Take-Aways From A Retirement 101 Seminar

 

I recently attended a Retirement 101 presentation at the community where I live. Truth be told, I went “undercover” to a free dinner seminar with several neighbors. 

My objectives were 1. To observe what older adults were being told about finances and what questions were on their mind, 2. To gather content for this blog post, and 3.To bring home a pulled pork dinner for my husband.

 Below are some key take-aways:

Financial Preferences- The presenter noted the following preferences among the older adults that he works with: 1. Less financial risk and more security, 2. A desire to lower taxes, 3. Simplicity and safety, 4. Reliable income now and later, and 5. “Fun” money for travel and entertainment.

Health and Money- Stress about finances (e.g., unpaid bills, running out of money, inflation, high tax bills) can affect overall physical health and reduce someone’s enjoyment of their later life years. Most people have no financial plan to guide their future.

Investment Characteristics- Bank accounts provide liquidity and are well-suited for emergency funds and short-term goals. Brokerage accounts include equities (stocks, mutual funds, exchange-traded funds) with growth potential. Annuities provide guaranteed income and life insurance provides a tax-free death benefit.

Three Types of Plans- Retirees need three types of plans: an income plan, a tax plan, and an estate plan. An income plan is needed to protect future income against inflation and address the income loss that occurs when one spouse in a married couple passes away.

Income Reduction Example- John and Jane currently have a $81,600 annual income: $30,000 (John’s pension), $24,000 (John’s Social Security), $9,600 (Jane’s pension), and $18,000 (Jane’s Social Security) for a total of $81,600. If John dies first and Jane receives half his pension and his full Social Security, her income would be $15,000 + $24,000 + $9,600 or $48,600, a 40% cut.

Long-Term Care- People need a plan to cover potential long-term care expenses, which are not covered by Medicare or Medigap supplemental plans. Recent average national annual costs for a nursing home, assisted living, and in-home care are $120,154, $53,088, and $50,918, respectively.

Inherited IRAs- When a surviving spouse inherits an individual retirement account (IRA) from a deceased spouse, the best option is generally to assume it and treat funds in the account as his or her own. Non-spouses have until December 31 of the 10^th year after the original owners death to withdraw the funds in an inherited IRA.

Bypassing Probate- Strategies to avoid probate include owning an asset with someone in joint tenancy with right of survivorship, payable on death (PoD) designations on bank accounts, Transfer on Death (ToD) designations on brokerage accounts, and beneficiary designations on assets such as life insurance policies, annuities, and retirement savings plans.

Adding Children’s Names to Accounts- This is rarely a good idea. Heirs lose the stepped-up basis that they would receive if the account was transferred following the account owner’s death. Also, adding a child’s name puts assets at risk during the account owner’s lifetime (e.g., creditors and lawsuits).

This post provides general personal finance or consumer decision-making information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.