Retirement planning is one of life’s most important financial goals. Indeed, funding retirement is one of the primary reasons many people put money aside in the first place. Yet many of us put more effort into planning for our vacations than we do to prepare for a time when we may no longer earn an income.

Whether you’ve put off planning for retirement altogether or failed to create a truly comprehensive plan, you’re putting yourself at risk for a future of poverty, penny pinching, and dependence. The stakes could hardly be higher.

When preparing for your final years, it’s not enough to simply hope for the best. You should treat retirement planning as if your life depended on it—because it does. To this end, even well-thought-out plans can contain fatal flaws you might not be aware of until it’s too late.

Have you committed any of the following three deadly sins of retirement planning?

1. Not having an actual plan
Even if you’ve been diligent about saving for retirement, without a detailed, goal-oriented plan, you’ll have no clear idea whether your savings strategies are working adequately or not. And such plans aren’t just about calculating a retirement savings number, funding your 401(k), and then setting things on auto-pilot.

Once you know how much you’ll need for retirement, you must plan for exactly how you’ll accumulate that money and monitor your success. The plan should include clear-cut methods for increasing income, reducing spending, maximizing tax savings, and managing investments when and where needed.

What’s more, you should regularly review and update your asset allocation, investment performance, and savings goals to ensure you’re still on track to hit your target figure. With each new decade of your life (at least), you should adjust your savings strategies to match the specific needs of your new income level and age.

Failing to plan, as they say, is planning to fail.

2. Not maximizing the use of tax-saving retirement accounts
One way or another, the money you put aside for retirement is going to be taxed. However, by investing in tax-saving retirement accounts, you can significantly reduce the amount of taxes you’ll pay.

Depending on your employment and financial situation, there are numerous different plans available. From traditional IRAs and 401(k)s to Roth IRAs and SEP Plans, you should consider using one or more of these investment vehicles to ensure you achieve the most tax savings possible.

What’s more, many employers will match your contributions to these accounts, which is basically free money. If your employer offers matching funds, you should not only use these accounts, but contribute the maximum amount allowed—and begin doing so as early as possible.

Since figuring out which of these plans will offer the most tax savings can be tricky—and because tax laws are constantly changing—you should consult with a professional financial advisor to find the one(s) best suited for your particular situation. Paying taxes is unavoidable, but there’s no reason you should pay any more than you absolutely must.

3. Underestimating health-care costs
It’s an inescapable fact that our health naturally declines with age, so one of the riskiest things you can do is not plan for increased health-care expenses.

With many employers eliminating retiree health-care coverage, Medicare premiums rising, and the extremely volatile nature of health insurance law, planning for your future health-care expenses is critical. And it’s even more important seeing that we’re now living longer than ever before.

Plus, these considerations are assuming that you don’t fall victim to a catastrophic illness or accident. The natural aging process is expensive enough to manage, but a serious health-care emergency can wipe out even the most financially well off.

Start preparing for retirement now
The best way to maximize your retirement funding is to start planning (and saving) as soon as possible. In fact, your retirement savings can be exponentially increased simply by starting to plan at an early age.

Let us know if we can help. We’ll be glad to review what you have in place now, advise you about what you need, introduce you to advisors you can trust, and ensure you and your family are well-protected and planned for, no matter what.

Dedicated to empowering your family, building your wealth and defining your legacy,

retirement 91024When it comes to retirement plans, IRAs and 401(k)s provide many of the same benefits. But in certain situations, an IRA can outperform a 401(k). IRAs aren’t right for everyone, so you should become familiar with the advantages IRAs have over 401(k)s before you transfer funds or set up a new account. To help you do this, here are a few benefits you can reap from an IRA which are not available in a 401(k).

  1. Qualified Charitable Distributions (QCDs)

IRAs allow you to take QCDs and send them directly to the charity without including the distribution amount in your taxable income. This often results in a lower tax bill. You can also use your QCDs to offset your required minimum distribution.

  1. Penalty-Free Distribution for Higher Education

A 401(k) distribution for higher education expenses will incur both a tax and a penalty. Taking an early IRA distribution to pay for higher education expenses for you or certain family members, however, is penalty-free.

