Charleston Wealth Management Advisors

Charleston Wealth Management Blog

Retirement planning, when you really simplify it, comes down to a simple math equation. “How much you have when you retire” minus “how much you will need in retirement.” If that gives you a positive number, you are in great shape. If that number comes out to a negative, well, you can see where that might be a problem.

Despite that, we all know that retirement planning is anything but simple. There are hundreds of variables that contribute to each of those numbers and can change the outcome of that final equation, and it’s important to ensure your math all adds up.

Many of those variables are tough for people to understand, but there’s one variable that goes into that second number, “how much money you need in retirement”, that nearly 75% of people over age 50 wish they understood better: Medicare.

Medicare is a huge factor in that retirement planning equation, and over half of older adults in a recent TIME Money survey didn’t know that it is even a factor at all, specifically not knowing that there’s a cost associated with Part B (which is the part that covers outpatient services like doctor’s visits).


Medicare Part B, like the insurance coverage model most are familiar with, costs $135 a month as a premium for those who are enrolling in 2019 within the lower income bracket ($85,000 for individuals, $170,000 for a couple). For those enrolling who earn more than that, the monthly premium can reach as high as $460.


There’s also an annual deductible of $185. Once you meet that deductible, enrollees typically pay 20% co-insurance for most doctor services, outpatient therapy, and durable medical equipment.

For those who are receiving Social Security benefits, that monthly premium will be deducted from your benefit check before you receive it, so if you had your Social Security benefit dollars into that “what I have” number on the front side of the retirement planning equation, make sure you take that deduction into account.


Another misconception about Medicare that can throw off your calculation is the idea that Medicare will cover long term care. Although rehab expenses are covered, most other long-term care services that we traditionally think of will not be covered.


You might be thinking, “Well yes, but Medicaid does!”, and you would be correct, but you have to meet some pretty stringent asset and income criteria to qualify, so that positive number at the end of your equation has to be down closer to zero than most people are comfortable with.

Now you might be thinking, as nearly half of affluent older adults surveyed also thought, “I’ll outsmart the government, I’ll offload my assets to my kids a little early so that I meet that requirement.” Before you and those 42% of the others that had that thought start patting yourself on the back, there’s a few problems with that.


First, there’s a “look-back” period, where the IRS can look at what you’ve done with your money within the past 5 years, including gifts, or sales made below fair market value. Secondly, when you go on Medicare, not only will you no longer have control of those assets you gave away, you also don’t have control over the care you receive, which can be unsettling for many people.


So, although the simple “what I have” minus “what I need” equation might make you think retirement planning is easy, that’s a costly assumption. There are hundreds of mini equations within each side of that minus sign that can impact your final number. Make sure you and your advisor have a thorough understanding of each one.


This content created by Rick Durkee in conjunction with Fusion Capital Management.

Updated: Nov 5, 2018



I had a nice couple, Moe and Deb from Charleston, come to my office recently for investment advice and estate planning.

Their questions concerned their investments, particularly their IRAs. They want to make sure that they are planning appropriately so that they can leave their wealth to the ones they love, their two kids, and they want to minimize any resulting tax consequences. At age 68 and 66, they are still relatively young, but they are smart to plan ahead.

As Ben Franklin said, "If you fail to plan, you are planning to fail."

When it comes to the financial aspect of estate planning, if you have an IRA, it is important to ask who will get it after you die. When I asked Moe and Deb that question, they seemed confused. They paused, looked at each other and responded, "Well, here, would you like to look at our will?"

Because that's where I would find the answer, right? Well . . . not necessarily.

Some of the most-costly estate planning mistakes I come across involve retirement accounts. Contrary to popular belief, the distribution of such accounts is typically not done pursuant to the terms of a will. Instead, the funds are almost always distributed to individuals named on beneficiary designation forms. Such forms are typically filled out when an account is opened, but should be amended as circumstances change. These forms notify the bank or financial institution (the IRA custodian) about who will inherit your accounts. Those named individuals are your beneficiaries.

Whether you are young or old, married or single, it's important to make sure all your beneficiary designations are in order and up to date.

If you opened the account years ago, check the designation on file, to make sure it reflects what your current wishes are. For example, if you or a family member got married or divorced; or have had children or grandchildren, you may want to make changes to your beneficiary designations.

Another small, and unexpected thing to note that some people are coming across is that, for decades, many beneficiary forms were held in paper copy in the World Trade Center buildings. Those forms obviously don't exist anymore, and people who had filled out their beneficiary forms prior to 2001, might want to check to make sure those forms are still viable and on record. There have been instances in recent years in which people were surprised to learn that their forms no longer exist, and it has cost them.

Anyway, back to my story, I reviewed Moe and Deb's current IRA with them. What we discovered is that somewhere along the line, they had never filled out the beneficiary form.

I explained to them that if you have an IRA, you should name primary and contingent beneficiaries. One of the great advantages of an IRA is that it does not need to pass through probate. It can pass directly to your named beneficiaries. However, if there's no beneficiary on file, guess what? Heirs are at the mercy of the IRA custodian's default policy. Most award an IRA first to a living spouse and then to the estate, but some send it straight to the estate.


If it is distributed to the estate, it must go through the probate process, which is very, very rarely a good thing.

I explained to Moe and Deb that another benefit of a properly executed beneficiary form is the ability to maximize the "stretch" rules allowed for IRAs. Generally speaking, an IRA beneficiary must withdraw a minimum amount each year and the first distribution must be taken by December 31 of the year after he or she inherits the account. If the beneficiary is an individual, and everything is done correctly, he or she can choose to "stretch" these minimum required distributions over his or her own expected life span.


