13 minute read
UNDERSTANDING THE SECURE ACT
Understanding the SECURE Act and How it Affects You
By Jim Coltrin and Andy Bailey | Managing Partners, True North Advisors
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For some time now, we’ve been following the SECURE Act as it made its way through Congress. Now the retirement savings reform bill has become law, and we wanted to offer an update on its provisions.
The Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 broadens the effectiveness of individual retirement accounts and employer-sponsored retirement savings plans. Essentially, it expands access to tax-advantaged retirement savings accounts and, ultimately, aims to help Americans save enough for a secure retirement. That’s a goal we can all get behind.
Among other things, the act: • Provides a startup credit to make it easier and more affordable for small businesses to set up retirement plans for their employees, even allowing them to band together to set up a plan for their collective employees. • Introduces a credit for those small employers who encourage savings through automatic enrollment, which has been shown to increase employee participation and boost retirement savings.
Removes the age cap that limits contributions to traditional IRAs after age 70½, which would give working people more time to contribute toward retirement.
Delays required minimum distributions (RMDs) until age 72, which allows the account to continue growing as life expectancies increase. The SECURE Act also eliminates the “stretch IRA,” an estate planning strategy that allowed much-younger beneficiaries to inherit an IRA and “stretch” the required minimum distributions across their actuarial life expectancies. Basically, the heirs received smaller RMDs over a longer period of time until the money ran out, reducing their tax liability on the withdrawals. In the meantime, the account would continue to grow tax-deferred.
Withdrawals over a lifetime are no longer an option for inherited defined contribution accounts. The SECURE Act gives non-spouse beneficiaries (including trusts) just 10 years to withdraw all the money from inherited IRAs, 401(k)s or other defined contribution plans. These supersized distributions are likely to trigger higher taxes for heirs, with few exceptions. This change does not apply to IRAs inherited in 2019 or prior, but will be effective for IRAs inherited in 2020 and beyond.
As we sort through the potential tax, retirement and estate planning implications, we are always here to assist you with your planning needs. To learn more, call us at 423-531-4111.
Please note, changes in tax laws or regulations may occur at any time and could substantially impact your situation. While familiar with the tax provisions of the issues presented herein, Raymond James financial advisors are not qualified to render advice on tax or legal matters. You should discuss any tax or legal matters with the appropriate professional.
© 2019 Raymond James Financial Services, Inc., member FINRA/SIPC. Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC, and are not insured by any financial institution insurance, the FDIC/NCUA or any other government agency, are not deposits or obligations of the financial institution, are not guaranteed by the financial institution, and are subject to risks, including the possible loss of principal. True North Advisors and the financial institution are not registered broker/dealers and are independent of Raymond James Financial Services. Investment advisory services offered through Raymond James Financial Services Advisors, Inc.
Pumpkin Spice Mouss
e
This light and creamy pumpkin dessert is the ultimate tastes-like-fall treat.
Ingred ients • 1 15-ounce can pure pumpkin (1 3/4 cups) • 1 tsp. grated peeled fresh ginger • 1/4 tsp. ground cinnamon • 1/4 tsp. freshly ground nutmeg • Kosher salt • 3 oz. cream cheese, cubed • 1 tsp. pure vanilla extract • 1 c. sweetened condensed milk • 2 c. heavy cream, cold • Sour cream and crushed ginger cookies, for serving DIRECTIONS In medium saucepan, combine pumpkin, ginger, cinnamon, nutmeg, and pinch salt. Cook on medium, stirring frequently until steaming heavily, darker in color and slightly thicker, about 5 minutes.
Remove from heat and stir in cream cheese and vanilla until smooth. Transfer to bowl, then stir in condensed milk. Let cool completely.
Using electric mixer, beat cream until medium peaks form. Fold in cream cheese mixture, then spoon into 4-ounce jars. Chill until ready to serve. Makes 8 cups. Serve dolloped with sour cream and crushed ginger cookies if desired.
HOW TO KNOW IF YOU’RE READY TO RETIRE
Eric Brotman, Forbes.com
Retiring is a huge life event, and it isn’t one that comes with many do-overs. You have to get it right the first time.
Luckily, there are ways to prepare for retirement—and even practice it—to help ensure you’re ready when the day comes.
