by Barbara Nevins Taylor
Who wants to consider aging, or the prospect of being old? You know the answer.
So the word “retirement,” and the phrase “retirement planning,” often seem like they involve other people. But here’s where optimism about the future needs a boost from a plan that you make, whatever you call it.
A MetLife Mature Market Institute study found that a 65-year-old man today has a 41% chance of living to 85 and a woman has a 63% chance. With those long lives ahead of us, we need to think about how we will support ourselves, protect ourselves and maintain control over our lives and assets.
Remember the saying, “Necessity is the mother of invention?” While no one is sure who said it, maybe Plato, necessity in this case means creating a blueprint for the way that you want to live the important years of your life.
We need to treat the inevitability of getting older the way we’d approach our business or professional lives. Attorney Stuart Schoenfeld says, “The sooner you start to plan the more choices have. The longer you wait the more likely it is that you lose your independence and control.”
You want to put your ideas about your future, and what comes later, on paper.
Here are the first steps to take:
- You need a WILL.
Your will should clearly spell out how you would like to leave your assets to your heirs or others. Planning saves heartache and headaches for you, and eliminates any questions people may have later.
- You need a HEALTH CARE PROXY
A health care proxy is extremely important. This document legally designates someone to help with doctors and hospitals if you get sick. Experts advise it, and I know it it’s true because of my personal experiences caring for my mother and elderly relatives. If you don’t have a health care proxy, the current laws prevent medical professionals from discussing your case with anyone but you. And that’s okay to a point. But it’s imperative to have an advocate when you deal with doctors especially in an emergency setting. So a health care proxy designates the person you want to help you get the best care possible.
- You need a LIVING WILL
This makes your wishes crystal clear about how you want medical personnel to treat you in extreme situations. You can choose to say that you want to be resuscitated and kept on life support, or say that you do not want extreme measures used to keep you alive. This is all up to you, and your wishes should be recorded in a legal document.
- You need a POWER OF ATTORNEY
This designates someone to handle your personal and business affairs while you’re alive, if you cannot do things yourself. Even if you can do things, it’s always a good idea to have a trusted person assist. It’s smart to get a qualified estate lawyer to help make these plans and put them on paper. If you can’t afford a lawyer, some states and local bar associations offer online forms. But be careful. The American Bar Association, www.aba.org offers a state-by-state list of clinics and not-for-profits that offer affordable and even free legal help.
MONEY AND SAVINGS
Studies also indicate we don’t start thinking about saving money for retirement early enough. Many wait until their fifties, or later. And more than 36% of Americans are not saving for retirement according to a recent Capital One Sharebuilder survey.
Even if you are just starting out experts advise that you take advantage of every opportunity to save.
- Your company 401 KA 401K is set up by your employer. It allows you to invest money regularly. This money is not subject to taxes, if you keep it in the plan until retirement. If you withdraw money before you are 59 ½ there’s a 10% penalty. The downside is that your company decides where the money should be invested.
- Creating an IRA
An IRA (Individual Retirement Account) allows you to put money, before it’s taxed, into an investment plan. You can choose how the money is invested, but if you withdraw it early there is a 10% penalty.
You do pay taxes on your profits when you withdraw from an IRA at retirement. And you have to begin withdrawing money when you are 70 ½.
- Creating a Roth IRAA Roth IRA differs from a traditional IRA in that you pay taxes on the money before you invest in the plan and your contributions are not tax deductible. The upside is that your earnings are tax-free once you start to withdraw money. And the IRS says money from a Roth account does not have to be withdrawn until after the death of the owner.
Socking money away in a savings account is still a solid way to save. But because interest rates are so low at this time, you won’t make much money by allowing a bank to hold it. For more on the tax consequences of investing plans visit www.irs.gov
Faye Reddit of the MetLilfe Mature Market Institute says, “We think of retirement as a three-legged stool. We know that basically it’s built on the idea of having a pension, which many people don’t have, although many people have a 401 K, personal savings and Social Security.
- Social Security is our basic benefit.
Although you qualify at 62, it’s suggested you wait until you’re at least 66 to claim the monthly payments. Every year that you wait, you get an extra 8% up until 70 years old.
For example: If you start to collect at:
62-you qualify for $650 a month
66-you’d get $1,000 a month
70-you’d get $1320.
After you’re 66 you can work, earn an unlimited amount, and still collect Social Security without deductions from your monthly benefit.
Our homes are usually are biggest assets and as with everything else, it’s important to think about how you will use this asset and the money that it has made for you over the years.
Tax attorney Robert Barnett says, “The IRS code allows special exemptions for the sale of your house. They will allow a single person to say $250,000 will be exempt, and a married couple will double that to $500,000. So people who bought their homes years ago and have seen a large fluctuation in value need to protect the ability to maintain those exemptions.”
Lawyers suggest putting your home, stocks and other assets into a trust to avoid probate court fees after you die. A trust allows you to live in the home. But the house and assets go to your heirs. A trust also gives you the opportunity to lay out instructions about what to do with the money in the trust.
- Revocable Trust
Can be changed.
- Irrevocable Trust
Can’t be changed.
MEDICAID AND THE TRUST
Protecting the assets become an issue if you become very ill, or go into a nursing home and need to use Medicaid to supplement Medicare. In addition, putting assets in a trust early may help you qualify for what’s called “Community Medicaid.” That allows you to stay at home and get Medicaid help for care.
Medicaid is primarily funded by the federal government, but administered by the states. And each state has different income and asset requirements. In New York State, for example, the income limit for one person is $14,250. In New Jersey it’s about $5,000.
It’s difficult to hide your money. Medicaid in every state does a five-year review for eligibility. Attorney Stuart Schoenfeld explains, “If you’ve transferred assets to a trust or children within five years, you’ll be disqualified from Medicaid for a period of time.
FIGURING IT OUT
This is all extremely complicated, but it is not rocket science and you can conquer the information to take control of your destiny and your money. Legal help is important, and a good geriatric care manager can be invaluable.
New York City-based geriatric care manager Joanne Lehman says, ”We come in and do an assessment of your needs and create a plan. We help you investigate all of the options, fill out the paperwork, work with attorneys and follow up to make sure that you have what you need.”
You can find a geriatric care manager through the professional organization at www.caremanager.org