Stock Market Risk

How much are you willing to lose? At this point in your retirement years, are you able to recuperate from a market correction? It is possible to reposition assets and accumulate returns without market risk and with return of principal assured. Bonds and equities that have historically been considered to be safe often do in fact pose an investment risk. Have you experienced substantial appreciation of stock or mutual fund shares and would now like to lock-in gains, without giving up future potential for market growth?

Tax Reduction Strategies

Retirees were glad to learn of the recent change in the social security rules, as they can now earn unlimited amounts from working and still collect their full social security benefits. Unfortunately, many social security recipients still pay taxes on their social security income unnecessarily. The rule works as follows:

A single person with "modified adjusted gross income" over $25,000 will pay tax on up to half of their social security income. The same rule applies to married couples with "modified adjusted gross income" over $32,000.

If their "modified adjusted gross income" exceeds $34,000 and $44,000 (respectively for singles and couples), the tax bite jumps up to 85% of social security income. You cannot beat the tax on social security benefits by investing in tax-free bonds or EE bonds as the IRS forces you to include these when calculating "modified adjusted gross income." The only shelter from this tax is to convert income to tax deferred incom (other than EE bonds). That leaves annuities and any account where the 1099 is sent only upon maturity. Therefore, annuities continue to provide a special tax advantage for retirees. Not only is the income tax deferred, the deferred income is not included for social security tax calculations and there can be a permanent savings for the retiree.

Probate Explained

Probate is best described as the court process that is established to care for people who can no longer make their own financial or health-care decisions and not make proper legal plans to avoid the process.

There are basically two types of probate court proceedings: The first being Guardianship and Conservatorship.

In these proceedings a Guardian is appointed to make health care and personal decisions and a Conservator is selected to assist in making the financial decisions for an orphaned minor or an incapacitated adult. These decision-makers are selected by a probate judge and will have an ongoing responsibility and obligation to report to the court for as long as that responsibility is held.

Death Probate is the second type of probate and is the one that most of us recognize. This is a court proceeding where a person's estate is administered after death. Your estate may be administered in probate in under the terms of your valid will or under the laws of intestacy if you die without a will. Most people prefer to avoid probate because it subjects personal affairs to public scrutiny, allows a probate judge to make important decisions about you,can take several years to resolve, and can be very costly. Probate administration expenses can run as high as 10 percent of your total estate. Costs can run even higher if your estate includes a closely held business interest or real property in more than one state. Probate is best described as the court process that is established to care for people who can no longer make their own financial or health-care decisions and not make proper legal plans to avoid the process. Unfortunately, probate can be a very long, drawn-out process that can be very stressful to all those involved.

The Living Trust is recognized in all 50 States and can be modified or terminated (revoked) by you at any time. Do not confuse the need for a Living Trust to avoid probate upon disability or death (which can be helpful for any size estate- even assets having $100,000, or less) with the need for planning to reduce or eliminate Federal Estate Taxes (which is normally a concern should the value of your assets approach the Federal Estate Tax "exemption"- currently $1,500,000.00. With a Living Trust you place all of your assets into the Trust. If you designate yourself as a Trustee, you can continue to manage and invest your assets as you wish- with complete control to withdraw income or assets as needs arise. The Successor Trustee that you have named in the Trust (who can be you children, other family members, friends, or a bank/ trust company) will manage your financial affairs in case of your disability during life. At your death, the Successor Trustee will continue to provide for your loved ones and/ or will distribute the assets according to your desires without the delays, costs, and publicity of Probate. In addition, a Living Trust can be used to reduce, or possibly eliminate, Federal Estate Taxes.

Long Term Care Cost

Since we live longer, healthier lives, there's a stronger possibility that we will require some form of long-term care in our lifetimes. Unfortunately, many Americans are unaware of the financial risks that are associated with Long Term Care Services. Will your assets be depleted by the high costs of long-term care? Many seniors incorrectly assume that their traditional health coverage, Medicare, Medigap Insurance, and most HMO's will cover the costs of Long Term Care According to Health Insurance Association (HIAA) of America, nearly 1 out of 2 people turning age 65 will spend time in a nursing facility. Furthermore, 3 out of 4 of that same group will require care at home. According to the HIAA, the average cost of a year's stay in a nursing facility is $36,000 and can even be as high as $60,000.