Abandoned 401(k)s, the Missing Piece of Retirement’s Puzzle – Frank Coen

Aspiring retirees may be closer than they think to their retirement dreams. Finding a “lost treasure” and re-deployment through a 401(k) rollover could make all the difference. Careful consideration should go to investment options, timelines and risk tolerance.

Nearly unthinkable, thousands of hard-working employees have left behind their 401(k) accounts with past employers, compromising their dreams of retirement. Published figures place asset values at more than $1 trillion, and many financial planners can cite a prospect or client experience that includes an “orphaned” account, as they are known. The cause may have been a cross-country move, neglect or, the after-effects of a job change in an era when employees can have double-digit employers.

The cost can easily escalate into the tens of thousands of dollars or more. Consider a forgotten $10,000 account balance. It would balloon to nearly $24,000 over 15 years compounding annually at 6%. If left behind, however, an annual 1% return during prolonged periods of puny money market rates – often the default investment option – would render a balance of perhaps just $12,000. The difference is what dream vacations are made of, and the multiplier had it been added to an existing account can only be imagined. Avoidance is best accomplished through attentiveness. In its absence, a career reconstruction that includes contacting the human resources departments of past employers is recommended. Creating an employment history and reviewing all your retirement accounts may yield monies you weren’t aware of.

Rollovers to IRAs from 401(k) accounts – whether attentively maintained following a career transition or re-discovered – are common and fees may apply. The benefits include client control and distribution to a broader or more preferred investment mix to include annuities, stocks or mutual funds. A risk-tolerance test, something that less than 10% of participants complete, can influence the allocation process. Strong consideration should be given to the owner’s age, and the limited number of available years to recover from a late-stage market decline.

Like trying to plan a road trip without a map or GPS, the retirement journey is hampered without having all the necessary components on-hand. Work and post-work years should include diligent documentation and the oversight of a retirement professional who can confirm accounts and balances.

Syndicated financial columnist Steve Savant interviews top retirement specialists in their field of expertise. this segment features retirement specialist Frank Coen. Right on the Money is a financial talk show distributed in daily video press releases to over 280 media outlets and social media networks.

Retirement Planning’s Impact to Spouses, Progeny & Charities – Chad Lewis

Thorough Planning Extends Beyond Both Spouses

Excellent financial planning goes beyond accumulation, distribution and preservation to legacy continuation. Tools are available to perpetuate assets’ growth far beyond the life of the originator. Retirees can take satisfaction in creating a legacy for their family and community.

Despite the many threats to retirement assets – market volatility, emergencies and depletion, to name a few – retirees may not exhaust their nest egg. Thorough retirement planning includes “family transfer” and considerations that accommodate spouses, children, and charities.

The motivation for such provisions is usually a desire to take care of one’s spouse. But once accomplished, legacy planning can be impactful for generations to come. However, without discussion or guidance, the surviving spouse may be unaware of impacts to income, taxes and health insurance. Social Security – a cruise control component of monthly income by way of direct deposit – reduces at the first death. Adjusted gross income, the basis of taxes, can increase due to a lost personal exemption of the deceased partner. Ripple effects could increase Medicare cost, as premiums are means tested.

The economic leverage of life insurance and its potential tax advantages can multiple assets to targeted family beneficiaries and charities. In recent years, generational planning has evolved into four generations planning strategies based on ever-increasing longevity. If it is a reasonable expectation that seeing your great grandchildren could become a fact of life, then planning for 100 years may not be science fiction anymore.

An additional option is for the originator to make a conservative annuity allocation of several years’ duration that exceeds CD and money market rates and includes market upside potential and protection against loss.

While death is certain and generally occurs in retirement., it’s rarely ever known in advance. Accordingly, any retirement plan should not be considered complete until family transfer considerations are addressed or specified.

Syndicated financial columnist Steve Savant interviews top retirement specialists in their field of expertise. This segment features retirement specialist Chad Lewis. Right on the Money is a financial talk show distributed in daily video press releases to over 280 media outlets and social media networks.

