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The Cost of Long-Term-Care

Long-Term-Care is something that some Americans rarely discuss. This underdiscussed topic is something that could be life-changing for families, potentially saving them thousands in the long run. If you are in a position to have the conversation, the best time is to have it before it is necessary.

What is long term care?

Long-Term-Care is available encompasses all services that include personal care needs. Most long-term care isn’t covered under conventional policies. A long term care policy offers coverage for everyday activities and living support.

Impact of long-term-care for families

Long term care is utilized by 12 million Americans. According to research by the Bipartisan Policy Center, only 11 percent of seniors age 65 entering retirement have long term care policies. The growing number of aging seniors relying on Medicaid will need assistance with nursing home care.

Expenses of long term costs are underestimated

According to a Genworth study, a private room in a nursing home averages $97,500 in 2017. A year in an assisted living facility was $45,000. Over the past five years, the costs of care increased between 3 percent and 4 percent each year. Time spent in a nursing care facility can cost hundreds of thousands of dollars over one’s lifetime. A semi-private nursing home room can cost $7,418, according to a Genworth Cost of Care Survey. Most families will find it difficult to handle the out-of-pocket costs independently. Most people turn to alternate sources to assist with meeting care needs.

Choices of the care needed

When resources are limited, families will have to make tough decisions. The costs could be significant for families, so planning for long term care is essential. As resources diminish, tough decisions may have to be made that could affect the quality of care provided to those in need of the care. Long term care evaluations assists with managing the costs that come with caring for a sick person. If planning is done well enough in advance, you will be able to manage care costs using a combination of long term care insurance and other resources.

Life expectancy

The average person has a life expectancy of 78.8 years according to the CDC. If life expectancy is nearing 80 years, it is imperative that people plan for long term care. Only 11 percent of people with care means that the remaining 89 percent of households will likely experience hardship if the need for long term arises.

Long term care planning is one of the most overlooked topics, but it is an important discussion to have. People must be prepared to discuss the tough financial challenges that comes with managing the personal care needs of a family member like they would retirement plans. All people are encouraged to have this discussion sooner rather than later given the financial implications that come with being unprepared.

Taxes in Retirement – What to Expect

You’ve made it to the end, no more daily grind; you’re heading off in the sunset. Whatever metaphor you favor for beginning your golden years, it is an important milestone in your life. Your planning has focused on making certain your nest egg has grown sufficiently to outlast your life, and it’s just as important to be sure your tax obligation doesn’t foil your plans.

Withdrawals from a Traditional IRA or 401(k)


It was great to be able to stash money through these tax-advantaged plans while you were working, but now’s the time to pay the piper. Withdrawals are taxed as ordinary income, which is the highest tax rate. However, now that you are retired you are almost certainly in a lower tax bracket and hopefully your planning accounted for this. Of course, if you opted for a Roth IRA, you paid your tax in the year the money was earned and placed in the qualifying account, you now enjoy the investment returns tax-free.

Income from Pensions


Some retirees are fortunate enough to collect a pension as part of their retirement income. Although some military and disability pensions can be partially or completely tax-free, the average pension income is taxed as ordinary income.

Gains from Investments


If you hold investments outside your IRA or 401(k) accounts, gains are taxable. One way to minimize the tax burden is to ensure your gain is taxed as a long term gain as opposed to a short term gain. This can be accomplished simply by holding the asset at least one year and one day before initiating a sale.

Income from Investments

In addition to earning income from the sale of an investment, you can earn income while retaining an ownership stake in an asset in the form of a dividend from a stock or an interest payment from a bond. Both are typically a taxable event, but favorable options exist. If you invest in a stock that pays a qualified dividend you can be taxed at the much more favorable long term gain tax rate rather than as ordinary income. Municipal bonds are tax-exempt from the feds and if you purchase in-state bonds you pay no state tax either.

