How Much Money Will You Need for Retirement?

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The main goal before you retire is to make sure that you have enough money when you do retire so you can maintain your standard of living. How much is enough depends on when you wish to retire, what your anticipated living expenses will be, what rate of return you can expect on your savings, and whether you will continue to work at all after retirement. The anticipated date of your retirement affects two important factors: how much time you will have to save up for retirement and the number of years you can expect to live after you retire….

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The Five Phases of Retirement Planning

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Retirement has changed radically over the last several decades in America. Years ago, you expected to work most of your life for a single, large employer and you then count on a pension. “Retirement planning” meant figuring out how to use your free time. Today, in all likelihood you will be living in retirement on money you, yourself, saved. “Planning” means calculating rates of return and deciphering tax rules. Without question, the core strategy to succeed in having enough for retirement is living well within your means. Keep in mind, there are significant differences in approach depending on your priorities,…

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Introduction to Retirement Planning

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Retirement has changed radically over the last several decades in America. Years ago, when you expected to work most of your life for a single, large employer, you could count on a pension. Retirement planning meant figuring out how to use your free time when you stopped working, not calculating rates of return and deciphering tax rules. You didn’t have to worry — enough money would be there from your pension and Social Security. Currently, with the exception of federal and state employees, most workers are not enrolled in pension plans, and the numbers continue to drop. Because fewer and…

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Spending Down Assets to Qualify for Medicaid

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In order to be eligible for Medicaid, applicants must have no more than $2,500 in countable assets (the dollar figure may vary, depending on the state). Applicants for Medicaid and their spouses may protect savings by spending them on non-countable assets. The following are examples of such expenditures: prepaying funeral expenses paying off a mortgage making repairs to a home replacing an old automobile updating home furnishings paying for more care at home buying a new home In the case of married couples, it is often important that any spend-down steps be taken only after the unhealthy spouse moves to…

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Transferring Assets to Qualify for Medicaid

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Congress has established a period of ineligibility for Medicaid for those who transfer assets. For transfers made prior to February 8, 2006, state Medicaid officials would look only at transfers made within the 36 months prior to the Medicaid application (or 60 months if the transfer was made to or from certain kinds of trusts). But for transfers made after February 8, 2006, the so-called “look-back” period for all transfers is 60 months. While the look-back period determines what transfers will be penalized, the length of the penalty depends on the amount transferred. The penalty period is determined by dividing…

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The Need for Medicaid Planning

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One of the greatest fears of older Americans is that they may end up in a nursing home. This not only means a great loss of personal autonomy, but also a tremendous financial price. Depending on location and level of care, nursing homes cost over $120,000 a year. Most people end up paying for nursing home care out of their savings until they run out. Then they can qualify for Medicaid to pick up the cost. The advantages of paying privately are that you are more likely to gain entrance to a better quality facility and doing so eliminates or…

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Protecting Your House from Medicaid Estate Recovery

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After a Medicaid recipient dies, the state must attempt to recoup from his or her estate whatever benefits it paid for the recipient’s care. This is called “estate recovery.” For most Medicaid recipients, their house is the only asset available. Life estates For many people, setting up a “life estate” is the simplest and most appropriate alternative for protecting the home from estate recovery. A life estate is a form of joint ownership of property between two or more people. They each have an ownership interest in the property, but for different periods of time. The person holding the life…

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Major Medicaid Mistakes

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As our aging population continues to grow, more and more families will face the need for long-term care for their loved ones. If that care is received in a nursing home, these families will face costs of $10,000 – $15,000 per month (and that number increases each year). Since Medicare does not cover the cost of skilled nursing home care (except for limited rehab stays), most residents must pay the full cost of skilled nursing home care. At $10,000 – $15,000 per month, the average family will exhaust their life savings within the first year of nursing home care. Most nursing home residents will eventually end up…

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Be Aware of the Kiddie Tax Before Leaving an IRA to Children

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Grandparents may be tempted to leave an IRA to a grandchild because children have a low tax rate, but the “kiddie tax” could make doing this less beneficial. An IRA can be a great gift for a grandchild. A young person who inherits an IRA has to take minimum distributions, but because the distributions are based on the beneficiary’s life expectancy, grandchildren’s distributions will be small and allow the IRA to continue to grow. In addition, children are taxed at a lower rate than adults—usually 10 percent. However, the lower tax rate does not apply to all unearned income. Enacted to prevent…

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HUD Makes Reverse Mortgages a Little Less Attractive

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The Department of Housing and Urban Development (HUD) has announced changes to the federal reverse mortgage program. Citing the need to put the program on better financial footing, HUD will raise reverse mortgage fees for some borrowers and lower the amount homeowners can borrow. A reverse mortgage allows a homeowner who is at least 62 years old to use the equity in his or her home to obtain a loan that does not have to be repaid until the homeowner moves, sells, or dies. In a reverse mortgage, the homeowner receives a sum of money from the lender, usually a bank,…

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