5 Popular Options for Charitable Giving: The Gifts That Keep on Giving

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According to Giving USA 2018, Americans gave an estimated $410.02 billion to charity in 2017. That’s the first time that the amount has totaled more that $400 billion in the history of the report. (1) Americans give to charity for two main reasons: to support a cause or organization they care about or to leave a legacy through their support.

When giving to charitable organizations, some people elect to support through cash donations. Others, however, understand that supporting an organization may generate tax benefits. They may opt to follow techniques that can maximize both the gift and the potential tax benefit. Here’s a quick review of a few charitable choices:

Remember, the information in this article is not a replacement for real-life advice. It may not be used for the purpose of avoiding any federal tax penalties. Make sure to consult your tax, legal, or accounting professional before modifying your charitable giving strategy.

Direct Gifts

Direct gifts are just that: contributions made directly to charitable organizations. Direct gifts may be deductible from income taxes depending on your individual situation.

Charitable Gift Annuities

Charitable gift annuities are not related to annuities offered by insurance companies. Under this arrangement, the donor gives money, securities, or real estate, and in return, the charitable organization agrees to pay the donor a fixed income. Upon the death of the donor, the assets pass to the charitable organization. Charitable gift annuities enable donors to receive consistent income and potentially manage taxes.

Pooled-Income Funds

Pooled-income funds pool contributions from various donors into a fund, which is invested by the charitable organization. Income from the fund is distributed to the donors according to their share of the fund. Pooled-income funds enable donors to receive income, potentially manage taxes, and make a future gift to charity.

Gifts in Trust

Gifts in trust enable donors to contribute to a charity and leave assets to beneficiaries. Generally, these irrevocable trusts take one of two forms. With a charitable remainder trust, the donor can receive lifetime income from the assets in the trust, which then pass to the charity when the donor dies; in the case of a charitable lead trust, the charity receives the income from the assets in the trust, which then pass to the donor’s beneficiaries when the donor dies.

Using a trust involves a complex set of tax rules and regulations. Before moving forward with a trust, consider working with a professional who is familiar with the rules and regulations.

Donor-Advised Funds

Donor-advised funds are funds administered by a charity to which a donor can make irrevocable contributions. This gift may have tax considerations, which is another benefit. The donor also can recommend that the fund make distributions to qualified charitable organizations.

Some people are comfortable with their current gifting strategies. Others, however, may want a more advanced strategy that can maximize their gift and generate potential tax benefits. A financial professional can help you assess which approach may work best for you.

Sources

  1. givingusa.org/giving-usa-2018-americans-gave-410-02-billion-to-charity-in-2017-crossing-the-400-billion-mark-for-the-first-time/

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Retirement Planning: What it is and How it Can Help You Increase Retirement Success

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Across the country, people are saving for that “someday” called retirement. Someday, their careers will end. Someday, they may live off their savings or investments, plus Social Security. They know this, but many of them do not know when, or how, it will happen. What is missing is a strategy – and a good strategy might make a great difference.

A retirement strategy directly addresses the “when, why, and how” of retiring.

It can even address the “where.” It breaks the whole process of getting ready for retirement into actionable steps.

This is so important. Too many people retire with doubts, unsure if they have enough retirement money and uncertain of what their tomorrows will look like. Year after year, many workers also retire earlier than they had planned, and according to a 2019 study by the Employee Benefit Research Institute, about 43% do. In contrast, you can save, invest, and act on your vision of retirement now to chart a path toward your goals and the future you want to create for yourself. (1)

Some people dismiss having a long-range retirement strategy, since no one can predict the future.

Indeed, there are things about the future you cannot control: how the stock market will perform, how the economy might do. That said, you have partial or full control over other things: the way you save and invest, your spending and your borrowing, the length and arc of your career, and your health. You also have the chance to be proactive and to prepare for the future.

A good retirement strategy has many elements.

It sets financial objectives. It addresses your retirement income: how much you may need, the sequence of account withdrawals, and the age at which you claim Social Security. It establishes (or refines) an investment approach. It examines tax implications and potential tax advantages. It takes possible health care costs into consideration and even the transfer of assets to heirs.

A prudent retirement strategy also entertains different consequences.

Financial advisors often use multiple-probability simulations to try and assess the degree of financial risk to a retirement strategy, in case of an unexpected outcome. These simulations can help to inform the advisor and the retiree or pre-retiree about the “what ifs” that may affect a strategy. They also consider sequence of returns risk, which refers to the uncertainty of the order of returns an investor may receive over an extended period of time. (2)

Let a retirement strategy guide you. Ask a financial professional to collaborate with you to create one, personalized for your goals and dreams. When you have such a strategy, you know what steps to take in pursuit of the future you want.

