Micro Wedding Is Sign of the Times

Micro weddings have become ultrachic in the time of coronavirus. These smaller weddings allow you and your future spouse to exchange your vows, enter into a legal relationship and get access to each other’s health insurance all while living through these socially-distanced times.

What Are Micro Weddings?

A micro wedding is generally a wedding with less than 50 guests. In the before times, micro weddings were often a cost-cutting measure as the most effective way to cut your budget is to cut your guest list.

When you cut your guest list, you’re cutting down on the amount of space you’ll need at the venue. Simultaneously, you’re cutting down on the costs of food, alcohol and favors.

During the time of Coronavirus, micro weddings are helpful to your health as well as your wallet. You may even want or be required to cut your guest list further than the normal standard of 50 guests.

Planning a Micro Wedding

When you’re planning a micro wedding the first thing you’ll want to start with is your guest list. You may only want your closest friends and family there for your big day. Or, in this time of pandemic, you may only want it to be the two of you and the officiant. In some states, you can even eliminate the officiant via a self-uniting marriage.

Whether you have a handful of guests or just the couple at your micro wedding, venues and vendors across the wedding industry have many ways to help you share your big day while saving money.

Get Creative with the Venue

Because you have a smaller guest list, your venue doesn’t need to be nearly as large. Your favorite art gallery might be renting out space, or you might be able to book a private room at your favorite restaurant. If a venue had a minimum guest count prior to 2020, those minimums have likely been reduced or eliminated altogether.

If you are absolutely set on having a larger wedding despite the pandemic, you could book your local park or another outdoor venue to make the event safer. Be sure to remind your guests that they still need to wear masks and observe the 6-foot rule even though the event will be taking place outside.

Newly weds get married as hot air balloons are released all around them on top of a mountain.
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Destination Weddings

You may have a bit of pent up wanderlust, dreaming of a destination wedding. Destination weddings are usually micro weddings. Because you or your guests will have to pay for extra expenses like hotel rooms and travel costs, the number of people who can attend usually becomes inherently smaller.

There are certainly some Caribbean destinations that are allowing Americans to visit during the pandemic, and some of the resorts are offering great deals. But despite more and more Americans getting vaccinated, many people are still avoiding air travel. Be prepared for some guests to decline your invitation if air travel is involved.

Instead of air travel, you can either commit to a long road trip through locales where the infection rate is low, or pick a venue within convenient driving distance. Traveling in your car with other members of your bubble is a far safer way to get from point A to point B.

Remember that even if you’re fully vaccinated, there is still potential for you to spread the virus to your guests, your hosts and anyone else you may come into contact with. The more the virus spreads, the more likely it is to harm the unvaccinated, even if those unvaccinated people aren’t in your immediate circle.

Allowing the virus to spread like this also provides it with increased opportunities to mutate into vaccine-resistant variants, which could force us all into lockdown again until boosters for new strains are available.

Invest in Quality Videography

Maybe you never dreamt of having a micro wedding. You might even be upset that you can’t have a huge party with your family and friends.

One way to help soften the blow of having a micro wedding during the pandemic is to share your big day with quality videography. You can either livestream your ceremony or hire a videographer to document the celebration.

Because business has been slower and videography has new importance during the pandemic, some venues and videographers are offering discounts on these services.

Curbside Tastings

The mere fact that you’re feeding less people at your micro wedding means you can spend less on your wedding cake and any catering your micro wedding may require.

During the pandemic, some bakeries, restaurants and caterers are offering curbside tastings to ensure everyone’s safety.

Drive-By Wedding Visits

Maybe in normal times, your sister would have been your matron of honor, but she has a disabled child who is high-risk. Even though you are both vaccinated, her child is not. She can’t risk exposing herself to even asymptomatic cases of the virus as she could unknowingly pass them on to her child.

You still want her to be a part of your big day. If she lives within driving distance, you could schedule a drive-by visit prior to the micro wedding ceremony. Either she and hers could drive by your place, where you’d be on display in your gown or tux, or you could drive by her place, stepping just outside the car to show her how good you look while keeping a masked distance of well over six feet.

It’s not the same. It’s still incredibly sad that she can’t be there, and you might even want to consider postponing your wedding until she can attend. But if the show must go on, these drive-by visits can still provide you both with a special memory from your special day.

Include Remote Readings

If you’re having a Zoom micro wedding, even those who cannot attend can participate in your ceremony. In the case of your sister, she may perform a reading or conduct a prayer through the screen. You can customize your ceremony any way you see fit, using your creativity and the power of the internet to make your micro wedding all that much bigger.

Micro Wedding Ideas for a Smaller Guest List

When planning a micro wedding, you may find that you have a bit of a budget surplus because of these cut costs. Both the budget surplus and the fact that you’ll have far fewer guests at your wedding allow you to get creative and a little more personal with the finer details of micro wedding planning.

Hand sanitizer and face masks are set out for guests to use during a wedding reception.
Getty Images

Wedding Favors

The following are a few favor ideas you might consider for your micro wedding, depending on your budget and your wedding’s theme. The dollar signs are meant to show you the relative expense but the exact dollar amount of each is based on your own budget.

  • Masks. ($-$$) Masks can be custom-printed with names and wedding date, nodding to the extraordinary times we’re all living in while giving your guests a functional gift they’ll be able to use in their day-to-day lives. You may even want to make these favors available to guests upon arrival rather than at the end of the celebration. That way if anyone forgot to bring their mask, they’ll literally be covered.
  • Hand sanitizer. ($) You can find plenty of beautiful yet affordable options for custom-printed hand sanitizer right now. Instead of the “Germ-X” label, your label will include your names, the wedding date and perhaps some adorable quote about love. This is another good favor to make available to your guests upon arrival.
  • Fauci-approved smooches. ($) Want to DIY your micro wedding favors? One cute idea is to get a glass jar, fill it with Hershey Kisses, and affix a label that reads “Social Distance Kisses.”
  • Flip flops. ($-$$) If you plan on driving to the beach for your destination wedding, flip flops can make a great wedding favor. If guests forget about the sand and wear fancy shoes to your celebration, they’ll appreciate the option to switch to beach-friendly attire upon arrival. Because your guest count is small, you can ask each guest for their shoe size beforehand so everyone is accurately accounted for. You can also go the extra mile and order custom flip flops with your names and wedding date printed on them.
  • Custom luggage tags. ($$$) This option is a little more expensive, but if you find yourself with extra padding in your wedding budget you may decide they’re worth it. Luggage tags can serve as a token of hope that life will go back to normal soon and we won’t have to stress as heavily should we have to get on a plane and traipse through the airport.

Guest Book

Similarly, because micro weddings have so few people in attendance, you can use creative ideas for a non-traditional guest book. Your guest book can then be integrated in your day-to-day married life.

Here are some ideas that can be customized to any micro wedding budget:

  • Picture frame. ($-$$$) When you get your wedding pictures back from the photographer, there’s likely to be one photo that just blows you away. Before the wedding, purchase a frame where you can display that much-anticipated picture. Buy a frame with a removable mat. Then, you can have your guests sign the mat in lieu of a guestbook on your wedding day. Their well-wishes can be displayed in your home alongside your favorite wedding photo.
  • Ornaments. ($-$$$) Have you ever known someone who has a tradition of picking up a Christmas ornament on every vacation? Their tree then reminds them of all the journeys they’ve enjoyed. You can do a similar thing for your wedding day — especially if you have a small guest list. Instead of a guestbook, provide ornaments and paint pens coordinated with your wedding colors. Each guest will sign one. Every year, you can display your wedding-day memories on your tree, remembering those who were there with you.
  • Tiles or stepping stones. ($-$$$) Are you and your soon-to-be spouse remodeling? Or doing some landscaping work? If so, you can integrate your wedding day into your design plans. For instance, if you’re doing interior repairs and plan to lay tile, you can put out some tiles at your micro wedding in lieu of a guest book. Each guest would then sign one, and you could integrate your guest book into your home. If you’re doing outside work, you could have each guest sign a wet stepping stone, even adding their handprint if they want to. You can then integrate these stepping stones into your garden.

