Planned Assets Planning Blog

According to studies by the government, AARP, Americans for Long Term Care Security and many others, 50% or more of Americans over the age of 60 will require some form of Long Term Care during their life.  While the predominance of long term care recipients may face less than 3 to 5 years of care even this limited amount of care can break or ruin retirement plans for the average couple, even the moderate wealthy.   As cost for Long Term Care Insurance (LTCI) continues to increase only the very wealthy can afford to self-insure their care expenses, but these are the very people insuring against the possibility of this need. 

Over the past several years we have seen LTCI increase in cost, recently companies have ask for permission to increase rates on issued policies by as much as 90% and now we are seeing companies leave the market.

Since the advent of LTCI most Americans have been adverse in obtaining it, thinking they will never need it.  In truth LTCI appears to be a bad bet:

Traditional LTCI policies have been intended for long term care needs and nothing else.  Basically a use it or lose it policy.  Even with the advent of more flexible policies providing not only nursing home care but home health and community care the use it or lose it principle still cause’s limited acceptance of these policies. 

Insurance companies, understanding the reluctance of the public to obtain LTCI because of the principal of use it or lose it added a return of principal rider to these policies. Thus, if the policy is never used a portion or all of the premium is returned, but this rider is usually too expensive and has not increased sales of the product.  Now with LTCI in apparent disarray what are the options for this necessary product? 

One such option is Life Insurance. Over the past several years people are relearning that life insurance has a place in retirement.  Life insurance may provide tax efficient income, family protection and estate cost funding.  Life insurance allows a couple to spend more of their retirement assets because the life insurance policy will replace them. Life Insurance has always been an excellent, flexible, misunderstood and maligned product.  Life insurance long term care (LTC) riders add to the flexibility of the product and eliminate the “use it or lose it” principle of LTCI.

Those people who need life insurance or desire a product providing guaranteed income, other than an annuity, and desire some form of LTCI can obtain a LTC rider to meet this need.

The life insurance LTC rider makes a portion of the death benefit available for long term care needs.  If you have a $1,000,000 policy it’s possible to have up to $500,000 available for care needs and if never used the only cost has been the rider, because the full $1,000,000 is then paid on death.

There are two types of LTC riders that can be added to cash value life insurance policies: Acceleration riders and extension riders.  The acceleration rider allows the insured to take an advance from the death benefit if long term care becomes necessary; but then the death benefit is reduced by the amount used.  The extension rider increases the insured’s LTC coverage without detracting from the death benefit.  This form is rarely used because of cost.

For all of us the need for long term care planning is a requirement of good retirement planning.  If your plan does not acknowledge this possibility and provide for it, your plan and retirement is at risk.

Is now the time to have a conversation concerning your plans for retirement and how you can develop a retirement you can count on?  Time is not on your side concerning retirement planning; regardless of when you plan for retirement it will get here before you know it.  A conversation with us today could save tomorrow.  Please call us at 888 270 9870 or email This e-mail address is being protected from spambots. You need JavaScript enabled to view it. , today!

1.     The most common mistake future and retired retirees make is going it alone or even worse not preparing a written retirement plan. 

a.     Because it is always about the money, anyone planning for or currently retired must plan a budget.  This budget will change from month to month, year to year, but you must know how much guaranteed income* will be or is available each year by month as far out into the future as possible.   

b.     Break down known living expense by month and subtracting it from your guaranteed income.  If this is a negative and you’re not retired yet you may have time to readjust your retirement plans.  If retired you now know the problem and may be able to make adjustments.

*Guaranteed Income is money you can actually count on each month.  This is money not at risk such as Social Security, Annuities, Insurance, Cash, even CD’s.

c.      Retirement planning is not a do it yourself task.  Finding then working with a financial a professional you like and trust is a major step in the right direction and often at no expense. There is a lot more to retirement planning than the money and how do you know if you have covered all of the basis if you don’t know what you don’t know?

2.     Retiring With Too Much Debt:  If possible you should dispose of all your debt prior to retirement.  Mortgage debt may be considered good debt, in fact paying it off may be the worst thing you can do to your financial plan, especially if you can write a portion off but this is an item most individuals must discuss with their financial professional.

3.     Lack of Insurance: Even though you have Medicare, there are still future healthcare costs not covered by Medicare, such as long term care.  Life insurance is still the least expensive way to pay final expenses, taxes and probate cost.  With life insurance you can create a tax effective income fund and insure your family is taken care of after your death.  Life insurance will allow you to spend more of your available assets and many policies will also provide help with as a form of Long Term Care Insurance.

4.     Ignoring Inflation: Inflation is a fact of life in our time.  Inflation will always erode savings, but with proper planning can be mitigated.  This type of planning is best done with the help of financial professionals using safe investment products.

5.     Relying Too Heavily on One Income Source:  Having all your eggs in one basket is never good advice and having diversified streams of income is good advice.  Even safe sources of income can fail; retirees can avoid losing all their income if one source loses value.

6.      Not Protecting Savings: Reaffirm item 5 above.  Although the stock market or other risk investment may be doing very well, as you look toward retirement you must use prudence with saved money.  Moving at least moving minimum necessary money into safe investments is effective planning.

Is now the time to have a conversation concerning your plans for retirement income and how you can develop a retirement plan you can count on?  Time is not on your side concerning retirement planning; regardless of when you plan for retirement it will get here before you know it.  A conversation with us today could save tomorrow.  Please call us at 888 270 9870 or email This e-mail address is being protected from spambots. You need JavaScript enabled to view it. , today!

Selecting a Care Facility: Assisted Living Homes

What is assisted living?  Assisted living is for adults who may need help with everyday task or feel it is time to live in an environment where help is available if needed, but over the past few years many of these facilities leaving the old definition of assisted living facility behind.  I some regards assisted living facilities are changing into villages or are a part of a retirement community of seniors living together for many reasons, but with resources to provide care at every level.  Many individual moves to assisted living because they are tired of living alone or they no longer want the day to day task of taking care of a house.  In many cases both the husband and wife move into an assisted living facility well in advance of need.  In this case the couple may even buy a condo within the facility and then pay for services as needed.  Within these same facilities, facilities may be available for visitors of a resident for a limited period.  But the traditional sense of assisted living is a facility catering to the individual that may need help with dressing, bathing, eating, or using the bathroom, but they don't need full-time nursing care.    

