Archive for Retirement Planning

Saving Money Before and During Retirement

Saving money before and during retirement so their standard of living doesn’t suffer is important for many retirees. Unfortunately, many Americans aren’t saving nearly enough and are falling short of setting aside adequate funds to support their retirement needs. The average retirement savings for people aged 56-61 is only $163,577. Meanwhile, retirees can spend nearly $275,000 on health care. The National Institute for Retirement Security estimates that America has an up to $14 trillion gap in retirement savings.

If you are retired and finding that balancing your savings and spending is an ongoing challenge, follow these tips for ways to trim your expenses and save more.

1. Cut Your ‘Time-Saving’ Costs
When you’re employed and busy managing your career and family, spending money on time-saving items—like professional house cleaning or monthly food-subscription services—can be helpful. Once you retire, however, you typically have more time on your hands. You may be paying for items that are no longer necessary. You can save money each month by trimming or eliminating any time-saving resources you don’t need to support your retirement lifestyle.

Actions to take:
• List all the monthly, quarterly, and annual subscriptions and services you have. Identify which ones aren’t necessary.
• Consider taking over household chores you pay someone else to manage.
• Assess how much you spend on eating out, and switch to eating in for some of those meals.

2. Reduce Your Health-Care Costs
Retirees typically spend a large amount on health care, often siphoning income that could be used for other expenses. Unless you have the money to pay these bills, they could leave you in a financial bind. You can help reduce some of your medical costs by learning to shop around. For example, changes like getting an MRI at a radiologist instead of a hospital can make a difference in your medical bills, as the radiologist is typically less expensive.

Actions to take:
• Get comparative quotes from hospitals and other medical professionals.
• Check prescription costs at different pharmacies, and consider buying generic.
• Revisit your insurance plans to help identify if you’re receiving the best value.

Every retiree’s financial life and needs are different, so knowing a true breakdown of your daily, monthly, and yearly costs (your budget) is important for finding ways to save. By taking time to assess what may be unnecessary spending in your life, and reducing or eliminating these expenses, you may have more money on hand for other lifestyle needs.

To learn more about how you can trim your spending or pursue other financial goals in retirement, please contact us. We’re happy to help you explore strategies for your unique needs.

“It’s not the situation, but whether we react (negative) or respond (positive) to the situation that’s important.”

–Zig Ziglar

IRA TROUBLE by Paul Ferraresi

What you think should happen to an IRA distribution and the actual outcome is two different things.

This great article (see link below) from the April 17, 2017 issue of shows the tax horror stories that can develop.

The Lesson: Get competent advice from your advisor before doing anything with your IRA.

