The SECURE ACT of 2020

Congress has passed a bipartisan appropriations bill. In the contents of this spending bill is a piece of legislation known as the Setting Every Community Up for Retirement Enhancement Act (SECURE), the first significant change in retirement legislation since the Pension Protection Act in 2006. The President signed the Act into law on December 20, and its effective date is January 1, 2020.

The impact of the SECURE Act to some retirees, near-retirees, and their future beneficiaries is profound, and it is imperative to schedule a review of your retirement, estate, and trust plans. Failure to act on the changes brought forward by the SECURE Act can create substantial tax burdens for some beneficiaries and even the possibility that they become locked out of their inheritance for a decade. 

One of the most important provisions of the SECURE Act to understand is the removal of the stretch IRA required minimum distribution (stretch RMD). In essence, the removal will act as a tax revenue generator. This change means many Americans will face a tax increase as non-spouse beneficiaries must spread withdrawals over a maximum of ten years and not the lifetime of the account holder. The removal of the RMD for stretch IRAs is going to create significant problems for certain types of trusts, like the “see-through trust,” that were written before the SECURE Act. Previously, a see-through trust allowed an individual, upon their death, to pass retirement assets of their IRAs via a trust to a chosen beneficiary. If the trust is not updated to match the current SECURE Act language, there could be restrictions in accessing funds to the heirs, which may cause massive tax liabilities down the line.  

Annuities are also affected by the SECURE Act as the legislation will ease restrictions to include them in consumers’ 401(k)s. While this is a positive for lifetime income, the bill also lessens and even removes some of the fiduciary requirements to vet insurance companies and their financial products before allowing them into your 401(k) plan. This change, coupled with a reduction in overall standards the SEC imposed earlier this year, creates an increased likelihood that consumers could experience negative consequences from poorly designed financial products and the possibility of insurance company failure.

According to Forbes, there are eight significant ways the SECURE Act will impact your retirement plans. They include an increase in ability for small employer access to retirement plans, an increase in annuity options inside of retirement plans, an increase in required minimum distribution (RMD) ages, and the removal of age limits on IRA contributions. There is also a tax credit to encourage automatic enrollment into retirement plans through small employers, penalty-free distributions for childbirth or adoption, lifetime income disclosure for defined contribution plans for transparency, and the removal of stretch inherited IRA provisions.

It is imperative as an individual to be responsive to the changes this proposed new law will enact. Currently, estate attorneys, CPAs, and financial advisors are receiving additional training to understand the long-term tax implications of SECURE Act provisions. For those affluent retirees, Kiplinger advises there are five things you can do immediately to respond to the SECURE Act. The first is to delay your IRA distributions if possible, and continue to save but perhaps not in an IRA. Also, consider paying taxes BEFORE your children inherit your IRA. Talk to your financial planner, tax advisor, and revisit your existing estate planning documents to make sure the plans don’t compromise any existing IRAs that will be passed on to your beneficiaries. 

The overall implications of the SECURE Act to your retirement and your estate plan are numerous. Give us a call at 1.800.660.7564 to discuss how we can help make sure your retirement assets pass with as few tax consequences as possible – or email us at info@covertlaw.com.

Gen Xers Retirement Planning & Longevity

As Gen Xers enter into their 40s and 50s, it is time for them to become active in the creation and execution of their retirement planning. There are many things to consider, including finances, investments, insurance policies, legal documents, living arrangements, and healthcare. It is advisable to make a detailed checklist within these categories and take action on each item. Meeting with an attorney can help you establish overall goals for your retirement and legacy planning while ensuring the steps you take will lead you to retirement success.

