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Posts Tagged ‘ Retirement ’

What is Trust?

January 25, 2015 by

The word “trust” is applied to all types of relationships, both personal and business, to indicate that one person has confidence in another person.

For our purposes, a trust is a legal device for the management of property. Through a trust, one person (the “grantor” or “trustor”) transfers the legal title to property to another person (the “trustee“), who then manages the property in a specified manner for the benefit of a third person (the “trust beneficiary“). A separation of the legal and beneficial interests in the property is a common denominator of all trusts.

In other words, the legal rights of property ownership and control rest with the trustee, who then has the responsibility of managing the property as directed by the grantor in the trust document for the ultimate benefit of the trust beneficiary.

A trust can be a living trust, which takes effect during the lifetime of the grantor, or it can be a testamentary trust, which is created by the will and does not become operative until death.

In addition, a trust can be a revocable trust, meaning that the grantor retains the right to terminate the trust during lifetime and recover the trust assets, or it can be an irrevocable trust, meaning that the grantor cannot change or terminate the trust or recover assets transferred to the trust.

Trusts can be used:

  • To provide management of assets for the benefit of minor children.
  • To assure the grantor that children will benefit from trust assets, but will not have control of those assets until the child is older.
  • To manage assets for the benefit of a disabled child, without disqualifying the child from receiving government benefits.
  • To provide for the grantor’s children from a previous marriage.
  • As an alternative to a will (a “revocable living trust”).
  • To reduce estate taxes and, possibly, income taxes.
  • To provide for a surviving spouse during his/her lifetime, with the remaining trust assets passing to the grantor’s other named beneficiaries at the surviving spouse’s death.

Trusts are complex legal documents and are not appropriate in all situations. Before establishing a trust, you should seek qualified legal advice.

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Taking control of your finances and your financial future can help you reach your desired destinations in life. You want to control your finances, not let them control you.  You can do this by creating a strong financial foundation upon which you then build or live a satisfying retirement.

The Managing your Financial Life guide book covers these 8 topics.

  1. Financial Pyramid
  2. Financial Foundation
  3. Lifestyle
  4. Growing Your Money
  5. Managing Your Money: Retirement
  6. Managing Your Money: Estate
  7. Budget Organizer
  8. Document Checklist

Download a free copy of A life guide for Managing Your Financial Life

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People who die without a valid will, die intestate. In this event, the state in which they resided effectively provides a will through the state’s intestacy law. This means that the state dictates who will receive the estate owner’s property and in what proportion.

While state intestacy laws do attempt to provide for a “fair” distribution of property, the state’s “one-size-fits-all” will simply cannot reflect the specific wishes of the estate owner in regard to either property distribution or the unique needs of the estate owner’s heirs.

In addition, state intestacy laws require that the probate court appoint a guardian for any minor children. The court-appointed guardian, who may not even be a relative, may be required to post bond and the guardianship will be supervised by the probate court.

Finally, when a person dies intestate, the probate court appoints an administrator of the estate. This administrator can be anyone of the court’s choosing and is required to post bond, an additional expense that must be paid by the estate.

The choice is yours…
you can draw your own will or the state will do it for you!

The Advantages of Having a Will Include:

  • A will allows property to be transferred according to the estate owner’s wishes, avoiding state intestacy laws.
  • A will permits a parent, instead of the state, to name the guardian for any minor children or other dependents, such as a handicapped adult child.
  • A will enables the estate owner to name an executor to administer the estate which, in some states, minimizes probate and its related expense.
  • A will can lower estate settlement costs by minimizing estate taxes, waiving probate fees and bonds and streamlining the disposition of estate assets.
  • Provisions in a will can defer distribution of a minor child’s remaining share of the estate to a more mature age than 18 or 21.
  • With a will, an estate owner can be certain that bequests of money or personal property to specific individuals or charitable organizations will be carried out.
  • If the estate includes a business, a will can authorize the executor to operate the business until the estate is settled, with no exposure to personal liability on the executor’s part.
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What Is the Marital Deduction?

The marital deduction (I.R.C. Sections 2056 and 2523) eliminates both the federal estate and gift tax on transfers of property between spouses, in effect treating them as one economic unit.  The amount of property that can be transferred between them is unlimited, meaning that a spouse can transfer all of his or her property to the other spouse, during lifetime or at death, and completely escape any federal estate or gift tax on this first transfer.  However, property transferred in excess of the unified credit equivalent will ultimately be subject to estate tax in the estate of the surviving spouse.

