Downs Law Firm, P.C.
Downs Law Firm, P.C.
As closely held business owners know, their financial plans, retirement plans, and estate plans are inextricably linked to the value of the business.
What is the size of the average retirement nest egg? It depends on what you mean by ‘average.’
One of the great things about being retired is that you no longer have a job tethering you to a particular location. You have the freedom to move. However, just because you can pick up and go, doesn’t mean it’s a good idea to go just anywhere.
Once your money is in a retirement account, it’s there until you’re ready to use it, right? Not exactly.
If you don’t marry someone close in age, your estate plan may require a closer look. When a couple has an age gap, there may be some special challenges ahead, when it comes to estate planning, according to The Washington Post in “How will a couple’s retirement look when there’s a big age gap?” Not only are men who have recently remarried more likely to have a spouse who is younger, said one researcher, in many cases they are marrying women who are much younger. Twenty percent of newly married men wed women who are at least 10 years younger than themselves and another 18% marry women who are six to nine years younger. By comparison, just 5% of men in their first marriage marry women who are 10 years younger. For women, the likelihood of having a far younger spouse is very low. That big age gap can be a big factor in decisions about when you retire, when spouses take Social Security and in planning how much money the couple needs to save and how to invest their savings. Since women tend to outlive men, it’s especially important for retirement savings to last longer, when the wife is much younger than her husband. When to retire is one of the big questions. Long-term care considerations, health insurance and other health costs become more significant, when there’s a younger spouse. Couples with big age gaps need to have a plan that accommodates the partner with the longest life expectancy. Therefore, a 70-year-old husband and a 56-year-old wife need to plan for their portfolio to last over the wife’s longer life span. That could be 30 years, especially if she has good health and a family history of longevity. If the older partner had a higher income level over his working career, delaying Social Security filing past full retirement age to age 70 could be extremely important. It will enlarge the higher-earning spouse’s benefit and it will also enhance the lifetime benefits for the surviving spouse. If there is a big age gap between you and your partner, you’ll need to have a lot of discussions about the issues that retirement and retirement planning brings. An estate planning attorney, coordinating with a financial advisor well versed in Social Security options, can advise you in creating an estate plan that fits your unique circumstances. Reference: The Washington Post (Oct. 22, 2018) “How will a couple’s retirement look when there’s a big age gap?”
‘Divorce gap’ can have an impact on income, as well as on retirement planning. In my prior life, a large part of my practice was as a divorce lawyer. I was involved with may stress filled conversations about the marital break-up. While the ending of a marriage is an emotionally devastating event for most people who experience divorce, it is also very much the ending of a business relationship. Intermingled efforts at saving, raising children and maintaining a home deserve the eyes of a third party who is knowledgeable about assets, alternative ways to negotiate, and what will likely happen in Court if you cannot agree. If you or a loved one is going through this process, seeing proper legal counsel about your rights, particularly as to retirement plans accumulated during the marriage, is critical. A competent divorce lawyer can be well worth their cost. A study from the Center for Retirement Research at Boston College found that divorced women historically are better off than single, never married women, because of the assets they have accumulated before divorce, primarily home ownership. However, that can have a negative impact on retirement, according to Money in “This is The Single Best Way Divorced Women Can Secure a Successful Retirement.” Many divorce lawyers and financial advisors say that keeping the house after divorce, isn’t always the best move. Many newly-single women find they don’t have the resources to keep up with mortgage payments, maintain the property, pay taxes and deal with unexpected crises. One advisor says she’s concerned that these new numbers will lead to women who can’t necessarily afford to maintain a home to hang on to their homes. However, a researcher involved in the study maintains that while the study mentions homeownership, there’s a bigger point being made. Married women who divorce benefit from receiving a share of marital assets. Single, never-married women do not and must rely solely on themselves for saving and accumulating assets that can be used to finance their retirement. A critical fact that women who are divorced must do: whatever assets they get in the divorce settlement, commit to keeping those assets intact for retirement. It’s easier to do this with a house. However, it’s tempting to dip into assets that are intended for retirement. Many of our clients put plans in place to protect the asset they leave to children from divorce. An estate planning attorney can advise you in creating an estate plan that meets your unique circumstances, including retirement planning. Reference: Money (Aug. 10, 2018) “This is The Single Best Way Divorced Women Can Secure a Successful Retirement”
If you have found your niche, now its time to take advantage of it. Are you in your 50s and now have some disposable income? It is time to take advantage of retirement planning opportunities, according to the Sioux City Journalin “In Your 50s? Do These 3 Things to Plan for Your Retirement.” Unfortunately, many people who turn 50 start thinking now is the time to retire early, go on extravagant vacations or buy themselves big ticket items that they’ve always wanted. A better approach: consider this a time to make the most of your income, keep saving for retirement and stay on a steady course. Use the catch-up options available to you. The federal government knows that many people don’t have the means or the motivation to save for retirement until later in their careers. That’s why there are several provisions in the tax laws that let you catch up, once you reach 50. You can put away an additional $1,000 above the annual contribution limit to an IRA. You can add $6,000 in annual contribution to 401(k)s and similar employer-sponsored plans after age 50. Once you pass your 55th birthday, you can make an additional $1,000 annual contribution to health savings accounts. If you’ve got the cash to spare, these are great opportunities. Educate yourself about Social Security. Many people rely on Social Security for their retirement, while others use it as a safety net. You’ll want to start learning about the rules. When you take your first benefits has an impact on how much you’ll receive over your lifetime. Yes, you can start at age 62, but the difference in the amount you’ll get at 62 versus 70 is substantial. If you plan to keep working indefinitely, maximizing earnings is the best way to boost your Social Security benefits. Get access to savings in the early years of retirement. If you can afford to retire in your 50s, know when you can tap your retirement savings. If you’ve used regular taxable accounts to invest your savings, it won’t matter when you make withdrawals. However, if your money is locked up in 401(k)s, SEPs, IRAs and other tax favored accounts, you’ll need to know the rules. Penalties for taking withdrawals before the specified age, can take a big bite out of your retirement accounts. You may choose to work every day for another 10 years or 20 years once you’ve celebrated your 50th birthday, or start to back off. However, keeping these three key ideas in mind as you plan for the future, will help put you in the best financial state possible. If you are in your 50s, now is the time to meet with an estate planning attorney for advice on creating an estate plan that fits your unique circumstances. Reference: Sioux City Journal (Aug. 25, 2018) “In Your 50s? Do These 3 Things to Plan for Your Retirement”