RJG Legal

What is My Retirement Plan Missing?

“How can you possibly know how much money you will need for retirement, if you don't know what you will be doing?”

Forbes’ article, “The One Piece Missing From Most Retirement Plans” says there’s just one small piece that many people don't think about when crafting their retirement plan. Any guesses what that is? Well, the missing piece is: THEIR RETIREMENT PLAN!

All the calculations are critical, but they aren’t much good without actually thinking about what you plan to do during retirement. There are two reasons why thinking about the final years of your life are crucial. The first is that you can’t possibly know how much money you’ll need for retirement, if you don't know what you’ll be doing, right? There’s a big difference in the money needed to travel around the world versus sitting on the porch knitting sweaters for grandchildren and playing bingo at church.

Next, when you wake up on your first morning of official retirement, you’ll have no responsibilities or plans. How great! But, be honest: how much can you really tend to your garden or catch up on reading? Retirement can be up to 30 years or more. That's a lot of time left to live. Retirees frequently are bored, lonely, or depressed during retirement, because they don't have the routine, social interaction or purpose that they had at work.

Before you begin your retirement calculations, ask yourself these questions:

• Where will I live?
• Do I want to downsize?
• What are my dreams and goals in retirement?
• Do I want to have the flexibility to move near my children?
• Do I want to help my children with their finances?
• Have I adequately considered the rising cost of healthcare?
• Do I have family to help me?
• Will I need to consider living in a retirement home?
• Do I want to work a part-time job to keep busy?
• Do I want to leave my estate to my children or charity?

If you’ve thought about how much money you have and how much money you'll need in retirement, that’s terrific. However, as you’re planning for retirement, remember to think about exactly what you’ll do when you retire.

Reference: Forbes (November 21, 2018) “The One Piece Missing From Most Retirement Plans”

What’s All that Stuff in Your Wallet?

“One of the worst feelings is reaching for your wallet and finding it's not there. Panic ensues: Did you leave it at home? Drop it? Were you the victim of a pickpocket? Following our advice won't salve that panic, but it may lessen it.”

Is your wallet filled with personal and financial information? Did you know that much of that information can be exploited by identity thieves? The bad dudes just need your name and Social Security number to get going.

Kiplinger’s recent article, “The Worst Things to Keep in Your Wallet,” identifies the things you should immediately take out of your wallet. After you’ve done that, photocopy whatever’s still in your wallet. That way, if your wallet is lost or stolen, you can at least quickly and easily file reports.

Your Social Security Card. There’s no faster way to identity theft than losing your Social Security number. Criminals can use your SSN to apply for loans in your name or obtain credit cards. Never carry your Social Security card or even a piece of paper with your Social Security number on it. You should also be certain that there’s nothing else in your wallet has your SSN on it, like other forms of identification.

Your Handy-Dandy Password Cheat Sheet. Admit it, you have one. Maybe it’s taped to your computer or under your keyboard. It’s your password cheat sheet. We Americans use at least seven different passwords to access all of our accounts. It is recommended that you create individual passwords made up of unique combinations of numbers, letters, and symbols that you change regularly. How do you remember them all? For most of us, it’s a cheat sheet. One of the worst places for a password cheat sheet with your financial passwords is your wallet. Instead, you can jot down your passwords and keep them in a locked box in your house. You can also use a digital password manager.

Your Spare Set of Keys. A step beyond the lost wallet, is a lost wallet with your spare house key, along with your ID that shows your home address. It’s an invitation for thieves to break into your home. Instead, keep your spare key with a relative or friend.

Checks (Really?). OK, some people still write checks, and many of us still carry a blank check in our wallets—"just in case"—for emergency purposes. However, blank checks are risky. A criminal can use a blank check to quickly drain money from your bank account. If the stolen check isn't used, it has your bank account and routing numbers on it—a target for electronic withdrawals from your account. Just take the checks with you that you might need immediately and leave the checkbook at home.

Your Passport. A passport, like any government-issued photo ID, can be a gold mine to use against your finances, if a criminal gets his hands on it. If you’re traveling in the U.S., take only your driver's license or other personal ID. Leave your passport book and wallet-size passport card in a safe place at home or in a bank safe-deposit box. If you’re traveling abroad, carry a photocopy of your passport and leave the original in a hotel safe.

Multiple Credit Cards. How many credit cards do your really need? Just think how svelte your bulging wallet could look with fewer credit cards in it. Therefore, if your wallet is lost or stolen, you won't have as many credit cards to cancel.