The Retirement Red Zone is the Life’s Financial Danger Zone – Kevin Smith

Five Years Before and After Retirement Can Make or Break Your Golden Years

When retirement begins is nearly as important as the value of retirement’s assets. Sequence of returns is retirement’s #2 risk, right behind the #1 risk longevity. Preparation and realistic expectations about assets may extend their duration and avoid depletion.

It’s often said that “timing is everything,” and that’s nowhere more relevant than retirement’s planning before the retirement’s Red Zone. Similar to football’s red zone – the 20-yard distance from the goal line where strategy and execution can result in a score – the five years on either side of retirement is where goals have the potential to be met.

Unlike working years, when accumulating assets is the priority, distributions of assets in retirement are subject to the sequence of returns. The rules for the last five years of accumulation are not the same as the first five years of distributions. With no plan to follow, excessive withdrawals and bad market returns may erode principal and potentially exhaust assets before death.

Seniors go through a major transition when they enter retirement. Most retirees encounter a series of unfamiliar obstacles that they did not experience during their working years. The focus of your working years is primarily on accumulating money. In retirement the focus shifts to being able to pull that money out while still preserving it and making it last. Early declines in the stock market combined with ongoing or over-withdrawals can lead to retirees running out of money. The threat of Sequence of Returns risk and preparing for it is crucial for the longevity of your money during retirement years. Increased longevity is also aggravates asset distribution. With both genders typically living deep into their 80s and early 90s, the result is increased demands on nest-egg principals and any account changes

The Sequence of Returns risk is frequently overlooked by both retirees and their financial advisors. Being aware of the dangers associated with this risk, and planning for it, can be invaluable to your retirement. Discussing the sequence of returns risk with your adviser may be the most important money discussion you’ll ever have. By recognizing both retirement’s risks and realities, retirees can construct a plan that will get them through the red zone and into the end zone.

Syndicated financial columnist Steve Savant interviews top retirement specialists in their field of expertise. This segment features retirement specialist Kevin Smith. Right on the Money is a financial talk show distributed in daily video press releases to over 280 media outlets and social media networks.

Organized Laborers’ Retirement Plans Need Input from Pro Planners – Lee Dillion

The “Measure Twice, Cut Once” Approach is Universal in Retirement Planning

Union workers are eligible for retirement sooner than many workforce sectors. Potentially long retirements and science-based longevity create additional demand on resources. Workers considering retirement are tasked with education and execution of benefits typically handled by administrators.

Union workers known for an “early to rise” work ethic would be wise to apply that same urgency to their retirement planning. The reasons are many, but of primary relevance is their relatively young retirement eligibility age, often only 55, and the resulting demands on the resources needed to support increasingly long lives

Five years in advance is often suggested to initiate retirement planning. While that process may start from age 57 – 62 for those hopeful of retiring in their mid-60s, it can be as early as age 50 for union craftsmen and tradesmen who can often retire by meeting the age 55 threshold with 20 or more years of service.

Early retirement planning is advocated by financial planners due to the nuances of benefits largely unique to organized labor. Urgency is also rooted in the time needed for client education and acclimation. Among the circumstances:

• Some unionists are unaware that their retirement benefits, nearly fully funded by the contractors who employ them, can be subject to 10% withholding at distribution if the retiree desires a spousal benefit. With proper advance planning, the withholding expense can potentially be offset, but not eliminated.
• Union members are largely underserved by retirement planners. Compounding the situation is an unfamiliarity of union regulations in the adviser community. Accordingly, it may take some time to locate the best qualified planning resource, and to transition the roles that are traditionally served by an insular union.
• Unfamiliarity by retirees with the execution of benefits can lead to an assumed “cruise control” approach to retirement, when actually, awareness and vigilance are required. An example is healthcare insurance premiums, which the worker does not pay for while working, but is fully responsible for in retirement. Advance planning can produce an effective strategy to manage this substantial monthly expense, and the 10-year window until a 55-year old retiree becomes Medicare-eligible.
• With longevities now estimated at more than 86 years for men and 88 for women, age-55 union retirees should plan for a 30+ year retirement. Even when social Security is added, the 10-year differential over age-65 retirees can easily stress accumulated tax-deferred accounts and structured sequences of return.