With regards to longevity, things may not be what they seem in the United States. While the world is experiencing an increase in life expectancy, Americans have seen a life expectancy decline for three years in a row. The Center for Disease Control and Prevention (CDC) considers this a worrying trend. Assessing life expectancy based on these CDC numbers using their traditional approach is just one part of the equation for Gen X retirement planning because the statistic is derived from birth years while retirement years are calculated from age 65 and beyond. Yes, some Americans are living until the age of 100, and fewer are having heart attacks in their 50s because of prescription medications; however, according to the Smithsonian Magazine, there is “no large extension of adult lifespan in old age.” Making a reasonable estimation of your life expectancy is crucial as it affects planning for how long retirement will likely be and the amount of money needed to cover associated expenses.

MDVIP Health and Longevity Survey reveal that more than half of Gen Xers want to live past 90 years of age, with some wanting to make it to 100, and yet, nearly half have not had a comprehensive medical exam in the past five years. One-third of Generation X avoids going to the doctor at all out of fear of finding something medically wrong. Two-thirds admit they could be doing better when it comes to regular exercise, eating healthy, maintaining a healthy weight, and managing stress levels. There is good news, however. Generation Xers have a reasonable amount of lifespan left to identify changes that need to be made and implement them. Barring an unforeseen accident or illness, time is still on the Gen Xer’s side to make their retirement a success story. 

The face of retirement has changed. The vision for most retirees is a full life bustling with activity and interpersonal relationships. Semi-retired is how many prefer to see their goal. There are many excellent reasons to keep working beyond age 65. Continuing to earn an income from work is great for health reasons and economic reasons. Generation X will further test the solvency of social security benefits after most of the baby boomer generation will have stressed the federal program to its limits. Staying productive and useful are key elements to financial well being, happiness, and long-term health. Entrepreneurial pursuits and consulting are more accessible than ever with the advent of the World Wide Web online community. Try pursuing or inventing a new career, perhaps something you have always dreamed about doing.

Joint life expectancy, whether married or not, is an important consideration when planning for and working toward retirement goals. According to the Vanguard Group, a heterosexual Gen X couple where both partners are age 50, the female partner has a 50 percent chance of reaching 85 years of age while her male counterpart only a 38 percent chance of reaching that same age. Since the couple is most likely to pass away at different times, factoring in the longevity of the surviving partner is crucial to planning. When extending longevity retirement scenarios understand that what is discretionary spending for fun in your 70s and 80s may shift to cover increasingly extensive medical aid and expenses in your 90^th decade and possibly beyond. A financial planner can help you to create scenarios that will accommodate repurposing of monies.

We welcome the opportunity to work with you on your retirement goals to help create a legal plan that supports those goals.  Email us at info@covertlaw.com or call us at 1.800.660.7564. 

5 Reasons to Rethink Your Retirement Investments

Kiplinger.com is suggesting it is time to rethink your financial retirement portfolio. You may have built up a significant nest egg in a 401(k) plan, but it does come with serious baggage during your golden years. It is impossible to argue against the early stages of a 401(k) when employers match your contribution to the plan. You can take advantage of the tax breaks because contribution money comes out of your paycheck before calculating taxes and that money compounds every year. When you retire, however, the tax impact of a 401(k), 403(b), or traditional IRA can become significant.  

You have probably been told at retirement time that you will be in a lower tax bracket however; it is more likely that the opposite will be true. Your tax rate is expected to increase. If you maintain the same standard of living, it will require the same amount of income, which translates to the same tax rate. Additionally, your children will be grown, the house paid off, and those substantial tax deductions are gone which may push you into a higher tax bracket. You will pay taxes on withdrawals from your contribution plan(s) annually irrespective of if the money comes from dividends, capital gains, or your contributions. That money will be taxed at your income tax rate at the time of withdrawal. Currently, the top marginal income tax rate is 37 percent, and taking into account the US deficit that tax rate could increase in time.  

Double taxation can eat away at your retirement savings and is often the norm because you can pay more taxes on your Social Security benefits. Unless you have a Roth IRA, distributions from your retirement plans count against your tax situation when calculating what percentage of your Social Security is subject to tax. The result is you are paying more taxes on your retirement plan distributions and Social Security income. You are also paying more taxes from capital gains, dividends, and interest from your investments.