▲ The retirement equation

Planning for retirement can be overwhelming as individuals navigate various retirement factors over which we have varying levels of control. There are challenges in retirement planning over which we have no control, like the future of tax policy and market returns, and factors over which we have limited control, like longevity and how long we plan to work. The best way to achieve a secure retirement is to develop a comprehensive retirement plan and to focus on the factors we can control: maximize savings, understand and manage spending and adhere to a disciplined approach to investing. (3)

Sources

  1. ebri.org/docs/default-source/rcs/2019-rcs/rcs_19-fs-2_expect.pdf?sfvrsn=2a553f2f_4
  2. investopedia.com/terms/m/montecarlosimulation.asp
  3. https://am.jpmorgan.com/us/en/asset-management/gim/adv/insights/guide-to-retirement

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

What’s the Difference Between Value Investing and Growth Investing?

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You might be initially confused by these terms or even suspect they aren’t that different in terms of what each model offers you as an investor, but they are very distinct approaches, and it’s good to understand these two schools of thought as you invest. This understanding could help you make important investment decisions, both now and in the future. (1)

At first glance, some of the advantages to each approach may not be immediately obvious, depending on what sort of market you are facing. There is an element of timing to both value and growth investing, and that concept may be helpful in understanding the differences between the two. (1)

Investing for Value

Value investors look for bargains. That is, they attempt to find stocks that are trading below the value of the companies they represent. If they consider a stock to be underpriced, it’s an opportunity to buy; if they consider it overpriced, it’s an opportunity to sell. Once they purchase a stock, value investors seek to ride the price upward as the security returns to its “fair market” price – selling it when this price objective is reached.

Most value investors use detailed analysis to identify stocks that may be undervalued. They’ll examine the company’s balance sheet, financial statements, and cash flow statements to get a clear picture of its assets, liabilities, revenues, and expenses.

One of the key tools value investors use is financial ratios. For example, to determine a company’s book value, a value analyst would subtract the company’s liabilities from its assets. This book value can then be divided by the number of shares outstanding to determine the book-value-per-share – a ratio that would then be compared to the book-value-per-share ratios of other companies in the same industry or to the market overall.

Investing for Growth

Growth investors use today’s information to identify tomorrow’s strongest stocks. They’re looking for “winners” – stocks of companies within industries expected to experience substantial growth. They seek companies positioned to generate revenues or earnings that exceed market expectations. When growth investors find a promising stock, they buy it – even if it has already experienced rapid price appreciation – in the hope that its price will continue to rise as the company grows and attracts more investors.

Where value investors use analysis, growth investors use criteria. Growth investors are more concerned about whether a company is exhibiting behavior that suggests it will be one of tomorrow’s leaders; they are less focused on the value of the underlying company.

For example, growth investors may favor companies with a sustainable competitive advantage that are expected to experience rapid revenue growth, effective at containing cost, and staffed with an experienced management team.

Value and growth investing are opposing strategies

A stock prized by a value investor might be considered worthless by a growth investor and vice versa. So, which is right? A close review of your personal situation can help determine which strategy may be right for you.

▲ Returns and valuations by style

This page shows returns and valuations by investment style for the U.S. equity market, and leverages the “style box” framework pioneered by Morningstar. Return periods include the most recent quarter, year-to-date returns, returns since the 2007 peak and returns since the 2009 low. To the right, valuations depict which areas of the U.S. equity markets are trading at a deeper discount or premium, relative to their own 20-year average. (2)

Sources

  1. https://kiplinger.com/article/investing/T052-C000-S002-value-vs-growth-stocks-which-will-come-out-on-top.html
  2. https://am.jpmorgan.com/us/en/asset-management/gim/protected/adv/insights/guide-to-the-markets/viewer

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Post-Retirement Risks That Can Get In The Way of Making Your Money Last

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Image by Carabo Spain from Pixabay

“What is your greatest retirement fear?”

If you ask any group of retirees and pre-retirees this question, “outliving my money” will likely be one of the top answers. In fact, 51% of investors surveyed for a 2019 AIG retirement study ranked outliving their money as their top anxiety. (1)

Retirees face greater “longevity risk” today.