Assisted living facilities have a wide range of costs depending on service provided, but again in the traditional sense the basic assisted living facility cost less than nursing home care, but is still fairly expensive.  Individual assets, life insurance,

long-term care insurance even mutual funds will be used to cover costs. Medicare does not cover the costs of assisted living in some cases part are all of the cost may be covered by Medicaid. 

Some assisted living facilities and communities have become specialized for specific problems such as Alzheimer’s, there is one in Tomball.

As assisted living facilities and communities have evolved from their initial reputation more for profit facilities become available, quality improves and ROI for investors has become positive and interesting.  Assisted living facilities unfortunately are not available for everyone.  Using data based on 71 of the larger facilities in Texas, provided by AssistedLivingFacilities.org, the average cost of assisted living in Texas is $3,100 per month.  Actually costs range from a low of $1,000 to a high of $7,600 per month.  Increase of cost for assisted living facilities slowed in 2009 reported as less than 3.0%.

What’s available in our area: The Houston area has several assisted living and senior care options with varying degrees of service and amenities.   Houston, Texas is the largest city in Texas with 2,034,749 residents. Of this population, there are 176,325 residents who are over the age of 65. This number represents 8.7% of the population of Houston, which is slightly lower than the national average of 12.5%. However, the number of seniors in Houston will most certainly grow in the coming years, so will the need for assisted living and long-term-care options. (AssistedLivingFacilities.org)

Selecting a Care Facility: Nursing, Assisted Living or Home Health Care

One of the most difficult tasks we, as children, face is making the decision to move a mother or father, even ourselves, into a care facility, nursing, assisted living or using home health care.  As it becomes more difficult to manage the care of a parent or loved one the question becomes what do I do and where or what is best.

What do I do is a personal question base on personal observation, consultation with their doctors and perhaps a professional working in Elder Care.  Of course the question that jumps out is what is affordable? National median cost of skilled nursing care has risen to $222 per day or $81 to $87,000 per year and assisted living is at $3,300 a month.  Although Texas is somewhat lower it is still growing faster than inflation.  Even Adult Day Care is becoming unaffordable with cost like $61 per day and the national daily median hourly rate for licensed home-health aid services is up to $19 an hour.

Your first step is obtaining as much information as possible and a good place to start is the National Association of Home Care (NAHC).  NAHC is the nation’s largest care trade association.  NAHC has an extensive website of information for consumers to refer to in their search for help. {www.nahc.org}Additionally, doing a web search, state and location specific, can generate a lot of good information.

As is always the case, when looking for good reliable help nothing can replace doing your homework, visiting locations, talking to staff and family members of service users or residents. Again, using an Elder Care specialist to work with and for you will save you from a bad experience, time, and money.

Whether planning for a parent, loved one or yourself this is a project you may find over whelming aside the emotional trauma and should not be tackled alone.  After starting your research and getting some idea of the breath of the problem developing a team is the best approach.  If you have a financial consultant he/she should already be involved.  If you don’t have one, get one.  Then you need an Elder Care professional and an attorney, preferable one work with Elder Care.

“Understanding risks you face in retirement has never been more important.”

Planning for a successful retirement requires a written retirement plan based on several foundational retirement planning foundational principals and is not a do it yourself project.  A good financial plan will cover many subjects but the one we are always concerned with most is financial.  While focusing on the financial aspects of retirement planning will not assure us of a successful retirement, not focusing on them will guarantee failure.

Following are several basic financial requirements to prepare to develop the financial part of your retirement plan:

1.     Determine how much money you must have in retirement to cover basic expenses.

a.     Develop a budget based on current “required” expenses.

b.     Develop a budget base on expected future needed expenses

c.      Outline and prioritize expenses for future plans.

2.     Identify income sources and assets available to help fund your retirement.

a.     First understand options you have with drawing Social Security benefits before you do.

b.     Identify your risk tolerance.

c.      Review the risk your assets are at and if this risk makes sense to you for the long term.

d.     Assemble all of your financial information in one place, including 3 years of tax returns.

e.      Financial information will include other assets such as property or possible inheritances

3.     Create an outline as you first see it for turning assets into cash flow during retirement.

Creating an effective financial plan is not a do it yourself project, but by the same token you must remember that your impute is the key part of any financial plan for you.   It is your job to have a good idea of what your retirement will look like, what it will cost and what functions you want your team to take.  Remember your financial team is there to advise, recommend, and provide technical expertise, it I your job to accept or reject this advice.

Is now the time to have a conversation concerning your plans for retirement income and how you can develop a retirement income you can count on?  Time is not on your side concerning retirement planning; regardless of when you plan for retirement it will get here before you know it.  A conversation with us today could save tomorrow.  Please call us at 888 270 9870 or email This e-mail address is being protected from spambots. You need JavaScript enabled to view it. , today!

“Understanding risks you face in retirement has never been more important.”

Once we reach a certain age, we spend a lot of time thinking about retirement and as the time of retirement grows closer part of this thinking turns to worry.  Most often this worry concerns the financial aspects of retirement.  There is a lot we want to accomplish in retirement and retirement now is not the same as it was for our parents.  But with a weak economy, worry about our investments, the future of health care and inflation the question is will our finances last as long as we do?  Well worry never accomplished anything and the only way to have any chance of a successful retirement is developing an effective financial plan and then keeping it updated.

During your working years, your focus was on saving for retirement but a lot of things got in the way, college for the kids, vacations, a new house and so on, but somehow you were able save quite a bit or you still have a few years to double down on savings.  However, to be effective your plan must include more than return on investment and future income.  In fact the best retirement income plans funded by outstanding financial performance does not guarantee successful financial retirement.  Planning for a successful retirement requires a mindset encompassing more than just future income or return on investment.

The financial part of any retirement plan has many parts but in general they can be brought down to 5 key aspects.  If you understand and plan for these aspects you are on your way to developing a successful plan:

1.      Longevity; you are going to live longer than you think.  Generally most retirement plans are based on too short of a lifespan.  According to the CDC average life spans are increasing with current average into the 80s and expectations that many will reach their 90s and beyond. So the first principal is plan long.

2.     Market performance; yes, we have had a poor or worse market for several years and the market has now been on a rise for several months, but over investing with risk can have an even more significant impact on how long your savings will last.  If you can’t afford to lose it, then it should not be invested at risk.

