Peach Tree Times
Some of our articles have been written by guest writers
Peach Tree Times
The full article was originally posted by James Royal on bankrate.com
Discussing finances is rarely easy, especially when it involves your aging parents. It's important to know how their money is allocated, so you can help them manage it when needed.
It's important to handle the topic with care. Releasing control of personal finances is difficult for those who have been managing their money for many years.
Financial planner Brent Neiser recommends asking the following questions:
What investments do they have?
Where are those investments held?
Who are the contacts for the investments?
How are these investments titled (joint accounts, individual, etc.)?
Is there a financial advisor in the picture?
How you can help
1. Get started now
It's better to talk to them about financial things while they're physically and mentally healthy, but sometimes that's not possible. Regardless, Royal writes, "The sooner you make an action plan and ready things, the less their finances can degrade."
2. Tidy up financial accounts
If your parent has a wide variety of accounts, you may want to clean up unused accounts & those with minimal balances. You might also want to add beneficiaries to any accounts you plan on keeping. This helps to simplify the legal process.
3. Check up on 401(k)s and IRAs
"Both 401(k) and IRA plans may need to be handled in special ways, such as required minimum distributions, depending on the owner’s age. If these accounts are not managed correctly, they can create more financial difficulties and needless expense, including severe bonus penalties."
4. Make sure investments align with your parent's goals
If they're retiring and their portfolio is too aggressive, their future income may be at risk if the market declines. If retirement is a ways away and their portfolio is too conservative, they might be losing out on potential gains.
5. Establish a financial power of attorney
"In the event of a parent’s incapacity, perhaps due to hospitalization, who’s going to manage the finances? In these situations, it can be useful to have a financial power of attorney that allows you to manage your parent’s affairs, pay bills, and the like."
6. Call in an expert
Financial issues are complicated. Don't be afraid to call in an expert. Whether it's a financial planner or elaborate estate planning with a lawyer, they can bail you out when you're in over your head.
Read the full article on bankrate.com.
Americans are no longer interested in buying mega-mansions but are opting for smaller properties, which cost less and require less upkeep.
For seniors, downsizing to a more compact house has significant advantages. They can enjoy their retirement years without spending as much time on chores like yard work. They also have to spend less on maintenance costs, which is significant since money troubles can be an issue after retirement.
Before you downsize, ask yourself these questions to figure out what you will do with your old property and ensure you have the money to purchase a new one.
Is Now a Good Time to Put Your House on the Market?
When you’re looking to unload your old home, the most obvious answer is to sell it. You can take the money you make and put it toward your new house.
Before you list your house, however, get a sense of what it’s worth. Look specifically at homes in your neighborhood that are a similar size.
If you do decide to go ahead and sell your home, put in the time and effort to make it as marketable as possible. For example, you should hire a professional photographer to take photos. Studies show that pictures make a huge difference in selling real estate, and can help a house sell faster and at a higher price.
Would You Prefer the Steady Income That Comes with Renting It Out?
If you find that the real estate market in your area isn’t great, hold off on selling. Property prices are projected to increase, so you may be able to close a better deal in a few years. Instead, consider renting out your property. This allows you to collect a monthly income, which you can use to put toward the mortgage payments on your new property.
If you want to maximize your rental income, keep the furnishings in the home: Furnished spaces command a higher monthly rent. Given that your new house will be smaller, you likely won’t be able to fit all your current furniture inside it. So, make sure you secure a reliable tenant who will pay on time with a thorough vetting process. This should include in-person interviews and a request for pay stubs to prove their income.
Could a Family Member Step In and Take Care of the Property for You?
Perhaps the real estate market is bad or you don’t want to deal with the hassle of tenants. In this case, consider asking a trusted family member if they want to take over the property.
You can have them live there rent-free or charge them rent, depending on your financial needs. With this arrangement, you can entrust them to take care of day-to-day maintenance and rest easy knowing you can visit the old home whenever you want.
Since you probably won’t charge your loved ones the full rent that you would a stranger, this arrangement will not be the most lucrative financially. You thus have to make sure that you will still have the funds needed to afford the down payment on your new home.
Take the time to calculate how large a down payment you need; about 20 percent of the property’s sale price is usually suggested. Then make sure that the monthly payments won't exceed 25 percent of your monthly income. Set your house shopping budget accordingly and stick to it.
Downsizing is a big decision, one that requires careful consideration, especially when it comes to financial planning.
Take the time to go through the above questions thoroughly and be realistic about your money needs. You don’t want to join the ranks of stressed-out Americans who are worried about insufficient retirement funds. Follow the above guidelines and you will be able to come up with a solution that best suits your needs.
Article author: Jim Vogel of Elderaction.org
For additional information, click on the link above for Elder Action.
Photo Credit: Pexels
Annuities are tax-free savings with minimal risks, that provide a reliable source of income for the rest of an investor's life. "Annuities provide income for you, insuring you against living longer than your retirement savings can support," writes Elaine Silvestrini, on annuity.org.
Annuities are usually bought through insurance companies. Like most contracts they can be negotiated to fit the specific needs of the parties.
To learn more, visit https://www.annuity.org/annuities/retirement/.
Once you’re living off your nest egg, it’s more important than ever to manage your money wisely. Unfortunately, many older adults head into retirement with a poor understanding of their financial needs and their ability to meet them. Make sure you don’t encounter any unwelcome surprises during retirement by making an informed financial plan.
Make a Budget
The advice to save 70 to 80 percent of your pre-retirement income is a helpful rule of thumb, but now that you’re no longer working, it’s important to reassess your financial standing. While retirement comes with savings in many areas, like no dependent children, no payroll taxes and (hopefully) no mortgage, life can get expensive in other ways.
