A Will is the Way to Have Your Wishes Followed

A will, also known as a last will and testament, is one of three documents that make up the foundation of an estate plan, according to The News Enterprises’ article “To ensure your wishes are followed, prepare a will.” As any estate planning attorney will tell you, the other two documents are the Power of Attorney and a Health Care Power of Attorney. These three documents all serve different purposes, and work together to protect an individual and their family.

There are a few situations where people may think they don’t need a will, but not having one can create complications for the survivors.

First, when spouses with jointly owned property don’t have a will, it is because they know that when the first spouse dies, the surviving spouse will continue to own the property. However, with no will, the spouse might not be the first person to receive any property that is not jointly owned, like a car.  Even when all property is jointly owned—that means the title or deed to all and any property is in both person’s names –upon the death of the second spouse, a case will have to be brought to court through probate to transfer property to heirs.

Secondly, any individuals with beneficiary designations on accounts transfer to the beneficiaries on the owner’s death, with no court involvement. However, the same does not always work for POD, or payable on death accounts. A POD account only transfers the specific account or asset.

Other types of assets, such as real estate and vehicles not jointly owned, will have to go through probate. If the beneficiary named on any accounts has passed, their share will go into the estate, forcing distribution through probate.

Third, people who do not have a large amount of assets often believe they don’t need to have a will because there isn’t much to transfer. Here’s a problem: with no will, nothing can be transferred without court approval. Let’s say your estate brings a wrongful death lawsuit and wins several hundred thousand dollars in a settlement. The settlement goes to your estate, which now has to go through probate.

Fourth, there is a belief that having a power of attorney means that they can continue to pay the expenses of property and distribute property after the grantor dies. This is not so. A power of attorney expires on the death of the grantor. An agent under a power of attorney has no power, after the person dies.

Fifth, if a trust is created to transfer ownership of property outside of the estate, a will is necessary to funnel unfunded property into the trust upon the death of the grantor. Trusts are created individually for any number of purposes. They don’t all hold the same type of assets. Property that is never properly retitled, for instance, is not in the trust. This is a common error in estate planning. A will provides a way for property to get into the trust, upon the death of the grantor.

With no will and no estate plan, property may pass unintentionally to someone you never intended to give your life’s work to. Having a will lets the court know who should receive your property. The laws of your state will be used to determine who gets what in the absence of a will, and most are based on the laws of kinship. Speak with an estate planning attorney to create a will that reflects your wishes, and don’t wait to do so. Leaving yourself and your loved ones unprotected by a will, is not a welcome legacy for anyone.

Reference: The News Enterprise (September 22, 2019) “To ensure your wishes are followed, prepare a will.”

Relocating for Retirement? What You Need to Know

Sometimes having too many choices can become overwhelming. Move closer to the grandchildren, or live in a college town? Escape cold weather, or move to a mountain village? With the freedom to move anywhere, you’ll need to do some serious homework. A recent article titled “Don’t Relocate in Retirement Without Answering These 5 Questions” from Nasdaq contains some wise and practical advice.

There are some regions that are more retirement-friendly than others. If you end up in the wrong place, it could hurt your retirement finances. Therefore, ask these questions first:

What are the state’s taxes like? If you are living on Social Security benefits, retirement savings and a pension, the amount of money you’ll actually receive will vary depending on the state. There are 37 states that don’t tax Social Security benefits, but there are 13 that do. There are also some states that do not tax distributions from retirement accounts. Learn the local rules first. If you currently live in a state with no income tax, don’t move to a state that may require a big tax check.

If you live in a high tax state and don’t have enough money saved for a comfortable retirement, then moving to a lower tax state will help stretch your budget.

Is there an estate or inheritance tax, and is that a concern for you? If leaving money to heirs doesn’t matter to you, this isn’t a big deal. However, if you want to pass on your assets, then find out what the state’s inheritance taxes are. In some states, there are no taxes until you reach a pretty large amount. However, in states with inheritance taxes, even a small estate may be taxed, with those who inherit sometimes owing money on even small transfers.

