3 Tax Penalties That Can Ding Your Retirement Accounts

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Building and living off a nest egg is tough — but you can make the situation even more difficult if you run afoul of some key laws governing retirement accounts.

Make one wrong move, and the long arm of Uncle Sam may soon tap you on the shoulder, demanding a few explanations.

Following are penalties to avoid at all costs when contributing to or withdrawing from retirement accounts.

Excess IRA contribution penalty

Building a large amount of retirement savings is an admirable goal. But contributing too much to an individual retirement account (IRA) can cost you, according to the IRS.

It’s possible to commit this offense by:

  • Contributing an amount of money that exceeds the applicable annual contribution limit for your IRA
  • Improperly rolling over money into an IRA

What happens if you get a little too eager to build a nest egg and make one of these mistakes? The IRS explains:

“Excess contributions are taxed at 6% per year as long as the excess amounts remain in the IRA. The tax can’t be more than 6% of the combined value of all your IRAs as of the end of the tax year.”

The IRS offers a remedy to fix your mistake before any penalties will be applied. The agency says you must withdraw the excess contributions — and any income earned on those contributions — by the due date of your federal income tax return for that year.

For example, if you contributed too much to an IRA for 2020, you have until April 15, 2021, to withdraw the excess and thus avoid a penalty.

Early withdrawal penalty

Taking money out too soon from a retirement account is another potentially costly mistake.

If you pull money from your IRA before the age of 59½, you might be subject to paying income taxes on the money, plus an additional 10% penalty, the IRS says.

The agency notes, though, that there are several circumstances in which you are allowed to take early IRA withdrawals without penalties. For example, if you lose a job, you are allowed to tap your IRA early to pay for health insurance premiums.

The same penalties apply to early withdrawals from retirement plans like 401(k)s, although again, there are exceptions to the rule that allow you to make early withdrawals without penalty.

It’s crucial to note that the exceptions that allow you to make early retirement plan withdrawals without penalty sometimes differ from the exceptions that allow you to make early IRA withdrawals without penalty.

Note: The Coronavirus Aid, Relief, and Economic Security Act (CARES) Act of 2020 created a one-time exception to the early-withdrawal penalty for both retirement plans and IRAs due to the coronavirus pandemic: Generally, coronavirus-related distributions of up to a total of $100,000 that were made in 2020 are exempt.

Missed RMD penalty

Retirement plans are great because they generally allow you to defer paying taxes on your contributions and income gains for decades. Alas, eventually, Uncle Sam is going to demand his share of that cash.

Previously, taxpayers were obligated to take required minimum distributions — also known as RMDs — from most types of retirement accounts beginning the year they turn 70½. But the Secure Act of 2019 bumped up that age to 72.

The consequences of failing to make these mandatory withdrawals still apply, though. Fail to take your RMDs starting the year you turn 72, and you face harsh penalties, says the IRS:

“If you do not take any distributions, or if the distributions are not large enough, you may have to pay a 50% excise tax on the amount not distributed as required.”

It’s important to note that the RMD rules do not apply to Roth IRAs. You can leave money in your Roth IRA indefinitely — although another provision of the Secure Act means your heirs have to be careful if they inherit your Roth IRA. For more, check out “Why Roth Retirement Accounts Are Now Even Better.”

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Source: moneytalksnews.com

How to Refinance Your Mortgage with Bad Credit

Refinancing your mortgage can provide you with a lot of financial benefits. You can cash out on some of your home’s equity when you need a large sum of money.

signing refinance papers

You can also take advantage of lower interest rates to save on your monthly payments. It’s also possible to get rid of your private mortgage insurance if you have enough equity in your home.

If your credit has taken a dive since you first bought your house, it may be difficult to refinance. After all, you’ll essentially be taking out a new home loan and will have to go through the entire application process with a mortgage lender.

However, you’re not left without any options. Learn how to make sure refinancing is the right move for you and how you can refinance your mortgage with bad credit.

Make Sure Refinancing Makes Financial Sense

Before applying to refinance your house, analyze the total cost of the transaction to ensure it’s the right move.