3.     Withdrawal rate; the financial press talks about the withdrawal rate from your investment all the time, but in truth no one knows how much you should withdraw to not run out of money.  Actually withdrawal rate is not the first problem, most people lose up to 20% of income because of the way they set up distribution from Social Security, cash and retirement plans.  Loss is further increased by maintain assets in non safe investments.

4.     Inflation; there is nothing you can do about inflation, but you cannot ignore it.  At a rate of 3% inflation, $100,000 today is only worth $70,000 in 10 years and you are going to live a lot longer than ten years.

5.     Healthcare; as we all know healthcare cost is at best a moving target even for those that remain healthy.  What are your plans if your health does not go as planned?  

Is now the time to have a conversation concerning your plans for retirement income and how you can develop a retirement income you can count on?  Time is not on your side concerning retirement planning; regardless of when you plan for retirement it will get here before you know it.  A conversation with us today could save tomorrow.  Please call us at 888 270 9870 or email This e-mail address is being protected from spambots. You need JavaScript enabled to view it. , today!

Social Security: Part D Surcharges

If you’re a high-income Medicare beneficiary {Single Individual with AGI above $85,000 or married above $170,000} you are aware you can lose your part D pharmacy coverage over an $11.60 to $66.40 a month payment you haven’t made?  For those insured by Medicare Advantage plans you can lose the whole plan. 

In 2011 our government started imposing a surcharge for Medicare beneficiaries with high adjusted gross incomes, similar to the Part B surcharge instituted in ’07.  Even though you paid the premium for your Part D plan, the Centers for Medicare and Medicaid Services (CMS) sends a separate monthly bill for the surcharge to these Medicare beneficiaries not yet enrolled in Social Security.  [Social Security beneficiaries have these charge deducted from their benefit checks.)

April 1st ended the three month grace period which started January 1st with close to 1,000 beneficiaries being disenrolled from their Part D plan or Advantage plan.  Beneficiaries dropped from Part D have 60 days to call Medicare (800 633 4227) to ask for reinstatement.  Of course all back surcharges must be paid if CMS allows reinstatement.  Those on an Advantage plan should first talk to plan administration before calling.

If you are not reinstated, Medicare open enrollment starts October 15th with coverage to begin I January of 2013.

The major concern of retired individuals or those planning to retire is “out living my assets”!  The second major concern is “to not be a burden on my children”!  Of course retirees have many other objectives but these are the most important.

Factors most affecting “out living my assets” considered savings and return on investment.  Over the last several years’ retirement assets have taken multiple hits and real damage has been inflicted.  While these negative factors have, are and will continue to affect retirement, health factors are the most destructive to retirement income and assets.  Failure to consider possible health issues after retirement is not an option.

2009 the CDC projected those turning 65 and in good health could expect to live into their 80’s with the average reaching 85 and no reason not to expect even longer life.  However longer life will bring more health related issues at even greater expense, with nearly 50% of this group requiring long term care at some point in their life.  The good news; 50% of claims will last less than 1 year, 85% less than 4 years and 90% less than 5 years.

With the daily increase of retirees the average cost of nursing home care, assisted living facilities and home health care will continue to increase, with assisted living and home health care rising more quickly than nursing home care.  With these increases, rising cost of long term care insurance and companies leaving the market the percentage of retirees not obtaining or having long term care insurance is growing.  The question is how will retires meet the cost of long term care without running out of money?

From 2010-2011 the average annual cost for a private one-bedroom unit in an assisted living facility rose 7 percent now averaging $32,294.  Average hourly rate for home health aide in home care has hit $25.32 per hour and growing.  The average annual cost for a private room in a nursing home rose by a modest 2 percent last year to $70,912.

American retirees must seriously evaluate how and if they will be able to maintain their lifestyles as we live well into our 80’s, 90’s and beyond.  Although rising increase of nursing home care cost has slowed down what can we expect when the 77 million baby boomers start reaching their 80’ and 90’s?  How many will be able to afford a nursing home at $87,000 a year in just 10 short years at 2 percent inflation?

The fact is event if you only spend a year in a nursing home the impact on retirement assets can and will be overwhelming for most.  At these levels will Medicare be a solution, will it survive?      

Having no plan or waiting too long to take action is the recipe for disaster; Medicare provides limited long term care and Medicaid is not an option for those with higher incomes.  But aid from Medicaid is not just based on income, current assets will affect availability.  Even protected assets are available for recovery of Medicaid expense after death.

Is your retirement plan ready for future high medical cost? Is now the time to have a conversation concerning your plans for retirement, how you can develop a retirement plan you can count on and how you can keep from running out of money?  Time is not on your side concerning retirement planning; regardless of when you plan for retirement it will get here before you know it.  A conversation with us today could save tomorrow.  Please call us at 888 270 9870 or email This e-mail address is being protected from spambots. You need JavaScript enabled to view it. , today!

The majority of failed retirements are due to two reasons; medical problems and debt.  While medical problems may generally be unavoidable control of debt is often, not always, self inflicted.  Control of debt is critical to any plan for retirement and a good retirement plan can help you avoid debt.

Getting into debt has always been easier than getting out, credit card balances are way up as is their interest and fees.  Investing for retirement is critical but if you’re only making minimum payment on those 10 and 15% interest credit cards is not an effective solution. Paying off high interest debt is one of the best investments you might make.  Where else can you obtain a guaranteed 10, 15 even 20% return on your money?

Getting into debt did not require a plan but getting out of debt will and the sooner you have the plan in place the faster you can move and get back on track.  Getting out of debt may even require cutting back on your 401(k) contribution or other company retirement plans but if your employer matches contributions, contribute enough to obtain maximum matching contributions.  If your retirement plan allows borrowing, doing so may be an effective plan but do not leave without paying it back first and do not violate other pay back rules, to do so may have expensive IRS penalties. Making the decision to back off on investing for retirement requires prioritizing and then staying the course.  Having a “written plan”, Budget, Focus and staying the course is the biggest problem in getting out of debt.  Living on a budget can be difficult especially if you are accountable only to yourself.  Holding yourself accountable to someone else is a proven an effective factor in success.    

Failure to pay back borrowed money such as through bankruptcy or loan forgiveness may involve hidden income tax, even penalties.  The best advice is to obtain help from one of the many agencies working with others just like you, but here again care is the watch word.  Most reputable agencies do not charge an upfront fee, before committing to any agency you must do your homework.  A financial planner cannot be as effective or obtain reduction of interest rates, fees and penalties as a credit agency is, but there are advantages in using a financial professional along with one of the credit agencies.