The 2010 Tax Relief Act, however, provided for “portability” of the maximum estate tax unified credit between spouses if death occurred in 2011 or 2012.  The American Taxpayer Relief Act of 2012 subsequently made the portability provision permanent.  This means that a surviving spouse can elect to take advantage of any unused portion of the estate tax unified credit of a deceased spouse (the equivalent of $5,000,000 as adjusted for inflation; $5,340,000 in 2014).  As a result, with this election and careful estate planning, married couples can effectively shield up to at least $10 million (as adjusted for inflation) from the federal estate and gift tax without use of marital deduction planning techniques.  Property transferred to the surviving spouse in excess of the combined unified credit equivalent will be subject to estate tax in the estate of the surviving spouse.

If the surviving spouse is predeceased by more than one spouse, the additional exclusion amount available for use by the surviving spouse is equal to the lesser of $5 million ($5,340,000 in 2014 as adjusted for inflation) or the unused exclusion of the last deceased spouse.

What Requirements Apply to the Marital Deduction?

To qualify for the marital deduction, the decedent must have been married and either a citizen or resident of theU.S. at the time of death.  In addition, the property interest (1) must be included in the decedent’s gross estate, (2) must pass from the decedent to his or her surviving spouse and (3) cannot represent a terminable interest (property ownership that ends upon a specified event or after a predetermined period of time).

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What Are the Obstacles to Successful Retirement Planning?

There are a number of obstacles that you may face in planning for your retirement:

 Discipline to Save

  •  Many people find it difficult to form the habit of “paying themselves first,” by making regular deposits to a savings plan.

 Saving to Spend

  •  Money is saved for retirement purposes, but then is spent to make purchases.


 Income Taxes

  •  Income taxes can erode the growth of your retirement savings.

Longer Life Expectancies

  •  Longer life expectancies increase the risk of retirees outliving at least a portion of their retirement income.


Longer life expectancies also increase the risk of inflation eroding the purchasing power of retirement income.

  • For example, if inflation increases at 3.5% a year, it would require over $1,400 in 10 years in order to maintain the original purchasing power of $1,000.





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Long-term care insurance purchased today can help provide you with the financial security you need and deserve in your retirement years. By acting today, you will have protection to help pay for whatever long-term care needs a long life brings!

Long-term care refers to help with daily activities needed by people with disabilities or chronic, longer-lasting illnesses, such as help with eating, bathing and dressing. Long-term care also includes assistance for those suffering from cognitive impairments, such as Alzheimer’s disease and dementia. Other types of insurance, such as health insurance and disability insurance, do not typically pay for these services. Long-term care can be provided in a variety of settings, such as your home, an assisted living community or in a nursing home.

A typical long-term care insurance policy helps cover the cost of long-term care services, including:

  • Assistance in your home with daily activities, such as bathing, dressing, meals and housekeeping services.
  • Visiting nurses and/or home health aides who come to your home.
  • Services available in your community, such as adult day care.
  • The cost of an assisted living community.
  • Nursing home care.

While the good news is that people are living longer, the bad news is that increased life expectancy also increases the odds of needing long-term care services, which can be expensive.

Without long-term care insurance to help meet the cost of needed long-term care services, you run the risk of depleting a lifetime of savings. With long-term care insurance, you’re in a better financial position to make the choice of what long-term care services you receive and where you receive them. PLUS, qualified long-term care insurance receives favorable income tax treatment…the benefits from qualified long-term care insurance, for the most part, are not taxable income to the recipient, up to a per diem limit ($330 for 2014).

Eligible premiums paid for qualified long-term care insurance can be applied toward meeting the 7.5% “floor” for medical expense deductions on your federal income tax return. The amount of eligible long-term care premium that can be applied to the 7.5% floor depends on your age:

If you are this age by the end of the year: This is the maximum eligible long-term premium for tax deduction purposes in 2014*:
40 or less $370
41 – 50 $700
51 – 60 $1,400
61 – 70 $3,720
More than 70 $4,660

* The maximum eligible long-term care premium is adjusted each year for inflation.

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In a recent United States Tax Court case, Bobrow v Commissioner, the Tax Court ruled that all IRAs of a taxpayer should be looked at in aggregate when it comes to the one-rollover-per-year rule. Prior to this ruling it was widely accepted, as well as published in IRS publication 590, that the one-rollover-per-year applied to each IRA independently.

Following the court decision the IRS issued Announcement 2014-15, stating their intention of enforcing the new aggregated one-rollover-per-year rule. However, they are allowing a grace period until January 1, 2015 before enforcement will begin.
As a reminder, the one-rollover-per-year rule applies only to indirect (60-day) IRA to IRA rollovers. Information on the IRS website implies that the limit will apply separately to indirect Roth IRA to Roth IRA rollovers. It appears that traditional, SEP and SIMPLE IRAs would be aggregated for purposes of the rule.

