Many Seniors May Run out of Money in Retirement – On the Money News

The Decade of Portfolio Contraction May Have Already Begun.
The four horsemen of the financial apocalypse are already on their way. Each one is a danger in themselves, but combined, they could be economic Armageddon. Portfolio contraction could be triggered by four factors: excessive withdrawals, the sequence of market returns, bad investor behavior and extended longevity.

Excessive Withdrawals – The old 4-percent rule of thumb isn’t a wise reference point for income withdrawal any longer. Stock dividends and bond interest are generally below the 4% benchmark. Most financial advisors recommend 3 percent, some even lower. However, most retirees don’t meet often enough with their financial advisers to make adjustments in their distributions and continue to withdraw at levels their portfolio can’t sustain, resulting in portfolio principle loss. Small adjustments along the way can help preserve your portfolio.

Bad Investor Behavior – Some seniors raid their retirement portfolios to fund unscheduled events like home repair, a sudden trip to Europe or emergency medical costs. Few understand their retirement portfolio was most likely predicated on monthly income needs based on their retirement plan. Sudden and unscheduled spending can derail a retirement plan. To stay on tract you need an emergency fund for repairs and medical expenses as well as a discretionary account for special events. Bad investor behavior can cannibalize portfolio principle and lower it’s income capacity.

The Sequence of Market Returns – The rules that govern the accumulation phase before retirement are not the same rules during distributions in retirement. Take mountain climbing for example: Most of the deaths occur during the descent. One of the biggest retirement mistakes are not adjusting your withdrawals in a downward market cycle and readjusting the new portfolio amount for income generation.

The strategies are different for accumulation to retirement, then distributions in retirement. You need predictable income to match your guaranteed domestic spending. You may want to consider a lifetime income annuity.

Extended Longevity – If you concede the average survivor of a married couple will live to age 93, then you may need to plan for a longer retirement based on living longer than the average. Willard Scott celebrated centurions on his TV show. There’s more than 72,000 centurions in the U.S. Susanna Jones died in May of 2016 at 116. She was a tri-centurion and a super-centenarian teenager. Jean Calment lived to age 122 and is the oldest person who ever lived according to the Guinness Book of World Records. Dr. Aubre De Grey, noted gerontologist, has said that the person who will live to age 150 has already been born. Could that be you?

The four horsemen of the financial apocalypse are coming, and it will be economic Armageddon for many. For more information on how to protect against these four retirement risks just write me at [email protected]

On the Money News is a weekly five-minute online broadcast distributed over the weekend to over 280 media outlets, financial web sites and social media networks. On the Money News is hosted by syndicated financial columnist and news anchor Steve Savant.

Hidden Taxes Can Disproportionately Hurt Women – On the Money News

It is estimated 7 out of 8 husbands precede their wives in death. The financial consequences for the surviving spouse can be devastating and difficult to recover from. Few financial advisors, much less retirement experts, actually have strategies set in place to defend mom when she needs it most. Increased taxes Can Sink the Retirement Dreamboat of Many a Widow.

A married couple uses two exemptions worth $8,100 in 2016. The standard deduction for married couples is $12,600. So that’s total of $20,700 in right-off-the-top in tax protection. But when a spouse dies, generally the male, only one exemption remains and the standard deduction is cut is half, totaling $10,350. The exemptions are static: the question is should you use the standard deduction or itemized deductions? But for most seniors without a mortgage, the standard deduction is often the choice. And remember Medicare Part B premiums are based on taxable income. It is conceivable the Medicare Part B premiums could increase for the surviving spouse based increased taxable income. That’s the basic tax issue.

Here’s the revenue issue. Let’s cite and remove from the equation the tax-free revenue that’s not reportable income for the provisional income test for Social Security taxation: Roth IRA distributions, reverse mortgage equity loan income, cash-value life insurance policy loans and HSA withdrawals for approved medical expenses. All other income sources are includable for Social Security benefit tax calculations and are subject to income or capital gains tax. Keep in mind that tax-free muni bond income is includable in the Social Security benefit tax calculation and although highly unlikely, may also trigger the alternative minimum tax.

But the big revenue news here is the loss of the Social Security income for the surviving spouse, generally the lower of the two monthly benefit checks. So for the surviving spouse, the combination of losing part of their Social security income, eliminated exemption and half the standard deduction can have a negative financial impact.

Few financial planners understand this, much less plan for it, and the majority of the time, women have to live with the consequences. You should create a financial plan for the surviving spouse. It’s bad enough to lose your partner in life, but to add economic hardship for the survivor can really be hurtful.

