Retirement Healthcare Planning in an Uncertain Environment

These days people are living longer than ever – and we’re all for that! But living longer does come with a tricky problem: The longer you live, the more likely you are to require extensive (and expensive) health care services. That means you’re incurring the highest healthcare costs during the part of your life when you’re not working – so you’d better have excellent insurance, good retirement income or both.

No one who plans to live long can escape the necessity of at least preparing for health care costs during their golden years. Even if you never need anything besides prescription medication, it will take a serious bite out of your retirement income.

How to prepare?

Obviously, Medicare makes a big difference, and the addition of Medicare Part D a few years ago expands coverage of prescription drugs, just as the emergence of generics has reduced the cost somewhat. But planning for what could be decades of escalating healthcare costs can’t assume the best-case scenario. At the same time, it’s hard to do long-term planning when no one knows what the law is going to be. If the health care reform passed in 2010 takes full effect as scheduled in 2014, the overall health insurance pool will look quite a bit different, but Medicare is set to remain largely the same – although money has been diverted from Medicare to pay for expanded coverage. It’s hard to predict the effect of that.

If this year’s election results in the law’s repeal, it’s difficult to say what will come in its place. One plan would leave Medicare unchanged for those 55 and over but go to subsidized insurance premiums for many of those who will be eligible in future years.

How do you plan when you don’t know what’s going to happen? The best approach is to plan for what you do know. It’s reasonable to assume that a percentage of your retirement income will be eaten up by healthcare costs, including nursing home costs in later years. So as you budget for your living expenses during retirement, put aside a reasonable percentage to keep available for health care expenses. If you don’t need to spend all of it – great. Roll it over. But never stop putting aside that percentage, because you have no idea what will happen with your health as you age, so you can never assume that this year’s light health care spending will be followed by more of the same.

Planning for the worst case scenario is the best approach. Wherever the law goes, at best you stay prepared.

To get more information on planning for your retirement, contact Louis Paolillo by emailing him at Louis.Paolillo@cunamutual.com. First Financial’s Investment and Retirement Center wants to help you plan for a happy and prosperous retirement!

Representatives are registered, securities are sold, and investment advisory services offered through CUNA Brokerage Services, Inc. (CBSI), memberFINRA/SIPC , a registered broker/dealer and investment advisor, 2000 Heritage Way, Waverly, Iowa 50677, toll-free 800-369-2862. Nondeposit investment and insurance products are not federally insured, involve investment risk, may lose value and are not obligations of or guaranteed by the financial institution. CBSI is under contract with the financial institution, through the financial services program, to make securities available to members. CUNA Brokerage Services, Inc., is a registered broker/dealer in all fifty states of the United States of America. FR081220-218B

Social Security and Your Retirement Seminar Summary

350xIn August, First Financial’s Investment and Retirement Center held a consumer seminar titled Social Security and Your Retirement. The presentation was lead by Eric DiBraccio the Regional Sales Director at MEMBERS Insurance & Investments. For those of you who couldn’t attend the seminar, here is a recap of what was covered during the seminar. Regardless of when you plan to retire, Social Security will likely be an important part of the road ahead and we want to make sure you’re educated and prepared so you can enjoy your retirement years!