Required minimum distributions (RMDs) can be frustrating and expensive if you neglect to take them. You have to withdraw funds from your retirement fund accounts when the IRS deems it necessary. Even if you want to leave the money in the account, the IRS will schedule your withdrawals when you reach 70 ½ years old. There are stiff penalties for not taking out the required minimum distribution. You may pay as high as an additional 50 percent tax.

If you are married a 401(k) or IRA is the worst account to leave to your surviving spouse. No one wants to die without leaving their spouse financially secure, but these two financial vehicles are fully taxable accounts. Upon your passing, your spouse is about to change tax filing status from married filing jointly to single. That takes your spouse’s tax obligation from the lowest to the highest bracket. Probably not exactly what you had in mind.

Both your 401(k) and IRA plans are subject to tax law changes. Every time Congress convenes a session, there is the possibility that increases in taxes on your retirement plans can occur. It is highly unlikely that your taxes won’t increase. The US debt continues to grow at an alarming rate. The US government will tax its citizens more than ever to gain some level of financial control. Privatize the gains, socialize the losses is the federal government’s rule of thumb, particularly when considering how massive the US debt is.

Get together with a tax planner to identify ways to move your retirement funds into better financial retirement vehicles. Sometimes conversion can cost a bit of money upfront, but in the long run, you will be far better off with regards to your retirement tax obligations.

If you have questions or would like to discuss your personal situation, please don’t hesitate to reach out by calling us at 1.800.660.7564 or by emailing us at info@covertlaw.com.

The Truth About Social Security Myths

According to NerdWallet, more than half of Americans apply for social security before reaching their full retirement age, and more than 30 percent of those apply for benefits at 62 years of age. Americans file early for benefits even though researchers claim it would be better to wait to claim their social security benefits. It DOES matter when you opt-in to take your social security benefit. Between the age of 62 and full retirement, your benefits increase by about 7 percent each year and additionally 8 percent each year between your full retirement age and 70. These percentages reflect an actuary adjustment to ensure those Americans who opt for a larger check for shorter periods do not receive less than those receiving smaller checks for more extended periods.

Currently, full retirement age is 66 for those born before 1960 and 67 for those born after that. Social security benefits will max out at age 70 and by waiting that long your checks could be 24 to 32 percent more than what you would receive at full retirement age and a whopping 76 percent larger than what you would receive at 62. However, statistics show that only about 1 in 25 applicants will wait to collect benefits at the age of 70 when monthly benefits hit their peak. Economic hardship for some seniors clearly defines part of the trend in early benefit assumption, but what of those who have retirement planning in place?

Currently, low-interest rates and survivor benefit rules coupled with longer life expectancies generally mean most retirees would benefit by delaying their benefits as long as possible. Those destined to become super-seniors, living well into their 90s and 100s, can quickly run out of savings and may end up depending entirely on their social security benefits check. Having delayed taking social security provides maximum benefits for these super-seniors. Additionally, this older age group typically has qualities in common like a strong work ethic, positive outlook, close bonds with family, and a tendency to be religious. These traits factor into a purposeful life so that even on limited social security benefits when combined with the help of their family and community systems, they can still make ends meet. 

At the other end of the spectrum are those Americans who feel, or know, they will have shorter life term expectancy. The Stanford Center on Longevity, however, reports that most people underestimate how long they will live. Today a 65-year-old man can expect to reach 84 years of age while a woman of the same age will probably reach 86.5 years. Studies by the Society of Actuaries are reporting life expectancies for those currently in their mid-50s (one in two women and one in three men) will live into their 90s. The cautionary tale is even if you project that you may not live long, you might indeed. It is best to anticipate being around and making financial decisions about social security benefits that reflect a longer life.

Claiming benefits early to invest the money does not mean you will come out ahead and may put you significantly behind. There is no guaranteed investment product with a return as high as delaying your application for social security benefits. Claiming benefits early can also shortchange your spouse. A married couple will lose one of their checks when the first spouse dies. The loss of a check can create a severe drop in income even if the survivor receives the larger of the two checks. This benefit loss should incentivize the higher earner of the couple, with the larger check, to delay taking their benefit so that the survivor spouse benefit is more substantial. 