You may have to generate a new source of income to replace the loss of Social Security if the couple’s budget was based on two Social Security incomes. A couple of income options that many survivors are unaware of: life insurance cash values and reverse mortgages. It’s surprising to find that most seniors with permanent life insurance have never considered its accumulating cash values. That cash could be distributed as a tax-free policy loan as long as the policy is kept in force for the life of the insured. Before moving with this idea contact a life insurance professional for guidance.

A reverse mortgage could be a tax-free income source that can generate lifetime revenue. Before moving forward with this idea contact a certified HECM loan officer for guidance.

These are just a couple of ideas that can be an alternative income resource for a surviving spouse. Remember always consult with a tax professional before moving forward with any of these ideas. For more information on how you can protect your spouse from economic harm just write me at [email protected]

On the Money News is a weekly five-minute online broadcast distributed over the weekend to over 280 media outlets, financial web sites and social media networks. On the Money News is hosted by syndicated financial columnist and news anchor Steve Savant.

Tax Strategies May Yield a Return of Their Own – On the Money News

The taxman cometh. He comes for everyone and he doesn’t discriminate. The retiree, the senior, the elderly and the uber-aged are in the crosshairs of his target. Uncle Sam is not your uncle—he’s the revenuer from old. His collection agency garnishes billions of dollars a year. The only way to defeat him is to learn the tax system that defends him. And why? Because taxes are the biggest annual budget item in retirement. And if you lower your tax bill, you’ll be able to keep more of your own money.

For most seniors, managing your distributions in retirement could yield 10 to 15 percent more spendable income every year. Learning the basics of the tax system could be the best education course to take in retirement. Remember, an uneducated retiree is generally paying unnecessary taxes to the government. The tax code is so convoluted and deliberately correlated to capture revenue. So learning how to protect your income can often result in more money spend.

One of the first tax items to consider is tax harvesting winners and losers from your mutual funds those that are not in your retirement plan. In 2015 many retirees lost money in their mutual funds. Nevertheless, some seniors still paid taxes. It’s bad enough that you lost money, but to pay taxes just adds insult to injury. So tax harvesting of non-qualified mutual funds may be a solution to lower your tax bill.

It’s amazing to note many retirees believe their tax exemptions and deductions will be enough to shelter their Social Security income from taxation. That could be true for those who have no other income sources. But the vast majority of seniors have qualified retirement plans, non-qualified investments and savings income, as well as specific tax-free municipal bond holdings. But in the end, all these forms of income are includable in the provisional income test to determine your Social Security benefit taxation.

2) Charitable giving is always a good place to start when creating a tax reduction strategy. Just make sure the charity you contribute to is an IRA approved non-profit organization.

3) Many retirees have become entrepreneurs and started small businesses. This is a good time to consider end of the year spending and increase your deductions.

4) Another tax strategy is to defer qualified plan distributions until age 70½ when required minimum distributions (RMDs) must be disbursed. On one hand, the deferral allows your investments to continue to grow tax-deferred. On the other, the accumulated build up increases your RMDs and may inadvertently push your income threshold into tier-two taxation of your Social Security benefits. It’s a catch 22 for most retirees.

But an individual can defer 25 percent of qualified plan monies (not to exceed $125,000) into the future as far out as age 85. A married couple may be able to defer $250,000 to age 85 and reduce their RMDs and the amount exposed to tax for at least 15 years. That tax savings could be significant, especially if deferring your RMDs drops you a tier or two in the Social Security tax brackets.

If you’re inclined to help your family financially, you may want to consider a stretch IRA. This strategy employs two lives, sometimes with different generations. The RMDs are factored on the basis of the younger of the two and can substantially lower the RMD obligation to the current retiree. And if you’re charitably inclined, you can donate your IRA monies direct to your IRS-approved non-profit organization as a Qualified Charitable Distribution from an IRA. The annual amount is $100,000 for individuals and $200,000 for a married couple.

These are just some basic strategies you can employ to control your taxes during retirement and keep more of your money back in your pocket where it belongs. Remember always consult with a tax professional before moving forward with any of these ideas. For more information just write me at [email protected]

On the Money News is a weekly five-minute online broadcast distributed over the weekend to over 280 media outlets, financial web sites and social media networks. On the Money News is hosted by syndicated financial columnist and news anchor Steve Savant.

Return on Principle – On the Money News

Syndicated financial columnist and news anchor Steve Savant interviews best selling author, popular platform speaker and frequent national media guest David Scranton, CFP, CFA, MSFS, CLU, ChFC.
On the Money News is a weekly five-minute online broadcast distributed over the weekend to over 280 media outlets, financial web sites and social media.

