Wieniewitz Financial will hold their second annual Cruisin’ for a Cause on Friday, September 28 at the Cokesbury Center. The charity car show will benefit Special Spaces of Knoxville, a charity that the Knoxville financial firm owner, Trae Wieniewitz, learned about while watching ABC’s “Secret Millionaire” last year.
I came across a rare situation yesterday where someone has the money to go ahead and retire at 55. For everyone out there, that sounds great, I know it does to me. But there are problems with this. If he goes ahead and uses his 401K, the IRS will penalize an additional 10% on his income due to not being 59 1/2. So how do we go about this without harming the client? The answer might be a 72T.
You can avoid the 10% penalty if distributions are made as part of a series of substantially equal periodic payments over your life expectancy or the life expectancies of you and your designated beneficiary, the §72(t) tax does not apply. If these distributions are from a qualified plan, not an IRA, you must separate from service with the employer maintaining the plan before the payments begin for this exception to apply. If the series of substantially equal periodic payments is subsequently modified (other than by reason of death or disability) within 5 years of the date of the first payment, or, if later, age 59½, the exception to the 10% tax does not apply. In that case, your tax for the modification year is increased by the amount that would have been imposed (but for the exception), plus interest for the deferral period.
This isn’t a very easy thing to do, and I would urge you to talk to a financial professional if you are in this situation. But the good news is you can retire early if you plan right.
Knoxville Financial Advisor|Knoxville Retirement Planning
Securities offered through Taylor Capital Management, Inc. | 2230 Towne Lake Parkway | Building 800 – Suite 130 | Woodstock, GA 30189 | Members FINRA/SIPC | 800-924-9322
As time goes on we see more and more information on Long Term Care and the need for it. Longevity for Americans has become more predominant, but the need for LTC has too. Also, making sure your income will live as long as you do have an increased importance now. It is imperative we meet with a financial advisor to plan properly to insure our money will last as long as we do. An article by Philip Moeller with U.S. News shows us how Americans are living longer.
Older Americans are paying attention to the steady stream of research findings and stories about impressive gains in longevity.
In particular, we have a pretty accurate view of the increases achieved in average life spans, according to the sixth biennial study of longevity sponsored by the Society of Actuaries (SOA).
Ask Americans age 65 and older how much longer they expect to live, and you’re likely to get a fairly accurate response, the SOA reports. “By age 65, U.S. males in average health have a 40 percent chance of living to age 85 and females more than a 50 percent chance,” the report says, and “the survivor of a 65-year-old couple is more than 70 percent likely to reach 85.”
There also are encouraging signs that this recognition is leading to changes in financial planning and preparation for a longer retirement. In particular, greater attention is being paid to the age at which people begin to collect Social Security.
The program’s early-retirement benefits can begin at age 62, but rise by about 8 percent a year for each year benefits are delayed until age 70. As people have become more confident that they will live to older ages, the appeal of delaying Social Security is on the rise.
But if we “get it” about longevity, the SOA warns, we still have a very sketchy understanding of longevity risks, a catch-all term that encompasses concerns about amassing enough money for retirement and then producing sufficient annual income payments so that we do not outlive our assets. “Many fail to understand the potential consequences of living beyond their own planned life expectancy,” the report says. “Many people are not focused on risk management, and making assets last for the rest of their lives is not their highest priority.”
In thinking about the implications of longevity, three strong themes emerge from the SOA’s research and public polling:
1. Beware of the averages. By definition, our collective life spans represent an accurate figure on average longevity. But individual life spans differ greatly from these averages. “When people are told they will live to an age such as 80 or 85, they don’t realize this means there is a 50 percent chance they could live longer than that age,” the report says. People with lots of education and financial resources are likely to live much longer than average.
Likewise, Americans with little money or schooling are likely to live shorter lives, a fact that is often overlooked in proposals to increase the Social Security retirement age. The nation’s longevity gap is distressingly large, the SOA report notes. “In the poorest part of the United States, life expectancy at birth is as low as in countries like Panama or Pakistan, a full 15 years behind the wealthiest and healthiest regions of the nation, where it rivals that of world leaders, Switzerland and Japan.”
2. Understand your health risks. Lifestyle choices dominate longevity gains until we reach old age, the SOA says, at which point genetics is the greatest driver of remaining life spans. Beyond influencing how long we live, the ways we take care of ourselves can also determine the quality of our lives as we age as well as the financial burden of older-age health expenses.
Women face more serious older-age health issues than men, in part because they live longer. “One actuarial research study predicts that for a healthy male age 65, 80 percent of his remaining lifetime will be spent non-disabled, 10 percent in mild to moderate disability, and another 10 percent in severe disability,” the report says. “For females, the corresponding disability percentages are considerably higher, with 70 percent in healthy status and approximately 15 percent in each of the two stages of disability.”
