Blog – Retirement Risk Advisors

12Dec

Retirement Plan Contribution Limits Are Increasing Come 2023

BlogDecember 12, 2022

2023 is upon us and an important factor to tax-advantaged accounts and plans is the contribution limits the IRS sets. This year the contribution limits were increased more than they have been in the past due to historically high inflation and cost-of-living. Here is a general overview for 2023:

401(k) Plans

In 2023, for 401(k) plans the contribution limit has been increased to $22,500. This contribution limit applies to most 457 plans and 403(b)s.

For those over 50, the catch up contribution limit is increasing to $7500. So those over 50 in 2023 can contribute up to $30,000.

Defined Contribution Plans and SEPs

For these plans, the contribution limit is increasing by $5000 from 2022’s limit: $66,000.

SIMPLE Plans

Increasing just over a $1000, these plans can contribute $15,500. The catch-up for those over 50 has been increased to $3500.

IRAs

While the over 50 catch-up limit is not being changed for IRAs, the annual contribution limit is being raised to $6500.

07Dec

Keep Retirement Strategy in Mind This Holiday Season

BlogDecember 7, 2022

With the holidays rapidly approaching, a goal often set during these times is to diversify your retirement funds. With retirement investment there are two main focuses: investing/saving and distribution. During retirement you are at your most vulnerable financially because a regular paycheck is not coming in. It is the longest self-imposed period of unemployment most folks face. The following is fantastic advice for when you are trying to invest.

Your retirement planned around living and may seem expensive to support. Remember, roughly 55% of folk live beyond their life expectancy. So, it is important to plan for the long haul. A long-term investment sustains a better savings, but there are risks being found there. Short-term investments usually have higher yields. It is important to balance these.

Spending now can save more money for the long road. An example of this is withdrawing properly to avoid provisional income.

Be reasonable when it comes to expectations. Historical returns may not be what your portfolio does. Returns typically fall below the average. However, this can be balance with a diversification of accounts. Though we have historically low interest rates, this means bond returns will not impact retirement much. This will affect those who have retired most.

Heedless of where you are at in retirement planning, relying solely on plans that require higher returns is dangerous. If you expect to make more in the future, that means spending much more upfront. Stocks carry a higher risk than bonds, so they will yield higher return rates. Simply put: Spending more today and expecting higher returns in the future is risky business. The risks and consequences must be evaluated on a case-by-case basis.

Strategy should always be a top priority. Diversifying your retirement portfolio is just a start. Considering all the risks you will face in retirement is the next stop. Putting all your funds in one bucket will expose you to much more risk—taxable, tax-deferred, and tax-free. Integrate different approaches and accounts to combat inflation, tax rates, rate of return, and even long-term care.

Crafty holidays savings to think about when retirement planning

22Nov

Crafty Savings as You Plan for Retirement this Holiday Season

BlogNovember 22, 2022

As retirement approaches, learning ways to spend less during the holidays is helpful! Shifting focus to doing so before retirement can also prepare you for when you’re living in the longest, self-imposed period of unemployment—heedless of what your retirement portfolio may look like!

Rethinking budget is a great first step. If you already have holiday decorations, don’t buy more; especially if they’re still in mint condition. This way it is one less expense on the holiday budget. Decide how much you want to spend on gifts overall and allocate so much to food. Remembering, be strict about your budget limits. If you can spend even less, do it!

For gifts, decide for who and how much per person. If you are able, shop in-stores versus online. This will save you shipping costs. If you want to gift a lot of people, consider doing smaller gifts for everyone. If there are couples on your holiday gift list, provide them with a gift card for a date night. The best gifts are also gifts homemade. Mass bake cookies or bread and give those out! You could always get crafty if you are able and make ornaments or simple photos collages. Lastly, another great idea would be the gift experiences. Much like giving a couple a gift card for a night out, take the grandkids together for a fun day to a public place such as a trampoline activity center or take your kids out of dinner once the holiday season calms down.

Meals, small or big, should be evaluated. If you are typically the one to hold a large family dinner in your home, see if family members can split making sides and desserts. Do a potluck. If you have done bigger family holiday dinners and are not feeling up to it, be honest with you family. Tell them you wish to not host the holiday this year or limit how many people you have over. This way the cost is either split up or at least reduced.

Take advantage of gift bundles and sales. A lot of places do gift bundles for things such as sample sizes for lotions or mini candle sets. Look into places that do gift card/certificate deals. Some food chain restaurants will give a packet of coupons if $50, for example, is spent on gift cards. Sometimes places will event gift “free” gift card money for a set amount on gift cards—buy $25, get $5 included.

living a long life comes with the need for more

16Nov

Annuities: A Longevity Risk Solution

BlogNovember 16, 2022

What makes an annuity tick? Short answer: Annuities are contracts made with an insurance company. Your annuity can be personalized to fit your exact needs.