Stationary

Things are a lot more hopeful right now with somewhat improved vaccine distribution, but there are still so many unknowns. As you plan your micro wedding during uncertain times, you might want to familiarize yourself with some Corona-era additions to the wedding stationary world:

  • Change-the-date announcements. Change-the-date cards are now incredibly common for wedding postponements. Just like wedding invitations, these cards range from cute and witty all the way to incredibly formal. You can look for a template that matches the tone of your wedding day.
  • Virtual wedding invitations. Maybe you’re doing your part by giving the virus as few opportunities to mutate as possible. That’s why you’re doing a Zoom micro wedding with just the two of you plus your officiant. Paper invitations to your wedding are still a beautiful touch, but the most convenient way to invite your guests to livestream the event is through a virtual invitation. With virtual invitations, your guests will have access to a clickable link where they can participate in your ceremony live.
  • Elopement announcements. Whether you elope or simply choose not to announce to anyone but your micro wedding guests that you’re getting married, after-the-fact wedding announcements are a good way to include family and friends. Prior to the pandemic, these were commonly used for elopements, so you can find plenty of templates online even if they predate 2020. But you can also find pandemic-specific announcements whether you eloped or did, indeed, plan and have a few guests. Ideally, this announcement will contain a link to a wedding website where friends and family can view either pictures or video of your celebration after the fact.

It can be hard to break it to family or friends that they are either not invited or are uninvited to your wedding. But you are not the only one going through this situation. The silver lining is that because so many couples have faced the same circumstances, there are plenty of templates online and professionals who have worded the same sentiment for numerous clients. You don’t have to stress about the wording on your own.

Brynne Conroy is a contributor to The Penny Hoarder. She blogs at Femme Frugality.

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Source: thepennyhoarder.com

How to Make a Retirement Budget So You Don’t Outlive Your Savings

You’ve spent decades in the workforce earning a living, your schedule dictated by the demands of the job. All the while, you’ve been steadily adding to your savings so that one day you could get to this point. Retirement.

Now, there’s no alarm to wake you up in the mornings and no boss to answer to. You can finally get around to crossing items off your bucket list — or simply have the opportunity to catch a midweek matinee movie.

The world is your oyster.

Life may feel more relaxed and carefree, but that doesn’t mean you no longer have financial responsibilities. In fact, now’s the time you might need to be even more diligent about budgeting your money.

Living on What You Have Saved

When you say goodbye to your 9-to-5, you also say goodbye to your regular paycheck. You’ll rely on Social Security benefits, the money in your retirement accounts and any additional income, like a pension, to cover your expenses.

Sticking to a budget is vital so your retirement savings last. That money you’ve squirreled away in your working years has to stretch for decades. Remember, life on a fixed income means there are no bonuses, overtime or promotions to increase your cash flow.

How Much Should You Have Saved?

If you’re already retired or nearing retirement age, hopefully you’ve done the math to determine whether you’ll have enough money to keep you afloat.

One popular rule of thumb is to have 25 times your average annual expenses saved up. But how much money you need in retirement depends on many factors, like your age, where you live and the type of retirement you want to enjoy.

If you want to retire at 60, rent a highrise in New York City and travel every couple of months, you’ll need considerably more money than a retiree who leaves the workforce at 70, lives in a paid-off home in rural North Dakota and just stays home and knits.

There are also a lot of unknowns in retirement — like what medical conditions you could develop and exactly how many years you’ll need your money to stretch.

That’s why it’s important to have robust retirement savings and be cognizant of your spending in your golden years.

How to Make the Most of Your Nest Egg

To make your savings last, you’ve got to be prudent about how much you withdraw each year.

“The gold standard has always been 4%, but new research has revealed a different number,” said Chuck Czajka, a certified estate planner and owner of Macro Money Concepts in Stuart, Florida.

He said withdrawing 3% a year instead gives you a 90% success rate to last through a 25-year retirement.

Keep in mind, once you’ve determined how much you can withdraw per year, you’ll want to divide that amount by 12 to come up with how much to withdraw each month. Czajka recommends withdrawing money from your retirement accounts on a monthly basis rather than taking out all you’d need for a whole year.

Meeting with a financial adviser can help you come up with a personalized plan to fit your individual situation.

“As people approach retirement, they should work with a retirement professional to determine their expected retirement income,” said Lisa Bamburg, a registered investment adviser and owner of Insurance Advantage in Jacksonville, Arkansas.

Two grandmothers dress in funky classes and brightly colored shirts.
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Factoring in Income Beyond Your Savings

In addition to the money you’ve saved in your 401(k), individual retirement account (IRA) or other investment accounts, a portion of your retirement income will come from Social Security benefits.

You can start collecting Social Security benefits as early as age 62, but you’ll receive less money per month than if you waited until full retirement age — 66 or 67, depending on when you were born.

If you delay claiming Social Security benefits past your full retirement age, you’ll receive even more each month. However, there’s no additional increase once you’ve reached age 70.

Pro Tip

This calculator from the Social Security Administration gives you a rough idea of your retirement benefits. This retirement estimator is more accurate but requires plugging in your personal info.

In addition to Social Security, you might have other sources of retirement income, like money from a pension plan or an annuity.

A report from the National Institute on Retirement Security found that many retirees don’t have a great diversity in their retirement income, though more income sources provide for a more secure retirement.

The report found less than 7% of older Americans have retirement income that’s made up of a combination of Social Security, a pension plan and a retirement contribution plan like a 401(k). About 40% rely on Social Security alone.

“Social Security benefits typically are not the equivalent of what it takes for most people to maintain their standard of living,” Bamburg said.

The Social Security Administration states its retirement benefits only replace about 40% of earnings for people with average wages — more for low-income workers and less for those in higher income brackets.

How to Create a Retirement Budget

Once you determine what your retirement income will be, it’s time to make your retirement budget.

If you’ve already been budgeting, you’re off to a great start, though your new budget will likely differ from that of your working days.

Take Stock of Your Essential Expenses

First you’ve got to get an overall look at your current spending. If you don’t already have a budget or track your spending, pull out the past several months of bank or credit card statements. Dig up old receipts if you tend to pay in cash.

Reviewing the past three months will help you find what you spend on average, but an even deeper dive — looking at the last six to 12 months — will give you a more accurate picture and will reveal things like your annual car insurance bill and holiday spending.

Group your spending into categories to get a good picture of where your money’s going. You’ll have fixed expenses, like your mortgage, where the cost stays the same each month. Other expenses, like groceries or utilities, will vary. For those, you should calculate your average monthly spend.

Account for Changes

After leaving the workforce, you’ll probably notice some differences in your spending. You’ll no longer have to pay for downtown parking near the office, dry cleaning your suits or pricey lunches with coworkers. Your monthly retirement contributions will be a thing of the past.

However, not everything will be budget cuts. You’ll have to account for new retirement expenses, like health care premiums your employer previously covered. If you’re 65, you can get health insurance through Medicare, but it’s likely you’ll have increased out-of-pocket medical costs as you age.

And of course, now that you have an influx in free time, you can pursue the things you’ve always wanted to do — which means more new expenses.

A group of retired women have fun.
Getty Images

Make Room for Fun in Your Retirement Budget

A big part of retirement planning is determining what type of lifestyle you want to have when you’re no longer at work 40 hours a week.

Do you want to travel? Spend more time with your grandkids? Explore a new hobby? After you’ve covered your essential expenses, how you spend what’s left in your budget is totally up to you.

Don’t forget to include run-of-the-mill discretionary expenses, like cable, magazine subscriptions and dining out. It won’t all be cruise ships and Broadway plays.

If you’re married, be sure to share your vision for retirement with your partner, so you’re both on the same page about how you’ll spend your time and money.

Adjusting Expectations to Reality

As you create your monthly budget, you may discover you don’t have nearly as much money as you thought you’d have in retirement. That doesn’t mean you have to live out the rest of your life kicking yourself for not saving more. You have a few options to get by.

Take another look at your living expenses. Are there any ways you can cut costs? Slash your food spending with these tips to save money on groceries. Consider downsizing to a smaller home.

When it comes to your discretionary spending, look for ways to enjoy a more frugal retirement. Take advantage of senior discounts. Check out free activities at your local community center. Find ways to save money on traveling.

Although retirement means leaving your working days behind, you may find it necessary to pick up a side gig or part-time job to supplement your income. Seek out opportunities that match your interests so it doesn’t feel like work.

Don’t forget to enjoy this new stage of life. You worked hard — you deserve it.

