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Transamerica Study Shows Five Biggest Retirement Fears for Americans

November 21, 2017

Filed under: Retirement Planning — Neel Shah @ 9:15 am

A recent study completed by Transamerica identified that even though retirement can be an exciting time, it is also one that provokes anxiety and fear among those reaching age 65 and beyond. 

Many Americans are concerned that retirement will not live up to their expectations or that they won’t have enough assets set aside to protect themselves. Appropriate estate and advance planning is important when it comes to retirement savings. What follows are the five most commonly referenced issues in the Transamerica study:

  •       Outliving investments and savings
  •       Not having access to enough social security benefits
  •       Long term care expenses that are unpredictable
  •       Cognitive decline like Alzheimer’s disease
  •       Lack of affordable and adequate healthcare

Most people are under the impression that Medicare will assist them in the event that they have an incapacitating event. While this is true to an extent, more serious problems like cognitive decline or long-term care concerns will likely not be covered by Medicare and you should have a plan in place to protect you with those. This is one of the biggest reasons that Americans are concerned with outliving the money they have set aside for retirement. Financial support can come from many different places but advanced planning is required for all of them. Scheduling a consultation with a knowledgeable estate planning attorney today can help you see how tax planning, charitable giving, estate planning and long-term care planning can all work together to give you a more powerful future.

Avoid the Newest Form of Social Security and Medicare Scams

November 1, 2017

Filed under: Retirement Planning — Neel Shah @ 9:15 am

Unfortunately, elderly individuals are in the market for crucial government assistance programs such as social security and Medicare. Scammers recognize this and given the many people who are turning 65 each day and becoming eligible for benefits from each, it is equally important to be aware of the potential risks of being caught up in a scam. Scammers are getting more elegant and experienced with how they use technology or threats to encourage people to hand over personal identifying information.

Many phone calls are going out to individuals who may have enrolled in a Medicare program or may be in the process of receiving a new social security card and these individuals may hear from the scammers that they need to provide their social security number or other personal identifying information over the phone in order to get these materials in the mail. 

Bear in mind that the Social Security Administration will usually contact you directly and be able to provide verification of who is contacting you. Instead, scammers will often leave a message on your voicemail prompting you to call back a number that leaves a generic voicemail as well threatening you that a lawsuit has been served against you or that a warrant has been issued for your arrest.

These scammers are targeting vulnerable seniors who may be unaware of their rights and may be deeply concerned about the nature of these voicemail messages and thus prompted to provide personal information such as their bank account, their Social Security number or other critical details.

You can avoid these scams by being mindful and always asking people to clarify who they are, where they work and their supervisor’s name and contact information, where possible. This can go a long way towards minimizing your concerns that you have given up details when they were unnecessary. The Social Security Administration and Centers for Medicaid Medicare services will usually contact you directly and will typically do so in a written format. Although if someone does contact you on the phone, it should be relatively easy to figure out whether or not they are truly working for the agency they claim to be.

Study Shows That Some People Need Outside Motivation in Order to Save For Retirement

October 31, 2017

Filed under: Retirement Planning — Neel Shah @ 9:15 am

Most people know in the back of their minds that it makes sense to save ahead of their retirement. However, a new study shows that short-term thinking, a lack of access to appropriate retirement programs and general inertial all contribute to the fact that many people do not engage in the estate planning process as soon as they should. plan for retirement

For many people, working longer and staying in the workforce past age 65 have been the common approaches towards addressing retirement strategies.

A new book from economist Richard Thaler explains why people so often fail to save for retirement and societal changes including the lack of employer managed retirement plans are involved as well. A defined contribution retirement savings plan on its own will fail to overcome behavioral barriers and lead to less than optimal outcomes when it comes to retirement savings.

Bearing in mind that most people have limited awareness regarding financial and retirement issues to begin with, without an outside professional to help them guide through the process they are more likely to ignore the option overall and fail to engage in retirement planning until it is too late to make that much of a difference in their bottom line. The same goes for estate planning.