  1. Freedom from Distribution Restrictions

Opportunities for early distributions of 401(k)s are limited at best. Subject to the plan administrator’s rules as well as the tax code, 401(k)s require a compelling reason such as a hardship, to receive an early distribution. Conversely, IRA distributions are restriction free. You can take an IRA distribution at any time and do not need an approved reason like you would with 401(k)s.

  1. Aggregate Required Minimum Distributions (RMD) From Multiple Accounts

If you have multiple IRAs, you can aggregate the RMDs for your accounts and then take that amount out of one or any combination of your IRAs. Doing this with your 401(k)s, however, results in steep penalties.

  1. No Withholding

You can opt-out of tax withholding from an IRA distribution but not with a 401(k) distribution. This is a great benefit for those who end up with little or no tax liability at the end of the year.

  1. Self Direction

One of the best parts of having an IRA, instead of a 401k, is that you have the most flexibility in how your IRA assets are invested, whereas with a 401k, your investment options are limited to those provided by the 401k Administrator. With an IRA, you can move your entire retirement account into a self-directed IRA account and then invest the money anywhere you want, including in real estate and start-ups. Yes, it’s true! You get to choose.

Deciding whether to maintain your retirement account as an IRA or a 401k is an important decision and you should understand the benefits and limitations of both.

Relying on generalized information found online is not enough to protect your interests. Guidance from your Personal Family Attorney provides personalized, legal assistance and empowers you to make the very best decisions when planning for retirement and all of life’s other big changes.

Dedicated to empowering your family, building your wealth and delivering your legacy,Marc Garlett 91024

Retirement 91024Our country is one of consumption. We buy, we use, we throw away. Unfortunately, this mentality has led to a society where over half of Americans lack a stock portfolio and where we are judged not just on our buying power but what we do with it. After all, who wants to sock money away for retirement when the new iPhone 7 just came out? So, in a culture where nearly half of all Americans have no retirement savings, we must stop and ask; what’s going on here? This question may be best answered by an Anthropologist or Sociologist, but we can still learn a lot by just looking at the numbers:

  •         45% of working-age American households have no retirement account savings
  •         53% of all Americans have no stock investments
  •        $403.35 is how much the average American spent on Black Friday in 2015.

What do these numbers say? Most obviously, they tell us we’re better at spending than saving. And all this spending doesn’t necessarily improve our lives – in meaningful ways at least. So, the lesson to be learned here is simple; it’s easier to spend than to save. And all that spending takes a toll no just on our finances, but on our planet, as well. In the US alone we generate 220 million tons of waste a year, with over half of it ending up in landfills. Think about that the next time you buy a cheaply made, “disposable” item.

Saving for retirement and avoiding over-consumption, however, is easier said than done. Making a real difference is a result of making better choices, consistently. While it’s hard to see the benefit of saving a few dollars here and there, it does add up over time. I can put an amazing estate plan together to enable a client to pass on their wealth to the next generation, but if I don’t help that same client conserve – or better yet, build – wealth, there may be nothing left to pass.  So, part of my job, at least, is to help clients improve their financial position throughout their lifetime, as well as help ensure the financial validity of their estate plan.

At my firm, we don’t just draft documents. We ensure clients make informed and empowered decisions about life. That includes their estate plan, finances, legal issues, and everything else that affects their ability to protect and provide for the people they love most in the world. By taking that holistic approach, we are able to be a part of real transformation – not only in the lives of our clients but for their extended families, too. That’s exciting stuff.

Dedicated to empowering your family, enhancing your wealth and embedding your legacy,
Marc Garlett 91024

Retirement 91024You’ve spent your entire life building up your retirement account. It may even be the biggest asset you’ll leave behind for the people you love.

If that’s the case, you may want to consider creating a special trust designed specifically to receive your retirement account assets in the event of your death.