According to U.S. News, a couple retiring in 2017 will spend an average of $275,000 on health care throughout their retirement — and that number is predicted to rise.
Although you’re healthy now, there’s no predicting the future. More than one third of the U.S. population will be diagnosed with cancer over the course of their lives, and more than one quarter of older adults fall each year.
An increasing number of older adults are opting to purchase long-term care insurance to cover the gap between Medicare benefits and actual health care needs.
Because of these unexpected costs, it’s not enough to make a household budget and multiply by it by the years you expect to live. A retirement budget should take into account routine, capital and unexpected expenses. Kiplinger recommends setting aside 10 percent of retirement savings for unexpected expenses.
Assess Your Finances
Now that you have an ideal budget, it’s time to evaluate your retirement savings. While Social Security benefits help seniors get by, at an average monthly payment of $1,404 in 2018, it’s not enough to make ends meet. That means you’ll need to rely on pensions, 401(k) and IRA accounts and other savings to cover the remaining expenses.
Sit down with your financial advisor to evaluate your assets and determine how much money you’ll have to live on.
Close the Gaps
Seniors who do the math and discover they don’t have enough savings to fund a comfortable retirement have a few options.
If you own a home, an easy choice is use your home equity. Downsizing to a smaller house is a good move for older adults’ safety, and it also offers big benefits to their finances. A smaller home costs less to upkeep and the savings from the home sale can be used in retirement.
If selling isn’t an option, a reverse mortgage allows seniors to continue living in their home while receiving tax-free payments based on the home’s equity. However, a reverse mortgage must be repaid when you move out of your home or die. Typically, that means selling the house.
Another option for adding to your nest egg is settling your life insurance policy. According to Mason Finance, there are a few reasons why a senior might want to settle their life insurance policy, such as if you no longer have a spouse or children to serve as beneficiary or you have a term policy and it’s approaching the expiration date. Settling an unneeded policy offers the benefit of no longer paying monthly premiums and receiving a payout greater than the policy’s cash surrender value.
Selling a home, applying for a reverse mortgage, and settling a life insurance policy are all big decisions, so talk to your financial advisor before making any changes.
Depending on the gap between how much money you have and how much you need, it could be a matter of going back to work for a couple of years before retiring or living more frugally than you had hoped. The world of retirement finance is complex, but a good financial advisor can help you make smart choices confidently.
Image via Unsplash
Photo via Unsplash
The maze of Medicare has a lot going on. With government and private companies offering different kinds of healthcare coverage, how are you supposed to know what to do? According to CNBC, 70 percent of soon-to-be retirees wish they had a better grasp of Medicare. Sadly, there is a lot of misunderstanding about what is covered by Medicare, what the program costs, and what other options are available to seniors. Hopefully, this quick guide can clear things up.
All of Medicare’s Parts
First, it's important to understand the difference between Medicare Parts A, B, C, and D. In general, Part A covers medically necessary hospital expenses, including lab tests and surgeries. Part B covers outpatient care, such as doctor’s visits and physical therapy. Part C, known as Medicare Advantage, is additional coverage offered by private companies. Finally, Part D covers prescription drugs and is also available through private insurance. For a more detailed explanation, check out this article from the Balance.
Your Additional Coverage Options
Due to all the confusion surrounding Medicare, many seniors don't look into their extra coverage options. Only one-third of eligible seniors are enrolled in a Medicare Advantage plan, but most people can benefit from the additional coverage. Though Medicare Advantage plans are offered by private companies, they are still regulated by the government and must provide the same coverage as the federal plans. However, they often include an array of additional coverage benefits. For example, Humana Medicare Advantage plans provide vision, dental, and prescription drug coverage, as well as free gym memberships through Silver Sneakers.
What You Have to Pay
Cost is another aspect of Medicare that is misunderstood. Many people are under the impression that the federal Medicare program (Part A and B) is free to seniors over the age of 65. While Part A is free for most Americans, everyone must pay a monthly premium for Part B. You will also have to pay out-of-pocket for about 20 percent of your medical expenses.
Where Medigap Comes In
Medigap, like Medicare Advantage, is a private insurance option for seniors who are eligible for Medicare. Medigap insurance covers the out-of-pocket expenses that come with Original Medicare, essentially filling the gaps in coverage. Many Medigap plans also pay for services that are not covered by Original Medicare, such as foreign travel insurance. However, Medicare Advantage usually eliminates the need for Medigap.
Choosing the Right Plan for Your Needs
You can’t have both Medicare Advantage and Medigap at the same time, so choosing a plan for your additional coverage can be tricky. Forbes recommends thinking of Medicare Advantage as an alternative form of Medicare that offers additional benefits on top of regular Medicare. Medigap is more like a coverage supplement, helping you pay your out-of-pocket expenses. Medicare Advantage plans replace Medicare, while Medigap plans are combined with Medicare.
Put careful thought into your Medicare decision because you can only switch your plan during the Medicare Open Enrollment Period near the end of each year. Consider what kinds of medical services you use. For example, if you require vision care, hearing aids, or prescription drugs, a Medicare Advantage plan might be your best option. Medicare Advantage plans tend to have lower premiums than Medigap plans, but you may be left paying more out-of-pocket for your services. Just make sure the plan you choose covers the doctors, clinics, pharmacies, and hospitals that you prefer. If you like to travel, you may also want to check that your plan will cover your medical costs in different states.
It will take some time to learn everything you need to know about Medicare. Don't rush the process. Consider your options carefully so you can take full advantage of this beneficial healthcare coverage. When you're covered properly, you'll be able to use all the health services you need to stay happy and healthy in retirement while minimizing your financial concerns.
*Written by Sharon Wagner