What to do first
A few years before you plan to retire, have a practice run. If you have a retirement plan that gives you a clear picture of how much money you’ll have to live on annually, spend a full year to two years living only on that amount. If you don’t, your first step is to meet with a financial advisor to get sense of your retirement income estimate.
If you can live comfortably on the decided amount, that’s great. If not, it’s better to know that now rather than later, and it’s time to devise a plan to increase your future income.
Have a timeline for your decisions
Do you know when you must make certain retirement-related decisions? Do you even know what decisions you’ll need to make? Having a clear idea of these decisions and a timeline to make them will reduce your stress and make retirement a smoother event.
Pre-retirement decisions
Before you retire, you’ll need to determine if you have any debts that need to be refinanced. It’s hard to refinance mortgages or other loans when you don’t have demonstrable income, so do this long before you give notice at work.
You’ll also need to decide how you’ll handle long-term care expenses and if you want to use long term care insurance for some of those potential costs. Applying for this insurance should ideally be done ten years prior to retiring, and three to five years before is basically the last chance for it to be affordable.
Retirement day decisions
Retiring likely means losing your employer-sponsored benefits, so you’ll need to make decisions about health insurance. If you’re retiring at or after age 65, then you can seamlessly transition into Medicare. Make sure you remember to enroll in Medicare Part A 60 to 90 days before your 65th birthday whether you’re planning to retire or not. For Part B, you can wait to enroll until after
If you’re retiring after age 63 ½, you can use COBRA provisions to continue your employer health plan for up to 18 months until you’re eligible for Medicare. However, if you’re retiring earlier than that, you’ll either need to join your spouse’s health plan or to use the health insurance exchange in your home state.
If you’re one of the fortunate few people who will still be receiving a pension, you’ll need to decide how you’d like to receive your benefit. You will likely be given the option to maximize your benefit as a single person—meaning it expires after your death—or a few options on how you’d like a spouse to receive income from your pension should he or she outlive you.
Post-retirement decisions
Social Security is a very complex benefit, and timing your benefit claim is an important decision you’ll need to make. You and your spouse must determine whether to claim immediately at age 62 or to wait until full retirement age or even age 70 to begin receiving benefits. The decisions you and your spouse make can greatly impact how much money you’re eligible to receive during your lifetimes and during a period of widowhood for either of you. While I could go on and on about this, I’ll let those interested read more in this article I published on the topic.
You’ll also want to review your current insurance coverages to see where you can save money. Since you’re no longer commuting to work, you may be able to lower your car insurance premium. If you’re paying for disability insurance, you’ll no longer need it and can let it expire. Lastly, if you have term life insurance, you may no longer need the extra death benefits and can consider discontinuing the coverage after claiming your Social Security and pension income.
The most important step
The most important thing to do before you retire is make sure you have a substantial nest egg you’ve built up over the years.
You don’t know what the future will hold, and having access to capital— especially funds not subject to market volatility—is vital to a successful retirement.
The lesson
There’s a lot to consider when you’re thinking about retiring. Starting to make decisions and prepare for the life change early will help you be successful in your retirement.
Retirement is the one thing you cannot borrow money to accomplish, so make sure you’re able to live off the income you’ll have. Returning to work out of necessity after you’ve started your retirement is not only the opposite of what you’ll want to do, but it can also be incredibly difficult to do so.
The Top 10 Things You Need to Know about Medicare Today
Hello friends, if you’re reading this there’s a good chance you’re eligible for Medicare coverage but may not know it, or may have no idea where to begin to acquire the optimum coverage for your specific needs. Enrollment season begins in October, so it’s time for you to be “in the know!”
I’ve been in the business of helping individuals and couples sort thru Medicare coverages and options for over a decade. It truly can be overwhelming! Recently, Money.com published a well-written and accurate summary of what you need to know. Give it a glance-through, jot down questions and THEN contact me. There is no charge for a consultation with me and you will leave feeling clear on your next best steps to take.
Sincerely, Medicare Misty
MOST RETIREES RECEIVE health insurance through Medicare, the federal government's health insurance program for people age 65 and older. To maximize the value of the health plan, make sure to sign up at the correct time and take advantage of the free and low-cost services Medicare provides. Here's what Medicare covers and how much you can expect to pay for benefits and services.