Many people put it off and do not realize the power of estate planning until they wish to take steps to protect their loved ones or until they have a loved one who fails to do estate planning and then puts the entire family in the spotlight of dealing with the issues. Consulting with a knowledgeable New Jersey estate planning attorney is strongly recommended if you wish to talk about how your retirement and estate planning can work together.

New Study Shows a Connection Between Retirement, Savings and Mental Health

September 6, 2017

Filed under: Retirement Planning — Neel Shah @ 9:15 am

Looking down the road to retirement? You’ve probably considered a broad range of issues, including what you’ve saved so far, what you might need for health care, and how you intend to live during retirement. plan for retirement and your estate together

There’s no doubt that you are thinking ahead about your retirement planning goals when wanting to plan for your future. There are key factors that contribute to your mental health status and a new study has identified that your retirement savings and other issues can affect how you feel about your life in general.

Some of the other elements that factor into the overall perception of how your future is perceived include longer lifespans, the greater reliance on defiant contribution pension plans and the questionable state of social security. Many different households including people who are aging inside are dealing with mental health concerns such as anxiety and depression. Medicare Research Institute, in a study that was published in Health Economics, identified that psychological distress was linked to a 47% higher likelihood of a married couple withdrawing money from their retirement account.

And it was also connected to married couples having approximately $42,000 left in retirement savings accounts. Key factors that influence this can all have an impact on a person’s overall psychological makeup. Thinking ahead about your retirement and how it works in conjunction with your intentions for your estate planning, is an important component of planning for your future.

Your retirement plan should look at your long-term goals and it should also be something you think about years in advance. When you’re getting close to retirement, it also makes sense to schedule a meeting with an estate planning attorney to talk about your needs as a whole.

These Four Habits Can Increase Your Chances of Retirement Savings Success

August 23, 2017

Filed under: Retirement Planning — Neel Shah @ 9:15 am

Whether you’re just entering your working years or looking towards retirement, how you save can impact your life after you’re doing working in a big way. Planning ahead can help you achieve targets that give you peace of mind later in life, even if that period is not that far away. New research shows there are major changes happening with regard to retirement savings and the U.S. workforce. retirement and estate planning

Are you one of the nearly 70% of Americans worried about their financial future? There is good reason to worry for plenty of people because research from the Economic Policy Institute indicates that half of all Americans have no retirement savings at all. Some young individuals, however, have been dubbed retirement super savers and are on their way toward increased prosperity. They’re contributing at least 90% of their annual 401(k) contribution limit. A study completed by Principle Financial Group identified what made those super savers likely to sacrifice things in their life in order to maximize their 401(k) contributions. Four habits of these super savers include:

  • Driving an older car
  • Living in a modest home
  • Forgoing the fancy vacations
  • Working a little bit harder

If you are interested in putting together a retirement plan that works in conjunction with your goals to pass on things to your loved ones in the future, consulting with an experienced New Jersey estate planning attorney is strongly recommended. Becoming a super saver is a worthwhile goal but one that requires careful prospective from many different areas. Engaging with professionals who are knowledgeable about the estate planning and retirement planning landscape can increase your chances of putting aside enough money to support you in your older years and also empowering you to leave money behind for beneficiaries or for philanthropic purposes. Consulting with an experienced estate planning attorney is one crucial component of this step.

Why Is Retirement Planning So Important for Women?

July 13, 2017

Filed under: Retirement Planning — Neel Shah @ 9:15 am

 

Everyone can benefit from the process of estate planning, but it’s more important for women than it is for men, frequently because many women do not think about the estate planning process. First of all, women tend to live longer and despite advances in gender equality in the United States, women still shoulder much of the burden associated with child care. This means a non-existent or a reduced income and ensures that savings for the future is difficult. retirement tips for women

As women tend to outlive men by five to six years, it is important for women to take crucial steps in the estate planning process that can help to position them to make an empowered decision should something arise. No one wants to find themselves in the position of failing to take the necessary planning steps and putting that burden on your loved ones. It can lead to unnecessary conflicts, court costs and legal fees.

