White House Proposes Changes to Retirement Plans

A look at some of the ideas contained in the 2017 federal budget.

Provided by Ken Ford

Will workplace retirement plans be altered in the near future? The White House will propose some changes to these plans in the 2017 federal budget, with the goal of making such programs more accessible. Here are some of the envisioned changes.

Pooled employer-sponsored retirement programs. This concept could save small businesses money. Current laws permit multi-employer retirement plans, but the companies involved must be similar in nature. The White House wants to lift that restriction.1,2

In theory, allowing businesses across disparate industries to join pooled retirement plans could result in significant savings. Administrative expenses could be reduced, as well as the costs of compliance.

Would governmental and non-profit workplaces also be allowed to pool their retirement plans under the proposal? There is no word about that at this point.

This pooled retirement plan concept would offer employees new degrees of portability for their savings. A worker leaving a job at a participating firm in the pool would be able to retain his or her retirement account after taking a job with another of the participating firms. Along these lines, the White House will also propose new ways to make it easier for workers to monitor and reconcile multiple workplace retirement accounts.2,3

Scant details have emerged about how these pooled plans would be created or governed, or how much implementing them would cost taxpayers. Congress will be asked for $100 million in the new budget draft to test new and more portable forms of retirement savings accounts. Presumably, many more details will surface when the proposed federal budget becomes public in February.2,3

Automatic enrollment in IRAs. In the new federal budget draft, the Obama administration will require businesses with more than 10 employees and no retirement savings program to enroll their workers in IRAs. This idea has been included in past federal budget drafts, but it has yet to survive bipartisan negotiations – and it may not this time. Recently, the myRA retirement account was created through executive action to try and promote this objective.1,3

A lower bar to retirement plan participation for part-time employees. Another proposal within the new budget would allow anyone who has worked for an employer for more than 500 hours a year for the past three years to participate in an employer-sponsored retirement plan.2

A bigger tax break for businesses starting retirement plans. Eligible employers can receive a federal tax credit for inaugurating a retirement plan – a credit for 50% of what the IRS deems the employer’s “ordinary and necessary eligible startup costs,” up to a maximum of $500. That credit (which is part of the general business credit) may be claimed for each of the first three years that the plan is in place, and a business may even elect to begin claiming it in the tax year preceding the tax year that the plan goes into effect. The White House wants the IRS to boost this annual credit from $500 to $1,500.2,4

Also, businesses could receive an annual federal tax credit of up to $500 merely for automatically enrolling workers in their retirement plans. As per the above credit, they could claim this for three straight years.2

What are the odds of these proposals making it into the final 2017 federal budget? The odds may be long. Through the decades, federal budget drafts have often contained “blue sky” visions characteristic of this or that presidency, ideas that are eventually compromised or jettisoned. That may be the case here. If the above concepts do become law, they may change the face of retirement plan participation and administration.

 

 


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 – nytimes.com/2016/01/26/us/obama-to-urge-easing-401-k-rules-for-small-businesses.html [1/26/16]
2 – tinyurl.com/je5uj3r Washington Post ( [1/26/16]
3 – bloomberg.com/politics/articles/2016-01-26/obama-seeks-to-expand-401-k-use-by-letting-employers-pool-plans [1/26/16]
4 – irs.gov/Retirement-Plans/Retirement-Plans-Startup-Costs-Tax-Credit [8/18/15]

Compliance:  1-463396 

The A, B, C, & D of Medicare

Breaking down the basics & what each part covers.

Provided by Ken Ford

Whether your 65th birthday is on the horizon or decades away, you should understand the parts of Medicare – what they cover, and where they come from.