Nicole Dow is a senior writer at The Penny Hoarder.

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Source: thepennyhoarder.com

The Consequences of Gray Divorce

Divorce rates overall are increasing but it is notable that the number of divorces for those over age 65 has tripled in the last 25 years.

The term “gray divorce” was coined by the AARP to describe adults 50 and up who are going through a separation. Rising gray divorce rates can be attributed to several factors: Being divorced is no longer stigmatized as it may have been in the past; people are living longer; family circumstances and relationship dynamics have changed; and people have different in lifestyle expectations.

Divorce is difficult for both parties, but unfortunately, gray divorces often have more difficult outcomes for women rather than men. Regardless of gender, divorce deals a financial blow to both spouses. For those over 50, it can be more difficult to rebuild financially because you don’t have several decades of work ahead. Likewise, if one spouse has been out of the workforce for many years to care for children, he or she may not have the same career progress or earning potential. Additionally, although you likely don’t have custody issues for minor children to consider in a gray divorce, your grown children may get involved and perhaps might even take one side or the other.

If you are going through a divorce at any age, you need to carefully consider the financial issues involved. But if you are experiencing a gray divorce, there are some issues that merit specific attention:

  1. Division of assets. At this stage of life, it is likely that your financial situation is complicated. You should consider consulting a financial adviser, particularly one with specialized divorce certifications, such as a Certified Divorce Financial Analyst® professional, to help you understand how the division of retirement assets works and to help you separate marital assets from non-marital assets.
  2. Social Security. It is very important to know your options for drawing on your Social Security benefits. In many cases, it is more advantageous for one spouse to consider drawing off the higher earning spouse’s benefits, but there are specific requirements to be able to do so.
  3. Health insurance. If you are not yet 65, you will not qualify for Medicare and may have been covered under a spouse’s employer-sponsored health insurance. If that is the case, you need to plan for the gap in years until you qualify for Medicare and understand how COBRA benefits, the cost of individual health coverage and the policy coverage limits apply to your personal health insurance needs. You may also consider whether you need long-term care insurance if you are single, as many married people assume their spouse would handle caregiving if needed.
  4. Estate planning. After a divorce, you need to create an updated estate plan and draw up new documents to replace those that you had in place with your former spouse. It is important to make sure you have updated your beneficiaries and named those that should now have your powers of attorney for financial and health care matters. If you remarry, you will need to review and revise again to be sure your plans reflect your wishes at that time, as well.
  5. Tax considerations. Alimony may be part of a gray divorce settlement, and the tax consequences for both the payor and the payee need to be understood. In general, the receiver of the alimony will owe income tax on the payment and there is no longer a tax deduction for the payor. Additionally, it is important to understand the tax implications of the assets that are being divided in settlement discussions. A home worth $500,000 that has appreciated in value by $100,000 has different tax treatment than an investment account worth $500,000 with a $100,000 capital gain. Again, a qualified financial adviser and tax professional are very helpful in understanding the tax treatment of your proposed asset split and future income tax expectations.

Divorce at any age can be devastating, but having a clear vision of what you want your next chapter in life to look like – along with a trusted financial adviser – will help you avoid mistakes that could lead to financial heartbreak. The good news is, the AARP survey that first identified the gray divorce phenomenon also noted that 76% of people who divorced late in life felt they had made the right choice for a fresh start.

Mercer Advisors Inc. is the parent company of Mercer Global Advisors Inc. and is not involved with investment services. Mercer Global Advisors Inc. (“Mercer Advisors”) is registered as an investment advisor with the SEC. Content, research, tools and stock or option symbols are for educational and illustrative purposes only and do not imply a recommendation or solicitation to buy or sell a particular security or to engage in any particular investment strategy. Past performance may not be indicative of future results. All expressions of opinion reflect the judgment of the author as of the date of publication and are subject to change. Some of the research and ratings shown in this presentation come from third parties that are not affiliated with Mercer Advisors. The information is believed to be accurate, but is not guaranteed or warranted by Mercer Advisors
Certified Financial Planner Board of Standards, Inc. (CFP Board) owns the CFP® certification mark, the CERTIFIED FINANCIAL PLANNER™ certification mark, and the CFP® certification mark (with plaque design) logo in the United States, which it authorizes use of by individuals who successfully complete CFP Board’s initial and ongoing certification requirements.

Managing Director of Client Experience, Mercer Advisors

Kara Duckworth is the Managing Director of Client Experience at Mercer Advisors and also leads the company’s InvestHERs program, focused on providing financial planning to serve the specific needs of women. She is a CERTIFIED FINANCIAL PLANNER and Certified Divorce Financial Analyst®. She is a frequent public speaker on financial planning topics and has been quoted in numerous industry publications.

Source: kiplinger.com

8 Best Disability Insurance Companies of 2021 (Short-Term & Long-Term)

Data from LIMRA’s 2018 Insurance Barometer finds that roughly 3 in 5 American households have some form of life insurance.

In other words, there’s a good chance you have — at minimum — a term life insurance policy and therefore have some experience choosing a life insurance policy that fits your financial needs and life goals.

It’s far less likely you have experience searching for another type of insurance you probably need. That would be disability insurance, a vital income replacement solution for workers unable to work productively due to serious injury or illness.

If you or your family rely on your employment income to make ends meet or support a lifestyle you’ve become accustomed to, disability insurance is nearly as important as life insurance. After all, not all life-altering accidents and illnesses result in death.

And not all life-altering events that qualify for disability coverage are tragic. According to internal data from the Guardian Life Insurance Company of America, new mothers make more than one-quarter of the company’s short-term disability insurance claims.


Best Disability Insurance Companies

Obtaining a disability insurance policy isn’t all that different from obtaining a life insurance policy. And many of the best life insurance companies also write disability insurance policies, so you’ll see plenty of familiar names along the way.

Always shop for insurance using an aggregator like Policygenius. But the following disability insurance providers, in particular, are among the best for U.S.-based workers.

There are two main types of disability insurance coverage: short-term disability and long-term disability. All of the companies on this list offer long-term disability coverage, some offer short-term disability insurance, and many of them (or their close affiliates) offer other insurance products, such as term life and annuities.

This evaluation incorporates:

  • Financial strength ratings from A.M. Best, which measures insurers’ financial stability and overall capacity to make promised benefit payouts
  • Customer satisfaction ratings from the Better Business Bureau (BBB), a leading evaluator of general business quality
  • Overall suitability based on each company’s product mix, strengths, weaknesses, and markets served

When evaluating disability insurance companies and policies, pay close attention to policy specifics like:

  • The length of the elimination period (the waiting period before benefits kick in)
  • The length of the benefit period itself (which is usually longer for long-term policies)
  • The monthly benefit amount
  • Actual disability insurance costs (monthly premiums)
  • Whether the policy offers “any occupation” or “own occupation” coverage (or both)

1. Breeze Financial & Insurance Services Group

  • Breeze LogoA.M. Best Financial Strength Rating: Not available
  • BBB Customer Satisfaction Rating: A+
  • Great For: Very affordable policies; 100% online process with no salespeople

Breeze offers short- and long-term disability solutions that are all about convenience and affordability. Its 100% online application process cuts traditional salespeople out of the equation, allowing would-be policyholders to focus on what matters most: finding and securing the right amount of disability coverage at the right price.

Young, healthy workers with low coverage needs qualify for long-term coverage for as little as $9 per month — significantly less than many mainline insurers charge.

Despite its technology-driven approach, Breeze prides itself on an unusually transparent process that walks applicants through the entire scope of coverage and can accommodate a range of nontraditional situations, including solopreneurs and small-business owners with complex insurance needs.

And Breeze offers low-risk applicants an instant approval option that waives the usual medical underwriting requirement — no invasive medical exams or time-consuming labs required.

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2. Northwestern Mutual

  • Northwestern Mutual LogoA.M. Best Financial Strength Rating: A++ (Superior)
  • BBB Customer Satisfaction Rating: A+
  • Great For: Supplementing employer-sponsored disability plans; specialized plans for part-time workers and stay-at-home parents

Northwestern Mutual specializes in long-term disability plans with variable-length elimination periods that bridge the coverage gap between what employer-sponsored disability plans pay and policyholders’ pre-disability income.