Yes, you might save money on your monthly mortgage payments with a lower interest rate, but remember that you also have to pay closing costs and other fees to get a new loan.

Refinancing Usually Extends Your Loan Term

Also, consider that your newly refinanced loan usually extends the length of your loan back to 30 years, regardless of how long you have been paying down your current loan. That means it will take longer to pay off your house and you’ll also be paying that interest for longer.

If you’ve been paying on your home for 10 years, that’s a long time to add back onto your mortgage, especially while making additional interest payments. Before you refinance, make sure you consider all of the financial implications, not just your new monthly mortgage payment.

Your lender can help you estimate what expenses you’re likely to incur so have an in-depth conversation before making a decision.

Refinance a Mortgage with Bad Credit

Credit scores and interest rates go hand in hand. As with all loans, a higher credit score results in lower interest rates, saving you money every month. This really adds up on mortgages because you’re paying the loan off for so long. And even if you don’t have excellent credit, you still might be able to get approved for a home loan.

Shop Around

Start off by shopping around for lenders. You’re under no obligation to use the same lender as your initial mortgage, and it’s good to compare several offers.

Refinanced home loans can be structured in any number of ways and some may work for you better than others. For example, you might want to roll closing costs into the loan rather than paying them in cash up front.

Mortgage Points

If you plan on staying in your home for a long time, it may be worth paying an extra point at closing in order to get a better interest rate. Think about what your goals are in refinancing and talk to each lender about the different ways you can achieve them.

A good lender can also help you prepare to get approved for a mortgage refinance, even with lower credit scores. If you can, demonstrate that you have strong cash reserves by putting extra money in the bank.

You’re more likely to be approved for a loan if you have money on hand that is accessible because it shows that you’ll be able to pay for your loan even if your monthly budget is tight at times.

Pay Off Debt

Another helpful move is to strategically pay down some of your debt. Although each lender’s exact requirements vary, most like to see a debt to income ratio of less than 41%.

That means the number of recurring debt payments you make each month (like your new mortgage, your credit card minimums, and any personal loans), should only take up 41% of your monthly pre-tax income.

For example, let’s say your monthly income amounts to $5,000 before taxes and health insurance are taken out, and you pay $2,000 a month on credit cards and a car loan.

Divide 2,000 by 5,000 and you’ll get 0.4. Multiply that by 100 to find the percentage of your debt to income. In this case, it’s 40%, which is less than most lender’s required minimum.

To strengthen your application, consider making a few extra payments to lower your debt amount even more. It may take a few months for those numbers to be reflected on your credit report, so ask your lender to perform a rapid rescore if you’re in a hurry.

Getting a Co-signer

If a bad credit score is still holding you back from refinancing a mortgage, you also have the option of adding a co-signer to the loan.

This basically means that someone else with better credit can help get you approved without having to be an owner of the property title. They’ll be responsible for the loan until they’re removed, which can only be done through another refinance or selling the home.

The catch with having a co-signer is that they are also financially responsible for paying the mortgage. So if for some reason you can’t make the payments, your co-signer’s credit will also suffer — even if the loan gets all the way to foreclosure.

You definitely want a strong and trusting relationship with a co-signer and talk about what would happen in a worst-case scenario. Would the co-signer help make payments or be ok with having their credit diminished? Have an honest conversation to make sure you’re both comfortable with every possible scenario.

Required Documents

Once you’re ready to apply, you’ll need to supply the lender with similar documentation as you did when you first applied for a mortgage. This could include pay stubs, tax returns, and bank statements so they can determine your ability to repay the loan.

Another important part of the process if the home appraisal where a professional appraiser comes to your house and assesses its current value.

You’ll need to have at least 20% of the home’s value paid off, whether through mortgage payments or equity earned. So if your outstanding loan is $150,000 and the appraised value of the home is $200,000, you have 25% equity in your home and the appraisal should be good to go.

Federal Refinancing Programs

If you can’t get approved to refinance through a traditional lender, check to see if you qualify for one of these government-sponsored programs.

