Tag Archive for: retirement

Seventeen years ago

Springtime in Michigan. Sunny, warm breezes, promise of summer. But a cold winter for Lansing Car Assembly. For 120 years, the factory churned out REO Speedwagons, tank cannons, aircraft machineguns, millions of artillery shells, muscle cars, and the last Oldsmobile convertible. GM’s most efficient plant. But the last Olds, a sporty Alero, drove off the line on April 29, 2004. It was over.

Fred and Barney walked away. Friends since their Lansing Technical High School days. They hired into the plant soon after graduation in the 60’s. Married to Wilma and Betty, Lansing Central girls they met at a Junior ROTC dance. The girls joined the steno pool soon after the boys went to work.

Many years later, the two men retired from the plant Ransom E. Olds founded so long ago. Pure Michigan. These older gentlemen were very much alike. Team players. They got the job done. Both had better-than-average careers. Personable, well-respected, and secure. Revered members of their church. Paid-for home in a nice neighborhood: $175,000. Savings of $200,000 from the days before 401(k) plans. Life insurance: $75,000. No debt. Conservative investments. Three kids. Three grandchildren. No bad habits (except spoiling the grandkids).

As new retirees so often are, both were filled with dreams for the future. Time to spend more time with the important people. Wives, kids, grandchildren. Tinkering in the shop. Volunteering at church. Traveling. Enjoying the retirement freedom and security they worked for, looked forward to, earned.

Last week. Still the same…

Every year, when the weather begins to turn, Fred and Barney return to visit. Nothing to see, really. Just memories.

They were still very much alike. Both healthy. Still devoted to their wives. Not all marriages thrive for fifty years. Both primary caregivers for their high school sweethearts. At home. Sadly, just a few short years into retirement, Wilma and Betty were stricken with Alzheimer’s.

But there are enormous differences.

Barney struggles to make ends meet. Living in subsidized senior housing. “On duty” 24 hours per day until his health broke. Exhausted. Retirement savings, Life insurance, Comfortable home – all gone. Betty went to memory care first. Now, the nursing home. Bank account emptied, retirement benefits cut, Barney needs every penny of social security.

Fred recently hosted his favorite (his only!) granddaughter’s wedding. “Uncle” Barney was an honored guest. Nothing high society, but really nice. One hundred and twenty close family and friends. Life savings intact. Independent, secure. Yes, he is Wilma’s primary caregiver. But she still lives at their home. And he has plenty of help.

Fred’s superpower is the Program of All-inclusive Care for the Elderly (PACE). PACE is the Medicaid program that provides services at home. No worries. COVID emergency rules let him keep the home, workshop, life savings.

Why Is One Desperate And The Other Secure?

Have you ever wondered, as I have, what makes this kind of difference in a person’s life? It does not seem to be natural intelligence or talent or dedication. I do not believe that Fred wants security, and that Barney does not.

Doesn’t the difference lie in what each person knows and how he or she uses that knowledge?

Every week we offer LifePlan™ Workshops and Webinars. Each week you are given a precious opportunity. You can say “Yes.” Yes to planning, security, choice. Middle class folks do not have to go broke. But traditional estate planning is broken. And that is the difference.

What is knowledge without action?

Nothing in the world can take the place of Persistence. Talent will not; nothing is more common than unsuccessful men with talent. Genius will not; unrewarded genius is almost a proverb. Education will not; the world is full of educated derelicts. Persistence and Determination alone are omnipotent. The slogan “Press On” has solved and will always solve the problems of the human race.

Calvin Coolidge

Years ago, Fred and Wilma invited Barney and Betty to join them at a LifePlan™ Workshop. Barney and Betty were too busy. Fred and Wilma made the time. Learned the lessons. Established their LifePlan™. It cost money. And effort. But Fred and Wilma (to be honest, it was mostly Wilma) persisted. And those law firm people made sure Fred and Wilma understood every step along the way.

When Alzheimer’s struck Wilma, Fred was ready. Health Care documents: Patient Advocate, Advance Directive, HIPPA releases. Even a funeral representative paper. Locked and loaded. Financial documents: Pantry Trust, Protection Trust, Financial Power of Attorney, Assignments, Deeds. Fort Knox safety.

Trusted professionals who do not charge by the hour. Everything quoted in advance. Friendly, reliable paralegals and attorneys. They sure seem willing to help. They say, “Always a free phone call. Always a free visit.” Maybe it is all just an act! But it is a pretty convincing act. Over all these years. And they have been darn helpful. Like with that wedding planner’s contract… Maybe they mean it…

“Freedom’s just another word for nothin’ left to lose” — Janis Joplin

Barney and Betty’s son-in-law told them about free fill-in-the-blank estate planning forms and cheap on-line services. A dedicated helpful son-in-law, he even printed them out on his own computer.
Free!