The Census Bureau says that Americans typically retire around age 63. Social Security projects that today’s 63-year-olds will live into their mid-eighties, on average. This is a mean life expectancy, so while some of these seniors may pass away earlier, others may live past 90 or 100. (2,3)

If your retirement lasts 20, 30, or even 40 years, how well do you think your retirement savings will hold up? What financial steps could you take in your retirement to try and prevent those savings from eroding? As you think ahead, consider the following possibilities and realities.

Understand that you may need to work part time in your sixties and seventies.

The income from part-time work can be an economic lifesaver for retirees. What if you worked part time and earned $20,000-30,000 a year? If you can do that for five or ten years, you effectively give your retirement savings five or ten more years to last and grow.

Retire with health insurance and prepare adequately for out-of-pocket costs.

Financially speaking, this may be the most frustrating part of retirement. You can enroll in Medicare at age 65, but how do you handle the premiums for private health insurance if you retire before then? Striving to work until you are eligible for Medicare makes economic sense and so does building a personal health care account. According to Fidelity research, a typical 65-year-old couple retiring today will face out-of-pocket health care costs approaching $300,000 over the rest of their lives. (4)

Many people may retire unaware of these financial factors.

With luck and a favorable investing climate, their retirement savings may last a long time. Luck is not a plan, however, and hope is not a strategy. Those who are retiring unaware of these factors may risk outliving their money.

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▲ The retirement equation

Planning for retirement can be overwhelming as individuals navigate various retirement factors over which we have varying levels of control. There are challenges in retirement planning over which we have no control, like the future of tax policy and market returns, and factors over which we have limited control, like longevity and how long we plan to work. The best way to achieve a secure retirement is to develop a comprehensive retirement plan and to focus on the factors we can control: maximize savings, understand and manage spending and adhere to a disciplined approach to investing. (5)

Sources

  1. markets.businessinsider.com/news/stocks/more-than-half-of-americans-want-to-live-to-100-but-worry-about-affording-longer-lifespans-1028099970
  2. thebalance.com/average-retirement-age-in-the-united-states-2388864
  3. usatoday.com/story/money/columnist/2019/09/30/social-security-4-key-trends-you-need-know-benefits/3790032002/
  4. fidelity.com/viewpoints/retirement/transition-to-medicare
  5. https://am.jpmorgan.com/us/en/asset-management/gim/adv/insights/guide-to-retirement

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

End-of-Year Money Moves for 2019

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Here are some things you might consider before saying goodbye to 2019.

What has changed for you in 2019?

Did you start a new job or leave a job behind? Did you retire? Did you start a family? If notable changes occurred in your personal or professional life, then you will want to review your finances before this year ends and 2020 begins.

Even if your 2019 has been relatively uneventful, the end of the year is still a good time to get cracking and see where you can manage your take bill and/or build a little more wealth.

Keep in mind this article is for informational purposes only and is not a replacement for real-life advice. Please consult your tax, legal, and accounting professionals before modifying your tax strategy.

Do you practice tax-loss harvesting?

That is the art of taking capital losses (selling securities worth less than what you first paid for them) to offset your short-term capital gains. You might want to consider this move, which may lower your taxable income. It should be made with the guidance of a financial professional you trust. (1)

In fact, you could even take it a step further. Consider that up to $3,000 of capital losses in excess of capital gains can be deducted from ordinary income, and any remaining capital losses above that can be carried forward to offset capital gains in upcoming years. When you live in a high-tax state, this is one way to defer tax. (1)

Do you want to itemize deductions?

You may just want to take the standard deduction for 2019, which has ballooned to $12,000 for single filers and $24,000 for joint filers because of the Tax Cuts & Jobs Act. If you do think it might be better for you to itemize, now would be a good time to get receipts and assorted paperwork together. While many miscellaneous deductions have disappeared, some key deductions are still around: the state and local tax (SALT) deduction, now capped at $10,000; the mortgage interest deduction; the deduction for charitable contributions, which now has a higher limit of 60% of adjusted gross income; and the medical expense deduction. (2,3)

Could you ramp up 401(k) or 403(b) contributions?

Contribution to these retirement plans may lower your yearly gross income. If you lower your gross income enough, you might be able to qualify for other tax credits or breaks available to those under certain income limits. Note that contributions to Roth 401(k)s and Roth 403(b)s are made with after-tax rather than pretax dollars, so contributions to those accounts are not deductible and will not lower your taxable income for the year. (4,5)

Are you thinking of gifting?