These options for refinancing a mortgage are specifically aimed to help people with bad credit. Each mortgage refinance option has different requirements, so read carefully before proceeding. If you qualify, you might be able to take advantage of significant savings.

Harp 2

This program is specially designed to benefit homeowners whose mortgage is greater than the value of the home, so there are no restrictions on the loan-to-value. However, you do have to meet some basic qualifications to take advantage of this program.

First, your loan has to be owned by Fannie Mae or Freddie Mac and must have been delivered to one of those entities by June 1, 2009. FHA loans don’t qualify and you can’t have already refinanced using Making Home Affordable Refinance Program (Harp 2’s predecessor).

FHA Rate and Term Refinance

If you already have an FHA mortgage, you may be able to qualify for an FHA Rate and Term Refinance. This option allows you to change the terms of your current FHA mortgage and replace them with more favorable terms. The minimum credit score to qualify is 580.

FHA Streamline Refinance Loans

If your current mortgage is not an FHA loan, you may be able to refinance your mortgage with an FHA Streamline Refinance. The minimum credit score is also 580. An FHA streamline refinance can help lower your interest rate, and you sometimes can get approved without having an appraisal performed, so it’s a speedy process.

FHA Cash-Out Refinance Loans

You can also do an FHA cash-out refinance have a minimum credit score of at least 620. The cash-out refinance allows homeowners with equity in their house to receive a lump sum of cash by increasing the principal mortgage amount (and, consequently, monthly payments).

VA Interest Rate Reduction Refinance Loan (VA IRRRL)

If you have an existing home loan backed by the U.S. Department of Veterans Affairs and you want to reduce your monthly mortgage payments, an interest rate reduction refinance loan (IRRRL) may be a good option for you. You can also move from a loan with an adjustable or variable interest rate.

Basically, a VA Interest Rate Reduction Loan lets you replace your current loan with a new one under different terms.

Improve Your Credit Score Before Refinancing

Whether your application to refinance was denied or you want to qualify for even lower interest rates, sometimes it’s worth taking the time to raise your credit score. Start by paying all of your monthly bills on time and in full. If you do that for long enough, you’ll start to see your credit score go up steadily.

You can also increase your credit card limit — as long as you don’t spend extra, you can quickly bump up your credit score.

Hire a Credit Repair Company

For people with a lot of negative items on their credit reports, a credit repair agency may be helpful in disputing those items and getting them removed altogether. Check out our reviews of the leading credit repair companies.

Credit scores are often categorized into five different ranges, from bad to excellent. If you can increase your credit score enough to boost yourself into the next category, you could automatically qualify for better refinance rates.

Don’t give up on your goal of refinancing your mortgage. There’s always room for improvement which means there’s always a way to get a better rate — even if it takes a bit of time.

Source: crediful.com

How to Retire in Turkey: Costs, Visas and More

How to Retire in Turkey: Costs, Visas and More – SmartAsset

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Turkey is filled to the brim with beautiful architecture, art and a melange of cultures that reaches back thousands of years. It’s home to artifacts from communities like the Hittites, Ancient Greeks, early Christians and Mongols, which fill this nation of some 82 million, with a rich sense of history. Lying as it does at a crossroads of Europe and Asia, visitors can see a unique blend of Western and Eastern influences. Its Mediterranean and Black Sea beaches are renowned for their beauty. Istanbul’s Grand Bazaar extends across 58 covered streets hosting some 1,200 shops. If you’re considering retiring in Turkey, here’s an overview of some basic information you’ll need. A financial advisor can offer valuable guidance as you consider retiring abroad.

Cost of Living and Housing

It’s much less expensive to live in Turkey than it is to live in the U.S. Without accounting for rent, Turkey’s cost of living is 53.56% lower than in the U.S. on average, according to Numbeo, a cost-of-living database.

U.S. rent prices are 556.13% higher when stacked against those in Turkey, on average. To rent a one-bedroom apartment in a city center will run you around $215.26 in Turkey, whereas a comparable setup in the U.S. would run about $1,340.16. If you wanted to pursue purchasing an apartment in Turkey, you would find that the price per square foot in a city center is averaged out to $83.07. In comparison, the same square footage in a similar city location in the U.S. would cost about $328.96.