Organized labor has long had a paternal and protective culture. Those seeking to retire as early as age 55 or soon after can benefit from an independent retirement planning specialist with the appropriate skills to navigate concerns of income, inflation, healthcare and taxes through what may be a relatively long retirement and asset distribution phase.

Syndicated financial columnist Steve Savant interviews top retirement specialists in their field of expertise. This segment features retirement specialist Lee Dillion. Right on the Money is a financial talk show distributed in daily video press releases to over 280 media outlets and social media networks.

Annuities Answer Many of Retirement’s Uncertainties – Lance Talbert

Retirement Portfolios Benefit from Annuities’ Predictability

Retirees seeking safety beyond Social Security and pensions are increasingly turning to annuities. Advanced age is accompanied by an appreciation for predictability over rates of return. Annuities are multi-dimensional in meeting retirees’ concerns.

Uncertainty drives three common and worrisome aspects of retirement planning: How long will life last? How far will the money take us? How will the stock market – so integral in the asset accumulation phase – perform in the distribution phase?

Since retirement doesn’t include a crystal ball, investors can enjoy an element of certainty by adding a fixed income annuity to their retirement portfolio’s asset allocation. Fixed Indexed Annuities can offer features such:

1. Principal is preserved and not subject to devaluation, like occurred to market assets in 2008. Many present-day retirees don’t have the time to recover from another hit.
2. Gains are credited on anniversary dates and lock-in for the duration. The current year’s ceiling value becomes next year’s floor.
3. Annuities are issued and backed by insurance companies, not investment houses, and are based on decades of verifiable data confirmed by actuaries.
4. Income is lifetime guaranteed, even to 150 years, an age that noted European Gerontologist Dr. Aubrey de Gray believes will be attained by someone who is already alive.
5. Annuities fortify retirement’s lifetime income foundation, which is typically comprised of Social Security and employer-sponsored pension plans.
6. Provides predictable income and peace of mind in lieu of dividends. Concerns about uncertain rates of alternate assets’ rates of return are alleviated.
7. Fixed indexed annuities offer domestic and foreign indices, and not market investments like stocks or mutual funds. Tracking can be assigned to well-known indices like the S&P 500, used with more than 70% frequency. J.P. Morgan and Merrill Lynch are but two Wall Street firms that validate these indices.
8. Fixed indexed annuities can be a buffer against early or unanticipated asset drain due to poor stock market performance or poor sequences of return. Math proves that portfolios can be devastated by negative returns in retirement’s early years.
9. Annuities with a guaranteed lifetime income rider can specify even a modest cost-of-living allowance, something that Social Security failed to deliver in three of six recent years.
10. Annuity distributions are rooted in systematic math, and are not subject to the emotion of investors’ market timing or sell decisions.

Given the uncertain nature of life – and especially the retirement subset – retirees can benefit from the predictability of fixed index annuities that complement their standards for suitability and risk tolerance.

Syndicated financial columnist Steve Savant interviews top retirement specialists in their field of expertise. This segment features retirement specialist Lance Talbert. Right on the Money is a financial talk show distributed in daily video press releases to over 280 media outlets and social media networks.

Intentional Tax Planning Can Increase Retiree’s Bottom Line – Tim Walla

End of the Years Tax Harvesting Can Impact Non Qualified Funds

Timely attention paid to low-profile financial factors can benefit net spendable income. Fees and hidden expenses often go unchecked and sabotage mutual fund returns. But perhaps tax management needs the most attention in retirement.

