Planned Assets Planning Blog

If you were struck with a Critical Illness, Heart Attack, Cancer or Stroke and couldn’t work for six months or more, how would you meet the cost of living, pay your bill and medical cost?

Did you know?

1.3 Million Americans will be diagnosed with Cancer each year?

1 out of 2 men and 1 out of every 3 women in America will be diagnosed with Cancer sometime in their lifetime?

77% of All Cancer diagnosis will be over the age of 55?

865,000 Americans will suffer a major Heart Attack each year?

700,000 Americans will suffer a Stroke each year?

It’s not pleasant to think about what could happen to your family if you were to become seriously ill or otherwise disabled for an extended period of time.  The reluctance to confront that risk may be one of the reasons why 69% of private sector employees have no long-term disability insurance.  If you consider small business and self employed, the percentages are even higher.

If you are 55 and hit with a critical illness and can’t work, what will it do to your retirement plans?  We all are actual cognizance of the risk but still we ignore the possibilities, why is this? 

For most small business and all medium to large business long and short term disability protection is normally available at very low cost, generally at very low cost to the business or employee.  For the business not to provide it and the employee not to accept it is irresponsible, but for the very small business or the self employed it just may not be available often because of cost.  While group short and long term disability is relative affordable with very low cost this may not be the case with individual disability coverage, but there are alternatives.

If you have not explored protecting your family and yourself from a situation that most probably will ruin all of your future plans, now should be the time.

Is now the time to have a conversation concerning your plans to protect yourself, your family and your retirement from disability?  We know how to help you cover this very important problem at less cost than you may think.  Time is not on your side concerning your risk of a disabling episode; regardless of what plans you have for retirement and it will get here before you know it, a disabling episode could ruin them.  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!

Monday’s Wall Street Journal included The Journal Report: Big Issues. Within this section was a discussion concerning Variable Annuities vs. equity investments such as bonds, stocks and mutual funds. As a financial consultant of 30 years and former Registered Rep, working with clients trying to build effective retirement incomes, I find these discussions disingenuous.

During the past 12 years we have seen the equities market plunge twice and although the DJIA and S&P are back up the recovery is shaky at best and really has no bearing on the smaller individual investor. The Dow is an index of 30 selected companies that are (stock) price weighted; a better index is the S&P 500 or the Russell 2000 Index. However, most small investors, whether investing individually or through mutual funds, recoup major losses within an effective time period effectively improving their retirement income position. As one of my clients said quoting Will Rogers, “if I had had it in a tin can, at least I would still have my money”. But what does this have to do with Variable Annuities (VA)?

In my opinion, a VA is another way for brokers to be continually paid for managing your money with the appearance of Safety. During the last equities melt down VAs took a heck of a hit, sells dropped to an astounding low and Registered Reps, brokers (to sell a VA you must be registered to sell securities) and insurance companies were losing money. Why did this happen?  If you don’t know you should find out VAs have not really changed.  Insurance companies then reinvented VAs adding what investors perceive as making VAs a safe investment. Unfortunately the proof is in extensive small print which small investor don’t read or understand if they do and Registered Reps or brokers don’t clearly explain. Regardless of the smoke and mirrors during the sales process VAs are not much different when it comes to being a safe investment than equities and often more expensive.

The really unfortunate problem is because a VA is an annuity Fixed and Equity Indexed Annuities (EIA) are painted with the same brush. Fixed and Equity Indexed Annuities are truly safe investments. Over a 20 year period an Equity Indexed Annuity will beat actual income returns from stocks bonds, mutual funds or VAs. With Fixed or EIAs you truly cannot lose money. Fixed annuities earn interest similar to CDs only better. EIAs earn interest based on indexes such as the S&P 500 but are not invested in the market. Each year interest earned is reset and becomes part of principal and principal is guaranteed. In years were we have a down market interest may, other than a guaranteed minimum, not be paid but nothing is lost and this is why over a period of years EIAs will beat the market or VAs.

