Confidence Wealth & Insurance Solutions January 18, 2017 No Comments

Retirement Planning for Nurses: By the Numbers

As nurses are earning more than ever before, they’re also working past retirement age. Here we explore why nurses are facing a financially shaky future and how they can change their course.

4,011,911 Professionally Active Nurses in the US Today¹

There are more than 4 million working nurses in the United States today. That’s almost twice the amount of lawyers and doctors combined. On the front line of patient care, nurses are expected to be compassionate, strong, smart and in control every second they’re on the clock. Lives depend on their abilities.

Average Salary of Registered Nurses: $71,000²

But what happens when it’s time to retire? Who is watching out for their well-being and security?

The answer is not black and white. While many nurses have access to retirement products through their employers – like 401ks and pensions, they don’t always have the time to understand them.

56% of Nurses Report Not Being Confident in Investing Their Money³

An eye-opening report by Fidelity showed that 56 percent of 356 nurses surveyed claimed they lacked confidence when it came to investing their money because they didn’t have the time to learn about it.

Although it seems like a no-brainer to make time for your future financial security, this is easier said than done.

Imagine, for a moment, going on your twelfth straight day of working 10-hour shifts. You have to be alert and on your feet. You’re dealing with sick, hurt and suffering people. You get home late, eat whatever’s around, go to bed and repeat. By the time you have a day off, your laundry is piled up, you have unanswered mail and your spouse barely recognizes you. The last thing you want to do is pore over a bunch of numbers that won’t matter to you for a few more years. This is the life of so many nurses.

The big problem with this, however, is that nurses are pushing back retirement at a higher rate than ever before. Today, 74 percent of nurses are working at age 62 and 24 percent are still working at 69. The median age for retirement, according to a recent Gallup poll, is 66.

Likelihood Of Divorce: 33%⁴

Compound the problem of busy schedules with other problems, like divorce – the divorce rate for nurses is 33 percent – and it creates a dismal picture for a financially secure future.

How Can Nurses Secure Their Future?

The future does not have to be so bleak. Nurses can enjoy a fulfilling, financially secure retirement – but they must take an active role in their investments and savings.

Four Key Steps In Smart Retirement Planning:

SET RETIREMENT GOALS

Before you do anything, figure out when you would LIKE to retire and how you want to spend your retirement. You have worked hard, you deserve a secure retirement at an age that suits you. In order to get this, you need a strategy – which begins with a goal.

Once you have your retirement age settled and how you want to spend your retirement – i.e. do you want to travel, shop and spend money or will you be happy living more modestly, go on to step #2.

MAKE TIME TO REVIEW AND UNDERSTAND RETIREMENT OPTIONS

This might mean setting up a 401k through your employer or digging deeper into what you already have saved – which brings us to number 2.

TALK TO A RETIREMENT INCOME PROFESSIONAL

Get professional feedback on where you are with your retirement savings and next steps for meeting your goal (your retirement age).

SCHEDULE A YEARLY CHECK-UP

Just like you get your annual medical check-up, you need to get a retirement check-up. Meet with your retirement income professional every 12 months to make sure you’re on the right trajectory to hit your target.

As you near retirement age, you want to reduce exposure to risk and secure your nest egg. A retirement income advisor will make sure this is happening. A bad one won’t even notice if it is or isn’t – meaning, your investments are on autopilot. Be proactive and stay on top of your retirement savings.

¹http://kff.org/other/state-indicator/total-registered-nurses/?currentTimeframe=0
²https://www.bls.gov/ooh/healthcare/registered-nurses.htm#tab-5
³https://www.fidelity.com/about-fidelity/individual-investing/more-than-half-of-nurses-lack-confidence-in-making-financial-decisions
⁴http://www.bmj.com/content/350/bmj.h706

Confidence Wealth & Insurance Solutions January 2, 2017 No Comments

2017 Retirement Planning Key Numbers

Certain retirement plan and IRA limits are indexed for inflation each year, but only a few of the limits eligible for a cost-of-living adjustment (COLA) have increased for 2017. Some of the key numbers for 2017 are listed below, with the corresponding limit for 2016. (The source for these 2017 numbers is IRS Information Release IR-2016-141.)