What’s the cost of living compared to where you live now? When you’re working, moving to a place with a higher cost of living is not as big a deal, since your wages (hopefully) increase with the relocation. However, if your cost of living goes up and your income remains fixed, that’s a problem. The last thing you want to do is move to a place where the cost of living is so high, that it decimates your retirement savings.

If you live somewhere with high taxes and high prices, moving to a lower cost of living area will help your money last longer, and could make your retirement much easier.

Is it walkable or do you need a car? Cars present two problems for aging adults. One, they are expensive to maintain and insure. Two, at a certain point along the aging process, it becomes time to give up the keys. If you live in a walkable community, you may be able to go from having two cars to having one car. You might even be able to get rid of both cars and do yourself a favor, by walking more. This also gives you far more independence, far later in life.

What’s healthcare like? Even people who are perfectly healthy in their 50s and 60s, may find themselves living with chronic conditions in their 70s and 80s. You want to live where first-class healthcare is available. Check to see what hospitals and doctors are in the area before moving. You should also find out if medical care providers accept Medicare. Consider the cost of a nursing home or home care in your potential new community. Some areas of the country have much higher costs than others.

Reference: Nasdaq (Aug. 9, 2019) “Don’t Relocate in Retirement Without Answering These 5 Questions,”

Social Security Disability Benefits for Children Under the Age of 18

If you have a child with a significant disability, you might think the child would automatically qualify for government benefits. However, in reality, you will have to jump through several hoops. In addition to any assistance your state might provide, your child might be eligible for Supplemental Security Income (SSI) benefits. Here is an overview of the process for going after Social Security disability benefits for children under the age of 18.

The Social Security Administration (SSA) uses a two-part procedure for determining whether a child is eligible to receive disability benefits. The adult acting on the child’s behalf must complete and file:

  • An Application for Supplemental Security Income, and
  • A Child Disability Report

The Application for Supplemental Security Income for a Child Under the Age of 18

The SSA does not provide an online Application for Supplemental Security Income for a child under the age of 18. You will have to fill out the printed form. These forms can be confusing, but do not give up. You can call your local Social Security Office or go by their office to schedule an appointment to complete the application paperwork with an agent of the SSA. The agent can help you in person or over the telephone.

The SSA usually does not publish the telephone numbers of their local offices, so you will have to call the main number to get connected to your local office. The main SSA phone number is 1-800-772-1213 (TTY 1-800-325-0778).

Your local office can help you determine whether the child meets the financial requirements for SSI benefits. The countable income and assets of the child and parents must not exceed the allowed amount. The SSA excludes many assets from consideration, which is why they use the term “countable income and assets.”

The Child Disability Report

You can complete the Child Disability Report online. If you want assistance with the form or would prefer not to use the online form, you can call the SSA for help. Whether you complete the Child Disability Report online or at an SSA office, you will have to sign a document that authorizes the SSA to talk with your child’s doctor about the medical condition that is the cause of the disability.

You can provide records you already have, and the SSA will make a copy so you can keep your records. You do not have to collect documents you do not already have. Since you have to give the SSA permission to contact the child’s health care providers, the agency can request the records for their evaluation of the application. Depending on the facts of your situation, the SSA might find these records of the child useful:

  • Medical records
  • Prescriptions or pharmacy medication containers
  • Individualized Education Program (IEP) from the child’s school
  • Individualized Family Service Plan

Sometimes people start an online Child Disability Report and realize the need more time or information to complete the form. If you find yourself in that situation, write down the re-entry number you get from the SSA website. You can use that number to go back to the Child Disability Report, when you are ready to finish the form.

It can be useful to talk to an elder law attorney in your area about planning for your child’s future and how your state’s regulations might vary from the general law of this article.

