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Could Insurance Rescue You in Retirement?

Posted on April 4, 2017 at 11:46 AM Comments comments (99)
You plan for retirement with expectations in mind. You hope to enjoy a certain quality of life, with sufficient income resulting from smart financial choices. Ideally, your future unfolds as planned.
 
But what if the unexpected happens? Will you have the right insurance in place to deal with it?  
 
Insurance matters more in retirement planning than you may think. It is seldom "top of mind" in retirement planning conversations, but the right coverage could help you maintain some financial equilibrium in the face of sudden money pressures.
 
A life insurance payout could provide income for a surviving spouse. Thanks to   late-night TV commercials marketing small funeral insurance policies, many retirees associate life insurance benefits with paying off burial costs. Benefits from larger policies can potentially accomplish much more.
 
Suppose a 75-year-old widow receives a $500,000 death benefit from a policy purchased by her late spouse. An income stream could be arranged from that death benefit, with the widow receiving $20,000 annually from that lump sum (or more) into her nineties. The payout could also be invested.
    
Liability insurance could help you out in retirement. As an example, say   you are one of three drivers involved in a multi-car accident that leaves a teenager with a disability. You are the only driver cited for a traffic violation, and you happen to be in your seventies. You could now be a target for "predators and creditors." Say you have some neighbors over for a barbecue, and one of them stumbles on your patio and breaks an arm or a hip; a lawsuit may be next. Few retirees think about or carry umbrella liability policies, but more may want to consider them.
 
What if you or your spouse need long-term care? Genworth's 2016 Cost of Care Survey says that the median cost of a semi-private nursing home room was $6,844 last year. How many years of such care would you be willing to pay for out of your savings? True, long-term care insurance has grown costlier. True, some people may never need it. Even so, three or four years of such care - for you, your spouse, or your elderly parents - might draw down your retirement savings more quickly than you would imagine. Think of how large those costs might be ten or twenty years from now. Long-term care coverage may end up being worth every penny. 1
 
Insuring yourself against the above possibilities is only prudent. With such coverage in place, you may go a long way toward insuring the quality of your retirement as well.


 
Mark McGahee may be reached at 757 539 9465 or [email protected]
www.nansemondriverfinancialservices.com
 
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
 
Securities offered through Securities America, Inc. Member FINRA/SIPC. Advisory Services offered through Securities America Advisors, Inc. Trading instructions sent via e-mail may not be honored. Please contact my office at 757-539-9465 or Securities America, Inc. at 800-747-6111 for all buy/sell orders. You should continue to rely on confirmations and statements received from the custodian(s) of your assets. The text of this communication is confidential and use by any person who is not the intended recipient is prohibited. Any person who receives this communication in error is requested to immediately destroy the text of this communication without copying or further dissemination. Your cooperation is appreciated."
   
Citations.
1 - genworth.com/about-us/industry-expertise/cost-of-care.html [6/22/16]
 

Key Estate Planning Mistakes to Avoid

Posted on March 20, 2017 at 11:17 AM Comments comments (100)
Many affluent professionals and business owners put estate planning on hold. Only the courts and lawyers stand to benefit from their procrastination. While inaction is the biggest estate planning error, several other major mistakes can occur. The following blunders can lead to major problems.  

Failing to revise an estate plan after a spouse or child dies. This is truly a devastating event, and the grief that follows may be so deep and prolonged that attention may not be paid to this. A death in the family commonly requires a change in the terms of how family assets will be distributed. Without an update, questions (and squabbles) may emerge later.  

Going years without updating beneficiaries. Beneficiary designations on qualified retirement plans and life insurance policies usually override bequests made in wills or trusts. Many people never review beneficiary designations over time, and the estate planning consequences of this inattention can be serious. For example, a woman can leave an IRA to her granddaughter in a will, but if her ex-husband is listed as the primary beneficiary of that IRA, those IRA assets will go to him per the beneficiary form. Beneficiary designations have an advantage - they allow assets to transfer to heirs without going through probate. If beneficiary designations are outdated, that advantage matters little. 1,2     

Thinking of a will as a shield against probate. Having a will in place does not automatically prevent assets from being probated. A living trust is designed to provide that kind of protection for assets; a will is not. An individual can clearly express "who gets what" in a will, yet end up having the courts determine the distribution of his or her assets. 2    

Supposing minor heirs will handle money well when they become young adults. There are multi-millionaires who go no further than a will when it comes to estate planning. When a will is the only estate planning tool directing the transfer of assets at death, assets can transfer to heirs aged 18 or older in many states without prohibitions. Imagine an 18-year-old inheriting several million dollars in liquid or illiquid assets. How many 18-year-olds (or 25-year-olds, for that matter) have the skill set to manage that kind of inheritance? If a trust exists and a trustee can control the distribution of assets to heirs, then situations such as these may be averted. A well-written trust may also help to prevent arguments among young heirs about who was meant to receive this or that asset. 3     

Too many people do too little estate planning. Avoid joining their ranks, and plan thoroughly to avoid these all-too-frequent mistakes.  

