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Retirement
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Gen X And Gen Y Start On Retirement Saving A Decade Earlier Than Baby Boomers; Like Those Who Came Of Age In The Depression Era, Younger Generations Have Come To Grips With Tougher Times |
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Tuesday, August 28, 2012 16:58
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Tags: client acquisition | financial planning | investing | new investors | retirement planning Nearly 60% of Americans born between 1965 and 1989 are making automatic contributions toward their retirement savings,compared to 46% of non-retired Baby Boomers born between 1946 and 1964. In addition, the younger generations that followed Boomers start saving for retirement, on average, in their mid- to late-twenties, nearly a decade earlier than Boomers, according to a survey released by TD Ameritrade.
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Generation X, defined by the study’s authors as those born between 1965 and 1976 and Generation Y, defined as those born from 1977 to 1989, according to TD Ameritrade, “have learned from the mistakes of their elders.”
Meanwhile, Gen Z, those born from 1990 to 1999, according to the survey, “show some signs of nest egg naivety. “Gen X and Y have accepted the reality of the past few years, and rather than being discouraged, they are using what they've witnessed to their advantage by saving earlier and regularly,” says TD Ameritrade. “The hope is that tomorrow's investors, Gen Z, follow suit as they near retirement."
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Educating Yourself About The Full Scope Of Social Security Benefits Will Help You Give Better Advice To Your Clients As They Decide When To Claim Benefits |
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Tuesday, August 28, 2012 12:49
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Tags: Advisor businesses | client education | retirement planning
As the Boomer population ages, questions about how to best utilize Social Security benefits become part of their investment strategy. To adequately advise them, it’s imperative to fully understand how Social Security benefits work. This Website Is For Financial Professionals Only
The Pension Research Council recently published a study that reveals mistakes that were made in devising investment strategies that also consider Social Security benefits, particularly where widows are concerned.
The Council is a retirement research center affiliated with the University of Pennsylvania’s Wharton School. The study covered both wirehouse and independent advisors as well as others.
It revealed that most advisors overly depend on break-even analysis in designing investment strategies for those clients who are eligible for Social Security benefits.
Break-even analysis shows how long it would take for higher benefits payments resulting from delayed claims to equal the amount received by claiming benefits at an earlier time.
This type of analysis completely ignores the ability of one spouse to receive benefits based on another spouse’s eligibility, especially in the case of delaying benefit claims.
The tendency is for those who are eligible to take the benefits as soon as they can—at age 62. But it could be a greater advantage to delay receipt of Social Security benefits until years later.
It’s difficult to calculate the best benefit claim scenario, particularly when spousal benefits and delay of claims are considered. There is software you can use that considers all the complexities that arise when you consider the age of beneficiaries, incomes, and longevity expectations.
You can find out more about the software here. Instead of simply factoring in when Social Security benefits are received, you can do your clients a great service by helping them frame that decision within the scope of these other factors. |
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New Designation Offered By Insured Retirement Institute Focuses On All Aspects Of Retirement Planning |
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Tuesday, August 21, 2012 12:22
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Tags: Advisor businesses | retirement planning | retirement plans
The Insured Retirement Institute (IRI) has created a new designation that focuses completely on retirement planning. The Retirement Income Certified Professional (RICP) designation and it’s offered by The American College and you can get it online through videos and recorded interviews with top retirement specialists. The course also includes support materials and a study guide. This Website Is For Financial Professionals Only
The designation requires three courses, only the first of which is currently available. Its title is Retirement Income Process, Strategies, and Solutions. Course Two is titled Sources of Retirement Income and Course Three is titled Managing Retirement Income Plans.
The Retirement Income Industry Association (RIIA) launched its Retirement Income Analyst designation last May. The designation is given after completion of three courses that can either be taken online or in person at three universities located across the country.
One of the RIIA-approved programs begins September 4 and is offered at Boston University. It’s also offered online during the fall, spring, and summer. Texas Tech University in Lubbock, TX offers a five-week course during the spring and fall.
You can find out more about the courses for all three programs here at the RIIA website.
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If Your Clients Have Not Saved Enough For Retirement, Understanding Social Security's Spousal Benefits Options Might Help |
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Wednesday, August 15, 2012 11:32
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Tags: retirement planning | social security | US investing
Many Boomers have failed to save enough money to support the type of lifestyle they’d like to lead during retirement. And although Social Security doesn’t provide nearly the amount of security it used to, there are ways to maximize your clients’ benefits, especially if they are married. This Website Is For Financial Professionals Only
Spouses can’t claim each other’s Social Security benefits. But if they wait until they’re both 66 years old (current retirement age) to file for benefits, then there’s a strategy they can employ which will give them a bit of income now and maximize benefits for both a few years later.