Social Security


Many people are surprised and perhaps a bit outraged to learn social security benefits may be taxable, but if you have any other additional income, there is a good chance some of your social security will be taxed. The income threshold where taxes kick in is not very high, and often 50 percent or as high of 85 percent of your social security benefits are subject to taxation.

The old saying that nothing is certain but death and taxes may be true, and including tax planning for your retirement income is an important part of the big picture. Don’t make the mistake of ignoring the inevitable. Proper preparation can provide security and peace in your long awaited post work years. Create a retirement plan that considers every aspect of planning for retirement, including tax strategies, we can help guide you.  You deserve nothing less.  

Divorce After 50 and Your Retirement

Divorce rates are surging in the 50 and older age group.  Today, divorce for those 50 and older has more than doubled since the 90’s!  Divorce can be complicated at any age. However, older couples usually have more financial consequences. The financial consequences are particularly fraught when a couple has to divide their retirement funds. Traditionally, older couples have more assets. Retirement accounts can be the cause of many arguments. Older people may be unable to correct poor retirement planning decisions. Retirement divorce planning is very important. Retirement assets are not always equally divided in a divorce settlement.

Give Your Spouse the House

Many people assume a house is their largest asset. The marital home could be a liability as the value might plummet. Also, the home will have property taxes due every year. A well-diversified portfolio can be a better retirement funding option.

Do Not Overlook Retirement Account Withdrawal Fees

If you have not paid taxes on your retirement accounts, you will have to give away some of your money. The government will take a percentage of your pre-tax retirement accounts. You will not have to pay taxes on your after-tax savings accounts.

Moving Your Spouse’s Retirement Account May Have Financial Consequences


Some divorcing spouses can withdraw money from their ex’s pre-tax retirement accounts without owing the usual 10 percent tax penalty. The QDRO allows you to use the money to pay for your divorce expenses. If you withdraw the money after it has been moved to your account, you will have to pay the usual 10 percent tax penalty.

Do Not Take Too Much Money Out of Retirement Accounts

Many people are overly excited about avoiding the tax penalty, and they take extra money for shopping and vacations. Remember, you will need your retirement funds in the future. If you spend the money on frivolous purchases, you will panic when you need the money at a later date.

Be Mindful of Social Security

An ex-spouse can claim a social security spousal benefit.  The spousal benefit does come with stipulations; the marriage had to be at least 10 years, and the divorcee cannot remarry. The ex’s social security payments will not affect the primary beneficiary’s social security payments.

Get a Prenuptial Agreement for Your Second Marriage

If you tie the knot again, you should consider signing a prenuptial agreement. The agreement will protect your finances. Without a prenuptial agreement, your retirement accounts can be divided again after a second divorce.

In most divorces, one partner has a solid understanding of the couple’s finances. If you do not know how much money is in the retirement accounts, you will need to take an inventory of your marital assets. Also, do not underestimate your expenses when you are thinking about your retirement divorce planning. You will have to adjust your spending after the divorce, so you should be prepared for major lifestyle changes.

Are You In The Retirement Sweet Spot?

Are you in the retirement sweet spot (RSP)?  No, it’s not a trick question.  The RSP refers to that time after you retire and before you take any required distributions from your 401k or traditional IRA at age 70 1/2. In addition to IRA’s, there are several other financial planning moves to consider in this time period.  A recent article by Sarah O’Brien, appearing in CNBC online, reviews the RSP and what you might want to learn about these wealth-preserving ideas.

Why the Sweet Spot is so Sweet

For many career workers, their highest earnings years are just prior to leaving career employment. Because of that, they often find themselves in higher tax brackets. Upon leaving work their income commonly decreases, pushing them down to the lower brackets.

Being in a lower bracket makes some financial decisions particularly advantageous:

Convert to a Roth IRA

Is it a good idea to consider converting your traditional IRA or 401K to a Roth IRA?  The sweet spot years may be a perfect time to effect such a conversion. Because you will probably be in a lower IRS bracket, the tax due will be minimized on any gains in your qualified investments.