Please also keep in mind:

  • There is no limit on the number of rollovers between an IRA and a qualified plan.
  • There is no limit on the number of IRA to IRA transfers.
  • It appears that there is no limit on the number of indirect traditional IRA to Roth IRA conversions.


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At retirement, if you have a pension, you have to make a difficult decision that could negatively impact your future financial security and that of your spouse.  Most people with company pension plans give this decision little thought and simply select the first payout option listed on their pension estimate; Joint and Equal Survivor Option.

For example, assume your maximum lifetime pension benefit is $2,000 monthly.

With the joint and equal survivor option, you’ll receive a significantly lower lifetime pension payment. Your surviving spouse, however, will continue to receive 100% of your pension benefit if you die first.

  • For as long as you live, you receive 75% of $2,000 the maximum life income option benefit.  Your benefit is reduced to $1,500 per month, for life.
  • If you die first, your spouse will receive a lifetime monthly pension benefit equal to 100% of your benefit, or $1,500 per month.
  • If your spouse dies first you will continue to receive $1500 per month.  There is generally no going back to the maximum $2,000 benefit. 

Second choice is  – Joint and One-Half Survivor Option:

If you elect the joint and one-half survivor option, you’ll receive a lower lifetime pension payment. On the other hand, if you die first, your surviving spouse will continue to receive a lifetime pension benefit equal to 50% of your pension benefit prior to your death. For example:

  • For as long as you live, you receive a monthly pension benefit of $1,700 or about 85% of the maximum life income option benefit.
  • If you die first, your spouse will receive a lifetime monthly pension benefit equal to 50% of your benefit, or $850 per month.
  • If your spouse dies first, however, your monthly pension benefit remains at $1,700.

Next choice is – Life Income Option:

If you receive your pension benefit under the life income option, you receive the maximum lifetime pension payment. If you die first however, your surviving spouse receives nothing after your death. For example

  • For as long as you live, you receive a monthly pension benefit of $2,000.
  • If you die first, however, your spouse will receive a monthly pension benefit of $0.
  • If your spouse dies first, your monthly pension benefit remains unchanged at $2,000.

At retirement, you will have to decide how your pension benefit will be paid out for the rest of your life:

  • If you elect to receive the maximum retirement check each month for as long as you live, with the condition that upon your death, your spouse gets nothing.
  • If you elect to receive a reduced retirement check each month, with the condition that upon your death, your spouse will continue to receive an income.
  • This pension decision is permanent.
  • The decision you make will determine the amount of pension income you receive for the rest of your life.
  • The decision is generally irreversible.
  • In making this decision, many people unknowingly purchase the largest death benefit (life insurance) they will ever buy and one over which they have no control.

How Can Retirement Income Protection Help Solve the Pension Benefit Dilemma?

Federal law allows a pension plan participant to waive the “joint and survivor” annuity payout requirement, with the written consent of his or her spouse.  This means that, with your spouse’s consent, you can elect to receive the MAXIMUM life income annuity payout at your retirement.

  • However, what happens to your surviving spouse’s income and lifestyle if you should die first?

The solution, you maintain sufficient life insurance to replace the pension income lost at your death, assuring that your spouse will have an adequate source of income after your death.  This is a death benefit you control and if your spouse predeceases you the life insurance can be surrendered paying you back part or all of your premiums;  Depending on when death occurred.

In making this important decision, you should evaluate the risks associated with retirement income protection funded with life insurance:

  • Your income after retirement must be sufficient to ensure that the life insurance policy premiums can be paid and coverage stay in force for your lifetime. Otherwise, your spouse may be without sufficient income after your death.
  • If your pension plan provides cost-of-living adjustments, will upward adjustments in the amount of life insurance be needed to replace lost cost-of-living adjustments after your death?
  • Does your company pension plan continue health insurance benefits to a surviving spouse and, if so, will it do so if you elect the life income option?
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Taxes are inevitable.  You know that part.  Each April 15, you tally up all of your 1099 forms that you have received and pay taxes on your investments, even if you haven’t actually spent a penny of those dividends and interest earnings.  Unfortunately, the money lost to taxes will never be available to you again.  But if you use the principles of tax diversification, you could benefit by paying taxes on what you spend – Not on what you earn. 

Tax diversification is as important as investment diversification when it comes to managing retirement saving risks.  With the proper advice you can create flexibility by selecting the best tax situation for your specific needs and time horizon.