To further illustrate the contrast, we can compare Istanbul, Turkey’s most populated city, to the U.S.’s New York City. To maintain the same standard of life, you would need around $8,203.10 in New York, which contrasts starkly to the approximately $1,960.45 necessary in Istanbul, assuming you rent in both.

So, if you’re looking for a country to retire in with both affordable renting prices and lower property costs to make the most out of your savings, Turkey may be a solid option.

Retire in Turkey – Visas and Residence Permit

Turkey doesn’t have a visa specifically for retirement, so you have to apply for a residence permit instead. This requirement applies to anyone who intends to remain in the country more than three months. You’ll first have to apply for a short-term residence permit, and you must do so within a month of your arrival in Turkey. There is an online application you fill out at the Turkish Ministry of Interior’s website. Once you finish, it will prompt you to make an appointment with the nearest DGMM office to continue the process and pay the fee your visa requires.

A short-term residence permit is issued on a two-year basis. After you’ve lived in Turkey uninterrupted for eight years under your short-term visa, you can apply for a long-term residence permit. These extend indefinitely.

No matter what residence permit you are applying for, you will likely need to show proof that you possess adequate assets. This can shift whether or not you have dependents, but a single person is generally required to have the equivalent to a month’s worth of Turkish minimum wage. As of early 2021, that would be around $400.

Retire in Turkey – Healthcare

The World Health Organization ranking of national healthcare systems puts Turkey’s at 70th out of 191. The central government body responsible for healthcare and related policies is the Ministry of Health (MoH). There is also a private sector and university-based care; however, the MoH is the main body responsible for providing healthcare. You can expect the quality of healthcare in Turkey to vary between regions. Although it’s cheaper than some of its European neighbors, access is limited in more rural areas. You’re more likely to have high-quality care in major urban locations like Istanbul – as well as the ability to communicate with your healthcare providers in English. This increase in quality is why most expats choose to go to private medical facilities over public ones.

All residents under 65 must have either public or private health insurance. Expats who have resided in Turkey for over a year under their residence permit can apply to have public health insurance through the state-run Sosyal Güvenlik Kurumu (SGK). Expats usually choose to supplement this with private insurance (or just choose private) to cover additional fees at private facilities.

As Turkey has grown as a country and political entity, it has experienced a great deal of reform around its healthcare system. It likely will continue to experience further changes in the future.

Retire in Turkey – Taxes

Like many countries, residents and non-residents are subject to different taxes in Turkey. Residents pay taxes on their worldwide income, whereas non-residents only have to pay taxes on Turkish-sourced income. The country uses a progressive tax scale, ranging from 15% to 35%, depending on your income bracket.

Turkey does possess a tax treaty with the U.S., which can provide some relief. You will only have to pay into one country’s Social Security program as a result, which in Turkey is a 14% flat tax for employees. Otherwise, there are also tax exemptions that may allow you to pay less on your U.S. income taxes. One example is the foreign earned income exclusion, which lets you exclude the first (approximately) $100,000 for foreign earned income if you can prove your Turkish residency.

Retire in Turkey – Safety

Each expat’s experience is unique. Some may travel through Turkey and find they encounter little to no issues on a security level. That’s not to say you shouldn’t be cautious. The U.S. Department of State’s travel advisory warns travelers either visiting or moving through Turkey to be wary of both terrorism and arbitrary detentions. The advisory heavily suggests that you avoid the Sirnak and Hakkari provinces, which are in the southeastern part of the country, as well as any area within six miles of the Syrian border to avoid terrorist activity. The State Department’s most recent report on human rights practices in Turkey bears a close reading, especially sections 1 and 6.

Although you should speak with locals and enjoy the culture, you should also be wary of your surroundings and keep an eye on political developments. It is also advised that you don’t engage with political topics online either since that can still be a red flag.

