Massachusetts Estate Planning & Asset Protection Blog

What will 2017 bring to Seniors and Persons with Disabilities? - Part I

Posted by Dennis Sullivan & Associates on Thu, Jan 19, 2017

What will 2017 bring to Seniors and Persons with Disabilities? - Part I

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Donald Trump’s election and Republican majorities in both houses of Congress surprised much of the nation. With control of legislative and executive branches of government, the expectation is Republicans will finally be able to push through long-awaited legislation, as well as follow through on promises made by candidate Trump. And they are expected to move quickly.

We will summarize some key issues to watch out for in 2017 that affect seniors and persons with disabilities and continue to provide updates throughout the year.

What the Election Outcome Means in Congress

The House has remained in Republican control—about 45% Democrat and 55% Republican. The majority rules, so while the Democrats may have loud opposition, they don’t have a lot of power. Currently, Republicans are mostly united, but those in the Freedom Caucus (Tea Party Republicans) are deciding how they will interact with the Republican establishment. If they split, votes may be needed from Democrats to pass legislation.

The Senate is 48 Democrats and 52 Republicans. 60 votes are needed to prevent a filibuster (where senators can talk for hours and delay votes). But with budget reconciliation, only a simple majority (51) is needed to pass legislation in the Senate. Because they are all budget-related programs, the Republicans will try to reform Medicaid, Medicare and the Affordable Care Act (Obamacare) through budget reconciliation. Individual Republican senators will have a lot of power, as some may insist on additions or deletions to secure their vote. If the Republicans do not stick together for the majority, votes may be needed from Democrats. (Note: Budget reconciliation was used to pass the Deficit Reduction Act of 2005 and OBRA 93, which enacted big cuts that changed elder law—the lengthening of the transfer penalty, the change in the time of when that penalty applies, the move from trust.)

One thing to watch is who is going to run Health and Human Services (HHS), Centers for Medicare and Medicaid Services (CMS) and the Social Security Administration, especially considering how much is related to Supplemental Security Income (SSI). The people now in charge of staffing these agencies are conservative. For example, the person in charge of staffing the political positions at the Social Security Administration has called for privatizing Social Security in the past. Donald Trump has repeatedly said he doesn’t want to change Medicare and Social Security, but that may be changing. (See below.)

Tax Policy

Tax changes are expected as part of the budget reconciliation process. We are not sure yet if 2017 will bring major tax reform or just tax cuts, but tax rates are expected to decrease for both individuals and businesses. Candidate Trump called for elder care and child care tax deductions and/or credits. He has also stated his plan to eliminate the federal estate tax, then charge capital gains tax on everything over $10 million, with exemptions for family farms and small businesses.

We may also see some changes to the ABLE Act (Achieving a Better Life Experience), which passed in December 2014 and amended Section 529 Plans. Currently, ABLE allows people with disabilities developed before the age of 26 and their families to set up tax-exempt savings accounts, which can be used to cover qualified disability expenses such as, but not limited to, education, housing and transportation. Revisions in 2017 may raise the age to 46, allow those working to put in more money, and allow rollovers of these accounts. 

Medicare Reform

President-elect Trump started by saying he was going to protect Medicare and Social Security. After meeting with House Speaker Paul Ryan, he said he will modernize Medicare. Reince Priebus, incoming chief of staff, recently insisted that Mr. Trump won’t meddle with Medicare or Social Security. Instead, he has said he will focus on 1) improving the economy, which will reduce the debt and ease entitlement concerns and 2) save Medicaid, Medicare and Social Security without cuts while eliminating fraud, waste and abuse. 

But he is already encountering resistance from Republicans, who for years have claimed that a major overhaul to Medicare and other entitlements are needed to ensure they don’t go bankrupt; that entitlement reform is critical to reducing debt; and the longer they wait, the harder it becomes to solve the problems. Obama administration officials warned just last year that a central Medicare trust fund is projected to run out of money by 2028.

