Articles Posted in Retirement Planning

Most Texans are under the misassumption that estate planning is similar for all people—regardless of socio-economic status, gender, age, and other factors. However, this is not the case. While estate planning is critical for everyone, the type of estate plan and the strategies taken will depend on the person’s unique situation. This is why no two estate plans are the same. For example, there are inherent retirement risks that many women uniquely face that should be factored into their estate plan. Below are questions and tips on how women specifically can plan to avoid potential retirement risks in their estate plans.

What Are Some Potential Retirement Risks for Women?

Statistically, women live longer than men of the same age. While this may not seem critical for estate planning purposes, it does impact the potential resources they will receive as they age, along with the funds they have to pay for services. For example, many seniors will have to balance paying for medications or other healthcare services against their savings—for women who live longer, they may not have the money for these expenses.

When people think about beginning the estate planning process, they often think about creating a will and power of attorney documents. They do not often consider how a Roth IRA can—and should—be incorporated into the estate planning process. Roth IRAs are a powerful tool that can benefit individuals as they plan for their future and make sure their loved ones are financially taken care of after they pass away. Below are common explanations to common questions about Roth IRAs and why they should be included in estate planning efforts.

What is a Roth IRA?

A Roth IRA is a retirement account that allows individuals to make tax-free withdrawals. Unlike traditional IRAs, individuals pay taxes on the money going into the account, which then makes future withdrawals tax-free. This is beneficial when individuals think their taxes will be higher in the future, once they are retired, than they are currently.

What Are the Benefits of a Roth IRA?

One benefit of a Roth IRA is there are no required minimum distributions—this is majorly beneficial when Roth IRAs are incorporated into estate plans. Required minimum distributions are minimum amounts that a retirement account owner must withdraw every year. Since Roth IRAs do not require the owner to make withdrawals every year, the funds can grow, tax-free, for the individual’s beneficiaries to use in the future. This is one way to include extra assets in an estate plan to help make sure beneficiaries are financially taken care of after the Roth IRA account owner has passed away.

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As life becomes more complicated, individuals should not expect to rely on the traditional retirement savings of the past. With people living longer and many working part-time before retiring fully, retirement is not what it used to be. And because of this, it can be difficult for residents of Houston to discern how much money they should expect to receive in retirement—along with how much money they will need to enjoy this time in their lives. Below are explanations for what funds most individuals will receive after they have stopped working fully, along with how to create a financial plan now that will assist in ensuring their financial future is secure.

What Retirement Savings Should I Be Expecting During Retirement?

When determining how much a person will have in retirement savings, there are a few monetary streams to take into account. One of these funds is Social Security retirement benefits. Social Security provides replacement income for individuals once they have retired. A person’s total benefits depend on how much money they make, along with what age they are opting to receive the Social Security funds.
Besides Social Security benefits, an individual’s own savings are the other major component of a retirement fund. Not only does this include miscellaneous money saved individually—through investments, such as stock portfolios and annuities—but also company retirement assets like 401ks and pension programs. It is important to take account of how much is saved through these avenues and consolidate these accounts, if possible, to make it easier to financially manage in the future.

How to Save Extra Money for Retirement

In order to save money for retirement, it is first essential to log spending habits. By reviewing bills from the past few years and comparing them to the amount expected to save for retirement, it allows individuals to assess if they will have enough money saved without having to take further steps.

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It is never too early to begin thinking about retirement. In fact, the wisest people often begin planning and saving for retirement early on, understanding that doing so can pay off in a big way down the line. One question many Texas individuals have when thinking about their retirement plans is what type of assets they should plan to live off of in retirement and what assets they should be passing down to their children in order to be tax-efficient and living comfortably. A Houston estate planning attorney can be a vital asset in answering these questions.

What Are Your Retirement Goals?

An important first step in answering this question is asking an additional question: what are my retirement goals? Do you want to leave as much as possible to your children and grandchildren? Do you plan on supporting charitable organizations in retirement and through your estate? Once your goals are identified, you can begin to figure out how to have different accounts and assets titled and earmarked appropriately to ensure they transfer in the correct way. It is important while planning to plan for both your core assets and excess capital.