The Takeaway

Turkey is still in the process of significant political change, making settling down difficult for the average retiree. That, along with terrorism concerns, may encourage you to look at other countries instead. However, Turkey has a strong sense of identity with a warm populace who wants to share their cultural. That sense of belonging, along with the country’s beautiful features and its low living costs, may make the challenges worth it to you.

Tips on Retiring

  • Finding the right financial advisor who can help address your needs doesn’t have to be hard. SmartAsset’s free tool matches you up with local financial advisors in as little as five minutes. If you’re ready to be meet with advisors in your area that will help you achieve your financial goals, get started now.
  • Planning your retirement comes with its challenges, especially if you intend to move abroad. While Turkey may have low living costs, there still may be other financial burdens you have to address. To get an idea of what to expect, stop by our retirement calculator.

Photo credit: ©iStock.com/hadynyah, ©iStock.com/Nikada, ©iStock.com/TEZCAN

Ashley Chorpenning Ashley Chorpenning is an experienced financial writer currently serving as an investment and insurance expert at SmartAsset. In addition to being a contributing writer at SmartAsset, she writes for solo entrepreneurs as well as for Fortune 500 companies. Ashley is a finance graduate of the University of Cincinnati. When she isn’t helping people understand their finances, you may find Ashley cage diving with great whites or on safari in South Africa.
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How to Retire in Barbados: Costs, Visas and More

How to Retire in Barbados: Costs, Visas and More – SmartAsset

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An island in the West Indies, Barbados is a jewel of the Caribbean. Its turquoise waters and golden beaches are a perfect match to many people’s idealized days in the sun that they hope is waiting at the end of their working life. While this commonwealth country, where English is the official language, does have good reason to boast, you may wonder whether it’s right for you to retire in Barbados. Before contacting your financial planner to see if your finances are in order for the move, here are a few matters to consider first.

Cost of Living and Housing

Barbados’s cost of living tends to run a little higher than the U.S.’s on average, according to Numbeo, a cost-of-living database. At 12.24% above the U.S.’s average, without taking into account rent, the difference is not as significant as some other percentages found between the two.

For example, although Barbados has a higher cost of living, it has a much lower rent average. In comparison to the U.S., Barbados’s rent is generally 48.53% lower. You’ll find that renting is the cheaper way of living in Barbados, with a single-bedroom apartment in a city center at about $654.55. However, purchasing is a different story. At about $3,087.21 per square meter to buy an apartment in the same setting, it’s in the same price range as the U.S. There, it’s around $3,533.12 per square meter.

So, if you’re looking to stretch your retirement funds further, it makes more sense to pursue renting Barbados rather than purchasing a property.

Retire in Barbados – Visas and Residence Permit

For those who want to retire in Barbados, the process is relatively simple. Individuals over 60 with sufficient funds to support themselves can apply for immigrant status. After living in the country for five years, those people can then apply for permanent residence. You’ll have application and approval fees, in this case, $300 and $1,200, respectively.

Another option open to retirees is a special entry permit (SEP). This permit is offered to retired property owners and allows them to visit the island and leave as they please. The main requirements include owning Barbados real estate valued at $150,000 or higher and health insurance coverage. The latter’s value depends on the person’s age; below 50 has to have $350,000, and over 50 has to have $500,000 worth of coverage.

There are flat fees to cover for the SEP. It’s $5,000 for those below 50 and above 60 with $3,500 for those in between 50 and 60. Once you hit 60, this permit is indefinite, but you must renew it until then.

Retire in Barbados – Healthcare

Barbados enjoys a high standard of living and, thus, its people’s health is overall quite good. Its healthcare system is even viewed as among the best in the Caribbean. However, if you’re not a Bajan (as citizens of Barbados are sometimes called), you are not included under the island’s universal healthcare system. Therefore, if you’re an expat looking to retire in Barbados, you should ensure that you have private health insurance. Otherwise, numerous travelers and potential residents seek out the U.S. for treatment instead.

This outsourcing is also partially due to the difficulty in accessing professional care, such as rehab services. Otherwise, you’ll generally find four types of institutions: hospitals, both private and public; polyclinics; alternative healthcare clinics; and somewhat specialized hospitals, such as the five geriatric hospitals on the island.