Think about your financial goals for today, the next 10-15 years and down the road as you near retirement and answer these questions:

  • What investments do you currently hold?
  • What is the intent for that money?
  • Can it be allocated more tax efficiently?
  • How many years until you retire?  If you are retired how much and long do need your income?
  • Are you planning a major purchase?
  • What do you pay in taxes on each year- as reflected in IRS Form 1099

Now divide your investments into these three categories:

  1. Money that is taxed now
  2. Money that is taxed later (tax deferred/taxed when withdrawn)
  3. Money that is never taxed (paid in with after tax dollars and tax free during accumulation and at withdrawal)

Reallocate your investments into the appropriate category, if necessary.

For help you may ask questions in the comments

Or click here to contact me privately: Tim Barton Chartered Financial Consultant

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Retirement plans come with a wide array of tax code abbreviations IRA, Roth IRA, SEP, 401(k), 403(b), HR10 just to name a few. There are times to consider doing a rollover of these funds.

When should you consider rolling over or transferring  your retirement plan?

  • Change of employment- Most retirement plans become what is known as orphaned when you leave the employer who sponsored the plan.  In order to maintain control of your money it is wise to rollover these plans into a personal retirement account.
  • Of course, when you are retiring – This is the time when you may want to start receiving income from your retirement plan.  Your plan may or may not have income options if it does shop these payments among private insurance companies.  This will insure you receive the highest income payments possible.
  • If you are receiving part of a spouse’s retirement plan due to a marital status change – It is a good idea to rollover the funds in order to maintain personal control.
  •  When your current retirement plan is terminating -  For a variety of reason employers will discontinue a plan and start another leaving the previous plan “frozen in place”.  A good time to do a rollover.
  • In-service distribution from your current plan when available can be rolled over into a personal retirement with guarantees in order prevent future losses.
  •  When you’re inheriting money as the beneficiary of a retirement plan account – Depending on your relationship with the deceased you may be able to do a spousal transfer without taxation into your own personal IRA.  Sorry kids you will have to pay income taxes.
  •  When you have worked for multiple employers, participated in multiple plans, and now desire to consolidate the assets from those different plans into a single plan.
  • If your retirement plan has no safe money investment options – it is advisable to diversify using a rollover whenever your plan allows.

A recent tax court ruled that only one IRA rollover is allowed per year.  To avoid tax problems it is better to do an institution to institution transfer.  This way the funds are never comingled with any of your other money.

Consult with a professional to help you make the most informed decision when a rollover is in your best interest.

You may ask questions in the comments or contact me privately Tim Barton, ChFC

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Do you own fixed annuities?

Do you wonder why so many retirees own fixed annuities?

The Top 3 Reasons to Own Annuities

46% own annuities to Supplement Social Security and Pension Income

  • Planning Tip

Do you receive interest earnings that you’re not using for income? Not only are you paying unnecessary taxes on this money, but those earnings may increase the amount of your taxable Social Security benefit. Repositioning certain assets into a tax-deferred annuity can reduce or eliminate excessive taxes

 34% own annuities to Accumulate Assets for Retirement

  • Planning Tip

One common way is to move assets into a tax-deferred annuity. This approach works because annuity earnings are excluded from provisional income until withdrawn, reducing provisional income — and taxes due — in the meantime. Remember, the real value of your Social Security benefit isn’t the amount you receive, it’s what remains after taxes.

27% own annuities to Receive Guaranteed  Lifetime Income

  • Planning Tip

Immediate annuities can offer retirement income for life.


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How Can an Income Annuity Protect Against the
Risk of Living Too Long?

The purpose of an annuity is to protect against the financial risk of living too long…the risk of outliving retirement income…by providing an income guaranteed* for life.

In fact, an annuity is the ONLY financial vehicle that can systematically liquidate a sum of money in such a way that income can be guaranteed for as long as you live!

Here’s How an Income Annuity Works:

The annuity owner pays a single premium to an insurance company.

  • Beginning immediately or shortly after the single premium is paid, the insurance company pays the owner/ annuitant an income guaranteed to continue for as long as the annuitant is alive. There are other payout options also available.
  • With a cash refund provision the insurance company pays any remaining funds to the designated beneficiary after the annuitant’s death.

Seeking a secure life long retirement income?  Click the video box to left of this post.


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The following is an overview of the options available to an IRA beneficiary. Depending on the type of IRA, whether or not the IRA beneficiary is the spouse of the deceased IRA owner and the IRA beneficiary’s needs and objectives, different options may be appropriate. 

In order to avoid unforeseen and/or negative tax consequences, an IRA beneficiary should seek professional tax advice before selecting an option.