Articulating your own desires now and thinking about the intersection of your estate and your retirement planning will give you peace of mind in addition to helping you feel confident that your family members will understand your intention when the necessary time comes. Some of the crucial steps to take include:

  • Getting organized
  • Taking control of your finances
  • Planning your estate and considering elder law issues.

Don’t put off these simple, but effective steps in planning for your future and for your loved ones. Taking action now is important because it saves your family members time and stress down the road.

Did You Know That There Is a Life Cycle to Your Retirement Plan?

July 10, 2017

Filed under: Retirement Planning — Neel Shah @ 9:15 am

Most people understand the basic benefits of planning ahead for retirement, but they may not understand the specific cycles and important impacts of planning for retirement. The financial life cycle follows your general aging cycle and every decade it will play its part in your financial lifecycle. During your 20s, you’ll be primarily focused on building a foundation for any financial independence. As you get into your 30s, you’ll be looking at accomplishing goals such as building your wealth, debt reduction and career consolidation. retirement planning tips

It is commonly in the 30s that people may begin contemplating the benefits of asset protection planning. In the 40s, you’ll still be focused on wealth accumulation and paying down any necessary debts. During your 50s, however, you will likely need to remain fully employed to age 60, if you do not have an employer’s sponsored pension or were somewhat older when you had a child. Your 60s is the work optional, semi-retirement period of your life, followed by the golden years and traditional retirement of you 70s and beyond.

Consulting with an experienced estate planning lawyer is just one of the steps that you should take as you look forward to retirement. Having the necessary documentation in place to assist you if you were to suddenly become incapacitated as well as to protect the assets you have spent so much of your life working to build, is an important component for anyone. Your retirement plan is the focus of much of your working years, and likewise you should continue to revisit it and determine how it will be used during your golden years or passed on to loved ones. All of these are important steps you should consider taking.

Working Longer is Better for Your Brain

July 6, 2017

Filed under: Retirement Planning — Neel Shah @ 9:15 am

 

Are you trying to determine the perfect time to retire? Many older people have difficulty figuring out when to leave their job at the ideal time to cash in on retirement benefits and maximize Social Security. It turns out that waiting a little bit longer could be better for your mental health.

NJ retirement planningA new study conducted in France determined that working longer could help to ward off dementia. More than half a million self-employed laborers in France participated in the study and were linked to a decreased risk of dementia when they worked longer. There are numerous different benefits to delaying your retirement. In addition to increasing your social security benefits up to a certain age, work often gives you a sense of purpose and a sense of community.

 

You have to communicate with others to do your job and also learn new programs and skills. This helps keep you sharp mentally and gives you a sense of purpose every single day. The work environment today puts demands on individuals that forces them to be there, engage, and socially interact. Although older employees may process information at a slower rate than their younger peers, other functions like speech, language and semantic memory can improve with age. To talk more about retirement planning benefits and how they work in line with your estate planning, consult with an experienced estate planning lawyer today. Finding that perfect time to retire involves careful consideration of your future healthcare needs and the money you have set aside to retire. 

How Much Can a Job Loss Today Cost You by Retirement?

July 4, 2017

Filed under: Retirement Planning — Neel Shah @ 9:15 am

 

What happens if you lose a job in your 30’s, 40’s, or 50’s? Doing so could impact your life significantly, it turns out. If you have multiple events, or income shocks, over the course of the critical years for your retirement savings, you could be facing challenges down the line.

Many individuals may suffer an event over the course of their life that could cause them to dip into their retirement savings account. Furthermore, major financial setbacks can generate challenges that can decrease the amount of money you’re contributing towards your retirement account. retirement savings in NJ

Up to 96% of Americans will experience at least 4 income shocks or a 10% or greater decrease in their pay as a result of something like a job loss, job change or poor health. This is shared by a study conducted by the New School for Social Research. Individually, these minor income shocks will not significantly impact your overall retirement savings.

One setback, for example, could lead to as little as $1000 less savings in retirement. However, multiple income shocks can really add up. 4 or more 10% income decreases can drop your retirement savings by $10,000.

