Covering Health Care Costs When Retired

ST. CROIX INSIGHTS

Covering Health Care Costs When Retired

BY BRETT ANDERSON/ST.CROIX ADVISORS, LLC

If you’re like many Americans, you’re eyeing retirement with apprehension. When my clients come to me, no matter the reason or the stage of life, there are always two questions that they ask me. “Will there be enough money?” and “Will everything be okay?”

As with any other situation in your life, planning and being prepared ahead of time is key for retirement planning. Making sure you cover your bases and manage potential factors before they arise is key. And one factor that weighs in is the cost of health care coverage.
The rising costs of health care (especially as we age) is enough to strike fear in the hearts of many approaching retirement. Health care costs can eat up a sizable chunk of retirement savings, especially given the hit that many retirement accounts took in the last decade.

“I know and can prove that if you pay attention to your money, you actually have more money than you think. “

Outliving one’s retirement assets is becoming a real fear for those approaching retirement, as people are living longer and being forced to spend diminished retirement income on rising health care expenses.

You shouldn’t be forced to spend your retirement worrying about whether or not you’ll be able to qualify for Medicaid or if your retirement nest egg will run out too soon. You should be enjoying these golden years of your life. This can be accomplished through the peace of mind that sound financial planning provides and you have many options for health care coverage as well as retirement savings and investing.

If you’re like the 62% of Americans in pre-retirement age (50-64) who are not at all confident that you will have enough savings to weather their health care costs in retirement, I encourage you to contact St. Croix Advisors today to get a financial plan in place. Don’t waste another second of your life worrying about the future that you could be looking forward to.

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Saving for College or Saving for Retirement

ST. CROIX INSIGHTS

Saving for College or Saving for Retirement

BY BRETT ANDERSON/ST.CROIX ADVISORS, LLC

Often, clients are willing to forego saving for retirement (under the guise of postponing it) in favor of saving for and financing their children’s higher education. This is a dangerous game to play and one that is not recommended.

With advancements in health care and increased lifespans, coupled with decreasing home and investment values that could occur at the wrong time, outliving your retirement is a very real possibility without proper planning.

I understand that for many families, you may not be able to save for both retirement and college simultaneously. However, you should not put your future (in terms of your retirement) on the line to cover college expenses for your children. I hear your arguments, and yes, children are the future, but just don’t do it.

“Why?” you might ask.For starters, you can get loans to cover college expenses. You cannot get loans to cover your retirement expenses. Additionally, when you’re funding your retirement savings, those financial tools may be more tax friendly AND still allow access to that money down the road. For college savings, it is very specifically for college expenses only.

The best plan? Continue saving for retirement. In fact, save as much as you can for retirement.

Then, when the kiddos start coming along, start saving for their educations as early as possible (i.e. when they’re babies), so the amount may build incrementally as they grow up.

If your kids are older now and you’re already staring down the gauntlet of college expenses, thinking that you should have started sooner, don’t fret, there are still plenty of options available to you. Contact me today for more information on formulating a plan for your situation.

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The Importance of Updating Beneficiaries on your Retirement Accounts

ST. CROIX INSIGHTS

The Importance of Updating Beneficiaries on your Retirement Accounts

BY BRETT ANDERSON/ST.CROIX ADVISORS, LLC

There’s no better time than the present. Keeping your beneficiaries, both primary and contingent, up to date matters, so your wishes in regard to who should receive your money are carried out.

 

Best Practices

It’s best practice to retain your own copy of beneficiary documentation, in the event your retirement account provider is unable to locate the document upon your death. Even with all the advances in technology and recordkeeping, paper copies can still disappear.

Avoid having someone else decide who receives your retirement account. It’s a good idea to periodically review beneficiary information and update as necessary.

Retirement Plan Beneficiaries

When to Update Beneficiary Designations

Some examples of when you need to update your retirement account beneficiary designations include:

 

  • When a spouse or family member dies
  • Divorce
  • Marriage
  • An overall change in one’s family situation
  • Financial or tax status changes

Chances are this will be the largest check your beneficiaries will ever receive. Call St. Croix Advisors at (651) 337-1919 or (877) 393-1919 or email at info@stcroixadvisors.com for help with your retirement accounts.

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What Does Saving Money Really Mean to You?

ST. CROIX INSIGHTS

What Does Saving Money Really Mean to You?

BY BRETT ANDERSON/ST.CROIX ADVISORS, LLC

I thought I was saving money for retirement. It turns out there is another side of the coin.

 

My Aunt Hank

My Aunt Hank, one of my all-time favorites, used to wear electrical tape around her shoes because she couldn’t afford to purchase new shoes. When I took her grocery shopping she would ask for a 6-pack of pop because she couldn’t afford a twelve pack of Coco-Cola (or so she said – I knew better!). Or stealing the sugar from the restaurant and bringing a few packets home for coffee in the morning. Now that’s a real life example of saving money at its core. How many of you would do that? Today, our shoes get a little dirty and we’re on amazon.com buying new ones.