Many VAs now provide guaranteed income based “only” on amount invested but require the annuity to be annuitize. {Annuitized, means the insurance company pays you a life income, but only for life, when you die the insurance company keeps any residual money in the annuity.} On the other hand Fixed or EIAs provide a rider that has an increasing income value higher than the accumulated value of the annuity and pays out any residual money within the annuity when you die.  Many VAs include or have available a death benefit or coverage, Fixed or EIAs also have availability of a death benefit, but with higher coverage.

Is VAs a safe investment? In my opinion, a VA is no safer than an equity, bond or mutual fund investment and over time can cost more. For real safety, return of and return on your money VAs, equities, bonds or mutual funds will not out perform fixed annuities or EIAs. For guaranteed retirement income why would you put your money at risk with a VA?

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.

If you ask ten different people about the rules, penalties, and tax consequences of an IRA distribution, you’re likely to get 11 different answers.  The fact is a wrong move could cost you dearly.

1^st IRAs are not the same as employer sponsored plans such as 401(k) plans, so they don’t play by the same rules.  

2^nd There are two types of IRAs; Traditional and Roth and both have different rules.

3^rd With the exception of Roth IRAs and 401(k)s distributions generally require payment of income tax.

4^th Distribution rules are governed by your age as to when distributions can be safely taken and how they may be taken.  Understanding these rules can mean the difference between tax savings and a potential tax liability as high as 50%.

With a traditional IRA contributions may be or have been tax deductible, but distributions, at the time they are taken, may be taxable as income.  Your age is the determining factor as to the cost of getting your money.  If you begin taking distribution prior to age 59.5, but if you don’t take enough at 70.5 (Required Minimum Distribution (RMD)) you pay a penalty.  Generally, money taken from an IRA prior to age 59.5 elicits a 10% penalty as well as standard income tax. (If only a portion of your contributions were deductible at the time they were made, that portion plus interest is only taxable.)  Miss taking the proper RMD and it could cost you up to 50% of what you did not take in penalty tax.

As with most things the government does there are a number of exceptions to the rules:

1.     By your beneficiaries at your death.

2.     If you become disabled.

3.     If the money is used to pay qualifying medical expenses [when they exceed 7.5% of your adjusted gross income]

4.     If you are unemployed, to pay the costs of health insurance.

5.     If the money is withdrawn to pay for “higher education” cost for yourself, your spouse, children or grandchildren.

6.     If you use the money [up to $10,000] for the first time purchase of a home for yourself.

7.     If you made an excess contribution, you can take out that amount on or before the due date, including extensions, of your federal income tax return (If you leave it in, you will be subject to a 6% excise tax.).  However, if you withdraw the net income attributable to the excess contribution, it will be included in income and subjected to the 10% penalty.

8.     At any age, under what is known as the Substantially Equal Payments Exception, if payments (at least annually) are spread out over your projected life expectancy.

This is a brief review dealing with traditional IRAs only, many factors can affect you IRA distributions and this is only information not tax advice.  I recommend you consult with your financial of tax professional for more specific information.  

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!

Last Wednesday evening I was having dinner as usual at church with a group of older men when the conversation turned to savings, certificates of deposit and U.S. Savings bonds.  As conversation progressed several of my friends started bragging about the number and amount of U.S. Savings bonds they had amassed over their working years.  Here we are not talking about just a few dollars, but amounts from $50,000 to $200,000 perhaps more. When I ask what they were going to do with the bonds, the general answer was hold them and pass them on to the children.  When I ask why, the general answer was tax.

This conversation presented a question as to how much did the government owe to people like my friends and how much did my friends make in interest each year on these bonds.  With just a little research I had some unbelievable information.

1.     Seniors are holding around $19 billion in expired U.S. government bonds.

2.     These bonds once expired cease to earn interest.  In other words if you hold a bond that has expired (reached it maximum value) you are loaning money to the government for free.

Why would people hold bonds that have ceased to bear interest?  People, like my friends, think that they still earn interest.  These bonds were purchased years ago and the government never sends annual reports or statements.  And, when the bonds mature and/or expire, the government notifies no one—not even heirs.   

I work with my client identifying transferred wealth, wealth being transferred out of family assets unknowingly and unnecessarily.  Generally, it is more profitable in stopping these transfers than earning higher returns on accumulated assets and with a lot less risk. 

