Review Your Advance Directive

If the topic of medical directives has not come up within the family and there has been no discussion, then do it now.

Medical directives and other estate planning documents need to be kept up to date as the years pass by, according to the Watertown Public Opinion in “Keep medical directives up to date.” If you do have a medical directive (called an “Advance Healthcare Directive” in California) and haven’t looked at it in years, it’s time for a review to make sure it still reflects your wishes.

If you don’t have a medical directive and an emergency strikes, family members and medical providers have to make the decisions without any input.

Medical directives that are out-of-date often become useless. If a family member who was designated to make end-of-life decisions for a spouse is suffering from dementia, they are no longer legally competent to make any decisions.

One way to avoid this is to have an alternate person designated. Your spouse may be aging along with you, and one of you may not necessarily be able to make decisions when they are needed. Be sure that the alternate has the strength of character to make a decision that follows your wishes, even if it’s not what your family wants to be done. They have to be able to follow your instructions, which is not always easy.

Just as important as having the documents created, is having the conversation among family members about what you want or don’t want. Having that conversation and clarifying wishes will make it far easier for the family member or designated representative, because they will know they are doing what you want. This conversation may give the individual empowered to make the critical decision greater confidence and strength.

While it is (relatively) easier to have these conversations when everyone is in good health, a family member who is scared, grieving and emotionally overwhelmed, may find themselves confronted with one of the hardest decisions of their lives.

That’s why it’s so important for people to give their family members the clarity and direction they will need, when it comes to end-of-life care decisions. You’ll need to select a person with a strong backbone, who is not easily frazzled and check in with them on a regular basis to make sure they can still perform the duties of their role.

An estate planning attorney can advise you on creating an estate plan or updating an estate plan that fits your unique circumstances.

Reference: Watertown Public Opinion (Nov. 20, 2018) “Keep medical directives up to date”

IRS Increases Annual 401(k) Contributions

If you are fortunate enough to have an employer match, the end results are even better.

The IRS has raised the contribution limit for a 401(k) plan by $500 next year and it can make a difference over the years in your retirement fund, according to The New York Times in “I.R.S Is Raising 401(k) Contribution Limits in 2019.”

It may not seem like a lot, but it should encourage more employees to save for retirement. The IRS announcement is that the employee contribution limit for 401(k)s and other workplace-based retirement plans will take a jump to $19,000.

When employees enroll in a 401(k) plan, money goes in as pre-tax dollars and isn’t taxed until withdrawn. For workers 50 years and older, there is an additional “catch up” contribution opportunity of $6,000. This amount is not changing in 2019. That means if you are 50 and older, you can contribute as much as $25,000 next year.

401(k) plans, which are named after a section of the tax code that created them, have been around for four decades. Workers typically open accounts as part of their employee benefits package. As employees make their decisions during open-enrollment season for 2019, advisors recommend increasing their payroll contributions to their 401(k) plans.

This is a good time to review your overall retirement saving strategies. Let’s say you take advantage of the new contribution limits. If you invested $500 annually over the course of 30 years (assuming you are in the early years of your career), a 7% average annual rate of return will add $47,000 to your retirement savings accounts.

For those who are lucky enough to have an employer who matches contributions, which range from 3% to 5% of pre-tax paychecks, take advantage of this perk and contribute as much as required, to maximize your employee-match.

Advisors recommend increasing contributions by 1% every year, which makes a big difference in the long run. Others remind us of the basics: Start saving early and take advantage of the power of compounding and time.

Even if your employer does not have a retirement plan, you can open one up on your own with an Individual Retirement Account (IRA). Contributions to IRAs are also increasing in 2019, for the first time in five years. You can increase your contribution up to $6,000, a $500 increase over last year. If you are 50 years or older, you can save an additional $1,000.

Bottom line: it is never too early to start saving for retirement, because the longer you can save, the better.

Reference: The New York Times (Nov. 9, 2018) “I.R.S Is Raising 401(k) Contribution Limits in 2019”

Preparing to Care for Your Parents Can Be Difficult

You may have to take care of your parents in later life and it’s best to prepare one step at a time.