Is now the time to have a conversation concerning your plans for retirement, obtaining control of your debt and developing a retirement plan you can count on?  Time is not on your side concerning retirement planning; regardless of when you plan for retirement it will get here before you know it.  A conversation with us today could save tomorrow.  Please call us at 888 270 9870 or email This e-mail address is being protected from spambots. You need JavaScript enabled to view it. , today!

A cold hard fact in retirement is health care cost.  The problem is most retirees and preretirees have no idea concerning future health care cost, fail to consider the impact of futur health care cost even for healthy retirees and will not consider the possibility of over whelming cost during retirement.  A 2011 study by the Transamerica, the Insurance company, center for Retirement Studies found that more than 40% of Americans do not have a strategy to reach their retirement goals.  Of those who do have a strategy, only 50% have considered and planned for healthcare cost, but less than one-fifth of these factored in long-term care insurance.

The truth is we refuse to consider the subject, we believe it won't happen to us.  We have Medicare with Part B and D or an Advantage plan and think that should be enough, but the truth is they do not provide full coverage.  50% of individual over 60 will spend time in a nursing home from a few day to months even years.  Medicare and Advantage plans provide very limited nursing home care. For most of us Medicaid is not an option or one we do not want to consider or qualify to receive.

When it comes to long term retirement planning most, including advisors, have a serious misconception about the cost of future health care.  When ask to estimate most guess around $5,261 a year.  However, a 2010 study found that a 65 year old health couple who retire today and lived for 20 years could spend as much as $10,750 in today’s dollars annually.  This is $15,862 in the 10^th year and $22,592 in the 20^th year at medical inflation of 3.6% and this is for health seniors.

Regardless of how well you plan investments, income or asset accumulation, failure to plan for health care cost can leave you depending on Social Security, children or family, not a place you want to go.  Today, the biggest concern of those planning for their retirement or now in retirement is running out of money yet less than 35% of retirees have an organized written plan and less than half of these have kept it up to date with periodic reviews and updates. As a wise man once said, failing to plan is planning to fail.

Is now the time to have a conversation concerning your plans for retirement income and how you can develop a retirement income you can count on?  Time is not on your side concerning retirement planning; regardless of when you plan for retirement it will get here before you know it.  A conversation with us today could save tomorrow.  Please call us at 888 270 9870 or email This e-mail address is being protected from spambots. You need JavaScript enabled to view it. , today!

Prior to the 90’s generally accepted principals were; retiring individual would have adequate income with replace ratios of 50 to 70% of earned income prior to retirement. (Lower income individuals require higher ratios)

During the 90’s these figures were bumped to 85%. A 1993 study by the American Society of Pension Professionals and Actuaries, “National Retirement Income Policy” projected income replacement ratios for those above $50,000 income as 76-73% and under $50,000 income 85-78%. 

Developing a static replacement ratio for any group is unrealistic.  Required income is individualistic and must be developed depending on health, longevity expatiation, expenditure patterns, inflation and a host of other influencing parameters.   Unfortunately even considering best guess, the amount required is almost always underestimated.  Major factors for underestimating are numerous but considering the last 20 years perhaps the most serious is; inflation (3.2% for seniors) inflation has been listed as low by the government over the past two year, but does cost for food, clothing, medication and gas really support their numbers?

Is it really wise to base adequate income on a current 50-85% need?  $50,000 at 3.20% over 30 years is $143,862.  This means it will take $143,862 to buy in 2045 what $50,000 will buy today.  Medical cost has risen even faster at a rate of 3.6 to 3.9% the last 20 years for seniors and during the past few years there has been no indication it is going to slow down.  At 3.6 in 20 years what cost a $1,000 today will cost $1,424 and long term care is rising even faster today.

Is now the time to have a conversation concerning your plans for retirement income and how you can develop a retirement income you can count on?  Time is not on your side concerning retirement planning; regardless of when you plan for retirement it will get here before you know it.  A conversation with us today could save tomorrow.  Please call us at 888 270 9870 or email This e-mail address is being protected from spambots. You need JavaScript enabled to view it. , today!

Thinking of converting assets to or establishing a Roth IRA? Roth IRA’s are a consistent recommendation by the financial press and financial planners.  Predominate value of the Roth is future tax avoidance, but it is not for everyone.   For those at a younger age and who qualify, developing a Roth IRA in concert with other planning makes inordinate sense.  But those close to retirement must contend with current tax ramifications of moving taxable money into a Roth.  Converting assets to a Roth IRA will legally allow you to keep more of your nest egg and move your IRA from forever taxed to never taxed, even when passed to your heirs.

When considering establishing a Roth, the first rule is prudence!  Your money can grow tax free well into your 70s, 80s or beyond unaffected by RMDs. (Required Minimum Distributions)  But considering current real income tax cost, will future projected growth of converted assets reward you sufficiently to warrant the change?

Prior to establishing or converting to a Roth, advice from you CPA is prudent.

Recharacterization:

Tax time is a good time to determine if your Roth Conversions should be recharacterized back to a traditional IRA.  If switching back to a standard IRA now makes more sense file for an extension and you will have until October 15th to complete the recharacterization or pay tax due for moving to a Roth, but you should be discussing this with your tax professional. 

Moving assets is not the only tax play available to have tax free income, not have to bother with RMDs and pass unused assets to the next generation.  

Is now the time to have a conversation concerning your plans for retirement income and how you can develop a retirement income you can count on?  Time is not on your side concerning retirement planning; regardless of when you plan for retirement it will get here before you know it.  A conversation with us today could save tomorrow.  Please call us at 888 270 9870 or email This e-mail address is being protected from spambots. You need JavaScript enabled to view it. , today!

Many if not most individuals are confused with the term “Living Will” or had it miss represented.  Do you know what a ‘Living Will’ is, do you have one?

A Living Will has nothing to do with estate planning but much to do with your medical care and or end of life; A Living Will is a Directive to Physicians and Family or Surrogate; at the minimum expresses your wishes about whether you do (or do not) want life support systems or heroic actions to be used in the event you are dying, with little or no hope for recovery.

In context of estate planning a ‘Living Will’ is often a miss labeled title for Revocable Living Trust.