Your Birth Certificate. Do you really need to carry this around? While if only your birth certificate is stolen, it won't get anyone very far. However, a criminal could use it with other types of fraudulent IDs and do some major damage to your finances.

A Bunch of Receipts. Why do you need all those receipts crammed into your wallet? Businesses are prohibited from printing on paper receipts, more than the last five digits of your credit card. However, skilled thieves could use those last five digits and merchant information on receipts to phish for the remaining numbers on your credit card! Get rid of those receipts and shred them. If you need to keep receipts for possible returns or warranties, ask the merchant to send you a digital receipt instead.

Your Medicare Card. Many retirees may have Medicare cards with their Social Security numbers printed on them. However, new legislation requires the Centers for Medicare and Medicaid Services to remove SSNs from Medicare cards. It’s a gradual change, so until April 2019, you might be stuck with your old card. If you have an old Medicare card with your SSN on it, remove it from your wallet and replace it with a photocopy of the card. You should black out your Social Security number on the photocopy.

Reference: Kiplinger (August 17, 2018) “The Worst Things to Keep in Your Wallet”

Can You Plan All 8,000 Days of Retirement?

“As life spans get longer and longer, there are now more challenges and opportunities involved with navigating transitions before and during retirement. Here's what you need to know.”

A recent WTOP article asked “Are you ready for 8,000 days or more in retirement?” The article notes that the years we spend in retirement are increasing, because we’re staying healthier and living longer. It’s not unlikely for those in their mid-60s today, to have a life expectancy of another 20 to 30 or more years.

Along with this good news come the issues and questions surrounding the transitions before and during retirement. As you near retirement, you may be pondering how you want to spend your days and if you’ll have the savings to live the life you want. Hopefully, if you have been planning, you have a good sense of your cash flow and assets available for retirement.

A complete financial plan addresses cash flow sources and a realistic living budget, as well as Social Security, Medicare, long term care, insurance, taxes and estate planning. It’s critical to envisioning your future retirement. Many professionals believe it’s important to incorporate both quantitative and qualitative planning to allow for a fulfilling retirement and a life well-lived.

At the MIT Age Lab, instead of looking at retirement as an end, they consider a new retirement story that lasts on average for 8,000 days. The MIT Age Lab divides a person’s life into four equal parts of 8,000 days. Each segment lasts approximately 22 years: Learning (birth through college); Growing (start of professional career, relationship/marriage, start young family from your 20s to mid-40s); Maturing (prime career years, bigger homes, raising older children from mid-40s to mid-60s); and Exploring (retirement beginning mid-60s).

In its studies, MIT found that most people only had a vague idea of what they would do in retirement. It is remarkable that many see retirement as a single state. MIT found that without a clear vision, many retirees are unprepared for what comes next. While you may know exactly what you plan to do on Day 1 of retirement, do any of us really have a clear vision of Day 4,000? Initially in retirement, most have resources, good health and time for leisure activities, travel and social connections, along with the desire to pursue new interests.

Individuals and couples also begin addressing crucial “tactical” decisions that include where to live, how you will get around and with whom you will spend your time. That includes planning where and with whom to retire, as well as how much it will cost.

Meet regularly with your attorney to be certain your long-term plan is intact, can accommodate any changes and is in harmony with your estate plan.

When it comes to retirement planning, many only look at accumulating assets and making sure we spend our money wisely. While many retirees are concerned with outliving their wealth, there’s an even greater risk of losing your independence to declining health, being unable to access things you enjoy or need and having fewer friends.

Reference: WTOP (May 9, 2018) “Are you ready for 8,000 days or more in retirement?”

Retired and Planning to See the World? Be Sure You Plan Ahead!

“When we think of retirement, we often imagine ourselves exploring the globe and taking advantage of the seemingly limitless amount of free time we suddenly have on our hands.”

Many people see retirement as the ideal time to travel, with all their work-related time constraints gone. However, because most seniors are on a fixed income, paying for those trips is often easier said than done. Add to that the fact retirees don't usually do a good job of budgeting for travel, and it's no shock that many find themselves financially stressed.

CNN Money recently published an article, “How to budget for travel in retirement” in which it notes that some retirees realize that travel expenses are 40% higher than expected, but 58% of seniors don't budget for travel in retirement at all. Here are some tips on budgeting for travel ahead of time.