 Inherited Traditional IRA Options: 

The options available to an individual who inherits a traditional IRA include the following: 

  1. Immediate Lump-Sum Distribution: Surrender the inherited IRA and receive the entire value in a lump sum. The taxable value of the IRA is then included in the beneficiary’s income in the year of surrender.
  2. Distributions Over Five Years: If the IRA owner was under age 70-1/2 at death, the beneficiary can take any amounts from the inherited IRA, so long as all of the funds are distributed by December 31 of the year containing the fifth anniversary of the original IRA owner’s death. This option is not available if the IRA owner was over age 70-1/2 at death.
  3. Life Expectancy: The IRA assets are transferred to an inherited IRA in the beneficiary’s name, where the date by which required minimum distributions must begin depends on whether or not the beneficiary is the surviving spouse and by the IRA owner’s age at the time of death.
  4.  Spousal  Transfer:    Under this option available only to surviving spouses who are the sole IRA beneficiary, the spouse beneficiary treats the inherited IRA as his/her own and the IRA assets continue to grow tax-deferred. IRA distribution rules are then based on the spouse’s age, meaning that distributions may not be available prior to the spouse’s age 59-1/2 without paying a penalty tax and required minimum distributions must begin by the spouse’s age 70-1/2.

For spouse beneficiaries: 

    • If the deceased spouse was younger than age 70-1/2 at the time of death, the surviving spouse may delay required minimum distributions until the year in which the deceased spouse would have reached age 70-1/2.
    • If the deceased spouse was older than age 70-1/2 at the time of death, the surviving spouse must begin taking required minimum distributions by December 31 of the year following the spouse’s death.

 For non-spouse beneficiaries:

    • Required minimum distributions from the inherited IRA can be spread over the non-spouse beneficiary’s life expectancy, with the first payment required to begin no later than December 31 of the year following the year of the IRA owner’s death.


Inherited Roth IRA Options:

 The options available to an individual who inherits a Roth IRA include the following: 

  1. Immediate Lump-Sum Distribution:  Surrender the inherited Roth IRA and receive the entire value in a lump sum. The earnings, however, may be taxable if the Roth IRA is not at least five years old.
  2. Distributions Over Five Years: The beneficiary can take any amounts from the inherited Roth IRA, so long as all of the funds are distributed by December 31 of the year containing the fifth anniversary of the original Roth IRA owner’s death. Any earnings distributed before the Roth IRA is at least five years old, however, may be taxable. Since all amounts other than earnings can first be withdrawn tax free, it may be possible to minimize or eliminate any taxation on earnings by withdrawing them last.
  3. Life Expectancy: The IRA assets are transferred to an inherited IRA in the beneficiary’s name. For non-spouse beneficiaries, required minimum distributions based on the beneficiary’s life expectancy must begin no later than December 31 of the year following the year of the deceased Roth IRA owner’s death. For a spouse who is the sole IRA beneficiary, required minimum distributions may be postponed until the year in which the deceased Roth IRA owner would have reached age 70-1/2. Since contributions are considered to be withdrawn first, it’s unlikely that any taxable distribution of earnings will take place if the Roth IRA hasn’t been in existence for five years.
  4.  Spousal Transfer: Under this option available only to surviving spouses who are the sole Roth IRA beneficiary, the spouse beneficiary treats the Roth IRA as his/her own. Roth IRA distribution rules are then based on the spouse’s age, meaning that distributions of earnings may not be available prior to the spouse’s age 59-1/2 without tax or penalty. Since Roth IRAs have no required beginning date and no required minimum distributions, the spouse can leave the money in the Roth IRA as long as he/she wants.
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Due to the requirements of ACA someone who is planning to retire prior to their Medicare eligibility will need to consider the cost of mandated health insurance.  As implementation of ACA looms closer the estimated ACA (Affordable Care Act) premiums and procedures  are becoming more clear.  Starting in October 2013 Health Care Exchanges will open for business in all 50 states as state run, partnership (federal & state) or federally operated.  As January 2014 all Americans will be required to carry qualified  insurance policy.  Grandfathered health insurance policies  issued prior to March 23, 2010 will satisfy this requirement, assuming they have not been significantly changed since their issue date, such as a large increase in deductible or coinsurance.

While making retirement plans it has always been prudent to consider and budget for healthcare costs along with the insurance required to pay for those costs.  Some retirees have had employer based options that they could extend up to Medicare eligibility for little or no cost.  These arrangements could end and if not protected by contract could end even for those currently on these plans.  It is important for retirees and future retirees to become familiar with ACA requirements and premiums.

How to calculate your expected ACA Bronze Plan Premium – The Kaiser Family Foundation has an easy to use subsidy calculator here.

