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No Increase in IRA Limits? Here’s How You Can Still Save in 2022.
NewsDecember 01, 2021
If you’re proactive about retirement savings or want to up your savings game this year, you may already know that retirement contribution limits stayed the same for 2022. Here’s what you need to know on how you can still save more for retirement.
High earners have a variety of options for saving for retirement—but income limits mean that direct contributions to Roth IRAs may not be among them. Roth IRAs offer tax-free earnings growth and withdrawals in retirement. This makes them a potentially valuable part of a broader investing and tax-planning strategy. Having both Traditional and Roth accounts can help with tax diversification in retirement. Let’s break down what this and other recent changes can mean for your retirement plans, whether you’re already saving or just getting started.
Are you getting the most from your 401(k)s?
Maxing out contributions to a traditional 401(k) is a good place to start. These accounts have no income phase-out limits, so you can generally contribute the lesser of your income or $19,500 (plus an additional $6,500 if you are 50 or older). Pre-tax contributions will reduce your taxable income and in turn, your earnings will grow on a tax deferred basis.
If your employer also offers access to a Roth 401(k), then you could consider using one to set aside some post-tax retirement savings. Like their traditional 401(k) counterparts, Roth 401(k)s don’t have income phase out limits. So even if you don’t qualify for a Roth IRA because your income is above IRS income limits you can make after taxes contributions to a Roth 401(k). Your earnings will grow tax-free, and you will pay no taxes when you take withdrawals after 5 years and over the age of 59½.
The annual contribution limit applies across all of your 401(k) accounts, not on each account individually. The IRS broke down the amount of Roth IRA contributions you can make for 2022. This table shows whether your contribution to a Roth IRA is affected by the amount of your modified AGI as computed for Roth IRA purpose.
< $204,000
up to the limit
> $204,000 but < $214,000
a reduced amount
> $214,000
zero
< $10,000
a reduced amount
> $10,000
zero
< $129,000
up to the limit
> $129,000 but < $144,000
a reduced amount
> $144,000
zero
Amount of your reduced Roth IRA contribution
The IRS stated that If the amount you can contribute must be reduced, figure your reduced contribution limit as follows.
See Publication 590-A, Contributions to Individual Retirement Accounts (IRAs), for a worksheet to figure your reduced contribution.
What about non-deductible IRAs?
Does it ever make sense to contribute to a Traditional IRA even if you can’t deduct the contributions? At the very least, you could still enjoy the potential for tax-deferred growth in the account.
You wouldn’t be getting any upfront tax break, and future withdrawal of growth on your original contribution would be taxed at your ordinary income tax rate. It’s possible that the future tax rates you’d pay would be higher than what you would owe if you’d invested in a tax-efficient way in a regular taxable brokerage account. With today’s low long-term capital gains and qualified dividend rates, non-deductible contributions to a traditional IRA may make less sense.
In 2022, long-term capital gains are taxed at a federal rate of either:
It’s important to have money in taxable accounts as well as tax-advantaged accounts because it can give you flexibility and access to savings for needs prior to age 59½. At 59½, you can withdraw from traditional IRAs and retirement accounts without a 10% early withdrawal penalty. These methods can also provide flexibility in managing your tax bracket as you plan for post-retirement cash flows.
What about Medicare Tax?
In addition to the above, filers may have to pay the Medicare surtax.
The Federal Insurance Contributions Act (FICA) imposes two taxes on employers, employees and self-employed workers — one for Old Age, Survivors and Disability Insurance, which is commonly known as the Social Security tax, and the other for Hospital Insurance, which is commonly known as the Medicare tax.
There’s a maximum amount of compensation subject to the Social Security tax, but no maximum for Medicare tax. For 2022, the FICA tax rate for employers is 7.65% — 6.2% for Social Security and 1.45% for Medicare (the same as in 2021).