When you stop and consider the situation how much money is being lost and how much more will be lost when tax rates increase.  This is a perfect example of a wealth transfer and one I could never make up.  The unfortunate fact is when a dollar is lost or paid that did not have to be paid, it is not just the dollar you lose but all the dollars that dollar could have made.

Is now the time to have a conversation concerning possible wealth transfers in your family assets and how you can stop the loss and redirect it to your accumulated assets or standard of living?  Time is not on your side concerning wealth transfers; money once lost is gone forever.  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!

Are you in control of your medical care?  Those of us looking at 60 in the rear view mirror find we spend a lot more time with the doctor and have a have a lot more doctors than in our younger years but are we in control?  Why do seniors or for that matter anyone put up with doctors that are continuously late for appointments?  Why do seniors allow doctors to prescribe medication or treatment without discussing it with them and reviewing the impact of a new prescription on current prescriptions or for that matter explaining why the senior should remain on the old prescription? 

Too often seniors are treated as a group and not as an individual; we allow the doctor to make us feel it is an honor for the doctor, taking time from his busy, to see us and in reply to a question tells us we just have to expect the problem because of our age.  We are being stereotyped by age and while none of us wants to be stereotyped by age, we let the doctor get away with it.

Dr. Mark Lachs, physician and gerontologist author of the book; Treat Me Not My Age, in an interview with Maureen Mackey (AARP Bulletin, 2011) laid out why this is unacceptable treatment and why you should not accept it.

“None of us wants to be stereotyped by age, yet all too often in the world of medicine, we are defined and labeled by our years of the planet—and treated according to preconceived notions about age.  Because of this, we can potentially miss out on the unique and individualized care we need for maximum health and well-being.

Lachs asserts that none of us ages in exactly the same way.  This is especially critical, he says, “Because when we’re looking at a tremendous increase in longevity among the population, we’re also looking at more chronic illness among older people.” We need to know what is at stake.

Ageism can start early and subtly – in our 40s, 50s, 60s, Lachs says. …”You might go to the doctor for pain, and without a complete evaluation or an exam, the doctor may say, ‘You should expect that. You’re getting older.’ And that’s just crazy.”

…Patients should feel that their doctor is leaving no stone unturned, that complaints are being fairly adjudicated, and that someone is really thinking about their issues.  No ailment should ever be written off as an old age ailment.  Treating patients based on their age means you can miss very significant, treatable situations.”

Q. What can patients do about it?

A. “Among other things, outline your goals for any doctor’s visit before you arrive.  Then, try saying ‘Doctor, today I’d like to cover three things --…”

This interview is well worth full consideration and can be found at www.aarp.org. [click on entertainment, books, author speaks, and then read at Lachs]  For even more read his book “Treat Me Not My Age”.

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!

With mortgage rate at one of the lowest rates in history, now is a good time to consider refinancing if you mortgage is over 5% interest, but which mortgage is best 15 year or 30 year.

Most people think the quicker you pay your home off the less you have to pay so those that can afford a 15 year mortgage so choose.  Those who can’t afford a 15 mortgage send in extra premiums to get the principal down and pay off the mortgage as soon as possible.  The common belief is paying your mortgage off as soon as possible will save you money.  We were all raised to believe this; it’s possibly in our DNA.  But will you really save more money paying off your mortgage?   If you are disciplined, the answer is NO!

The answer is based on a number of factors but the two most important are arbitrage and opportunity cost.  The first factor that must be understood is that there is math and there is money and using straight math the answer favors a shorter term mortgage while the math of money does not.  Consider if I have a mortgage of $250,000 at 4% for 15 years my premium is $1,849.22 per month $9,018 per year more than a 30 year note.  Over the 15 year period I have paid $82,859 in interest with a 30 year mortgage at the 15^th year I still owe $151,954, using safe investments, if I invest my money not spent on the 15 year mortgage over this period I could have earned $203,825 at 6%.  With this amount it is my choice to pay off the house or maintain control of the money for other opportunities and a higher return at the end of 30 years.

