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So, right about now, folks are thinking about giving. It’s that time of year. Toys for the grand- kids. Jewelry and vacations and such for spouses. All great and fun to receive. Today, let’s talk about really meaningful things. Things that can make a difference in someone’s life.
Thing One:A great gift can be a gift of education. There is an investment vehicle called a 529 plan. The 529 is not so much an investment but a tax-free basket of investments. In 2019, gifts totaling up to $15,000 per individual will qualify for the annual gift tax exclusion. This is a way for you to fund a child’s education and have the money grow tax free, if used for higher learning.
Thing Two: Sometimes when a spouse passes, it leaves an income shortfall. There are a few things that you can do to counteract this insult to injury. One is that you can buy a life insurance policy to cover funeral costs as well as other end-of-life expenses. This way, you can grieve without having to worry about money. Now, if the cost won’t change your lifestyle while your alive, you may consider an income replacement policy. This is just life insurance with enough death benefit to replace the income of a spouse. Sometimes these policies can even be used to cover long-term care, grow in cash value, and be sold if the coverage is no longer needed.
Thing Three: Do you have a favorite charity that you gift to every year but always wished that you could make an even larger gift? Well, life insurance may be able to magnify your gift. We call this a Legacy Gift. You deposit premium dollars into a life insurance policy and name a charity or charities to receive the death benefit after you pass. It can be as small as a few thousand or as large as you like. I actually have a client in Las Vegas who had a CD that she was not going to use for anything so she decided that she would like to transfer the asset to a life insurance policy, effectively doubling her 400,000 dollar CD to an almost 800,000 dollar tax-free death benefit. Even better, she has access to the cash value if she needs it while she’s alive and can always change her mind.
Stay warm and have a great Thanksgiving.
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Should I have Life Insurance 2019
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Lately, I’ve had a lot of clients asking about life insur- ance. Some of our clients are retiring and want to know if they can or should maintain their life insur- ance from work or replace it with a new policy. Well, everyone’s needs are different. There is no one blanket answer. Are you wealthy and need coverage for estate taxes? Do you have moderate means and just want to make sure that there is enough for final expenses? Or somewhere in between?
You see, it really depends on your individual needs. Age is usually not an issue up to around 80 years of age or so. Health will be a major determining factor in how much the policy will cost, as well as what company to use. If we discover that a client does, in fact, need a plan, we figure out what company and policy to use the same way we do with Medicare products. We run your statistics and needs through an algorithm with several companies and hundreds of plans to determine the most appropriate plan for specifically you. Some life insurance policies cover Long-Term Care (nursing home, assisted living facilities & home health care). Some plans can grow a tax-advantaged cash value. Some are guaranteed issue, requiring no health questions or exams.
Some folks have had life insurance for years and discover that in retirement, they have saved enough that they no longer require life insurance. We can talk about a variety of ways to discontinue your existing policies in a tax advantaged way and come out ahead.
In summary, life insurance can be a valuable tool in retirement or an unnecessary expense. If you want help figuring out what’s right for you, call to schedule an appointment with your trusted American Retirement Advisor.
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When should you make changes 2019
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Do you still own clothing from the 70s and 80s? Do you listen to music from this decade or are you like me and stick to what you grew up with? Do you have meds in your cabinet from the last decade? Well, you’re not alone. To my wife’s dismay, I still wear some clothing that I owned in the eighties.
Holding on to the past is not the best idea when it comes to your investment portfolio. I know, you have always heard that buy and hold is a good strategy. Sometimes that holds true. But not if it’s buy and ignore or buy and forget. The best strategy is to buy and diligently watch and adjust. The problem is that most folks just don’t have the time, patience, or knowledge of markets or underlying positions. Another problem is that many folks have their entire retirement in their 401(k) at work. They “chose” the mutual funds when they started the 401(k) and never made a change. As we get closer to retirement or if we are in retirement, it is imperative that we make some adjustments. It’s time to get more conservative. It’s time to really watch what’s going on. We’re at a stage in life where we can’t afford to lose money. This is a time in life where we need a predictable income and a degree of certainty.