Keep in mind that a Roth has many benefits that are not part of the rule-structure governing traditional IRA’s an 401k’s, especially when you withdraw money: Roth withdrawals are generally tax-free! There are other benefits as well including that there are no required minimum distributions. This makes Roth IRA’s a perfect vehicle for passing wealth on to loved ones when you die.

Be sure you are aware of the Roth 5-year rule. This rule states that in order to receive tax-free withdrawals, you must have your contributions in a Roth IRA for at least five years. Otherwise, you may be liable for taxes on your gains as well as a ten-percent penalty. Ouch! Be sure that you will not need to withdraw from your Roth conversion for al least five years.

Sell Stock Winners

Again, because you are now probably in a lower IRS bracket upon leaving full-time work, take a look at any stock holdings you may have in your taxable, non-qualified accounts. If you have some big winners, consider selling them. Your profits will now be taxed at your lower tax-bracket rate.

This is especially neat for long-term (greater than 1 year) holdings. You may end up paying zero taxes on your long term gains if you are married filing jointly and have up to $77,200 in income (up to $38,600 if single), courtesy the Tax Cuts and Jobs Act of 2017.

Unload Employee Stock Options

Some employees were fortunate enough to receive employee stock options as part of their total compensation plan. If any of these are in-the-money, take the gains while you are in the sweet spot. Again, you’ll probably be taxed at a lower rate.

Sell Savings Bonds

Over the years, many folks have systematically purchased savings bonds as part of their retirement planning. If you have some, the RSP may be a good time to cash them in. Again, the idea is that you’ll now probably be paying less to the IRS during this time.

We can help you with these strategies and more as you plan for the years ahead in retirement. 

Should I Buy Or Rent A Home During Retirement?

The thought of growing older and retirement can be overwhelming to some. As the body begins to age, things like routine home maintenance are not as easy as they once were. It is estimated that homeowners will spend about one to four percent of their annual income on household upkeep. When you are no longer able to cut the grass, repair clogged drains, and service the water heater, then you will likely need to call for professional assistance.  All these little expenses have a dramatic impact on your already strained budget. With that in mind, some seniors are choosing to rent rather than own.

The Beauty of On-Call Free Maintenance

There are apparent benefits to owning a home, even if you must pay someone to take care of routine maintenance. You must consider that a mortgage payment comes with taxes and insurance that must also be figured into the equation. A renter can merely pick up the phone and have assistance quickly and without any additional costs, a homeowner is required to do planning. If your budget is already stretched thin, paying for household maintenance may be out of the question.

The Lucrative Tax Write-Off

Some people want to own a home because it gives them a nice tax write-off at the end of the year. Yes, that write-off is very helpful when you pay insurance and mortgage interest. Arguably, it is not the best option for everyone.  Those who have a steady stream of income from investments and other sources during retirement may benefit from the write-offs.

Selling a Home Is A Daunting Task / Leases Can Be Easily Broken

Owning a home ties you to one location. If you have children scattered all over the country, you may choose to move closer to one of them. Should your health take a turn for the worse, selling a home can be a significant burden on your family. A rental can easily be re-rented, and there are no lasting financial repercussions to bear. Debatably, a mortgage does give the family options should someone want to take over a childhood home.

Weighing the Pros and Cons

It appears that renting has many advantages that come along with flexibility, no maintenance costs, and the ability to move with ease. Yes, owning a home also comes with benefits to ponder. When the house is paid off, the costs of insurance and maintenance would be a small price in comparison with the cost of rent. Keeping a home in the family that has been around for a long time has a sentimental factor that cannot be ignored. Should you become cash-strapped in the future, you have the option of a reverse mortgage or taking out a home equity loan. These two options are not available to renters. Some fear that renting is throwing away good money that could go towards an investment.

Every situation is different, and the dynamics of that situation certainly come into play. True, having a home to pass down to the children is a noble gesture, but it is not always feasible. A home provides stability both physically and financially as well as a great deal of upkeep and planning. A rental gives the ability to move into a nursing home or assisted living facility with ease. Before considering the right option for you, it is essential to review all the intricacies of your situation and decide based on the finances and your overall health and well-being.