A Simplified Approach to Retirement – On the Money News

Building a basic retirement strategy should include these simple prioritized steps.

Step One: Cover Your Domestic Expenses You and your spouse need to select a budget that outlines your domestic spending and routine trips like visiting the grandchildren or going on church missions. Once you’ve collected all your bills and travel costs, assess them against your Social Security income and corporate or government pension. If there is a short fall, you should look at two strategies: 1) guaranteed lifetime annuity with a cost-of-living adjustment for you and your spouse. 2) Consider the home equity conversion program that can generate income, eliminate your mortgage or create a money reserve for later in life.

Step Two: Protect Your Portfolio Against Inflation You and your spouse need to take a risk-tolerance test and share the results with each other. Then, you both need to work at establishing common-ground principals with your portfolio purchases and the mix of your investments. One rule of thumb is to buy equities with returns greater than inflation, with low expense charges and low beta risk. It may also be prudent to consider guaranteed lifetime annuities with a cost of living rider to be part of your inflation strategy.

Step Three: Insure Your Legacy and Giving with Life Insurance You and your spouse need to make a list of family members and charities you desire to help after you’re gone. If you and your spouse are in relatively good health, you should investigate Survivorship Guaranteed Universal Life (SGUL). This type of life insurance can cover both spouses and, depending upon your situation, may transfer the death benefit proceeds tax free to your beneficiaries for pennies on the dollar. Then, you can enjoy your retirement knowing your family members and charities are funded. One word of caution: The leverage of life insurance delivers more bang for the buck for beneficiaries than home equity, so use your housing wealth while you’re living.

Step Four: Indemnify Yourself Against Elder Care Costs No retirement strategy can be complete without long-term care strategy. The most expensive costs in retirement are medical and elder care costs. Medicare can take care of the bulk of the medical costs you’ll incur, but you still need elder care strategy. There are conventional long-term care insurance policies as well as hybrid polices combined with life and annuity contracts. If your health is an obstacle for securing coverage, consider one of the home equity conversion mortgage program called an appreciating equity line of credit as a money reserve for later in life.

These four steps are the building blocks that can be used to construct a comprehensive retirement plan, but if additional sophistication becomes necessary, you’ll need a professional financial advisor whose area of expertise addresses all aspects of retirement. If you’re interested in reviewing these four steps for yourself, just write me at [email protected]

Developing Budgetary Basics Can Build A Firm Foundation for the Future – On the Money News

Creating a financial profile requires an “honest” assessment on your attitude towards money. An example of investor conflict is often revealed after taking a risk tolerance test: As an example the test results may reveal a moderate conservative personality, but the investments in the 401(k) are dominated by aggressive growth funds. The test itself may not be scientific, but it should create a conversation between the investor and the advisor, especially if there’s a disparity between the test results and actual holdings. In addition, a life-expectancy test can establish a timeline for basic assumptions for retirement planning or cost projections on long-term care and medical expenses. You’ll need to create a budget to establish a spending threshold during retirement. But a budget can also be a road map for milestone events that occur in most of our lives, such as children getting married, having children, funding college education for grandkids or helping to buy a home for retirement. Timeline planning around life events can trigger conversations between an investor and an advisor on financial goals. Once financial goals are established, you and your advisor can create planning strategies and tactics to prepare you for each life event. Then you can discuss financial products based on your risk tolerance to achieve your goals.

It’s important to know the fee structure of your advisor, the expenses of the financial products you buy and the retirement administration costs of your plan. You don’t want to wait until retirement to discover all the costs of your retirement plan and the investments you purchased. You also may need to adjust your predispositions toward money by shedding money myths and create an open environment of trust with your advisors. You need to approach our money decisions with eyes wide open and demand full disclosure. We all have a history with money that has formed our opinions as consumers and investors. And speaking of history…there’s an estimated 1 trillion dollars in unclaimed qualified retirement money abandoned by plan participants with former employers. It’s worth your time to reconstruct your work history to make sure you’ve accounted for all your money.

For more information on how you can establish a budget, your risk tolerance, life expectancy and work history, just write me at [email protected]

The Face of Retirement is Changing – On the Money News

Many of the rock icons and Hollywood stars of the baby boomer generation are in sixties. The flower children of the sixties are now in their sixties. This is the changing face of retirement. 10,000 baby boomers turning age 65 everyday.

In the last generation, most retirees have a pension and Social Security. But today many employers have migrated from pensions to defined contribution plans. From 1985 to 2000, the rate of participation in pensions by full-time employees of medium and large private firms dropped from 80 percent to 36 percent. A 2013 survey by the Bureau of Labor Statistics found only 26 percent of civilian workers in the U.S. participated in defined benefit pension plans. The boomer generation is often referred to as the “sandwich generation,” because they are paying for their parents’ elder care as well as the tuition of their children. When you add the funding of their retirement plan, there’s not much money left to pay off a mortgage.