Our clients like having a professional watching over their retirement nest egg. Attend a Retirement Planning or Social Security Workshop and see if you are ready for the future.
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Happy August to our friends in Hotzona and Hotvada, and all over this great nation! All I know is my office is 72 degrees year round. You know what else is still hot? The stock market, that’s what! We are in the longest economic expansion in US history. That’s great! The economy is also continuing to grow at a moderate rate.
Now for the reality check. Does this mean that there is some looming recession? If so, how might that affect stock prices?
THE U.S. ECONOMIC CYCLE IS DIVIDED INTO FOUR STEPS AS FOLLOWS:1. Growth (Recovery)2. Peak3. Contraction (Recession)4. Trough
The question is when do we move from the peak to recession? It’s not if, it’s when. While the length of this expansion is remarkable, does it hold any ignificance? Does the duration of an expansion have predictive value? Should we be concerned about a looming recession based on the extended period of growth we are experiencing? The short answer is “probably not.” Although each day brings us closer to the next recession, it’s more important to focus on what the economic indicators are telling us. There is no doubt there will be another recession. However, we do not know when it will occur or its magnitude.
When investors believe a recession is imminent, selling pressure will intensify and stocks will likely decline. Will there be another “false recession signal” like we had in December 2018? Perhaps. However, as of the end of July, there was no ign of a recession. Even though things can change quickly, the economy is strong, and I expect the expansion will continue for a while longer. Stay tuned.
So, because 99% of our clients are retired or retiring soon, we tend to err on the ide of caution. Meaning that, for the most part, our clients can’t afford to lose their hard-earned dollar. The way that we manage portfolios takes most of the unpredictability of the stock market out of the equation. This gives our clients a more comfortable and predictable outcome year after year.
To see how we achieve this goal, please schedule an appointment to discuss with your American Retirement Advisor. We are here to help.
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Fixed-Index Annuity 2019
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Feeling the heat? Yah, I know, it’s hot outside. Some retirees feel the heat all year long. I’m talking about the heat when your monthly bills come in. Gas, cable, internet, phone, water, insurance, and, for the next several months especially, the dreaded electric bill will be there
without fail.
The problem is that, usually, the only income that you get monthly is Social Security and pensions, if you’re lucky enough to have one. Your investments usually don’t throw off regular income. Wouldn’t it be nice if they did? Stock dividends come quarterly. Nice, but it’s not that convenient. Stocks also have share price volatility as well as fluctuating dividend amounts. What if there was an investment that could provide a monthly income that wasn’t a part of the broad market. Maybe something that had less volatility than, say, the S&P or the Dow? Well, you could use REITs (Real Estate Investment Trusts). REITs are super income-friendly assets. They are, however, not completely risk-free. Don’t get me wrong. They are usually a great fit for retirees. BDCs (Business Development Companies) are a great monthly income alternative as well but have a slightly higher risk profile than REITs. ETFs (Exchange Traded Funds) do a good job of providing monthly income too. But ETFs bring us back into the broad stock market which, in turn, can bring more risk.
So, if you are like most, you would like something that can have a market-like return, provide a stable monthly income stream that you can never outlive, have access to account values, transfer those assets to your heirs without probate fees and time delays, has very low or NO fees, and has absolutely ZERO market risk. Am I right? Well, you’re in luck. That product does exist. It’s called a Fixed or Fixed-index Annuity. Yes, you read that correctly. Fixed annuities are fully insured savings programs, not investments. There is no one-size-fits-all. At American Retirement Advisors, we use actuarial services to identify every Fixed Annuity that matches your specific need. Again, there is NO one-size-fits-all. Most folks should have a healthy mix in their retirement income portfolio.
Ask your American Retirement Advisor to design a retirement income plan for you. Of course, there is never a fee to meet with your advisor. Stay cool!
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The classification of money June 2019
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Happy June, fellow investors! Money comes in different shapes and sizes. I’m not talking about the physicality of money. I’m talking about the classification of money. Some assets are for us to use now to buy things that we want. Some are used to create an income stream for now or later. But some of us are lucky enough to have “throw it over the fence money”. This is my classification for assets that we don’t expect to need. Assets that we can throw over the fence to our heirs or charities. Now, there are efficient ways to do this and there are inefficient ways.