How about donating to a qualified charity or nonprofit organization before 2019 ends? Your gift may qualify as a tax deduction. You must itemize deductions using Schedule A to claim a deduction for a charitable gift. (4,5)

While we’re on the topic of estate strategy, why not take a moment to review your beneficiary designations? If you haven’t reviewed them for a decade or more (which is all too common), double-check to see that these assets will go where you want them to go, should you pass away. Lastly, look at your will to see that it remains valid and up to date.

Can you take advantage of the American Opportunity Tax Credit?

The AOTC allows individuals whose modified adjusted gross income is $80,000 or less (and joint filers with MAGI of $160,000 or less) a chance to claim a credit of up to $2,500 for qualified college expenses. Phaseouts kick in above those MAGI levels. (6)

See that you have withheld the right amount.

If you discover that you have withheld too little on your W-4 form so far, you may need to adjust your withholding before the year ends.

What can you do before ringing in the New Year?

Talk with a financial or tax professional now rather than in February or March. Little year-end moves might help you improve your short-term and long-term financial situation.

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▲ A closer look at tax rates – 2019

At-a-glance individual federal income tax guide for 2019. (7)

Sources

  1. investopedia.com/articles/taxes/08/tax-loss-harvesting.asp
  2. nerdwallet.com/blog/taxes/itemize-take-standard-deduction/
  3. investopedia.com/articles/retirement/06/addroths.asp
  4. investopedia.com/articles/personal-finance/041315/tips-charitable-contributions-limits-and-taxes.asp
  5. marketwatch.com/story/how-the-new-tax-law-creates-a-perfect-storm-for-roth-ira-conversions-2018-03-26
  6. irs.gov/newsroom/american-opportunity-tax-credit-questions-and-answers
  7. https://am.jpmorgan.com/us/en/asset-management/gim/protected/adv/insights/guide-to-retirement

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Understanding the Parts (A, B, C, D) of Medicare and What They Cover

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Whether your 65th birthday is on the horizon or decades away, you should understand the parts of Medicare – what they cover and where they come from.

Parts A & B: Original Medicare

There are two components. Part A is hospital insurance. It provides coverage for inpatient stays at medical facilities. It can also help cover the costs of hospice care, home health care, and nursing home care – but not for long and only under certain parameters. (1,2)

Seniors are frequently warned that Medicare will only pay for a maximum of 100 days of nursing home care (provided certain conditions are met). Part A is the part that does so. Under current rules, you pay $0 for days 1-20 of skilled nursing facility (SNF) care under Part A. During days 21-100, a $170.50 daily coinsurance payment may be required of you. (2)

Part B is medical insurance and can help pick up some of the tab for physical therapy, physician services, expenses for durable medical equipment (hospital beds, wheelchairs), and other medical services, such as lab tests and a variety of health screenings. (1)

Part B isn’t free. You pay monthly premiums to get it and a yearly deductible (plus 20% of costs). The premiums vary according to the Medicare recipient’s income level. The standard monthly premium amount is $135.50 this year. The current yearly deductible is $185. (Some people automatically receive Part B coverage, but others must sign up for it.) (3)

Part C: Medicare Advantage plans.

Insurance companies offer these Medicare-approved plans. To keep up your Part C coverage, you must keep up your payment of Part B premiums as well as your Part C premiums. To say not all Part C plans are alike is an understatement. Provider networks, premiums, copays, coinsurance, and out-of-pocket spending limits can all vary widely, so shopping around is wise. During Medicare’s annual Open Enrollment Period (October 15 – December 7), seniors can choose to switch out of Original Medicare to a Medicare Advantage plan or vice versa; although, any such move is much wiser with a Medigap policy already in place. (4,5)

How does a Medigap plan differ from a Part C plan? Medigap plans (also called Medicare Supplement plans) emerged to address the gaps in Part A and Part B coverage. If you have Part A and Part B already in place, a Medigap policy can pick up some copayments, coinsurance, and deductibles for you. You pay Part B premiums in addition to Medigap plan premiums to keep a Medigap policy in effect. These plans no longer offer prescription drug coverage. (6)

Part D: prescription drug plans.

While Part C plans commonly offer prescription drug coverage, insurers also sell Part D plans as a standalone product to those with Original Medicare. As per Medigap and Part C coverage, you need to keep paying Part B premiums in addition to premiums for the drug plan to keep Part D coverage going. (7)

Every Part D plan has a formulary, a list of medications covered under the plan. Most Part D plans rank approved drugs into tiers by cost. The good news is that Medicare’s website will determine the best Part D plan for you. Go to medicare.gov/find-a-plan to start your search; enter your medications and the website will do the legwork for you. (8)

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▲ What is Medicare?