The downside? The options can be overwhelming.

Types of Annuities

Fixed, variable, and fixed-indexed annuities are the three main types. Each comes with benefits and specific levels of risk based on your needs.

Type	Interest	Risk	Reward
Fixed	Guaranteed	Low	Predicted
Variable	Coordinated to investments	High	Unpredictable, yield varies
Fixed-indexed	Preset, linked to stock market index	Medium	Capped

Fixed Annuity

With the least risk and the most predictability, fixed annuities are contracted with a set interest rate. The only time the interest may vary is depending on terms of the contract with the insurance company. For example, per contract, sometimes the interest rate may reset after several years.

Variable Annuity

The variable annuity promotes higher yield but comes with the greatest risk. The interest rate is directly linked to an investment portfolio. Payments from the annuity are not consistent. If the investments are doing well, the payments will increase. If they are not doing well, the payments will drastically decrease.

Fixed-indexed Annuity

As middle grounds for fixed and variable annuities, this annuity comes to a compromised agreement. The contract carries lower risk and has a potential higher yield than fixed annuities. Thus, the interest rate will not sink below a present amount, but the rate is tied to a specific stock market index and could potentially rise.

Payment Arrangements

Immediate annuity, also income annuity, is when the holder begins receiving payments within a few years after the contract is purchased.

Deferred annuity is the most common in retirement, the most ideal to streamline retirement income for CPAs. These payments are started at a specific age while investment grows tax deferred.

Longevity Risk & Annuities

Since annuities guarantee lifetime income, they are a means to protect against the longevity risk your retirement will face. Payments are based on the health, age, and life expectancy of the annuitant holder. Note: The longer a person is calculated to life, the longer the payments may be.

Lifetime annuities: guarantee of an income stream for the holder’s lifetime. Often, the payments extend to beneficiaries after the holder’s passing. This covers your retirement and serves as inheritance for family.

Fixed-period annuities: guarantee of payment for a set period, also called term-certainty. These periods are typically 20-30 years. Moreover, the payments here are not as impacted by age and life expectancy of holder since they are a set period.

01Nov

When Planning to Age in Place

BlogNovember 1, 2022

Trying to plan may be hard since you never know exactly what your needs will be. But thinking of what may happen and those what ifs are great places to start. Consider your family medical history and your personal medical history. Think of your living situation, too. Have you lived alone or close by to family your entire life? Do you and your spouse both have long life expectancies?

Begin by talking with your doctor about your family and personal medical history and see how specific diseases and disorders may affect your mobility, mentality, and daily living. Read up on and discuss with other retirees their experiences, too.

Another great aspect in planning to age at home is the accessibility to help and care. Though it will sometimes come at a cost for services, there usually are many local and states offices that offer help to elders. Care options you may want to consider and plan for:

Personal care – Such as bathing, hairstyling, and even dressing, a family member or a trained aide could come in for your morning routine if you need.

Household care – Grocery shopping, lawncare, and even cleaning. Many groceries stores will do over the phone or online orders and deliver them to your home post-pandemic. Hiring help for housework and lawncare will be easier since these services are always available through various companies, large and small. If you already know someone who has a lawncare specialist or housekeeper, you may be able to hire them, too.

Cooking and meals – Meals are a good time to stay social. Perhaps each week host some friends or family and have a little potluck. Not only will there be leftovers for yourself and the others, but you can spend time catching up with family or friends. Eating out may even be an option. There are meal delivery programs that are low-cost or even free.

Financial care – The biggest worry for retirees is money management. Ranging from paying bills on time to medical bills and health insurance, depending on where you live, there are resources you have access to. Having a conversation with a trusted family member like a child or niece or nephew about your finances is an excellent first step. If you are able, hire a financial advisor to make sure everything looks good. Paying bills online and setting up autopay will ensure that utility bills and monthly premiums are paid on time. Some banks even offer financial services for seniors for free if you have been banking with them for a while.

The trick with financial care in retirement, especially as you age, is to make sure you do not fall victim to scams. Never give sensitive information like your Social Security number or banking information to someone unless you placed the call. Regularly check (or have someone do so) bills to make sure there are not unusual charges.

Health care – Often a tricky category, making sure you are covered here ranges from taking your medicine on time to hospital stays and aftercare. For medicines, there are special pill boxes that allow you to set out an entire week’s worth of medicine at once. If you have recently had a hospital stay and need to arrange aftercare such as temporary assisted living or rehabilitation, if your family is unable to, discharge planners at most hospitals can plan with you. Some insurance, even Medicare plans, may cover all or a portion of a home health aide. And lastly, if you need the doctor’s recommendations and directions written, your doctor or nurse can make sure those are in the summary for you. Or a family member or friend can help with those during your stay.