You do not need to claim your social security benefit as soon as you stop working. Most financial planners will suggest tapping into other sources of income like a retirement fund or additional savings that allows your social security benefit to grow. Just delaying your benefits from age 62 to 66 can translate in a sustainable annual increase of 33 percent, so even a four-year delay can provide substantial returns. 

What about 2035 and the projected insolvency to fund social security benefits? If Congress does not act, the social security system will only be able to pay out 77 to 80 percent of the benefits promised. While this is not good, social security is not going bankrupt. The funding mechanisms must, however, get straightened out by politicians who want your vote to keep them in office. The silver tsunami of voters ensures that Congressional leaders and policymakers cannot overlook the senior demographic, which is critical to their re-election.

Each person’s or couple’s situation is different; their savings, assets, debt, work history, and retirement planning all vary widely. Additionally, according to Barrons.com, every state has a distinct annual spending threshold recommended for a comfortable retirement. To learn your best options and create your plan for a successful financial retirement, including when to take your social security benefit, talk to elder counsel. The social security benefit structure and rules are changing, change with it to maximize your benefits. If you have questions, please don’t hesitate to reach out by calling us at 1.800.660.7564 or by emailing us at info@covertlaw.com. We are here to help.

A Closer Look at Retirement Savings Statistics

It is all over the media that nearly half of Americans aged 55 and older have no retirement savings in an individual retirement account (IRA) or 401(k) according to the federal Government Accountability Office (GAO). Also, while two out of five households do have a defined benefit plan (traditional pension), a full 29 percent of older Americans have nothing saved for retirement in any of these financial retirement tools. Retirement statistics have wide-ranging implications for the economic well being of aging baby boomers. But are the numbers being interpreted accurately? Contributing Forbes Magazine writer Andrew Biggs, who works on retirement policy, public sector pay and other economic issues facing Americans, says that the claim is factually incorrect. Furthermore, he feels how the media will cover the statistics and interpreted by politicians will continue to distort the facts. 

According to FactCheck.org, the statistic the GAO uses is derived from the Federals Reserve’s Survey of Consumer Finances. This survey excludes those Americans who only have a traditional pension. While that may seem a small exclusion, it significantly changes the retirement savings statistic and forward trends for aging Americans’ retirement economic health. When both traditional pensions and retirement accounts are included, a full 72 percent of households aged 55 or more have retirement savings. In 1989 the same analysis criteria indicated only 64 percent of households had retirement income set aside. Therefore there is a net gain over time of 8 percent since 1989 and about 24 percent better than when looking at current statistics that only include an IRA and 401(k) as retirement savings.

If the statistics look much better when traditional pensions are included, why does the Federal Reserve exclude projected pension income in retirement forecast data? Traditional employer-sponsored pensions have fallen off dramatically for several decades. More often, employers are likely to contribute to a personal employee retirement plan like a 401(k). This makes good business sense for private corporations that only have to match or contribute half of an employee’s contribution and avoids the long term financial planning for employee pensions; in particular indexed pensions which progressively increase in value in an attempt to address inflation and the cost of living. The private sector has been bailing out of the responsibility of individual retired workers pensions for some time and for viable economic reasons.

Meanwhile, America’s public sector job pensions are at risk of becoming too expensive for municipalities, states, and even the federal government to guarantee. Cuts in future public sector pension benefits have become common for civil servants, and the reason is the same as for the private sector, cost. Underfunded and unfunded pensions are becoming the norm, which calls into question the reliability of pension plans themselves.