Parts A & B: Original Medicare. America created a national health insurance program for seniors in 1965 with two components. Part A is hospital insurance. It provides coverage for inpatient stays at medical facilities. It can also help cover the costs of hospice care, home health care and nursing home care – but not for long, and only under certain parameters.1

Seniors are frequently warned that Medicare will only pay for a maximum of 100 days of nursing home care (provided certain conditions are met). Part A is the part that does so. Under current rules, you pay $0 for days 1-20 of skilled nursing facility (SNF) care under Part A. During days 21-100, a $157.50 daily coinsurance payment may be required of you.2

If you stop receiving SNF care for 30 days, you need a new 3-day hospital stay to qualify for further nursing home care under Part A. If you can go 60 days in a row without SNF care, the clock resets: you are once again eligible for up to 100 days of SNF benefits via Part A.2

If you have had Medicare taxes withheld from your paycheck for at least 40 calendar quarters during your lifetime, you will get Part A coverage for free.1

Part B is medical insurance and helps pick up some of the tab for outpatient care, physician services, expenses for durable medical equipment (scooters, wheelchairs), and other medical services such as lab tests and varieties of health screenings.1,3

Part B isn’t free. You pay monthly premiums to get it and a yearly deductible (plus 20% of costs). The premiums vary according to the Medicare recipient’s income level; in 2015, most Medicare recipients pay $104.90 a month for their Part B coverage. The current yearly deductible is $147. Some people automatically get Part B, but others have to sign up for it.2,4

Part C: Medicare Advantage plans. Insurance companies offer these Medicare-approved plans. Part C plans offer seniors all the benefits of Part A and Part B and a great deal more: most feature prescription drug coverage and many include hearing, vision, dental, and fitness benefits. To enroll in a Part C plan, you need have Part A and Part B coverage in place. To keep up your Part C coverage, you must keep up your payment of Part B premiums as well as your Part C premiums.2

To say not all Part C plans are alike is an understatement. Provider networks, premiums, copays, coinsurance, and out-of-pocket spending limits can all vary widely, so shopping around is wise. During Medicare’s annual Open Enrollment Period (Oct. 15 – Dec. 7), seniors can choose to switch out of Original Medicare to a Part C plan or vice versa, although any such move is much wiser with a Medigap policy already in place.5

How does a Medigap plan differ from a Part C plan? Medigap plans (also called Medicare Supplement plans) emerged to address the gaps in Part A and Part B coverage. If you have Part A and Part B already in place, a Medigap policy can pick up some copayments, coinsurance and deductibles for you. Some Medigap policies can even help you pay for medical care outside the United States. You have to pay Part B premiums in addition to Medigap plan premiums to keep a Medigap policy in effect.6

Medigap plans don’t feature prescription drug coverage anymore. Medigap policies have been sold without drug coverage since 2005.6

Part D: prescription drug plans. While Part C plans commonly offer prescription drug coverage, insurers also sell Part D plans as a standalone product to those with Original Medicare. As per Medigap and Part C coverage, you need to keep paying Part B premiums in addition to premiums for the drug plan to keep Part D coverage going.1,2

Every Part D plan has a formulary, a list of medications covered under the plan. Most Part D plans rank approved drugs into tiers by cost. The good news is that Medicare’s website will determine the best Part D plan for you. Go to medicare.gov/find-a-plan to start your search; enter your medications and the website will do the legwork for you.7

Part C & Part D plans are assigned ratings. Medicare annually rates these plans (one star being worst, five stars being best) according to member satisfaction, provider network(s) and quality of coverage. As you search for a plan at medicare.gov, you also have a chance to check out the rankings.8

 


 

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 – dailyfinance.com/2013/05/14/medicare-explained-part-a-b-c-d/ [5/14/13]
2 – medicare.gov/coverage/skilled-nursing-facility-care.html [3/30/15]
3 – info.tuftsmedicarepreferred.org/medicare-matters-blog/bid/74844/Medicare-Part-A-B-C-and-D-What-does-it-all-mean [10/1/13]
4 – medicare.gov/your-medicare-costs/part-b-costs/part-b-costs.html [3/30/15]
5 – medicare.gov/sign-up-change-plans/when-can-i-join-a-health-or-drug-plan/when-can-i-join-a-health-or-drug-plan.html#collapse-3192 [3/30/15]
6 – medicare.gov/supplement-other-insurance/medigap/whats-medigap.html [3/30/15]
7 – medicare.gov/part-d/coverage/part-d-coverage.html [3/30/15]
8 – medicare.gov/sign-up-change-plans/when-can-i-join-a-health-or-drug-plan/five-star-enrollment/5-star-enrollment-period.html [3/30/15]

Internal compliance number: 1-372570

The Major Retirement Planning Mistakes

Why are they made again and again? 