Retire in Barbados – Taxes

After you spend 182 days of one year in Barbados, you are considered a resident. So, it’s important to know the tax distinctions between resident and non-resident status. Residents must pay taxes on their worldwide income, or the income they earn both inside and outside Barbados. In contrast, non-residents only pay taxes on income earned in Barbados.

For residents, they must file their income taxes on a minimum threshold of BBD50,000, or approximately $24,786. Incomes up to and including BBD50,000 incurs a 12.5% tax rate, while going over that amount leads to 28.5%. Residents are ensured a basic personal allowance of BBD25,000 ($12,500) and BBD40,000 ($20,000) for pensioners older than 60.

Non-residents receive the same tax rates. However, it’s important to note that even if you live outside the country, you must file taxes with the U.S. as an expat as well. Barbados and the U.S. have a tax treaty that can offer benefits and help ease the burden. There are also opportunities for U.S. expats through the foreign earned income exclusion and foreign tax credits to avoid double taxation on their Barbados earned income.

Retire in Barbados – Safety

While U.S. expats are not specific targets of crime in Barbados, they are still susceptible to crimes of opportunity and violence. Theft, such as burglary and gun violence, among other crimes, exist in Barbados. So, it is essential to remain vigilant, to avoid walking alone, particularly at night, and to know who you’re with at all times.

In particular, the U.S. Department of State advises against traveling through specific areas on the island to avoid these dangerous interactions. Areas to avoid include Crab Hill, Nelson and Wellington Streets and general nighttime party cruises.

Be cautious about which activities you enjoy, such as water sports or tourist events. This advisement comes more from a practical, safety concern than a pointed targeting of tourists, though. So, keep your wits about you.

The Takeaway

Barbados is the island of dreams for some retirees. Thanks to the prominent U.S. community as well as an English-speaking citizenry, there’s less of a culture shock to shake you up. There is also the gorgeous weather, a location out of most hurricanes’ paths and the relative ease in becoming a resident. However, before you start to plan out your future on this island, it’s best to speak with a trusted financial advisor. Such a person can lay out the commonwealth’s tax and healthcare systems and help you determine whether the high purchasing price of property is in line with your long-term goals.

Tips for Achieving Your Retirement Goals

  • Finding the most suitable financial advisor for your needs doesn’t have to be complicated. SmartAsset’s free tool matches you with local financial advisors in as little as five minutes. If you’re ready to be matched with your financial advisor, who will help you achieve your financial goals, get started now.
  • Barbados may not have a high cost of living compared to the U.S., but the difference could still affect your finances. To see  if your finances will support this, try our retirement calculator. Just put in a few details about where you want to retire, when you want to retire and the value of your current savings.

Photo credit: ©iStock.com/Fyletto, ©iStock.com/isitsharp, ©iStock.com/zstockphotos

Ashley Chorpenning Ashley Chorpenning is an experienced financial writer currently serving as an investment and insurance expert at SmartAsset. In addition to being a contributing writer at SmartAsset, she writes for solo entrepreneurs as well as for Fortune 500 companies. Ashley is a finance graduate of the University of Cincinnati. When she isn’t helping people understand their finances, you may find Ashley cage diving with great whites or on safari in South Africa.
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Are You Prepared for Health Care Costs While in Retirement?

There is a simple and unsettling reality in the United States. Many Americans don’t feel financially prepared for health care costs in retirement. In a recent study of U.S. adults ages 50 to 64, nearly 45% had low confidence in their ability to afford health insurance during retirement. We’ve all heard these costs are rising faster than inflation, but how do we plan for something that feels so uncertain?  

So, how much is health care likely to cost during retirement? The average 65-year-old couple in 2020 will need $295,000 in today’s dollars during their retirement, excluding long-term care, to cover health care expenses, according to Fidelity. But depending on your age, income, health, location and Medicare eligibility, that number could be much different. When long-term care is factored in, the expense for health care can increase considerably. According to the U.S. Department of Health and Human Services, a person turning 65 today has almost a 70% chance of needing long-term care services in their remaining years. Currently, the national average median cost is $8,821 for a private room in a nursing facility and $4,576 for a home health aide, according to the Genworth Cost of Care survey.