Retirement security is a serious and significant national issue that typically does not get enough thoughtful analysis. Attention-grabbing headlines can distort truths, but even in its best light, many retiring Americans are at significant risk for economic hardship as people are living longer than ever before. It is widely recommended that a retirement plan make provisions for 30 years and with dementia cases on the rise many of those 30 years for a retiree may become very expensive if it includes dementia care. Many retirees plan to rely heavily on their social security benefits check. The notion that social security benefits will be the social safety net promised is also at risk. Much like pensions, the promise of full benefit payment is now at risk to individuals and many retirees are projected to receive only 77 percent of their promised social security benefit payments according to the Social Security Administration’s (SSA) own admission. 

The truth about retirement savings is as individual as you are. These overall projections can be both frightening and distorted with regards to your personal retirement experience. If you are 55 or older and still working, you have the control to make different and better decisions. Any proactive planning for your future retirement is better than abdicating responsibility to private firms and public employment sectors who may have mismanaged your retirement savings. 

If we can be of assistance, please don’t hesitate to contact us by calling us at 1.800.660.7564 or be emailing us at info@covertlaw.com.

Crowdsourcing site helps seniors determine where to retire

While aging in place is very popular among the baby boomer generation, about one-third of those retirees would choose to live elsewhere. The family remains the most significant factor when deciding where retirees live, followed by the general livability of an area and desirable weather conditions. The decision about where to live should be a high priority as you approach retirement age. According to www.AgeFriendly.com, two out of three retirees feel they did not do the necessary in-depth research when determining where to live out their retirement years. Three out of four of the same group of retirees indicated that an online tool such as Age Friendly Advisor (a section of www.AgeFriendly.com) would be handy to determine what a location is really like from its current residents. This online crowdsourcing site designed for those aged 50 or more allows the user to tap into advice about good cities to live in, get care, and even get a retirement job to improve and enhance the quality of life.  

This user review approach is similar to other sites where consumers can give product reviews and read opinions about the product before purchasing. This approach provides an “upvote” function that allows easier navigation of the more popular and valuable topics addressed. Age Friendly Advisor answers questions for three distinct purposes: everyday living, working and volunteering, and caregiving. The living section helps older adults connect with available resources, engage with one another and communicate with their city or town. The working and volunteering section connects the user to a list of age-friendly employers and businesses including customer/employee reviews and job listings. The caregiving section is for those who opt to age in place while staying connected to their communities. The cities and towns support of the elderly community are assessed and rated by Age Friendly Advisor. As a location becomes responsive to their older citizens, the steps taken to improve their support is recognized.

This website is part of a larger corporate entity known as Age Friendly Ventures, and the use of and information from their websites are free. Age Friendly Ventures operates other retirement friendly sites such as RetirementJobs.com and MatureCaregivers.com. The sites are all geared toward persons age 50 or more and support the mission to fight ageism and provide resources for a successful aging experience. “When managed well, user-contributed reviews reveal an extraordinary wisdom of the crowd,” Age Friendly Ventures founder and CEO Tim Driver said in a statement. “Just as consumers read and give product reviews on Amazon and restaurant and hotel ratings on Yelp and TripAdvisor, Americans can now go to agefriendly.com to read and publish crowd sourced reviews tackling complicated topics around aging.”

Age Friendly Ventures and their subsidiary websites currently enjoy the support of at least one major senior living operator and other corporate entities. More will surely follow as these websites gain traction on influencing the process of and choices about aging. Sponsorship and brand exposure to the baby boomer (and older) community while providing them with a reliable and free set of information services is destined to become more popular as the corporate world chases retirees’ purchasing power and retirement dollars. Finding trusted information about health and wellness, lifestyle and retirement options with the bonus of user reviews can help a senior successfully navigate the many options available to them and make an informed decision.  

Gathering trusted peer-reviewed information from sites like agefriendly.com is one of the first steps to take in your plan for successful aging. Your choice may lead you to a new state or just a new town. Wherever it takes you, a trusted elder law attorney can help you review your plan and make any necessary adjustments. Contact our office today and schedule an appointment to discuss how we can help you with your planning by emailing us at info@covertlaw.com or by calling us at 1.800.660.7564.