The Balance: Saving For Retirement And Your Kids College

Student loan statistics never cease to disturb. In the United States, there are 44 million borrowers with $1.3 trillion in outstanding debt. With that kind of debt burden on new graduates, it’s no wonder that many parents want to try and find a way to save for both their children’s college expenses and retirement.

The reality is, it may not be possible for every parent to save for both retirement and their children’s college. However, there can be ways to find a balance when attempting to accomplish these goals.

Think About Maximizing Your 401(k)

Borrowing from a 401(k) to fund college costs is a plan that can quickly backfire. With early withdrawal penalties and taxes, it’s an expensive option that should probably be avoided. If possible, it may be wise to max out your employer matching contribution to increase the amount that’s saved toward retiring. This can help someone saving for retirement reduce their personal savings burden.

Check Out Your State’s 529 Plan Options

Planning for college is hard when tuition costs keep rising, but in some states, a 529 plan can help by allowing you to prepay tuition costs, locking in today’s prices. Not every state sets up their 529 plans that way, however, in some, the plan acts as a normal savings account.

Get Help With Financial Aid

Taking on the entire burden of school costs without looking into financial aid can be a huge mistake, especially since about 66 percent of full-time students in the 2014-2015 school year qualified for some financial aid. Have your child work with the school’s financial aid counselors to determine which programs, grants and scholarships they might qualify for.

Automate Savings Deposits

Planning to save money and really saving it are two different things. One way to ensure you actually save for both your retirement and your kids’ tuition is by automating your savings deposits. In addition to automating your 401(k) through work, you can automate transfers from your checking account to your kids’ tuition funds and your IRAs every week or month. There are also some bank programs and apps that can allow you to regularly save $1 with every debit card purchase. Some of these programs also help you save the change, the difference between your sales totals and the next rounded up dollar.

Consider Opening an IRA

Every year, you can deposit a good chunk into an individual (non-employer) retirement account called an IRA. You can choose between a tax-deferred Traditional IRA or a tax-free Roth IRA. If you’re in a high tax-bracket now, the Traditional IRA can help you reduce your tax burden, which may leave you more cash to save toward your dual goals. Choosing a Roth means you can take tax-free distributions later on, which reduces the amount you need to have saved.

Even if you can’t fully fund your kids’ tuition costs, the savings you amass can reduce the number of loans they need, putting both you and your child in a much more secure, comfortable financial position during your future golden years.

Be Ready For The Next Market Correction

Some retirement investors have a portion of their investment in stocks, and this may have served them well.  Stocks have recently been on a roll – and many are near all-time highs. Some investors may think the market is a bit extended.   Aside from relying on luck, what could you do to prepare your retirement nest-egg for the next downturn? Practical tips that you can evaluate and easily implement were provided recently in a Money Online article written by Walter Updegrave. Let’s take a look at the planning he suggests:

Steps To Take Before The Next Market Correction

  • Review Your Stock Holding Allocation

    Could you be too heavily weighted in stocks?  Some may recommend a high percentage of stocks, say 60 to 70 percent, in your investment mix when you are young and just starting out is fine.  Perhaps that may be a good strategy for some to begin with that allocation, but as you near or are in your post-working life, a smaller percentage may be more prudent.  There is no single stock or fixed-income mix that is best for everyone. When the bear growls, you want to be sure your retirement nest egg is protected.  Having a nice percentage of your investment mix safely in cash may not only dampen the volatility of your portfolio, but may give you some dry powder to buy if stocks become really cheap.
  • Tweak Your Budget

    While you are at it, think about your overall retirement budget. It can be as simple or as elaborate as you like. Pay special attention to such things as health care and insurance as well as prescriptions drugs, which may cost more as you get older. Conversely, the amount of money you spend on clothing for work or gas for commuting may decrease.
  • Can You Generate Other Income?