Here’s the way it works. One spouse reaches the age of 66 and files to receive benefits but suspends actual collection of those benefits until he is age 70. His wife may claim a spousal benefit of half the husband’s full benefit.
So if the husband’s benefit is $3000 per month, she can receive $1500 per month without reducing the benefits he will receive. She can claim this benefit at age 62. If she chooses to do so, her benefit will be less than half of his—32% less, to be exact.
But if she also waits until she is 66, she can receive the full 50% of her husband’s benefit. If both wait until 70 to actually receive benefits (they both file and suspend), she can start receiving half of his monthly benefit at age 66, then they both can receive 32% more of their respective benefits per month at age 70.
So, if he files at age 66 and suspends receiving benefits until age 70, then she files at 66 and suspends receiving her benefits until age 70, she can still receive the $1500 per month. Then at age 70, they both will receive 32% more (benefits go up by 8% per year from age 66 to age 70) on their respective benefits.
This higher benefit level also serves as the basis from which all other benefits are calculated. This could be a retirement strategy your clients don’t know about, but should.
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Buying An Annuity So Assets Aren't Counted In Determining Medicaid Benefits Eligibility |
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Friday, July 27, 2012 18:48
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Tags: annuities | medicaid In Morris v. Oklahoma Dept. of Human Services, the US 10th Circuit addressed whether an institutionalized spouse could buy an annuity for the benefit of the other spouse to reduce assets considered in determining Medicare eligibility. The Court ruled in favor of Morris, concluding that an annuity meeting certain requirements can be purchased to convert countable resources into uncountable income.
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FACTS
Mrs. Morris required institutionalization in a long-term care facility and in 2008 the Morrises asked the Oklahoma Department of Human Services (OKDHS) to determine their Medicaid eligibility. OKDHS calculated their “countable resources to be $107,812,” half of which were assigned to each spouse. The limit on the program to which the Morrises applied was $2,000, meaning Mrs. Morris would have to “spend down” $51,906 to be eligible for Medicaid.
The Morrises spent $15,000 on burial contracts, $4,000 in attorney’s fees, and $41,000 in an annuity, which would pay Mr. Morris monthly. Then the Morrises applied again for Medicaid program. OKDHS denied the application, again determining Mrs. Morris had more than $2,000 in resources.
The Morrises appealed, but the OKDHS appeals board affirmed, reasoning the annuity remained a countable resource, and Mrs. Morris made a transfer to Mr. Morris without receiving FMV in return, thus, requiring a disqualification period as penalty for improper transfers.
The Morrises then appealed to the Federal District Court and lost on Summary Judgment. They then appealed to the Circuit Court.
ANALYSIS
The Circuit Court first concluded that the OKDHS appeals board was incorrect in categorically determining that annuities do not count as a “spend down.” The OKDHS’s decision was inconsistent with the Medicaid statutes.
The Court cited numerous cases which concluded a couple can convert countable resources into uncountable income of the non-applying spouse by purchasing “an irrevocable actuarially sound commercial annuity for the sole benefit of the community spouse.” The Court also noted that “rather than close the annuity ‘loophole,’ Congress has twice amended the Medicaid statutes to specify the types of annuities capable of producing uncountable spousal income.”
The Court also addressed the OKDHS second contention that the Morrises violated the transfer provisions of the Medicaid statutes. This was a somewhat more difficult issue because case law arguably favored OKDHS. The issue was one of timing. Building off the case law, the District Court concluded an annuity could only qualify towards a “spend down” if it was purchased before an initial determination of ineligibility or eligibility. However, the Circuit Court, determined that the transfer limitations of the statues began after a spouse is deemed eligible, but not after a spouse is deemed ineligible. Therefore, the Morrises were not subject to the transfer limitations and the annuity could count towards a “spend down.”
This is a quite interesting policy case. On one hand, Medicaid is an expensive program that should only benefit the most deserving to preserve the program's vaibility. On the other hand, requiring that a spouse of someone who is institutionalized in a long-term facility be destitute before being eligible for Medicare is equally unnerving. Fortunately for the Court, it did not have to wrestle with the policy decision because Congress had already made it.
Cite: Morris v. Oklahoma Dept. of Human Services, 10-6241, 2012 WL 2689824 (10th Cir. July 9, 2012).
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