In conjunction, having poor health can also significantly decrease your nest egg value. Poor health reduces it by more than $86,000 and less than outstanding health reduces the retirement savings by about $34,000. Don’t let one job loss discourage you from continuing to work towards your retirement planning goals- it’s well worth the effort to continue contributing as soon as can again. When it comes to retirement savings, it can be hard to bounce back from a job loss, but it might also be a crucial component of being able to recover the funds you need for a comfortable retirement. 

Consulting with an experienced estate planning attorney about your retirement planning goals is strongly recommended if you find yourself in this situation. Looking ahead to the future is one way to minimize the potential impacts.

Retirement Account Loans: Do They Make Sense?

June 29, 2017

Filed under: Retirement Planning — Neel Shah @ 9:15 am

If you have designated someone to receive the assets inside your retirement account after you pass away and you then take a loan, there are other things to consider before you pull out these funds. If you fail to return the money and pass away in the interim, the loved one you intended to receive those assets will be affected. Furthermore, there are other downsides to pulling money from your 401(k) plan. retirement account loans

Keep in mind that for any money you pull out, you’ll pay interest. You cannot deduct the interest paid, and those funds will not appreciate while on the loan. In addition, since you’ll have to repay that loan from your personal paycheck, your cash flow will be affected. Other restrictions and fees can apply based on your employer’s rules. For example, most of these plans only allow you take out one loan at a time. Repayment comes up pretty quickly for anyone who has withdrawn the funds, so it can be dicey as to whether or not you’ll be able to pull out enough money to cover your immediate needs.

Don’t forget about tax consequences if you’re unable to pay the loan back, either- this means it’s taxed like ordinary income and a penalty could apply of 10% if you’re younger than 59 1/2. Having a large tax bill could be an even bigger challenge if you were to lose your job and had no way to pay it back.

When you take out a loan, don’t forget that you probably allotted your estate at least partially on the current value of those accounts. Awarding your retirement accounts to one child, as an example, could lead to conflicts after you pass away if you pulled funds from that account if the account was worth much less. Make sure you consider all these factors when looking to withdraw funds from an existing retirement account.

 

 

News Shows That Americans Have Not Come Far Enough on Retirement Planning

May 9, 2017

Filed under: Retirement Planning — Neel Shah @ 9:15 am

retirement planning optionsAccording to a recent study conducted by the American College of Financial Services, three out of four adults reaching retirement age failed a quiz on how to make their nest eggs last throughout their retirement. 

 

Older Americans or those between the ages of 60 and 75, also indicated a lack of understanding about critical financial topics like paying for long term care expenses, investment considerations and different strategies that could help to sustain income over the course of retirement.

 

This is a particularly problematic study finding, given that approximately 10,000 baby boomers will be reaching age 65 single day over the course of the next 12 years. More Americans are facing retirement, but are doing so without clear knowledge about how to make this money last and what they need to have set aside when they begin the retirement process.

 

Many Americans, however, might not even know that they are simply unprepared for retirement. 61% of the respondents reported having high levels of knowledge about their retirement income, but only 33% of them passed the corresponding quiz. The survey found that there is a major divide when it comes to particular demographics as well.

 

Only 17% of women were able to pass the quiz when compared with 35% of men. 40% of those individuals who had at least a college degree passed this study as well. This divide underscores that it is so important for everyone to approach comprehensive estate and retirement planning.

How to Find Retirement Volunteer Opportunities

February 9, 2017

Filed under: Retirement Planning — Neel Shah @ 9:15 am

Many individuals approaching retirement have spent many years saving for this opportunity and have adjusted their estate planning documents to reflect their retirement goals. However, the transition from the working world to retirement can be a difficult one as far as making use of all of your time.