The Revocable Living Trust (RLT) may be classified as a Will substitute, which may accomplish many estate planning objective better than a Will.  However, while the RLT will remove assets from probate charges it will not remove the asset from estate tax consideration.  Value of the asset is still estate taxable and may receive a stepped up in biases on the death of the grantor.

Revocable Living Trust (RLT) Value:

1.Allows for effective management transfer in the event of mental or physical disability, as well as eliminating or avoiding conservatorship proceeding for assets within the trust.

2.At death of the Grantor assets within the trust are handled under powers of the trust, which is now an irrevocable trust.  As such, the assets do not enter probate and cost is avoided.

3.Although any document may be challenged in court after death, an RLT now an irrevocable trust is less successfully challenged if correctly established.

4.Any Will is publicly filed an open to public observation, RLT or Irrevocable Trust are not thereby providing confidentiality.

5.The RLT may help in handling administration of out of state assets such as property.

RLTs do not abrogate the need for at least two other ‘estate planning’ documents.

1.A Will or better yet a ‘pour over will’.  Among the several things RLTs may not do is designate the guardian or trustee of minor children.  Appointing a guardian or trustee must be accomplished through a Will and is subject to the court’s approval. 

2.“Durable’ power of attorney; there is considerable difference in a power of attorney and a durable power of attorney.  In relation to the RLT, the durable power of attorney will allow the appointed representative to act for and in place of the grantor if the grantor becomes disabled.

Several years ago, more like 20, Revocable Living Trust became an item often recommended by financial/estate planners and much marketed by many attorneys’, at considerable expense and time.  As effective as RLTs are, they are not for everyone.  First there is a good deal of paperwork in transferring assets to the trust.  Secondly expense and management of the trust may be more than it’s worth.  As with any planning device, it is wise to evaluate actual cost, financial, time and effect.  

Before transferring real property to any trust obtain the advice of a real estate attorney.  Personally, I do not advocate maintaining real property within a trust in most situations.

Establishing an RLT for partial care or distribution of assets may be very effective for some in estate planning, possibly lowering estate value where it may be handled under summary probate and unsupervised administration.  However, an RLT is only one part of effective estate or retirement plan.  In the course of my practice I often have discussed RLT’s and even involved some planning, but for the most part we and my clients lawyer decided to drop the idea.  In the late ‘90s individuals watching late night TV were impressed by other than righteous attorneys that RLTs could solve all estate problems but close investigation, financial professionals and better attorneys often disabused them of the idea.  However, it effectively motivated many to do much needed planning; would this concept be solve certain problems for you—perhaps/perhaps not?

Is now the time to have a conversation concerning your estate and how you can develop an effective estate plan you can count on?  Estate planning is not just about saving estate taxes.  Time is not on your side concerning retirement planning; regardless of when you plan for retirement it will get here before you know it.  A conversation with us today could save tomorrow.  Please call us at 888 270 9870 or email This e-mail address is being protected from spambots. You need JavaScript enabled to view it. , today!

Older Americans (those over 65) spent 12.9% of their total expenditures on health (2009), more than twice the proportion spent by all consumers. (Retirement Weekly March 18, 2011)

Retirement Weekly’s March 18, 2011 edition has put together an interesting insight concerning use of health care by older Americans of retirement age.  The report is taken from statistics provided at www.aoa.gov/AoARoot/Aging_Statistics/Profile?2010/14.aspx. Statistics are based on information through 2010 covering 2006-2009 and are exceedingly important to developing a retirement plan.

In 2007, about 12.9 million persons age 65 and over [3,395 for every 10,000 persons age 65+] were discharged after a short stay in the hospital, average stay was 5.6 days.  “In 2009 older consumers (65+) averaged out-of–pocket health-care expenditures of $4,846, an increase of 61% since 1999.”  As reported, Americans 65+ spent an average 12.9% of their total expenditures on health, while the general population spent less than 6.4%. “Health cost incurred on average by older consumers in 2009 consisted of $3,027 (63%) for insurance, $821 (17%) for medical services, $828 (17%) for drugs, and $179 (3.5%) for medical supplies.”

Above statistics is an average over a very large population for the period of 2006-2008.  Since then cost of Medicare part B increased to $115 per month through 2011 for many of us now somewhat lower for others much higher, but on average Medicare part B has increase 20% since 2008.  Another report from www.gao.gov/products/GAO-11-306R reports “a basket of brand-name prescription drugs increased at an average annual rate of 8.3% as typical prices for a basket of 45 generic drugs fell at an average annual rate of 2.6%.” [Retirement Weekly 3.18.2011 Health Watch]

Covering the cost of health care has always been a significant factor in designing any retirement plan, but a factor always demanding consideration.  Average inflation from 1988-2009 was about 3% annually.  However, seniors averaged 3.2% and 3.9% for health care.  Core inflation (as reported by the government) has been quite low, although real consumer inflation (which includes energy and food) has not.  Nor has or is health care inflation slowing down, the numbers are not out for health care inflation 2009-2011, but no doubt we will see an increase.  

Although these increases could be considered minor they are just a small part of health care cost for seniors, and like part B medical inflation has not slowed down even during these economic troubling times. Are you aware of the impact potential health events may have on your retirement plans?  What are your options and alternative courses of action?  Last minute planning for these events is not an option you want to consider

Is now the time to have a conversation concerning your plans for retirement and how you can develop a retirement plan you can count on?  Time is not on your side concerning retirement planning; regardless of when you plan for retirement it will get here before you know it.  A conversation with us today could save tomorrow.  Please call us at 888 270 9870 or email This e-mail address is being protected from spambots. You need JavaScript enabled to view it. , today!

If you don’t have a retirement [written] plan, how do you know you don’t have a problem?  Many of us put things off until the last minute and planning for retirement is not an exception to this inclination. Federal income tax is due Monday the 17^th, yet many will spend all weekend working on income tax.  Many will miss deductions costing hundreds of dollars, because they did not plan ahead.  Yes, they can submit a corrected tax return later, but that in itself has additional cost, lost time or both.

When it comes to retirement planning, failing to plan is always expensive and very often not open to correction.  Recently, an example of this involved a new client and Social Security.  By failing to plan ahead, Social Security income was lost based on the spouse’s work history; income never to be recovered.  A little planning would have provided additional significant income for a number of years.  Now, income will never be drawn from this account.