Sample Premiums for- Bronze Plan

Couple age 62 with household income of $60,000 and nontobacco users.

  • Household income in 2013: 387% of poverty level
  • Unsubsidized Health Insurance Premium in 2013: $17,342
  • Receive a government tax credit subsidy of up to:$11,642 (which covers 67% of the overall premium)
  • Amount they pay for the premium: $5,700

Same couple with $63,000 annual household income

  • Household income in 2013: 406% of poverty level
  • Unsubsidized Health Insurance Premium in 2013: $17,342
  • Eligible for a subsidy: None
  • Amount they pay for the premium: $17,342

With only $3000 more income annually the premium per couple rises from $5,700 to $17,342 per year for the most basic plan. 

For those who retire early or those who have already retired early will need to consider the new ACA requirements very carefully.  Those who have retired and are not yet 65 may need to go back to work for health benefits. For those considering early retirement; might want to reconsider before it is too late.

At the very least income per year will need to be managed very carefully.  The couple above with $60,000 income- after insurance premium net $54,300 .  Where as the second couple only nets $45,658 after paying for their insurance even though they had $63,000 to start with.

Keep in mind the Government pays the subsidy to the  insurance company at time of application so if, as in the example above income by year’s end crept up by $3000.  They would have to pay the premium difference of $11,642 in addition to any other income taxes due.  Quite an unexpected expenditure.  Also should you have any medical expenses the Bronze plan require each person’s out of pocket expenses to be $6,400 before they will be covered 100%; capped at $12,800 per family.

There are going to be “navigators” hired to help people navigate through the health exchange.  In the state of WI 10 navigators will be assigned for the entire state.  By law these navigators cannot make recommendations they only help navigate the exchange or “marketplace”.

Each health insurance applicant will checked by the

  • IRS for income to determine their subsidy if any.
  • Department of Homeland Security for citizenship and residency requirements
  • Social Security Administration for identity.

Tim Barton ChFC

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When the market failed the blame game started.  Workers were laid off and they blamed their employers. The government blamed the big banks.  Citizens blamed the government.

And clients blamed their financial advisors.  After all wasn’t it the advisor who laid out the financial plan that was suppose to provide the retiree a solid foundation? In many cases yes.  In other cases it depends.

There are basically 2 methods of retirement planning;


  • Some advisors dictate all of the investments their clients buy.  In some cases the advisor has personal preferences, the things they like and feel good about. Or they simply use their company’s computer models to make recommendations.  Usually these recommendations are based on set preconceived personality and risk tolerance assessments.  The client is then “type cast” into a certain group and instructed what to buy based on the group.


  • These are advisors who operate more like coaches and work in collaboration with their clients to make decisions.  They present a variety of concepts for the client and avoid “type casting” them into certain risk tolerant groups.   In this method the client is making the decision about what is best in their situation at any given point in their life.
  • In this model retirees are free seek the advice and do business with more than one planner.

Which advisor model are you more comfortable with?


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Government regulations dictate senior’s retirement income plans.  The question; Is this government “retirement plan” the best option?

If they have a traditional IRA, 401(k) and/or any other qualified retirement plan they must take Required Minimum Distributions (RMD) upon reaching age 70- 1/2.  If they do not take RMD as required the penalty is a harsh 50%.  Most seniors follow the RMD plan so it must be the optimal way to receive retirement income… Right?

The new reality is nothing could be further from the truth.  Expected longevity continues to increase well past the I.R.S. life tables used to calculate RMD withdrawals.  This could  set up a dangerous financial situation later in life.

The alternative solution and one most seniors have not considered  is a Life Income Annuity.  Rollovers from IRAs and 401(k)s are easy and there are no taxes due or 10% penalty even if income is started before age 59.

Advantages of Life Income Annuities are significant and perform better than RMD plans:

  1. After enduring a decade of sub economic performance, low interest rates,  disappearing pensions and a decreasing Social Security trust fund seniors need protection from steep market swings. Income annuities eliminate market risk by providing a steady monthly pay check.
  2. Saves the golden decade of retirement; the 10 years from age 70 – 80.  RMDs are scheduled to be lower during this time and increase later.  The lifetime annuity has on average a 60% higher payout  during the golden decade and guarantees these payments for life with any remaining principal paid to beneficiaries.
  3. Prevents the RMD crash.   A typical life income annuity starts payments at age 70 about 60% higher than RMD withdrawals.  It is true RMDs increase with age but assuming a 3% growth rate at their peak they  will provide an income 15% lower than the annuity.  After the RMD’s peak withdrawal years the  annual income begins decreasing until the money runs out.