Just some facts about Social Security…

  • Established in 1935 during the Great Depression and designed to help alleviate the problems of poverty for senior citizens
  • Roughly 75% of all retirees are receiving reduced Social Security benefits
  • Only 66% of workers remember ever receiving or reviewing a Social Security statement
  • Only about 33% of employees visit with a financial professional for help understanding the role of their Social Security benefits
There are things you should know about Social Security and the various features and benefits that are offered to you and what it provides you with. It is important to read the statements below; you may even want to print these out and keep them in a safe place for the future!
  • Steady Income: Social Security provides you with a regular retirement income, delivers an amount you don’t have to guess at and offers you the comfort of a “retirement income check” to replace your “working paycheck”.
  • Income for Life: Social Security is one of the few sources of income you can’t outlive and the longer you live, the more money you receive from the Social Security system.
  • Spousal and Survivor Benefits: A spouse who didn’t work and earn any Social Security on his or her own can receive up to 50% of their working spouse’s benefit. After one spouse dies, the survivor can receive the greater of their spouse’s or their own benefit and dependent children may also be entitled to benefits.
In order to make your road to retirement as smooth as possible, follow these “10 Rules of the Road” to ensure an easy journey.
  1. Eligibility: You become eligible for Social Security benefits by working in a Social Security covered job for a minimum of 10 years. The typical threshold is that you must have 40 credits to be eligible (4 credits a year by earning a minimum dollar amount). Once those 40 credits are earned, you are insured under Social Security and your benefits are based on your earnings history not credits.
  2. Insurance Amount: The formula consists of your 35 highest years of earnings and fills in missing years with $0. Divided by 35 for an average then divided again by 12 for Average Indexed Monthly Earnings (AIME), then finally a 3-part formula is applied to your AIME to determine your Primary Insurance Amount (PIA).
  3. Full Retirement Age: If you were born in 1937 or prior to, your full retirement age is 65 as well as those born between 1938-1942. 1943-1959 you must be 66 and 1960 and later you must be 67.
  4. Start Date: Anyone can start receiving benefits as early as 62 but if you do start before your full retirement age, your benefit will be reduced and that reduction will continue for life and will not go up one you’ve reached your full retirement age.
  5. Spousal Benefits: Your spouse is entitled to receive up to 50% of your benefit and would still claim their own benefit if it was higher than their spousal benefit.
  6. Survivor Benefits: At death, a survivor can switch and receive the benefit for the spouse who has passed if it’s higher than their own. The survivor must be at least 60 for reduced benefits, but survivor benefits are not available for same-sex couples. The couple must be married for at least 9 months before benefits will be paid and ex-spouse benefits are also available if the marriage lasted for more than 10 years.
  7. Earnings Test: The maximum amount you can earn before benefits are withheld is called the earnings test and the amount is adjusted each year for inflation. Up until the year you reach full retirement, for every $2 you earn over the earnings test, Uncle Sam will withhold $1.
  8. Pension Income: If you receive a pension from a former employer, your Social Security benefits are not affected as long as you contributed to Social Security while at that job (including IRAs and 401(k) plans).
  9. Taxation: Your Social Security benefits may be taxable depending on how much other income you earn.
  10. Inflation Adjustments: Cost-of-living adjustments (COLAs) are announced each year in October for the following January. COLA is based on increase in the Consumer Price Index (CPI) from the third quarter of one year to the next and if there is a negative inflation (deflation), your Social Security benefit will not decrease.
For additional information about your social security and retirement, please visit the Investment and Retirement Center at First Financial’s Neptune Branch or give us a call at 866.750.0100 option 6. Stayed tuned for additional information about upcoming social security seminars.

Representative is not a tax advisor. For information regarding your specific tax situation, please consult a tax professional. 

Representatives are registered, securities are sold, and investment advisory services offered through CUNA Brokerage Services, Inc. (CBSI), memberFINRA/SIPC, a registered broker/dealer and investment advisor, 2000 Heritage Way, Waverly, Iowa 50677, toll-free 800-369-2862. Nondeposit investment and insurance products are not federally insured, involve investment risk, may lose value and are not obligations of or guaranteed by the financial institution. CBSI is under contract with the financial institution, through the financial services program, to make securities available to members.

FR081229-1352

In Case of the Unthinkable, are Your Assets Going to the Right Place?

Many people ask us what would happen to their accounts in the event of their deaths, and while no one wants to think about it, it’s a situation for which it only makes sense to be prepared.

And in truth, many people are not.

IRAs, annuities, life insurance policies and qualified retirement accounts are set up with specific beneficiaries named. Usually there is also a secondary beneficiary named, who would receive the asset in the event the primary beneficiary is deceased.

Usually, when people name their designated beneficiaries, they still have many more years to live. Sometimes situations change in their lives. For instance, if a woman names her husband as her primary beneficiary on an account, then gets divorced some time later, she may not know that her ex-husband is still entitled to those assets upon her death unless she changes her beneficiary designation.

Most people will remember to change their wills upon such an occurrence, but it’s not uncommon that they would overlook similar changes to financial accounts. In fact, many people would be surprised to know that beneficiary designations on financial accounts tend to override wills. That means if your will says your son gets your savings, but the account designates your ex-husband, your ex-husband likely has the legitimate legal claim to the money.