Mark McGahee may be reached at 757 539 9465 or [email protected] www.nansemondriverfinancialservices.com  

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.   Securities offered through Securities America, Inc. Member FINRA/SIPC. Advisory Services offered through Securities America Advisors, Inc. Trading instructions sent via e-mail may not be honored. Please contact my office at 757-539-9465 or Securities America, Inc. at 800-747-6111 for all buy/sell orders. You should continue to rely on confirmations and statements received from the custodian(s) of your assets. The text of this communication is confidential and use by any person who is not the intended recipient is prohibited. Any person who receives this communication in error is requested to immediately destroy the text of this communication without copying or further dissemination. Your cooperation is appreciated."    

Citations. 1 - thebalance.com/why-beneficiary-designations-override-your-will-2388824 [10/8/16] 2 - fool.com/retirement/2017/03/03/3-ways-to-keep-your-estate-out-of-probate.aspx [3/3/17] 3 - info.legalzoom.com/legal-age-inherit-21002.html [3/16/17]  

Should the Self-Employed Plan to Work Past 65?

Posted on March 13, 2017 at 2:00 PM Comments comments (0)
Should the Self-Employed Plan to Work Past 65?

Some solopreneurs think they will "work forever," but that perception may be flawed.
 
About 20% of Americans aged 65-74 are still working. A 2016 Pew Research Center study put the precise figure at 18.8%, and Pew estimates that it will reach 31.9% in 2022. That estimate seems reasonable: people are living longer, and the labor force participation rate for Americans aged 65-74 has been rising since the early 1990s. 1,2  
 
It may be unreasonable, though, for a pre-retiree to blindly assume he or she will be working at that age. Census Bureau data indicates that the average retirement age in this country is 63. 3  
 
When do the self-employed anticipate retiring? A 2017 Transamerica Center for Retirement Studies survey finds that 56% of U.S. solopreneurs think they will retire after 65 or not at all. 4  
 
Are financial uncertainties promoting this view? Not necessarily. Yes, the survey respondents had definite money concerns - 28% felt Social Security benefits might be reduced in the future; 22% were unsure that their retirement income and accumulated savings would prove sufficient; and 26% suspected they were not saving enough for their tomorrows. On the other hand, 54% of these self-employed people said that they wanted to work in retirement because they enjoyed their job or profession, and 67% felt working would help them remain active. 4  
 
Is their retirement assumption realistic? Time will tell. The baby boom generation may rewrite the book on retirement. Social Security's Life Expectancy Calculator tells us that today's average 60-year-old woman will live to age 86. Today's average 60-year-old man will live to age 83. Leaving work at 65 could mean a 20-year retirement for either of them, and they might live past 90 if their health holds up. Even if these Americans quit working at age 70, they could still need more than a dozen years of retirement money. 5
 
You could argue that an affluent, self-employed individual is hardly the "average" American retiree. Many solopreneurs own businesses; doctors and lawyers may fully or partly own professional practices; real estate investors and developers may have passive income streams. These groups do not represent the entirety of the self-employed, however - and even these individuals can face the challenge of having to sell a business, a practice, or real property to boost their retirement savings.  
 
Successful, self-employed people over 50 need to approach the critical years of retirement planning with the same scrutiny and concerted effort of other pre-retirees.
 
Look at the years after 50 as a time to intensify your retirement planning. This is the right time to determine how much retirement income you will need and how much more you need to save to generate it. This is the time to evaluate your level of investment risk and to think about when to collect Social Security. This is the time to examine your assumptions.    
 
Mark McGahee may be reached at 757 539 9465 or [email protected]
www.nansemondriverfinancialservices.com
 
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
 
Securities offered through Securities America, Inc. Member FINRA/SIPC. Advisory Services offered through Securities America Advisors, Inc. Trading instructions sent via e-mail may not be honored. Please contact my office at 757-539-9465 or Securities America, Inc. at 800-747-6111 for all buy/sell orders. You should continue to rely on confirmations and statements received from the custodian(s) of your assets. The text of this communication is confidential and use by any person who is not the intended recipient is prohibited. Any person who receives this communication in error is requested to immediately destroy the text of this communication without copying or further dissemination. Your cooperation is appreciated."
   