References:

Social Security Administration. “Apply for Disability Benefits – Child (Under Age 18).” (accessed August 29, 2019) https://www.ssa.gov/benefits/disability/apply-child.html

The Five Steps to Qualify for SSDI Benefits

Many people assume that if you have a significant illness or injury, you can apply for and get Social Security Disability Insurance (SSDI) benefits. In reality, no matter how sick you are, your medical condition is only one part of the process. The Social Security Administration (SSA) will only pay monthly benefits, if you pass all the factors that they evaluate. Here is an overview of the five steps to qualify for SSDI benefits.

You must have worked in jobs that paid Social Security taxes to be eligible for SSDI benefits. As the name says, Social Security Disability Insurance is an insurance program. The money your boss takes out of your paycheck helps to fund the program.

If you are eligible to participate in Social Security programs, the SSA will ask you a series of questions.

Question #1 – Are You Making Too Much Money?

Usually, the SSA does not consider people to be disabled, if they continue to work and earn more than the SSDI earnings cap. The income limit changes every year. For the year 2019, if you earn more than $1,220 if non-blind or $2,040 if statutorily blind, the SSA will deny your application for SSDI benefits.

Question #2 – Does Your Condition Limit Your Ability to Perform Basic Work Functions?

If your injury or illness has impaired your ability to do standard work tasks for at least a year, the SSA might find you satisfy this requirement. For example, if your medical condition limits your capacity to walk, sit, stand, lift things, think, remember, or solve problems, you might not be able to maintain employment. If such is the case, the SSA will move on to the next issue.

Question #3 – Is Your Illness or Injury on the Listing of Impairments?

The SSA uses the Blue Book (also called the Listing of Impairments – Adult) to determine whether your medical condition is severe enough to justify getting disability benefits instead of working. Usually, you must have a condition in the Blue Book and meet the specific Blue Book requirements for that issue.

For example, a person who needs reading glasses only for close-up work would not qualify for SSDI benefits for visual impairment. Someone with 20/200 or less vision in the better eye after the best correction available would meet the Blue Book benchmarks for visual impairment.

If your situation does not meet the Blue Book rules or is not in the Blue Book, you might still qualify for SSDI benefits if you can prove your medical condition is as severe as one that is in the Blue Book. The SSA acknowledges that it is not possible to include every possible illness or injury that could cause disability.

Question #4 – Can You Continue to Do Your Current or Any Previous Job?

If you can still perform your current job or any job you had in the past, and earn more than the earnings threshold, the SSA will say you are not disabled. If your medical condition prevents you from performing any of these types of work, you must overcome one more hurdle before the SSA declares you eligible for SSDI benefits.

Question #5 – Is There Any Type of Work You Can Do?

Even if you cannot perform any kind of work you did in the past, the SSA will evaluate whether you can go into a different line of work to earn a living. Depending on your age, the SSA might decide you need to go back to school or get job training, instead of collecting SSDI benefits.

References:

Social Security Administration. “Benefits Planner – Disability | How You Qualify.” (accessed August 29, 2019) https://www.ssa.gov/planners/disability/qualify.html

Social Security Benefits and Services for People Who Are Blind or Have Low Vision

People who have significant visual impairment or loss can get benefits if they are unable to work. The Social Security Administration (SSA) applies different rules that can make it easier for people with vision issues. Here is an overview of the Social Security benefits and services for people who are blind or have low vision.

The Rules About Visual Impairment

If your vision cannot get corrected to better than 20/200 in your better eye or you have 20 degrees or less in your better eye, you might qualify for Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI) benefits. Your visual impairment must have met the severity requirements for at least one year or be expected to last at least that long.

You might qualify for SSDI or SSI benefits, if your vision problems by themselves or in combination with other medical conditions keep you from being able to work. In this situation, you might not have to meet the 20/200 vision or 20 degrees of visual field factors.

SSDI and SSI Explained

SSDI recipients must have worked for enough time in jobs that paid into the Social Security system. If your employer withholds money from your paycheck for Social Security, you are paying into the system and earning “work credits.” The number of work credits you need will depend on your age. If you do not have enough credits, you might qualify for disability benefits based on your spouse’s or parents’ work records.