Doing so can significantly reduce the required distribution because minimum required distributions are based on the beneficiary's life expectancy. Usually, a beneficiary is younger and therefore has a longer life expectancy than the life expectancy of the original owner. The longer the life expectancy, the smaller, as a percentage of the IRA balance, each payout must be. This strategy can significantly extend the tax advantages of an IRA. Stretching out the IRA gives the funds extra years and potentially decades of income tax-deferred growth in a traditional IRA or tax-free growth in a Roth IRA.


This is a wonderful tax planning opportunity.

On the other hand, if there are no named beneficiaries, and an estate "inherits" the IRA, the "stretch" provisions cannot be taken advantage of because the estate is not treated as an individual. Therefore, the funds must be distributed within five years of the death of the owner, if he or she dies before the Required Beginning Date (April 1st of the year following the year the owner turns 70 1/2); or, if the owner dies after the RBD, the distribution period is the deceased owner's remaining life expectancy calculated in the year of death.

Once again, the devil (or angel) is in the details when it comes to your financial plan, and small moves can have a big impact. When building your retirement system, you must make sure you seek out a retirement specialist who understands the whole picture.

This content created by Rick Durkee in conjunction with Fusion Capital Management.

#IRA #retirement #retirementplanning #wealthmanagement #beneficiaries #taxfree #RothIRA

9 views

Updated: Nov 5, 2018


The gender disparity in the workforce may not be what it used to be, but it's still a much needed topic of discussion and it's still a big concern when it comes to retirement planning for women. Whether women are married or single, they require specific attention in terms for how to prepare for retirement, and this attention is not often given.

There are a few different things to consider when planning for women, and creating retirement future they can depend on.

One is that they often do not make as much as men, so they have less money they can put back and save up. Additionally, they take more time away from the workforce due to raising children and having other family commitments, so they typically make less money over their lifetime. Because of that, when they reach retirement age they do not have enough money to enjoy a good standard of living. With only 12 percent of women being confident that they can comfortably retire, it is clear that there is a serious problem with women's retirement options in the US today.

Forty-six percent of the women surveyed by the Transamerica Center for Retirement Studies say they are not confident at all, or not very confident, in their ability to successfully retire and have what they need to feel secure.

The average woman, who makes 84 cents to every dollar made by a male colleague, simply is not making enough in many cases to put a lot of money aside for retirement.

Many women are raising children on their own, as well, and a large portion of their income goes toward paying their bills and caring for their children. They may not have enough left over to put back for retirement.

Fortunately, there are ways that women can be proactive and start making financial moves that can help them with retirement. The first way to be proactive is to take a careful look at the Social Security benefits that will be received. Consulting a professional for financial advice can help, because a lot of women assume that Social Security will pay all of their expenses in their later years. That is often not the case, though, and it is especially true for women who have not made a lot of money over their lifetime. In general, Social Security benefits will pay around 60 percent of expenses for most people.

Underestimating how much is needed overall, and claiming Social Security benefits early, are two of the serious problems that women encounter. It is very tempting to take Social Security early and retire, but doing that lowers the potential lifetime income a woman will receive.

Retiring at 62 means a lower amount of Social Security, and retiring at 65 or even at 67 is much better financially if it is feasible for a woman to remain in her job for that length of time. Some jobs are easier for older people to continue in, while others may be too demanding as a person ages.

Remaining strategic about the earning power they have can help many women focus on avoiding a retirement crisis. When women plan to work until a particular age they need their health to hold out. But they also need to make sure they have the skills required to continue to do their job effectively. If they cannot perform their job duties the right way, and they do not remain relevant in the work force, they may find themselves forced out of the work they are doing and needing to retire earlier than expected. That can really harm their retirement goals.

Working with a professional on retirement planning is one of the best ways for any woman to reduce the chances of having a retirement crisis at a later date. That way it is possible to get the information needed to successfully prepare for retirement, and to take all of the potential issues into account. By addressing any issues that are already occurring, and finding ways to avoid potential future issues, it is possible to focus on retirement in a way that helps a woman plan adequately and feel more prepared for the future.

This content created by Rick in conjunction with Fusion Capital Management.


#womeninretirement #retirement #SocialSecuritybenefits #financialadvice #womensretirementoptions

6 views

Coastal Financial Planning Group

78 Ashley Point Drive Suite 201 
Charleston, SC 29407

(843) 735-5065

  • Facebook
  • LinkedIn
  • YouTube
  • Twitter

Listen On-Demand To

"Navigating Retirement with Rick Durkee"

Apple_Podcast_Icon.png
250-Stitcher_W.png
iHeartRadio_Logo_iHR-Vertical-White.png
file-spotify-logo-png-4.png
soundcloud-computer-icons-music-logo-sou

           Closed

         9:00 am - 5:00 pm

         9:00 am - 5:00 pm

    9:00 am - 5:00 pm

         9:00 am - 5:00 pm

            9:00 am - 5:00 pm

       Closed

HOURS

Sunday          

Monday          

Tuesday           

Wednesday     

Thursday         

Friday             

Saturday        

South-Carolina-Christan-Chamber-Commerce

Investment advisory services are offered through Fusion Capital Management, an SEC registered investment advisor. The firm only transacts business in states where it is properly registered, or is excluded or exempted from registration requirements. SEC registration is not an endorsement of the firm by the commission and does not mean that the advisor has attained a specific level of skill or ability. All investment strategies have the potential for profit or loss. 

Third-party rankings and recognition from rating services and publications do not guarantee future investment success. Working with a highly-rated adviser also does not ensure that a client or prospect will experience a higher level of performance. These ratings should not be viewed as an endorsement of the adviser by any client and do not represent any specific client’s evaluation. Generally, ratings, rankings and recognition are based on information provided by the adviser. Please contact the adviser for more information regarding how these rankings and ratings were formulated.

©2021 by Coastal Financial Planning Group. Powered by Brand U Media