    If your evaluations indicate you may not have enough saved, consider a side-gig after leaving full-time employment. Many folks find that freelancing, consulting, or other such endeavors not only bring in extra dollars, but they are fun and keep the mind sharp.
  • Remember: Patience and Preparedness Go A Long Way!

    Finally, it may help to work with an Advisor that can help you strategically position your retirement portfolio.  Also, exercising patience can be a virtue as well.   Position your portfolio well and realize all down markets are followed by the inevitable upswing. 

Having a strategic plan and some cash may help you feel more comfortable with the retirement road ahead.  We are here to help you navigate your journey.

Budget For Retirement Travel

For many people, the dream of traveling in retirement is strong. You may want to plan trips to see your adult kids and grandkids a few times per year, and you likewise may have bucket list trips in mind. Because you do not have a job to rush back home to, retirement is an excellent time of life to travel more. However, some people may not properly budget for their trips. This inevitably means that trips simply do not happen or that financial stress makes them less enjoyable. Learning how to budget properly for your trips is essential if you want to enjoy them fully.

Add Traveling Expenses to Your Budget

The first step to take when planning for trips is to properly fund them. One of the easiest ways to accomplish this is to incorporate traveling expenses into your regular budget. Many retirees create an annual budget, and they break this down into a monthly budget. Even when retirees incorporate a line item for traveling expenses into their budget, they often fail to budget enough money for these experiences. Depending on your plans for various trips, a single trip may easily cost you several thousand dollars or more. If you plan to travel at least a few times per year, your budget will need to be adjusted accordingly.

Prioritize Your Trips

If you are like most retirees, you may have a lengthy list of desirable amazing destinations. However, these you may only be able to visit a few destinations each year. You may want to prioritize the trips that you want to take so that you can cross those off of your list first. Remember to factor in costs for your trips to visit family with your recreational trips. Determine which trips that you want or need to take each year. This is essential if you want to properly allocate funds in your budget for all of your planned trips.

Research Expenses

The expenses for each of your planned trips could vary substantially. For example, you may have plans to drive to a few national parks and to take a trip to Europe a few months later. The Europe trip may be much more expensive. With both types of trips, you may need to essentially create a detailed itinerary. Research accurate costs for each aspect of your trip so that your budget is realistic. Remember to factor funds for food and gas.

Look for Savings

Remember, seniors often qualify for special savings at restaurants, theaters, stores, hotels and more. When you begin planning each of your trips seriously, spend time analyzing all discounts available. Look for alternatives, such as staying at a different hotel that may offer a senior discount. Take advantage of senior discounts, but be aware that other discounts and savings may also be available. For example, you can travel during a non-peak season to likely save a substantial amount of money. You can buy plane tickets on non-peak days or in the very early or very late hours of the day. These are only some of the many ways that you can potentially save hundreds or thousands of dollars on your trips.

Traveling may be one of your primary goals in retirement, but your dreams of taking amazing trips may not happen if you do not have money available. As you can see, you should work on budgeting properly for them in various ways in order to have funds available for your trips. You can get started today by adjusting your budget and researching desirable destinations that you want to visit within the next year. By doing this, you can get the wheels in motion for taking exciting trips to amazing locations.

Getting Organized In Retirement

Once you reach your retired years, you may think that your previous planning efforts would put you in the clear from a financial standpoint. However, the numbers that you use in your projections are in flux. This means that you must stay organized and keep on top of your financial status if you want to enjoy financial peace of mind in the years to come. However, monitoring your efforts on a monthly basis may be overkill. Furthermore, when your oversight of your finances and budget is too frequent, it can be difficult to spot trends and potential issues. With this in mind, it is great to take organizational steps at the beginning of each year. When you fall into this habit, you can stay on track to meet your future financial goals.