Citations.
1 - nytimes.com/2017/03/02/business/retirement/workers-are-working-longer-and-better.html [3/2/17]
2 - pewresearch.org/fact-tank/2014/01/07/number-of-older-americans-in-the-workforce-is-on-the-rise/ [1/7/14]
3 - thebalance.com/average-retirement-age-in-the-united-states-2388864 [12/24/16]
4 - transamericacenter.org/docs/default-source/global-survey-2016/tcrs2017_pr_retirement_preparations_of_self-employed.pdf [1/31/17]
5 - ssa.gov/OACT/population/longevity.html [3/9/17]
 

Building an Emergency Fund

Posted on March 7, 2017 at 2:11 PM Comments comments (96)
We all would love to have a little extra cash on hand for emergencies. Saving up that cash can be a challenge - but with a little effort, that challenge can be met.
 
Imagine a 30-year-old couple with no real savings. Let's call them Kurt and Diana. Together, they earn about $8,000 a month, but their household finances are being squeezed by education debt, rent, and the high cost of living in an affluent metro area. They have about $300 in the bank between them, and they just learned they have a baby on the way. Their need to save has never been greater. How can they do it?
 
They have many options for building their fund, more than they first assume. Kurt has an old dirt bike gathering dust in his dad's garage, and he is no longer into off-road motorcycling. Even in its dusty condition, it could easily be sold for more than $1,500. They each have gym memberships; Kurt drops his and Diana switches to a cheaper gym, leading to a 12-month savings of $500.
 
Kurt also explores the possibility of working weekends or evenings as a barista in addition to his full-time job, a move that could bring in a couple of thousand dollars in the next few months. The pair sense they have a federal tax refund coming - and the average I.R.S. refund for the 2015 tax year was $2,860. They could put some or all of a four-figure refund toward their emergency fund, rather than toward paying down their student loans. 1  
 
Ideally, Kurt and Diana's emergency fund should be $25,000 or more (the equivalent of 3 or more months of living expenses). No, they are not going to come close to that this year. Or next year. They have started, though, and it looks as if they will soon have a few thousand dollars set aside for emergencies. Even having $1,000 could ease many acute financial pains.
 
There are numerous potential ways to boost your emergency fund. Some are simple: save $5 or $10 a week and deposit it, eat out less, drop those memberships and subscriptions, sell something, save the money the I.R.S. hands back to you. Some require more ingenuity and energy: getting a part-time job for supplemental income, renting out a room.
 
Perhaps the easiest way of all is to create an automatic transfer of a small portion of your paycheck into a dedicated emergency savings account each month. Saving will seem painless this way, and when you pay off a debt, you can direct the money you used each month to reduce it into your emergency fund instead.
 
Mark McGahee may be reached at 757 539 9465 or [email protected]
www.nansemondriverfinancialservices.com
 
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
 
Securities offered through Securities America, Inc. Member FINRA/SIPC. Advisory Services offered through Securities America Advisors, Inc. Trading instructions sent via e-mail may not be honored. Please contact my office at 757-539-9465 or Securities America, Inc. at 800-747-6111 for all buy/sell orders. You should continue to rely on confirmations and statements received from the custodian(s) of your assets. The text of this communication is confidential and use by any person who is not the intended recipient is prohibited. Any person who receives this communication in error is requested to immediately destroy the text of this communication without copying or further dissemination. Your cooperation is appreciated."
   
Citations.
1 - fool.com/retirement/2017/02/26/how-big-is-the-average-americans-tax-refund.aspx [2/26/17]
  rite your post here.

Managing Money Well As A Couple

Posted on February 7, 2017 at 11:07 AM Comments comments (685)
When you marry or simply share a household with someone, your financial life changes - and   your approach to managing your money may change as well. To succeed as a couple, you may also have to succeed financially. The good news is that is usually not so difficult.
 
At some point, you will have to ask yourselves some money questions - questions that pertain not only to your shared finances, but also to your individual finances. Waiting too long to ask (or answer) those questions might carry an emotional price. In the 2016 TD Bank Love & Money survey of 1,902 consumers who said they were in relationships, 42% of the respondents who described themselves as "unhappy" cited their number one financial error as "waiting too long" to discuss money matters with their significant other. 1
 
First off, how will you make your money grow? Investing is essential. Simply saving money will help you build an emergency fund, but unless you save an extraordinary amount of cash, your uninvested savings will not fund your retirement.
 
So, what should you invest in? Should you hold any joint investment accounts or some jointly titled assets? One of you may like to assume more risk than the other; spouses often have different individual investment preferences.
 
How you invest, together or separately, is less important than your commitment to investing. Some couples focus only on avoiding financial risk - to them, maintaining the status quo and not losing any money equals financial success. They could be setting themselves up for financial failure decades from now by rejecting investing and retirement planning.
 