But traditional employees with existing disability coverage aren’t the only folks Northwestern Mutual’s worthwhile for. The company also offers nontraditional products and add-ons for part-time workers and stay-at-home parents whose emotional labor is so often undervalued.

Plus, it’s regarded as one of the strongest insurance companies on the market, which is no small thing for those seeking peace of mind.

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3. MassMutual

  • Mass Mutual LogoA.M. Best Financial Strength Rating: A++ (Superior)
  • BBB Customer Satisfaction Rating: B-
  • Great For: Retirement savings protection; tying benefit growth to salary

MassMutual’s customizable disability insurance products protect between 45% and 65% of policyholders’ pre-disability income, but that’s far from the whole story.

Powerful riders, some of which aren’t widely available elsewhere, help policyholders keep their financial plans on track, even as they pay into their policies or (if it comes to that) collect benefits.

For example, the retirement savings protection rider earmarks some income for policyholders’ retirement plans, keeping their long-term investment strategy on track when they’re temporarily unable to work.

Another rider pegs benefit growth to salary growth, adding protection as policyholders’ careers advance.

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4. Guardian Life Insurance Company of America

  • Guardian Life Insurance LogoA.M. Best Financial Strength Rating: A++ (Superior)
  • BBB Customer Satisfaction Rating: A+
  • Great For: Coverage for self-employed workers; group plans for small employers

Guardian Life Insurance Company of America offers short- and long-term disability insurance for self-employed individuals, group plans for employers, and supplemental policies for workers looking to add to their employer-sponsored coverage.

Because its policies are only available through licensed insurance brokers or employers themselves, Guardian requires all would-be policyholders to go through a middleman and definitely caters to small-business owners and executives looking to retain employees with attractive disability coverage.

But it’s a solid choice for self-employed workers with variable income, a group that tends to be perceived as high-risk (and is therefore underserved) by most disability insurance providers.

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5. Principal Financial Group

  • Principal Financial LogoA.M. Best Financial Strength Rating: Not rated
  • BBB Customer Satisfaction Rating: A+
  • Great For: Existing Principal Financial clients and those willing to work with a Principal advisor

Like Guardian’s, Principal Financial Group’s disability insurance offering is gated, available only to clients of Principal Financial Group advisors and those willing to establish an advisory relationship (even if temporary) to obtain disability coverage.

The advantage: All Principal policies are written for individuals, not employers, and are therefore portable, meaning they remain in force when the policyholder changes jobs.

Because Principal clients’ relationships extend well beyond disability insurance, they can sometimes qualify for lower premiums than those available through one-off individual policy transactions. However, the most critical factor in any pricing decision is the perceived risk of disability.

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6. RiverSource Life Insurance Company

  • Riversource LogoA.M. Best Financial Strength Rating: A+ (Superior)
  • BBB Customer Satisfaction Rating: A+
  • Great For: Option to tie benefits to salary; potential for high coverage limits

RiverSource Life Insurance Company offers two disability insurance solutions: Income Protection and Income Protection Plus.

The main difference between the two is a higher level of coverage with the latter, though both are customizable based on policyholders’ incomes and long-term goals.

And both come with optional riders that tie benefits to salary increases, ensuring peace of mind with every raise. Like Guardian and Principal, RiverSource offers disability policies through a network of advisors — in this case, those working with Ameriprise Financial.

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7. Mutual of Omaha Insurance Company

  • Mutual Of Omaha LogoA.M. Best Financial Strength Rating: A+ (Superior)
  • BBB Customer Satisfaction Rating: A+
  • Great For: High coverage limits, optional coverage until age 67

Mutual of Omaha Insurance Company’s long-term disability insurance offering has two distinct advantages: high coverage limits (up to $12,000 per month) and the option to extend coverage until age 67, two years past the usual cutoff date for long-term disability benefits.

If you continue to work full-time and pay your premiums, your policy could remain in force until age 75, but Mutual of Omaha reserves the right to cancel your policy at any time after age 67.

The main drawback here: As with some competitors, individual Mutual of Omaha disability insurance policies are only available through licensed agents.

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8. Assurity

  • A.M. Best Financial Strength Rating: A- (Excellent)
  • BBB Customer Satisfaction Rating: A+
  • Great For: Longer coverage periods, flexible benefit amounts (including total disability coverage)

Assurity is a flexible option for workers with longer-term disability income insurance needs. Its coverage periods start at one year and continue up until retirement age.

Customizable benefit amounts range from partial disability (for those transitioning back to the workforce) to total disability coverage for policyholders unable to work at all.

Assurity also stands out for its commitment to any occupation coverage. Even if you’re able to perform some duties in a role or profession other than the one you held before your disability, you can remain out of the workforce (and earning benefits) until you’re once more able to do the job you were trained for.

Learn More


Final Word

Health insurance is a prevalent employment benefit. And it’s a valuable one — so much so that many workers accelerate or delay job changes based on the availability or absence of quality, affordable employer-sponsored health insurance.

Employer-sponsored disability insurance isn’t offered as widely and isn’t as high on workers’ must-have lists as health insurance. But it’s still a fairly common employment benefit. If you’re not sure whether your employer offers it, dig up your new-hire packet or log into your HR portal to see for yourself.

If it’s an option, investigate further. It could be a better deal than what’s available on the individual market to someone in your risk class.

Then again, it might not be, which is why it always pays to shop around.

Source: moneycrashers.com

The Benefits of Working Longer

Financial planners and analysts have long advised workers who haven’t saved enough for retirement to work longer. But even if you’ve done everything right—saved the maximum in your retirement plans, lived within your means and stayed out of debt—working a few extra years, even at a reduced salary, could make an enormous difference in the quality of your life in your later years. And given the potential payoff, it’s worth starting to think about how long you plan to continue working—and what you’d like to do—even if you’re a decade or more away from traditional retirement age.

Larry Shagawat, 63, is thinking about retiring from his full-time job, but he’s not ready to stop working. Fortunately, he has a few tricks up his sleeve. Shagawat, who lives in Clifton, N.J., began his career as an actor and a magician. But marriage (to his former magician’s assistant), two children and a mortgage demanded income that was more consistent than the checks he earned as an extra on Law & Order, so he landed a job selling architectural and design products. The position provided his family with a comfortable living.

Now, though, Shagawat is con­sidering stepping back from his high-pressure job so he can pursue roles as a character actor (he’s still a member of the Screen Actors Guild) and perform magic tricks at corporate events. He also has a side gig selling golf products, including a golf cart cigar holder and a vanishing golf ball magic trick, through his website, golfworldnow.com. “I’ll be busier in retirement than I am in my current career,” he says.

Shagawat’s second career offers an opportunity for him to return to his first love, but he’s also motivated by a powerful financial incentive. His brother, Jim Shagawat, a certified financial planner with AdvicePeriod in Paramus, N.J., estimates that if Larry earns just $25,000 a year over the next decade, he’ll increase his retirement savings by $750,000, assuming a 5% annual withdrawal rate and an average 7% annual return on his investments.

Do the math

For every additional year (or even month) you work, you’ll shrink the amount of time in retirement you’ll need to finance with your savings. Meanwhile, you’ll be able to continue to contribute to your nest egg (see below) while giving that money more time to grow. In addition, working longer will allow you to postpone filing for Social Security benefits, which will increase the amount of your payouts.

For every year past your full retirement age (between 66 and 67 for most baby boomers) that you postpone retiring, Social Security will add 8% in delayed-retirement credits, until you reach age 70. Even if you think you won’t live long enough to benefit from the higher payouts, delaying your benefits could provide larger survivor benefits for your spouse. If you file for Social Security at age 70, your spouse’s survivor benefits will be 60% greater than if you file at age 62, according to the Center for Retirement Research at Boston College.

Liz Windisch, a CFP with Aspen Wealth Management in Denver, says working longer is particularly critical for women, who tend to earn less than men over their lifetimes but live longer. The average woman retires at age 63, compared with 65 for the average man, according to the Center for Retirement Research. That may be because many women are younger than their husbands and are encouraged to retire when their husbands stop working. But a woman who retires early could find herself in financial jeopardy if she outlives her husband, because the household’s Social Security benefits will be reduced—and she could lose her husband’s pension income, too, says Andy Baxley, a CFP with The Planning Center in Chicago.