Presidential candidates have promised Social Security will not be altered for baby boomers, but Congress has changed things over the years. With the most recent changes coming with the passing of the Bipartisan Budget Act of 2015, most baby boomers lost income from the elimination of the “file and suspend” provision and age tested restrictive application benefits. But perhaps the biggest change and the greatest risk in retirement isn’t legislation, but living longer.

Today, the average life expectancy for men is 86.6 years and for women 88.8. The impact of longevity on retirement modeling has created an environment fear among of among seniors of outliving their money. One answer to longevity problem maybe annuities. Annuities can be structured to pay guaranteed lifetime income with annual increases. Today, more retirement plans are using guaranteed lifetime annuity income to pay for household living and travel expenses. The structured payout can cover two lives and provide income for the survivor.

Two years ago, Qualified Longevity Annuity Contracts or QLACs, were introduced. The key part of the legislation was to offer the option to defer required minimum distributions or RMDs at age 70½ to age 85 from qualified plans like 401(k)s. The rules of engagement allow deferring 25 percent of qualified plan monies not to exceed $125,000 per participant to age 85. QLACs use deferred income annuities that can guarantee income for life. Controlling RMDs with QLACs can have a significant impact on retirement taxation and may insulate a portion of Social Security income from taxation as well. Annuities are not insured by the FDIC or any government agency. So it’s important to have your financial advisor review the balance sheet and ratings of the insurance company before you purchase an annuity.

For more information on insurance company ratings, deferred income annuities, QLACs or RMDs, just write me at Steve at onthemoneynews.com.

Tax-Free Income from Cash-Value Life Insurance – On the Money News

Many retirees are seeking shelter from taxes on their Social Security, but it’s difficult to escape taxes on their benefits because other retirement income can trigger taxation on their Social Security income. Luckily, there are a few products or planning strategies that can help mitigate taxes.

Surprisingly, cash-value life insurance can also generate tax-free income with a variety of saving and investment crediting methods. With me today is Rob Hagg, popular platform speaker, assets management and life insurance specialist.

Rob has a unique perspective in the financial community with traditional investment modeling using modern portfolio theory and his groundbreaking work with mortality products in turnkey asset management programs.

Nationally syndicated financial columnist Steve Savant interviews with popular platform speaker, asset management expert and life insurance specialist Rob Hagg.

Right on the Money is a weekly one-hour online broadcast for TV and radio distribution. The show contains five ten-minute segments that are redistributed online as individual video press releases.

Risks That Can Derail Your Retirement – On the Money News

Many seniors are finding it difficult to stay on track with their standard of living during retirement, especially when there are so many risks that can derail your retirement dreams. Most retirees need a track to run on that can help them experience a successful retirement.

For many seniors, just identifying the risks in retirement can be overwhelming, much less deal with the sidetracks that often occur in retirement.

Resource Risks like Longevity, Inflation & Excess Withdrawal Risk

Health Risks like Frailty, Health & Long Term Care Costs

Investment Risks like Market Volatility, Interest Rates, Liquidity & the Sequence of Returns

Employment Risks like Forced Retirement, Reemployment, Employer Insolvency & Spouse’s Job Loss

Life Risks like Unexpected Responsibility, Public Policy Changes, Taxes & Just Plain Bad Timing

With me today to identify the risks that can derail retirement is popular platform speaker, best selling author and retirement expert Curtis Cloke. Curtis is an adjunct professor at the American College and has been one of the top five financial advisers in the country as ranked by Senior Market Adviser magazine. On the Money News is a weekly five-minute online broadcast distributed over the weekend to over 280 media outlets, financial web sites and social media.

Don’t Get Burned by the Sequence of Returns – On the Money News

The Sequence of Returns Risk is the Retirement Apocalypse. Retirees Exposed to Outliving Their Retirement Money Now A Reality.

Retirees may not survive the stealth impact of the sequence of returns until its too late. Only guaranteed lifetime annuity income with a COLA rider can remove the risk of the sequence of returns.

Curtis Cloke is a popular platform speaker, retirement software developer and adjunct professor of the American College. Curtis has been recognized as one of the top financial planners in America.

Steve Savant is a nationally syndicated financial columnist and talk show host of Right on the Money and weekend anchor for On the Money News. Both broadcasts are distributed to 280 media outlets, social media networks and industry web sites. Steve also is a contributing author to Advisys Advance, Insmark and Life Specs.