24Oct

Your Options for Facility-Based Care in Retirement

BlogOctober 24, 2022

Nursing homes are not your only option for care in retirement. Some facilities offer only housing and housekeeping, but many do provide a more personal care and even medical services. Oftentimes, with medical care there are specialized units for memory care or specific disabilities/illnesses.

Nursing Homes

With a wide range of health and personal care, nursing homes offer more than just assisted living. There is 24-hour supervision and care, meals, personal care, and assistance with everyday living. Part of why they are the most common facility for the elderly is also rehabilitation services (physical, speech, occupational) and extra curriculars that build and maintain community.

Another reason nursing homes are so popular is because they offer long-term and short-term stays especially those who only need short supervision and rehabilitation.

Board and Care Homes

Known as residential care facilities or group homes, board and care homes are smaller facilities with 20 or less residents. Rooms are either private or shared, but staff is available around the clock for personal care and meals. Medical care is off-site.

Assisted Living

Assisted living is for retirees who need daily care, but as much help as someone in a nursing home. These types of facilities typically offer their residents levels of care, where specific levels are more costly. In comparison to nursing homes, assisted living facilities do have fewer residents.

The residents typically stay in apartments or rooms and then shared space is the common areas. With access to daily meals and personal care assistance, certain levels of care offer different services such as medical or housekeeping care.

Continuing Care Retirement Communities (CCRCs)

Referred to as life care communities, CCRCs offer independent living arrangements, but also have assisted living, or skilled nursing care on the same campus. Recreational and healthcare services are also provided onsite.

The biggest plus to a CCRC is you are permitted to live and transfer depending on your needs. Someone who is looking to live somewhere that might offer long-term care services if they need it may want to live here even if they are fully able to live independently now.

elder woman smiling in semi retired life

18Oct

Does Semi-Retirement Expose You to More Risks?

BlogOctober 18, 2022

Retiring is tricky enough, and retirement planning is also not a walk in the park. Those who decide on a semi-retired life should be aware of a few things before moving forward.

Working for Your Current (and likely last) Employer:

Depending on the company, if you reduce your hours, you may still be eligible for your employer’s retirement plan and health benefits. For instance, if you are still able to contribute to your 401(k) with your employer match while working 30 hours weekly, you may want to consider this as an option. It is a great way to keep the retirement funds increasing, and it is a great potential way to increase your Social Security benefits since you work history will continue and you are still paying into it from each paycheck.

Income Tax

Semi-retirees often find themselves in a higher tax bracket due to retirement income withdrawals, required minimum distributions, Social Security, and the part-time job income that is flowing in. Reducing your work hours and the withdrawals from your retirement accounts is the best way to combat this higher tax bracket. Depending on where you are financially, a Roth conversion may also be an option.

Social Security Risk

CPAs who work before full retirement age and receive Social Security benefits are subject to have their benefits reduced monthly. The exemption limit was $18,960 in 2021 and for 2022 is $19,560. Making more than the limit means your benefits are reduced by $1 for every $2 made over the limit. And once you reach the full retirement age the SSA has calculated, your benefits are reduced by $1 for every $3 over $51,960 in 2022. Please note these limits are predicted to increase for 2023, but announcements for this information are not released until the start of the 4^th quarter.

Healthcare Decisions

Once you are 65 you are eligible for Medicare. However, if you are still working, even part-time and qualify for your employer’s healthcare plan, you will have both plans and will need to work out coordination of benefits. Outside of Medicare Part A, there are premiums. For Part B enrollees pay $170.10 monthly in 2022 with a deductible of $233. Deciding to delay Medicare Part B may result in a penalty. You may even opt into a MediGap or Medicare Advantage Plan based on your needs. Considering your options carefully before you enroll into Medicare and are semi-retired is crucial. The earlier you investigate Medicare options the better off you will be.

Social Security Benefit increase for 2023

14Oct

What the Social Security 2023 Increase Means for You Now and Later

BlogOctober 14, 2022

The Social Security Administration announced that there will be an 8.7% cost-of-living-adjustment (COLA) beginning January 2023. Overall, this means benefits will increase an average of $140 a month.

The COLA rate is determined by the consumer price index (CPI) which relies on the U.S. inflation rate. While many thought 2022 COLA increase (5.9%) was large, the 2023 increase of 8.7% is the largest since 1981. Here is a quick breakdown of how Social Security benefits will change: For the average Social Security recipient an extra $1752 will be seen yearly, increasing benefits on average from $1681 to $1827. The average couple receiving benefits will see a yearly increase of $2856.