What Is Medicare?
Medicare is a government health insurance program for people age 65 and older. Medicare helps cover the costs of health emergencies and chronic conditions, but it can also be used to help maintain good health. Medicare beneficiaries have to pay premiums and a variety of other out-of-pocket costs, and must make decisions about their coverage options.
LET’S TALK MEDICARE
What Does Medicare Part A Cover?
Medicare Part A covers hospital care and hospice. Part A will also pay for short-term stays at a skilled nursing facility if it follows a hospital stay of at least three days. Most retirees don’t pay a premium for Medicare Part A, but there is a $1,408 deductible in 2020 and additional charges for long hospital stays.
What Does Medicare Part B Cover?
Medicare Part B is medical insurance that pays for doctor’s visits and outpatient care. Part B provides a variety of free preventive services, such as an annual wellness doctor’s office visit, flu shot and screenings for certain conditions. Beneficiaries can go to any doctor, specialist or other health care provider that accepts Medicare and is taking on new patients.
Most beneficiaries pay the standard Medicare Part B premium of $144.60 per month in 2020, but higher-income retirees pay more. “If your income is at least $87,000 or more, then you pay the income-related premium, which is indexed and rises with income,” says Tricia Neuman, director of the Program on Medicare Policy at the Kaiser Family Foundation. Medicare Part B has a $198 deductible in 2020, after which beneficiaries are generally responsible for 20% of the cost of most doctor’s services.
What Does Medicare Part C Cover?
Medicare Part C or Medicare Advantage Plans are an alternative to original Medicare in which private insurance companies pay for Medicare-approved and sometimes other services, but with different prices and restrictions than original Medicare. You may be required to use doctors in the plan’s network and get a referral to see a specialist.
What Does Medicare Part D Cover?
Medicare Part D provides prescription drug coverage. Part D plans are private health insurance policies that follow rules set by Medicare. The premium for Medicare Part D prescription drug coverage varies depending on the plan you select. Plans can charge deductibles of up to $435 in 2020.
What Does Medigap Cover?
Retirees can purchase Medicare supplement insurance policies called Medigap to pay for original Medicare’s out-of-pocket costs and additional services Medicare doesn’t cover. Medigap policies typically cover the copays, coinsurance and deductibles of original Medicare in exchange for a monthly payment.
It’s important to enroll in a Medigap plan during the six-month period that begins when you’re 65 or older and enrolled in Part B, because after this
enrollment period ends, you may not be able to buy a Medigap policy or could be charged significantly more.
What Isn’t Covered by Medicare?
Medicare doesn’t cover all of the health care services older people are likely to need in retirement. Medicare generally won’t pay for glasses and contact lenses or the routine eye examinations to prescribe corrective lenses. Dental care and hearing aids are also commonly needed services that aren’t covered. Perhaps most significantly, while short-term nursing home stays might be covered under specific circumstances, Medicare does not pay for long-term care.
When Should You Enroll in Medicare?
Retirees can first enroll in Medicare during a seven-month window that begins three months before the month they turn 65. Sign up at the beginning of this period if you want coverage to begin the month you reach age 65.
If you miss the initial enrollment period, you can sign up between Jan. 1 and March 31 for coverage that will begin July 1, but you will be charged late enrollment penalties for as long as you have Medicare. “Late enrollment penalties from Medicare can be long-term,” says Anna Maria Chávez, executive vice president and chief growth officer at the National Council on Aging. “You don’t want to have to worry about higher costs just because you didn’t act when you became eligible at 65.”
If you delay Medicare enrollment because you or your spouse is still working at a job with group health insurance, sign up within eight months of leaving the employer or health plan to avoid the penalty.
How Do You Sign Up for Medicare?
Social Security beneficiaries are often automatically enrolled in Medicare Parts A and B, with coverage starting the month they turn 65. If your birthday falls on the first of the month, coverage will start at the beginning of the prior month.
Medicare cards are mailed out to most Social Security beneficiaries three months before their 65th birthday, and Medicare Part B premiums are withheld from Social Security payments. However, you will need to actively sign up if you want prescription drug coverage, a Medicare supplement policy or a Medicare Advantage plan.