An ongoing relationship with a financial professional may enhance your knowledge of the ways in which you could build your wealth and arrange to retire confidently. 
 
How much will you spend & save? Budgeting can help you arrive at your answer. A simple budget, an elaborate budget, any attempt at a budget can prove more informative than none at all. A thorough, line-item budget may seem a little over the top, but what you learn from it may be truly eye-opening.
 
How often will you check up on your financial progress? When finances affect two people rather than one, credit card statements and bank balances become more important. So do IRA balances, insurance premiums, and investment account yields. Looking in on these details once a month (or at least once a quarter) can keep you both informed, so that neither one of you have misconceptions about household finances or assets. Arguments can start when money misconceptions are upended by reality. 
 
What degree of independence do you want to maintain? Do you want to have separate bank accounts? Separate "fun money" accounts? To what extent do you want to comingle your money? Some spouses need individual financial "space" of their own. There is nothing wrong with this, unless a spouse uses such "space" to hide secrets that will eventually shock the other.     
 
Can you be businesslike about your finances? Spouses who are inattentive or nonchalant about financial matters may encounter more financial trouble than they anticipate. So, watch where your money goes, and think about ways to repeatedly pay yourselves first, rather than your creditors. Set shared short-term, medium-term, and long-term objectives, and strive to attain them.
 
Communication is key to all this. In   the TD Bank survey, nearly 80% of the respondents who indicated they talked about money once per week said that they were happy with their relationship. Follow their lead and plan for your progress together. 1  
   
Mark McGahee may be reached at 757 539 9465 or [email protected]
www.nansemondriverfinancialservices.com
 
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
 
Securities offered through Securities America, Inc. Member FINRA/SIPC. Advisory Services offered through Securities America Advisors, Inc. Trading instructions sent via e-mail may not be honored. Please contact my office at 757-539-9465 or Securities America, Inc. at 800-747-6111 for all buy/sell orders. You should continue to rely on confirmations and statements received from the custodian(s) of your assets. The text of this communication is confidential and use by any person who is not the intended recipient is prohibited. Any person who receives this communication in error is requested to immediately destroy the text of this communication without copying or further dissemination. Your cooperation is appreciated."
   
Citations.
1 - gobankingrates.com/personal-finance/surprising-ways-money-affects-love-life/ [9/26/16]

What Does Your Home Insurance Policy Cover?

Posted on January 24, 2017 at 9:36 AM Comments comments (0)
Not all home insurance policies are alike. Coverage amounts obviously vary, and so do coverage areas. Taking ten minutes to scrutinize what your policy does (and does not) cover is a wise idea.
 
Homeowner policies routinely provide tornado, windstorm, & hailstorm coverage. If a tornado, windstorm, or hailstorm damages your home or yard, the insurer will commonly pay out in response to your claim, unless your residence has somehow failed to qualify for such coverage.1,2
 
How about hurricanes & floods? Here, basic coverage may not be enough. Most homeowner policies cover hurricane damage, but a hurricane frequently results in flooding. A flood is not usually a covered peril in a standard home insurance policy.2
 
In areas with serious flood risks, mortgage lenders often require borrowers to obtain flood insurance. Nationally, about a fifth of flood insurance claims are filed in regions that have low or moderate flood risks. If you live by a normally calm creek, river, reservoir, bay, or beach, you must decide if flood insurance is worth purchasing. You should consider it even if a creek, river, or reservoir near you is dry most of the year - flash floods, for example, can wreak havoc in a desert community.3 
 
How about earthquakes? If you live in quake country, you likely know that the standard homeowner policy will not cover earthquake damage. Just like those who consider an optional flood policy, you must conduct your own informal cost-benefit analysis: is the extra coverage worth the money?3
 
Many homeowners decide against buying hurricane, flood, and earthquake insurance. They see this supplemental coverage the same way they see long-term care insurance - a lot of money spent for something they may never need. Their decision may come to haunt them, however. One temblor, one storm, or one rising river may impact them more than they could imagine.
 
How about fire & lightning? The answer is yes - homeowner policies commonly provide coverage against lightning damage as well as damage from fire and smoke. Explosions from gas leaks may also be covered, at least under most circumstances.1 
 
What about sewer problems? Damage caused by leaking or ruptured septic tanks, sump pumps, and sewer systems is usually not covered in a home insurance policy. You can often attach a rider to a policy to gain that kind of protection.3 
 
How about theft? Coverage against larceny - the theft of real property - is common in any homeowner policy. Limits are set on coverage of art, antiques, collectibles, and jewelry, but they can be raised. They may need to be raised because, in some instances, the payout may fall short of the full value of what was stolen. All homeowners would do well to keep a home inventory checklist of valuable items on their property, complete with some kind of visual record.1 
 
You may want to add some business coverage if you work at home. That coverage should be tailored according to the nature of the work you perform, and it may need to include inventory or liability coverage. An umbrella liability policy could also come in handy, especially if you have clients coming over to your home or you provide goods and services to others as a function of your work.
 