“A place for everything, and everything in its place,” is a proverb often attributed to Charles Goodrich, a New England reverend of the early-mid 19th century. Its application to savvy retirement planning includes not only the role of income, portfolio allocation and deductions, but how intentional tax management can similarly benefit spendable net income.

Tax management starts with the tax harvesting of non-qualified funds, and includes the uncovering of investment losses that can offset realized gains that Uncle Sam would otherwise claim as tax. By matching losses against gains, the retiree’s tax liability can decrease or may be negated.

Tax harvesting typically occurs in the fall, coincidental to a time of crop harvesting. It’s a time on the calendar when results for the majority of year are known and projections can be made, though subject to change.

While tax management is a broad topic, the impetus for tax harvesting comes from specific events and sources. Many taxpayers are surprised to learn that taxes can be due on mutual funds that have negative overall returns in a year. This occurred widely in 2015 when funds experience some gains in the individual holdings of a fund, though the fund itself delivered overall negative results. By reviewing your non-qualified fund holdings before December 31, funds with a loss can be sold by the investor to counter that gain.

Asset allocation is another application of the “a place for everything” philosophy.

For a diverse allocation, mutual funds and ETFs are popular choices. However, retiree investors should be aware of annual fees. Prospectuses generally address expense ratios but buyers should also seek out the fund’s statement of additional information for other expenses.

For conservative allocations, and depending on buyer suitability, fixed index annuities can be an answer. These insurance-backed instruments offer guaranteed lifetime income and an escalating account floor that locks in gains and protects against loss, even in poor-performing years.

For those who appreciate an element of speculation, oil and gas investments can create tax benefits through depletion allowances. Due to their relatively obscure nature, investor scrutiny and due diligence can be beneficial.

Retirement planning is hardly a DIY (do it yourself) exercise, and can have lasting consequences. Retirees are encouraged to engage a certified professional who can not only coach asset appreciation and preservation, but who can implement aspects of intentional tax management through tax harvesting.

Syndicated financial columnist Steve Savant interviews top retirement specialists in their field of expertise. This segment features retirement specialist Tim Walla. Right on the Money is a financial talk show distributed in daily video press releases to over 280 media outlets and social media networks.

Retirement Planning Today Creates Your Future Lifestyle Tomorrow – Lindahl Lucas

Gut-check Planning Assesses Assets and Mortality.

Retirees often avoid or procrastinate planning for the long term, despite the peace of mind benefits it can bring. Ever-increasing longevity is actively accounted for by the government and actuaries, but is slowly acted upon by retirees confronting a Catch-22 scenario of dollars vs. duration.

Retirement advisers often observe clients and prospects who willingly spend many hours planning a two-week vacation, but precious little time planning for their remaining financial lifetime. It’s an inverse commitment of sorts, the type that can provide short-term gain and result, long-term pain.

The reluctance to plan, especially by Baby Boomers, has numerous root causes: Anxiety about life’s uncertainties, Health concerns. Fears of an economic downturn. Insufficient recovery time. Whether accumulated assets supplemented by Social Security will suffice or endure. The list goes on.

Such uncertainties are best seen through a lens of reality that a retirement planning specialist can provide: Longevity is increasing into the late 80s and early 90s. At 88+ years, the median for females, half will live longer. Retirements can easily last 25 – 30 years. Traditional “set and forget” retirement plans, along with employer-sponsored pensions, represent a bygone era. Access to financial help from friends and family typically diminishes over time.

A qualified retirement planner cannot only help with the fact-finding; he or she can assess a location’s cost of living, rents, taxes and the appropriate age to retire. There are Social Security advantages of working until 70 or exploring a hybrid work-in-retirement arrangement. The combined facts, uncertainties and recommendations are the makings of a meaningful and actionable plan.

Such a plan, heretofore ignored, can include establishing a lifetime financial foundation by joining Social Security (and potential cost of living allowances) with a pension. Pensions can come from a traditional employer, or, the conversion of retirement assets to a fixed income annuity. Variations of this insurance-backed product can provide guaranteed lifetime income with no loss of value, subject to guidelines or restrictions.