Creating a Houston estate plan and preparing for retirement can often be an extremely stressful process, especially with the passage of new laws and regulations that impact a person’s plans. One such law that affected many people’s retirement savings was the Setting Every Community Up for Retirement Enhancement (SECURE) Act. The SECURE Act came into effect on January 1, 2020, and created new requirements for defined contribution plans, such as 401(k)s and individual retirement accounts (IRAs). Below are some of the retirement and estate planning aspects most impacted by the passage of the SECURE Act.

Individual Retirement Accounts

Prior to the SECURE Act, an individual had to start withdrawing funds from their IRA, called required minimum distributions (RMDs), after they turned 70 ½ years old. Now, individuals are not required to withdraw from their IRA until they reach 72 years old. As there are income tax payments associated with RMDs, the SECURE Act can help reduce a person’s overall taxation rate. The SECURE Act also removed the age limit for IRA contributions; now, people can contribute to their IRA at any age, as long as they are still working. Before the passage of the SECURE Act, where removing funds from an IRA before turning 60 years old would make the withdrawal subject to income tax, people can now draw up to $5,000 from an IRA penalty-free after the birth or adoption of a child.

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Managing your finances likely isn’t the most exciting task on your to-do list, but it’s crucial if you want to reach all your financial goals and set yourself up for long-term success.”

You may be saving for retirement, paying down debt or simply budgeting for your everyday expenses. Whatever your goal is, it’s critical to have a plan in place. Some planning now can go a long way in making sure your finances are as healthy as possible. Without any type of plan, you’re just blindly throwing your money around and hoping for the best.

Motley Fool’s recent article entitled “A Whopping Number of Older Adults May Be Headed Toward a Financial Disaster” says that millions of older adults are making a critical mistake as they plan for the future. If they don’t make any changes soon, it could be extremely expensive.

2.13.20Admit it: Whether you're 35 or 65, the prospect of retiring without a mortgage is an attractive one. No more monthly mortgage payments to your home lender means extra money to spend on having fun in retirement. After years of punctual principal-and-interest mortgage payments, it's the least you deserve, right?

An increasing number of Americans are still carrying a mortgage when they hit retirement. According to a 2019 report from Harvard's Joint Center for Housing Studies, 46% of homeowners ages 65 to 79 have yet to pay off their home mortgages. Back in 1990, that number was just 24%.

Kiplinger’s November article “7 Ways to Retire Without a Mortgage” says that there are a few wise ways to retire without a mortgage. Let’s review these seven ways to retire sans (without) a mortgage.

1.13.20Check out some often-overlooked retirement planning facts of life that everyone should be aware of.

It’s crucial to have a plan for your retirement, so let’s get educated. There are some facts you might not know about retirement, like the way in which your Social Security benefit can be taxed and how to factor in travel expenses.

Kiplinger’s recent article entitled “5 Surprising Facts to Know About Retirement” gives us five important facts to learn about retirement.

5.10.19“If you're between 55 and 64, you still have time to boost your retirement savings. Whether you plan to retire early, late, or never ever, having an adequate amount of money saved can make all the difference, both financially and psychologically. Your focus should be on building out—or catching up, if necessary.”

It’s never too soon to begin saving. However, the last decade prior to retirement can be crucial. By then you’ll probably have a pretty good idea of when (or if) you want to retire and, even more important, still have some time to make changes, if need be.

If you discover that you need to put more money away, Investopedia’s article “Top Retirement Savings Tips for 55-to-64-Year-Olds” gives you several time-honored retirement savings tips to consider.

12.23.19There are many rules about reverse mortgages, including what happens at the end of the mortgage. What if the children decide they want to undo the reverse mortgage and buy out their parents, so the home can be kept in the family?

Let’s start by understanding what a reverse mortgage is, and how it works. This is a way for seniors to tap the equity in their homes. It’s usually done to generate cash, sometimes to pay for care and other times to supplement retirement accounts. However, the rules are a bit complex, says nj.com’s recent article, “Can we undo a reverse mortgage to keep the home?”

One of many common misconceptions about reverse mortgages is that the bank owns the home.

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