Life starts out with your parents taking care of you but often that scenario changes and you end up caring for your parents. Sometimes preparing for that situation is easy but not always, according to Connecticut Magazine in “Senior Caregiving 101.”

The very idea of being in charge of the people who taught you how to tie your shoes and drive a car, can be emotional and many people put off having the talk about caregiving, until an emergency presents itself. That’s not a good plan. Those of us in our 40s, 50s, and 60s will, at some point, need to be involved in taking care of a parent, including their finances, living arrangements, legal issues and medical care.

Where to start? Take it one step at a time.

Begin with a conversation about these issues, long before anyone is sick. Getting started in a crisis leads to increased anxiety and sometimes outright panic.

If you are worried that your parents or siblings will think you are after their money, think again. How you approach these topics will make the difference. Once a caregiving plan, legal and financial matters are addressed, you’ll all feel more comfortable. Start with a simple thought: “I/We want to make sure that your wishes are respected.”

Is there a lot of paperwork? Yes and no. By preparing in advance, you avoid digging through a scavenger hunt for insurance policies and bills and wills. You’ll know where the documents are and will be free to focus on the important things, such as taking care of and spending time with your aging parents.

You’ll need to have a Power of Attorney prepared. A Durable Power of Attorney means that the Power of Attorney will remain in effect, so the appointed agent may continue acting even if the principal becomes mentally incapacitated. Power of Attorney can be limited or broad. However, it’s a good idea to build in periodic reports, as a system of checks and balances.

You’ll also need an Advance Directive. This is a document that protects an individual’s right to refuse medical treatment or to request treatment, if they are not able to make decisions on their own. Depending on the person’s needs, they may need a living will, a health care representative, designation of a conservator and an anatomical gift declaration. This is needed if they want to make an “anatomical gift,” which is also known as an organ donation.

Now is a good time to review any other estate planning documents as well, including your parents’ Living Trust. Many times these are created at a time when the focus is on the period after death, and they may need to be updated to anticipate any possible period of incapacity while your parents are still alive.

If you are facing these challenges, we can help. Give us a call to schedule a consultation and we can help you put together a plan.

Reference: Connecticut Magazine (Nov. 23, 2018) “Senior Caregiving 101”

Planning Retirement? Consider All Of Your Options

Thinking of traveling after years of work? Plan for it and save for it.

When it comes to planning for your retirement, consider the possibilities that await you. However, you should also consider the fact you will most likely be living on a fixed budget and costs become crucial, according to Investopedia in “How to Plan for Travel in Retirement.”

The average retiree spends about $11,077 per year on travel, and the mean after-tax household income for seniors who are 65 and older was $44,051 in 2017. How do you make these two numbers work and see the world? Think budgeting and financial goal-setting, both before and after you retire.

Start by considering how well prepared you are for handling everyday costs during retirement. Do you have the cash flow to cover the normal cost of living? Then add the cost of travelling. If the answer is yes, start making plans. If not, then it’s time to go to work on planning and saving.

Analyzing current cash flow and projected retirement spending can help determine how much you’ll realistically be able to devote to travel. Obviously, the more retirement savings you have, the more room you’ve got to plan.

A few things to consider:

  • If the travel you have in mind is too expensive, can you still travel but at a lower cost?
  • Can you afford to travel at all, based on your current cash flow?
  • Should you delay travel plans, so that you have time to save for them?
  • How many trips do you think you can manage, financially, each year?

Once you know your annual travel budget you then can decide whether you want to take one big trip a year or a series of smaller, less expensive trips. Remember to include airfare, hotel costs, food, shopping and entertainment. Don’t forget the cost of medical care.

Medicare does not provide health coverage when travelling overseas, so you’ll need to be aware of what, if any, coverage you have from Medicare Advantage. You may need to purchase additional travel health insurance, so include that in your budget as well.

You might use a “bucket” strategy: have one bucket for fixed expenses, another for variable expenses and a third for a future bucket. Travel would be the future bucket, for those who are still working. You might also want to start a dedicated account, savings, money market or CD. You can also allocate a portion of your investment portfolio for travel costs.

Reference: Investopedia (Nov. 19, 2018) “How to Plan for Travel in Retirement”

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