Calculate the cost of health care

Many retirees believe, sometimes erroneously, that they’ll spend less when they stop working. But even if you succeed in cutting costs, health care expenses can throw you a costly curve. Working longer is one way to prevent those costs from decimating your nest egg.

Employer-provided health insurance is almost always less expensive than anything you can buy on your own, and if you’re 65 or older, it may also be cheaper than Medicare. If you work full-time for a company with 20 or more employees, the company is required to offer you the same health insurance provided to all employees, even if you’re older than 65 and eligible for Medicare. Delaying Medicare Part B, which covers doctor and outpatient services, while you’re enrolled in an employer-provided plan can save you a lot of money, particularly if you’re vulnerable to the Medicare high-income surcharge, says Kari Vogt, a CFP and Medicare insurance broker in Columbia, Mo. In 2021, the standard premium for Medicare Part B is $148.50, but seniors subject to the high-income Medicare surcharge will pay $208 to $505 for Medicare Part B, depending on their 2019 modified adjusted gross income. Medicare Part A, which covers hospitalization, generally doesn’t cost anything and can pay for costs that aren’t covered by your company-provided plan.

Vogt recalls working with an older couple whose premiums for an employer-provided plan were just $142 a month, and the deductible was fairly modest. Because of their income levels, they would have paid $1,150 per month for Medicare premiums, a Medicare supplement plan and a prescription drug plan, she says. With that in mind, they decided to stay on the job a few more years.

The math gets trickier if your employer’s plan has a high deductible. But even then, Vogt says, by staying on an employer plan, older workers with high ongoing drug costs could end up paying less than they’d pay for Medicare Part D. “If someone is taking several brand-name drugs, an employer plan is going to cover those drugs at a much better price than Medicare.”

Even if you don’t qualify for group coverage—you’re a part-timer, freelancer or a contract worker, for example—the additional income will help defray the cost of Medicare premiums and other expenses Medicare doesn’t cover. The Fidelity Investments annual Retiree Health Care Cost Estimate projects that the average 65-year-old couple will spend $295,000 on health care costs in retirement.

Long-term care is another threat to your retirement security, even if you have a well-funded nest egg. In 2020, the median cost of a semiprivate room in a nursing home was more than $8,800 a month, according to long-term-care provider Genworth’s annual survey.

If you’re in your fifties or sixties and in good health, it’s difficult to predict whether you’ll need long-term care, but earmarking some of your income from a job for long-term-care insurance or a fund designated for long-term care will give you peace of mind, Baxley says.

And working longer could not only help cover the cost of long-term care but also reduce the risk that you’ll need it in the first place. A long-term study of civil servants in the United Kingdom found that verbal memory, which declines naturally with age, deteriorated 38% faster after individuals retired. Other research suggests that people who continue to work are less likely to experience social isolation, which can contribute to cognitive decline. Research by the Age Friendly Foundation and RetirementJobs.com, a website for job seekers 50 and older, found that more than 60% of older adults surveyed who were still working interacted with at least 10 different people every day, while only 15% of retirees said they spoke to that many people on a daily basis (the study was conducted before the pandemic). Even unpleasant colleagues and a bad boss “are better than social isolation because they provide cognitive challenges that keep the mind active and healthy,” economists Axel Börsch-Supan and Morten Schuth contended in a 2014 article for the National Bureau of Economic Research.

A changing workforce

Many job seekers in their fifties or sixties worry about age discrimination—and the pandemic has exacerbated those concerns. A recent AARP survey found that 61% of older workers who fear losing their job this year believe age is a contributing factor.  But that could change as the economy recovers, and trends that emerged during the pandemic could end up benefiting older workers, says Tim Driver, founder of RetirementJobs.com. Some companies plan to allow employees to work remotely indefinitely, a shift that could make staying on the job more attractive for older workers—and make employers more amenable to accommodating their desire for more flexibility. “People who are working longer already wanted to work from home, and this has helped them do that more easily,” Driver says. To make that work, though, older workers need to stay on top of technology, which means they need to be comfortable using Zoom, LinkedIn and other online platforms, he says.  

More-flexible arrangements—including remote work—could also benefit older adults who want to continue to earn income but don’t want to work 50 hours a week. Baxley says some of his clients have gradually reduced their hours, from four days a week while they’re in their fifties to three or two days a week as they reach their sixties and seventies.

That assumes, of course, that your employer doesn’t lay you off or waltz you out the door with a buyout offer you don’t think you can refuse. But even then, you don’t necessarily have to stop working. The gig economy offers opportunities for older workers, and you don’t have to drive for Uber to take advantage of this emerging trend. There are numerous companies that will hire professionals in law, accounting, technology and other fields as consultants, says Kathy Kristof, a former Kiplinger columnist and founder of SideHusl.com, a website that reviews and rates online job platforms. Examples include FlexProfessionals, which finds part-time jobs for accountants, sales representatives and others for $25 to $40 an hour, and Wahve, which finds remote jobs for experienced workers in accounting, insurance and human resources (pay varies by experience).

Job seekers in their fifties (or even younger) who want to work into their sixties or later may want to consider an employer’s track record of hiring and retaining older workers when comparing job offers. Companies designated as Certified Age Friendly Employers by the Age Friendly Foundation have been steadily increasing and range from Home Depot to the Boston Red Sox. Driver says age-friendly employers are motivated by a desire for a more diverse workforce—which includes workers of all ages—and the realization that older workers are less likely to leave. Contrary to the assumption that older workers have one foot out the door toward retirement, their turnover rate is one-third of that for younger workers, Driver says.

At the Aquarium of the Pacific, an age-friendly employer based in Long Beach, Calif., employees older than 60 work in a variety of jobs, from guest service ambassadors to positions in the aquarium’s retail operations, says Kathie Nirschl, vice president of human resources (who, at 59, has no plans to retire anytime soon). Many of the aquarium’s visitors are seniors, and having older workers on staff helps the organization connect with them, Nirschl says.

John Rouse, 61, is the aquarium’s vice president of operations, a job that involves everything from facility maintenance to animal husbandry. He estimates that he walks between 12,000 and 13,000 steps a day to monitor the aquarium’s operations.

Rouse says he had originally planned to retire in his early sixties, but he has since revised those plans and now hopes to work until at least 68. He has a daughter in college, which is expensive, and he would like to delay filing for Social Security. Plus, he enjoys spending time at the aquarium with the fish, animals and coworkers. “It’s a great team atmosphere,” he says. “It has kept me young.”

New rules help seniors save

If you’re planning to keep working into your seventies—which is no longer unusual—provisions in the 2019 Setting Every Community Up for Retirement Enhancement (SECURE) Act will make it easier to increase the size of your retirement savings or shield what you’ve saved from taxes.

Among other things, the law eliminated age limits on contributions to an IRA. Previously, you couldn’t contribute to a traditional IRA after age 70½. Now, if you have earned income, you can contribute to a traditional IRA at any age and, if you’re eligible, deduct those contributions. (Roth IRAs, which may be preferable for some savers because qualified withdrawals are tax-free, have never had an age cut-off as long as the contributor has earned income.)

The law also allows part-time workers to contribute to their employer’s 401(k) or other employer-provided retirement plan, which will benefit older workers who want to stay on the job but cut back their hours. The SECURE Act guarantees that workers can contribute to their employer’s 401(k) plan, as long as they’ve worked at least 500 hours a year for the past three years. Previously, employees who had worked less than 1,000 hours the year before were ineligible to participate in their employer’s 401(k) plan.

Delayed RMDs. If you have money in traditional IRAs or other tax-deferred accounts, you can’t leave it there forever. The IRS requires that you take minimum distributions and pay taxes on the money. If you’re still working, that income, combined with required minimum distributions, could push you into a higher tax bracket.

Congress waived RMDs in 2020, but that’s unlikely to happen again this year. Thanks to the SECURE Act, however, you don’t have to start taking them until you’re 72, up from the previous age of 70½. Keep in mind that if you’re still working at age 72, you’re not required to take RMDs from your current employer’s 401(k) plan until you stop working (unless you own at least 5% of the company).