However, this increase does not factor in taxes. The one who giveth will also taketh. Under current law, if you are a single taxpayer, you will be taxed 0% on your Social Security benefits if you have provisional income under $25,000. Your Social Security benefits can be taxed up to 50% if your provisional income is between $25,000-34,000; and up to 85% can be taxed if your provisional income is over $34,000.

For those married and filing jointly, provisional income less than $32,000 results in zero taxation on your Social Security benefits. Between $25,000-44,000 your benefits can be taxed up to 50%; and from provisional income over $44,000 up to 85% of your benefits can be taxed.

Today, the Social Security Administration reports that roughly half of Social Security beneficiaries pay taxes on their benefits. With the COLA increase of 8.7%, more could be paying taxes in 2023. And depending on which state you live in, you may be paying more tax at both the federal and state level when it comes to taxes on your Social Security benefits.

COLA increases are always giving long-term. Once you reach 62, the increases are automatically included into your benefits. Heedless of when you take them, the increases are cumulative meaning the next COLA increase is determined off the new “base” Social Security benefits. This means even for spousal, survivor, or divorce benefits, you will still receive the COLA increases no matter when you enroll.

13Oct

2023 Means Savings on Medicare

BlogOctober 13, 2022

Medicare beneficiaries will pay lower Part B premiums for coverage come 2023. Those who are paying these premiums need to be aware of two major changes.

For this upcoming year, the premium for Part B will decrease by 3% to $164.90. The annual deductible will also decrease from $233 to $226 for 2023.

Sometimes people do not know they are paying their Part B premiums because when you elect to enroll in Medicare, your premiums come directly out of your Social Security benefits.

Moreover, since CMS regulates Medicare Part D, even though the prescription coverage is sold by private insurances, there is a good chance that many will see a general decrease in Part D premiums, too. Unfortunately, since the private insurers set the terms and limits of these policies, there is not set amount for the decrease like Part B has. CMS is predicted that an almost 2% decrease may happen for Part D. If there is a change to your plan, you will receive a statement in the mail notifying you. If you do not receive any statement, please call your insurance directly or check online.

Lastly, another major change CMS announced were changes to income brackets and rates for the premium surtax for Medicare. This surtax is known as income-related monthly adjustment amount (IRMAA). This is in addition for higher income beneficiaries to the Part B base premium of $164.90 everyone pays. This also is an addition to Part D premiums for higher income beneficiaries.

This surtax is imposed on modified adjusted gross incomes starting at $97,000 for a single person and $194,000 for married couples who file a joint return and maxes out at $500,000 of MAGI for a single person and $750,000 for a married couple fling a joint return. The maximum Part B premium if you hit the top income limits would be $560.50. For Part D the imposed surtax would be an additional maximum of $76.40. It is important to note that the highest bracket ($500,000/$750,000) discussed here is not adjusted for inflation, but the lower brackets are. So over time, more and more people will be moved into the top bracket and will pay the higher Medicare Part B premiums due to inflation.

04Oct

Elder Abuse and Financial Exploitation: What Are They?

BlogOctober 4, 2022

Unfortunately, financial abuse and exploitation is a reality many seniors face in their retirement. Strikingly, financial institutions have reported the number of these incidents tripling since 2017. And no matter how big or small the deception may be, it leaves elders financially and even emotionally devastated.

The question remains: how can you protect yourself and your loved ones from it? Having a solid understanding of what elder financial abuse and exploitation is, how to spot red flags, and what preventative measures can be put in place is a great place to start.

What is elder financial abuse and exploitation?

Elder financial abuse and exploitation are when someone within the elder’s life misuses or takes advantage of their assets for their own benefit. Oftentimes, it is done without the consent or knowledge of the victim and can leaves them without significant financial resources they worked hard to save. The worst part is family, friends, or even caregivers can commit elder abuse or financial exploitation. It is not uncommon for force, harassment, or threats to be involved either.

Why does elder financial abuse go unreported?

It is estimated billions of dollars per year is lost to elder abuse and financial exploitation. And sadly, financial exploitation can be even harder than physical elder abuse to detect. Circumstances vary and warning signs are not always prevalent.

There are four major reasons why the financial abuse goes unreported:

A trusted family member or caregiver is the abuser
Vulnerable older adult doesn’t know it happened until too late
Victim experiences overwhelming shame
Elder doesn’t know who to tell or where to report

The abuser may be someone the senior relies on for basic needs and care and fearing further abuse and retaliation is often part of the situation to why the abuse goes unreported. A victim’s lack of mentality or physical ability also factors into why the abuse may go unreported.

Reporting the exploitation and abuse can be a very overwhelming experience. And the process varies immensely state to state. Fortunately, your local adult protective services can help guide you through the process for you or a loved one and point you to resources you didn’t even know of.