Elective deferral limits	2016	2017
401(k) plans, 403(b) plans, 457(b) plans, and SAR-SEPs* (includes Roth contributions)	Lesser of $18,000 or 100% of participant's compensation ($24,000 if age 50 or older)**	Lesser of $18,000 or 100% of participant's compensation ($24,000 if age 50 or older)**
SIMPLE 401(k) plans and SIMPLE IRA plans*	Lesser of $12,500 or 100% of participant's compensation ($15,500 if age 50 or older)	Lesser of $12,500 or 100% of participant's compensation ($15,500 if age 50 or older)

IRA contribution limits	2016	2017
Traditional and Roth IRAs	Lesser of $5,500 or 100% of earned income ($6,500 if age 50 or older)	Lesser of $5,500 or 100% of earned income ($6,500 if age 50 or older)

Defined benefit plan annual benefit limits	2016	2017
Annual benefit limit per participant	Lesser of $210,000 or 100% of average compensation for highest three consecutive years	Lesser of $215,000 or 100% of average compensation for highest three consecutive years

Defined contribution plan limits (qualified plans, 403(b) plans, and SEP plans)	2016	2017
Annual addition limit per participant (employer contributions; employee pretax, after-tax, and Roth contributions; and forfeitures)	Lesser of $53,000 or 100% (25% for SEP) of participant's compensation	Lesser of $54,000 or 100% (25% for SEP) of participant's compensation

Retirement plan compensation limits	2016	2017
Maximum compensation per participant that can be used to calculate tax-deductible employer contribution (qualified plans/SEPs)	$265,000	$270,000
Compensation threshold used to determine a highly compensated employee	$120,000 (when 2016 is the look-back year)	$120,000 (when 2017 is the look-back year)
Compensation threshold used to determine a key employee in a top-heavy plan	$1 for more-than-5% owners $170,000 for officers $150,000 for more-than-1% owners	$1 for more-than-5% owners $175,000 for officers $150,000 for more-than-1% owners
Compensation threshold used to determine a qualifying employee under a SIMPLE plan	$5,000	$5,000
Compensation threshold used to determine a qualifying employee under a SEP plan	$600	$600

Income phaseout range for determining deductibility of traditional IRA contributions for taxpayers:	2016	2017
1. Covered by an employer-sponsored plan and filing as:
Single/Head of household	$98,000 - $118,000	$99,000 - $119,000
Married filing separately	$0 - $10,000	$0 - $10,000
2. Not covered by an employer-sponsored retirement plan, but filing joint return with a spouse who is covered by a plan	$184,000 - $194,000	$186,000 - $196,000

Income phaseout range for determining ability to fund a Roth IRA for taxpayers filing as:	2016	2017
Single/Head of household	$117,000 - $132,000	$118,000 - $133,000
Married filing jointly	$184,000 - $194,000	$186,000 - $196,000
Married filing separately	$0 - $10,000	$0 - $10,000

* Must aggregate employee deferrals to all 401(k), 403(b), SAR-SEP, and SIMPLE plans of all employers; 457(b) contributions are not aggregated. For SAR-SEPs, the percentage limit is 25% of compensation reduced by elective deferrals (effectively a 20% maximum contribution).

**Special catch-up limits may also apply to 403(b) and 457(b) plan participants.

Confidence Wealth & Insurance Solutions May 6, 2016 No Comments

[Financial Friday] Projecting a Happy Retirement

A 2015 study found that 41% of households headed by someone aged 55 to 64 had no retirement savings, and only about a third of them had a traditional pension. Among households in this age group with savings, the median amount was just $104,000.¹

Your own savings may be more substantial, but in general Americans struggle to meet their savings goals. Even a healthy savings account may not provide as much income as you would like over a long retirement.

Despite the challenges, about 56% of current retirees say they are very satisfied with retirement, and 34% say they are moderately satisfied. Only 9% are dissatisfied.²

– Develop a realistic picture

How can you transition into a happy retirement even if your savings fall short of your goals? The answer may lie in developing a realistic picture of what your retirement will look like, based on your expected resources and expenses.

As a starting point, create a simple retirement planning worksheet.

You might add details once you get the basics down on paper.

– Estimate income and expenses

You can estimate your monthly Social Security benefit at ssa.gov. The longer you wait to claim your benefits, from age 62 up to age 70, the higher your monthly benefit will be. If you expect a pension, estimate that monthly amount as well.

Add other sources of income, such as a part-time job, if that is in your plans. Be realistic. Part-time work often pays low wages.

It’s more difficult to estimate the amount of income you can expect from your savings; this may depend on unpredictable market returns and the length of time you need your savings to last. One simple rule of thumb is to withdraw 4% of your savings each year. At that rate, the $104,000 median savings described earlier would generate $4,160 per year or $347 per month (assuming no market gains or losses). Keep in mind that some experts believe a 4% withdrawal rate may be too high to maintain funds over a long retirement. You might use 3% or 3.5% in your calculations.

Now estimate your monthly expenses. If you’ve paid off your mortgage and other debt, you may be in a stronger position. Don’t forget to factor in a reserve for medical expenses.

One study suggests that a 65-year-old couple who retired in 2015 would need $259,000 over their lifetimes to cover Medicare premiums and out-of-pocket health-care expenses, assuming they had only median drug expenses.³

– Take strategic steps

Your projected income and expenses should provide a rough picture of your financial situation in retirement.

If retirement is approaching soon, try living for six months or more on your anticipated income to determine whether it is realistic.