2022 updates
For 2022, an employee will pay:
For 2022, the self-employment tax imposed on self-employed people is:
Final Thoughts
Contribution limits didn’t increase for the 2022 tax year, but through understanding your contribution limits and future taxes, you can still continue to make good progress toward saving for retirement. Where will your retirement money come from? If you’re like most people, qualified-retirement plans, Social Security, and personal savings and investments are expected to play a role. Once you have estimated the amount of money you may need for retirement, a sound approach involves taking a close look at your potential retirement-income sources. What’s more, understanding tax strategies can potentially help you better manage your overall tax situation.
At Agemy Financial Strategies, we have an array of will and retirement and tax planning solutions to guide you through the entire process, all with the help of our trusted financial planners.
For more information on IRA limits and how you can put your best foot forward in 2022, contact us today!
Understanding RMDs and What You Need to Know for 2022
NewsNovember 26, 2021
How well do YOU understand RMDs? With the RMD deadline looming, you need to take action now before it costs you big bucks.
A required minimum distribution (RMD) is the amount of money that must be withdrawn from an employer-sponsored retirement plan, traditional IRA, SEP, or SIMPLE individual retirement account (IRA) by owners and qualified retirement plan participants of retirement age. RMDs are calculated separately for each account and must come out of said account unless an exception applies.
There’s still time to withdraw your required minimum distribution (RMD) from your traditional IRA, 401(k) or other retirement account (except a Roth IRA) before the end of the year…but you should hurry! The 2020 RMD suspension was for one year only, so don’t think you can skip it again in 2021. And if you don’t take enough out of your retirement plans this year, you could be hit with a 50% penalty from the IRS on the amount not distributed as required. Here’s what you need to know for 2022.
RMD Tables for 2022
In 2022, various life expectancy tables used by owners and beneficiaries to calculate required minimum distributions (RMDs) from retirement plans, are being updated. This is being done to reflect the increase in life expectancies experienced since the current tables came out in the early 2000s.
These changes mean that smaller distributions will be required to be taken on an annual basis, resulting in less taxation and longer lasting account balances which in turn creates an opportunity to grow the funds that are in the account. You can calculate your 2022 RMD by taking your Dec. 31, 2021, account balances and dividing by a factor from an IRS table.
If you are single or married to someone not more than 10 years younger than you, use 2022 Table III, Uniform Life Table which lists the factor for a 72-year-old at 27.4. If your spouse is more than 10 years younger than you, use the factor in 2022 Table II, Joint and Last Survivor Life Expectancy.
Impact of RMDs in 2022
Beneficiaries of IRAs, retirement plans and nonqualified annuities who will start using their life expectancy to take out the annual RMD in 2022 will use the new factors from the Single Life table to start their payout schedule. Those beneficiaries who have been using their life expectancy to take out their annual RMD need to adjust the life expectancy used in 2022 to reflect these new tables.
For many owners and beneficiaries, the overall increase in life expectancy represented in the updated tables is a good change. These changes will reduce the taxation on required distributions and provide more opportunity for growth and longer lasting account balances. If you’d like to learn more about the payout options beneficiaries of IRAs and nonqualified annuities check out our RMD webinar on our website.
Planning for the Future
At this time of year, the most important thing is that you get the ball rolling now! Looking into the years ahead, your first RMD (for 2022) may be taken as late as April 1, 2023. Only this first RMD for 2022 can be delayed into the following year. Your second RMD will be for 2023 and will be due by Dec. 31, 2023. Your 2024 RMD needs to be out by Dec. 31, 2024 and so on every year for the rest of your life.
If you don’t take the first RMD in 2022 and delay it into spring of 2023, you will be taking two RMD in 2023 and reporting the income from both on your 2023 return. That may or may not be problematic; If your 2022 marginal tax rate will be lower than 2023, delaying is probably not wise. If your 2023 marginal tax rate is lower than 2022, delaying could save you some money. To avoid taking two RMD in 2023, don’t delay taking your 2022 RMD and take it during 20222. The 2022 RMD can be taken any time in 2022, even before you turn 72. The IRS automatically counts any distributions taken in a given year as part of the RMD for that year until the RMD is met.