While these high figures may seem alarming, it is not all doom and gloom and there are some ways to proactively prepare for the costs of health care while in retirement. So, what can you do if your retirement and health care savings need a shot in the arm?   

Save in a tax-free account for health care expenses

One great way to begin budgeting for your health expenses is by contributing to a Health Savings Account (HSA). If you currently have a high-deductible health care plan, your employer may offer an HSA. This type of account allows you to contribute while receiving a tax deduction, the money can get invested and grows tax-deferred, and if the money is eventually used for qualified medical expenses the withdrawal is tax-free. In 2021 the IRS allows individuals to contribute $3,600 and families to contribute $7,200.

Over several years this contribution can add up to a significant sum, which can be a ready source of health care funds when needed.

Prepare for long-term care

Even sound retirement plans can be disrupted by rising health care costs and catastrophic illness. Medicare Part A covers skilled nursing care for a specific period after hospitalization. It does not pay for custodial care for Alzheimer’s or other cognitive illnesses. This is why many people protect themselves with a long-term care (LTC) insurance policy. The benefits of LTC insurance go beyond what your health insurance may cover by reimbursing you for services needed to help you maintain your lifestyle if age, injury, illness or a cognitive impairment makes it challenging for you to take care of yourself.

By planning with long-term care insurance, you can prevent your retirement and savings from being devastated if this type of care is needed in the future. In addition, by owning an LTC insurance policy, you provide your loved ones with greater options for providing care while relieving them from full-time caregiver responsibilities.

Where you live makes a difference

Another factor that will have a big impact on how much you spend on health care is where you are living while you are retired. Traditional Medicare coverage is the same all over, but prescription coverage (Part D), Medicare Advantage (Part C), “Medigap” supplemental plans and private insurance vary depending on where you live. The costs of long-term care can vary by thousands of dollars depending on the state you live in. If you are currently living in a state where health care costs are higher, you can consider moving somewhere different while in retirement.

Consider your age when you retire

While you are eligible to begin collecting Social Security at age 62 you are not able to begin Medicare until age 65. If you choose to retire earlier than 65 there are some options that you can explore for health insurance. When you retire, you may choose to continue your employer’s coverage under COBRA for up to 18 months. However, your premiums will increase significantly since you will now be paying the full premium yourself. If your spouse is still working and eligible for health insurance, you may be able to move to their plan relatively easily. Another option is buying an Affordable Care Act plan on a federal or state health insurance marketplace. You may also qualify for a subsidy if your household income is below a certain level.

It is relatively unsurprising to learn people who are most confident about retiring have spoken with a professional financial adviser about retirement planning. Will you be able to retire comfortably? The answer can be equally complicated. It is a complicated question. Financial planning is not a static activity. Retirement goals, income needs and projected expenses may change significantly over a lifetime. As a result, it is important to review retirement plans often and revise as needed.

The good news is that whatever your health care costs end up being, those costs will usually be over the course of several years. This gives someone with a well-developed plan the ability to feel confident and prepared for what’s ahead.  

Financial Adviser, Western International Securities

Matt Stratman is a financial adviser at Western International Securities in Southern California. His focus is helping business owners and entrepreneurs who are planning for retirement. With a strong, client-centered approach he creates personalized investment strategies to help them reach their financial goals. Matt is extremely passionate about retirement planning, believing the better prepared a person is, the more fulfilling their retirement will be.

Source: kiplinger.com

Unanticipated Side Effects: The COVID-19 Pandemic and Working Women

The COVID-19 pandemic has challenged individuals and families around the globe, with a disproportionately large burden falling on the shoulders of working women. This ongoing crisis has exacerbated demands on women who juggle the responsibilities of a career with a primary caregiver role at home. According to a recent report from LeanIn.org and McKinsey, one in four women have considered “downshifting their careers or leaving the workforce” due to lack of flexibility at work, housework and caregiving burdens and burnout.

