Category: Current Affairs

Tips on Creating a “Life After Me” Document

Once they have their estate planning in place, many baby boomers are creating a "Life After Me" document that lets them say goodbye to their family in a heartfelt letter that discusses the things that may have been too difficult to say in person.

6/20/2016A Place for Mom's article, "How to Prepare a 'Life After Me' Document," says that a touching goodbye isn't the only purpose of this document. It also provides you with the opportunity to leave critical information that you might not want to share until you're gone.

Make sure to add these types of pieces of information:

  • A list of people to contact in the event of your death and the location of your contacts info;
  • Burial arrangements, especially if prepaid, including cemetery deeds and detailed funeral arrangements;
  • Proof of loans and debts owed;
  • Receipts;
  • Family history, including the location of your family tree (if you have one);
  • Medical history;
  • Keys or codes to deposit boxes and safes;
  • The location of your personal identification, including birth certificate or proof of citizenship, driver's license, passport, veteran's identification;
  • The physical location of the documents that your executor of your will and your loved ones will need, such as a completed authorization to release any medical information, divorce papers, and escrow mortgage accounts;
  • Individual and group retirement accounts, including 401(k) accounts, pension documents, annuity contracts, life insurance policies, marriage license, property deeds, stock certificates, savings bonds, and brokerage information;
  • Vehicle titles;
  • Estate planning documents; and
  • Usernames and websites for your online accounts.

Keep a copy on your computer and label it "Open Upon My Death." You could also have a video file for your loved ones where you can say your goodbye in a video. In addition, place a hard copy in a sealed envelope labeled "Open Upon My Death" with your name on the front, stashed in your bureau or in your desk at home. And remember to tell your loved one(s) that this "Life After Me" document exists and where to find it. Tell them to open it only upon your death.

A "Life After Me" document can be a great testament to your family. It shows them how much you care, lets you have one final goodbye, and—most importantly—makes the aftermath of your death less stressful for those you love by ensuring your estate and related details are organized and easy to find.

Reference: A Place for Mom (April 28, 2016) "How to Prepare a 'Life After Me' Document"

How to Go About Retiring These Days

MP900430876The past several months have been rough on investments. Whatever the cause, market mayhem can be a real concern for retirees and near-retirees, who have less time to make up for big market declines. Kiplinger's March 2016 article, "How to Retire During a Volatile Stock Market," lays out seven tips to help you survive.

Don't Panic! An important lesson of the devastating 2007-09 downturn is that even in the worst of times, recoveries can occur in a reasonable period. Since 1945, it has taken about four months to recover from market declines of 10% to 20%. Stay the course.

Monitor Your Portfolio. Retirees need an investment horizon long enough to withstand this storm or whatever the market has in store. For a retirement that can last decades, new retirees should have 40% to 60% of their assets in stocks. Stocks are better with inflation—better than bonds and cash over time, so even 90-year-olds should keep at least 20% of their assets in stocks. You should have been cutting back on stocks periodically over the past few years, and it's a good time to review your investment mix to see if it's consistent with your tolerance for risk.

Diversify. Investors should own a mix of domestic and foreign bonds and U.S. and international stocks. Your stock allocation should have a variety of market sectors, with no one sector having more than 5% to 10% of your holdings.

Stick With High-Quality Holdings. This is no time to get risky, so stick with companies with dependable earnings, healthy balance sheets, and substantial dividends, or funds that invest in such companies.

Tap Your Cash Bucket. Instead of dumping stocks, use Social Security and any annuities, plus the portion of your portfolio that is in cash and short-term CDs to pay your expenses. If you have planned for the inevitable downturns, you should have enough in cash and cash-like investments to cover two to three years of living expenses.

Rethink Your Withdrawal Strategy. The key is to be flexible, and if you don't have other income to offset lower withdrawals, you should think about deferring gifts and discretionary expenditures until the market stabilizes. Also note that spending changes (and typically declines) in retirement, which may make it easier to cut back.