Yet Republicans are also encouraged by what some of the President-Elect’s Cabinet picks could mean for future entitlement reform. Representative Tom Price (R-GA), who replaced Paul Ryan as Budget chairman and sought to overhaul entitlement programs, is Trump’s pick for Health and Human Services secretary. Representative Mick Mulvaney (R-SC), a fiscal hawk and Freedom Caucus co-founder, will lead his White House budget office.

So, we will have to wait and see if President-elect Trump, his Cabinet members and leading Republicans will find a way to agree. Some reforming of Medicare may be part of the 2017 budget reconciliation, but with ObamaCare repeal and replace, tax reform and infrastructure as the immediate priorities, solving the decades-long problem of deficits in Medicare and Social Security will likely have to wait until after 2017.

In the meantime, we are seeing a tilt toward Medicare Advantage plans. These managed care plans (offered through HMOs) often have lower costs and provide benefits not covered by traditional Medicare and Medicare Supplement Plans, such as health club memberships and preventative educational programs for those with diabetes and other chronic diseases. 

A long-term goal for Medicare, which has been around since its founding in 1964, is premium support. Basically, the consumer would choose a plan from those offered through an exchange. The government would provide subsidies to companies, they would lower the premiums and then people would choose their plans. It’s not likely that this will replace Medicare as we know it, but it is an idea being discussed.

Medicaid Reform

President-elect Trump has called for block granting Medicaid. House Speaker Paul Ryan has called for it, too, and Republicans are looking at whether they can reform Medicaid through budget reconciliation.

Those who want to reform Medicaid are focusing on the FMAP, the federal percentage match that states receive through federal funding. This is based on per capita income of the state. For example, a rich state like New Jersey is a 1:1 ratio, while a poor state like Mississippi is about a 3:1 ratio. This means for every one dollar that Mississippi spends on Medicaid, they will receive three free extra dollars from the federal government. This can impact states’ budget decisions. For example, if the governor of Mississippi needs to cut costs, he will more likely cut education or infrastructure by one dollar, rather than cut Medicaid spending by one dollar and lose the three free extra dollars.

The idea of block grants has been around for about 30 years. They are attractive because there are fewer federal rules to comply with and the states can use the money however they wish. But block grants shift more costs onto the states, and governors tend to oppose that.

Another idea floating around is a per capita cap, which would give the states a fixed dollar amount per individual, based on Medicaid standard lines (the blind, aged, and disabled children and adults). It was first proposed by President Clinton, who also wanted block grants. A per capita cap may force the states to control Medicaid costs over time, but there is also a demographic shift to consider—the medical needs and costs for an 85-year-old are much greater than for a 65-year-old. Nursing homes and aging disability provider groups have a huge stake in this and would likely oppose it, as would some governors.

The cost changes may not be felt right away, but they will be noticeable ten years from now and that’s what Congress must plan for. There may be increased waiver flexibility for the states and provider taxes to offset states’ losses. We may also see reforms to make it easier to manage care.

We will be following changes in legislation very closely and will keep you informed as to how these changes affect seniors and persons with disabilities. Check back next week for Part 2 of this blog where we will discuss more anticipated changes in the law including the Affordable Care Act and VA Benefit Rules!

At the Estate Planning & Asset Protection Law Center, we help people and their families learn how to protect their home, spouse, life-savings, and legacy for their loved ones.  We provide clients with a unique educational and counseling approach so they understand where opportunities exist to eliminate problems now as they implement plans for a protected future.

To learn more about elder care and how changes in the law may affect you,attend one of our free educational workshops, call 800-964-4295 and register to learn more about what you can do to enhance the security of your spouse, home, life savings and legacy.