Spending more time with children and grandchildren is a huge benefit of being retired, but you may also find that you wish to give back to your community. Thankfully, there are many different ways that you can give back to your community by considering some important questions about volunteering. More than 62 million Americans volunteered a median of 52 hours in 2010, according to research gathered by the Bureau of Labor Statistics. So, if you are hoping to volunteer, you are not alone. That number increases to a high of 96 hours for volunteers aged 65 and over. There are several key things you need to consider when approaching volunteering in retirement. These include:

  •    Seeking out a volunteer job you are good at. Whether you have empathy for others or have specific experience or skills uniquely suited to the position, make sure that you have identified a volunteer opportunity specifically in line with what you need.
  •    Ask yourself why you are actually volunteering. There are many different motivations for signing up for a volunteer opportunity, but ensure that you and the organization you choose to partner with are clear about yours.
  •    Will the need required match your commitment? Make sure that the hours per week required, the duration of the work and the intensity of the work is suitable with the time and energy that you are able to give to the position. Asking colleagues and friends in your community is a great way to get started with the volunteer process.

 

Some Tips for Bringing Debt into Retirement

January 26, 2017

Filed under: Retirement Planning,Reverse Mortgages — Neel Shah @ 9:15 am

Most people approaching retirement age admit they have struggled with thinking ahead not just about life beyond their working years but also about how to make the money they’ve saved last during that time and to plan appropriately for it after they pass away. While a lot of information out there talks specifically about saving or how to maximize what you save, what about debt that you might be bringing into your golden years? Is there a particular way you should handle it? 

Did you know that the typical American couple has approximately $5,000 of retirement savings? However, debts are on the rise: studies show that debts have tripled since 2003 for those in their mid-60s. Many older Americans are picking up additional debt because they are refinancing their homes, adding on two or three decades worth of payments in the process. Others are taking cash out of a reverse mortgage. Sometimes this borrowing is done with the best of intentions, such as helping one of their children with the cost of a divorce, assisting a grandchild with a college education, or trying to enhance income after a job loss. With the downsizing that usually comes as part of this process, it can lead to a higher mortgage on the first house.

Now more than ever older Americans are working longer to try and make ends meet so that they can cover a child’s advanced education. Even those not pursuing further education may be returning home for additional financial support. The refinance process that might seem like a quick fix for cash flow could even double the size of the original mortgage, though.

Reverse mortgages are also picking up traction even with wealthy older individuals. The reverse mortgage seems like a way to enhance current income without having to delve into a retirement portfolio or a current income stream. Reverse mortgages have very specific rules, however, and should not be taken out until you have had the chance to talk over all the pros and cons.

Being aware of all your debts and being mindful of additional support you may need for healthcare needs is critical for anyone bringing debt into retirement. A team of professional advisors, including a financial advisor and your estate planning attorney, may be extremely helpful during this process.

 

 

Steps You Must Take If You Are Approaching Retirement

December 19, 2016

Filed under: Retirement Planning — Neel Shah @ 9:15 am

During the holidays there is a good chance that your life is busier than ever so this might mean that you are looking at a massive to-do list. However, this is a great opportunity to reflect back on the previous year and think carefully about your to-do list as you approach retirement. What follows are several tips you need to keep in mind in order to be successful with this.

Examine Your Existing Retirement Planning Age

You might have thought previously about retiring at a particular age but now is a good time to take a step back and look at whether or not this is in line with your overall financial situation.

Be Aware of the Rules Associated with Retirement Plan Withdrawal

It is not enough to only recognize and set an intention for what you intend to withdraw from your retirement plan. You also need to know how much you have to withdraw. For example, after you turn age 70 and a half, you’ll need to begin taking money out of your traditional IRA as well as a 401(k). This is known as a required minimum distribution.

Put a Clear Price Tag on Your Lifestyle in Retirement

Do you want to stay at home pursuing hobbies or traveling the world during your retirement? Each of these can have a significant impact on the money you will need to support yourself.

Evaluate Your Healthcare Situation and Consider Long-term Care

Once you pass 65, you may be eligible for Medicare, but you also want to be familiar with what it does and does not cover in terms of your costs, so that you can set aside a healthcare budget on an annual basis. One service that Medicare doesn’t cover, or in the best case scenario, covers only in a small way is long term care. In the event that you’re looking at an extended stay inside a nursing home, this could be a major mistake.