1. Calculate what you can spend on travel annually. You need to plan your trips with a strong sense of how much money you have available to spend. As a general rule, you can withdraw about 4% of your nest egg's value each year without having to worry about running out of money in retirement. However, you'll need to deduct for taxes (unless your savings are in a Roth account) before you do anything else. Remember that 401(k) and IRA withdrawals are considered income, so the IRS will tax that cash. You also must estimate your basic living expenses, like housing, food, clothing and healthcare. Once you've accounted for these essential costs, you can then see what you can spend each year for travel.
2. Prioritize your trips and appreciate their costs. Once you get a feel for how much you can afford to spend on travel, you next need to maximize that money. Identify the trips most important to you and get a good sense of how much they'll cost. Don’t just guess!
3. Add a cushion. Once you see how much your dream trips will cost, you’d be smart to look for any senior discounts. That may be savings on car rentals, meals or even hotels. It's also important to build a buffer into each trip's budget to account for the unknown.

There will also always be incidentals, like taxis and tips. They will end up costing more than expected.

Finally, purchase travel insurance to give yourself some degree of protection, if your plans are disrupted or you encounter a health issue that makes you cancel or change your itinerary.

Reference: CNN Money (February 5, 2018) “How to budget for travel in retirement”

Estate Planning for Art Collectors

“Art is left to loved ones or other individuals, donated to charity directly, or in trust at the death of the collector. Proper planning means that the artwork is transferred to others very tax efficiently.”

Affluent art collectors hope that their acquisitions will appreciate in value, but they will also purchase pieces for personal and aesthetic reasons. These collectors may be extremely focused on acquiring art—and not very interested in disposing of it.

This frequently means that at death they’ve amassed sizeable collections. However, it’s also surprisingly common that many affluent art collectors do a poor job of addressing their artwork in their estate plans, says Forbes in the recent article, “Estate Planning And Affluent Art Collectors.”

Failing to plan for the disposition of collections upon death can mean a lot of expense for your family. This is because they may have to pay higher estate taxes. It can also result in the unfair division of the art, creating family conflict and legal battles.

Unfortunately, wealthy collectors often adopt the default option of not properly planning. If the collector isn’t certain to whom to leave pieces, he or she will procrastinate until it’s too late.

However, smart planning can often resolve these issues. One option is to have corporate entities to own the art. This addresses many ownership issues and can simplify probate, because there’d be no need to retitle the art.

With a meaningful and valuable collection, proper planning means more than constructing an estate plan. It means building files of ownership to make certain there are no questions concerning provenance. The files should include certificates of authenticity, bills of sale and insurance records.

Work with an experienced estate planning attorney to ensure that your wealth is passed on to whom you select and done in a way that mitigates taxes.

Reference: Forbes (January 8, 2018) “Estate Planning And Affluent Art Collectors”

Have You Conducted Your “Dostadning?”

“The phrase ‘death cleaning’ may sound jarring to unaccustomed ears, but the concept makes sense. It’s about getting rid of excess, rather than leaving a mess for your heirs to sort out.”

“Death cleaning” is the literal translation of the Swedish word dostadning, which means an uncluttering process that begins as people age. There’s even a new book called “The Gentle Art of Swedish Death Cleaning,” by Margareta Magnusson.

Santa Fe New Mexican’s recent article, “How to ‘death clean’ your finances,” says the focus should be on jettisoning junk. However, most senior’s finances could also use a good death cleaning. Simplifying and organizing our financial lives can make things easier for us while we’re alive and for our family after we’re gone.

This task becomes more pressing when we’re in our 50s. Our financial decision-making abilities generally peak around age 53, researchers say, while rates of cognitive decline and dementia start to increase at age 60. As we get older, we may become more vulnerable to fraud, scams, unethical advisers and bad judgment. Here are some steps you can take:

Consolidate financial accounts. Fewer accounts are easier to watch for suspicious transactions and overlapping investments. You also may save on account fees. See if your employer will let you transfer old 401(k) and IRA accounts into its plan or consolidate them into one IRA. Think about exchanging individual stocks and bonds for professionally managed mutual funds or exchange-traded funds (investigate prior to selling any investments held outside of retirement funds). Move scattered bank accounts into one account, but note that FDIC insurance is generally limited to $250,000 per depositor per institution.

Automate payments. Memory lapses can cause missed payments, late fees, and credit score damage. This can drive up the cost of borrowing and insurance. Set up regular recurring payments in your bank’s bill payment system, have bills charged to a credit card and set up an automatic payment, so the card balance is paid in full each month.

Scale back on credit cards. Keep just two credit cards: one for everyday purchases and another for automatic bill payments. Closing accounts may hurt credit scores, so wait until you’re sure you won’t need to apply for a loan before you start cutting down on the plastic.