What events will home insurance not protect you against? You will be hard-pressed to find any homeowner policy that offers protection against terrorist acts, acts of warfare, nuclear accidents, or movements of the earth (earthquakes, mudslides, landslides, and sinkholes). Some things are very difficult or nearly impossible to imagine, predict, or guard against.   
 
Renters need insurance, too. If you rent rather than own, you can still face many of the risks mentioned in this article. If you lack renter's insurance, think about getting a policy - it may be cheaper than you assume.   
 
Mark McGahee may be reached at 757 539 9465 or [email protected]
www.nansemondriverfinancialservices.com
 
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
 
Securities offered through Securities America, Inc. Member FINRA/SIPC. Advisory Services offered through Securities America Advisors, Inc. Trading instructions sent via e-mail may not be honored. Please contact my office at 757-539-9465 or Securities America, Inc. at 800-747-6111 for all buy/sell orders. You should continue to rely on confirmations and statements received from the custodian(s) of your assets. The text of this communication is confidential and use by any person who is not the intended recipient is prohibited. Any person who receives this communication in error is requested to immediately destroy the text of this communication without copying or further dissemination. Your cooperation is appreciated."
   
Citations.
1 - cleveland.com/insideout/index.ssf/2017/01/home_insurance_tips_kids_sewin.html [1/12/17]
2 - 360financialliteracy.org/Topics/Home-Ownership/Homeowners-Insurance/Windstorms-Hurricanes-and-Tornadoes-Are-You-Covered [1/19/17]
3 - realestate.usnews.com/real-estate/articles/do-you-need-additional-home-insurance/ [2/18/16]
 

Saving $1 Million for Retirement

Posted on January 12, 2017 at 2:44 PM Comments comments (223)
Saving $1 Million for Retirement
 
How can you plan to do it? What kind of financial commitment will it take?

 
How many of us will retire with $1 million or more in savings? More of us ought to - in fact, more of us may need to, given inflation and the rising cost of health care.
 
Sadly, few pre-retirees have accumulated that much. A 2015 Government Accountability Office analysis found that the average American aged 55-64 had just $104,000 in retirement money. A 2016 GoBankingRates survey determined that only 13% of Americans had retirement savings of $300,000 or more.1,2
 
A $100,000 or $300,000 retirement fund might be acceptable if our retirements lasted less than a decade, as was the case for some of our parents. As many of us may live into our eighties and nineties, we may need $1 million or more in savings to avoid financial despair in our old age. 
 
The earlier you begin saving, the more you can take advantage of compound interest. A 25-year-old who directs $405 a month into a tax-advantaged retirement account yielding an average of 7% annually will wind up with $1 million at age 65. Perhaps $405 a month sounds like a lot to devote to this objective, but it only gets harder if you wait. At the same rate of return, a 30-year-old would need to contribute $585 per month to the same retirement account to generate $1 million by age 65.3    
 
The Census Bureau says that the median household income in this country is $53,657. A 45-year-old couple earning that much annually would need to hoard every cent they made for 19 years (and pay no income tax) to end up with $1 million at age 64, absent of investments. So, investing may come to be an important part of your retirement plan.4
 
What if you are over 40, what then? You still have a chance to retire with $1 million or more, but you must make a bigger present-day financial commitment to that goal than someone younger.
 
At age 45, you will need to save around $1,317 per month in a tax-advantaged retirement account yielding 10% annually to have $1 million in 20 years. If the account returns just 6% annually, then you would need to direct approximately $2,164 a month into it.4
 
What if you start trying to build that $1 million retirement fund at age 50? If your retirement account earns a solid 10% per year, you would still need to put around $2,413 a month into it; at a 6% yearly return, the target contribution becomes about $3,439 a month.4
 
This math may be startling, but it is also hard to argue with. If you are between age 55-65 and have about $100,000 in retirement savings, you may be hard-pressed to adequately finance your future. There are three basic ways to respond to this dilemma. You can choose to live on Social Security, plus the principal and yield from your retirement fund, and risk running out of money within several years (or sooner). Alternately, you can cut your expenses way down - share housing, share or forgo a car, etc., which could preserve more of your money. Or, you could try to work longer, giving your invested retirement savings a chance for additional growth, and explore ways to create new income streams. 
 
