This recent article in the Wall Street Journal explains that “under current rules, the first dollars out of an IRA count as the required withdrawal. So if an IRA owner makes a withdrawal before Congress extends the law, he or she can’t redeposit the funds and make a donation of IRA funds after lawmakers act.”

The expiration of this rule may not be a big deal for many of our readers who intend to make charitable donations as they always have, regardless of retirement-account donation benefits; but for some, not knowing what Congress may choose to do is making it hard to design a financial plan for the year, and causing increasing stress. “The problem arises for IRA owners [who are] over 70½ and must take an annual payout from the account. They want to withdraw as little as possible in order to let the assets expand but also want to donate some or all of the required payout directly to charity.”

Your best bet right now may be to consider your ultimate goal both for your IRA payout and for your charitable giving for the year, and then talk to a trusted advisor. One thing any estate or financial planner will tell you is that there is almost always more than one way to accomplish your goals. We cannot stress enough, however, how important it is to stay on top of any legal requirements or changes in the law when it comes to IRAs and retirement savings.

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A recent article in Forbes reveals that “self-employed folks with business income that passes through onto their personal returns… can deduct 100% of the premiums paid for themselves (and spouse) as a business expense, just like health insurance. These folks are still subject to the age-related premium limits, but that doesn’t necessarily limit [their] deduction.”

This could be a HUGE incentive for self-employed business owners who tend to lag behind their traditionally-employed counterparts in saving for future retirement expenses. It’s not that business owners are less concerned about their futures than their peers, but that as entrepreneurs struggle to get their small business off the ground in the early years they are more likely to put any extra income back into their business, rather than investing it for retirement. This tax-deduction for long-term care insurance can be just what entrepreneurs need to put them back on equal footing.

In today’s economy traditional employees and entrepreneurs alike need all the help they can get saving for the future and protecting the assets they have. To find out more about this, or other strategies to prepare yourself and your family for what we hope will be a long and prosperous retirement, please contact our office.

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According to the article, savers can look forward to 4 beneficial changes in the new year:

Higher income limits for contributions to your Roth IRA. “The income limits for making contributions to a Roth IRA will be between $110,000 and $125,000 for singles and heads of household in 2012, up $3,000 from 2011.” Married couples will reap the benefits as well, as their income limits will increase from $173,000 to $183,000 in 2012.

The ability to contribute more to your 401(k). “The contribution limit for 401(k), 403(b), and the federal government’s Thrift Savings Plan will increase to $17,000 in 2012, up from $16,500 in 2011.” This is great news for anyone who lost money when the economy crashed and is trying to slowly build up their savings again.

Tax breaks for more households who contribute to a traditional IRA. While IRA contribution limits will remain the same in 2012, and while there will be no change to the fact that “only workers who earn below certain income levels get a tax break for contributing to a traditional IRA.” The good news is that “those income limits will relax slightly next year.”

The tax-saver’s credit is expected to be expanded in 2012 as well, with “income limits [increased] by $1,000 to $57,500 for married couples filing jointly and by $750 to $43,125 for heads of households.”

While these may be baby steps as far as many savers and tax-payers are concerned, even small steps are good news for those trying to recoup their losses and get back on track for retirement. For more information about how these changes (or others) may benefit you or your loved ones please contact our office.

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That article covers eight estate planning components, beginning with a will and a living trust and ending with long term care insurance and disability insurance. All of these components are extremely useful (and in some cases absolutely necessary) and we highly recommend reading through the entire article. We would also suggest that there are three more documents that an entrepreneur should consider to help preserve business and wealth for future generations.

Family Limited Partnership (FLP): A Family Limited Partnership is an asset protection tool which allows parents to take business assets out of their taxable estate and transfer the value of that asset to their children while still remaining in control of the business.

Buy-Sell Agreement: A buy-sell agreement is a formal plan or contract between business partners establishing what will happen to the business should one of the partners die. This document specifies whether a partner may or may not buy your ownership shares for your heirs and for what price, or if you want to block certain family members or individuals from having any ownership share in the business.

Succession Plan: A succession plan should be a key element in any business plan, but especially for small or family businesses. A succession plan is exactly what it sounds like, a formal plan outlining your wishes for passing your business on to your successors. You may design a succession plan to facilitate your retirement, or to provide a smooth transition in the event of your death. In any case, a succession plan is essential for any business owner.