Free. Except for the $200,000 of life savings. Free. Except the $175,000 home. Free. Except the $75,000 life insurance. Yes. Free. Except for a lifetime’s worth of work and savings. Free. Except for that.
Maybe Janis was right. The most expensive things in the world are “free”.

LifePlanning™ works for you, your loved ones, your greater circle of friends. Have you heard about PACE or the new COVID emergency rules anywhere else?

Heartfelt Thanks To Geraldine T. Richardson – Special Contributor

I wish to recognize Geraldine T. Richardson (not to be confused with the other Geraldine Richardson who is a fine person but has no middle initial) for her inspiration. Geraldine has personally experienced, in her own family, the difference LifePlanning™ can make. I think it is fair to say that she is a little frustrated that more folks do not take advantage of these opportunities. (Hey, I’m doing the best I can!) When I asked Geraldine what more we could do, she said “Tell them, David! Tell them!” “How?” I replied. “Tell them about real families! But change the names…”

Call The Lifeplan™ Hotline Today at (800) 317-2812

The House of Representatives has passed a bill that could mean changes for all Americans with the most common type of retirement plan, such as a 401(k) or Individual Retirement Account (IRA). Proposed changes to retirement reflect the realities facing many workers today.

The SECURE Act is being proposed as an improvement to the retirement system, and stands for “Setting Every Community Up for Retirement Enhancement Act of 2019”. Interestingly, most of the changes either highlight the difficulty of saving for retirement, or the challenges faced by many workers today who are facing a future with a shaky Social Security System, and insufficient retirement funds. While there are some positives, some of the changes proposed would simply make it easier for people to retire with less money and less security than before.

Access to Retirement Plans for Part-time employees

With the rise of the “gig” economy, more people are working part-time jobs. This bill would allow long-term part-time employees the opportunity to participate in retirement plans, if their employer offers one.

Disclosure of Estimated Retirement Income

Employers would be required to disclose an estimate of future retirement income on 401(k) statements. This would hopefully show employees how much more they need to save, if the assumptions used for those estimates are realistic. The assumption for the estimates will be set out by the Treasury Secretary.

Use of Retirement Savings for Student Loan Debt

With the rising costs of higher education, this bill would provide some relief for those who find themselves with crippling student loans that can’t be discharged in bankruptcy. They could now also reduce their retirement savings to pay off those loans.

Access to Retirement Plans for Small Employers

Another change would make it possible for small employers to group together in offering a retirement plan. This would be helpful, since 42% of private-sector workers don’t have access to a workplace retirement plan.

Reduced Regulations on Annuities

More 401k plans will be able to offer plans to convert retirement savings into annuities. This should greatly benefit insurance and annuity companies by increasing their market and reducing the regulations for offering annuities as part of retirement plans.

Extended Retirement Contribution Age

As more people need to keep working well past normal retirement age, this bill would allow people to continue adding to their retirement plans after age 70-1/2 and would allow people to hold off on withdrawing from their plans until age 72. This also reflects the fact that many people probably haven’t saved enough for retirement by the time they hit 70-1/2.

Use of Retirement Savings for New Children

Many new parents find that their health insurance plan still leaves them with thousands of dollars of out-of-pocket expenses for the birth of a child. Rather than making any changes to the health insurance system, or increasing entitlement programs for families, this bill would allow these parents the opportunity to reduce their future retirement savings by spending some now on these expenses for new children. This will probably not help increase the falling birth rate in the country.

Restrictions on Stretch Distributions

With the US budget deficit in the trillions, this bill would bring in additional revenue in the form of increased and accelerated income taxes paid by beneficiaries of retirement plans. Rather than being able to stretch out inherited retirement money over their lifetime, beneficiaries (your children) will have to take out money over 10 years, likely bumping them up to a higher tax bracket, and increasing the percentage of the inheritance that goes to taxes. What does this mean? Let’s look at an example.

A single 45-year-old making $100,000 inherits a $1,000,000 Traditional IRA from her parents. She can either cash it out immediately (which is what the vast majority of children do) or she can stretch out the distributions.

Cash out: Based on her income and 2018 tax rates, she would be taxed at an effective rate of 33.48%, leaving her with $665,200 of inherited cash.

Current Stretch Rules: She can opt to take the required minimum distributions over her life expectancy. After 10 years, she has paid a total of $243,000 in taxes, received approximately $368,000 in required minimum distributions, and has $1.64 million left in the IRA.

Proposed Stretch Rules: She can opt to take the required minimum distributions for a maximum of 10 years. After 10 years, she has paid $615k in taxes and inherited a total of $865,000.

Below is a graph that visually represents the difference in these rules, assuming the child invests the required distributions after paying taxes and has normal living expenses and Social Security Income:

Image credit: “The Hidden Money Grab in The SECURE Act” James Lange, Forbes Contributor

As usual, all parties involved will continue to look for ways to maximize their benefits under any changed law. We will continue to look for ways to protect and preserve your assets for you and your family. There are options involving trusts that could still preserve a lifetime income stream for children who inherit your retirement savings.