The Looming Baby Boomer Retirement Crisis

A study conducted by The Blackstone Group, an independent research firm, on behalf of Bankers Life Center for a Secure Retirement outlines some very unsettling data regarding middle-income baby boomer retirement care preparedness. According to the survey above, the bleak financial reality of this demographic is that 79 percent of middle-income baby boomers have NO savings put aside to cover their retirement care. Couple this disaster savings scenario with the US government’s admission that for the first time since 1982 Social Security trust funds are being used to pay current benefits to recipients and Medicare’s reserves are being used to cover the costs of that program as well. It is the perfect storm of a looming retirement insolvency crisis.

Middle-income baby boomers for this study are defined as aged 53 to 72 with an annual income of $30,000 to $100,000 and less than one million dollars in investable assets. For those baby boomers in this demographic, a mere 4 percent of them have more than $100,000 saved for health care retirement planning, long term care, and general retirement preparedness. While 65 percent of these survey respondents prefer to receive retirement care in their current homes only 55 percent of them expected to be able to do so, and there is a disconnect at what age these care services will be required. A full 45 percent thought that assisted living circumstances would be needed between the ages of 71 and 80 while 37 percent said it would be between the ages of 81 and 90. The problem with these hopes is the ever-increasing presence of Alzheimer’s and other forms of dementia which can push retirees younger than ever into the need for assisted living and retirement care.

According to the survey, 40 percent of those surveyed consider retirement care planning to be a low priority or not one at all, 42 percent thought it to be a medium priority and only 18 percent identified retirement care planning as a high or very high priority. Incredibly 56 percent expected that Medicare would pay for retirement care as needed, including long-term care needs which Medicare does not cover. The costs of long-term care policies are cited as the biggest reason for not making the prudent insurance purchase. 

Dangerous misperceptions about how much retirement care costs and how to pay for it exist. It may seem incredible, but the truth is that baby boomers are better prepared to die than to live. Among middle-income baby boomers, 81 percent have formally made at least one preparation for when they pass away, usually in the form of a will or trust, while only 32 percent have a plan as to how they will receive retirement health care should it become necessary. 

The message is unmistakable; middle-income baby boomers need to address their underfunded retirement plans pronto. There is an overconfidence in this demographic that allows them to think they will be able to manage their and their spouse’s healthcare costs as they continue to age. The reality is that many of them are one bear stock market or health care crisis away from disaster. The federal government and its programs are just as unlikely to be able to stave off the financial crisis brought about by this willful ignorance of the costs of aging successfully. 

If you are in these incomes and age brackets, it is time to take a realistic look at what you can do to better prepare yourself for the coming years ahead. Being financially unprepared to age brings stress and family discord at a time when you should be living your best life. Be proactive, contact our office today and schedule an appointment to discuss how we can help you with your planning by calling us at 1.800.660.7564 or by emailing us at info@covertlaw.com.

The largest coordinated sweep of identity fraud involving US seniors has recently been conducted. The US Department of Justice has reported that more than one million elderly people have collectively lost hundreds of millions of dollars because of this targeted financial abuse. The Department has criminally charged 200 out of 250 defendants identified in the sweep. These third party scam artists account for 27% of seniors who are financially exploited. 

Con artists and scammers employ many different schemes to defraud seniors of their identity information and money. A large number of them are conducted over the telephone, for instance posing as an Internal Revenue Service agent claiming back taxes are owed, or frightening a grandparent to think that their grandchild has been arrested and needs bail money wired to them. Other schemes include the promise of a prize or lottery cash if they just send a large fee in order to collect their “winnings.”. Seniors become easy victims when targeted by these social engineering schemes and it is likely to get worse because of the proliferation of smart phones and other devices that get seniors to explore the online world.

USA Today reports that while phone scams target one senior at a time the online environment is opening doors to thousands or even millions of seniors falling prey to a single scam. Email and other online channels can reach a vast number of potential victims and more elderly people have an online presence than ever before. 