Don’t leave your business—or your family—out in the cold. Take the necessary steps to protect them both in the event of your death with a well-designed estate plan.

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Deciding who should inherit your retirement savings is fairly simple (although it is not uncommon for an ex-spouse to receive IRA benefits because beneficiary designation forms are not updated after significant life events such as a divorce,) it’s figuring out how the assets should be distributed that poses the problem. If done correctly, inherited IRA assets can be rolled over and stretched out by beneficiaries for years. But without the correct planning your heirs may find themselves paying significant taxes on their inheritance or worse yet, unable to access the funds at all.

The article explains that each of the many options for IRA beneficiaries requires a different kind of planning. Naming a spouse as a beneficiary is fairly straightforward, your spouse can either “Roll the funds into his or her own IRA” or “Open an inherited IRA and take distributions based upon his or her remaining life expectancy.” Planning to leave your IRA to a single child is somewhat similar to planning to leave it to a spouse.

But if you would like to leave your IRA to more than one child, or to a trust for the benefit of multiple individuals or charities, you’ll likely want to contact an attorney or accountant for more significant planning. As beneficial as these options can be, there are regulations and requirements involved with multiple beneficiaries, and “there are a lot of complexities with naming trusts as beneficiaries, so seek a competent estate planner for assistance.”

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We all know, however, that the wisdom of this adage comes from the fact that things are not always as they appear. The same is true, it seems, when it comes to perceptions about the difficulty of retirement planning for married couples vs. single individuals. The findings of the Charles Schwab & Company survey quoted by the NY Times article reveal that “85 percent of married Americans were saving for retirement, compared with 67 percent of singles, across all age groups. Thirty-eight percent of married Americans expressed confidence in their retirement readiness, compared with 32 percent of those who were single.”

The numbers aren’t all that surprising when you consider that while it may be easier to make decisions about money when you’re on your own, it’s easier to sock money away in a savings or retirement account when you have two incomes to draw from.

Furthermore, having a second person in the picture can actually serve as an incentive to stick to your savings plan. “While everyone wishes they didn’t have to compromise, a spouse is also a sort of ‘buddy system,’ in terms of staying on track for savings… If one person tends to be a spender, a spouse who has the opposite tendency may help the couple stay on track toward savings goals.”

The important thing—whether you’re single or married—is that you’re ready for whatever the future may be. Having a retirement savings plan, and protecting that plan for yourself and your family, is of the utmost importance.

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How expensive will long term care be? It turns out the answer to this question depends a great deal on where you live. The AARP, The Commonwealth Fund, and The SCAN Foundation recently released a report which they call “The Long Term Scorecard,” which compares states and ranks them according to categories. The website Web MD has an article explaining how to use the scorecard and what it means.

The article in Web MD states that “Long-term care is unaffordable for middle income families, according to [The Long Term Scorecard report.] Even in states where nursing home care is most affordable, such care averages 171% of an older person’s household income. The national average is 241%.”

Some states, however, have been making the issue of long-term care a priority, and have been wrestling with questions such as how to make it more affordable to residents and how to provide support to family caregivers. According to the article in Web MD, they’ve broken down the information in “The Scorecard” to help readers understand which states provide the best support (either financial, social, emotional or legal) for the elderly and their caregivers.

The article “ranks states’ performance according to four categories: 1. Affordability and access, 2. Patient choice of both provider and setting, 3. Quality of life and care, and 4. Support for family caregivers.” The states ranked highest overall were Minnesota, Washington, Oregon, Hawaii and Wisconsin; while the lowest ranking states turned out to be Mississippi, Alabama, West Virginia, Oklahoma and Indiana. (For more information on how the states were ranked and what each ranking means please read the article here.)

Perhaps the most important lesson to take from all this is that no matter where you live, or what your health is like right now, it is very likely that you will need some kind of long-term care in the future, and that that care will be expensive. Burying your head in the sand or choosing to “think about it when the time comes” will only make things worse for you and for your family. Call our office and let us help you prepare now for whatever the future may bring.

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The author of this article in Reuters writes that she learned quite a bit about retirement from her 91 year old mother, the first lesson being that “Retirement spending is a roller coaster, not a flat line.” According to the article the author’s mother chose to spend a lot of money on golf, travel and fun in the first few years of her retirement, but was later happy to settle down into a calmer, less expensive lifestyle later on. Her expenses didn’t go up again until near the end of her life when “her health deteriorated and she ended up spending thousands of dollars every month to cover her care.”

