“I am 65 years old. My wife is 61 years old. I’m looking to plan an income stream upon retirement at age 66 & 1/2. Advice?”
You are (as most thoughtful people are) looking to replace your current paycheck with a similar ‘paycheck’ in retirement.
Retirement ‘paychecks’ can come from many different sources. Social security, pensions, IRA distributions, annuities, and many, many more. The challenge is to create the mechanics to direct these income sources to your bank account on a systemic and consistent basis. Once there, you can also set most of your regular bills up on an automatic payment basis and make your life much simpler.
While I’m sure the mechanics of all this seem quite challenging, a trusted financial advisor can assist you in setting just this kind of system.
“I talked with your insurance partner and, after reviewing our situation and the various premium-reducing options offered by Genworth, he suggested keeping every benefit in place, but remove the 5% compounding on the Maximum Daily Benefit (currently $321) feature.
The next day I spoke with Genworth — at length, twice — and they agreed to that option and offered a premium reduction from $5,690 to $2,911! I have jumped on it. Does it increase our financial exposure down the road? Yes, but how many more years do we have? And we can afford it to self-insure a bit anyway. Many thanks to both of you!”
A bit of context is useful here. This gentleman and his wife have had LTC insurance for many years through Genworth. Genworth is a solid company with many years of experience in the LTC field. They, as many LTC companies, have been raising premiums for their insured at (sometimes) staggering rates. This gentleman met with Mike Pompei, our Ash Brokerage insurance partner, to explore options. This email was the result of those discussions.
If you have LTC coverage premiums that are increasing you may well benefit from a discussion with Mike Pompei to review your options.
If you are now exploring LTC for the first time you should understand that LTC policies have changed quite significantly since this gentleman and his wife first got their policies. You now have the option to avoid all future premium increases with the use of alternative LTC policy types.
Constructing a Long-Term Care plan whether it includes insurance or not is one of the most important steps you can take to ensure your retirement is protected. And the quite typical ‘my daughter lives close and will take care of me’ plan is unacceptable. Have a discussion with your financial advisor, explore your options, and make a plan that best fits you.
“My daughter received an IRA from her deceased husbands’ estate. We believe there is a loophole for a 5-year withdrawal with no fine. Has this been extended to longer?”
Our prayers are with your daughter during this challenging time.
Inherited IRAs are treated very differently when the beneficiaries are spouses. Your daughter does not have to take the funds out within 5 (or even 10) years. She can treat the IRA as her very own. However, there may be an advantage to her (depending on her age) for her to accept it as an inherited IRA.
Non-spouse IRA beneficiaries most often are required to withdraw all the IRA funds within 10 years. Spouses can choose to follow that rule if they are under age 59 ½ and wish to withdraw some/all the funds without penalty. If they are over that age, they should almost always integrate the inherited funds with their own IRAs.
It is very important for anyone receiving an inherited IRA that they meet with an advisor they trust to review their options. This step will help insure they are making the choices that best fit them.
“On contribution of appreciated stock to a 529 plan, does the 529 recipient owe any capital gains tax when funds are used for college expense?”
Ah . . . a trick question – how fun.
Contributions to a 529 plan must be made in cash. Appreciated stock may not be contributed to a 529 plan. As a result, your question is moot. But what cows might have to do with a question about 529 plans is beyond me…
“My partner has been self-employed his whole working life. He is 78 years old. He has been divorced for about 35 years and never remarried. He is collecting social security. He would like to see if he can collect on his ex-wife’s SS.
She did remarry and her husband had an office job and collected a good SS benefit. He recently passed away. She is now collecting her late husband’s SS. Can her ex-husband claim on her new SS benefit which is more than he is collecting on his own? I understand he would be eligible to half her benefit. Her individual SS benefit was very much while here late husband was alive.”
A second trick question in one newsletter?
I confess this to be one of the more creative questions/suggestions/strategies I’ve seen in many a year. Can an individual collect a higher Social Security benefit based on the benefit earned by the spouse of his (35 year) ex-spouse?
No. But thanks for asking.
“I am a retired federal employee. My wife and I currently meet our expenses with my pension and Thrift Savings Plan savings.
She has a traditional IRA account with a $178,000 balance. She has eight years before she’ll have to start RMDs. We’re wondering if it would make sense to start converting this to a Roth IRA? If we started converting $25,000 per year most, if not all, of the balance would be converted prior to RMDs kicking in.
In our current bracket, we’d be paying 12% ($3,000) in taxes per year on the converted funds. We don’t think we’ll need to make withdrawals from this account for the foreseeable future as my pension and other savings should meet our needs. Would this make sense for us?”
Your idea makes perfect sense.
Many financial professionals believe that higher income tax brackets are inevitable. You would be paying tax at (what I believe to be) a very attractive 12% and converting to tax-free income in the future at (what could be) much higher rates. If you can swallow the extra tax now, it appears you will be amply rewarded in the future.
And (perhaps) icing on the cake – if you don’t end up spending the Roth IRAs yourself, you can pass them to your children for tax-free income for their retirement.
Check with a tax professional to confirm your assumptions and then get ‘er done.
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