Put Together Your Estate Planning

Your retirement to-do list should always include estate planning as well. You’ll want to work directly with an experienced estate planning attorney to ensure that all your bases are covered.

 

New Study Shows That Pre-Retirees and Retirees Are Uncomfortable with Estate, Retirement & Investment Planning

November 8, 2016

Filed under: Retirement Planning — Neel Shah @ 9:15 am

Getting close to the point of retirement and thinking about it within the next five years should prompt discussions with these individuals about their next steps as it relates to estate planning, investing and retirement planning. It’s hard for anyone to plan for the future, but it becomes all the more important as longevity in the U.S. is increasing. This means that you not only need to think about retirement, but you need to be prepared to fund a potentially long retirement and consider how long-term care issues may also influence your situation. 

However, according to research from Hearts & Wallets, more than 5,000 adults shared that they are uncomfortable with the prospect of estate planning. A full 26% of the individuals who participated in the study said that estate planning was very difficult or somewhat difficult for them. This represents an increase of 2 percentage points since the previous years’ study asking the same question. Despite recognizing that estate planning was a worthwhile endeavor to explore, only 8% of retirees and pre-retirees admitted that they had sought help for estate planning in the previous 18 months.

Not getting help for estate planning can easily be avoided because you’re uncomfortable thinking about your own mortality or feel as though the issues don’t apply to you. However, everyone can benefit from comprehensive and aligned estate planning. Reach out to an experienced New Jersey estate planning attorney today to learn more about what’s right for you. Send us an email to info@lawesq.net to learn more.

                                                                                                                

Add Estate Planning Review to Retirement Checklist

September 26, 2016

Filed under: Retirement Planning — Neel Shah @ 9:15 am

Approaching retirement involves a careful calculation of several different numbers- what you’ll be bringing in from any pensions, when you’ll leave your position for good, and when you should elect to receive Social Security. Don’t overlook the calculations about what will happen to your assets after you pass away, however.

Thinking about death is not something that’s top of mind for anyone, but it’s also critically important and worthwhile. In addition to putting together a will, you may have more assets than you think, necessitating a conversation with your New Jersey estate planning attorney about how you’ll plan for taxes and whether it makes sense to use a trust.

A healthcare proxy and powers of attorney are good tools to have just in case, too. Far too many people don’t realize just how common a disability-related event can be. Without the proper tools in place, you can make it difficult for family members to understand your wishes and to carry them out.

Likewise, even if you are drawing from a retirement account, make sure the beneficiary information is fully up to date. You may need to evaluate this a few times over the course of your retirement as life changes, but set up a meeting with your estate planning attorney to talk about all the documents you need to have in order to address your full estate planning needs.

Best and Worst States to Retire in the United States – Part I

March 15, 2016

Filed under: Retirement Planning — Neel Shah @ 9:15 am

Making your retirement plans involves not just carefully thinking ahead about having enough finances to support you but also about where you’ll live. More investors than ever are thinking about moving in order to capitalize on the savings they have and maximize them effectively. To help you better weigh your options, consider some of the best and the worst states to retire in. Part one of this series looks at the best states to retire in.shutterstock_98725502

  • Wyoming: Wyoming has one of the lowest tax burdens in the country at 7.1%. It also scores well below the national average for issues like crime rates.
  • South Dakota: Just like Wyoming, South Dakota has one of the lowest tax burdens at 7.1%. Individuals living in the state also appear to be overall quite happy. The winters can be difficult.
  • Colorado: It will not come as a surprise to most people that Colorado has some of the best weather across the country. The state experiences a great deal of sunshine and very little humidity. The city of Denver, for example, enjoys more than 300 days of sun every single year. The tax burden in the state is 8.9%.
  • Utah: Individuals who love the great outdoors will find a broad range of activities to keep them excited and active in Utah. The state also ranks sixth best in the nation for weather. Taxes might be slightly higher than other states but the cost of living is below the national average.
  • Virginia: The only coastal state to make the ranking is Virginia, primarily because the state has very low cost of living. The low crime rate across the state is also beneficial.