COUNTDOWN TO RETIREMENT-Recommended by Paul Ferraresi

Getting ready for retirement can be pretty exciting. With such a huge lifestyle change, you should consider
to start laying the groundwork now. Here are some tips to help you through that transition.
Create a realistic budget
Your early 60s is a great time to start crunching some hard numbers on your retirement budget. You’re
probably just a few years from your actual retirement date at this age, which means you’re close enough to
be able to accurately estimate your income and expenses, but far enough away to manage any corrections.
When planning your retirement budget, remember that some expenses may decline in retirement, but your
medical expenses will most likely go up as you age. Plus, be sure to include any long-term care expenses.
Set a firm retirement date
As you approach 60, you probably have an idea of when you’d like to retire, but now could be a good time
to set that date in stone. One option to ease into retirement is to switch from a full-time to a part-time work
schedule rather than quitting your job entirely. If your employer is open to this idea, it can give you a chance
to test drive retired life instead of fully committing to retirement. Plus, having a little extra income during
your first few years of retirement can be a big help. This is also a good time to determine when you should
claim Social Security to maximize your benefits and factor that into your planned retirement date.
Determine your retirement lifestyle
Let’s say that your dream retirement has always been to move to Florida and live out your days on the golf
course. You’ve probably done a fair amount of research online at this point and maybe have spoken with
friends or family who are now living in the Sunshine State. But as the big day is fast approaching, it’s probably
a good idea to confirm that this is still what you want your retirement to look like and to make some concrete
plans to make them a reality.
In-depth research is a must no matter where you plan to live in retirement — whether it’s in another country
or a nearby assisted-living community. Aside from obvious factors like the weather, you should also consider
factors like state and local taxes, the local real estate market, proximity to friends and family, access to the
kinds of activities you enjoy, and access to high-quality healthcare. Of course, the best way to determine
whether a living situation is right for you is to try it out beforehand. If possible, take some of your saved
vacation time and spend a couple of weeks living as you plan to in retirement. Remember, you’ll likely be
spending the rest of your days in this place, so due diligence ahead of time is vital to your future happiness.
Review your portfolio
Soon you’ll be switching over from putting money into your retirement accounts to taking money out. If you
haven’t already done so, you should rebalance your investments in preparation for retirement. For example,
you may want to change the types of stocks you’ve selected. High-dividend stocks can be useful during
retirement because of the regular income they generate. This is also a good time to take your account
statements to a financial professional who has experience in retirement planning and ask for guidance.
Most pensions offer you the option of receiving your money either in a lump sum (meaning you get it all at
once) or as an annuity (meaning you get a check every month as long as you live). There are pros and cons
for both options, so your own personal circumstances will determine which one is the best for you—although
for many retirees the guaranteed income of an annuity may be the better choice. Lump-sum payouts can be riskier because it’s up to you to use the money wisely. There’s the possibility that retirees can make poor investment decisions or spend the lump sum too quickly and run out of money too soon. On the other hand, if you’re an experienced and disciplined investor, you may be able to put that lump sum to work and end up with more income than you would get from an annuity. Be sure to consult with both your Human Resources contact and your financial professional at length before deciding which option to take.
No matter what your vision of retirement is, working with the right financial professional can help immensely. Be sure to contact your financial professional today to help you plan and take the necessary steps toward a stress-free retirement.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments or products may be appropriate for you, consult with your financial professional.
Adult Financial Education Services (AFES)
August 2017

IRA TROUBLE by Paul Ferraresi

What you think should happen to an IRA distribution and the actual outcome is two different things.

This great article (see link below) from the April 17, 2017 issue of shows the tax horror stories that can develop.

The Lesson: Get competent advice from your advisor before doing anything with your IRA.

A STEEP PRICE FOR MEDICARE recommended by Paul Ferraresi

Planning may help high income seniors avoid paying up to four times the going rate for Part B and Part D coverage.

In 2017, the standard premium for Medicare Part B is $134 a month. Most enrollees pay for Part B via reductions in their Social Security benefits, and the overall average monthly fee is $109.

Yet some senior pay almost quadruple that much – $428.60 a month ($957.20 for married couples) – for the exact same medical insurance.

Seniors who pay more for Part B also pay Medicare as much as $76 per month extra for prescription drug coverage, known as Part D.

This is the IRMAA – the income related monthly adjustment amount. If people are on Medicare, and their tax return shows high income, Medicare adds the IRMAA amount to their monthly premium.

Modified adjusted gross income over $85,000 ($170,000 on joint returns) brings IRMAA into play, with amounts increasing as MAGI hits certain thresholds. (Here, MAGI includes tax-exempt interest income.)


The Medicare trustees’ 2016 report projects that Part B monthly premiums, which have risen from a maximum of $161.40 in 2007 to $428.60 today, will continue to climb, reaching as much as $564 in 2025. Thus, Medicare Part B is likely to become more of a financial planning issue.

One key is to realize that there is a two-year lag between the income observed by Medicare and the resulting payments. Money that flows into a Medicare enrollee’s pocket in 2017 will be reported on a tax return filed in 2018, which determines Part B premiums due in 2019.

When seniors retire, they may pay the higher premium for two more years until that income history drops off their records. In order to reduce Part B premiums sooner than two years, you should appeal your higher IRMAA premium immediately upon retirement, if your income has dropped dramatically. One of the things that could qualify Medicare recipients for an IRMAA reduction is that they have stopped working.

You will qualify for the appeal under the life-changing event of ‘work stoppage.’ You can call Social Security or visit in person to present evidence of retirement to have your Medicare premiums recalculated.