It’s a good idea to double-check with your financial institution and make sure your beneficiary designations are what you want them to be. It’s a fairly simple process, but no one can do it for you once you’ve passed away.

Have questions about setting up your beneficiaries or you’d like to set up a no-cost consultation with the Investment & Retirement Center located at First Financial Federal Credit Union? Contact us.

Representatives are registered, securities are sold, and investment advisory services offered through CUNA Brokerage Services, Inc. (CBSI), memberFINRA/SIPC , a registered broker/dealer and investment advisor, 2000 Heritage Way, Waverly, Iowa 50677, toll-free 800-369-2862. Nondepositinvestment and insurance products are not federally insured, involve investment risk, may lose value and are not obligations of or guaranteed by the financial institution. CBSI is under contract with the financial institution, through the financial services program, to make securities available to members. FR071205-11F9

Planning How Much You’ll Need for Retirement

If you are actively planning for your retirement – good going.  More people should. But as you plan, do you have a clear sense of how much money you’ll need to retire?  In this month’s Planning for Your Financial Future column, we’re urging you to think about how much you’ll need when the time comes for you to retire.

It’s been said that as a rule of thumb, you’ll need 70% of your end salary to live comfortably in retirement — that’s not necessarily true for everyone.  People often underestimate what they will need to sustain their lifestyle and handle both short and long term expenses – especially those related to medical care.

Life changing events such as marriage, having a family, planning for your retirement, potential healthcare costs, and the like, are bound to arise in your life – so you need to prepare for them as best as you can.

None of this is reason to panic.  It just means you need to plan wisely, especially if you are under the age of 50.  You may come from a family with good genes, where people routinely live well into their 80’s or even longer.  That’s great – but just understand what you’ll need in order to remain independent throughout those years.

To get more information on planning for your retirement, contact First Financial’s Investment and Retirement Center to set up a no-cost consultation at 866.750.0100 option 6 or visit our website for more information.

Retirement Ready Checklist

Representatives are registered, securities are sold, and investment advisory services offered through CUNA Brokerage Services, Inc. (CBSI), memberFINRA/SIPC , a registered broker/dealer and investment advisor, 2000 Heritage Way, Waverly, Iowa 50677, toll-free 800-369-2862. Nondeposit investment and insurance products are not federally insured, involve investment risk, may lose value and are not obligations of or guaranteed by the financial institution. CBSI is under contract with the financial institution, through the financial services program, to make securities available to members. CUNA Brokerage Services, Inc., is a registered broker/dealer in all fifty states of the United States of America. FR051231-175F

What Are You Going To Do With Your Tax Refund?

PLANNING FOR YOUR FINANCIAL FUTURE 

For many people, good financial news is coming around April 15, when they will discover that they have a tax refund on the way.  It might be the start of even more good news, as there are some signs that the economy is also turning around.

If you get a refund check from the IRS, great. And if it’s the start of better economic developments for you and your family, even better.

But with positive developments, comes the need to make good decisions. If your financial situation improves – whether on a one-time basis or more permanently – what are you going to do, not only with the money, but with the way you operate financially?

One thing to consider is that your tax refund is not a gift from the federal government. The money belongs to you – it always did – and the government essentially borrowed it from you for the better part of the year without paying you interest. You might want to consider adjusting your withholding so less will be taken out of your check. We understand that people love their tax refund checks, but you could have been earning interest on that money all year long. Assuming you saved it and didn’t spend it, you would end up with more money that way than waiting for a refund check.

But that save-not-spend part of the equation is important. When you start earning a little more money, it’s a good time to reassess how you budget, how you save and how you plan.

On the one hand, you want to pay off any high-interest debt as quickly as you can. On the other hand, you want to put something away for your future – especially retirement. And it’s a good idea to have some money in a rainy-day fund – with easy access to the cash – in case of something unforeseen.

The best idea is to develop a plan that incorporates all of these priorities. Develop a budget that takes into account all of your regular expenses, then allocates portions of what’s leftover for debt payments, savings and a rainy-day fund.

Having developed that plan, treat your tax refund like a paycheck and use the money accordingly. Then treat all your subsequent paychecks in the same way.