If you have retirement accounts, you owe it to yourself to understand the rules that apply to distributions, such as the RMD rules discussed here. And at Agemy Financial Strategies, we can help with this often complicated process. Our experienced advisors carefully explain the calculations necessary to convert to the new RMDs, as well as a breakdown of all of the new tables for those looking for a by-the-numbers approach.
Final Thoughts
It’s important to note, a large RMD can push you into a higher tax bracket. One strategy for reducing the amount of RMDs is to make a qualified charitable distribution (QCD). If you’re 70½ or older, a QCD allows you to distribute up to $100,000 tax-free directly from an IRA to a qualified charity and to apply that amount toward your RMDs.
In addition, the income-based limits on charitable deductions don’t apply. Any amount excluded from your income by virtue of the QCD is similarly excluded from being treated as a charitable deduction. If you haven’t withdrawn the necessary funds yet, don’t delay. Contact the financial advisors at Agemy right away for help setting up a distribution.
At Agemy Financial Strategies, we have an array of will and retirement planning solutions to guide you through the entire process all with the help of our trusted financial planners. If you have any questions on our company, services, values and more, contact the team at Agemy Financial here today. Our highly experienced financial advisors in both Denver, Colorado and Guilford, Connecticut are waiting for your call!
2022 Tax Inflation Adjustments
NewsDecember 08, 2021
On Nov. 10, 2021, the IRS announced inflation adjustments for 2022 affecting standard deductions, tax brackets, and more. The changes (effective when you file in 2023) are the result of higher inflation in 2021. There are also changes to the alternative minimum tax, estate tax exemption, earned income tax credit and flexible spending account limits, among others.
Over the past few years, your tax bill has been affected by many law changes. These changes can be somewhat confusing at times. The best way to be prepared for these changes is to make year-round tax planning your top priority.
Overview
Recently, the IRS announced higher federal income tax brackets for 2022 due to the rise of inflation. The standard deduction is increasing to $25,900 for married couples filing together and $12,950 for single taxpayers. The consumer price index surged by 6.2% in October compared to the previous year, the biggest jump in more than three decades.
Here are a couple ways Agemy Financial Strategies can help you make the necessary adjustments for your tax planning in 2022 and beyond.
Last Chance for Deductions and Credits
Several deductions and credits will expire in 2021. It’s important to take advantage of these credits and deductions now to consider how their elimination could affect your income and corporate tax rate in 2022. The best way to do this is to consult with your tax advisor to see what credits and deductions you qualify for.
The Employee Retention Tax Credit is an incentive that was created within the Coronavirus Relief and CARES Act that was intended to encourage employers to keep employees on the payroll as they navigate the unprecedented effects of COVID-19. With ERTC, companies can get a maximum of $21,000 for keeping workers employed through September 30, 2021. However, if you started your business after February 15, 2020, it’s considered a recovery startup business, and the maximum credit is $50,000. Learn more by reviewing IRS Notice 2021-49.
If you paid qualified sick or family leave related to COVID-19 or vaccinations through September 30, 2021, you may be eligible for a credit due to the Families First Coronavirus Response Act (FFCRA) and American Rescue Plan (ARP). Review the IRS comparison chart to see how rules for time frames in 2021 differ.
As of now, you can deduct expenses paid for with PPP loans. Guidance may change before tax filing time, so it’s very important to track payroll and fees paid with PPP funds or other government grants or loans.
2022 Tax Year: Leverage these deductions before they expire
2022 will be the last year you can take the total deductions for Section 179, bonus depreciation, and qualifying business meals. Although this could change, it’s a good idea to take advantage of these deductions before the January 1, 2023 deadline to acquire and place assets into service.
For 2021, the maximum expense deduction is $1,050,000. This limit is reduced by the amount by which the cost of Section 179 property placed in service during the tax year exceeds $2,620,000. Although the TCJA offers deductions for 50% of qualifying client-related business meals, the Consolidated Appropriations Act (CAA) made an exception for 2021 and 2022.