Much has been written about the classic financial mistakes that plague start-ups, family businesses, corporations and charities. Aside from these blunders, there are also some classic financial missteps that plague retirees.

Calling them “mistakes” may be a bit harsh, as not all of them represent errors in judgment. Yet whether they result from ignorance or fate, we need to be aware of them as we plan for and enter retirement.

Leaving work too early. The full retirement age for many baby boomers is 66. As Social Security benefits rise about 8% for every year you delay receiving them, waiting a few years to apply for benefits can position you for greater retirement income.1

Some of us are forced to make this “mistake”. Roughly 40% of us retire earlier than we want to; about half of us apply for Social Security before full retirement age. Still, any way that you can postpone applying for benefits will leave you with more SSI.1

Underestimating medical expenses. Fidelity Investments says that the typical couple retiring at 65 today will need $240,000 to pay for their future health care costs (assuming one spouse lives to 82 and the other to 85). The Employee Benefit Research Institute says $231,000 might suffice for 75% of retirements, $287,000 for 90% of retirements. Prudent retirees explore ways to cover these costs – they do exist.2

Taking the potential for longevity too lightly. Are you 65? If you are a man, you have a 40% chance of living to age 85; if you are a woman, a 53% chance. Those numbers are from the Social Security Administration. Planning for a 20- or 30-year retirement isn’t absurd; it may be wise. The Society of Actuaries recently published a report in which about half of the 1,600 respondents (aged 45-60) underestimated their projected life expectancy. We still have a lingering cultural assumption that our retirements might duplicate the relatively brief ones of our parents.3

Withdrawing too much each year. You may have heard of the “4% rule”, a popular guideline stating that you should withdraw only about 4% of your retirement savings annually. The “4% rule” isn’t a rule, but many cautious retirees do try to abide by it.

So why do some retirees withdraw 7% or 8% a year? In the first phase of retirement, people tend to live it up; more free time naturally promotes new ventures and adventures, and an inclination to live a bit more lavishly.

Ignoring tax efficiency & fees. It can be a good idea to have both taxable and tax-advantaged accounts in retirement. Assuming that your retirement will be long, you may want to assign that or that investment to it “preferred domain” – that is, the taxable or tax-advantaged account that may be most appropriate for that investment in pursuit of the entire portfolio’s optimal after-tax return.

Many younger investors chase the return. Some retirees, however, find a shortfall when they try to live on portfolio income. In response, they move money into stocks offering significant dividends or high-yield bonds – which may be bad moves in the long run. Taking retirement income off both the principal and interest of a portfolio may give you a way to reduce ordinary income and income taxes.

Account fees must also be watched. The Department of Labor notes that a 401(k) plan with a 1.5% annual account fee would leave a plan participant with 28% less money than a 401(k) with a 0.5% annual fee.4

Avoiding market risk. The return on many fixed-rate investments might seem pitiful in comparison to other options these days. Equity investment does invite risk, but the reward may be worth it.

Retiring with big debts. It is pretty hard to preserve (or accumulate) wealth when you are handing chunks of it to assorted creditors.

Putting college costs before retirement costs. There is no “financial aid” program for retirement. There are no “retirement loans”. Your children have their whole financial lives ahead of them. Try to refrain from touching your home equity or your IRA to pay for their education expenses.

Retiring with no plan or investment strategy. Some people do this – too many. An unplanned retirement may bring terrible financial surprises; retiring without an investment strategy leaves some people prone to market timing and day trading.4

These are some of the classic retirement planning mistakes. Why not plan to avoid them? Take a little time to review and refine your retirement strategy in the company of the financial professional you know and trust.

 


 

High yield/junk bonds (grade BB or below) are not investment grade securities, and are subject to higher interest rate, credit, and liquidity risks than those graded BBB and above. They generally should be part of a diversified portfolio for sophisticated investors.

The payment of stick dividends is not guaranteed. Companies may reduce or eliminate the payment of dividends at any given time.