You must also not make more than $2,040 a month in 2019 to qualify for SSDI. (Non-blind applicants cannot earn more than $1,220 a month in 2019.) If you are visually impaired and self-employed, you can qualify, if your average monthly earnings are less than $2,040 a month, using the 2019 earnings cap.

If you did not work long enough at jobs that paid Social Security taxes, you might qualify for SSI benefits instead of SSDI. You must meet the same disability standards, as well as have low income and resources (assets).

Accessible Information from the SSA

The SSA provides accessible versions of all SSA publications. You can request any SSA publication in these formats:

  • Braille
  • Audio cassette tapes
  • Compact discs
  • Enlarged print

Most of the SSA publications are immediately available as audio recordings on the SSA website.

Different Rules the SSA Uses People with Visual Impairment

People who have vision issues that affect their ability to work, can get the benefit of unique rules the SSA does not apply to people without visual impairment. For example:

  • The SSA has special work incentive programs for you, if you receive SSI.
  • If the work you do after age 55 requires less skill and ability than the work you did before age 55, the SSA will treat excess income less strictly, than if you were not blind. In this situation, if your earnings in a given month in 2019 exceed $2,040, the SSA will not terminate your benefits. The SSA will merely suspend your benefits, until your income falls below the earnings cap.
  • If you do not get disability benefits now, because you are working, you can file for a “disability freeze,” that might help you get a higher Social Security disability or retirement benefit in the future. A “freeze” lets you exclude years in which you earned less money because of your visual impairment, when the SSA one day calculates your average lifetime earnings for purposes of retirement or disability benefits.

You might qualify for additional state or federal benefits. Your state regulations might differ from the general law of this article, so it could be a good idea to talk with an elder law attorney near you.

References:

Social Security Administration. “If You’re Blind or Have Low Vision – How We Can Help.” (accessed August 29, 2019)  https://www.ssa.gov/pubs/EN-05-10052.pdf

Do It Yourself Estate Planning Leads to Bad Outcomes

While the attraction of simplicity and low cost is appealing, the results are all too often disastrous, affirms Insurance News in the article “Mind Your Mouse Clicks: DIY Estate Planning War Stories.” The increasing number of glitches that estate planning attorneys are seeing after the fact has increased, as much as the number of people using online estate planning forms. For estate planning attorneys who are concerned about their clients and their families, the disasters are troubling.

A few clumsy mouse clicks can derail an estate plan and adversely affect the family. Here are five real life examples.

Details matter. One of the biggest and most routinely made mistakes in DIY estate planning goes hand-in-hand with simple wills, where both spouses want to leave everything to each other. Except this typical couple neglected something. See if you can figure out what they did wrong:

John’s will: I leave everything to my wife Phyllis.

Phyllis’ will: I leave everything to my wife Phyllis.

Unless John dies and Phyllis marries someone named Phyllis, this will is not going to work. It seems like a simple enough error, but the courts are not forgiving of errors.

Life insurance mistakes. Jeff owns a life insurance policy and has been using its cash value as a “rainy day” fund. He had intended to swap the life insurance into his irrevocable grantor trust in exchange for low-basis stock held in the trust. The swap would remove the life insurance from Jeff’s estate without exposure to the estate tax three-year rule, and the stock would receive a stepped-up basis at death, leading to tax savings on both sides of the swap.

However, Jeff had a stroke recently, and he’s incapacitated. He planned ahead though, or so he thought. He downloaded a free durable power of attorney form from a nonprofit that helps the elderly. The POA specifically included the power to change ownership of his life insurance.

Jeff put his name in the space designated for the POA. As a result, the insurance company won’t accept the form, and the swap isn’t going to happen.

Incomplete documents. Ellen created an online will leaving her entire probate estate to her husband. It was fast, cheap and she was delighted. However, she forgot to click on the space where the executor is named. The website address for the website company is the default information in the form, which is what was created when she completed the will. The court is not likely to appoint the website as her executor. Her heirs are stuck, unless she corrects this, hoping the court will understand. Hope is a terrible estate plan.