Nursing home care is more than $180,000 per year! Attend this FREE educational seminar to learn:

  • How to protect your home and assets from the costs of long-term care
  • How to stay out of the nursing home and access in-home care
  • How to make sure your spouse is not left financially ruined if you need nursing home care
  • How to access Veterans benefits to pay for long-term care

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Tags: Medicare, Medicaid, seniors, disabled, Elder Law, Affordable Health Care Act, social security, trusts, Estate Planning, New estate tax law, new regulations, retirement plans, Nursing Home, Nursing Home Costs

Massachusetts Estate Planning Attorney | Naming the Right Beneficiary of Your Retirement Plan

Posted by Massachusetts Estate Planning & Elder Law Attorney, Dennis B. Sullivan, Esq., CPA, LLM on Wed, Feb 13, 2013

IRA, Retirment, Estate PlanningIRAs and other tax-deferred retirement accounts allow your savings to grow tax-free until you retire. At that point, typically the year after you become age 70 ½, you must begin taking required minimum distributions, on which you pay ordinary income taxes. The rest of the money in your account continues to grow tax-free until it is distributed to you. If you die before depleting your account, the balance of your account will go to the beneficiary you have named.

Naming the right beneficiary is critical. Most people want to continue the tax-deferred growth for as long as possible, paying the least amount in income taxes. This is called “stretching out” the account. Distributions after you die will be based on the new beneficiary’s age and life expectancy, so the younger the beneficiary (like a child or grandchild), the longer the stretch out potential.

However, naming a beneficiary outright has several disadvantages:

  • If the beneficiary is a minor, distributions will need to be paid to a guardian; if no guardian exists, one will have to be appointed by the court.

  • An older beneficiary can do whatever he/she wants with this money, including taking larger distributions or even cashing out the entire account and destroying your carefully made plans for long-term, tax-deferred growth

  • This money could be lost to the beneficiary’s creditors, spouse and ex-spouse(s).

  • There is the risk of court interference if your beneficiary becomes incapacitated.

  • Outright distributions could cause a beneficiary with special needs to lose valuable government benefits.

  • If your beneficiary is your spouse, he/she will be able to name a new beneficiary and is under no obligation to follow your wishes. This may not be what you want, especially if you have children from a previous marriage or you feel that your spouse may be too easily influenced by others after you are gone.

    •  Substantial amount of income taxes that would be due on a lump sum distribution.

Increased Control & Protection

Naming a trust as beneficiary will give you more control over, and protection for, these tax-deferred accounts. It should be a separate trust designed specifically for this purpose; because of the rules governing naming trusts as a beneficiary it should not be part of your revocable living trust or other trust. For this reason, these trusts are often called “stand-alone retirement trusts.”

Instead of required minimum distributions being paid directly to your beneficiary, they will be paid into the trust for the benefit of your beneficiary. The trust can either be mandated to pay these distributions directly to the beneficiary (called a conduit trust) or it can accumulate these distributions (called an accumulation trust) and pay out trust assets according to your instructions (for example, for higher education expenses, down payment on a home, etc.)

Specific benefits include:

  • No guardian is needed for minor children and there is no risk of court interference at the beneficiary’s incapacity. That’s because a trust, not the individual, is the named beneficiary.

  • Your beneficiary is prevented from cashing out or taking larger distributions, assuring the continuation of tax-deferred growth.

  • The account itself is protected from creditors and predators, even from divorce claims. However, if a conduit trust is used and distributions are required to be paid to the beneficiary, those distributions would be at risk. For maximum creditor protection, an accumulation trust is preferable.

  • You can name successor beneficiaries in the trust document and keep control over who will receive the proceeds if your initial beneficiary should die before the account is fully paid out.

  • An accumulation trust is typically used to provide for a beneficiary with special needs. Instead of the beneficiary receiving the required distributions as income (which could affect his/her ability to receive government benefits), the trustee can use discretion and provide for certain needs of the beneficiary as they arise, without jeopardizing their benefits.

In order to be accepted by the IRS, the trust must meet very specific requirements, and should be designed and written by an attorney who has experience in this area.

You’ve worked years to accumulate your tax-deferred plans. Naming the right beneficiary can preserve and continue the tax-deferred growth long after you’re gone, protect the assets from creditors and the courts, and provide for your loved ones the way you want.  

At the Estate Planning & Asset Protection Law Center, we help people and their families learn how to protect their home, spouse, life-savings, and legacy for their loved ones.  We provide clients with a unique education and counseling approach so they understand where opportunities exist to eliminate problems now as they implement plans for a protected future.

We encourage you to attend one of our free educational workshops. Call 800-964-4295 to learn more about what you can do to enhance the security of your family and legacy.

Click Here to Register For Our Trust, Estate & Asset  Protection Workshop

Tags: retirement plans, IRA, Estate Planning, Retirement, 401(k), 529 plans, family

Massachusetts Elder Law Lawyer | Considering Retirement or Retired?

Posted by Massachusetts Estate Planning & Elder Law Attorney, Dennis B. Sullivan, Esq., CPA, LLM on Wed, Jan 30, 2013

Now Is the Time to Review Your Investments

In conducting research for our upcoming book, the Senior & Boomer’s Guide to Health Care Reform & Avoiding Nursing Home Poverty we learned that many people who are still working are giving retirement a second thought.

This is because they have to make big decisions about things such as Social Security and taxes - in advance. The world as we knew it has been turned upside-down in recent years, and this decision will affect the rest of your life.  Many are not sure they are ready - emotionally and financially - to retire.

If you're considering making the break, ask yourself these questions:

AM I REALLY READY?

Because of the loss of our financial security-blankets in recent years, people are working longer. If you enjoy your job, maybe you should keep working.

Working will allow you more time to build up your savings for the day when you really do want to play golf instead of office politics, and more time to pay down your mortgage. Keep in mind, once you retire, it can be difficult to un-retire.

CAN I REALLY LIVE ON A SMALLER BUDGET?

If you think it was hard staying on a budget during your working life, you ain't seen nuthin' yet! In fact, it often gets more expensive to live after you retire. You've got less coming in. But you'll probably be spending money on things you never had the time to spend it on before.

You'll probably be traveling more. Seeing more movies or ballgames. Playing more golf. Going out with friends more. And perhaps buying more "toys."

The Web can be a resource.  Retirement and financial planning websites like Mint.com can help you figure out expenses that may end with retirement, and those that may begin.

Some experts encourage a trial run, by living on a projected "retirement budget" while you're still working. It's not a totally accurate method. But it might give you time to develop coping strategies.

CAN I PUT OFF TAKING SOCIAL SECURITY?

There's a natural instinct to sign up when you turn 62. But "full-retirement age" isn't until 66...and, if you start early, your benefits will be reduced. So, if you've got a bit of a nest egg, consider waiting a while. And if you can wait until 70, your benefits will be even higher.

For those eligible at age 66, waiting just one year will result in monthly benefits equaling 108% of the previous amount. And waiting until 70 would generate 132% of the regular monthly benefit!  In fact, you can nearly double the amount you'll get at 62 if you can wait until 70.

HAVE YOU SPOKEN WITH YOUR ACCOUNTANT?

Most of us speak with our accountant just once a year - at tax time. But don't consider retirement without discussing your finances with your accountant or asking us about how we can help you with retirement and tax planning.

Consider a financial planner, too. A big chunk of your IRA is going to Uncle Sam when you withdraw it.  Together, we can help you develop a strategy for your taxable and tax-sheltered accounts. And we can help you decide whether to convert to a Roth IRA, where withdrawals are tax-free, but conversions are not.

ARE YOUR INVESTMENTS SAFE AND PRODUCTIVE?

Many people especially those considering retirement or in retirement should review their portfolio with an eye towards age and risk tolerance, making sure they are in line with one and other.  Many people are sick of banks not only dropping their CD rates but their money market rates as well.  Many professionals are concerned that interest rates may be at a turning point and with the debt ceiling conversation being revisited, now may be a good time to review your investment options.  If you would like some information on safe investing for seniors, please let us know.

At the Estate Planning & Asset Protection Law Center, we help people and their families learn how to protect their home, spouse, life-savings, and legacy for their loved ones.  We provide clients with a unique education and counseling approach so they understand where opportunities exist to eliminate problems now as they implement plans for a protected future.

We encourage you to attend one of our free educational workshops. Call 800-964-4295 to learn more about what you can do to enhance the security of your family and legacy.

elder law, massachusetts, estate planning, medicaid, alzheimer's

Click Here to Register For Our Trust, Estate & Asset  Protection Workshop

Tags: retirement plans, Estate Planning, Elder Law, roth conversions, Retirement, Baby Boomers, 401(k), Attorney, senior, income

Retirement Plan: Should You Plan on Social Security?

Posted by Dennis Sullivan & Associates on Fri, Jun 03, 2011

There is a spectre that looms for every potential retiree and that is the projected exhaustion of Social Security (projected for 2036).  What can people do to protect or maximize their benefits?  What not to do is panic. Some pre-retirees feel they should sign up for Social Security now - earlier than they originally had planned - at least to lock in some benefit.  That, however, is not good planning.   

In the first place, changes to Social Security typically happen very slowly.  Secondly, if you sign up for Social Security too early, you lock in reduced benefit, probably unnecessarily.  Stay the course,  particularly if you planned to wait for higher payments at an older age.  After all, unlike many businesses in the private sector, Social Security is funded for decades to come, and may still be quite viable even after that. 
The Social Security system has some financial pressures that would be fairly simple to address. Wealthier retirees might receive slightly less of a benefit or more affluent workers might pay more. Nancy Altman, co-chair of the Strengthen Social Security Campaign and chair of the Pension Rights Center, said this: “With respect to whether the benefits will be there, it is important to understand that Social Security is currently in surplus and is projected to remain so for more than another decade, even with no Congressional action whatsoever. Its projected shortfall over its conservative 75-year valuation period is a manageable 0.6% of GDP … The question of how large the benefits should be and how to finance them are political questions, not economic ones. All past Congresses have ensured that benefits were always paid on time, and there is no reason to think future Congresses will be less responsible.”

Andy Landis, author of Social Security:  The Inside Story, has said, “But the numbers we’re seeing now have been expected since the mid-1980s.  It was always expected that Social Security financing, overhauled in 1983, would get us part way through Baby Boomer retirements in the 2030s. Later generations would decide how to steer Social Security after that. It’s sort of like your next birthday — it’s hardly a surprise because you could see it coming.”

For future planning, the best advice for maximizing benefits is to continue to work as long as possible and delaying retirement age well beyond 62 maybe even as far as to age 70, if possible.  It is also a good idea to have some level of long-term or disability insurance - just in case.

Along with this, getting a handle on strategies that a husband and wife should use is critical.  Be sure to evaluate claiming alternatives and consider spouse benefits when they do. Many people will benefit from claiming later and too many claim early.  In some instances, a lower-paying wife should claim as early as possible and a husband as late as possible.

And, if you’re unsure of your expected benefit, get an estimate from the Social Security website. (Visit the Social Security Administration’s benefit calculators website.) Also, read The National Academy of Social Insurance’s report, ‘When To Take Social Security: Questions to Consider.’ (Read the report from the National Academy of Social Insurance here.)

For more information on planning for retirement, read our report on -The 7 Biggest Concerns for your Retirement Planning.  Also, register online or call 800-964-4295 to attend one of our Trust, Estate and Asset Protection workshops to learn more about your options for a healthy, wealthy, and happy retirement.

Tags: retirement plans, Retirement, social security

Choosing a Financial Planner

Posted by Dennis Sullivan & Associates on Tue, May 10, 2011

We work with many qualified financial planners to assist clients with comprehensive estate and financial planning. But we don’t work with everyone, and sometimes we see unscrupulous sales methods employed that take advantage of trusting clients, particularly the elderly. Just such a case is brewing now in Indiana, where an insurance brokerage was disciplined for the unauthorized practice of law – and is now the defendant in a class-action lawsuit.

According to insurancenewsnet.com, the insurance brokerage used estate planning as the hook for a lucrative business selling other insurance products, including annuities. Sadly, this is not an unfamiliar tale. Apparently, some clients not only purchased inappropriate estate plans, but paid huge tax penalties after they cashed in valuable stocks to buy the firm’s annuities.

The estate planning packages were sold using what the Indiana Supreme Court called “an entirely one-sided ad delivered in such a way so as to likely alarm the customer.”

Here are five tips to help you (or a loved one) avoid falling victim to similar scams:

-          Don’t Let Anyone Rush You. One of the ways scammers get their victims is by rushing them into making decisions.

-          Don’t Let Anyone Scare You. Scare tactics are common among scammers. If the product or service is valid, it won’t have to be sold with screaming headlines or scare tactics.

-          Be Suspicious of Anyone Who Pressures You to Sell Your Investments to Buy Theirs. It might be a good idea, but check with an objective third-party professional before making the move – such as your CPA or attorney.

-          Check References. Before buying any kind of financial product, check the references of both the agent and the company behind him. Check with your friends, family and business acquaintances, as well as with professionals you know and trust, such as your CPA or attorney.

-          Consult Trusted, Objective Advisors. Anyone can be fooled, and there’s no shame to being fooled by an expert scammer. Before you sign on the dotted line, take the time to consult a trusted – and objective – advisor. The opinion of a qualified, disinterested third party who has nothing to gain or lose by the transaction could be your best protection.

The right financial advisor can be an asset in planning for your retirment and preserving your wealth for your loved ones. Its important to do your homework and evaluate your needs when looking for a financial advisor or estate planner.  To learn more about retirement planning, check out our free article on your 7 Concerns for Retirement Planning.  To learn more about how to protect your spouse, home and life savings, plan to attend a free educational Trust, Estate and Asset Protection Workshop.  Register online or call 800-964-4295 in Wellesley.

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Tags: retirement plans, Estate Planning, Financial Planning

When Can You Withdraw from Your IRA Early Without Tax Penalties?

Posted by Dennis Sullivan & Associates on Fri, Apr 29, 2011

There are a number of good reasons that you might be eying your IRA as it sits there with years to go before you turn age 59-1/2. You could see it as potential, as rescue capital, or if you’re in a really good place you could see it as the start of an early retirement. Of course, there are a few good reasons for leaving it alone – heavy tax hits and penalties – however, sometimes it's a good idea tofor withdrawing from your IRA early and penalty free.

The general wisdom is to leave your IRA alone until age 59-1/2 or else pay a 10 percent penalty on withdrawals. But there are allowances for penalty-free distribution in the case of serious financial hardship, higher educational expenses, or the cost of a first home. What is far less known is the 72(t) exception for Substantially Equal Periodic Payments (SEPP). Essentially, the IRS regulations allow annuitization of your IRA, so you can receive distributions straight from your IRA by taking them as a series of “substantially equal periodic payments.” The payments, once initiated, act much like required minimum distributions in that you must take out an amount determined by your life expectancy (or the joint life expectancy of you and your beneficiary) and at regular intervals, at least annually. Once initiated, you must take these distributions for 5 years or until age 59-1/2. You can then reorganize your distribution pattern or hold off entirely until the actual required minimum distributions set in at age 70-1/2.

The process, as you would imagine, is fairly complicated and that probably accounts for its relative under-use. To see it in action you can consult information from the IRS’s FAQ. It is tricky, and perhaps a little risky, but it is at least an interesting tactic to bring to light, and may be a practical solution to your early-retirement plans.

For more information on this and other retirement planning options, attend one of our free workshops or download our free guide on The 7 Biggest Concerns for Estate and Retirement Planning.

           

Tags: retirement plans, IRA, annuity, Retirement, IRS

Using your Retirement Nest Egg as Startup Capital

Posted by Dennis Sullivan & Associates on Thu, Apr 14, 2011

If you’re over age 50, have substantial assets in your qualified retirement plan, and always dreamed of being your own boss, you are not alone. In fact, you may decide to join the growing number of baby boomers who are tapping their retirement savings for start-up capital on a new business.

The Wall Street Journal, along with SmartMoney, recently discussed the trend, the possibilities, and the potentially dangerous risks involved. Here is the strategy, which the IRS called a Roll Over as Business Startup (ROBS). First, you create a legal corporation with its own 401(k) plan into which you can transfer all of your funds from a previous employer-held plan. With those funds, you can then invest the 401(k) into your new corporation in exchange for shares. What once was simply retirement money has thus become start-up capital.

The problems with this approach are probably obvious: most start-ups fail, but if you fund your start-up with your retirement money then your retirement also goes down the drain. That is probably the biggest risk, but don’t discount the IRS. While this move is legal (if done properly), it does invite IRS scrutiny.

This financing move has become popular enough to draw the attention o f the IRS, which has suggested that these kinds of rollovers “seek to exploit the generous tax benefits enjoyed by qualified retirement plans.” The agency has called for added scrutiny on firms that use them. 

Still, some financing firms like Guidant Financial have seen increases in this method (a 30% increase in the case of Guidant Financial, for example). David Nilssen, co-founder of Guidant Financial Group, Inc., says the IRS has never called thse kinds of rollovers non-compliant, only that it would watch firms funded by 401(k) rollovers more closely.

To be sure, there are risks involved. But the profile of an entrepreneur is one of a risk-taker. And then there are other risks at play. Many baby boomers facing retirement simply are not prepared to stop working. That retirement nest egg may not be enough to finance a comfortable retirement, but it just might be enough to finance a second career as an entrepreneur, providing income that could make an eventual retirement that much happier.

There are certainly rewards to a start up, but do not forget to safeguard your home, family and lifesavings.  To learn more about how you can protect your home, family and assets at a free Trust, Estate & Asset Protection workshop.

Tags: retirement plans, Retirement, Baby Boomers, 401(k)

Top Three Retirement Plans for Small Business

Posted by Dennis Sullivan & Associates on Wed, Apr 06, 2011

There are many different retirement plan options for small businesses (25 or fewer employees).  Before you decide which one would be best for your business, consider the following questions:

1. Can I afford a match for my employees?

2. Do I want to allow employees to contribute to the plan?

3. If so, will some want to save more than $11,500 a year?

4. Do I need flexibility to access the funds prior to retirement for emergencies?

5. How important are managing future taxes (a Roth option) versus my tax needs today?

Your answers to these questions will help you choose between the top three options: the 401(k), the SEP IRA, and the SIMPLE IRA.

The 401(k), which is probably the most well known, is also the most versatile because you can choose to match employee contributions or not and provide a vesting schedule. It’s also versatile for employees in that you can enable penalty-free access to the funds (by way of loans) and offer “catch-up” contribution opportunities to employees over age 50.  You could also elect for Roth 401(k)s that switch taxation to contribution rather than distribution, if you or your employees fear higher taxes in the future.

The SEP IRA, or “Simplified Employee Pensions” is the modern equivalent of a pension. It means that only the employer contributes to the fund, and must do so for all employees, rather than the employee contributing and the employer matching or not. The penalties are generally smaller, and it’s fairly easy to start, but this is because it is fairly stripped down in comparison to the 401(k) as there is no Roth, no catch-up contributing, no profit-sharing, and no loan option.

The SIMPLE IRA or the Savings Incentive Match PLan for Employees, offers the third option and is somewhat of a combination of the previous two. It is affordable, like the SEP IRA, but it operates by employer matching of employee contributions and offers catch-up options. Nonetheless, it is not quite as expansive as the 401(k), offering fewer options and having smaller contributions allowances. These of course, are just outlines.  Learn more by having your questions answered in person by attending one of our free Trust, Estate and Asset Protection Workshops.

Tags: retirement plans, IRA, roth conversions, roth conversions, Retirement, 401(k), Roth IRA

Retire Abroad, Spend your Retirment Globetrotting

Posted by Dennis Sullivan & Associates on Fri, Mar 18, 2011

It’s no secret that “retirement” is a touchy subject nowadays. Costs are up, savings are down, and the public is generally pessimistic according to the 2011 Retirement Confidence Survey. As a recent SmartMoney article relates, one increasingly popular solution, although it might not be an easy one, is to escape domestic problems and costs by going global and retiring abroad.

It’s hard to say just how many retirees are living offshore. They aren’t counted in the census, and many go to great pains to fly below the radar, but according to the Social Security Administration the number of retirees taking benefits overseas has risen 32% since 2002. Some end up in small French villages or other cultured corners, many more retire to exotic regions like Thailand, while still others fly south to warmer climes in South America, happy to endure the rainy seasons to live where they can stretch out their dollar in style.

The potential pay-off is great, especially if you have a taste for tropical drinks, but there are a number of concerns too. Simply put, it’s an entirely different place. Moving out of the way of rising costs in the US may mean moving into the path of hurricanes, into entirely different cultural waters with conflicts you don’t understand, and a potential web of paperwork and legal technicalities.

Be cautious of scams, particularly the yet-to-be-completed “development.”  Investors have been known to abandon such projects, leaving an incomplete, insolvent, or undersold development that may not fulfill the promises of the pamphlet.

The Smart Money article is quite lengthy and detailed. If an off-shore retirement destination is enticing you, I suggest reading this – and many others. Due diligence is the key to a successful off-shore transition.

For more on planning your retirement and protecting your life savings, attend a free Trust, Estate and Asset Protection workshop.

Tags: retirement plans, Retirement, Baby Boomers

How to Retire in 2011

Posted by Dennis Sullivan & Associates on Wed, Mar 16, 2011

Much of the American workforce is still just trying to hold on to their current jobs, not transition out of them, but now that the economy is showing increasing signs of growth, and nest eggs are starting to come back, many baby boomers are thinking about retirement. Phased retirement is not new, but given the aging population and the tumultuous economy of the past few years, it is enjoying a comeback.

In a continuation of their previous article about test-driving your retirement plans, SmartMoney recently offered a reminder about the prospect of a transitional retirement – which may be the best way for some to leave the workforce.

Retirement doesn’t have to be a climactic stopping point, where yesterday you were working full speed ahead and today you’re at full stop. From a financial planning standpoint, it’s difficult to transition from a full working income to a retirement income – especially if your retirement accounts took a recessionary hit. From an emotional standpoint, the abrupt lifestyle adjustment may be difficult to manage.

Transitional retirement may be one solution. For some this means retiring from their old job and taking on a new part-time job. For others it may be smarter to stay with your current job and simply cut back a bit on your involvement. With the prospect of a transitional retirement, there are essentially two questions: “How should you transition?” and “How do you sell it to your boss?”

For your own sake, you’ll need to assess your goals and your financial needs. As you work less you’ll probably earn less, which means you can ease into a retirement budget gracefully. Of course, you have to figure out how to work less. One option may be to become an independent consultant for your current employer.

When it comes time to broaching the subject with your employer, think in terms of mutual benefits. Your employer needs to know why you need to begin the transition, and why it’s better (for them) to keep you by any means possible. To your advantage, many companies right now are hurting for talented experts, and cautious of hiring new full-time employees. You may be solving their problems by offering to provide your expertise on an as-needed basis. A transitional retirement also gives the company time to set up succession plans, find the right person for your job, and give that person time to get up to speed on company policy, protocol, and learn the tricks of the trade, so to speak. Don’t hesitate to point out these benefits to your employer during your discussions.

To find out how you can protect your retirement savings and assets from the increasing cost of nursing home care, attend a free Trust Estate and Asset Protection workshop.

Tags: 2011, retirement plans, Retirement, Baby Boomers

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