Romance scams that use to be conducted in person can now be achieved in the online dating environment and even in social media. The attacker can befriend multiple seniors online and then ask for money to cover “travel expenses” to visit them. This is particularly successful as many seniors are dealing with isolation and loneliness. 

The online shopping world is another vehicle employed by scam artists to defraud seniors of money. All that is needed is a picture of an object that seems to be owned by the scammer and you have the potential to sell that item over and over again to thousands of seniors. All the scam artist has to do is set up a mirror web site that appears to be a legitimate online auction house such as E-bay to drain seniors of their money as well as obtain credit card and other identity information. These mirror sites masquerading as official websites are often in the email accounts of seniors and a mere click on a link can download malicious software to their device that is designed to steal critical identity information. 

Of the 27% of seniors who do become financially exploited by a third party, 67% do not exhibit symptoms of cognitive decline. That is a huge number of mentally fit seniors being financially exploited. This is a pervasive problem in the elderly community. According to the Federal Trade Commission’s “Consumer Sentinel Network Data Book 2017” identity fraud is second only to debt collection with regard to consumer complaints. Identity fraud accounted for 14% of all consumer complaints last year. The Commission also reported that seniors who are financially exploited suffer higher median losses than other age groups. 

Many seniors who have been targeted are embarrassed, ashamed, or scared as a result. Many never saw themselves as being at risk, they fear retribution from the perpetrator, and they fear that government agencies or family members will label them unfit to care for themselves. 

Systems can be put in place to monitor senior accounts and make their money less easy to access by scammers. In addition, there are legal documents that can protect the accounts of seniors during their lifetime, and eliminate the chance of fraud or abuse.  Please contact us for more information on how we can help you or your loved ones reduce the chance of financial fraud or abuse.

Middle and Low Income Seniors Facing Affordable Housing Shortage

There is a growing need for affordable senior housing that is only starting to be addressed by businesses that build for this market. If you have a lot of money you typically have a lot of options. At the other end of the spectrum if you have nothing you can qualify for government assistance though these programs, but most often include wait times, years of wait times, due to lack of available housing. The truth is many seniors, nearly 40%, have less than $50,000 in savings, not including the value of their homes, according to a study by the Joint Center for Housing Studies and Harvard University. That doesn’t make them poor but it doesn’t make them rich either. Middle income seniors are stuck in the middle and the statistics are indicative of a looming senior housing crisis. By 2035 one in three households will be headed by someone aged sixty-five or more years and the population aged eighty or more years will have doubled to 24 million.

The truth is that thoughtfully designed housing for senior adults is not being created on a scale that reflects the growing need and the need is palpable. Many aging adults don’t even want to project that one day they will no longer be able to live in their current home. When asked about their forward living plans it usually consists of some variant of “the plan is to die in my home.” Sadly, it is impossible to script your passing and while you might hope it happens gently in your home it is more likely that an adverse event, such as a fall, will change everything and you will require some level of care. The Social Security Administration estimates that if you turn 65 today, you will live to 84.3 if you are a man, and to 86.6 for women. Added SSA: “And those are just averages. About one out of every four 65-year-olds today will live past age 90, and one out of ten will live past age 95.” (https://www.thestreet.com/story/13640644/1/inside-the-nation-s-looming-senior-housing-crisis.html) Those numbers of longevity represent staggering costs when you consider the likelihood that those oldest years will require the most significant care.

That “significant care” costs serious money. According to “A Place for Mom,” the average national cost for a private assisted living facility is almost $4,000 per month. If you want private nursing home care that cost increases to more than $6,000 per month, depending on where you live. If you compare these costs with the fact that nearly 50% of adults aged sixty-five or older have just enough income to afford basic expenses you can intuit it is a recipe for disaster. The only thing left is to spend assets pay for care. That is not a good option for several reasons. First, you will likely run out of assets quickly due to the current costs of care. Second, you would be unable to leave a legacy to children or continue to provide for a spouse after you are gone. 