The left side of this table shows all the parts of Medicare. The next column to the right has a check mark for all the parts of Medicare that are included in traditional Medicare. Individuals sign up for the different parts, and Part A is usually free for most people. The column to the far right shows what is typically included in Medicare Advantage, which are local plans sold by private companies. Usually Medicare Advantage beneficiaries are limited to a local network of providers. During the annual enrollment period, beneficiaries may switch from traditional Medicare to Medicare Advantage and vice versa. However, Medigap, which covers the gaps in Parts A and B, is only available with traditional Medicare, and must be signed up for when first eligible or the individual may be denied coverage, face underwriting or incur higher premiums. Whichever plan an individual chooses, they should consider future coverage needs including drug coverage to avoid lifetime penalties when signing up later. (9)

Sources

  1. mymedicarematters.org/coverage/parts-a-b/whats-covered/
  2. medicare.gov/coverage/skilled-nursing-facility-snf-care
  3. medicare.gov/your-medicare-costs/part-b-costs
  4. medicareinteractive.org/get-answers/medicare-basics/medicare-coverage-overview/original-medicare
  5. medicare.gov/sign-up-change-plans/joining-a-health-or-drug-plan
  6. medicare.gov/supplements-other-insurance/whats-medicare-supplement-insurance-medigap
  7. ehealthinsurance.com/medicare/part-d-all/medicare-part-d-prescription-drug-coverage-costs
  8. https://www.medicare.gov/drug-coverage-part-d/what-drug-plans-cover
  9. https://am.jpmorgan.com/us/en/asset-management/gim/protected/adv/insights/guide-to-retirement

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

The Pros and Cons of Using a Reverse Mortgage For Retirement Income

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Often criticized, these loans are getting another look.

Is a reverse mortgage worth it?

Before the great recession, couples who asked their retirement advisors if they should get a reverse mortgage were often given a quick answer: “No.”

Today, the answer to that question might be “yes”. In an environment with minimal interest rates, these loans can offer retired homeowners a source of tax-free cash, either in periodic payments or a lump sum. (A HELOC is also possible.)

How does it work?

A reverse mortgage allows you to borrow against your home equity while retaining ownership of your residence. Many of these loans have variable rates, consequently permitting different payment options. (1)

Reverse mortgage balances increase with time, as there are no monthly payments to reduce principal as in a “forward” mortgage. The loan doesn’t have to be repaid until you move out of the home or pass away. At the time of repayment, the amount owed will not exceed the home’s value – but when the loan becomes due it must typically be paid in full, including interest and closing costs. (1)

What are the qualifications?

You must be 62 or older to get a reverse mortgage. You also have to own your home free and clear, or have a mortgage balance that can easily be paid off using funds from the loan. In addition, you must keep paying property taxes and homeowners insurance and maintain your residence with needed repairs to avoid defaulting on the loan. (2,3,4)

Why not get a reverse mortgage?

These products have gotten a bad rap for many reasons. At first, they were seen as loans of last resort. If you were up in age and close to outliving your money, they could give you needed income.

Then the perception of reverse mortgages began to change, thanks to marketing. Commercials for these loans appeared everywhere, with celebrities hawking them as a cure for retirement income woes. Sixty-something homeowners liked the pitch and signed up – but today, some wish they had studied the fine print.

  1. Reverse mortgages can come with severe fees – origination fees, closing fees and even ongoing fees to cover the risk of a possible default or the sale of the property for less than the value of the loan.
  2. If just one spouse takes out the loan and then dies or moves out of the house, the spouse whose name isn’t on the loan is stuck with paying off the mortgage – and that often means selling the home in question.
  3. You are giving up home equity. Let’s say that you have to move because of family or health reasons. How would you finance that move?
  4. If you have cash flow problems and can’t keep up with your property taxes or homeowners insurance, you could default and lose your home. According to Forbes, about 10% of U.S. homeowners with reverse mortgages currently face this risk.
  5. If you really want to use your home as an ATM in retirement, you could refinance or take out a home equity loan or HELOC with no reverse mortgage involved. (3,4)

During 2011-2012, Wells Fargo, MetLife and Bank of America all got out of the reverse mortgage business. Interpret that as you wish. Their reverse mortgages represented 36% of the market. In their absence, smaller nonbank originators have picked up the slack – perhaps not the best development for interested homeowners. (3)

So why get a reverse mortgage?