If I complete a 15 year mortgage and then invest the after tax house payment at 6% for 15 years I will have $410,632, but continuing to use the 30 year mortgage concept I will have $665,123.  More importantly I will have maintained control of my money for other opportunities of higher return.  What impact would an extra $254,491 have on your retirement income?

Is now the time to have a conversation concerning your plans for wealth management, how you can stop wealth transfers and develop a retirement income you can count on?  When you lose a dollar you did not have to lose, you not only lose the dollar but the future return that dollar could have earned. Time is not on your side concerning wealth transfers.  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!

The unified gift and estate tax credit is the lifetime federal credit available to each taxpayer to reduce the tax on taxable transfers that he or she makes during life and at death.

Prior to 2011 the gif tax credit schedule and estate tax credit schedule were not unified from 2004 through 2010.  That is, the maximum gift before taxes were imposed was $1,000,000 which was only a part of the estate tax exclusion during that period.  In 2011 the two were united and you could gift the full amount of the estate tax exclusion but only for 2011 and 2012. 

The unified gift and estate tax exclusion for 2012 is $5.12 million (adjusted for inflation) or $10.24 million for couples.  Taxable assets gifted or passed above these thresholds will be taxed at 35% if you die this year.  By having a unified gift and estate tax exclusion you do not have to wait until death to use the exemption.  This year an individual could gift $5.12 million and a couple $10.24 million without incurring the 35% gift tax, but you still must file the correct forms to notify IRS.

This gifting is often confused with the annual gift-tax exclusion which in 2012 is $13,000 for an individual and $26,000 for couples.  To add to the confusion, the annual gift-tax exclusion is per gift and is not a total. That is, I can give as many gifts of $13,000 to as many individual as I desire or my wife and I could give as many gifts of $26,000 as we desire, as long as they are to separate individuals.

Admittedly not many of us have $5.12 million or $10.26 million estates and with land values at current reduced levels you might think only large farms and ranches may reach this number, but even a farm or ranch of 40 to 50 acres could reach the $5.12 million level fairly easy as well as many medium to large family businesses. Next year, the estate and gift tax exemption is set to return to $1 million ($2 million for couples) and the tax for taxable property over that amount increased to 55%.  Will it, most likely not, but the one thing we can count on is the unified gift and tax exclusion will not remain at $5.12 million and most likely will not remain unified.

Numbers often mentioned is an estate tax exclusion of $3.5 million and gift tax exclusion of $1 million.  This means that for purposes of transferring property 2012 is a window about to be shut.  Assuming you don’t plan to die this year, we are talking about gifting of property.

The problem for small business is most families have no idea how much the family business is worth or how much it may be worth in the future.  Then there is the problem of control and an inability to turn loose of control.  But there are ways to transfer ownership without giving up control or losing income.  The other question is does the next generation of family members want to be involve in the business or even have the ability to take control and survive?  Extending ownership of a family business is a very difficult question and one without an answer sometimes until the very last moment, but the prudent business owner will not let this opportunity pass without significant investigation. 

Family farms and ranches are usually somewhat more stable in selecting future ownership and why 2012 is an important benchmark.  If future ownership can be qualified 2012 is the last year ownership may be transferred tax effectively.  Again it is not always necessary to give up full control or income making the transfer, but any family with farm or ranch of 40 acres or more should consider now how much it might cost to pass ownership at death in the future.

Unlike standard businesses, most of the money available to the farm & ranch businesses is tied up in land, equipment, the next crop or all three.  Estate tax is due within 9 months, and although there are delaying alternatives all are expensive.  If you have not obtained enough life insurance and do not have enough cash on hand how will you meet the tax and do you really want to give up the cash?  Starting the transition now may allow the farm to remain within the family rather than most or some of it remaining in the family.

Whether a nonagricultural family business, farm or ranch the window will shut December 31^st, not considering your alternatives only available for the rest of 2012 is not a viable option for any family business.

Is now the time to have a conversation concerning your estate plans and how you may tax effectively maintain the family business, farm or ranch within the family.  Time is not on your side, 2012 will be over before you realize, and we are not likely to see these tax rates again in our life time. 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!