Retirees, or aspiring retirees, who have taken a denial approach to a formal but flexible retirement planning process, can acquire peace of mind and “sleep insurance” by recalling – and acting upon – Franklin D. Roosevelt’s 1933 Inaugural quote, “The only thing we have to fear is fear itself.”

Syndicated financial columnist Steve Savant interviews top retirement specialists in their field of expertise. This segment features retirement specialist Lindahl Lucas. Right in the Money is a financial talk show distributed in daily video press releases to over 280 media outlets and social media networks.

Medicare is Retirement Planning’s Other Stepchild – Joel Braschler

Like taxes, Effective Medicare Management Can Benefit the Bottom Line

Medicare’s complexities go well beyond “healthcare for seniors.” High-income earners may be a surprised by their initial Medicare premiums. Medicare is yet another dynamic aspect of retirement planning that is best tackled pro-actively.

Just as many retirees shortchange the role of effective tax management in retirement, they similarly underestimate – and frequently misunderstand – the role and expenses of Medicare.

Medicare became law in 1965 under President Lyndon B. Johnson as an equal opportunity healthcare program for seniors. Intended as an “everyone pays the same” program (except for those with an inability to pay – the beneficiaries of Medicaid), healthcare premiums are typically paid through deductions from monthly Social Security benefits.

However, since 2003, rates have become “means-tested,” meaning they’re decided on income. For 2016, monthly premiums can range from $50 – $275 more per month for earners with a modified adjusted gross income exceeding $85,000 and among five separate income tiers. Rate differences vary by taxpayers’ marital and filing status.

The kicker for new retirees is that the means test looks back to the immediately preceding two years’ income. For earners leaving high-income jobs, the initial Medicare premiums for parts B (physician expenses) and D (prescription drugs) can be much higher than anticipated. Although the system allows for waivers in certain circumstances, many new retirees will absorb the initial cost hit and adapt over time.

Like retirement planning and tax management though, pro-active measures can be taken to lessen the Medicare burden. For retirement planning begun five years in advance, wages can possibly be deferred, or overall income can be staggered to effectively reduce MAGI to a lower threshold.

The ripple effects of Medicare can include gap insurance for deductibles and co-pays missed by Medicare, including so-called Cadillac plans for those who can afford them. Retirees should also know that while Medicare may cover some in-home, event-specific therapies, it does not cover long-term care or in-home, daily-living needs like bathing.

Given the pervasiveness and misperceptions about Medicare, and the largely unanticipated impacts when one spouse predeceases the other (Social Security benefits, reduced tax exemptions and Medicare costs), retirement planners suggest that aspiring retirees give Medicare the same attention as they would to income, deductions and taxes when formulating a retirement plan.

Syndicated financial columnist Steve Savant interviews top retirement specialists in their field of expertise. This segment features retirement specialist Joel Braschler. Right in the Money is a financial talk show distributed in daily video press releases to over 280 media outlets and social media networks.

Use Age as the Gauge for Retirement’s Safe-Money Allocation – Ron Pucci

Persistent low interest rates and demographics drive the demand

Multiple factors are impacting safe-money retirement purchase preferences. Demand for an alternative investment is being driven by a burgeoning retiree population and answered by retirement planning specialists with a multi-point solution.

Retirees accustomed to a lifetime of asset accumulation are finding growth opportunities few and far between in what may be the second longest stage of their lives. Efforts to grow and even preserve their portfolios have been met by persistent headwinds in recent years and don’t show signs of changing soon.

Low interest rates have persisted for years, compromising accumulation that in the past fueled compounding. Formerly strong 6% returns and frequent renewal terms have given way to puny 2.25% annual returns on five-year lockdown CD’s.

Risk-aversion resulting from stock market volatility in five separate years since 2001 has kept money on the sidelines, often in money market funds that offer security but mere basis-point interest that is subject to taxation.

