Is Retirement Right For You?

Last Updated (Wednesday, 16 July 2008 15:35)
Written by Hank Brock

The Top Questions You Need To Ask Yourself About Retirement

Working beyond retirement age might appeal to you for a number of reasons. You will have ongoing socialization, an opportunity to keep mentally and physically active, and hopefully an escape from boredom.  It may give you a reason to get up in the morning. It exposes you to a mixed age group. And, of course, it can help supplement other income sources. Plus, it may help you feel like you are contributing to society in a meaningful way.

The down side, of course, is that you will probably have less time for leisure activities, a possible reduction in Social Security benefits, and the inability to plan vacations, travel, and family time at your convenience.  Weigh the advantages and disadvantages, and then ask yourself the following questions:

• Are you ready to retire?
• Have you prepared financially?
• Not only do you have enough dollars set aside, but are those dollars invested in a portfolio that will provide an inflation hedge as well as downside risk protection?
• Do you have an estate plan?
• Have you raised your children to be financially independent? Or, are they still coming home to siphon from mom and dad?
• Are you emotionally ready?

According to Dr. Thomas H. Holmes, retirement can be a major source of stress for many people.

• Have you prepared yourself mentally and emotionally to cope with these potential stressors?
• Has your spouse likewise prepared for the mental or emotional adjustment?

Dr. Thomas H. Holmes, at the University of Washington School of Medicine, has developed a scale to measure the psychological stress that may be caused by various changes in life circumstances. Dr. Holmes indicates an accumulation of 200 or more "life-change units" in a single year may be more disruptive than individuals can withstand, and make them susceptible to depression and other illnesses.

• How is your health?

Everyone has heard stories about workaholics who would take little relaxation, and then die when they had nothing to do. That is not uncommon, because of the stress factors and the lifestyle adjustment.

I remember well a CPA client whose wife was an author.  She needed quiet time at home during the day in order to write. When he retired, his constant presence drove her nuts!

• Have you and your spouse talked things over, and made provision for the amount of time together and the amount of time away from each other?

It is important to work out a schedule that meets both of your needs.

• Are your hobbies, interests, or part time job engaging enough that you feel you have purpose?

Don't expect to live a life of boredom, monotony, and lack of purpose, and then suddenly develop a purpose upon retirement. If you are a couch potato before retirement, you are not going to develop interests overnight.

Finally, try practicing retirement with your spouse. Develop a weekly schedule, and try living it. Imagine what you would be doing day in and day out. Try living on the amount of income that you would have at retirement. Evaluate your physical activities and your diet. Get involved in those activities which you might be pursuing after retirement. Start looking for a new residence, if you plan to move when you retire.  Work on developing social contacts outside your office environment.  Then, make the retirement decision that will work best for you.

Hank Brock is President of Brock and Associates, LLC and author of "Your Complete Guide to Money Happiness." Hank is an expert at making your retirement plan a success!

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Why Utah Has One of the Best 529 College Savings Plan

Last Updated (Tuesday, 07 October 2008 15:27)
Written by Scott Slater

A great way to save for either a child’s or grandchild’s college education is through a states’ 529 plan, and according to the investment research firm, Morningstar, we have one of the best right here in Utah. 

The Utah Educational Savings Plan has one of the lowest management fees of any plan and waves the $25 administration fee for Utah residents. Utah’s plan is so popular 80% of participants are non-residents.

The Utah plan allows contributions to grow both state and federal income tax free if withdrawn for qualified higher education expenses here in Utah or abroad. Another bonus for Utah residents, contributions are state tax deductible up to $1,620 ($3,240 filing jointly) per beneficiary.

Or instead of the deduction you could take a tax credit of $87 ($173 filing jointly). The beneficiary needs to be younger than 19 when the account is opened to take advantage of this perk.  You may also contribute up to $60,000 ($120,000 filing jointly) at one time without triggering gift taxes as long as you prorate that gift over 5 years.

529 plans remain under the donor’s control and can be transferred to another family member if the original recipient decides not to go to college. If the beneficiary dies or ends up being awarded a full scholarship the donor can transfer the funds to another qualified family member or withdraw the funds and just pay taxes on any earnings in the account.

Investment choices available can range from money market funds to mutual funds, but remember they are not guaranteed by any government entity as to their performance.  One last note, you can rollover series EE or series I savings bonds into a 529 plan and avoid paying any interest earned on those bonds. The rollover is considered equivalent to using the proceeds for qualified education expenses.

Scott Slater is an Associate of Brock and Associates, LLC, a financial planning firm that specializes in retirement, estate, and tax planning. Scott has professional knowledge of Utah's 529 College Savings Plans.

Leaving A Legacy To Your Children

Last Updated (Monday, 23 February 2009 09:45)
Written by Scott Slater

Once we are gone from this earth can we only hope the virtues we taught our children will go on to the next generations?  True, when our children are adults they are responsible for making their own decisions, but do we not still want to sway commendable behavior whenever we can?  Does anyone ever grow to old to appreciate praise from their parents or someone they respect?

We all try our best to pass on principles that we know will serve our children well.  Most times those lessons are passed on by simply showing our approval.  But after we are gone how can we reinforce the good qualities we want them to have?

If you would like to know more about how to accomplish this ask about a Legacy Trust.  No, this is not just another fancy name for another trust.  A Legacy Trust is much more than a legal document, it is an inheritance that will pass on your values to future generations.