Further Adjustments
The IRS also made other inflation adjustments, such as changes to the alternative minimum tax, a parallel system for higher earners, and an increased estate tax exemption. Moreover, there’s a boost for the earned income tax credit, a write-off for low- to moderate-income families, and higher flexible spending account limits, among other changes. The key takeaways of these changes include:
Workers may also save more to 401(k) plans in 2022, according to last week’s announcement. But there won’t be a higher limit for individual retirement accounts.
Final Thoughts
Lastly, before making any tax and/or business decision, you should always consult a professional who can advise you based on your individual situation. Understanding tax strategies and managing your tax bill should be part of any sound financial approach. Some taxes can be deferred, and others can be managed through tax-efficient investing. With careful and consistent preparation, you may be able to manage the impact of taxes on your financial efforts.
A strong tax planning strategy can save you money on retirement withdrawals, keep your investments efficient, help you give more to charity, maximize your estate, and put more money in your pocket. At Agemy Financial Strategies, our seasoned financial advisors are highly experienced in managing taxes and understand the importance of a well-executed tax plan for financial success. Click here to find forms, explanations, and other tools to help you manage your taxes.
For more information on 2022 tax inflation adjustments and tax advising services, contact us here today.
The Update on the Proposed Reconciliation Bill
NewsChanges are again said to be underway at the Whitehouse level. And it could severely affect your retirement. Here’s what you need to know…
Under the Reconciliation proposal, starting in 2023, employers with five or more employees would have to offer a retirement plan and automatically enroll employees, diverting 6% of their pay to a retirement account. Then write about the scaled cutbacks and what could lie ahead.
This plan would also create many universal programs as well as assist families with child care and send them the enhanced child tax credit for another year. The problem with the proposed Reconciliation Bill is how Democrats will pay for it. Here are a couple things to keep your eyes on for 2023.
Automatic Enrollment Plans
The legislation requires employers with more than five workers to provide access to a retirement plan that automatically enrolls employees by 2023. Governments and churches are exempt from the mandate. The automatic contribution percentage would start at 6 percent for qualified employees and would auto-escalate up to 10 percent during the fifth plan year. Employers would not be required to make contributions to the plan.
Employees would be able to opt out and could change their investment election and deferral rate. Employers that do not offer an automatic contribution plan or arrangement would be charged an excise tax of $10 per day per employee for noncompliance (with certain exceptions and adjusted for inflation). To offset costs for employers, the bill provides an enhanced employer plan startup credit.
A Limit on the Size of 401(k) Accounts
If a worker’s combined retirement account balances—including 401(k) and other employer-sponsored defined contribution plans and IRAs—exceeded $10 million (as adjusted for inflation) at the end of a taxable year, the account holder would have to reduce his or her combined account sizes by taking a distribution in the following year.
The minimum distribution generally is 50% of the amount by which the individual’s prior year aggregate account balances exceed the $10 million limit. These new limits would be effective for plan years beginning in 2022.
A National Paid-Leave Program
Beginning in July 2023, the bill provides up to 12 weeks of federal benefits to replace lost wages due to time off for medical leave or caregiving for an ill relative. The taxpayer-funded program covers all full-time and part-time workers without regard to employer size, although employers with fewer than 50 workers may be eligible for assistance grants.
While the bill follows the Family and Medical Leave Act (FMLA) in terms of leave events, it goes beyond the FMLA by including a much broader definition of covered family members. Eligible workers can apply for benefits if they have at least four caregiving hours in a week. Benefits would replace 85% of lost wages for the lowest-income workers and gradually decrease, replacing just 5% of wages for workers earning up to $250,000.
Lower Affordability Threshold for Employer Health Plans
Under the ACA, the lowest-cost, self-only health plan option an employer offers cannot charge employee premiums that exceed 9.5 percent of an employee’s income. The threshold is adjusted each year based on premium rates and in 2021 rose to 9.83 percent. It is set to fall to 9.61 percent in 2022.
The Ways and Means Committee proposal would permanently reduce the affordability threshold to 8.5 percent of an employee’s income and eliminate the indexing requirement, so the 8.5 percent requirement would not increase over time. This change would go into effect beginning with the 2022 plan year. The proposal would also make permanent the American Rescue Plan Act increased federal
Paying for the Reconciliation Bill
House Democrats have gone back and forth trying to figure out ways to pay for the proposed Reconciliation Bill. In the framework, President Biden ultimately settled on a mix of corporate and individual revenue raising measures.