Lifetime annuities take the RMD drop off  and longevity risk away while offering a higher payout.

For help you may ask questions in the comments

Or contact me privately: Tim Barton Chartered Financial Consultant


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Despite Growing Status as Primary Breadwinner and Household CFO, Women Still Fear Becoming “Bag Lady” a new  2013 Allianz Life Women, Money & Power Study Reveals.  

This is a surprise considering 60% of women say they are the primary breadwinner in their household

  • 54% of respondents describe themselves as the household CFO.
  • 49% sometimes fear becoming a “bag lady”.
  • 27% of those earning more than $200,000 per year share that fear.

Inside the study

  • More than 2,200 women ages 25-75
  • Minimum household income of $30,000 a year
  • “Bag Lady” fear extends to all corners of life and affluence
  • Was highest among single respondents at 56%
  • Significant concern for divorced women 54%
  • Widows 47%
  • Married women 43%

Despite feeling more empowered about financial planning

  •  Forty-two percent said they believe financially independent women are intimidating to men and often end up alone
  • (31%) said those women are hard to relate to and often don’t have many friends.
  •  This feeling was even higher among single women at 47% and 32%, respectively.

Allianz Life Vice President of Consumer Insights Katie Libbe comments-

“When Allianz Life conducted the initial wave of the Women, Money & Power Study seven years ago, we discovered that women everywhere – even well-educated, successful, financially independent women – have major gaps and unmet needs when it comes to achieving comfort and confidence with money,”  “Today, women clearly feel more invested in financial planning, however, fears of fiscal failure still persist. The real message here is that the financial services industry needs to help women learn about money and prepare for their retirement.”

In the Age of the Financially Empowered Woman

  •  57% of all women surveyed said they both “have more earning power than ever before” and also “handle major investment decisions and retirement planning.”
  • 55%  noted they take the lead in suggesting new investing or retirement ideas.
  •  60% said they were responsible for handling tax preparation and planning.
  • 90%  of women surveyed agreed that in today’s world, women need to be significantly more involved in financial planning than in the past
  • 96% of divorced women felt this way.
  • 67% of women surveyed said that becoming more knowledgeable and involved in managing their finances has improved the quality of their life, 71% of  single women agreed.

“Allianz Life is dedicated to the mission of achieving financial literacy and independence for every American, so we’re especially keen to design solutions that are relevant, responsive, and sensitive to helping women accomplish greater financial security,” noted Libbe.

Financial Crisis of 2008-2009 Drives Behavior Change

  •  68% say they have increased their financial involvement since the crisis
  • Women ages 45-54 (72%) and widows (75%).
  •  43% of women surveyed said they don’t feel any smarter about how to manage their money than before the crash. That feeling was shared by 36% of women with the highest income (household income of $200,000+).

When asked what key issues will have the greatest effect on their retirement outlook

  • “lack of adequate retirement savings”
  •  ”the future of Social Security,”
  •  ”rising health care costs,”
  •  ”unemployment,”
  • “tax changes.”

Retirement is the worry that keeps most women up at night.

Second only to loss of spouse/significant other. “Running out of money in retirement” is a worry that keeps 57% of women up at night and is the number one worry for single and divorced women.

 Full study available here.

For help you may ask questions in the comments

Or click here to contact me privately: Tim Barton Chartered Financial Consultant

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Smart retirement planning has become all about the income, as in how much and for how long.  Last year the Journal of Financial Planning conducted extensive research into retirement portfolio withdrawal rates. They concluded the traditional 4% rule was too risky because it leaves a retiree with an 18% chance of portfolio failure; that’s about a one in five failure rate.

Retirement income failure (running out of money before you die) is disastrous. In the financial planning business they call it “portfolio failure”

Portfolio failure is another way saying “sorry your money is all gone”.  Very bad news to someone in their 70’s potentially looking at many more years of life by surviving only on Social Security each month.

What is the problem with money in a 401 (k)?

It must be withdrawn and a safe withdrawal rate must be determined.

What is the new safe withdrawal rate?

  • 2.52% According to the Journal of Financial Planning.

Retirement income  money that is invested in equities; stock market, mutual funds, ETF, variable annuity etc. has an 18% chance of failure if the retiree withdraws more than 2.52% per year.

What is the solution?

With interest rates hovering around 1% certainly not bonds or certificates of deposit.

That leaves fixed annuities because they can insure a retirement income for life.  But their rates are also low and the income is sometimes level with no chance of increase.

Enter the time tested fixed index annuity with income options.  An indexed annuity can offer a guaranteed withdrawal percentage increase, meaning each year you own an indexed annuity the percentage you can withdraw goes up; some as high as 7%.