Best retirement planning begins well in advance of any actual retirement.  As retirement draws near plans are reviewed, improved or modified to reflect changing situations or to take advantage of opportunity never before recognized or available.  Planning not started early or even after retirement commenced is no reason to not plan now, it’s more of a reason.  Contingencies unrecognized are impossible to value until they are upon you, and unfortunately, they can make a financial or retirement plan nearly worthless if they remain unrecognized or ignored.  Over the past 20 year’s inflation for seniors averaged 3.2% per year, medical inflation 3.6% per year.  Do you know what 3.2% inflation does to a fixed income over 10 years, are you ready for it? [Multiply 1.032 times any amount for as many times as number of year.)

Difficulty seeing or forecasting the twists and turns life will take after retirement is not unlike planning a car trip.  Most people spend more time planning a car trip of a few hundred miles than planning for retirement lasting 20 to 30 years or longer. 

Much in life changes slowly, plans put together today can identify concerns and objectives over much of the future.  At the very minimum, early planning may provide an approximation of actual retirement needs.  Working with current standard of living cost, less certain current expenses, times a selected long term factor can provide a close estimate of future cost and where you stand.  From this estimation you may be able to determine if you are on course to retire when you expected or need to work a little longer. Planning allows for consideration of possible obstacles and inflations that can hurt or hinder your retirement.  Making small adjusting now may prevent large problems later. 

Less than 35% of seniors have completed any type of long term or retirement plan.  Of this group, most have failed to review and update.  Economic change of the last 5 years has disrupted most retirement income concepts or plans.  However, planning is not just income, not having a durable power of attorney or medical power of attorney may cost you more than you ever thought possible, not to mention a will or trust.  May I mention Long Term Care?  I know it will not happen to you but what of your spouse? 

Is now the time to have a conversation concerning your plans for retirement and how you can develop a retirement plan you can count on?  Time is not on your side concerning retirement planning; regardless of when you plan for retirement it will get here before you know it.  A conversation with us today could save tomorrow.  Please call us at 888 270 9870 or email This e-mail address is being protected from spambots. You need JavaScript enabled to view it. , today!

Before and during retirement, you plan trips, different activities and hopefully a long and successful retirement.  A plan with more time for family and friends maybe even a second career, volunteer pursuits, or special interests.  Whatever your plans, mapping your route to retirement satisfaction requires ensuring your savings won’t run out before you reach your destination.

It’s no surprise, research shows that the road to retirement satisfaction is paved with good health and financial well being.  Retirees who guarantee their retirement income with annuities tend to maintain higher levels of satisfaction over time than those drawing income from liquid savings.  An annuity can help provide the fuel you need to make your income last for six reasons:

1.     Fixed Indexed Annuities Protect Your Assets:  Long-term fixed indexed annuities are issued by Life Insurance companies who have been in the business of protecting assets for centuries.  A fixed indexed annuity provides guaranteed protection of principal and interest potential you will not find with other sources of safe savings accounts such as certificates of deposit or savings bonds. In addition most fixed indexed annuities offers bonus up to an additional 10% at the inception of your contract jump starting your savings plan.

2.     Interest-Crediting: With most fixed indexed annuities you can choose up to five interest-crediting strategies. Each strategy credits interest to your annuity differently. You can elect more than one strategy, and re-elections of strategies are allowed during the 30 days following each contract anniversarywith each being guaranteeingnot to lose principal or earnings.
 
Interest-Crediting Strategies:
 
Fixed Rate Strategy: Premium placed in a Fixed Rate Strategy receives interest credited at a fixed rate that is declared at the beginning of each contract year by the company. This strategy may be ideal if you want to know at the beginning of the year how much interest will be credited to your contract during the upcoming year.
 
Choice of Four Index-Linked Interest-Crediting Strategies You also normally have the choice of up to four strategies where the interest credited to the contract is related* to the increase, if any, in one of the various indexes such as the the S&P 500® Index during the contract year. The S&P 500® Index is widely regarded as the premier benchmark for U.S. stock market performance. The index contains stocks from 500 large, leading companies in various industries. These four index-linked interest-crediting strategies may offer more interest-crediting potential than the Fixed Rate Strategy may in any given year, with the assurance that your interest credit can never be less than zero. With the index-linked interest-crediting strategies, interest is credited annually at the end of the contract year. The index credit is calculated over the contract year, NOT the calendar year. Since the interest credit is related, in part, to movements in the S&P 500® Index, the amount of interest your annuity will be credited at the end of the contract year cannot be known or predicted prior to the end of the contract year. Once interest is credited it becomes part of the principal and is then guaranteed.  {*Indexed annuities are only related to the index chosen to define interest to be credited if the index increases** over the chosen period. ** At the end of each period the policy index value is reset to the current value of the index.  If the value of the index goes down the value is reset, therefore if the index rises in the following period there is gain in the annuity.}

3.     Flexibility: Regardless of contract period selected most if not all indexed annuities allow access to at least 10% of the value of the annuity without penalty.  Allowance is made for RMDs and certain critical events in life providing penalty free access to your money.

4.     Income: Most annuities no longer have to be annuitize to obtain life income from your annuity.  Certain options or riders are available providing lifetime income, but in the event of an early death the residual annuity value is passed to your heirs.

5.     Inflation: Some annuities continue to increase your income even after the income period starts, thereby protecting your income from loss due to inflation.  

6.     Protection for Life: The biggestchallenge facing investors today is providing for adequate retirement income and income that cannot be outlived.  Fixed Indexed Annuities can make a guarantee to do just that, a guarantee no other product can provide.  

Is now the time to have a conversation concerning your plans for retirement income and how you can develop a retirement income you can count on?  Time is not on your side concerning retirement planning; regardless of when you plan for retirement it will get here before you know it.  A conversation with us today could save tomorrow.  Please call us at 888 270 9870 or email This e-mail address is being protected from spambots. You need JavaScript enabled to view it. , today!

As a Retirement Planning Specialist, there are certain documents I often find missing from new clients files and/or records that are absolutely necessary whether a single individual or couple.  The need for these documents is not age directed, should be maintained, and always available to your chosen representative(s).