Even with all the demerits that these loans have, they can be a boon to retirees searching for a consistent income stream. That includes younger retirees: a recent MetLife study shows that 15% more homeowners aged 62-64 considered a reverse mortgage in 2010 than in 1999. Forbes notes that reverse mortgage applicants trending younger, with about 70% opting for a fixed rate lump sum payment option. (3,5)

There are three types of reverse mortgages.

The single-purpose reverse mortgage (offered by nonprofits and state and local agencies) is the least expensive. Federally insured Home Equity Conversion Mortgages (HECMs) are HUD-backed and may only proceed after consumer counseling from an independent government-approved housing counseling agency. That is also true for some proprietary reverse mortgages available from private lenders. HECMs let you choose your cash payment option, and you can change it if you need to for a fee of about $20. (1)

Reality can’t be ignored: many baby boomers are house-rich, cash-poor and scared of retiring with insufficient income. Is a reverse mortgage their only choice? Hardly – yet with interest rates low and retirement savings scant, more and more baby boomers may resolve to convert home equity into cash.

Sources

  1. www.ftc.gov/bcp/edu/pubs/consumer/homes/rea13.shtm
  2. blogs.smartmoney.com/encore/2012/08/07/reversing-the-negative-view-of-reverse-mortgages/
  3. www.forbes.com/sites/ashleaebeling/2012/06/28/cfpb-dont-get-stung-by-a-reverse-mortgage/
  4. www.npr.org/2011/02/15/133777150/Reverse-Mortgages-Good-For-Seniors
  5. www.bankrate.com/financing/mortgages/too-young-for-reverse-mortgage/ 

This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Understanding What Long-Term Care Is and How Much It Might Cost You

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Addressing the potential threat of long-term care expenses may be one of the biggest financial challenges for individuals who are developing a retirement strategy.

The U.S. Department of Health and Human Services estimates that 69% of people over age 65 can expect to need extended care services at some point in their lives. So, understanding the various types of long-term care services – and what those services may cost – is critical as you consider your retirement approach.1

What Is Long-Term Care?

Long-term care is not a single activity. It refers to a variety of medical and non-medical services needed by those who have a chronic illness or disability that is most commonly associated with aging.

Long-term care can include everything from assistance with activities of daily living – help dressing, bathing, using the bathroom, or even driving to the store – to more intensive therapeutic and medical care requiring the services of skilled medical personnel.

Long-term care may be provided at home, at a community center, in an assisted living facility, or in a skilled nursing home. And long-term care is not exclusively for the elderly; it is possible to need long-term care at any age.

How Much Does Long-Term Care Cost?

Long-term care costs vary state by state and region by region. The national average for care in a skilled care facility (semi-private in a nursing home) is $85,775 a year. The national average for care in an assisted living center is $45,000 a year. Home health aides cost a median $18,200 per year, but that rate may increase when a licensed nurse is required.

Individuals who would rather not burden their family and friends have two main options for covering the cost of long-term care: they can choose to self-insure or they can purchase long-term care insurance.

Many self-insure by default – simply because they haven’t made other arrangements. Those who self-insure may depend on personal savings and investments to fund any long-term care needs. The other approach is to consider purchasing long-term care insurance, which can cover all levels of care, from skilled care to custodial care to in-home assistance.

When it comes to addressing your long-term care needs, many look to select a strategy that may help them protect assets, preserve dignity, and maintain independence. If those concepts are important to you, consider your approach for long-term care.

FINAL-2019-GTR-2_22_HIGH-RES-33-2

▲Long-term care planning
At age 65, the lifetime likelihood of needing at least some care is nearly 70%. Most often, care will be at home although it may progress to other settings. Duration of care needs vary widely, with about 5 in 10 men and 4 in 10 women requiring significant care for zero – 90 days and 1 in 10 men and nearly 2 in 10 women needing significant care for 5 years or more. When planning for long-term care consider multiple solutions that may be utilized including family assistance, income, savings, home equity, life insurance for a surviving spouse, and insurance options that range from traditional long-term care insurance to combination products. (2)

Sources

  1. fool.com/retirement/2018/09/02/5-long-term-care-stats-that-will-blow-you-away.aspx
  2. https://am.jpmorgan.com/us/en/asset-management/gim/protected/adv/insights/guide-to-retirement

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

What to Do When a Family Member Dies: A Financial Checklist for Difficult Times

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The passing of a loved one irrevocably alters family life. After a death, there is so much to attend to; it is better to do it sooner rather than later. Here, then, is a list of what commonly needs to be looked after.

Request copies of the death certificate.