Again, these are averages. Individual outcomes can be dramatically influenced by our behavior. The report’s polling of older Americans found that nearly half of those surveyed said their health and lifestyle decisions were major factors in their personal longevity expectations. “The message is beginning to be heard and heeded,” the report says.
3. Anticipate cognitive decline. Even normal aging brings reduced mental abilities, making it harder to understand money matters, make sound financial decisions, and protect yourself from financial fraud.
For the considerable population that will have some degree of dementia, the problem can be much worse. Research cited in the SOA report suggests that a household’s prime financial decision-maker hangs onto this role for too long. By the time the household recognizes the problem, it may be too late to avoid serious money problems that could have been avoided. Consider involving younger family members in financial planning and decisions. Even if they initially serve only as a back-up to your own financial planning and management efforts, their advice can be helpful. And they will be likely to see signs of cognitive decline before you do, and will already have the knowledge about your finances to step in quickly and provide help.
Knoxville Financial Advisor|Knoxville Retirement Planning
Securities offered through Taylor Capital Management, Inc. | 2230 Towne Lake Parkway | Building 800 – Suite 130 | Woodstock, GA 30189 | Members FINRA/SIPC | 800-924-9322
There has been a lot of media coverage dedicated to the fact that first wave of baby boomers is hitting hit the “unofficial” retirement age of 65. For the next 10-12 years, there will be approximately 8,000 – 10,000 baby boomers turning 65 every single day. So as you can imagine, there has been a considerable amount of focus on baby boomers and their retirement. In particular, lifetime income options that are provided by vehicles like annuities. With a large number of Boomers concerned about the size of their 401(k)’s and whether they are large enough to provide income for life, annuities could play a very important role in their history over the next 15 years.
With all of this focus on the Boomers, we want to turn our attention to Generation X, who will need the support of financial professionals for retirement income even more than their parents. To begin, Generation X is broadly defined as adults born from 1960 to 1980. So today, Gen X’ers are in the age range of 30 to 50.
Many times I asked if annuities are a fit for 30 and 40 year old Gen X’ers. Of course the answer is determined by many factors including that particular client’s financial goals, current financial situation, and risk tolerance to name a few. Annuities can have the combination of principle protection, annual reset of gains, and tax deferral. So a 30 year old who starts his or her annuity today could continue to fund that annuity along with his or her 401(k) or other retirement plans over many decades. A difference is that most fixed annuities limit the client’s principle from market risk unlike traditional investment vehicles used in 401(k) plans. Whereas a 75 year old might need the lifetime income that an annuity can provide immediately or within several years of the purchase, the 30 year old most likely has a number of years left to work and save for retirement. Continued contribution to his or her retirement plans and annuities could allow that 30 year old to build a large enough nest egg to meet retirement needs while keeping a protecting a portion from the downturns in the market.
Furthermore, many recent studies have estimated that within 20 years, Social Security may not be able to meet the income needs of our current population. If that proves to be true, Generation X may get little to no help from Social Security. So the next time you hear a younger adult mention that annuities are only for older people, think again.
Securities offered through Taylor Capital Management, Inc. | 2230 Towne Lake Parkway | Building 800 – Suite 130 | Woodstock, GA 30189 | Members FINRA/SIPC | 800-924-9322
Many Baby Boomers head to work each day and wonder, “So what’s the number?”
How many more years do they need to keep working? It turns out that if many of us could just keep working until age 70, we could be OK in retirement, according to a new study.
Sure, 70 isn’t the magic number that most people want to hear. Even so, knowing any number might be reassuring, if you’re worried that you’d never be able to stop working.
The National Retirement Risk Index, produced by the Center for Retirement Research at Boston College, examines household wealth and retirement readiness. The center receives sponsorship from Prudential. Research shows that only about 30% of households are prepared for retirement at Social Security’s earliest retirement age of 62. What’s key is that more than 60% of those households are covered by a defined-benefit plan or a traditional pension.
Research for the National Retirement Risk Index indicates that about 49% of today’s working households would be able to afford to retire at age 65.
The unsettling aspect of the study indicated that about 51% of working households are at risk if they retire at 65.
The toughest question of all is, will 5 more years really make that big of a difference to you?
Securities offered through Taylor Capital Management, Inc. | 2230 Towne Lake Parkway | Building 800 – Suite 130 | Woodstock, GA 30189 | Members FINRA/SIPC | 800-924-9322
With interest rates hovering at all-time lows, does it pay to start taking Social Security right away or is there a larger benefit in delaying Social Security? Social Security is in essence an annuity with more generous terms any private annuity available. That said in a low rate environment as the current economy, it would actually be in the best interest of a large of group of retirees to delay taking Social Security payouts. According to Soven and Slavov, “Delaying Social Security is equivalent to purchasing an annuity….An individual who delays forgoes benefits during the delay period in exchange for an increase in benefit payments for life.” Lita Epstein, author of “Complete Idiot’s Guide to Social Security and Medicare,” every year of retirement that you delay social security after age 66 you receive an 8% benefits increase, therefore a 32% increase if you wait until age 70 to claim the benefits. Unlike private annuities Social Security may become more generous over time despite increase in life expectancy and fluctuations in the real interest rate which cause the terms on private annuities to change. By using strategic claiming plan, a couple could increase their overall Social Security benefit by $250K.