Postpone Retirement. This may sound drastic, but delaying retirement can really improve retirement success. This provides more time to save, including making catch-up contributions to retirement accounts, plus allows money in your accounts to grow. You'll also have fewer years during which you must rely on savings once you do retire. Working longer can really ease strain on your portfolio.

Reference:  Kiplinger's (March 2016) "How to Retire During a Volatile Stock Market"

Baby Boomer Estate Planning Lessons for Wills, Funerals and Health Care Expenses

MP900422340 (1)The website, A Place for Mom, recently posted “Poor Estate Planning Lessons Inherited by Baby Boomers” that has some lessons for all of us to heed when we think about our estate planning.

Wills. The long-term consequences of not having a will are huge. Your assets will go to probate, which can leave your family with huge expenses that will eat away at your wealth. Many folks don’t have a will—even though they know they should. It should come as no surprise that many baby boomers are stuck dealing with an estate without a will. This has encouraged many baby boomers to invest their time in making sure that their own children are better prepared. An outdated will can also cause major issues for a family. If you have been divorced or recently widowed and remarried, it is crucial to reflect those changes in your will. Think it would go over well if your estate is left to your ex?

Funerals. If funds are tied up in probate or otherwise inaccessible for funeral planning, it can create considerable stress and a financial burden. In theory, an entire inherited estate can be used to pay for the funeral, but you should have liquid assets available for the funeral. More baby boomers are opting to pre-pay for their funerals or to set up an account designated to use for funeral expenses. US News says that about 23% of people over 50 have prepaid for at least some of the funeral or burial expenses for themselves or someone else.

Healthcare Costs. Unexpected healthcare costs can put a major dent in a retirement plan. Baby boomers need to have early conversations to determine if their parents have included health care costs in their retirement planning. And they shouldn’t neglect health care costs in their own retirement plans. People often fail to add these expenses into their long-term retirement planning. You should know your health care costs and account for them into your long-term strategy. In order to plan for health care expenses, you should consider the following:

  • Current healthcare expenses
  • Details and coverage of each plan
  • Plan providers
  • Insurance details
  • Prescription costs
  • Doctor fees
  • Current budgets and budget adjustments required for the future

If there are health concerns now, be sure you plan for them long-term. Baby boomers are learning the hard way that it’s important to plan for the worst and hope for the best. Trying to find health information in a crisis is stressful. Having family planning meetings and going over all of the possibilities will help when the time comes to deal with these issues.

If you have experienced the loss of a parent, you already know first-hand the importance of strong estate planning and the benefits to surviving family members. Learn from poorly planned estates and implement better planning for yourself and those you love.

Reference: A Place for Mom (March 25, 2016) “Poor Estate Planning Lessons Inherited by Baby Boomers”

Ten Mistakes Not to Make with an Inherited IRA

Bigstock-Young-man-holding-a-trash-bin--26453660One-third of U.S. households own at least one type of IRA, so chances are that you might inherit one in the future. If that happens, you'll need a plan—a plan that avoids common and sometimes costly mistakes. USA Today's article, "If you inherit an IRA, make a plan before doing a thing," lists 10 common inherited IRA mistakes:

  1. Failing to set up the inherited IRA properly;
  2. Using the incorrect Life Expectancy Tables—the Single Life Table must be used;
  3. Using the incorrect Life Expectancy factor—the life expectancy factor of the beneficiary in the current year must be used;
  4. Not taking the Required Minimum Distribution (RMD) after death of the owner and in future years (result: a 50% penalty);
  5. Using the incorrect IRA balance for the RMD calculation—the value of the account as of December 31st of the prior year must be used to calculate the RMD (under-withdrawal means a 50% penalty);
  6. Not naming beneficiaries could mean acceleration of distribution for the inherited IRA beneficiary;
  7. Failing to make a trustee-to-trustee transfer in the establishment of an Inherited IRA—no 60-day rollover rule here;
  8. Including other non-inherited IRA funds to an inherited IRA;
  9. Not confirming that the RMD is taken out of account by December 31st each year; and
  10. Not establishing the inherited IRA before December 31st of the year following the death of the owner.

Reference: Reference: USA Today (March 15, 2016) "If you inherit an IRA, make a plan before doing a thing"