Let’s focus on an efficient way. I have a client that told me that she had $400,000 in a bank CD, earning 3% interest. She said that she didn’t need, and wouldn’t need, the money and was not taking any income from it. I asked what she was saving the money for. She said that she had worked her entire career for a college library. She was leaving it, in her will, to the library. I showed her how I could reposition the $400,000 into a single-premium, guaranteed life insurance policy, and turn her $400,000 into a $700,000 tax-free death benefit for the University. She could gift the policy to the college now and take the write- off, or make the college a beneficiary and retain ownership of the policy. She didn’t need the tax deduction, so we made her the owner of the policy. This way, she could change her mind, as well as have complete control and use of the cash value of the policy. The policy also had a great Long-Term Care benefit that she could use if she needed. This client was 68 years old at the time and in average health.
This is just one example of an efficient transfer method for “over the fence” money. If you would like to explore this option further, please let your American Retirement Advisor know. In future issues, I will share some other “over the fence” strategies.
Enjoy June and stay cool.
Call American Retirement Advisors to see if we can assist with recommendations for your “fence” money
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Long Term Care 2019
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This month is going to be a highbred article. Why, because an important financial planning tool involves protecting yourself from the staggeringly high cost of long-term care. Long-Term Care (LTCi) insurance is an important financial planning tool and can protect your nest egg.
I’ve been assisting clients with this type of coverage for over 30 years. Over that time period, I’ve seen many new and improved variations of coverage. The thing that folks tell me when I first bring it up is that they have already looked at it and found it to be too expensive. Well, if you spoke to an agent who doesn’t know how to properly design a custom plan to the client’s needs, then, yes, it can be too expensive. Also, most agents just represent one company. You should always work with an advisor who is contracted with most, if not all, companies that offer LTCi coverage.
If you’re of a mindset that you just don’t want to pay a monthly premium for yet another insurance policy, not to worry. Several companies have designed unique solutions that can mitigate the risk of long-term care without paying a monthly premium. There are single premium policies that give you access to cash, death benefit and additional benefits for Nursing Home, Assisted Living Facility and Home Health Care. Some products that fit into financial portfolios can also increase retirement income to accommodate a stint in a long-term care facility or Home Care. It’s okay to be creative, you just need to work with advisors that know how.
So, to sum up, ignoring long-term care costs could be catastrophic to your nest egg, spouse, and family. Yet, nearly 70% of those in their mid-60s are going to need some kind of long-term care. And the average cost can exceed $89,000 per year. Who’s going to pay? Medicare? 46% of baby boomers surveyed said, yes, Medicare will pay. Nope, not a nickel.
Call American Retirement Advisors to see if adding this kind of valuable protection is right for you.
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Is my 401(k) still appropriate to hang on to April 2019
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Is my 401(k) still appropriate to hang on to, now that I’m retiring? Do I have to keep my retirement money in my 401(k) if I’m still working at my company? How about my 403(b) or 457 plans? How about cash balance pensions? These are just a few of the questions that I’m asked on a regular basis.
The short answer is, if you want more control and an actively managed account where you’re not stuck with mutual funds as your only choice, then you probably should consider moving your assets. The Fed was kind enough to give us a tax-free way to transfer our qualified retirement accounts like 401(k), 403(b), 457, and pension plans into our own IRA. Even if you are still working! If you are still working, you may be able to use the “In-Service Non-Hardship Withdrawal” clause in the tax code.
In-service withdrawals are made from qualified employer-sponsored retirement plans, such as 401(k) plans before participants experience a triggering event. These events generally include reaching age 59-1/2, being terminated from employment, becoming disabled, or death. Most employers will even allow you to keep the existing plan open and still contribute after you move the existing balance out, including employer matching continuation.