Will or Wills:                                                 

Time and time again we are told the importance of having a Will.  Many individuals feel they do not have enough assets to warrant a Will.  But if you own anything or have children you have two choices:

1.      You select, who will get your “stuff” or take care of your children.

2.      Let the State decide. 

Maybe you really don’t care right now what happens but someone will have to clean up your mess if you don’t.  Very often, in fact most often, once you go this route you never get around to creating a Will or other documents needed to preserve your assets or protect your family.  The lack of a Will or finial planning always creates significant difficulty handling transfer of assets (property) in the event of death.  Its lack will cause heart ache, bad feelings, serious expense, difficulties for your spouse and/or children as well as destruction of the family.  It is not uncommon to find children disinherited because of no Will or lack of an updated Will.  Who can make a better determination for distribution of your property or insure your children are provided for than you, the State?   If you have a few dollars or a lot how much do you want to give to your family, the State or someone else?

It’s truly amazing considering those who knew better but did not take care of this little matter and what it cost.  Abraham Lincoln, Howard Hughes and Martin Luther King are just a few who failed to have a Will or a legal Will and Michael Jackson’s estate is still tied up because although several Wills have been found, no legal Will has. 

In Texas when you die without a Will the Court will give you one and appoint your personal representative; the first choice is the surviving spouse if capable, 2^nd is the principal beneficiary of the estate, 3^rd any beneficiary of the estate and 4^th next of kin as determined by Texas Laws of Descent and Distribution. 

Own a home in Texas; the Small Estate Affidavit is not an option when there is a Probate Estate in excess of $50,000.

Can you avoid having a Will and keeping everything out of probate, actually you can but in cases I have seen where this path was taken, the process often failed because it was not reviewed and updated over the years between doing the planning and death.  Just to be safe it is never wrong to have a will.

If you have a safety deposit box and just must, place a copy in your safety deposit box but have an original centrally located with your other documents protected from fire and other disasters.  Make sure that someone knows about other than you; if you were smart enough to use an attorney leave an original with him.  Your personal representative should know where to find your Will as well as other important documents

Trusts:                                                           

Trusts are a way of maintaining some control over your estate after death and if designed correctly may preserve assets from the clutches of estate and other tax.  You should know, in Texas a child receives his part of the estate at age 18 if you have not take steps to protect the child from himself.  Generally, an attorney can provide information concerning structure of a trust which will maintain assets for proper use and protect assets from creditors, legal judgments, family and so much more.  Is it expensive, there are ways to mitigate the expense for some, but for others the question is do you pay a little now or does your estate and heirs pay a lot later. 

Estate Plan:

Depending on size of your estate you may or may not need a formal estate plan.  If you are not concerned with Taxes or Probate it is possible to have your estate handled by your will and a few trusts within your will.  But we have all been told an ounce of prevention is a lot better than a pound of cure.  Having someone consult with you is well worth the effort and can actually be without cost.  Many individuals in my profession make no charge for this type review, many life insurance professionals are very able to help and your attorney may be able to advise you in this area as he works with you on your will and/or trusts.

Before we go on there is one area that often escapes review and will cause problems, heart ache, and disaster for your spouse and may destroy your family.  This item is the beneficiaries you listed on your Life Insurance, IRAs, 401Ks and other such property.  Case in point, I had a client who still had his former wife of his first marriage 20 years ago beneficiary of his $1,000,000 life insurance policy.  But he had no insurance for his current wife and mother of his two children.  He said he thought he had made the change.   If he had died there would have been a good chance his wife and family would have never known about the coverage and if they had it would have become a court case. 

Many assets and property are handled by direct beneficiary and it is a good idea to have a list of all these assets with beneficiaries listed.  This list should be kept in a safe organized file along with your other papers, records, life insurance, other insurances and all of the above.  A safety deposit box is not a good place to keep these files.  Ask your bank what happens to your safety deposit box when you die or become incapacitated, even if it is a joint box.    

Durable Powers of Attorney:                                  

This legal instrument is essential in the event of several situations, such as old age and incapacitation.  A Durable Power is more effective than a standard power of attorney and should always be discussed with an attorney.  It would take more words than I care to write as to why some form of this legal instrument is so necessary, in most instances a copy is not acceptable and in certain cases your signature must be certified.

Medical Powers of Attorney:                                  

There is some question concerning the ability of Durable Powers of Attorney effectiveness in handling control of your medical care in the event you are unable to do so.  A trusted representative provided with this document could become very important to your care and desires.

Living Will:                                                   

Directive to Physicians and Family or Surrogate; at the minimum express your wishes about whether you do (or do not) want life support to be used in the event you are dying and there is no hope for recovery.

Estate (Care) Plan:                                       

If you become incapacitated you cannot make legal decisions concerning your property. Someone must have this authority to speak for you and it is better and cheaper to not have to seek a court order. 

HIPP Release Forms:                                   

Due to the Privacy Act the completion of these forms on those important to you is very important.  Many of my clients have Children in college at some distant from home.  If they are over 18 and under a doctors’ care or in hospital you cannot obtain information from these providers without this release form.  Even if you were there they cannot legally provide this information.  They do not have a choice in this regard; it’s the law which carries significant penalties, even jail time.  This also goes for your mother and/or father who may be well into their years.  If they now are considered or become unable to make decisions for themselves you may and probably are in a catch 22 position.  The form that would have cost nothing will now require a court order, along with attorney fees and the time and expense it takes to prove your position as well as theirs.

Is now the time to have a conversation concerning your plans for retirement preparation and how you can develop a retirement plan you can count on?  Time is not on your side concerning retirement planning; regardless of when you plan for retirement it will get here before you know it.  A conversation with us today could save tomorrow.  Please call us at 888 270 9870 or email This e-mail address is being protected from spambots. You need JavaScript enabled to view it. , today!

March of 2010 I wrote; “Should We Refrain from Equity Investments” my answer was I think not, if we have a guaranteed retirement income plan in place.  My comments were directed to those in or entering into the retirement zone, with a proclivity for equity investment and maintaining a significant asset position in The Market.  At the time the DJIA had just clawed its way back to 10,550 yesterday April 10, 2012, the DJIA dropped 213.66 to 12715.93 after rising well into the 13,000’s.  The question is with the volatility we have seen since 2010 which way is the market headed now and should we go along for the ride? 

Bill Gross, CEO of PIMCO, one of the world’s largest bond fund managers, has said “history was made in October 2007 when the stock market fell, because we may never again in our lifetimes see a DOW of 14,000 points.”  Many advisors who know or think they know have continued to point out we now live in a period of seemingly tremendous Market flux.  They also tell us during the next 10 to 20 years we will see market growth followed by significant drops in market value.