There’s plenty you can do. In addition to paying off debt and saving, if there is something you’ve been needing (not wanting) to buy, it’s wise to pay cash for it if you can, so you don’t add credit card debt. Beyond that, priorities might include:

  • Home improvements
  • Investing in a tax-sheltered account, like a 529 or Roth IRA, depending on your income and goals
  • Investing in a taxable account like a Brokerage Account
  • Giving to charity
  • And if you still have money left over, buying something you just simply want isn’t such a bad thing to do

Our experts located at First Financial, can walk you through the process. It’s worth remembering: The economy tends to go in cycles, and when you save and eliminate debt today, you put yourself in a stronger position for when times are tougher. Make a plan, stick to the plan, and watch as your situation continues to improve. Maybe that tax refund check will be the start of something pretty special. Give us a call at 866.750.0100 option 6 to set up a no-cost consultation or visit our website for more information!

Representatives are registered, securities are sold, and investment advisory services offered through CUNA Brokerage Services, Inc. (CBSI), member FINRA/SIPC , a registered broker/dealer and investment advisor, 2000 Heritage Way, Waverly, Iowa 50677, toll-free 800-369-2862. Nondeposit investment and insurance products are not federally insured, involve investment risk, may lose value and are not obligations of or guaranteed by the financial institution. CBSI is under contract with the financial institution, through the financial services program, to make securities available to members. FR031214-CF9C

Income Annuities for Retirement

PLANNING FOR YOUR FINANCIAL FUTURE

As options for retirement, you have both income and income annuities.

One job that annuities have is to make sure money is coming in during retirement. Many people have social security or a pension, but it can be a good idea to turn some of your savings into payment that will pay you for the rest of your life. This is known as an income annuity and provides lifetime income guaranteed by an insurance company.

There can be advantages to having an income annuity. If you just keep your income in a savings account and draw money out of it, there is a chance that you will outlive your savings and run out of money. An annuity can guarantee your income for life, regardless of how long you live.

How to go about setting up an annuity:
A great time to set up an annuity is before you retire so that you can give it a chance to grow. This is called a deferred annuity. One good rule of thumb can be to open one between five to ten years prior to your planned retirement.

How do I know if an annuity is right for me?
Some factors to consider when deciding if an annuity is right for you is the combination of your life expectancy, amount of savings and income amount.

Annuity Payments and Types:
There are various types of annuities and different payout options you can choose -

Income annuity with Life Payout - This gives you the highest cash flow/payout and a lifetime income. If you die prior to using all of your cash, payments stop and there is no refund.

Fixed annuity with fixed or refund payments - This annuity offers a fixed rate and no market exposure. If you die prior to using all of your cash, your beneficiary receives the rest.

Variable annuity - This annuity, like all annuities, is a long term investment and the accumulation is based on the performance of investment options.

Annuities are typically paid monthly and are lower for women than for men. Women have a longer life expectancy so the payout is longer and as a result, lower.

There are also options to get an annuity in which your income is guaranteed for your lifetime with a minimum number of payments. For example, if you get an annuity with a payment guarantee of ten years and you die within three years, your beneficiary would receive the rest of your guaranteed payments. There is also a lower payout for this annuity.

First Financial offers annuities and acts as a broker for many different companies. Have questions about investing or you’d like to set up a no-cost consultation with the Investment & Retirement Center located at First Financial Federal Credit Union? Contact them. You can also obtain more information on our website at FIRSTFFCU.COM, under the Investment & Retirement tab.

All guarantees are based on the claims-paying ability of the underwriting insurance company. Withdrawals before age 59 1/ 2 may be subject to a 10% federal tax penalty.

Representatives are registered, securities are sold, and investment advisory services offered through CUNA Brokerage Services, Inc. (CBSI), member FINRA/SIPC, a registered broker/dealer and investment advisor, 2000 Heritage Way, Waverly, Iowa 50677, toll-free (866) 512-6109. Non-deposit investment and insurance products are not federally insured, involve investment risk, may lose value and are not obligations of or guaranteed by the financial institution.  CBSI is under contract with the financial institution, through the financial services program, to make securities available to members. FR111123-F058.