Jan/Feb Let’s Talk Money Newsletter

View the newsletter here: https://www.ltmonline.com/jerrysiver

Estate Planning:

What your children should know about your finances

It may not be easy talking to your adult children about your finances and estate strategy. But discussing your finances with your grown children now can better prepare your whole family for the future.

General Interest:

Great way to start the new year

If you spent more than you wanted to this holiday season, you need to take a closer look at where your money is going. A spending plan can help you track your money and get your finances in order.

I resolve to . . .

Instead of making the same resolutions you have in the past, resolve this year to improve your financial health. We offer several ways to become more financially fit.

By the numbers: spending patterns

The Employee Benefit Research Institute has released some statistics on the spending patterns of Americans ages 50-64.

The minimum payment trap

Paying the minimum amount on your credit card may seem like a good idea, but it’s not. Not only will it take you longer to pay off the balance, but you’ll also end up paying more for the item than what it originally cost.

Insurance:

Single? You need life insurance, too

Just because you’re single doesn’t mean you shouldn’t consider life insurance. Incorporating a life insurance policy into your financial strategy can be a smart move.

The gift of a better financial future

If you’d like to help a family member get the year off to a better financial start, consider making a gift that can make a real difference in your loved one’s financial future. Your generosity also may help save estate taxes later.

Retirement Planning:

Take charge of your retirement

With pensions becoming far less common than in the past, it’s up to you to figure out how to fund your retirement. We discuss several recommendations from the IRS for preparing for retirement.

Put a realistic price tag on your retirement

When it comes to funding retirement, not everyone needs to save the same amount. Figuring out how much income you’re going to need ahead of time can put you on the path toward an enjoyable retirement.

Seniors:

Have you had the talk?

The beginning of a new year is a good time to talk to your loved ones about your possible long-term care needs. Discussing your wishes and possible solutions for long-term care can help alleviate any future stress and indecision.

Small Business:

Does your business have a contingency plan?

Financial issues can cause considerable stress between business partners. Setting up a buy-sell agreement can alleviate some of that potential stress.

The life insurance crisis

Many American households don’t have individual life insurance, even though they need the protections it provides. If you’re looking for a way to help your business attract and retain valuable employees, consider making life insurance part of your employee benefit package.

Standard:

Are you an abstract or a concrete thinker?

If you have trouble saving money, it could be because your strategy doesn’t match the way you think. Figuring out what kind of thinker you are can help you create a successful strategy for reaching your goals.

Womens:

Protect your income with disability insurance

Illness or injury can happen to anyone. Would you be prepared if it happened to you? Having long-term disability insurance coverage could help keep you financially afloat if you were prevented from working due to disability.

Retirement Income…you’re probably in trouble.

I’m noticing a disturbing trend when talking to people about saving for retirement and what their expectations are for their own retirement. Most people have no idea how much income they’ll need when they retire. Even worse, hardly anyone has a specific plan describing how much they need to save NOW to enable them to have enough money when it comes time TO RETIRE.

If you’re under 50, you are in luck…you still have time. If you’re over 50, and haven’t been saving at least 20% of your income, you might be in trouble.

So, unless you have:

• a large trust fund

• are already independently wealthy

• have a big inheritance coming your way soon

• lucky enough to have a large pension

You need to follow this advice, as appropriate to your age:

Over 50, but not retired

Within the next few weeks, write down your ideal plan for retirement. Include everything that could affect your income or spending. For example, will you downsize your home; will you want to spend winters in a warm climate; will you take up a new hobby or activity (golf or travel can be expensive); will you earn money doing part time work; what will groceries, telephone, gas, insurance, cable, etc, etc, cost.

 

Once you have your list, assign a dollar value (in annual terms using today’s values) to each. Then, add all those amounts up to see what you’ll be spending each year. Next is the step that’s a little complicated: you’ll need to calculate your annual retirement income using projected Social Security benefits, pension benefits, retirement savings you’ll have accumulated and income property you may own. Your spending amount is now subtracted from your income amount and if the result is a negative number you’ll need to spend less or retire later

Under 50

Good news, you still have time to build a decent retirement income. You need to save enough so that your retirement savings are equal to this multiple of your annual income at these ages:

     Age 40, 1.61 x annual income

     Age 45, 3.53 x annual income

     Age 50, 5.82 x annual income

     Age 55, 8.56 x annual income

     Age 65 15.7 x annual income

If you have any questions about how to make sure you’ll be able to retire with enough income, get advice from an Investment Advisor, they aren’t paid commission so they have no incentive to sell you anything.

Jerry Siver

Planning for Non-Traditional Couples

Non-traditional couples (NT) are defined as opposite sex couples that are not married and same sex couples (married or not). If you fall into either of these categories, you have advantages and (mostly) disadvantages as compared to traditional couples when dealing with tax and financial issues. We’ll highlight a few examples of each:

1. Federal tax code does not recognize NTcouples as a family and therefor does not allow assets to pass  tax-free to the surviving partner upon death of the other…estate taxes will apply.

2. Asset transfers from one partner to the other are subject to gift tax and lifetime gift exclusion rules.

3. Since partners are not related in the eyes of the tax code, one partner can sell assets to the other at a loss and use the loss for tax purposes (one of the few benefits you have over traditional couples).

4. Exclusion on Sale of Residence of $250,000 for an individual and $500,000 for a couple is restricted to just one exclusion ($250,000).

5. Passive Loss Limitation rules apply separately to each partner (one of the few bonuses for NT couples).

6. COBRA premium subsidy. If both partners are insured under a group policy at a company only one of the partners work at, the other partner is not a “qualified beneficiary” under the definition of the act and therefor not eligible.

7. Social Security. Don’t even ask.

8. Qualified Domestic Relations Order. If the NT couple split up and retirement plan benefits are included in the QDRO, an employer is under no obligation to follow the order since The Defense Of Marriage Act prohibits the recognition of same-sex marriage.

9. Property transfers between spouses/domestic partners. If a traditional marriage ends, any gains in value of property transferred between spouses to settle the divorce are not taxed. NT couples will pay tax on any gain over the cost basis of transferred property.

These are just a few of the financial and tax issues a NT couple faces which traditional couples don’t. Luckily there is a way to solve many of these problems using insurance or trusts. The most common trusts to use are:
-Grantor Retained Income Trusts
-Charitable Remainder Trusts
-Wealth Replacement Trusts
-Charitable Lead Trusts

The problem with trusts are that they cost money to create and maintain and the rules regarding trusts seem to change constantly. Life insurance is one of the best ways to transfer assets at death of one of the partners of a  NT couple and keep those assets from being taxed. Life insurance (with a Long-Term-Care rider) can also  make sure each partner has funding for nursing home or home health care available without worrying about bankrupting the other partner.

These are complex issues that every NT couple should deal with…earlier rather than later!