One other note: If you work for yourself, whether as a self-employed business owner, freelancer or contractor, you can significantly increase the size of your savings stash. In 2021, you can contribute up to $58,000 to a solo 401(k), or $64,500 if you’re 50 or older. The actual amount you can contribute will be determined by your self-employment income.

chart that shows payoff from putting off retirement for a few yearschart that shows payoff from putting off retirement for a few years

Source: kiplinger.com

The Benefits of Working Longer

Financial planners and analysts have long advised workers who haven’t saved enough for retirement to work longer. But even if you’ve done everything right—saved the maximum in your retirement plans, lived within your means and stayed out of debt—working a few extra years, even at a reduced salary, could make an enormous difference in the quality of your life in your later years. And given the potential payoff, it’s worth starting to think about how long you plan to continue working—and what you’d like to do—even if you’re a decade or more away from traditional retirement age.

Larry Shagawat, 63, is thinking about retiring from his full-time job, but he’s not ready to stop working. Fortunately, he has a few tricks up his sleeve. Shagawat, who lives in Clifton, N.J., began his career as an actor and a magician. But marriage (to his former magician’s assistant), two children and a mortgage demanded income that was more consistent than the checks he earned as an extra on Law & Order, so he landed a job selling architectural and design products. The position provided his family with a comfortable living.

Now, though, Shagawat is con­sidering stepping back from his high-pressure job so he can pursue roles as a character actor (he’s still a member of the Screen Actors Guild) and perform magic tricks at corporate events. He also has a side gig selling golf products, including a golf cart cigar holder and a vanishing golf ball magic trick, through his website, golfworldnow.com. “I’ll be busier in retirement than I am in my current career,” he says.

Shagawat’s second career offers an opportunity for him to return to his first love, but he’s also motivated by a powerful financial incentive. His brother, Jim Shagawat, a certified financial planner with AdvicePeriod in Paramus, N.J., estimates that if Larry earns just $25,000 a year over the next decade, he’ll increase his retirement savings by $750,000, assuming a 5% annual withdrawal rate and an average 7% annual return on his investments.

Do the math

For every additional year (or even month) you work, you’ll shrink the amount of time in retirement you’ll need to finance with your savings. Meanwhile, you’ll be able to continue to contribute to your nest egg (see below) while giving that money more time to grow. In addition, working longer will allow you to postpone filing for Social Security benefits, which will increase the amount of your payouts.

For every year past your full retirement age (between 66 and 67 for most baby boomers) that you postpone retiring, Social Security will add 8% in delayed-retirement credits, until you reach age 70. Even if you think you won’t live long enough to benefit from the higher payouts, delaying your benefits could provide larger survivor benefits for your spouse. If you file for Social Security at age 70, your spouse’s survivor benefits will be 60% greater than if you file at age 62, according to the Center for Retirement Research at Boston College.

Liz Windisch, a CFP with Aspen Wealth Management in Denver, says working longer is particularly critical for women, who tend to earn less than men over their lifetimes but live longer. The average woman retires at age 63, compared with 65 for the average man, according to the Center for Retirement Research. That may be because many women are younger than their husbands and are encouraged to retire when their husbands stop working. But a woman who retires early could find herself in financial jeopardy if she outlives her husband, because the household’s Social Security benefits will be reduced—and she could lose her husband’s pension income, too, says Andy Baxley, a CFP with The Planning Center in Chicago.

Calculate the cost of health care

Many retirees believe, sometimes erroneously, that they’ll spend less when they stop working. But even if you succeed in cutting costs, health care expenses can throw you a costly curve. Working longer is one way to prevent those costs from decimating your nest egg.

Employer-provided health insurance is almost always less expensive than anything you can buy on your own, and if you’re 65 or older, it may also be cheaper than Medicare. If you work full-time for a company with 20 or more employees, the company is required to offer you the same health insurance provided to all employees, even if you’re older than 65 and eligible for Medicare. Delaying Medicare Part B, which covers doctor and outpatient services, while you’re enrolled in an employer-provided plan can save you a lot of money, particularly if you’re vulnerable to the Medicare high-income surcharge, says Kari Vogt, a CFP and Medicare insurance broker in Columbia, Mo. In 2021, the standard premium for Medicare Part B is $148.50, but seniors subject to the high-income Medicare surcharge will pay $208 to $505 for Medicare Part B, depending on their 2019 modified adjusted gross income. Medicare Part A, which covers hospitalization, generally doesn’t cost anything and can pay for costs that aren’t covered by your company-provided plan.

Vogt recalls working with an older couple whose premiums for an employer-provided plan were just $142 a month, and the deductible was fairly modest. Because of their income levels, they would have paid $1,150 per month for Medicare premiums, a Medicare supplement plan and a prescription drug plan, she says. With that in mind, they decided to stay on the job a few more years.

The math gets trickier if your employer’s plan has a high deductible. But even then, Vogt says, by staying on an employer plan, older workers with high ongoing drug costs could end up paying less than they’d pay for Medicare Part D. “If someone is taking several brand-name drugs, an employer plan is going to cover those drugs at a much better price than Medicare.”

Even if you don’t qualify for group coverage—you’re a part-timer, freelancer or a contract worker, for example—the additional income will help defray the cost of Medicare premiums and other expenses Medicare doesn’t cover. The Fidelity Investments annual Retiree Health Care Cost Estimate projects that the average 65-year-old couple will spend $295,000 on health care costs in retirement.

Long-term care is another threat to your retirement security, even if you have a well-funded nest egg. In 2020, the median cost of a semiprivate room in a nursing home was more than $8,800 a month, according to long-term-care provider Genworth’s annual survey.

If you’re in your fifties or sixties and in good health, it’s difficult to predict whether you’ll need long-term care, but earmarking some of your income from a job for long-term-care insurance or a fund designated for long-term care will give you peace of mind, Baxley says.

And working longer could not only help cover the cost of long-term care but also reduce the risk that you’ll need it in the first place. A long-term study of civil servants in the United Kingdom found that verbal memory, which declines naturally with age, deteriorated 38% faster after individuals retired. Other research suggests that people who continue to work are less likely to experience social isolation, which can contribute to cognitive decline. Research by the Age Friendly Foundation and RetirementJobs.com, a website for job seekers 50 and older, found that more than 60% of older adults surveyed who were still working interacted with at least 10 different people every day, while only 15% of retirees said they spoke to that many people on a daily basis (the study was conducted before the pandemic). Even unpleasant colleagues and a bad boss “are better than social isolation because they provide cognitive challenges that keep the mind active and healthy,” economists Axel Börsch-Supan and Morten Schuth contended in a 2014 article for the National Bureau of Economic Research.

A changing workforce

Many job seekers in their fifties or sixties worry about age discrimination—and the pandemic has exacerbated those concerns. A recent AARP survey found that 61% of older workers who fear losing their job this year believe age is a contributing factor.  But that could change as the economy recovers, and trends that emerged during the pandemic could end up benefiting older workers, says Tim Driver, founder of RetirementJobs.com. Some companies plan to allow employees to work remotely indefinitely, a shift that could make staying on the job more attractive for older workers—and make employers more amenable to accommodating their desire for more flexibility. “People who are working longer already wanted to work from home, and this has helped them do that more easily,” Driver says. To make that work, though, older workers need to stay on top of technology, which means they need to be comfortable using Zoom, LinkedIn and other online platforms, he says.  

More-flexible arrangements—including remote work—could also benefit older adults who want to continue to earn income but don’t want to work 50 hours a week. Baxley says some of his clients have gradually reduced their hours, from four days a week while they’re in their fifties to three or two days a week as they reach their sixties and seventies.

That assumes, of course, that your employer doesn’t lay you off or waltz you out the door with a buyout offer you don’t think you can refuse. But even then, you don’t necessarily have to stop working. The gig economy offers opportunities for older workers, and you don’t have to drive for Uber to take advantage of this emerging trend. There are numerous companies that will hire professionals in law, accounting, technology and other fields as consultants, says Kathy Kristof, a former Kiplinger columnist and founder of SideHusl.com, a website that reviews and rates online job platforms. Examples include FlexProfessionals, which finds part-time jobs for accountants, sales representatives and others for $25 to $40 an hour, and Wahve, which finds remote jobs for experienced workers in accounting, insurance and human resources (pay varies by experience).