New Fiduciary Rule Could Be Good For Investors In 2016

January 19, 2016

Filed under: Retirement Planning — Neel Shah @ 9:15 am

 

The stock market may be a little bit bumpy in 2016 but it looks like those who are focusing on retirement saving can benefit during this same period. This is because the US Department of Labor is applying the final touches to what’s known as a fiduciary rule that means a lot for anyone who has an individual retirement account or 401(k).shutterstock_47215390

This rule will alter the retirement advice business completely because it will mandate that insurance agents, brokers, banks and mutual fund companies all keep their fees low in order to protect your savings from excessive risk when you are receiving information about what to do next. One important thing to consider in relation to this regulation has to do with the case of J.P. Morgan Chase and Company. shutterstock_47215390

Right before the holidays, the biggest bank in the country agreed to pay more than $300 million to settle claims about advisors and brokers forcing clients into their own costly investment products over other options without making the required disclosures about this for conflict of interest.

According to those claims, J.P. Morgan additionally gave preference to hedge fund managers in a third party possession who paid placement fees for the market value of the client assets that were invested. It can put a drag on performance for the investor and ultimately hurt the investor tremendously, which is part of the reason this fiduciary rule is being considered to begin with.

Contact a New Jersey estate planning attorney today to get started with the planning process for your estate. Reach out to us at info@lawesq.net.

Should I Worry About Protecting My IRA?

September 29, 2014

Filed under: Asset Protection,Asset Protection Planning,IRA,Retirement Planning — Tags: — Neel Shah @ 9:02 pm

This past June, an important ruling from the Supreme Court found that an inherited IRA is not protected as retirement funds. If a beneficiary of inherited IRA funds files for bankruptcy, the funds they inherited could be subject to creditor claims.

Photo Credit: breitbart.com

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This new finding highlights the value of a trust. If the inherited IRA funds were received by a beneficiary though a trust, this would help to protect those funds so that they could be used in the manner desired by the person setting up

the beneficiaries. One such example is the use of a Standalone Retirement Trust, where inherited funds flow to a third-party trust after the retirement plan owner passes away. While the beneficiary still retains access to the funds, the fact that he or she didn’t create the trust allows quite a bit of protection for the beneficiary.

There are some states where laws on the books do protect inherited retirement accounts from creditors, but it’s always wise to consult with an estate planning attorney to discuss best structures for passing down assets. To learn more about your options, send us an email at info@lawesq.net or contact us via phone at 732-521-9455 to get started.

New After-Tax Rollover Rules For Your 401(k)

September 26, 2014

Filed under: Retirement Planning,Taxes — Tags: — Neel Shah @ 8:47 pm

New rules for your 401(k) could actually end up benefitting you. If you have saved after tax money in your 401(k) retirement account, it can be rolled over to a Roth IRA. While in the Roth IRA, your money will grow on a tax free basis instead of a tax deferred basis. You’ll avoid having to pay pro rata taxes on your distribution, too.

Photo Credit: visionarywealthmgmt.com

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This new change creates an opportunity for planning. Prior to this new rule, advisors had to use complex planning tools to address client concerns. Taxpayers were required to roll over their entire 401(k) and use outside funds at the time to manage the 20% income tax withholding amount. The new rule, however, gives people without the cash on hand to replace dollars that were already withheld through a distribution.

In order to capitalize on this new rule, it’s important to understand that the distributions must be scheduled at the same time or they will be treated as separate, causing the mix of pre-tax and post-tax dollars. While the official rules begin on January 1, 2015, taxpayers can make use of them now since the rules were issued on September 18, 2014. In the past the IRS has allowed taxpayer relief based on a “reasonable interpretation” standard.

To learn more about the best strategies for your 401(k) and other retirement accounts, contact our offices for a personalized consultation. Request an appointment via email at info@lawesq.net or over the phone 732-521-9455.

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