Most people make a concerted effort to plan and save for retirement, but many fail to account for the projected toll that health care costs will take on their mandatory expenses throughout their retirement. There is a common misconception that savings will be enough to cover living expenses while Medicare can cover health care related costs, but reality doesn’t always match the numbers, and Medicare only covers approximately 60%.
Earlier this year, the Fidelity Retirement Health Care Cost Estimate found that an average retired couple, age 65 in 2018, would need around $280,000 saved (after taxes) just to cover health care expenses. That is a big ask for most couples, and both health care inflation and expected lifespan are continuing to increase at expedited rates to compound the problem.
Whether you’re the owner of a small business or involved in risk management for a national organization, the right Property and Casualty coverage can have a huge impact on protecting your business against unforeseen events. P&C Insurance exists to safeguard the buildings, vehicles, and people that make up your business structure, but P&C coverage can be as varied as the types of businesses out there.
Once a year, we like to remind our current and prospective clients to work with their insurance broker to review the specifics of their P&C coverage. Property liability and bodily injury in the workplace can deal a devastating financial blow to a business of any size. Staying on top of the unique components that make up your coverage will not only provide peace-of-mind for you and your employees, but also mitigate chances of reputational damage or other catastrophic setbacks to your business goals caused by injury, mishap, property damage, or negligence.
For smaller businesses, a Business Owner’s Policy (BOP) combines property coverage and general liability insurance into one blanket policy. BOPs have limited eligibility requirements based on number of employees, amount of revenue, low risk industry status, and smaller office/workspace.
Have you ever come home from a trip with a renewed perspective? Sometimes the very activities designed to help us relax can also work to free the mind so we can more easily prioritize what needs to get done. Here are five goals that can be great to achieve during the rest of the summer. Click on each to learn more.
#3Summer is a time to take stock of whether you are fully engaged with your financial picture – or whether you have been letting your spouse or partner take the lead too often, for too long. Over the years, many women fall farther and farther behind in knowledge and familiarity with all things financial.
#4 Summer is a good time to make sure your high school graduate has the right estate planning documents before heading off to college. To ensure students and their families are as prepared as possible for college life, it is necessary to set up an incapacity plan that includes a health care proxy, durable power of attorney and a HIPAA release.
Unclaimed Retirement Benefits: Do you have money lost in old 401(k)s and pensions?
There has been a wave of reporting over the last few years around the vast sums of money in unclaimed accounts in the US. Millions of Americans have forgotten or are completely unaware of money in their name from government payouts, bank accounts, and stock sales. But, by far, the largest numbers are held in unclaimed 401(k) and pension plans from previous employers.
The nonprofit National Association of Unclaimed Property Administrators estimates that state and government treasuries are sitting on an excess of $33 billion in unclaimed assets. It seems like a good time for a reminder on how and where you might track down long-lost funded pensions or 401(k)s in your name.
Termination Death Benefit for Large Corporations: How Not to Lose Benefits to Taxes, While Insuring Recovery of Accrued Liabilities
It is a hard, somewhat morbid, topic to face, but the death of business executives at large companies is a financially fraught time for both the company and family of the executive alike. The financial payout of termination benefits at the death of an executive is taxed heavily, usually leaving between 30-35% of benefits after estate and income taxes to their heirs.
Having spent a lifetime analyzing such situations and dealing with them first hand, I can definitively say that I’ve found a better way for all parties to plan for such difficult moments. To first test my theory, I spent a number of months searching through the proxy statements of large corporations who have had executives die while employed. I calculated how much the company paid out in “death benefits” (salary, incentive bonuses, stock options, etc.) that were promised to the employee and now passed on to their estate. In most every case, the company paid large amounts, which were then taxed through the roof leaving only a small portion of what was promised.
I am not normally a fan of Jim Cramer, the loud, stock-picking host of CNBC’s “Mad Money.” That said, this week on the TODAY show he had a sensible reflection about the recent days’ market decline: “No one ever made a dime panicking.”
Most advisors, including me, preach staying the course, having a long-term goal, and an asset allocation model. We caution against selling out, especially now. We talk about risk/reward tradeoff, and pride ourselves on educating investors that the stock markets reward us in the long run for taking on additional risk.
All of this is easier said than done, of course. Especially in volatile markets like we’re experiencing now, especially with the 2008-2009 stock market crash still looming large in our memories.
What pre-retirees owe could compromise their future quality of life.
The key points of retirement planning are easily stated. Start saving and investing early in life. Save and invest consistently. Avoid drawing down your savings along the way. Another possible point for that list: pay off as much debt as you can before your “second act” begins.
Some baby boomers risk paying themselves last. Thanks to lingering mortgage, credit card, and student loan debt, they are challenged to make financial progress in the years before and after retiring.
More than 40% of households headed by people 65-74 shoulder home loan debt. That figure comes from the Federal Reserve’s Survey of Consumer Finances; the 2013 edition is the latest available. In 1992, less than 20% of Americans in this age group owed money on a mortgage. Some seniors see no real disadvantage in assuming and retiring with a mortgage; tax breaks are available, interest rates are low, and rather than pay cash for a home, they can arrange a loan and use their savings on other things. Money owed is still money owed, though, and owning a home free and clear in retirement is a great feeling.1
One of the bread-and-butter staples of a well-conceived employee benefit program is the classic group term life insurance. You join a company, fill out a beneficiary form, and voila, you are provided with group term life insurance equivalent to a multiple of salary, such as two times annual earnings. You don’t think much of this benefit until you receive your W-2 form at the end of the year. Imagine your surprise when you look at Box 12, Code C, and find a taxable cost in the thousands!
Group term life insurance is taxed under IRC Section 79. An employee is allowed to exclude any cost for the first $50,000 of coverage provided. Amounts of insurance over $50,000 are considered income to the employee, and taxed using the Uniform Premium Table (Table I) in IRC Section 79. The dollar amount added to the employee’s taxable income is calculated based on the employee’s age and amount of coverage. Since Table I uses outdated and artificially inflated rates, the cost to the employee can be significant.
Many of our clients are surprised and exasperated by the high tax cost they are forced to report, and come to us seeking solutions.
When individuals purchase permanent insurance (whole life, universal life, variable life), as opposed to term insurance, the expectation is that the policy will remain in force as life insurance until death of the insured. However, due to a marked increase in longevity, many are likely to survive to the end of the mortality tables on which their life insurance policies are based. The bottom line is that there is a grave and imminent danger that many life insurance policies will terminate at age 100 and expose the policy owner to adverse income tax consequences.