This move can open an entirely new world of opportunity for you. You may have your retirement assets actively managed in a variety of investments. We, here at American Retirement Advisors, specialize in retirement income planning. We understand that a portfolio of mutual funds, in or out of a retirement plan, may be too costly in fees, have a lack of client control, and have too much exposure to market risk. We seek to avoid these issues by building a well-balanced, fee-and risk-conscious portfolio, that adapts and changes over time with your renewed goals in mind.
Give us a call to schedule an appointment with your advisor, or come to one of our monthly Retirement Income Planning workshops. We are always here to help.
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Difference between Financial Planning and Retirement Income 2019
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Warming up yet? This month I want to talk about the difference between Financial Planning and Retirement Income Planning. From 2002 to 2010, my job was to be the expert in Estate, Business, and Retirement Planning for a Fortune 100 company, as a consultant for all the big banks and wirehouse brokerage firms in Nevada and Utah.
Stockbrokers and financial planners would call me in to consult with them and their high-net-worth clients. My job was to listen, review, build, present, and implement a plan for the broker and his or her client.
Why would someone at Merrill Lynch, Morgan Stanley, or Wells Fargo Private Client Services need my help, you ask? Simple; they are not trained on advanced planning. I found that they usually see clients of all ages and don’t change what they do for different age groups of clients. Brokers should know how to buy and sell stock, obviously. But they don’t typically “build a plan”.
A financial planner is usually focused on the accumulation phase of the work-life cycle, to make sure you have a general, but realistic, target of how much you’ll need after work stops. It also, hopefully, helps ensure that you’re saving and investing enough to hit that target when you do retire. Big market gains are important here.
By comparison, a retirement income plan is designed to focus in detail on expenses after the paycheck stops and how your various assets can generate an income stream that will cover those costs for the rest of your life. When done properly, it also considers fees, taxes, and risk mitigation and includes guarantees. This is our firm’s primary focus.
In retirement, is when we put your money to work, so you don’t have to. Even if you have been fairly aggressive over the years, this may be the time when you can’t afford to get this wrong. For anyone worried about being able to afford to retire, conducting such a detailed retirement income plan can be extremely valuable. You’ll protect yourself against a financial catastrophe as you get older, and you’ll see how much you can spend on the things you want to do.
Here at American Retirement Advisors, we have a patent-pending process like no other. I’ve seen them all. We review all the pertinent details of our clients’ family, needs, wants, goals, and, lastly, assets. We then recommend in a clear, easy to understand, chart.
This chart will illustrate predictable income over the next 20 years. It will show the most effective way to take your flexible income.
It will give you peace of mind and comfort in retirement, knowing that someone’s got your back.
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Want to save money on taxes?- 2019
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Happy New Year! I hope everyone had a great holiday season with friends and family. For those of you that are still in the giving mood, but would like to save on your taxes while gifting, you’re in luck. There’s a secret the IRS is sitting on. If you are 70.5 years old or more, the IRS will allow you to donate Traditional IRA assets, effectively lowering your taxable income. The name of this obscure strategy is the Qualified Charitable Distribution or QCD.
Since millions of Americans will no longer be able to deduct charitable contributions, this is a welcome surprise. It’s not new, but, because of the new tax overhaul, there is a renewed need for many to find more deductions. This strategy almost doubles the standard deduction folks get if they don’t itemize write-offs for state taxes, mortgage interest, donations, and the like, on schedule A.
Folks 65 and over can take the standard deduction (13,600 for individuals and 26,600 for joint filers). If you are 70.5 and over, you have the best of both worlds. You can take the standard deduction and use the QCD.
For example, if you are over 70.5, you must take your Required Minimum Distribution or RMD. If you are taking the standard deduction, you don’t get a write-off for charitable contributions in excess of the standard deduction. Now, you won’t get a write-off for the contribution from your IRA, but you won’t have to pay tax on the portion of the Required Minimum Distribution that is donated. This will effectively reduce your overall taxes. But wait, that’s not all! It will also lower your Adjusted Gross Income or AGI. This can reduce the amount that you pay for Medicare Part B and Part D premium.
If you have additional questions, please ask your advisor here at American Retirement Advisors or your tax professional.