Karlan Tucker, CEO of Tucker Advisor Group in an article for Producers Web.com (an industry publication) pointed out (6.28.2010) “When bubbles burst like the real estate market and stock markets did, they don’t re-inflate to their previous levels for a long period of time-typically twenty years or longer.”  He went on to mention many other bubbles yet to pop that will affect the Market as radically as those of 2007.

Our economy today is still reeling with high unemployment, government debt and an election which has not yet had full impact on The Market.  Then there is the health care issue before the Supreme Court and various laws and regulations passed during the past four years which will take effect with full impact in 2013and 2014 if they are not changed by a new administration.  Is the time to commit irreplaceable assets to a volatile Market?

As Mr. Tucker and others point out the biggest factor in getting to DJIA of 14,000 was the baby boomer generation of 77-million on a spending spree.  Today there is no similar generation or one with available discretionary assets as that generation.

The question remains: Should those of us in or entering the retirement zone refrain from Equity Investments?  I think it is time to remain on the sidelines, even when we see the market moving as it was since the first of the year.  At this point in our lives development of guaranteed retirement income is paramount.  The only way to accomplish this is protection of principal and growth with a mix of safe money investments; fixed for absolute return and equity indexed products that will not lose principal and interest to safely increase assets and overcome inflation.  With the world and U.S. economy in the state it is, we will see extreme movement in the Market and possible Market loss equivalent to what we have witnessed or worse.  What effect would such loss have on retired or retiring individual’s equity investment heavy and their plans for retirement or quality of life in retirement?  Will that individual be able to wait out the loss, have courage or time to do so?

Qualified retirement specialist’s can help develop effective retirement income plans with guaranteed lifetime income indexed for inflation.  Proper retirement income planning is based on developing guaranteed lifetime income indexed for inflation using safe investments.  Primary consideration must be given to guaranteeing quality of life throughout retirement with available or known assets and then improving or growing these assets with safe money options.

Is now the time to have a conversation concerning your plans for retirement income and how you can develop a retirement income you can count on?  Time is not on your side concerning retirement planning; regardless of when you plan for retirement it will get here before you know it.  A conversation with us today could save tomorrow.  Please call us at 888 270 9870 or email This e-mail address is being protected from spambots. You need JavaScript enabled to view it. , today!

If your stock has appreciated significantly, now may be the time to take a lump-sum distribution of this stock.  This is one case where a lump-sum distribution could actually make sense. 

If you take a lump-sum distribution of the employer stock from your plan, you are only required to pay ordinary income taxes on the value of the stock when you obtained it.  Appreciation on this stock will be taxed at lower capital gains rates (now 0 to15%), depending on your annual income.  Additionally, any appreciation occurring after distribution date receives favorable capital gains rates when the stock is held an additional 12 months.

If you leave the stock in the plan, appreciation eventually becomes subject to income taxes at your ordinary tax rate when you start taking retirement distributions.  This net unrealized appreciation (NUA) strategy can help you reduce income taxes by taking advantage of the lower capital gains rates of today. 

Rules of the game:

1.     The strategy only applies to qualified employ stock. For NUA purposes this is stock only of your current employer.

2.     The election must be lump-sum, in kind distribution from the plan, and distribution must take place within one year.

Remember laws change and you should always consult with a qualified tax professional before making this type move.

If the possibility of future retirement is now a consideration, you are not delighted with or absolutely sure of your current plan it may be time to have a conversation with someone that will understand your situation and provide the information you need.  Call us today at 888 270 9870 or email This e-mail address is being protected from spambots. You need JavaScript enabled to view it. .  Remember time is not on your side when it comes to retirement planning and the hardest step is getting started. 

For decades, tax-deferral has been one of the most powerful ideas advocated by financial advisors, the government and financial press.  But is it still the best option for everyone?

It’s often quoted “Why pay income tax now on money you don’t need now?  Instead, you can defer taxes, grow more assets, and ultimately have more money after-tax.”  This concept has always been based on the belief you will be in a lower tax bracket when you retire, but is this still the case? 

To answer this question we must first look at look at Federal, not to mention state, income tax history.  Federal taxes started out at a low 7% for the highest income earners, in 1944 it moved to 95% and over the years it has average 65% for the highest earners.  Now the highest earners are paying 35% and capital gains is at a low 15%.  As we look at the economy, follow the financial press, review our corporate national debt and those in political power do we really believe tax rate are going to remain at this level?  Furthermore we are well aware that tax increases are being pushed for those in the highest brackets that is not where most of the money is.  While it may help to increase the 35% bracket and even capital gains eventually it falls on the middle brackets (25 & 28%) to provide the money and allow 55% of the nation not to pay income taxes.

Deferral of taxes has always made sense, up until now:

Change is coming and coming quickly and it is past time for all of us to reconsider the concept of deferring tax on our investments, above any match of our employers. The reasons are many but the most obvious:

1.     Probability income tax rate will increase on the affluent Americans followed by an increase on the rest of us.

2.     Unusually low return on investments, the volatile market and unlimited printing of money by the Fed.

3.     Our tax and spend government.

If you believe taxes will go up, then is now the time to defer income?  Taxes are on sale and we might be better advised to move money from or stop deferral of investment, pay the tax and move assets to tax free investments for the future.

With the Billions of dollars that has been printed with nothing to back them up except national faith and credit at some point someone must pay and this is normally called inflation. The value of the dollar becomes less, we have to make more to buy the same products and even if brackets stayed level inflation will push us to a new level of tax.

Where is the largest pool of untaxed money today, it’s in our IRAs, 401(k)s and qualified plans.  If this is where the money is, don’t you think the government is considering how to get more of it?  Would you borrow money from a bank that says you can borrow as much as you like, but we will tell you when it’s time to pay it back and what the rate is?  Even if you do not need the money at 70.5 you have to start taking it due to Require Minimum Distributions.

The question you must ask yourself, whose retirement am I planning anyway, mine or the government? 

Is now the time to have a conversation concerning your plans for retirement income and how you can develop retirement income you can count on?  Time is not on your side concerning retirement planning; regardless of when you plan for retirement it will get here before you know it.  A conversation with us today could save tomorrow.  Please call us at 888 270 9870 or email This e-mail address is being protected from spambots. You need JavaScript enabled to view it. , today!