The framework would put in place a 15% minimum tax on the corporate profits that large companies report to shareholders, not to the Internal Revenue Service. This would apply to companies with more than $1 billion in profits. It would impose a 15% minimum tax, calculated on a country-by-country basis, that American companies pay on foreign profits. This is consistent with an agreement Biden recently won among 136 countries.
The wealthiest Americans would pay a 5% surtax on income above $10 million, and an additional 3% levy on income above $25 million. The framework would also close the loopholes to allow some affluent taxpayers to avoid paying the 3.8% net investment income tax on their earnings.
The framework would beef up IRS enforcement so that it can ensure that people are paying what they owe to the IRS. The new enforcement measure would focus on Americans with the highest incomes, not those earning less than $400,000 a year.
Final Thoughts
While the Reconciliation Bill is still in the works and not yet finalized, there are many ways you can stay on top of it and plan accordingly. At Agemy Financial Strategies, we have an array of will and retirement planning solutions to guide you through the entire process, all with the help of our trusted financial planners.
If you have any questions on our company, services, values and more, contact the team at Agemy Financial here today. Our highly experienced financial advisors in both Denver, Colorado and Guilford, Connecticut are waiting for your call!
Planning for Higher Tax Bills for Retirees
NewsTax planning and financial planning go hand-in-hand. As you near retirement, avoiding tax planning could create major hurdles for your financial future. Here’s what you need to know about the potential impending tax hikes and what they could mean for your golden years.
There’s a common misconception that when you retire, your tax bills shrink, your tax returns become simpler and tax planning is a thing of the past. While that might be true for some, others find that the combination of Social Security, pensions, and withdrawals from retirement accounts increase their income in retirement and therefore may push them into a higher tax bracket.
With speculation about taxes possibly going up in the near future, your best course of action may be to incorporate tax strategies in your financial plan geared toward retirement. How much of your income will be taxable in retirement? What will your tax rate be after you retire? It’s important to remember that today’s rates are low by historical standards, and the Tax Cuts and Jobs Act expires after 2025. Here’s a couple ways to plan accordingly.
Open a Roth IRA or Roth 401(k)
Based on the premise that taxes will be higher in the future, a wise move is making contributions that can grow tax-free. Two vehicles toward that goal are a Roth IRA or Roth 401(k). Contributions are made after taxes, meaning your taxable income isn’t reduced by the amount of your contributions when filing your taxes. But the benefit is in retirement, as earnings can be withdrawn tax-free starting at age 59½.
Three differences between the Roth IRA and Roth 401(k):
Roth 401(k)s have a higher contribution limit. Employees can save up to $19,500 in 2021, and workers older than 50 have a maximum limit of $26,000 per year. Roth IRA contributions are limited to $6,000 annually, while workers older than 50 can contribute $7,000.
There is no required minimum distribution for a Roth IRA. However, there is an RMD for the Roth 401(k) beginning at age 72. You can avoid that RMD by rolling it into a Roth IRA when you retire.
Investors in a Roth IRA have more control over their accounts than they do in a Roth 401(k). In a Roth IRA, investors can choose any type of investment – stocks, bonds, etc. – but in a 401(k), they are limited to the funds offered by their employers.
Consider the timing of Social Security benefits
You can begin receiving Social Security benefits as early as age 62 or as late as age 70. The later you start, the larger the benefit amount — so, if you don’t need the money right away, putting it off may be a good investment. Also, benefits are reduced if you start them before you reach full retirement age and continue to work.
Keep in mind that if your income from other sources exceeds certain thresholds, your Social Security benefits will become partially taxable. For example, married couples filing jointly with combined income over $44,000 are taxed on up to 85% of their Social Security benefits. (Combined income is adjusted gross income plus nontaxable interest plus half of Social Security benefits.)