Depending on where you live, you have two or three places to turn to for this document. You can phone, email, or personally visit the office of the county recorder (or county clerk, as the term may be). Alternately, you can contact your state’s vital records department (sometimes called the state registrar or department of health); it may take a little longer to get the document this way. In addition, some large and mid-sized cities maintain their own registrars of births and deaths.

Call advisors, executors, & business partners as applicable.

The deceased’s lawyer and CPA should be quickly notified along with any business partners and the executor of his or her estate. You must have a say in the decision-making. The tasks of protecting family assets, carrying out your loved one’s bequests, and determining the next steps for a business will follow.

Call your loved one’s current or former employer(s).

Notify them, even if your loved one left the workforce years ago, as retirement savings or pension payments may be involved. As the conversation develops, it is perfectly appropriate to ask about pertinent financial matters – say, 401(k) or 403(b) savings that will be inherited by a beneficiary or what will happen to unused vacation time and/or unpaid bonuses.

Funds amassed in a qualified retirement plan sponsored by an employer (or an IRA, for that matter) commonly go to the primary beneficiary who has been named on the most recent beneficiary form filled out by the account owner. That sounds simple enough – but certain rules and regulations can make things complicated. (1)

As a general rule, if the late 401(k) or 403(b) account owner was your spouse, then you are the presumed beneficiary of the 401(k) or 403(b) assets. Under the Employee Retirement Income Security Act (ERISA), workplace retirement plans are directed to abide by this guideline. If someone else has been named as the primary beneficiary of the account, with your consent, then the assets will go to that person. (2)

If the late 401(k) or 403(b) account owner was single, the assets in the account will go to whomever is designated as the primary beneficiary. The beneficiary designation will override other estate planning documents. (3)

To arrange and confirm the transfer or distribution of such assets, the beneficiary form must be found. If you can’t locate it, the employer and/or the financial firm overseeing the retirement plan should provide access to a copy. The financial firm should ask you to supply:

  • A certified copy of the account owner’s death certificate
  • A notarized affidavit of domicile (a document certifying his or her place of residence at the time of death)

If you have been widowed, call Social Security.

If you already receive benefits, you may now be eligible for greater benefits. (4)

If your spouse received Social Security and you did not, you may now qualify for survivor benefits – and you should let Social Security know as soon as possible, as these benefits may be paid out relative to your application date rather than the date of your loved one’s death. (4)

If this is the case, you may apply for survivor benefits by phone or by visiting a Social Security office. You will need to have some extensive paperwork on hand, specifically:

  • Proof of the death (death certificate, funeral home documentation)
  • Your late spouse’s Social Security number
  • His/her most recent W-2 forms or federal self-employment tax return
  • Your own Social Security number & birth certificate
  • Social Security numbers & birth certificates of any dependent children
  • Your marriage certificate, if you have been widowed
  • The name of your bank & the number of your bank account, for direct deposit purposes

If you have reached full retirement age, you will likely get 100% of the basic benefit amount that your late spouse was receiving. If you are in your sixties, but haven’t yet reached full retirement age, you may receive anywhere from 71% to 99% of that amount. If you have a child younger than 16, you will get 75% of your late spouse’s basic benefit amount and so will your child. (4,5)

Contact the insurance company.

Assuming your loved one had some form of life insurance, contact the policyholder services department of that insurer and confirm the steps for claiming the death benefit. A claim form will have to be filled out, signed, and presented to the insurance company (one for each named adult beneficiary of the policy), and a certified copy of the death certificate must also be sent. If the primary beneficiary of a policy is deceased, the contingent beneficiary can usually claim the death benefit with a claim form, plus the death certificates of the policy owner and the primary beneficiary. Some insurers simply have you submit a form reporting the death of the policyholder first, and then follow up by mailing you forms and instructions for the next steps. (6)

Death benefits are generally paid out within 30 to 60 days of a claim. Presumably, they will be paid out in a lump sum. Some insurers will let a beneficiary receive a payout as a stream of monthly income or in installments. (7)

It isn’t unusual for people to own multiple life insurance policies. The AARP, AAA, and myriad banks and non-profits market group life coverage to members/customers, and mortgage lenders and credit issuers offer forms of life insurance for borrowers. Tracking all this coverage down is the problem, and canceled checks and bank records don’t always provide ready clues. Not surprisingly, websites have appeared that will help you search for life insurance policies, and you may be able to locate policies with the help of your state insurance commissioner’s office. (8)

If the family member was a veteran, call the VA.