Review Last Year’s Spending

Your personal budget in your retired years will fluctuate considerable, and many retirees notice that their expenses tend to increase over the years. For example, our budget may have been well- organized initially, but it was riddled with uncertainties. After all, you did not know with certainty what the inflation rate would be like, which service providers would increase rates and more. When you keep your budget updated based on realistic numbers, you can better plan for the future. A smart idea is to review your average expenses for all categories over the last year and to update your budget accordingly for the next year. Projecting your budget for the next several years is also a smart idea.

Check Your Debt Balances

Part of your planning efforts to prepare for your retired years may included paying off all outstanding debts. However, you can accumulate new debt in retirement. For example, you have had a financial emergency that resulted in credit card debt, or you may have needed to use auto financing to buy a new car. Therefore, get in the habit of always checking your debt balances each year. Your goal should always be to eliminate debt balances as soon as reasonably possible.

Analyze Investments

Just as you need to monitor your progress with debt reduction, you also need to analyze your investment accounts. Your future income is based on how much money you withdrawal from your accounts now as well as how well your investment accounts grow. It is just as important to stay on top of these accounts in your retired years as it was to stay on top of them in your pre-retirement years.

Update Your Net Worth


You do not necessarily need a specific net worth figure to retire. You simply need to have low enough expenses that you can live comfortably on the income that you have available. This is a simplistic description of finances in your retired years. For example, you need to take into account inflation, increasing medical expenses and more. However, when you update your net worth figure while taking these other steps, you can see how your wealth is increasing. Seeing how much progress that you have been between last year and this year can help you to feel more relaxed. Keep in mind that many retirees who properly manage their finances may see their net worth continue to increase over the years.

Financial management does not end after you retire. In fact, preparing for retirement is only the first step. Once you are retired, you must stay on top of all aspects of your finances so that you can ensure continued financial freedom going forward. Remember that it is easier to correct issues sooner rather than later.  A yearly review is common for our clients, if you need help staying on track and maximizing your retirement goals, call us today.

This Could be Your Biggest Expense in Retirement

No matter what your age, it’s important to start preparing for the time when you eventually retire. One of the biggest financial issues you may encounter by the time you’re ready to stop working is how much money you will need for your health care. In general, this can be a sizable amount. On average, a person of 65 would need around $190,000 to pay for costs related to their health. This estimate doesn’t even take into account any preexisting chronic conditions or disabilities.

Unfortunately, the one mistake people could make regarding retiring is that once they reach the age of 65, they will be eligible for Medicare and that it will cover all their needs. However, in reality, Medicare isn’t free and people are responsible for covering their premiums, deductibles and copays. Retirees who require coverage for dental care, prescription drugs, vision or hearing are also required to either buy additional insurance or pay for these things out of pocket.

However, there is good news. There is a lot you can do to manage the costs of your medical care. Planning ahead can really be a lifesaver for your costs once you retire. These are ways you can ensure that you are covered:

Health Care Investment Account: Creating an investment account for your estimated medical costs can be a great idea. You should ensure that it’s kept separate from your other retirement money. Estimating how much you will need for the future can help you to be successful at saving for these costs. Additionally, these types of accounts also allow you to save money on your taxes.

Consider Long-Term Care Insurance: Over half of people 65 or older will require long-term care at some point in their lives. Getting a long-term care insurance policy can ensure that your future health needs are met if you require assisted living, home care or a nursing home. This option is also expensive, but it is well worth it if you save early on and already have chronic health conditions or a family history of certain conditions.

Take Care of Your Health: Obviously, if your health is better after retirement age, it will be easier on you from a financial standpoint. Your health care expenses will be less than that of someone who isn’t in good health. Eat a well-balanced diet, incorporate physical activity into your everyday routine, maintain a healthy weight and get a good night’s sleep daily. This offers you a dual benefit in enjoying better health than your peers and helping you save money in the long run.

Use COBRA: If you had health insurance through your last job, you can take advantage of COBRA to continue using it after you retire. COBRA allows you to use your work health insurance for up to 18 months after you leave the job as long as the company employs at least 20 employees.

These are great ways to go about planning for the time you eventually retire. They can help you to save plenty of money on any medical related costs and can bring you a sense of ease.

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