How long will a million-dollar retirement fund last? If it is completely uninvested, you could draw down about $35,000 a year from it for 28 years. The upside here is that your invested retirement assets could grow and compound notably during your "second act" to help offset the ongoing withdrawals. The downside is that you will have to contend with inflation and, potentially, major healthcare expenses, which could reduce your savings faster than you anticipate.
 
So, while $1 million may sound like a huge amount of money to amass for retirement, it really is not - certainly not for a retirement beginning twenty or thirty years from now. Having $2 million or $3 million on hand would be preferable.
 
Mark McGahee may be reached at 757 539 9465 or [email protected]
www.nansemondriverfinancialservices.com
 
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
 
Securities offered through Securities America, Inc. Member FINRA/SIPC. Advisory Services offered through Securities America Advisors, Inc. Trading instructions sent via e-mail may not be honored. Please contact my office at 757-539-9465 or Securities America, Inc. at 800-747-6111 for all buy/sell orders. You should continue to rely on confirmations and statements received from the custodian(s) of your assets. The text of this communication is confidential and use by any person who is not the intended recipient is prohibited. Any person who receives this communication in error is requested to immediately destroy the text of this communication without copying or further dissemination. Your cooperation is appreciated."
   
Citations.
1 - investopedia.com/articles/personal-finance/011216/average-retirement-savings-age-2016.asp [12/8/16]
2 - time.com/money/4258451/retirement-savings-survey/ [3/14/16]
3 - interest.com/retirement-planning/news/how-to-save-1-million-for-retirement/ [12/12/16]
4 - reviewjournal.com/business/money/how-realistically-save-1-million-retirement [5/20/16]
 

Could Education Debt Shrink Your Social Security Income?

Posted on January 4, 2017 at 5:32 PM Comments comments (382)
 Could Education Debt Shrink Your Social Security Income?

 $1.1 billion has been garnished from retirement benefits to pay back old student loans. 

 Do you have a federal student loan that needs to be repaid? You may be surprised at what the government might do to collect that money someday, if it is not paid back soon enough. 

If that debt lingers too long, you may find your Social Security income reduced. So far, the Department of the Treasury has carved $1.1 billion out of Social Security benefits to try and reduce outstanding student loan debt. It has a long way to go: of that $1.1 billion collected, more than 70% has simply been applied to fees and interest rather than principal.1,2  

How many baby boomers & elders are being affected by these garnishments? Roughly 114,000 Social Security recipients older than 50. In the big picture, that number may seem insignificant. After all, 22 million Americans have outstanding federal student loans.1,2,3  

What is not insignificant is how quickly the ranks of these seniors have increased. According to the Government Accountability Office, the number of Americans older than 65 who have been hit with these income cuts has risen 540% since 2006.2  

A college education is no longer an experience reserved for the young. As older adults have retrained themselves for new careers or sought advanced degrees, they have assumed more education debt.  

The financial strain of this mid-life college debt is showing. Since 2005, the population of Americans aged 65 or older with outstanding education loans has grown 385%. The GAO says roughly three-quarters of those loans have been arranged for the borrower's own higher education.2 

Separately, data from the Federal Reserve Bank of New York shows that student loan balances held by Americans older than 60 grew from $6 billion in 2004 to $58 billion in 2014. No other age group saw education debt accumulate so dramatically in that time.1 

In 2015, the GAO found that a majority of federally backed student loans held by borrowers older than 75 were in default - that is, a year or more had transpired without a payment. Overall, just one in six federal student loans are in default.1,3 

Paying off a student loan in retirement is a real challenge. Household cash flow may not readily allow it, and the debt may not be top of mind. Even declaring bankruptcy may not relieve you of the obligation. The Treasury has the authority to garnish as much as 15% of your Social Security income to attack the debt, and it can claim federal tax refunds and wages as well.1 

Is this the right way to solve this problem? It seems like cruel and unusual financial punishment to some. Taking a 5%, 10%, or 15% bite of a retiree's monthly Social Security benefit is harsh - possibly harsh enough to induce poverty. 

In 2015, more than 67,000 people age 50 and older carrying unsettled federal student loans had their Social Security benefits taken below the poverty level because of these income reductions. A Social Security recipient is allowed to retain at least $750 of a garnished monthly benefit - but that $750 minimum has never been adjusted for inflation since that rule was established in 1996. Last year, the federal government defined the poverty level at monthly income of $990 for an individual.2 

Some people file for Social Security without knowing that they have unpaid student loans. As the GAO notes, 43% of the borrowers that had their Social Security incomes docked because of this issue had loans originated at least 20 years earlier.2 

Is some forgiveness in order? That can be debated. A student loan is not a gift, and a student borrower is tasked to understand its terms. On the other hand, it is a pity to see people go back to school or train themselves for new careers at 40 or 50 only to carry student debt past their peak income years into retirement.  

