before you get to the point of making a mistake that might create tax headaches for you later in retirement, investigate your options so that you can, to the greatest possible extent, optimize your retirement for taxes and sustainable income.
We’ve all heard stories about individuals who passed away quietly after a life of frugality, leaving a fortune to their unsuspecting heirs or, occasionally, a beloved pet.
The reality is a lot less riveting. According to the Washington Post, the average American has inherited only about $58,000 as of 2022, taking into account that most of us won't receive any form of inheritance. The Federal Reserve also reports that from 1989 to 2007, on average, only 21% of American households at a given point in time received a wealth transfer.
Complicating matters is the fact that many estate plans contain a smorgasbord of items, including real estate, investments, cash, retirement savings accounts and life insurance plans. It could take months to track down these assets and divide them among the estate’s heirs, and you could incur significant legal fees — particularly if the estate was large or your relative died without a will. There are also different rules for different heirs: Spouses, for example, enjoy some tax breaks and exemptions that aren’t available for adult children or other heirs.
For example, Brian Lee of Tacoma, Wash., got a crash course in estate law after his late father’s brother and sister died almost within a year of each other, in late 2015 and 2017. Neither of his father’s siblings had children when they died, so their estates were divided among their nieces, nephews and other surviving relatives.
Lee ended up with a six-figure inheritance, but because his uncle died without a will, settling the estate took months and cost thousands of dollars in legal fees. Lee’s aunt had a will, with Lee as the executor, which made “all the difference in the world in terms of the process,” Lee says.
Here's what you need to know in order to handle an inheritance like a pro.
Home repairs
Stocks: Unless your parents were fabulously wealthy, you won’t have to worry about federal estate taxes, but that doesn’t mean Uncle Sam has no interest in your inheritance. If you inherited stocks, mutual funds or other investments in a taxable account, you’ll be able to take advantage of a generous tax break known as a step-up in basis. The cost basis for taxable assets, such as stocks and mutual funds, is “stepped up” to the investment’s value on the day of the original owner’s death.
For example, if your father paid $50 for a share of stock and it was worth $250 on the day he died, your basis would be $250. If you sell the stock immediately, you won’t owe any taxes; if you hold on to it, you’ll only owe taxes (or be eligible to claim a loss) on the difference between $250 and the sale price.
It’s a good idea to notify the investment account custodian of the date of death to ensure that you get the step-up, said Annette Clearwaters, a certified financial planner in Mount Kisco, N.Y.
Because of this favorable tax treatment, a taxable-account inheritance could be a good source of cash for a short-term goal, such as paying off high-interest debt or making a down payment on a house, said Jayson Owens, a CFP in Anchorage, Alaska. If you’d rather keep the money invested, review your inherited investments to see whether they are appropriate for your portfolio. For example, you could sell individual stocks and invest the money in a diversified mutual fund without triggering a big tax bill.
Retirement accounts: If you inherited a tax-deferred retirement plan, such as a traditional IRA, you’ll have to pay taxes on the money. Spouses can roll the money into their own IRAs and postpone distributions — and taxes — until they’re 73.
However, the Setting Every Community Up for Retirement Enhancement (SECURE) Act, which took effect on Jan. 1, 2020, changed the inherited IRA rules for non-spouse heirs. Instead of taking required minimum distributions, based on their age and life expectancy, heirs must withdraw all assets from the inherited IRA, 403(b) or 401(k) within 10 years of the death of the owner.
If you were fortunate enough to inherit a Roth IRA, you’ll still be required to deplete the account in 10 years, but the withdrawals will be tax-free. If you inherit a traditional IRA, 403(b) or 401(k), you may want to consult with a financial planner or tax professional to determine the best time within the 10-year window to take taxable withdrawals. For example, if you’re close to retirement, it may make sense to postpone withdrawals until after you stop working, since your overall taxable income will probably decline.
Real estate: When you inherit a relative’s home (or other real estate), the value of the property will also be stepped up to its value on the date of the owner’s death. That can result in a large lump sum if the home is in a part of the country that has seen real estate prices skyrocket. Selling a home, however, is considerably more complex than unloading stocks. You’ll need to maintain the home, along with paying the mortgage, taxes, insurance and utilities, until it’s sold.
Life insurance: Proceeds from a life insurance policy aren’t taxable as income. However, the money may be included in your estate for purposes of determining whether you must pay federal or state estate taxes.
A 529 plan is a tax-advantaged savings account designed to be used for a beneficiary's education expenses. These plans allow a contributor to prepay a beneficiary's qualified higher education expenses at an eligible educational institution or to contribute to an account for paying those expenses. And while 529 contributions must be made with after-federal-tax money, the contributions grow free from federal or state tax. (Many states also offer a tax deduction to residents contributing to their own state’s plan.)
Andy Esser, an Edward Jones Financial Advisor in Durham, NC, said in a statement: “As a financial advisor and parent, I see first-hand the varying benefits of 529 funds – no matter what path a child may choose. Educating families on those benefits leads to more impactful results.”
But many are missing out on the benefits of a 529 plan, including tax-free growth, gift tax benefits, the opportunity to rollover unused funds into a Roth IRA and the ability to use the 529 grandparent loophole to fund a grandchild’s education without impacting their financial aid eligibility.
According to a study from Edward Jones, 50% of Americans don’t know what a 529 plan is. More specifically, out of all Americans who are actively saving for a child’s education, 32% are unaware of what a 529 plan is, and 60% do not feel they’re saving enough to reach their goals for future education expenses.
The study also found that to reach education savings goals, Americans have turned to several other strategies, including using a personal savings account (35%), scholarships (18%), federal or state financial aid (18%) and getting a job at a school or university for tuition benefits (9%). The rising cost of tuition, rulings about college admissions criteria and the increase in applicants at numerous colleges are all factors driving individuals to save for their children’s education.
Surprisingly, however, 84% have not or do not plan to invest in a 529 plan as part of their education savings strategy.