Letting the form define the estate plan. Single parent Joan has a 6-year-old son. Her will includes a standard trust for minors, providing income and principal for her son until he turns 21, at which point he inherits everything. Joan met with a life insurance advisor and applied for a $1 million convertible 20–year term life insurance policy. It will be payable to the trust. However, her son has autism, and receives government benefits. There are no special needs provisions in her will, so her son is at risk of losing any benefits, if and when he inherits the policy proceeds.

Don’t set it and forget it. One couple created online wills, when the estate tax exclusion was $2 million. They created a credit shelter, or bypass, trust to reduce their estate taxes, by allowing each of them to use their estate tax exclusion amount. However, the federal estate tax exclusion today is $11.4 million per person. With $4 million in separate assets and a $2 million life insurance policy payable to children from a previous marriage, the husband’s separate assets will go into the bypass trust. None of it will go to his wife.

An experienced estate planning attorney who is licensed to practice in your state is the best source for creating and updating estate plans, preparing for incapacity and ensuring that tax planning is done efficiently.

Reference: Insurance News Net (Sep. 9, 2019) “Mind Your Mouse Clicks: DIY Estate Planning War Stories”

More Reasons to Review Your Estate Plan

Every estate planning attorney will tell you that they meet with people every day, who sheepishly admit that they’ve been meaning to review their estate plan, but just haven’t gotten to it. Let the guilt go.

Attorneys know that no one wants to talk about death, taxes or illness, says Wicked Local in the article “Five Reasons to Review Your Estate Plan.” However, there are five times when even an appearance before the Queen of England has to come second to reviewing your estate plan.

You have minor children. An estate plan for a couple with young children must do two very important things: address the care and custody of minor children should both parents die and address the management and distribution of the assets that the children will inherit. The will is the estate planning document used to name a guardian for minor children. The guardian is the person who will determine where your children will live and go to school, what kind of health care they receive and make all daily decisions about their care and upbringing.

If you don’t have a will, the court will name a guardian. You may not like the court’s decision. Your children might not like it at all. Having a will takes care of this important decision.

Your estate is worth more than $1 million. While the federal estate plan exemptions currently are at levels that remove federal tax from most people’s estate planning concerns, there are still state estate taxes. Some states have inheritance taxes. Whether you are married or single, if your assets are significant, you need an estate plan that maps out how assets will be left to your heirs and to plan for taxes.

Your last estate plan was created before 2012. There have been numerous changes in state estate tax laws regarding wills, probate and trusts in Massachusetts. This is not the only state that has seen major changes. There have been big changes in federal estate taxes. Strategies that were perfect in the past, may no longer be necessary or as productive because of these changes. While you’re making these changes, don’t forget to deal with digital assets. That includes email accounts, social media, online banking, etc. This will protect your fiduciaries from breaking federal hacking laws that are meant to protect online accounts, even when the person has your username and password.

You have robust retirement plans. Your will and trust do not control all the assets you own at the time of death. The first and foremost controlling element in your asset distribution is the beneficiary designation. Life insurance policies, annuities, and retirement accounts will be paid to the beneficiary named on the account, regardless of what your will says. Part of a comprehensive will review is to review beneficiary designations on each account.

You are worried about long-term care costs. Estate planning does not take place in a vacuum. Your estate plan needs to address issues like your plan, if you or your spouse need care. Do you intend to stay in your home? Are you going to move to live closer to your children, or to a Continuing Care Retirement Community? Do you have long-term insurance in place? Do you want to plan for Medicaid eligibility?

All of these issues need to be considered when reviewing and updating your estate plan. If you’ve never had an estate plan created, this is the time. Put your mind at ease, by getting this off your “to do” list and contact an experienced estate planning attorney.