Mark McGahee may be reached at 757 539 9465 or [email protected] This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment. Securities offered through Securities America, Inc. Member FINRA/SIPC. Advisory Services offered through Securities America Advisors, Inc. Trading instructions sent via e-mail may not be honored. Please contact my office at 757-539-9465 or Securities America, Inc. at 800-747-6111 for all buy/sell orders. You should continue to rely on confirmations and statements received from the custodian(s) of your assets. The text of this communication is confidential and use by any person who is not the intended recipient is prohibited. Any person who receives this communication in error is requested to immediately destroy the text of this communication without copying or further dissemination. Your cooperation is appreciated."   Citations.1 - time.com/money/3913676/student-debt-into-retirement/ [6/30/15]2 - marketwatch.com/story/more-borrowers-are-losing-social-security-benefits-over-old-student-loans-2016-12-20 [12/20/16]3 - time.com/money/4284940/student-loan-payments-debt-college/ [4/7/16] 
Mark U. McGahee, CFP, ChFC

(757) 539 - 9465
Nansemond River Financial Services
204 Mililtary Road, Suffolk, VA 23439
  Phone 757 539 9465
www.nansemondriverfinancialservices.com Securities offered through Securities America, Inc. Member FINRA/SIPC. Advisory Services offered through Securities America Advisors, Inc. Trading instructions sent via e-mail may not be honored. Please contact my office at 757-539-9465 or Securities America, Inc. at 800-747-6111 for all buy/sell orders. You should continue to rely on confirmations and statements received from the custodian(s) of your assets. The text of this communication is confidential and use by any person who is not the intended recipient is prohibited. Any person who receives this communication in error is requested to immediately destroy the text of this communication without copying or further dissemination. Your cooperation is appreciated."

Retirement Tips June 2016

Posted on June 16, 2016 at 12:08 PM Comments comments (97)


R E T I R E M E N T  I N  S I G H T

Presented by Mark McGahee

 MONTHLY NEWS AND INFORMATION FOR CURRENT AND FUTURE RETIREES JUNE 2016 

 One act of real usefulness is worth all the abstract sentiment in the world.
     - Anne Radcliffe 
 
GOLF TIP

Get the broom outIf you start topping the ball either because you are a beginner or because you have a negative “muscle memory” associated with taking deep divots, this exercise can help. Every day, take 10 golf swings with a kitchen broom. Focus on brushing the bristles against the floor and reaching and extending your left arm on the follow-through.

  BRAIN TEASER

The Apple Wrapper Riddle.

A shop sells apples for $1 each. Each apple comes wrapped in a special wrapper. You can trade 3 wrappers for 1 apple. If you have $15, what is the maximum number of apples you can buy? 

DID YOU KNOW?

In the 1800s, aluminum was actually worth more than goldBack then, it was a precious metal: coveted for its light weight, yet very difficult to produce. In 1852, usable aluminum was worth the equivalent of $1,200 a kilogram in today’s terms. By 1900, new and easy ways of creating aluminum had emerged and a kilogram of it cost less than a dollar. 
   
RETIRING WITH A COMFORTABLE LEVEL OF INCOME

In retirement, your level of income directly affects your quality of life. How can you effectively give yourself more spending power?   From a portfolio standpoint, you can focus on income-producing investments. When you start planning for retirement, you invest with an emphasis on growth. As you transition to retirement, growth remains important – but you also need to seek investments that can potentially create ongoing income streams. In addition, you can plan to make your portfolio more tax-efficient. Too many investors pay too little attention to this factor and leave money on the table.  New retirees sometimes spend more per month than they anticipate. Retiring with an income plan outlining how much money you really need and where it will come from may help you avoid this shock. Longevity and inflation will certainly come into play. The Social Security Administration says that today’s average 65-year-old can expect to live until his or her mid-eighties; about a quarter of 65-year-olds will live past age 90. So across a 20-year retirement, your income must grow significantly to maintain your standard of living, even if inflation proves mild.      

      HOW MUCH DO WE REALLY KNOW ABOUT ELDERCARE? 

 As a society, perhaps not as much as we should. In a new Associated Press/NORC poll of Americans 40 and older, 38% of those surveyed said they expected to depend on Medicare “quite a bit” or “completely” for long-term care. In truth, most long-term care is non-medical and Medicare will not pay for it. Just 20% of respondents had any form of long-term care coverage. While 77% of survey respondents said they would want to be cared for at home if eldercare was necessary, only 18% thought they would turn to family members or friends for no-cost eldercare. The reality is different. By the estimate of the Department of Health & Human Services, unpaid caregivers deliver roughly 80% of in-home eldercare. More states may be ready to give these caregivers a financial break. Right now, California, New Jersey, and Rhode Island are the only states mandating employers to offer them paid leave – but New York will join the list in 2018, and 19 other states are considering such legislation.        