If it’s not, or your anticipated expenses exceed your income even without a trial run, you may have to reduce expenses or work longer, or both.

Even if the numbers look good, it would be wise to keep building your savings. You might take advantage of catch-up contributions to IRAs and 401(k) plans, which are available to those who reach age 50 or older by the end of the calendar year. In 2016, the IRA catch-up amount is $1,000, for a total contribution limit of $6,500. The 401(k) catch-up amount is $6,000, for a total employee contribution limit of $24,000.

Preparing for retirement is not easy, but if you enter your new life phase with eyes wide open, you’re more likely to enjoy a long and happy retirement.

¹ U.S. Government Accountability Office, “Retirement Security,” May 2015
² The Wall Street Journal, “Why Retirees Are Happier Than You May Think,” December 1, 2015
³ Employee Benefit Research Institute, Notes, October 2015

Important Disclosure

Confidence Wealth & Insurance Solutions April 30, 2015 No Comments

Three College Savings Strategies with Tax Advantages

To limit borrowing at college time, it’s smart to start saving as soon as possible. But where should you put your money? In the college savings game, you should generally opt for tax-advantaged strategies whenever possible because any money you save on taxes is more money available for your savings fund.

529 plans

A 529 plan is a savings vehicle designed specifically for college that offers federal and state tax benefits if certain conditions are met. Anyone can contribute to a 529 plan, and lifetime contribution limits, which vary by state, are high–typically $300,000 and up.

Contributions to a 529 plan accumulate tax deferred at the federal level, and earnings are tax free if they’re used to pay the beneficiary’s qualified education expenses. Many states also offer their own 529 plan tax benefits, such as an income tax deduction for contributions and tax-free earnings. However, if a withdrawal is used for a non-educational expense, the earnings portion is subject to federal income tax and a 10% federal penalty (and possibly state tax).

529 plans offer a unique savings feature: accelerated gifting. Specifically, a lump-sum gift of up to five times the annual gift tax exclusion ($14,000 in 2015) is allowed in a single year per beneficiary, which means that individuals can make a lump-sum gift of up to $70,000 and married couples can gift up to $140,000. No gift tax will be owed if the gift is treated as having been made in equal installments over a five-year period and no other gifts are made to that beneficiary during the five years. This can be a favorable way for grandparents to contribute to their grandchildren’s education.

Also, starting in 2015, account owners can change the investment option on their existing 529 account funds twice per year (prior to 2015, the rule was once per year).

¹ Survey of grandchildren and their grandparents performed by KRC Research on behalf of TIAA-CREF, April 2014.
² CollegeBoard Trends in College Pricing 2013 http://trends.collegeboard.org
³ U.S. Department of Education, National Center for Education Statistics (2013). Digest of Education Statistics, 2012 http://nces.ed.gov/fastfacts/display.asp?id=76
Image source: https://www.aarpcollegesavings.com/help-your-grandchildren-save-college

Note: Investors should consider the investment objectives, risks, fees, and expenses associated with 529 plans before investing. More information about specific 529 plans is available in each issuer’s official statement, which should be read carefully before investing. Also, before investing, consider whether your state offers a 529 plan that provides residents with favorable state tax benefits. Finally, there is the risk that investments may lose money or not perform well enough to cover college costs as anticipated.

Coverdell education savings accounts

A Coverdell education savings account (ESA) lets you contribute up to $2,000 per year for a child’s college expenses if the child (beneficiary) is under age 18 and your modified adjusted gross income in 2015 is less than $220,000 if married filing jointly and less than $110,000 if a single filer.

Image source: http://lajollamom.com/scholarshare-529-california-college-savings-plans/

The federal tax treatment of a Coverdell account is exactly the same as a 529 plan; contributions accumulate tax deferred and earnings are tax free when used to pay the beneficiary’s qualified education expenses. And if a withdrawal is used for a non-educational expense, the earnings portion of the withdrawal is subject to income tax and a 10% penalty.

The $2,000 annual limit makes Coverdell ESAs less suitable as a way to accumulate significant sums for college, though a Coverdell account might be useful as a supplement to another college savings strategy.

Image source: http://lajollamom.com/scholarshare-529-california-college-savings-plans/

Roth IRAs

Though traditionally used for retirement savings, Roth IRAs are an increasingly favored way for parents to save for college. Contributions can be withdrawn at any time and are always tax free (because contributions to a Roth IRA are made with after-tax dollars). For parents age 59½ and older, a withdrawal of earnings is also tax free if the account has been open for at least five years. For parents younger than 59½, a withdrawal of earnings–typically subject to income tax and a 10% premature distribution penalty tax–is spared the 10% penalty if the withdrawal is used to pay a child’s college expenses.