Reference: Wicked Local (Aug. 29, 2019) “Five Reasons to Review Your Estate Plan”

Are You Prepared to Age in Place?

If aging in place is your goal, then long-term planning needs to be considered, including how the house will function as you age, accommodations for the people who will care for you and how to pay for care, says the Record Online in the article “Start planning now so you can ‘age in place.’”

Many homes will need to be remodeled for aging in place, and those changes may be big or small. Typical changes include installing ramps and adding a bathroom and bedroom on the first floor. Smaller changes include installing properly anchored grab bars in the shower, improving lighting and changing floor covering to avoid problems with walkers, wheelchairs or unsteady seniors.

Choosing a caregiver and paying for care are intertwined issues. Many adult children become caregivers for aging parents, and for the most part they are unpaid. Family caregivers suffer enormous losses, including lost work, career advancement, income and savings. Stress and neglect of their own health and family is a common byproduct.

You’ll want to speak with an estate planning elder care attorney about how or if the parent may compensate the child for their caregiving. If the payment is deemed to be a gift, it will cause a penalty period, when Medicaid won’t pay for care. A caregiver agreement drafted by an elder law estate planning attorney will allow the parents to pay without a penalty period. The child will need to report this income on their tax returns.

The best way to plan ahead for aging in place, is with the purchase of a long-term care insurance policy. If you qualify for a policy and can afford to pay for it, it is good way to protect assets and income from going towards caregiver costs. You can also relieve the family caregiver from duties or pay them for caregiving out of the insurance proceeds.

Without long-term care insurance, the next option is to apply for community Medicaid to pay for care in the home, if available in your state. To qualify, a single applicant can keep $15,450 in assets plus the house, up to an equity limit of $878,000 and only $878 per month of income. For a married couple, when one spouse applies for community Medicaid, the couple may keep $22,800 in assets plus the house and $1,287 per month of income. If the applicant or spouse are on a managed care plan, the couple may keep more assets and income.

Another option is spousal refusal, which may allow the couple to keep more assets and income. When an applicant has too much income, a pooled income trust may be used to shelter income from going towards the cost of care. This is a complicated process that requires working with an estate planning attorney to ensure that it is set up correctly.

Self-paying for home care is another option, but it is expensive. The average cost of home health care in some areas is $25 per hour, or $600 per day. When you get to these costs, they are the same as an expensive nursing home.

Planning in advance with careful analysis of the different choices will give the individual and the family the best picture of what may come with aging in place. A better decision can be made, once all the information is clearly assessed.

Reference: Record Online (Aug. 31, 2019) “Start planning now so you can ‘age in place’”

Living Together Isn’t as Simple as You Think

One reason for the popularity of living together without marriage, is that many in this generation have experienced one or more difficult divorces, so they’re not always willing to remarry, says Next Avenue in the article “The Legal Dangers of Living Together.” However, like many aspects of estate planning, what seems like a simple solution can become quite complex. Unmarried couples can face a variety of problematic and emotionally challenging issues, because estate planning laws are written to favor married couples.

Consider what happens when an unmarried couple does not plan for the possibility of one partner losing the ability to manage his or her health care because of a serious health issue.

If a spouse is rushed to the hospital unconscious and there is no health care power of attorney giving the other spouse the right to make medical decisions on his or her behalf, a husband or wife will likely be permitted to make them anyway.

However, an unmarried couple will not have any right to make medical decisions on behalf of their partner. The hospital is not likely to bend the rules, because if a blood relative of the person challenged the medical facility’s decision, they are wide open to liability issues.

Money is also a problem in the absence of marriage. If one partner becomes incapacitated and estate planning has not been done, without both partners having power of attorney, an illness could upend their life together. If one partner became incapacitated, bank accounts will be frozen, and the well partner will have no right to access any assets. A court action might be required, but what if a family member objects?

Without appropriate advance planning, courts are generally forced to rely on blood kin to take both financial and medical decision-making roles. An unmarried partner would have no rights. If the home was owned by the ill partner, the unmarried partner may find themselves having to find new housing. If the well partner depended upon the ill partner for their support, then they will have also lost their financial security.