Job seekers in their fifties (or even younger) who want to work into their sixties or later may want to consider an employer’s track record of hiring and retaining older workers when comparing job offers. Companies designated as Certified Age Friendly Employers by the Age Friendly Foundation have been steadily increasing and range from Home Depot to the Boston Red Sox. Driver says age-friendly employers are motivated by a desire for a more diverse workforce—which includes workers of all ages—and the realization that older workers are less likely to leave. Contrary to the assumption that older workers have one foot out the door toward retirement, their turnover rate is one-third of that for younger workers, Driver says.

At the Aquarium of the Pacific, an age-friendly employer based in Long Beach, Calif., employees older than 60 work in a variety of jobs, from guest service ambassadors to positions in the aquarium’s retail operations, says Kathie Nirschl, vice president of human resources (who, at 59, has no plans to retire anytime soon). Many of the aquarium’s visitors are seniors, and having older workers on staff helps the organization connect with them, Nirschl says.

John Rouse, 61, is the aquarium’s vice president of operations, a job that involves everything from facility maintenance to animal husbandry. He estimates that he walks between 12,000 and 13,000 steps a day to monitor the aquarium’s operations.

Rouse says he had originally planned to retire in his early sixties, but he has since revised those plans and now hopes to work until at least 68. He has a daughter in college, which is expensive, and he would like to delay filing for Social Security. Plus, he enjoys spending time at the aquarium with the fish, animals and coworkers. “It’s a great team atmosphere,” he says. “It has kept me young.”

New rules help seniors save

If you’re planning to keep working into your seventies—which is no longer unusual—provisions in the 2019 Setting Every Community Up for Retirement Enhancement (SECURE) Act will make it easier to increase the size of your retirement savings or shield what you’ve saved from taxes.

Among other things, the law eliminated age limits on contributions to an IRA. Previously, you couldn’t contribute to a traditional IRA after age 70½. Now, if you have earned income, you can contribute to a traditional IRA at any age and, if you’re eligible, deduct those contributions. (Roth IRAs, which may be preferable for some savers because qualified withdrawals are tax-free, have never had an age cut-off as long as the contributor has earned income.)

The law also allows part-time workers to contribute to their employer’s 401(k) or other employer-provided retirement plan, which will benefit older workers who want to stay on the job but cut back their hours. The SECURE Act guarantees that workers can contribute to their employer’s 401(k) plan, as long as they’ve worked at least 500 hours a year for the past three years. Previously, employees who had worked less than 1,000 hours the year before were ineligible to participate in their employer’s 401(k) plan.

Delayed RMDs. If you have money in traditional IRAs or other tax-deferred accounts, you can’t leave it there forever. The IRS requires that you take minimum distributions and pay taxes on the money. If you’re still working, that income, combined with required minimum distributions, could push you into a higher tax bracket.

Congress waived RMDs in 2020, but that’s unlikely to happen again this year. Thanks to the SECURE Act, however, you don’t have to start taking them until you’re 72, up from the previous age of 70½. Keep in mind that if you’re still working at age 72, you’re not required to take RMDs from your current employer’s 401(k) plan until you stop working (unless you own at least 5% of the company).

One other note: If you work for yourself, whether as a self-employed business owner, freelancer or contractor, you can significantly increase the size of your savings stash. In 2021, you can contribute up to $58,000 to a solo 401(k), or $64,500 if you’re 50 or older. The actual amount you can contribute will be determined by your self-employment income.

chart that shows payoff from putting off retirement for a few yearschart that shows payoff from putting off retirement for a few years

Source: kiplinger.com

More Monthly Child Credit Payments, Higher Child Care Credit, and Other Tax Breaks in Biden’s Latest Plan

In March, the American Rescue Plan Act made several tax credits better. And, in one case, it requires the IRS to send monthly payments to families with children. However, the enhancements are only temporary – they only apply for the 2021 tax year.

The Biden administration sees those temporary improvements as simply a first step. So now President Biden wants to extend the expanded tax credits and continue supporting low- and middle-income families, as well as low-income workers without children, with tax reductions beyond this year.

That’s the goal of the tax-cutting provisions in the president’s American Families Plan. The $1.8 trillion package would also do many other things for ordinary Americans, such as providing universal pre-school, free community college, guaranteed family and medical leave, caps on child-care costs, and much more. All these – along with the extended tax credit enhancements – are designed to “build a stronger economy that does not leave anyone behind.”

It’s way too soon to tell if any of the tax credit extensions – or any other part of the American Families Plan – will make it through Congress and be signed into law. There will be stiff resistance from Republicans in Congress, and a few Democrats are likely to push back on some of the more costly items, too. Biden’s plan is just the starting point for further negotiations, so we’ll just have to wait and see how things progress from here. But in the meantime, we can take a look at the 4 tax credit enhancements that President Biden wants to extend. If you qualify, you’re already going to save a lot of money in 2021. If the extensions become law, you could pocket even more cash in 2022 and for years to come.

1 of 4

Child Tax Credit

picture of a happy family at home on their sofapicture of a happy family at home on their sofa

For tax years before 2021, the child tax credit is worth $2,000 per dependent child 16 years old or younger. It begins to phase out if your adjusted gross income (AGI) is above $400,000 on a joint return, or over $200,000 on a single or head-of-household return. Once your AGI surpasses $400,000 or $200,000, the credit amount is reduced by $50 for each $1,000 (or fraction thereof) of AGI over the applicable threshold amount. Up to $1,400 of the child credit is refundable for some lower-income individuals with children. But you must also have at least $2,500 of earned income to get a refund.

Thanks to the American Rescue Plan, the 2021 credit amount is increased to $3,000 per child ($3,600 per child under age 6) for many families. Children who are 17 years old qualify for the credit, too. The credit is also fully refundable for 2021, and the $2,500 earnings floor is eliminated. In addition, the IRS will pay half of this year’s credit in advance by sending monthly payments to families from July to December 2021. (To see how much you’ll get, use Kiplinger’s 2021 Child Tax Credit Calculator.)

The new American Families Plan, if enacted, would generally extend the 2021 child tax credit enhancements through 2025 (including, presumably, the monthly payments). There would be one important difference, though. The new plan would make the credit full refundable on a permanent basis.

For more on the 2021 credit, see Child Tax Credit 2021: Who Gets $3,600? Will I Get Monthly Payments? And Other FAQs.

2 of 4

Child and Dependent Care Credit

picture of young children gathered around a preschool teacher who is reading a bookpicture of young children gathered around a preschool teacher who is reading a book

The American Rescue Plan also expanded the child and dependent care tax credit for 2021. This will boost tax refunds for many parents when they file their tax return next year.

For the 2020 tax year, if your children were younger than 13, you were eligible for a 20% to 35% non-refundable credit for up to $3,000 in childcare expenses for one kid or $6,000 for two or more. The percentage dropped as income exceeded $15,000.

The American Rescue Plan made several enhancements to the credit for the 2021 tax year. First, it made the credit refundable for the year. It also bumped the maximum credit percentage up from 35% to 50%. More childcare expenses are subject to the credit, too. Instead of up to $3,000 in childcare expenses for one child and $6,000 for two or more, the 2021 credit is allowed for up to $8,000 in expenses for one child and $16,000 for multiple children. When combined with the 50% maximum credit percentage, that puts the top credit for the 2021 tax year at $4,000 for families with just one child and $8,000 for families with more kids. The full credit will also be allowed for families making less than $125,000 a year (instead of $15,000 per year). After that, the credit starts to phase-out. However, all families making between $125,000 and $440,000 will receive at least a partial credit for 2021. (For more information, see Child Care Tax Credit Expanded for 2021.)

The American Families Plan would make these enhancements permanent. If it becomes law, parents paying for childcare will continue to see lower tax bills and/or higher refunds until their youngest kid turns 13.

3 of 4

Earned Income Tax Credit

picture of a fry cook standing with arms folded in front of a grillpicture of a fry cook standing with arms folded in front of a grill

The earned income tax credit (EITC) provides an incentive for people to work. And, under the American Rescue Plan, more workers without qualifying children will qualify for the credit on their 2021 tax return and the “childless EITC” amounts will be higher.

For 2020 tax returns, the maximum EITC ranges from $538 to $6,660 depending on your income and how many children you have. However, there are income limits for the credit. For example, if you have no children, your 2020 earned income and adjusted gross income (AGI) must each be less than $15,820 for singles and $21,710 for joint filers. If you have three or more children and are married, though, your 2020 earned income and AGI can be as high as $56,844. If you don’t have a qualifying child, you must be between 25 and 64 years old at the end of the tax year to claim the EITC.