This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. 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 – moneyland.time.com/2012/04/17/the-7-biggest-retirement-planning-mistakes/ [4/17/12]
2 – money.usnews.com/money/blogs/planning-to-retire/2012/05/10/fidelity-couples-need-240000-for-retirement-health-costs/ [5/10/12]
3 – www.forbes.com/sites/ashleaebeling/2012/08/10/americans-clueless-about-life-expectancy-bungling-retirement-planning/ [8/10/12]
4 – www.post-gazette.com/stories/business/personal/shop-smart-avoid-seven-common-errors-in-retirement-plans-635633/ [5/13/12]                 

Internal Doc Number: 1-353168

Who Needs Estate Planning? Why estate planning is so important, and not just for the rich.

Why estate planning is so important, and not just for the rich.

You have an estate. It doesn’t matter how limited (or unlimited) your means may be, and it doesn’t matter if you own a mansion or a motor home.

Rich or poor, when you die, you leave behind an estate. For some, this can mean real property, cash, an investment portfolio and more. For others, it could be as straightforward as the $10 bill in their wallet and the clothes on their back. Either way, what you leave behind when you die is considered to be your “estate”.

“But, I don’t need estate planning … do I?” Let’s think about that. If the estate is small, should you still plan? Well, even if you’re just leaving behind the $10 bill in your wallet, who will inherit it? Do you have a spouse? Children? Is it theirs? Should it go to just one of them, or be split between them? If you don’t decide, you could potentially be leaving behind a legacy of legal headaches to your survivors. This, quite simply, is what estate planning is all about – deciding how what you have now (money and assets) will be distributed after your lifetime.

Do you HAVE to create an estate plan? While it is absolutely possible to die without planning your estate, I wouldn’t say that it is advisable. If you don’t leave behind an estate plan, your family could face major legal issues and (possibly) bitter disputes. So in my opinion, everyone should do some form of estate planning. Your estate plan could include wills and trusts, life insurance, disability insurance, a living will, a pre- or post-nuptial agreement, long-term care insurance, power of attorney and more.

Why not just a will? Did you know that your heirs could encounter legal hassles … even if you have a will? Basically, a will tells the world what you’d like to have happen, but proper estate planning is what provides the tools to make those things happen. While your will may state who your beneficiaries are, those beneficiaries may still have to seek a court order to have assets transfer from your name to theirs, and in such a case, those assets won’t lawfully belong to them until the court procedure (known as probate) concludes. Estate planning can include items like properly prepared and funded trusts, which could help your heirs to avoid probate.

Where do you begin? I recommend that you speak with a qualified legal or financial professional – one with experience in estate planning. A qualified financial professional may be able to refer you to a good estate planning attorney and a qualified tax professional, and lead a team effort to assist you in drafting your legal documents.

 


 

This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. 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.
Internal Doc Number: 1-248288

The Annual Financial Check-Up

Don’t ignore it. Here’s why.

Here’s the scenario … you get a card in the mail, one of those little reminders that tells you it’s time for your annual financial checkup. Your reaction: I’ll take care of that later. Here’s why you should look forward to it.

Why do I need an annual review? Because things change, and during the course of the last 12 months, you may have … changed jobs, made major purchases, welcomed a new child, retired, bought or sold a residence, decided upon new goals. These developments can change your financial objectives. Also, it is just sensible to measure your financial progress. If you are not making progress in accumulating assets, or if you are assuming too much risk as a result of your current portfolio or financial decisions, it’s time for change.

The annual review is a “deep breath” where you can get away from daily distractions and think clearly about financial planning.

Just imagine. Imagine letting your investments go for five or ten years, assuming that they’re doing okay while you wonder what the quarterly statements mean. Imagine being a few years from retirement only to find you have less than a year’s salary in savings. Imagine passing away and leaving unresolved money issues for your loved ones, or subjecting them to a contentious probate process.

These scenarios are all too real; people run to financial advisors for help with them every day. If they had only reviewed what was happening with their lives financially, they could have planned to avoid these issues in advance. Putting things off can be dangerous.

This is an ideal time to take a look under the hood – financially speaking. During your annual review, you can estimate your net worth, and also possibly learn about any tax changes that might affect your investments, business or estate. It’s also a good time to make voluntary IRA contributions, and get college funding and financial aid applications underway.

Financial planning is not an event you do once in your lifetime and forget about. Financial planning should be an ongoing priority.


This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. 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.

Internal Doc Number: 1-257843