Every situation is unique, and the decision to make a career change is a deeply personal and individual one. Women who are contemplating taking a step back from work should consider carefully evaluating the financial implications of this shift, consulting with their partners about how it will affect their families, and seeking guidance from a financial adviser about the impact on their long-term financial plans.

Steps to take before ‘stepping back’ from work

Before moving forward with a career exit or major downshift, there may be smaller steps you can take to alleviate the pressures of balancing work and family — both financially and otherwise.

For starters, reaching out to your employer to discuss your concerns may yield a modified working arrangement that meets your needs, such as reduced hours or flex time. You may also be entitled to benefits or other resources to help reduce feelings of burnout and financial anxiety. Keep in mind that research shows companies where women are well-represented in leadership roles are 50% more likely to outperform than their peers — in other words, you may have more negotiating power than you think.

In addition, now is a good time to reassess your long- and short-term goals for your career, finances and personal fulfillment, as well as to write them down, if you have not recently done so. Having a clear sense of what you want to accomplish in various areas of your life will help ensure that the decisions you’re making align with those goals. (Research also shows that people who put their goals in writing are more likely to accomplish them.)

From a financial standpoint, there may be budget adjustments within your control that will make reducing hours at work more financially feasible. Take stock of the cash flow basics: your income vs. your spending, where the money is going each month, and where you can easily reduce expenses.

Contemplating a career change from every angle

If leaving the workforce or scaling back to a part-time role still feels like the best solution, it’s important to examine the complex implications of that decision for your personal life, your career and your finances. While it is most often women who make changes in their professional lives in response to COVID-19, involving your spouse or partner in your plans is crucial. Both parties need to understand your household’s current financial situation, your collective goals, and the pros and cons of your decisions. Contemplating these questions, and talking them through with your spouse or partner can help prepare you for what will likely be a significant shift on multiple fronts:

  • If you are in a two-income household, is your partner’s income sufficient to support your family’s needs?
  • If you decide to shift to part-time work, will that change or reduce access to benefits you and your family receive from your employer (health insurance, group life or disability insurance, or a 401(k) match)?
  • Can you still afford to contribute the same amount to your retirement account if your income is reduced?
  • If you quit your job or cut back to part-time, how will the resulting reduction in income impact your long-term financial security and future Social Security benefits?
  • Should you decide to return to the workforce in the future, how will taking time away affect your career?
  • Is there an opportunity to stay engaged in your career and professional network via freelancing or consulting work?
  • Will stepping away from your job lead to feelings of resentment or regret? Are there other areas of your life from which you derive a sense of purpose and fulfillment?

How your financial adviser can help

Before making any major decisions, you may also want to loop in your financial adviser to help you evaluate your options in the context of your long-term financial plan. An adviser who understands what you’re trying to accomplish, your current financial circumstances, and your long-term goals can walk you through different courses of action and establish a plan to move forward. I’ve found that for many people, having a plan goes a long way in alleviating stress and anxiety around financial issues.

Speaking of having a plan, it’s also important to keep in mind that financial planning is not a one-time exercise, but an ongoing, dynamic process. You should check in periodically with your adviser, let them know of any significant changes in your life as they happen, and adjust your long-term financial plan as often as needed. In addition, your financial adviser can be a valuable resource in ways that go beyond answering your financial questions. Believe it or not, due to an adviser’s vast network, they can help clients do everything from finding attorneys to review new employment contracts and updating estate planning documents to collaborating with eldercare experts and long-term care specialists, and more.

For women balancing careers and families, the COVID-19 pandemic has piled additional burdens onto plates that were already full. No matter how you ultimately navigate these challenges, taking stock of all your options, involving your partner and your financial adviser in planning, and making decisions that are rooted in your long-term goals can help ensure the best possible outcomes for you and your family.

Senior Wealth Adviser, Boston Private

Kathleen Kenealy, CFP®, CPWA® is the Director of Financial Planning and a senior wealth adviser for Boston Private. She specializes in working with successful individuals and families to manage, protect and grow their assets. Kenealy provides guidance on investment, retirement, philanthropic, estate and tax-planning strategies.

Source: kiplinger.com