If you leave your retirement account to the people you love outright, simply by naming them as beneficiaries on your retirement account rather than through a special trust, here are the risks:

  1. Some studies indicate 80% of retirement account beneficiaries immediately liquidate the account and frivolously spend the assets (and on top of using the assets in ways you may not agree with, they also lose significant tax benefits for these assets you worked so hard to create);
  2. If your beneficiary is married and does not properly handle the retirement assets you leave behind, and then gets divorced, your hard-earned assets could end up in the hands of the future ex-spouse of your beneficiary;
  3. If you are in a second marriage situation with children from a prior marriage, you may be setting your spouse and children up for conflict after you are gone, due to the way you have planned (or not planned) for the passage of your retirement account.
  4. If your beneficiary is ever in a situation where he or she has creditors or may have to file bankruptcy, and you’ve left your retirement account to him or her without a special trust, your retirement account would go to satisfy those creditors first.

Here’s the good news, it’s not hard to protect your retirement account for your beneficiaries with the right planning. We use a variety of special trusts to ensure the retirement assets you’ve worked so hard to build up throughout your life are passed on to the people you love so they are totally protected from a future divorce, creditors, bankruptcy and so that they do not create conflict for your loved ones.

If you have a significant retirement account whose designated beneficiary is your spouse or children, or even your regular revocable living trust, call us to have your planning reviewed immediately.

Dedicated to your family’s health, wealth, and happiness,
Marc Garlett 91024

estate planning 91024A recent U.S. Supreme Court decision changes the way inherited IRAs are viewed when it comes to bankruptcy, which means those who inherit these retirement account assets must find new ways to protect that inheritance.

In Clark v. Rameker, Heidi Heffron-Clark inherited an IRA from her mother. She received distributions from that inherited IRA for several years before filing Chapter 7 bankruptcy. Ms. Heffron-Clark relied on the Bankruptcy Code, which states that IRAs are exempt up to $1.245 million from bankruptcy, to claim her inherited IRA qualified for the retirement account exemption.

In a unanimous ruling, the Supreme Court disagreed, distinguishing inherited IRAs from other IRAs established by an individual for his or her own retirement. Because the beneficiary of an inherited IRA cannot make contributions to that IRA, an inherited IRA does not provide any tax incentives, which is an important purpose of other IRAs. Since the beneficiary of an inherited IRA has different rules for taking distributions than other IRA owners, this also establishes inherited IRAs as different from other IRAs. These differences, the Court reasoned, are enough to disqualify an inherited IRA from qualifying for the federal bankruptcy exemption.

Even though some states offer protection for inherited IRAs in bankruptcy, a move to another state that does not offer this protection can endanger inherited IRA assets. IRA owners who wish to provide their heirs with valuable protection should consider naming a trust as beneficiary of IRA assets instead of heirs, who could instead be designated as beneficiaries of that trust.

The Court did not address spousal inherited IRA beneficiaries; however, since a spouse is allowed to roll over an inherited IRA into his or her own account, this may qualify a spousal inherited IRA for the bankruptcy exemption for retirement funds.

Keep this in mind as you plan for the safe, successful transfer of your assets to the next generation.

To you family’s health, wealth, and happiness,
Signature - Marc

Retirement decision-making for baby boomers is very different than it was for their parents, when it was usually just one spouse (Dad) who retired.

More often than not, both spouses work now and must make decisions together on retirement, and each may have very different ideas of what that retirement should look like. Here are 5 important decisions you need to make as a couple before you retire:

Timing. Your financial position and how much (or how little) you enjoy your work are usually the main determining factors regarding when to retire. But couples also need to consider how to maximize their Social Security benefits.

Finances. If only one spouse has been handling the family finances, it’s time for a change. Both spouses need to understand the overall financial situation and how retirement may impact it.

Lifestyle. While one spouse may want to travel more in retirement, the other may just want to lounge around the house. While one may want to move, the other may want to stay put. For this to work, you need to compromise and make decisions together about your retirement lifestyle.

Healthcare. It is imperative that both spouses have good healthcare coverage, either from Medicare and supplemental plans or, if either will continue to work in retirement, from an employer’s plan.

Long-term care. Studies show that most of us will need some long-term care during our lifetimes. We can help you examine the options for long-term care coverage and help you put a plan together that meets your needs.

If you would like to learn more about retirement planning, we need to talk. Please call my office today.