Preparing for long-term care can be essential to having a pleasant and affordable retirement; whether this means finding the right long-term care insurance or setting money aside in another vehicle and earmarking it for long-term care needs. “In the last year of my mother’s life, we were spending almost $7,000 a month of her money so that she could live in a nice place and get good care. If she had annuitized too much of her money or was living simply on pension checks, she wouldn’t have had the cash to do that. On the other hand, if she had a good long-term care policy, that might have helped.”

The last thing the author mentions in her article is that “The right paperwork really is helpful.” Having an updated will or trust, power of attorney, and healthcare directive or living will may not make it any less painful for you or your loved ones if you are diagnosed with Alzheimer’s or dementia, but it can make it easier for the people who care about you to spend quality time with you rather than with lawyers or accountants. The author’s mother had all her paperwork in order, which “made it very easy for me to manage her care and pay her bills when I had to. It was emotionally difficult to watch my mother give up her health and her spirit and her life, but I didn’t have to waste any of my time and worry on those bureaucratic details.”

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“The struggling economy, a longer life expectancy, ever-increasing health care costs and challenges facing Social Security are putting added pressure on the boomers, those born between 1946 and 1964.”

An Associated Press LifeGoesStrong.org poll questioned almost 1,500 adults, over 1,000 of whom were Baby Boomers, and found that while ALL Boomers had some concerns about financial comfort and survival as they aged, the younger Boomers in particular (those born in the ‘60s) had the strongest—and the most all-encompassing—concerns.

This discrepancy in fear makes sense when you consider that “Many older boomers still have a defined benefit pension plan, probably some decent retiree medical insurance and Social Security,” whereas “the youngest boomers… face more uncertainty about their pensions, their Social Security, their housing and their medical care.”

The NPR article does not offer any easy fixes or instant comforts to these financial concerns—indeed there are no easy fixes—but it does offer a few suggestions to help Boomers ease their minds about those things that worry them the most:

* Push retirement back as long as you can to put off drawing on your savings until absolutely necessary.

* Start investing in long term care insurance, and do so as early as possible. “Costs for long-term care insurance can range from $1,000 to $8,000 a year, depending on age, health conditions, policy term and other factors.” As you get older the cost goes up—sometimes very steeply.

* Don’t neglect your estate planning. According to the poll, “Forty-percent of the boomers polled said they had a legal will to spell out how their possessions should be distributed after death,” and even fewer had health care directives, proxies, or living wills. A health care directive “allows people to document their wishes concerning medical treatment, and the proxy is a medical power of attorney that allows for the appointment of a trusted person to make medical decisions in case an individual is unable to do so.”

Our office can help you address any concerns you might have about your own (or a loved one’s) golden years. Don’t hesitate to contact us.

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As noted by this article in the Wall Street Journal, “The new, higher threshold for the federal estate tax has many heirs happily thinking they won’t have to surrender a big piece of their inheritance.” But these heirs “may need to think again if they’re in line to receive a lot of money from tax-protected retirement accounts like 401(k)s and IRAs.”

Many (if not most) retirement assets these days are IRD assets, this is “income in respect of a decedent,” and it means that the assets are income earned by a person, but not taxed or received before that person passed away. These IRD assets can be wonderfully beneficial to the investor… but they can be an unpleasant surprise for heirs, who will end up paying the taxes on these assets.

“Heirs who receive retirement accounts often pay far more tax on IRD than they have to, collecting payments from the plan but failing to take an annual deduction that is available to beneficiaries. Sometimes that’s because the tax attorney who planned the estate knew about the deduction, but the accountant who prepares the heir’s taxes doesn’t.”

Some of the solutions suggested in the article are to take advantage of a recent rule change which allows many IRD savings accounts to be converted to Roth 401(k)s. Taking advantage of this and converting the money to a Roth allows the owner to pay any applicable taxes now, so that heirs won’t be liable. Another option is to move money from the IRD retirement account into an irrevocable life insurance trust, thus removing it from the taxable estate.

“People need to refocus their thinking on what heirs are truly inheriting.” Our office can help you do just that. A little bit of thought and action now can save your heirs a lot of taxes and confusion down the line, and this is especially true if you are lucky enough to have a significant amount of savings that you anticipate passing on to your children or grandchildren.

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