To read the entire article written by Robert Powell for MarketWatch click Does it pay to delay social security.
Powell, Robert. “With Rates Low, It Pays to Delay Social Security”. Yahoo! Finance. July 12th, 2012. August 18th, 2012. http://finance.yahoo.com/news/rates-low-pays-delay-social-040148291.html
Securities offered through Taylor Capital Management, Inc. | 2230 Towne Lake Parkway | Building 800 – Suite 130 | Woodstock, GA 30189 | Members FINRA/SIPC | 800-924-9322
As the Baby Boomers transition their lives from their earning years to their burning years, they will need to make some major decisions. One decision which will be made more than any other will be whether to take social security or to defer it. The decisions they make today could possibly cost them tens of thousands of dollars over their longest vacation called Retirement. This article will focus on 3 of the most common mistakes retirees make with their social security election.
The math behind whether to elect social security before Full Retirement Age could possibly make or break a retirement. We will continue this blog with a series of things to consider when applying for your most reliable income stream in retirement. Right now, we want to demonstrate these ramifications of the 3 major mistakes that we see Baby Boomers should consider when electing their benefits.
Have you stopped to re- think about what happens to your loved ones after your passing? Lifetime of income is probably the tip of the sword so to speak when it comes to retirement planning for baby boomers. Leaving a legacy behind for your heirs is up there as well, but have you really thought about what happens to that so called legacy?
One of the the most common questions I get on a weekly basis is, “what happens to my money when I die?” or “will that money be passed along to my beneficiaries?” We wonder about the assets, but not the debt.
Most debts held in the decedents name only will be paid from assets in their estate. In the case of secured debt, if the assets do not cover the debt, the property may be sold or repossessed to cover the debt. In the case of accounts held jointly with another person, the surviving account holder will be responsible for any remaining debt.
That’s why life insurance and annuities with death benefits are so important. It turns out to be much more than giving upon death, but income replacement for the other costs associated with your estate that otherwise could become a burden to your family.
You are looking into buying an annuity or a new life insurance policy and you are now wondering, “What is more important, the rates or the ratings”? This is a question that we are hearing more and more every week here at Wieniewitz Financial. It used to be a real simple answer back when interest rates were high and all carriers had excellent offerings with no reserve or capital issues, you simply went with the higher rated carrier. But now, with all time low interest rates, many of the top carriers are forced to cut back their offerings in order to keep their reserve and capital numbers up to keep their high ratings. Call it an insurance “Catch 22″. The higher the carrier rating, the more reserves they need to have to meet their large obligations and keep their rating. The last thing an A or A+ rated carrier wants is a downgrade.
However, the B+ rated carriers don’t have as big of a bulls-eye on their back and usually don’t have the large reserve and capital requirements as the large A+ rated carrier. Many times in these all time low interest rates, the best rates are clearly going to the lower rated (A- and B+) carriers.
So what exactly do the ratings even mean? The ratings agencies use the rating system to rank the insurance carriers ability to meet their on-going obligations. Meaning, the rating is supposed to indicate that the company has the proper assets and reserves needed to pay any and all claims. Is the rating always correct? Of course not. But for the most part, the rating agencies do a good job of basing their rating on what they can see.
Finally, there is some good news to consider when making your final decision. Since 2008, there have been over 400 banks that have failed. In that same time frame, we are not aware of any insurance company that has failed regardless of rating. So even a C rated insurance carrier was safer than any of those 400+ banks.
After the rough run in the market following the debt ceiling issue in 2011, the experts on Wall Street are advising investors that they need to get ready for another bumpy volatile ride. According to a CNNMoney survey 80% of investment strategists and money managers agree that the next few months will be rough as the market is going to be extremely choppy. In fact they say that it is very likely that the market will be more volatile than last year. John Praveen, managing director and chief investment strategist of Prudential International Investments Advisers, said “In case investors are not sufficiently convinced that policy makers and politicians are up to the task of handling the fiscal cliff in a reasonably effective manner, financial markets are likely to again fall sharply, similar to the plunge around the debt ceiling debacle in 2011.” According to Peter Tuz of the Chase Investment Counsel, trading will most likely be more volatile leading up to the presidential election as investors attempt to predict which tax policies will be enforced and or extended. According to the CNNMoney survey, 75% of the money managers and investment strategists concede that a victory for Romney and a republican controlled congress will be the most ideal outcome for financial markets. The Congressional Budget Office and many economists have already predicted that if the expiring tax cuts and the upcoming spending cuts are put into effect simultaneously that US will most likely fall right back into a recession. As market volatility increases, many investors seek safe havens, for retirement planning annuities can provide that low risk option.