 

Hudson Retirement Saving Strategies

Retirement & Taxes 

I bet we all have a host of ways we try to save money, day-in and day-out, and my guess is you’re pretty successful at it.  At the same time, I bet you’ve overlooked a major expense that we’re all going to face when we retire: taxes. You’ve saved all these years into your IRA, 401k, 403b, SEP or Simple IRA plan but haven’t considered helping prevent your retirement accounts from being consumed by taxes. Uncle Sam is the uncle who shows up and never leaves. If you’re not careful, he’ll eat you out of house and home.

 

With the exception of a Roth IRA, contributions are contributed on a pre-tax basis and upon distribution, these types of accounts (IRA, 401k, 403b, SEP, Simple IRA) are taxed at the ordinary income rate. The tradeoff is tax-free growth since taxes are paid upon distribution at retirement.

 

A Bigger Trade Off

But, here’s the bigger trade off. What happens to your retirement accounts when you die? Heirs potentially encounter not only income taxes on the account, but also potentially estate taxes. You need to add it all up – all of your retirement accounts, your home, your investments, and even your business to determine your federal estate tax rate. I also failed to mention any State taxes which you may need to include. It doesn’t take long before over 50% of your retirement accounts could be eroded by taxes. Chances are you haven’t worked all these years just to pay taxes, have you? I’m all for paying my fair share, and my fair share alone. I would rather see my family and favorite charities benefit from the fruits of my labor and planning.

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Roth IRA vs. Traditional IRA

ST. CROIX INSIGHTS

Roth IRA vs. Traditional IRA

BY BRETT ANDERSON/ST.CROIX ADVISORS, LLC

Pay now or pay later – that is the question. When we discuss the difference, most individuals generally point out the fact that they’ll be in a lower tax bracket come retirement. I’m 99% confident that this is probably not the case for most of us. Remember, our government needs and wants your money. A host of factors will ultimately decide your tax rate at retirement, the two biggest of which are health and lifestyle in your golden years. We can run the math a thousand ways, and in our retirement years here’s the biggest question to ask: do you want all of your income in retirement taxed? I suspect the answer is no.

 

Here’s a list of some of the differences between two of the most common retirement accounts: the Roth IRA and the Traditional IRA account. If you have specific questions, please don’t hesitate to give me a call.

 

Roth IRA vs. Traditional IRA

Roth IRA

  • Individual contributors must have taxable compensation (or a spouse with earned income if filing jointly) and contributions to a Roth are not subject to any age requirements or limitations.
  • Roth IRA contributions are not tax deductible and are also subject to adjusted gross income limitations.
  • Individuals may contribute up to $5,500 a year for those under 50. Those over 50 have an additional $1,000 catch up allowance per year (2016).
  • No minimum distribution requirements while the owner is alive and qualifying distributions are tax free. This is a great tax benefit in our retirement years.
  • Best practice is to have your money in the account for five years and until you reach age 59 ½, to enjoy distributions that are tax free. Otherwise, you may be subject to a 10% tax on the earnings.

Traditional IRA

  • Individual contributors must have earned income (or a spouse with earned income if filing jointly) and be younger than age 70.
  • Generally, Traditional IRA contributions are fully deductible. However, if either taxpayer or spouse is an active participant in an employer sponsored plan then adjusted gross income must be under IRS published thresholds.
  • Individuals may contribute up to $5,500 a year for those under 50. Those over 50 have an additional $1,000 catch up allowance per year (2016).
  • If distributions are taken prior to age 59 ½, taxable distributions are subject to 10% excise tax unless the taxpayer faces certain exception events such as death, disability, medical expenses, education, first-time homebuyer, and health insurance needs while unemployed.
  • At age 70 ½, you are required to begin making required minimum distributions, regardless of whether or not you need the funds.

Making a decision about your retirement savings can be difficult. Consulting with a skilled financial planner can help you make the best decisions for you situation. Call St. Croix Advisors at (651) 337-1919 or (877) 393-1919 or email at info@stcroixadvisors.com for more information.

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Why Do We Take So Long To Retire?

ST. CROIX INSIGHTS

Why Do We Take So Long To Retire?

BY BRETT ANDERSON/ST.CROIX ADVISORS, LLC

I found myself reading this article about a 30 something who retired early to travel. What a great goal not only to set but also to accomplish. She paid off $100,000 in law school debt with a bonus from her employer, worked her way up to make $360,000 a year, saved $700,000 in a short period of time and “retired” to travel.

While reading this Forbes article, it got me thinking, and rethinking, and I began to ask why does it take so long to retire?

Retirement Planning

3 Reasons People Put Off Retirement

I think it comes down to 3 reasons:

  1. Values
  2. Money
  3. Relevancy

Values – our checkbooks truly show our priorities.

I’d suggest that “retiring” with only $700,000 in your early 30s will not be enough to make a “traditional retirement” enjoyable for my typical client. This assumes a 5% rate of return and living off the interest; a gross income of $35,000 won’t cut it.

I Want Her to Prove me Wrong!

I think we can retire early, yet retiring with only $700,000 just won’t cut it for someone in their 30s. Especially, when you factor in life expectancy. She could live for 50 years. That’s a long time! $700,000 is a nice sum of money, but when you factor in life, I suspect it won’t be enough for the long run.

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