Unmarried couples need to execute key estate planning documents, while both are healthy and competent. These documents include a durable power of attorney, a medical power of attorney and a living will, which applies to end of life decisions. A living trust could be used to avoid the problem of finances for the well partner.

Another document needed for unmarried couples: a HIPAA release. HIPAA is a federal health privacy law that prevents medical facilities and health care professionals from sharing a patient’s medical information with anyone not designated on the person’s HIPAA release form. Unmarried couples should ask an estate planning attorney for these forms to be sure they are the most current.

If one of the partners dies, and if there is no will, the estate is known as intestate. Assets are distributed according to the laws of the state, and there is no legal recognition of an unmarried partner. They won’t be legally entitled to inherit any of the assets.

If a married partner dies without a will in a community property state, the surviving spouse is automatically entitled to inherit as much as half the value of the deceased assets.

Beneficiary designations usually control the distribution of assets including life insurance policies, retirement accounts and employer-sponsored group life insurance policies. If the partners have not named each other as beneficiary designations, then the surviving partner will be left with nothing.

The lesson for couples hoping to avoid any legal complications by not getting married, is that they may be creating far more problems than are solved as they age together. An experienced estate planning attorney will be able to make sure that all the correct planning is in place to protect both partners, even without the benefit of marriage.

Reference: Next Avenue (Aug. 28, 2019) “The Legal Dangers of Living Together.”

Retirement Planning: Where to Start?

While you may be thinking about retirement for a long time, with visions of tropical beaches or grand trips overseas, when the date starts to get closer, it’s time for some real analysis and planning, says limaohio.com’s recent article “What to consider when starting retirement.”

Start with a realistic assessment of your healthcare needs. At age 65, most people are eligible for Medicare. There are many different parts of Medicare, identified by letters, that are optional add-ons to expand coverage to serve more like the health insurance you have while working. Medicare is not directly charged to individuals, but the parts in which Medicare participants opt into, do require out of pocket payments.

Next, prepare a budget and cash-flow plan that reflects your current cash-flow situation and compare that to your expected cash-flow situation upon retirement. During retirement, income comes from several sources: part-time work, Social Security, distributions from retirement plans and earnings from investments or returns from investments.

As you get closer to retirement age, you can secure an estimate of your benefits from the Social Security Administration. This can be done by going to the government agency’s website and creating a “my Social Security” account, by calling the local office or sending a letter via mail. Note that the estimates are only estimates. Don’t depend on those being the final numbers.

Social Security benefits are based on the number of years you have worked and the amount of money that was contributed to Social Security over a lifetime. Many people mistakenly think that Social Security is a government managed retirement system, where there is a relationship between what gets paid and what is distributed. However, Social Security’s process of determining benefits is based on a formula.

Based on your birthdate, Social Security calculates the age at which you can receive the program’s maximum benefit. If you take benefits before that date, then the monthly amount will be smaller over your lifetime. The longer you can delay taking benefits after your Full Retirement Age (FRA), the larger the monthly payment will be.

Retirement accounts, like 401(k)s and IRAs, allow for withdrawals without penalty after age 59 ½. Unless the account is a Roth IRA, any amounts withdrawn will be subject to taxes. At age 70 ½, account owners are required to withdraw a certain amount from IRAs and 401(k)s, known as Required Minimum Distributions (RMDs).

All this information needs to be considered to plan for retirement, especially with the prospect of needing long-term care, including nursing home or in-home care. This usually involves planning to someday become eligible for Medicaid, if needed.

When you are preparing for retirement, it’s also a good time to make sure that your estate plan is in place. An estate plan that has not been reviewed in three or four years may only need a few tweaks, or it may need a complete overhaul. Speak with your estate planning attorney to make sure you’ve covered all of your retirement bases.

Reference: limaohio.com (Aug. 31, 2019) “What to consider when starting retirement.”