Make Qualified Charitable Distributions
You’re required to begin RMDs from tax-deferred retirement accounts once you reach age 72 (up from 70½ for people born before July1, 1949) though you’re able to defer your first distribution until April 1st of the year following the year you reach age 72. RMDs are generally taxed as ordinary income and you must take them regardless of whether you need the money. As previously noted, a large RMD can push you into a higher tax bracket.
One strategy for reducing the amount of RMDs, at least if you’re charitably inclined, is to make a qualified charitable distribution (QCD). If you’re 70½ or older (this age didn’t increase when the RMD age increased), a QCD allows you to distribute up to $100,000 tax-free directly from an IRA to a qualified charity and to apply that amount toward your RMDs.
The funds aren’t included in your income, so you avoid tax on the entire amount, regardless of whether you itemize. In addition, the income-based limits on charitable deductions don’t apply. Any amount excluded from your income by virtue of the QCD is similarly excluded from being treated as a charitable deduction.
Final Thoughts
Making smart tax decisions can have a big impact on the amount of money someone has in retirement. Strategic withdrawals from Roth accounts can help retirees from creeping over income thresholds that cause these higher taxes and premiums.
At Agemy Financial Strategies, we have an array of will and retirement planning solutions to guide you through the entire process all with the help of our trusted financial planners.
If you have any questions on our company, services, values and more, contact the team at Agemy Financial here today. Our highly experienced financial advisors in both Denver, Colorado and Guilford, Connecticut are waiting for your call!
Two Financial Planning Topics to Bring to the Table This Thanksgiving
NewsOctober 27, 2021
Bringing up money with family can be uncomfortable and even be seen as taboo. But this year instead of avoiding the issue, address it head on when the family is all together over Thanksgiving. Here’s how.
Family and personal finances are a big part of every holiday season. People are buying gifts, preparing holiday meals, and planning all of the changes in their lives that the coming new year might bring.
While it’s easier to speak with financial professionals about your finances, we try to keep peace with the family, have lighter conversations and speak about things that we think will unite us. However at Agemy Financial Strategies, in addition to giving thanks for all we have, we want everyone to engage in some financially sound thinking this Thanksgiving.
With that being said, here are two important financial topics to discuss with loved ones over the holiday.
Organizing Finances
The first dinner table conversation to have is to get a grasp of where everyone stands financially. If no-one yet knows off the top of their head, checking credit scores is a quick way to get an initial overview. Nowadays, there are many websites where you can receive instant reports. Credit scores can help creditors determine whether to give you credit, decide the terms they offer, or the interest rate you pay. Having a high score can benefit you in many ways. It can make it easier for you to get a loan, rent an apartment, or lower your insurance rate. Whilst you can login to your credit report anytime, you are entitled to one free copy of your credit report every 12 months from each of the three nationwide credit reporting companies. Order online from annualcreditreport.com, the only authorized website for free credit reports, or call 1-877-322-8228.
The 6 Best Free Instant Credit Reports of 2021 include:
Second up, and to truly get a solid financial picture of where they stand, encourage loved ones to gather and organize financial documents, such as:
Be sure to remind everyone to keep the paperwork (or login information for online access) in a secure location. Having all documents in a central location makes it easier to collect documentation for loan applications, as well as to review your finances for budgeting. By gathering such information, every family member will have a better understanding of their financial picture in 2021 and be able to make adjustments for the year ahead. In fact, reflecting on your previous year’s budgeting is essential to figure out where you have gone wrong and what aspect of your budgeting needs improving. By reflecting, you can also see where you have gone right in your budgeting and do the same this time around.
One of the keys to a sound financial strategy is spending less than you take in, and then finding a way to put your excess to work. A money management approach involves creating budgets to understand and make decisions about where your money is going. It also involves knowing where you may be able to put your excess cash to work.
Estate Planning
Many adults, regardless of age, delay estate planning because it can be uncomfortable to think about one’s own mortality. While no one believes that wills and trusts should be contemplated over Thanksgiving turkey, clarifying whether you or your aging loved ones have the documents in place to protect their personal and financial affairs is not only appropriate, but essential. It’s a good idea to do your own estate planning documents first or be working on your own and researching these topics yourself so you have more credibility when you bring up the topic. Third-party material from your trusted financial professional can also be a useful tool for starting a conversation.
