Even a Late Start toward Retirement is Better than None at All – Annapolis and Towson Estate Planning

There are also people who wait until they become senior citizens to begin planning for retirement. That’s a little on the late side, but the important thing, says the article “Retirement Planning: Start now to help Social Security, Medicare” from Martinsville Bulletin, is to get started. That’s better than doing nothing.

It’s easier if you start earlier. Let’s consider the high school student who diligently puts away 10% of a $7.25 per hour gross minimum wage earning for a year on an average 20-hour work week. That’s $750 into a retirement plan after one year. If that student never went to college, never learned a trade, got a raise or a promotion, they would still have $34,600 in personal savings in 46 years. It’s not a lot, as retirement savings go, but it’s better than nothing.

If the same high school student put those savings into an Individual Retirement Account (IRA), more would have been saved. The more time your money has to grow through compounding, the more money you’ll have.

Saving a little money every month could make a big difference later on. This year, the average monthly Social Security benefit rounds out at about $1,460 per person, calculated by combining a worker’s highest paid years in the workplace. That’s not enough for retirement. The answer? Start saving early.

It is not as easy to build a nest egg in a few years, but it’s possible.

Many people don’t wake up to the reality of retirement, until they reach age 62. There’s still time to plan. They can put money into IRA accounts, and at age 62 they can save as much as $7,000. Those IRA contributions count as tax deductions.

Roth IRAs are a little more flexible, but there are no tax deductions with contributions. On the plus side, when money is withdrawn, you’re not paying taxes on the withdrawals.

Another important planning point for seniors: if you’ve had health issues, it’s a good idea to keep working to maintain your employee health insurance. The healthier you are, the lower your health insurance costs will be during retirement. However, health costs do tend to increase with age, so that has to be factored into your retirement planning.

For people who take a lot of medication to control chronic conditions, they’ll need to look into health insurance outside of the workplace. That usually means Medicare. Most seniors are eligible for free Medicare hospital insurance, which is Part A of a four-part option, if they have worked and paid Medicare taxes.

Part A helps pay for inpatient care in a hospital or skilled nursing facility after a hospital stay, some home health care and hospice care. Part B helps to pay for doctors and a variety of other services. Part C allows HMO, PPO and other health care organizations to offer health insurance plans for Medicare beneficiaries. Part D provides prescription drug benefits through private insurance companies.

The Social Security Administration advises people to apply for Medicare three months before they celebrate their 65th birthday, regardless of whether they plan to start receiving retirement benefits right away.

Whether you’re 26 or 56, you need to plan for retirement. You also need to have an estate plan, and that means making the time to meet with an experienced estate planning professional to discuss your life and your retirement plans. You’ll need their guidance to create a will and other documents.

Advance planning will always be better than waiting until the last minute, for retirement and estate planning.

Reference: Martinsville Bulletin (May 17, 2019) “Retirement Planning: Start now to help Social Security, Medicare”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys 

Figuring Out A Parent’s Financial Life, When They Cannot – Annapolis and Towson Estate Planning

Imagine that your parent has had a minor stroke and is no longer able to manage their financial or legal affairs. For years your parent has been living independently, waiving off offers of help or having someone come in to clean. It seemed as if it would go on that way forever. What happens, asks the Daily Times, when you are confronted with this scenario in the aptly-titled article “Senior Life: What a nightmare! Untangling a loved one’s finances”?

After the health crisis is over, it’s time to get busy. Open the door to the home and start looking. Where’s the will, where are the bank statements and where’s the information about Social Security benefits? When you start making calls or going online, you run into a bigger problem than figuring out where the papers are kept, because no one will talk with you. You are not legally authorized, even though you are a direct descendant.

This happens all the time.

Statistically speaking, it is extremely likely that your parent will end up, at some point, in a nursing home or a rehabilitation center for an extended period of time. Most people have no idea what their parent’s financial situation is, where and how they keep their financial and legal records and what they would need to do in an emergency.

It’s not that difficult to fix, but you and your hopefully healthy parent or parents need to start by planning for the future. That means sitting down with an estate planning attorney and making sure to have some key documents, most importantly, a Power of Attorney.

A Power of Attorney (POA) is a legal document that gives you permission to act on another person’s behalf as their agent. It must be properly prepared for your state’s laws.  It allows you to pay bills and make decisions on behalf of a loved one while they are alive. Without it, you’ll need to go to court to be appointed as legal guardian. That takes time and is much more expensive than having a POA created and properly executed.

If you have downloaded a Power of Attorney and are hoping it works, be warned: chances are good it won’t. Many financial institutions insist that the only POA they will accept are the ones that they issue.

Once you have a POA in place, it’s time to get organized. You’ll need to go through all the important papers, and set up a system so you can see what bills need to be paid, how many bank accounts or investment accounts exist and review her financial status.

Next, it’s time to consolidate. If your parent was a child of the Depression, chances are they have money in many different places. This gave them a sense of security but will give you a headache. Consolidate four different checking accounts into one. The same should be done for any CDs, investment accounts and credit cards. Have Social Security payments and any pension checks deposited into one account.

If you need help, and you might, don’t hesitate to ask for it. The stress of organizing decades of a loved one’s home, plus caring for them and managing the winding down of a home can be overwhelming. Your estate planning attorney will be able to connect you with a number of resources in your area.

Reference: Daily Times (April 9, 2019) “Senior Life: What a nightmare! Untangling a loved one’s finances”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys