• ARE YOU PREPARED TO RETIRE

    Can We Afford to Live to 100?

     

    Our increased longevity poses a retirement planning challenge.

     

    Provided by MidAmerica Financial Resources

     

     

    Some of us may retire at 65 and live to 100 or 105. Advances in health care may make this a strong possibility. The corresponding question is: will we outlive our money?

      

    More people are spending more of their lives in retirement. According to the actuaries at Social Security, today’s 65-year-olds have roughly a 25% chance of living into their nineties, and about one in ten will live to 100 or longer. Clearly, this puts a strain on Social Security. When it first sent out retirement benefits in 1940, the average life expectancy for a 65-year-old was 79. It was not designed to fund 30-year retirements.1,2

     

    Social Security aside, many Americans are retiring with inadequate savings. A Vanguard study says that retirement savers aged 65 or older have average balances of just $197,000 in their workplace retirement accounts. IRA distributions, home or business sale proceeds, and pension and Social Security income may help them out in the first decade of retirement, but what about the decades that might follow?3

     

    Three factors may lead us into a gigantic retirement crisis. People are not saving enough, they are living longer than ever, and the retirement planning process now emphasizes self-reliance. These challenges amount to a “perfect storm” for the financially underprepared and unfortunate – a population that threatens to grow.

     

    There are three ways pre-retirees can respond to these challenges. One, retire later. Two, save and invest more and spend less. Three, consult a financial professional about retirement planning rather than going it alone. If Gen Xers and baby boomers are lucky, they may see a fourth response in the form of legislative changes to help retirees.  

      

    Retiring after age 70 could become the norm in 10-15 years. Pair healthier seniors and new technologies, and you could see millions of septuagenarians working 40-hour weeks. Retiring at 75 could leave us with ten fewer years of retirement to fund.

     

    Retirement saving is not a top priority for many households, especially given today’s economic pressures. That does not mean it can be ignored. We used to save more than we do now: the U.S. personal saving rate routinely exceeded 7% until the mid-1990s. During the Great Recession, it reached 8.1%; in September 2017, it was down to 3.1%, with personal saving levels mirroring those seen right before the Great Recession.4  

     

    How many pre-retirees chat with a financial professional about their goals and investment approach? How many have defined goals and investment approaches? Yes, this sort of consultation is not free – but it may be worth every penny, just in terms of offering insight as well as possibly steering pre-retirees away from retirement planning errors.

     

    If enough seniors struggle to make ends meet (or if there is a national emergency of senior homelessness or indigence), we could see the federal government respond by boosting retirement benefits. Cutting Social Security benefits would be unthinkable in such a crisis, so payroll tax (and the amount of income subject to it) could increase instead. The resulting inflows could potentially help Social Security’s balance sheet as well as its beneficiaries.

     

    We are all financially challenged by increasing longevity. Assuming we need 30 years of retirement income is not unorthodox, merely pragmatic. From that assumption, we can plan for our futures with an understanding of how much money we may need to live comfortably and pursue our dreams.

      

    MidAmerica Financial Resources may be reached at 618.548.4777 or greg.malan@lpl.com www.mid-america.us

     

    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.   

         

    Citations.

    1 - ssa.gov/planners/lifeexpectancy.html [10/30/17]

    2 - fool.com/retirement/2017/03/21/11-facts-about-social-security-every-retiree-shoul.aspx [3/21/17]

    3 - cnbc.com/2017/10/23/trump-says-there-will-be-no-change-to-401k-plans.html [10/23/17]

    4 - fred.stlouisfed.org/series/PSAVERT [10/30/17]      

     

  • Why Life Insurance Will Always Matter in Estate Planning

    With or without the estate tax, it addresses several key priorities.

     

    Provided by MidAmerica Financial Resources

     

     

    Every few years, predictions emerge that the estate tax will sunset. Even if it does, that will not remove the need for life insurance in estate planning. Why? The reasons are numerous.

      

    You can use life insurance proceeds to equalize inheritances. If sizable, illiquid assets make it difficult to leave the same amount of wealth to each heir, then the cash from a life insurance death benefit may financially compensate.

     

    You can plan for a life insurance payout to replace assets gifted to charity. You often see this move in the planning of charitable remainder trusts (CRTs).

     

    People use CRTs to accomplish three objectives. One, they can remove an asset from their taxable estate by placing it into the CRT. Two, they can derive a retirement income stream from the trust’s invested assets. Three, upon their death, they can donate a percentage of the assets left in the CRT to charities or non-profit organizations.1

      

    When a CRT is fashioned, an irrevocable life insurance trust (ILIT) is often created to complement it. The life insurance trust can be funded with income from the invested assets in the CRT and tax savings realized at the CRT’s creation. (The trustor can take an immediate charitable income tax deduction in the year that an appreciated asset is transferred into the CRT.) Basically, the value of the life insurance death benefit makes up for the loss of the CRT assets bound for charity.1

      

    Life insurance can help business owners with succession. It can fund buy-sell agreements to help facilitate a transfer of ownership, regardless of how an owner or co-owner leaves a company. It can also insure key employees – the policy can help the business attract and retain first-rate managers and creatives, and its death benefit could help lessen financial hardship if the employee unexpectedly passes away.2

     

    Life insurance products can also figure into executive benefits. Indeed, corporate-owned life insurance is integral to supplemental executive retirement plans (SERPs), the varieties of which include bonus plans and non-qualified deferred compensation arrangements.3

        

    Lastly, a life insurance policy death benefit transfers quickly to a beneficiary. The funds are paid out within weeks, even days. A beneficiary form directs the process, rather than a will – so the asset distribution occurs apart from the public scrutiny of probate. Life insurance is also a backbone of trust planning, and assets held inside a trust can be distributed directly to heirs by a trustee according to trust terms, privately and away from predators and creditors.4

     

    MidAmerica Financial Resources may be reached at 618.548.4777 or greg.malan@lpl.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.

       

    Citations.

    1 - estateplanning.com/Understanding-Charitable-Remainder-Trusts/ [3/28/16]

    2 - quotacy.com/protecting-the-future-of-your-business/ [8/17/16]

    3 - nationwide.com/supplemental-executive-retirement.jsp [11/9/17]

    4 - forbes.com/sites/markeghrari/2017/05/30/pass-on-your-assets-wisely-how-to-choose-the-right-beneficiaries/ [5/30/17]