Gaining traction among financially conservative Baby Boomers, who are retiring at a rate of 10,000 per day, and seniors with near-expected longevities into their 80s, are fixed index annuities.

Provided and backed by insurance companies, fixed index annuities are lauded by industry veterans for these attributes:

• Preservation of principal
• Account growth due to market-indexed gains
• Protection against loss of gains, even in negative-return years
• Availability of an income rider to pay benefits for the holder’s lifetime, or, the option to annuitize the account without a rider

Though accounts are not credited for earned dividends, clients can find satisfaction from the stability of insurance-backed providers. Additionally, guaranteed lifetime income can pick up where exhausted resources and a depleted sequence of returns leaves off.

Statistics provided by the LIMRA Secured Retirement Institute verify the popularity of indexed annuity sales. For the period ended September 30, 2015, quarterly sales increased 22% to 14.3 billion, with year-to-date sales up 7% to $38.4 billion.

Despite dismal interest rates and fears of market uncertainty, retirees and aging investors can find safe-money havens in fixed index annuities that are consistent with a generally accepted approach that is conservative and age-appropriate.

Syndicated financial columnist Steve Savant interviews top retirement specialists in their field of expertise. This segment features retirement specialist Ron Pucci. Right in the Money is a financial talk show distributed in daily video press releases to over 280 media outlets and social media networks.

Use Age as the Gauge for Retirement’s Safe-Money Allocation – Steve Dietzel

Applying common sense and risk tolerance can satisfy a retiree’s investment appetite.

A mix of common sense and risk tolerance can solve an investor’s appetite and foil market volatility.

Aging investors and retirees cannot absorb another stock market hit like 2008. Once highly subjective, the age at which retirees can reduce unnecessary risk can be found on a driver’s license, birth certificate or by taking an honest look in the mirror. Allocations can both solve investors’ needs for safety, and mitigate speculative losses.

Age is an age-old obsession. Young people want to look older. Old people want to look younger. No matter the person, aging is undeniable, yet steps can be taken in the financial aging process to preserve and protect retirement-targeted assets.

A “safety first” philosophy for seniors can be considered as early as one’s mid-50s. While consumers appreciate product and service discounts at this life stage, the bigger picture involves preserving assets to last an increasingly long lifetime.

A commonly accepted guideline has one’s age in years equal to the percentage of “safe-money” assets, those that are not at risk of reduced value due to market volatility. For example, a 60-year old may have 60% in insurance, government securities or money market products, and the remaining 40% in stocks, bonds or mutual funds.

Just such a mix can help mitigate a sudden 20% market-related drop by limiting the damage to 40% of the whole, rather than 100%. Many investors favor a yet more conservative mix, say 70/30 or greater, beginning at age 60, and then ratchet up the ratio as the years fly by. Some seniors find that having at least some allocation in market-based assets satisfies an itch for growth and risk that was common in their asset accumulation years.

An increasingly popular safe-money alternative is fixed index annuities, an insurance industry product. An outgrowth of variable annuities, these can provide growth, protection against loss and guaranteed lifetime income. Insurers can offer these features by allocating perhaps 2% – 5% of the client’s investment to exercisable index-based options, and then 95% or more to government-backed securities. Insurers protect any loss against the collective power of many millions of dollars, clients and actuarial statistics.

Clergy have an unusual opportunity with fixed index annuities. Under tax code provision 403(b)(9), they can not only designate income equal to their housing expenses in their working years to be free of federal and state income taxes, they can similarly take tax-free distributions from qualified accounts in retirement, and fund a fixed income annuity that can provide guaranteed lifetime income.

Using age as the threshold, a “safety first” approach can allow assets to extend for a lifetime.

Syndicated financial columnist Steve Savant interviews top retirement specialists in their field of expertise. This segment features retirement specialist Steve Dietzel. Right in the Money is a financial talk show distributed in daily video press releases to over 280 media outlets and social media networks.