Roth IRAs offer some flexibility over 529 plans and Coverdell ESAs. First, Roth savers won’t be penalized for using the money for something other than college. Second, federal and college financial aid formulas do not consider the value of Roth IRAs, or any retirement accounts, when determining financial need. On the flip side, using Roth funds for college means you’ll have less available for retirement. To be eligible to contribute up to the annual limit to a Roth IRA, your modified adjusted gross income in 2015 must be less than $183,000 if married filing jointly and less than $116,000 if a single filer (a reduced contribution amount is allowed at incomes slightly above these levels).

And here’s another way to use a Roth IRA: If a student is working and has earned income, he or she can open a Roth IRA. Contributions will be available for college costs if needed, yet the funds won’t be counted against the student for financial aid purposes.

Source:
http://cgi.money.cnn.com/tools/collegeplanner/collegeplanner.jsp
http://blog.classesandcareers.com/education/2014/01/08/infographic-saving-for-college-tuition-expenses/

Scenario #1: If you start saving at your child’s birth, you must put away $2,121 per year into a 529 plan, and then other plans once that’s maxed out, in order to have enough for your child to begin college at 18 and finish in four years.

Scenario #2: If you start saving at your child’s sixth birthday, you must put away $3,059 per year into a 529 plan, and then other plans once that’s maxed out, in order to have enough for your child to begin college at 18 and finish in four years.

Scenario #3: If you start saving at your child’s 12th birthday, you must put away $5,101 per year into a 529 plan, and then other plans once that’s maxed out, in order to have enough for your child to begin college at 18 and finish in four years.

Confidence Wealth & Insurance Solutions August 20, 2014 No Comments

How Does Divorce Affect Social Security Retirement Benefits?

One of the challenges of planning for retirement is that an unexpected event, like divorce, can dramatically change your retirement income needs. If you were counting on your spouse’s Social Security benefits to provide some of your retirement income, what happens now that you’re divorced?

What are the rules?

Even if you’re divorced, you may still collect benefits on your ex-spouse’s Social Security earnings record if:

Your marriage lasted 10 years or longer
You are age 62 or older
Your ex-spouse is entitled to receive Social Security retirement or disability benefits, and
The benefit you’re entitled to receive based on your own earnings record is less than the benefit you would receive based on your ex-spouse’s earnings record

If you’ve been divorced for at least two years, and the other requirements have been met, you can receive benefits on your ex-spouse’s record even if he or she has not yet applied for benefits.

How much can you receive?

If you begin receiving benefits at your full retirement age (66 to 67, depending on your year of birth), your spousal benefit is equal to 50% of your ex-spouse’s full retirement benefit (or disability benefit). For example, if your ex-spouse’s benefit at full retirement age is $1,500, then your spousal benefit is $750. However, there are several factors that may affect how much you ultimately receive.

Image source: http://pubs.aarp.org/aarpbulletin/201411_DC?pg=14#pg16

Are you eligible for benefits based on your own earnings record? If so, then the Social Security Administration (SSA) will pay that amount first. But if you can receive a higher benefit based on your ex-spouse’s record, then you’ll receive a combination of benefits that equals the higher amount.

Will you begin receiving benefits before or after your full retirement age? You can receive benefits as early as age 62, but your monthly benefit will be reduced (reduction applies whether the benefit is based on your own earnings record or on your ex-spouse’s). If you decide to receive benefits later than your full retirement age, your benefit will increase by 8% for each year you wait past your full retirement age, up until age 70 (increase applies only if benefit is based on your own earnings record).

Will you work after you begin receiving benefits? If you’re under full retirement age, your earnings may reduce your Social Security benefit if they are more than the annual earnings limit that applies.

Are you eligible for a pension based on work not covered by Social Security? If so, your Social Security benefit may be reduced.

Planning tip: If you decide not to collect retirement benefits until full retirement age, you may be able to maximize your Social Security income by claiming your spousal benefit first. By opting to receive your spousal benefit at full retirement age, you can delay claiming benefits based on your own earnings record (up until age 70) in order to earn delayed retirement credits. This can boost your benefit by as much as 32%. Because deciding when to begin receiving Social Security benefits is a complicated decision and may have tax consequences, consult a professional.

What happens if one of you remarries?

Benefits for a divorced spouse are calculated independently from those of a current spouse, so your benefit won’t be affected if your spouse remarries. However, if you remarry, then you generally can’t collect benefits on your ex-spouse’s record unless your current marriage ends. Any spousal benefits you receive will instead be based on your current spouse’s earnings record.

What if your ex-spouse dies?

If your marriage lasted 10 years or more, you may be eligible for a survivor benefit based on your ex-spouse’s earnings record.

Image source: http://www.facethefactsusa.org/facts/think-you-know-who-gets-social-security-think-again-infographic

For more information on how divorce may affect your Social Security benefits, contact the SSA at (800) 772-1213 or visit socialsecurity.gov.