Let’s compare the recommended 2.52% equity withdrawal and 7% index annuity withdrawal using a nice round figure like $100,000.

2.52% of $100,000  provides a safe income of $2520 per year.

Whereas the annuity’s 7% withdrawal is $7000 per year guaranteed for life  and this $7000 could go up each year if there is an index interest credit and once it goes up, it is guaranteed to stay up.

3 choices are:

  • Unsafe withdrawal using the antiquated 4% rule and risk running out of money 1 out of 5 times. ($4000 per year)
  • The new “safe” 2.52% rule ($2520 per year)
  • The insured, guaranteed 7% index annuity ($7000 per year)

Which choice do you prefer?

For help you may ask questions in the comments

Or contact me privately: Tim Barton Chartered Financial Consultant

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Americans in retirement and those soon to be retirees have serious concerns. According to the Reclaiming the Future Study conducted in 2011-2012 by Allianz Life:

Fear # 1American Retirement Crisis/Unprepared:

  • 92% of Americans believe there is a retirement crisis and fear they are unprepared

When asked “Do you believe there is a retirement crisis in this country?”

  • 92% answered absolutely or somewhat.

In the age group 44-54

  • 54% said they feel unprepared for retirement.
  • 57% of all respondents worry about their nest egg safety and it may not be large enough.
  • 47% fear they will not be able to cover basic living expenses.

 Fear #2Americans fear outliving money more than they fear death

  • Increasing longevity mean more people are spending more years in retirement.  
  • 77% of all age groups worry about living too long.  So much so a shocking 61% feared outliving their assets more than they feared death. 

The market meltdown of 2008-2009 caused a profound financial rethinking for Americans. 

  • 53% reported their net worth was significantly eroded in a very short period of time.
  • 43% had their home values drop
  • 41% realized they were not “in control” of their financial futures as they’d thought.

 As a result of this financial turmoil many research participants said they changed their behaviors.

  • Cut back on spending
  • More interest in financial news and studying the markets

The majority agreed- “That the safety of my money matters more.” 

“Asked to consider the features that would be most important to them if they could build the ideal financial product?”

  • 69% of survey respondents said they would prefer a product that was “guaranteed not to lose value”
  • Only 31% would choose a product that is not guaranteed with the goal of “providing a high return.”

Annuity-like solutions are gaining relevance and appeal.

For help you may ask questions in the comments

Or click here to contact me privately: Tim Barton Chartered Financial Consultant


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As we move forward into tax season, we wanted to take a moment to remind you of some unique benefits that are available to the brave men and women serving in our Armed Services

Heroes Earned Retirement Opportunities (HERO) Act:

On May 29, 2006 President Bush signed into law the Heroes Earned Retirement Opportunities (HERO) Act. The HERO Act allows members of the Armed Forces serving in a combat zone to include nontaxable combat pay as compensation for purposes of determining traditional IRA or Roth IRA contribution amounts.

Prior to this act, because combat pay is nontaxable and excluded from gross income, a serviceman or servicewoman with only combat pay was unable to make an IRA contribution.

Additional time to make traditional IRA or Roth IRA contributions:

Generally, traditional IRA or Roth IRA contributions are due by the tax filing deadline (April 15, 2013 for the 2012 tax season), not including extensions. However, military members and their spouses may qualify for a deadline extension of up to 180 days after the last day served in a combat zone, hazardous duty area, or certain other deployments, plus the number of days that were left to make the IRA contribution at the time service in the combat zone began. The extension doesn’t just apply to traditional IRA or Roth IRA contributions, but also to filing tax returns, paying taxes, and claiming a tax refund.

Heroes Earnings Assistance and Relief Tax Act (HEART) Act:

On June 17, 2008 President Bush signed into law the Heroes Earnings Assistance and Relief Tax (HEART) Act. One of the major provisions of the HEART Act relates to the ability to roll over Servicemembers’ Group Life Insurance (SGLI) payments to a Roth IRA or a Coverdell ESA.

The Act permits an individual who receives a military death gratuity or SGLI to contribute the funds to a Roth IRA and/or one or more Coverdell education savings accounts. In addition, the contributions would be treated as rollover contributions and not subject to normal income or contribution limits. The contribution must be made within one year from the date the taxpayer receives the military death gratuity or SGLI payment. This provision is generally effective for payments made on accounts of deaths from injuries occurring on or after June 17, 2008.

For help you may ask questions in the comments

Or click here to contact me privately: Tim Barton Chartered Financial Consultant

Reprinted with permission- Allianz

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