That is why the understanding of aging is facing a paradigm shift – many companies that design and build for retirement communities want the word “senior” dropped altogether. Innovative technology companies and non-profits are sounding the alarm and changing the discussion from challenge to opportunity, from health care to health, wellness, and lifestyle, and bringing entrepreneurial ideas to create a positive change. It is a step in the right direction but it does not change the current reality – there is a shortage of affordable senior housing and there is a continuing increase in need for senior residency. 

What is your housing reality and future? Do you have a plan in place to handle the changes that most likely will affect you and your living environment? It is important to have this discussion with your family, and with a professional elder law attorney. Proactive planning is in your best interest. Contact our office today and schedule an appointment to discuss how we can help you with your planning.

A significant portion of Americans are saving nothing for retirement and very little in their day to day lives. While the unemployment rate is low and wages are seeing an increase the American worker is not saving enough of their income which will inevitably lead to short falls of operational cash during an unexpected crisis and in their retirement years further down the road. (https://www.cnbc.com/2018/03/15/bankrate-65-percent-of-americans-save-little-or-nothing.html) 

Bankrate maintains that half of all Americans will not be able to maintain their standard of living once they have stopped working. GoBankingRates corroborates these findings citing that over forty percent of Americans have less than $10,000 dollars saved for their retirement. These statistics point to a dismal retirement future for nearly half of all Americans. 

This doesn’t have to be your future. It doesn’t matter how little you currently save. You don’t have to become the horror story of retiring and meeting financial ruin like so many do. What matters is that you change the trajectory of your retirement life by proactively examining how you are spending and saving. The sooner you begin the better your chances of success. 

The first and most important strategy to implement is learning to live beneath your means. That translates into saving money: probably more than you currently do. Saving money is an underestimated survival skill. To save begin by tracking your spending habits for thirty days. Once you have the data create a realistic and doable budget. Fluid expenditures like groceries, eating out, clothing, gasoline and auto maintenance need to have a set monthly budget. Create a simple two columned sheet of paper with budgeted and actual expenditures to monitor your progress. Typical categories where you can reduce expenditures include; cable packages, phone plans, groceries, entertainment costs, gym memberships, clothing and dining out. Start asking yourself over and over “Is this a need or a want?” and if it is a need, how can you make the cost lower. The game is how much money you can save, not spend.

Consolidate your non essential debt and pay it off, completely. Make it a primary goal to get out of debt. Stop being a debt slave. In the credit card industry there is an insider term used for people who fully pay their credit cards off each month. Guess what it is? It is a deadbeat. Companies cannot make money off of you if you stop becoming a slave to debt. If you can’t afford it then find a way to live without it.

Double check your insurance rates on your car, homeowner, and health. Do not purchase flight insurance, extended warranties, and disease insurance. Check this site for fifteen insurance policies you don’t need. (https://www.investopedia.com/insurance/insurance-policies-you-dont-need/). Get rid of the policy all together or find wiggle room for reduced premiums or get a more competitive provider to save money. 

Get rid of automatic payments attached to your banking accounts. Most people can eliminate expenditures they forgot they are even locked into. This also forces you to take control of your bill/payment cycles. Being involved in the day to day of bill payment keeps you far more aware of your financial situation and keeps your mind active.

Consider downsizing your home. If you are in a two story house it is inevitable that one day you will not be able to climb those stairs. A one story home or a first floor condo or apartment can help you purge your life of ‘stuff’ you no longer need. Some of those things can be sold and the proceeds can be saved. Any profit left over from downsizing immediately goes into savings or a financial investment vehicle to provide and protect your senior years. 

These are some but not all of the ways it is possible to change your savings habits. Guidance from a trusted professional is key to the pathway of success because there will always be roadblocks and setbacks that you must make adjustments for. Structuring a legal plan in connection with a retirement plan can provide added protection and allow you to enjoy retirement more thoroughly.

Contact our office today and schedule an appointment to discuss how we can help you with your planning.