The American Rescue Plan expanded the 2021 EITC for childless workers in a few ways. First, it generally lowers the minimum age from 25 to 19 (except for certain full-time students). It also eliminates the maximum age limit (65), so older people without qualifying children can claim the 2021 credit, too. The maximum credit available for childless workers is also increased from $543 to $1,502 for the 2021 tax year. Expanded eligibility rules for former foster youth and homeless youth apply as well.

Under the just-released American Families Plan, the credit enhancements for childless workers will be made permanent. If enacted, the enhancements for workers without children would join other changes made by the American Rescue Plan that continue past 2021 to:

  • Allow workers to claim the EITC even if their children can’t satisfy the identification requirements;
  • Permit certain married but separated couples to claim the EITC on separate tax returns; and
  • Increase the limit on a worker’s investment income from $3,650 (for 2020) to $10,000 (adjusted for inflation after 2021).

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Premium Tax Credit

picture of a stethoscope laying on several one-hundred dollar bills picture of a stethoscope laying on several one-hundred dollar bills

The premium tax credit helps eligible Americans cover the premiums for health insurance purchased through an Obamacare exchange (e.g., HealthCare.gov). The American Rescue Plan enhanced the credit for 2021 and 2022 to lower premiums for people who buy coverage on their own. First, it increases the credit amount for eligible taxpayers by reducing the percentage of annual income that households are required to contribute toward the premium. It also allows the credit to be claimed by people with an income above 400% of the federal poverty line. According to the White House, these changes will save about 9 million families an average of $50 per person per month.

The American Families Plan would make these changes permanent to lower health insurance costs beyond 2022.

However, it’s not clear if the American Families Plan would extend the suspension of advance payment repayments. When you purchase insurance through the exchange, you can choose to have an estimated credit amount paid in advance to your insurance company so that less money comes out of your own pocket to pay your monthly premiums. Then, when you complete your tax return, you’ll calculate your credit and compare it to the advance payments. If the advance payments are greater than your actual allowable credit, the difference (subject to certain repayment caps) is subtracted from your refund or added to the tax you owe. If your allowable credit is more than the advance payments, you’ll get the difference back in the form of a larger refund or smaller tax bill. The American Rescue Plan suspended the repayment of excess advanced payments for the 2020 tax year. (If you already filed your 2020 tax return and repaid any excess advance payments, the IRS will automatically adjust your return and send you a refund if necessary.)

We suspect that the American Families Plan wouldn’t extend the repayment suspension. This, we believe, was and is intended to be a one-year-only rule to help people struggling during the COVID-19 pandemic.

Source: kiplinger.com

Medicare Will Not Cover These 6 Medical Costs

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Turning 65 brings access to senior discounts galore, but there is no benefit of senior citizenship quite like Medicare.

The federal program extends subsidized health insurance primarily to folks age 65 and older. But, while Medicare coverage comes with numerous freebies, it is hardly free.

Medicare beneficiaries pay into the system via taxes withheld from their pay during their working years. Additionally, Medicare coverage is not all-inclusive: Beneficiaries must cover all or part of certain medical expenses.

If you are already on Medicare, you already know that — perhaps painfully well. But the costs associated with coverage can come as a surprise to folks who have yet to sign up for Medicare.

So, here’s a look at some of the most expensive, most common and most surprising health care costs that Medicare does not cover.

First, though, note that your out-of-pocket costs under Medicare will vary depending on your coverage type. When enrolling in Medicare, you’ll choose between two main types of Medicare:

  • Original Medicare (aka traditional Medicare), which is offered directly by the federal government’s Medicare program
  • Medicare Advantage plans (aka Medicare Part C plans), which are offered by private insurers that are approved by the Medicare program

Medicare Advantage plans must cover all the same services that Original Medicare covers. Some Medicare Advantage plans cover other expenses, too. So, as you read on, remember that some of the following costs may not apply with certain Medicare Advantage plans.

1. Care you receive outside the U.S.

Tourists on a street in Europe.
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For many, retirement is a perfect time to see the world. Just be sure you first understand what your insurance will and won’t cover when you travel.

With a few limited exceptions, Original Medicare does not pay for health care that you receive while traveling outside of the United States or its territories. Medicare prescription drug plans — which are supplemental plans that people with Original Medicare can opt to buy — don’t cover prescriptions you buy outside of the U.S., either.

How to lower your costs: If you have Original Medicare, you have the option to buy a supplemental Medicare health insurance plan, also known as a Medigap plan, from a private insurer. Depending on the specific plan, it might cover any care you receive while traveling.

Another option is to buy travel insurance that includes coverage for health care.

2. Premiums

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You might be surprised to learn that even federally subsidized health insurance can have premiums, but that is the case with Medicare.

For 2021, the monthly premium for Part B — the component of Medicare plans that primarily covers services you receive outside of a hospital — is $148.50 or more, depending on your income. Usually, this premium is deducted from your Social Security benefits check.

Seniors with Medicare Advantage usually pay a premium for their plan in addition to the Part B premium.

One bit of good news: A vast majority of seniors do not pay a premium for Medicare Part A, which covers inpatient hospital services.

How to lower your costs: The Part B premiums are fixed. There’s nothing you can do about them.

Again, if you have Original Medicare, you could buy a supplemental Medigap policy, which would pay for some expenses that Original Medicare does not cover.

The Part B premium generally isn’t among the costs that Medigap plans cover, though. So, if you bought a Medigap plan, you will still have to pay the Part B premium — plus the Medigap plan premium.

Still, a Medigap plan is worth the extra cost in some cases — especially if you were to face big medical bills. To learn more, see “How to Pick the Best Medicare Supplement Plan in 4 Steps.”

3. Long-term care

Nursing Home
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Long-term care refers to medical and nonmedical services for people who are unable to perform basic daily tasks like dressing or bathing on their own. You may receive long-term care in your home, in the community or at an assisted living facility or nursing home.

Like most health insurance plans, Medicare generally does not cover long-term care costs, which are notoriously high.

The national median cost of long-term care ranges from $1,603 per month for adult day health care to $8,821 per month for a private room at a nursing home, as we report in “11 Huge Retirement Costs That Are Often Overlooked.”

How to lower your costs: Start by considering long-term care insurance. For help determining whether it would be a smart buy for you, check out Money Talks News founder Stacy Johnson’s advice in “Should I Buy Long-Term Care Insurance?”

4. Dental care

Dental patient
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Some Medicare Advantage plans may cover some dental services. It depends on the specifics of the plan.

Original Medicare does not cover most dental care, procedures or supplies — including:

  • Cleanings
  • Fillings
  • Tooth extractions
  • Dentures
  • Dental plates
  • Other dental devices

There are some exceptions. For example, Original Medicare covers certain dental services that you get while in a hospital. But aside from exceptions, seniors on Original Medicare plans are stuck paying for 100% of their dental expenses.

How to lower your costs: Check out “5 Ways to Slash Dental Care Costs.”

5. Hearing aids

Otolaryngologist putting hearing aid in woman's ear
Pixel-Shot / Shutterstock.com

Some Medicare Advantage plans may pay for hearing aids, but Original Medicare doesn’t cover them. So, if you have Original Medicare, you are responsible for 100% of the cost of hearing aids themselves and exams to fit hearing aids.

Original Medicare generally does cover 80% of the Medicare-approved cost of diagnostic hearing exams — meaning those that a health care provider orders to determine whether you need medical treatment. The patient or the patient’s Medigap plan pays the other 20%, though a deductible applies.

How to lower your costs: Check out “How to Save Hundreds of Dollars on Hearing Aids.”

6. Routine vision care

Older woman in eyeglasses
Diego Cervo / Shutterstock.com

Some Medicare Advantage plans cover some vision-related expenses, but Original Medicare typically does not cover eyeglasses or contact lenses or exams for eyeglasses or contacts. So, 100% of those costs is on you.

Original Medicare does cover eye exams for patients with diabetes. It also covers tests for glaucoma and macular degeneration. It even covers artificial eyes that your doctor orders. So, a senior on Original Medicare is responsible for only 20% of such expenses, after a deductible.

How to lower your costs: Check out “Lookin’ Good! How to Get a Killer Deal on Eyeglasses.”

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Source: moneytalksnews.com