Your family may be entitled to funeral and burial benefits. In addition, the Veterans Administration offers Death Pensions and Aid & Attendance and Housebound Pensions to lower-income widows of deceased wartime veterans and their unmarried children. (9)

These pensions are needs based. To be eligible for the Death Pension, a widow or child’s “countable” income must fall below a certain yearly limit set by Congress. (A “child” as old as 22 may be eligible for the Death Pension.) The deceased veteran must not have received a dishonorable discharge, and they must have served 90 or more days of active duty, at least 1 day of it during wartime. If they entered active duty after September 7, 1980, then in most cases, 24 months or more of active duty service are necessary for a Death Pension to eventually be paid. The Aid & Attendance and Housebound Pensions provide some recurring income to pay for licensed home health aide or homemaker services. (9)

It is wise to contact a Veterans Services Officer before you file such a pension claim, as they can be a big help during the process. You can find a VSO through your state veterans’ affairs department or through the VFW, the Order of the Purple Heart, the American Legion, or the non-profit National Veterans Foundation. (9)

A final individual income tax return may be required for the deceased.

You or your tax professional should consult I.R.S. Publication 17 for more detail. Also, search for “Topic 356 – Decedents” on the I.R.S. website. Deductible expenses paid by the deceased before death can generally be claimed as deductions on such a return. (10)

If you have been widowed, consider the future.

In the coming days or weeks, you should arrange a meeting to review your retirement planning strategy, and your will, beneficiary designations, and estate plan may also need to be updated. The passing of your spouse may necessitate a new executor for your own estate. Any durable powers of attorney may also need to be revised.

Sources

  1. thebalance.com/review-401-k-plan-beneficiary-designations-2894174
  2. nolo.com/legal-encyclopedia/if-you-don-t-want-leave-retirement-accounts-your-spouse.html
  3. cnbc.com/2018/04/16/out-of-date-beneficiary-designations-are-a-common-and-costly-mistake.html
  4. thebalance.com/social-security-survivor-benefits-for-a-spouse-2388918
  5. ssa.gov/planners/survivors/onyourown.html
  6. nolo.com/legal-encyclopedia/beneficiaries-claim-life-insurance-32433.html
  7. investopedia.com/articles/personal-finance/121914/life-insurance-policies-how-payouts-work.asp
  8. thebalance.com/finding-a-lost-life-insurance-policy-4066234
  9. nvf.org/pensions-for-survivors-of-deceased-wartime-veterans/
  10. irs.gov/taxtopics/tc356.html

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Why Diversification, Patience, and Consistency are Important When Investing

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Regardless of how the markets may perform, consider making the following part of your investment philosophy:

Diversification

The saying “don’t put all your eggs in one basket” has real value when it comes to investing. In a bear or bull market, certain asset classes may perform better than others. If your assets are mostly held in one kind of investment (say, mostly in mutual funds or mostly in CDs or money market accounts), you could be hit hard by stock market losses, or alternately, lose out on potential gains that other kinds of investments may be experiencing. There is an opportunity cost as well as risk.(1)

Asset allocation strategies are used in portfolio management. A financial professional can ask you about your goals, tolerance for risk, and assign percentages of your assets to different classes of investments. This diversification is designed to suit your preferred investment style and your objectives.

Patience

Impatient investors obsess on the day-to-day doings of the stock market. Have you ever heard of “stock picking” or “market timing”? How about “day trading”? These are all attempts to exploit short-term fluctuations in value. These investing methods might seem fun and exciting if you like to micromanage, but they could add stress and anxiety to your life, and they may be a poor alternative to a long-range investment strategy built around your life goals.

Consistency

Most people invest a little at a time, within their budget, and with regularity. They invest $50 or $100 or more per month in their 401(k) and similar investments through payroll deduction or automatic withdrawal. They are investing on “autopilot” to help themselves build wealth for retirement and for long-range goals. Investing regularly (and earlier in life) helps you to take advantage of the power of compounding as well.

MI-GTM_3Q19_September-63

▲ Time, diversification and the volatility of returns

This chart shows historical returns by holding period for stocks, bonds and a 50/50 portfolio, rebalanced annually, over different time horizons. The bars show the highest and lowest return that you could have gotten during each of the time periods (1-year, 5-year rolling, 10-year rolling and 20-year rolling). This chart advocates for a simple balanced portfolio, as well as for having an appropriate time horizon. (2)

Sources

  1. forbes.com/sites/brettsteenbarger/2019/05/27/why-diversification-works-in-life-and-markets
  2. https://am.jpmorgan.com/us/en/asset-management/gim/protected/adv/insights/guide-to-the-markets/viewer

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.