Assign a watchdog. Identify the person you want to make decisions for you, if you’re incapacitated. Ask your attorney to create two durable powers of attorney — one for finances and another for health care. You don’t have to designate the same person for both, but name backups if your first choice can’t serve. Consider naming someone younger, because someone your age or older could become impaired at the same time you do. Discuss where your agent can find the information and access.

Your emergency file. Create “in case of emergency” files that your trusted agent or heirs will need. The file can include the following:

• Estate planning documents, such as your will, trust, healthcare directives, powers of attorney, and living will;
• Birth, death and marriage certificates;
• Military records;
• Social Security cards;
• Car titles, property deeds and other ownership documents;
• Insurance policies;
• A list of your financial accounts;
• Contact info for your attorney, CPA, financial adviser, and insurance agent; and
• Photocopies of passports, driver’s licenses, and credit cards.

A safe deposit box isn’t the best spot because your agent may need access outside of bank hours. A fireproof safe or a locked file cabinet may be better, but share the combination or key (or its location) with your trusted person. Scan important papers and retain an encrypted copy in the cloud to help you or someone else recreate your financial life, if the originals are lost or destroyed.

Reference: Santa Fe New Mexican (December 18, 2017) “How to ‘death clean’ your finances”

Make 2018 the Year You Organize Your Finances

“Do you want to feel as if you've lost 10 pounds? Get your financial life in order.”

nj.com’s recent article, “5 resolutions for managing money,” gives five easy-to-make and easy-to-keep New Year's resolutions for protecting your money.

Create Goal-Specific Plans. Think about what you want to achieve in 2018 and how you can save to make it happen. Move funds into the savings category automatically and regularly. Ask your bank to have a specific amount regularly moved from your checking account into a savings account. You can use direct deposit from your paycheck to a savings account, if that’s available. Then leave that money alone!

Keep Track of Your Spending. "Budget" may be a dirty word to many, but knowing what you spend is the best way to make changes to your financial life. There are plenty of resources that can help. For example, mint.com is a free budgeting app that is easy to set up and maintain. If you want more control over the categories and a variety of reports related to spending and budget, Quicken is a good product.

Lower Banking Fees. Review your bank accounts and find better deals, such as checking and savings accounts that don't charge monthly fees or require a minimum balance.

Lower Interest Rates. If you carry a balance on your credit cards, look at the options. Make a list of credit cards and their interest rates, then contact each card company and ask them to lower your rate. If you have a good payment history, you might be surprised to see how often they agree. If your lender says no, don't give up. Try your other cards, and see if they have a zero-percent interest balance transfer offer.

Visit an Estate Planning Attorney. No one wants to prepare for their own death, but if you don't, the state will dictate what happens to your minor children and your property.

Even if you have all the documents you think you need, review them on a regular basis with an experienced estate planning attorney. Circumstances can change, and estate plans need to keep up with our lives. There are births, adoptions, deaths, marriages, divorces, and many other things that can happen that necessitate changes to your estate plan.

An estate planning attorney will help design your documents to be certain that your wishes and instructions are clear. If you wait to make updates, it could be too late, and that will cause stress and issues for your loved ones.

Reference: nj.com (December 6, 2017) “5 resolutions for managing money”

Picking the Right Retirement Community

“Moving into a retirement community can be one of the biggest decisions seniors have to make. For many people, it means leaving a home they've lived in for decades.”

Lancaster Online’s recent article, “It's never too early to start retirement planning,” says that before you make the move to a retirement community, look at these tips for selecting the best option:

Give yourself plenty of time. It is never too early to start looking for a retirement community. Begin looking long before you need to move. That will give you ample time to research all of the many options for retirement living.

Evaluate the types of services offered. Some offer only independent living. Therefore, if someone needs additional care in the future, they’d have to relocate again. Other homes offer a full range of care from independent living to skilled nursing.

Look at the cost. Calculate all the fees, such as those associated with assistance with activities of daily living or nursing care, as well as any entrance fees. Ask to review a standard community contract.

Plan ahead. Take the time to do estate planning long before you plan to move. If you do some estate planning at least five years before you may need to enter a nursing home, you may be able to protect more of your assets from having to be spent on your care. Talk to an elder law attorney about specific strategies.

Look at the community’s location. Figure out transportation issues and whether you want to live in an apartment or a separate home. Look at how far it is to stores, medical care and other off-site places.