It’s worth noting there’s more to estate planning than how assets are distributed at death. Estate plans should also include incapacity documents. The three most common incapacity documents are:
1. Living Will
Although everyone knows in theory that they should complete important paperwork before the need arises, very few of us actually do. But it’s crucial to have this discussion early—both for those who may need care and for those who may have to act on someone else’s behalf.
Your family may have heard that a living will is a good idea, but do they understand what a living will actually does? A shocking 92 percent of Americans know they need a living will but only 27 percent actually have them. With families gathering for the holidays, now may be a perfect time to discuss this with older relatives.
A living will is also known as a health care or instruction directive. It is separate from the will that determines the inheritance of your assets. It focuses on your preferences concerning medical treatment if you develop a terminal illness or injury, such as a brain tumor, Alzheimer’s disease or head trauma that causes you to lose brain activity. Medical care in a living will may include instructions for the following:
It may also outline your religious or philosophical beliefs and how you would like your life to end. A living will is only valid if you are unable to communicate your wishes.
2. Healthcare Power of Attorney
A health care power of attorney gives someone else (the proxy) the ability to make decisions for you regarding your health care. Unlike a living will, it applies to both end-of-life treatment as well as other areas of medical care.
As a designated healthcare power of attorney, it’s important that you understand your loved one’s health insurance. If your family member is age 65 or older, they are more than likely insured through Medicare:
Experts recommend supplemental insurance to extend benefits for health care needs not provided by Medicare Parts A and B so your loved one may have a supplemental policy as well. Medicare doesn’t pay for long-term care so you’ll need to find out if your loved one has a long-term policy or if it would be advisable for him or her to purchase one.
Many of these policies provide home health care services. You’ll have peace of mind knowing someone is taking care of your family member. You may decide to have both a power of attorney and a living will, called a combined advance directive for health care. Whether you go with one or both, you receive similar benefits.
3. Financial Power of Attorney.
A seemingly sore topic to discuss at family gatherings – but crucial nonetheless – is who will control financial matters on behalf of a loved one when they are unable to do so. But if you need to give another person the ability to conduct your financial matters when you can’t or unable to be present, a financial power of attorney (POA) may be your solution.
This document allows someone you appoint to act on your behalf when it comes to money matters. They can pay your bills, transfer funds between accounts and even sell your car if need be. This durable power of attorney can go into effect the day you have it notarized, or you can make it a “springing” power, which means it only goes into effect if a doctor deems you incapable of making decisions.
Many states have an official durable power of attorney form, which is usually a durable financial power of attorney form. Some banks and brokerage firms have their own power of attorney forms. Also, for buying or selling real property, a title insurance company, lender or closing agent may require the use of their form. Therefore, you may end up with more than one financial POA form.
It’s especially important that your loved ones have an estate plan in action with incapacity documents so you can review them. If not, schedule a meeting with an estate planning professional. You’ll be grateful you implemented the plan now rather than later. Remember, the goal of the holiday discussion is to ensure that your aging parents or loved ones have their financial house in order, not to pry, or in any way appear as if your inquiries are motivated by self-interest. As a general rule of thumb, you should avoid asking direct questions about account balances, beneficiaries, or the value of their estates.
Final Thoughts
As much as we look forward to the gathering around Thanksgiving, preparations for many of us include ticking off a mental list of what we cannot talk about for fear of igniting a feud between second helpings and dessert. Even if your family members are not ready to tackle everything on their financial goals list, after the family get together they can start chipping away now.
It’s always important to meet with your Financial Advisor to get the facts from the source. Be sure to provide them with updates on your financial situation, including your expected retirement date, income needs, and any other family situations that may affect your financial plan.
However you’re spending the holidays this year, the team at Agemy Financial Strategies are always on-hand to help guide you through your financial planning journey. Contact us here today to get started.