 ON THE BRIGHT SIDE

You may spend less during retirement than you think you will. According to an analysis in the Journal of Financial Planning, households headed by 65-year-olds that spend $100,000 a year typically reduce their expenditures 20% by age 80.
     
Mark McGahee may be reached at
757 539 9465 or [email protected]
www.nansemondriverfinancialservices.com
 Securities offered through Securities America, Inc. Member FINRA/SIPC. Advisory Services offered through Securities America Advisors, Inc. Trading instructions sent via e-mail may not be honored. Please contact my office at 757-539-9465 or Securities America, Inc. at 800-747-6111 for all buy/sell orders. You should continue to rely on confirmations and statements received from the custodian(s) of your assets. The text of this communication is confidential and use by any person who is not the intended recipient is prohibited. Any person who receives this communication in error is requested to immediately destroy the text of this communication without copying or further dissemination. Your cooperation is appreciated."This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty.* TRIVIA ANSWER: Stumped? Contact me for the answer! 757 539 9465CITATIONS.
1 - forbes.com/sites/joeljohnson/2016/05/02/four-strategies-to-maximize-your-retirement-income/ [5/2/16]2 - ssa.gov/planners/lifeexpectancy.html [6/9/16]3 - nextavenue.org/expectations-long-term-care-match-reality/ [6/3/16]4 - cnbc.com/2016/05/26/retirement-spending-good-news-at-last.html [5/31/16]5 - todayifoundout.com/index.php/2014/05/aluminium-cost-gold/ [5/13/14]Mark U. McGahee, CFP®, ChFCNansemond River Financial Services204 Mililtary Road, Suffolk, VA 23439Phone: 757 539 9465[email protected]    www.nansemondriverfinancialservices.comSecurities offered through Securities America, Inc. Member FINRA/SIPC. Advisory Services offered through Securities America Advisors, Inc. Trading instructions sent via e-mail may not be honored. Please contact my office at 757-539-9465

 

Life Insurance & Long Term Care Combined

Posted on June 15, 2016 at 3:01 PM Comments comments (97)

A few years ago I wrote a pair of articles for the SUFFOLK NEWS HERALD about the importance of being prepared when your health changes as you age.  The articles included facts and figures about the cost of Long-Term Care (LTC) in America and the options available to address the reality of it.  One of the options was to purchase an insurance policy designed solely to pay for LTC expenses.  The advantage of an LTC policy is it pays for care whether received in the home, in a rehab facility, in an assisted living facility, and in a nursing home.  The primary disadvantage is it is a “use it or lose it” plan in most cases.  If the insured person dies without ever having received LTC benefits, the insurance carrier keeps all the premiums paid, and pays nothing on behalf of the insured.  This could be potentially thousands, even tens of thousands of dollars that ends up being a big ZERO return on investment.  For this reason, buyers of pure LTC policies remain relatively few.

The better news is an option has emerged that means a benefit will be paid one way or another.  Life insurance carriers are adding Accelerated Benefit Riders to certain newly issued policies that specifically permit access to the death benefit to pay for the LTC needs of the person insured.  A formula is used to determine the annual amount of the death benefit available to pay for LTC expenses, and is based upon a percentage of the death benefit (generally about 24% per year), and the person’s age at the time of qualification for LTC benefits.  Most often qualification is met when the person is unable to perform two of the Activities of Daily Living (ADLs) without assistance.  The ADLs are:  eating, dressing, bathing, toileting, continence, and transferring (e.g. from the bed to a chair).  Since the vehicle is life insurance, premiums are reasonable, and if the policy is retained by the purchaser, the death benefit is going to be paid out on either an accelerated basis, or in total at the death of the person insured.  Finally, there is no requirement that LTC services be provided by a licensed professional; a family member can be the caregiver and still receive the benefits.

In a recent case, a healthy 63 year old female purchased a life policy with a $260,000 death benefit.  If she were to need LTC at age 75, her maximum benefit would be $4,160 a month (she could opt for less).  The monthly premium for her is $261.64.  It was kept low because she owned an old cash value life insurance policy that did not have the capacity to pay LTC benefits, so she transferred the cash value into the new one.  She has the peace of mind that there is life insurance in place for her loved ones when she dies, and if her health changes and she needs LTC, she has a revenue source for it as well.

When a family member requires LTC, it is traumatic enough from an emotional perspective.  Adding the financial burden can devastate a lifetime of savings.  If you would like to find out how a life insurance policy like this could benefit you and your family, please call me at (757) 539-9465, or email me at [email protected].  It would be my pleasure to help you.


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