Thoroughly evaluate the community. Before meeting with people from different communities, create a checklist to complete for each one. Get your answers in writing to aid with accountability.

Plan a surprise visit. Show up unannounced, when you want to visit a community. The staff will be on its best behavior, if they know when you're coming. See how well they can adapt to accommodate you, when you aren’t expected.

Speak with other residents. When you take a tour, talk to the residents and ask their opinions of the place.

Inquire about current occupancy. If you know how full the home is, you may have negotiating room on the cost.

Check the reviews. Research any online reviews of the retirement community, along with inspection reports.

Trust your gut. And your nose. If things don't smell right, and it smells like urine, that's a bad sign.

Reference: Lancaster Online (November 29, 2017) “It's never too early to start retirement planning”

More Reasons for Estate Planning

“There are two types of powers of attorneys.”

Estate planning is critical for everyone. That goes double for seniors.

Basic estate planning means you’ve drafted and properly recorded legal documents, such as wills and powers of attorneys, and they’re all up-to-date. Wills written 20 years again after a child is born are now severely dated and possibly inaccurate.

There’s a fair chance that things have changed, and the will may be missing all of the grandchildren or still includes individuals whom you no longer want as primary beneficiaries.

The Herald-Standard explained, in its recent article, “Your Financial Future: Estate planning,” that powers of attorney come in two general flavors.

One power of attorney is for health care. This document designates an individual and gives him or her the authority to make health care decisions for you, if you are incapacitated. Capacity is the ability to understand your options and pick the best one. There are times when people may not have capacity temporarily, such as when they are in a coma. It can also be long term, when a person suffers from dementia.

The other type of power of attorney is for financial matters. This permits the appointed individual to make decisions concerning paying your bills and those that keep your family’s financial life functioning. Note that powers of attorney end upon your death.

Powers of attorney are granted under state laws. Because of this fact, federal government agencies don’t typically recognize them. Since federal law supersedes state law, your power of attorney may not be recognized by agencies, like the Social Security Administration.

The Social Security Administration has its own form which appoints a personal representative. The agency requires that its own form be used to make decisions on behalf of another. If someone may need this, it’s prudent to prepare Social Security Administration paperwork in advance while the senior can still make sound decisions. This may be called for, if he or she moves into a nursing home, and their benefit checks are mailed to their old address. Yes, this is another good reason to receive your payments by direct deposit.

That individual may also want to set up a Social Security Administration account online at Social Security/myaccount. Changes can be made here at any time without the need to speak to a Social Security Administration employee.

Reference: Herald-Standard (November 23, 2017) “Your Financial Future: Estate planning”

Elder Financial Exploitation Comes in Many Forms

“One in five Americans age 65 and older has been impacted by fraud, according to a survey by the financial education organization Investor Protection Trust. Holiday time, in particular, is high season for these illegal actions.”

It is estimated that seniors who’ve been scammed have lost an average of $430. The national overall total is more than $9.5 billion. Law enforcement and eldercare agencies say financial scams targeting the elderly have become so common, they’re now “the crime of the 21st century.”

The Dayton Daily News reports in its recent article, “Phone scams of elderly ramp up for holidays,” that the ways elder consumers can fall victim to financial exploitation may come in many forms.

Some research indicates that seniors make twice as many purchases over the phone than the national average. As a result, it’s a very common practice to target the elderly in telemarketing fraud.

New widows or widowers who have recently assumed the role of managing their finances, may be more susceptible to being targeted by a scamming telemarketer.

Maggie Flowers from the National Council on Aging says, “Scam artists know that many older adults have fixed incomes, which may make them more susceptible to fraud, because there may be an openness to learn about ways to make money and pay their bills.”

Financially secure elders are also at risk for fraud, because criminals may presume that years of saving could mean a healthy checking account. Older adults who are socially isolated or who are unaware of a decline in cognition may also be at increased risk for financial exploitation. Older adults who get multiple daily telemarketing calls are likely to experience three times as much financial loss, as a person who receives an occasional telemarketing call.

The FBI says elder victims of scams often don’t report telemarketing fraud because these victims feel shame for being scammed. An elder may also not care to talk about a fraudulent act because they think their family may act aggressively and make the elder feel that their independence may be threatened.

To help minimize the risk for fraud, remember the adage that if it sounds too good to be true, it probably is. Don’t share information that could be used to access to financial information over the phone, and speak with an elder law attorney to learn about the most effective practices for protection from potential scams.

Reference: Dayton Daily News (November 27, 2017) “Phone scams of elderly ramp up for holidays”