Yes, this type of planning requires a great deal of experience and care to set up, but once it is you can immediately enjoy how it will benefit your family.  Only an experienced advisor who shares your desire to do something meaningful for your family should be considered for this task.  When this type of planning is done correctly and thoroughly you will know that you have done something very significant for your loved ones.

Scott Slater is an Associate of Brock and Associates, LLC, and has extensive training in legacy planning.

 

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Control Your Assets or Someone Else Will

Last Updated (Monday, 28 July 2008 13:31)
Written by Hank Brock

First, and most important, planning is control. You want to determine who will get what, how they will get it, and when they will get it.

How are assets distributed? Let's look at an example. Robert, whose children were grown and gone, decided that the simplest thing he could do was leave 100 percent of his assets to his wife, Ann. He figured she'd take care of distributing things fairly among their children.

What happened? Robert died unexpectedly at the age of 58. Ann was only 53. She remarried, and took 100 percent of Robert's assets with her.

Eighteen years later Ann died, leaving all her assets to her second husband. Twelve years later he died, leaving all his assets-which now included Robert's original assets-to his children. Remember: These are people Robert never even knew existed.

What about Robert's children? In essence, they were disinherited. That's clearly not what Robert had intended, but the way he designated his assets be distributed, that's exactly what happened. Think that doesn't happen very often? Think again. It's actually quite common.

So, how are your assets distributed to your intended heirs after you die? Your assets will probably go through probate, either by the operation of law or because their trust was not set up properly. Many people think that just because they've prepared a will, their assets won't go through the expense and delay of probate. Nothing could be further from the truth.

All wills must be presented to the probate court. The court determines whether the will is valid. The court, considering what is written in the will, and then makes the final determination as to how assets (and minor children) are to be distributed to heirs (or guardians).

Your will may not necessarily have the final say. The probate judge does.

In certain cases, your assets will be distributed by "operation of law." That could happen, for example, if property was held by you and your spouse in joint tenancy with rights of survivorship. It could also happen if you've named a specific beneficiary-through a life insurance policy, retirement plan, tax-sheltered annuity, pension, or profit-sharing plan.

In those cases, your assets pass directly to the beneficiary you designated. Your assets may also be distributed by operation of law if you die without a will. In that situation, you're considered to have died "intestate." In essence, the state in which you live writes your "will" for you. Often, your state's "will" can be quite onerous. Consider the following "will" which contains some typical provisions, and which may be applicable to you.

On the surface, this may make sense. But examining further, does it really? For example, your children are either older or younger. If they're grown and gone, do you want two-thirds of your assets going to them rather than your spouse? If they're young children at home, do you want your spouse having to account to them for what he or she is doing with their money? The questions go on ...

You should also be aware that mutual funds, CDs, real estate, checking accounts, savings accounts, vehicles, stocks, bonds, and many other assets normally do not pass according to the operation of law but will go through the probate process.

The message here is clear: Do something about your estate plan. Don't let money stop you. A reputable attorney will usually prepare a simple will for $125 to $200. Don't rely on the will and trust "kits" offered for $10 on late-night television and in magazines. The court may consider them valid, but you will have forfeited the professional counsel you deserve.

Why is professional counsel so important? Assume that you go to the library and read an article on tonsillectomy. From that article, you figure out how to perform a tonsillectomy. Then you decide that you can do it easily and for much less money than a surgeon charges for the procedure. So you go to the bathroom mirror, open wide, and go to work.

Are you properly trained? Hardly. Can you perform a proper tonsillectomy? No way. So what makes you think you can properly interpret all the complicated estate laws from a $10 do-it-yourself kit?

Even if you're a surgeon who is completely trained in performing tonsillectomies, you're not going to do one on yourself. You'll hire another surgeon to do it for you.

The following excerpt was taken from "Your Complete Guide to Money Happiness." For more information on Hank's book visit our Recommended Reading page...

Hank Brock is President of Brock and Associates, LLC and author of "Your Complete Guide to Money Happiness." For almost 30 years Hank has been providing sound estate planning advice.

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How to Sell Highly Appreciated Assets and Pay No Tax

Last Updated (Tuesday, 15 July 2008 13:26)
Written by Scott Slater

Did you know that for 2008 and possibly 2009 – 2010 you can sell assets that will generate long term capital gains and pay no tax! The law allows taxpayers to pay 0% on capital gains whose taxable income is inside their 15% marginal tax bracket.

This means for 2008 married couples filing a joint return whose taxable income is under $65,100 and includes long term capital gains, will not pay tax on those long term capital gains. Single tax payers would need to be under $32,550 including long term capital gains to take advantage. In addition to long term capital gains, qualified dividends are also taxed at 0% if taxable income is inside a taxpayers 15% margin.

If your income is above these margins, consider making a charitable gift or maximizing your retirement contributions to reduce your taxable income in the same year you have a long term capital gain. Investing in tax deferred assets will also help maximize this tax strategy.

This law is set to expire at the end of 2010 but that could possibly change with the elections this year. Record deficit spending is putting pressure on Washington to raise revenue and the capital gains tax will probably be in the cross hairs first. If the capital gains rates do go up, that could precipitate a selling spree in the equity markets which could decrease their value for a time, wiping out any tax benefits.

Also, there are some special nuances to be aware of so consult your tax professional first or call our office and make an appointment to see how we can incorporate this and many other tax saving strategies into an overall plan that will give you more to live on.  Please don’t forget to pass this article on to friends and family that may benefit from this special tax benefit.

 

Scott Slater is an Associate of Brock and Associates, LLC, a financial planning firm that specializes in retirement, estate, and tax planning.

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