Retirement Income

Based on current IRS life expectancy tables, the 2013 RMD from most retirement plans is based on the account owner’s age as of their 2013 birthday and account balance as of December 31, 2012.

These IRS tables change infrequently. The only retirement plans not covered by these tables are 401(k) plan participants who are still working, Roth IRA owners. These same tables cover retired Roth 401(k) owners but their withdrawals are almost always tax free.

A person cannot have > $2,000 in assets in their name and still qualify for Medicaid and Supplemental Security Income. For clients who have parents that may qualify for one of these programs, make sure direct gifts are very small. More specifically, rely as much as possible on certain trusts, on loans to parents, and on making payments directly to the medical or educational facility.

Depending on age and policy features, a long-term care policy costs $4,000 to $6,000 a year. Genworth Financial, the largest seller of long-term care policies in the U.S., stopped selling policies in California toward the end of March 2013.

A number of states offer tax breaks to seniors. For example, 27 states exempt Social Security from state income taxes (source: CCH). Other states exempt part of these payments. Still other states provide property tax breaks for seniors.

[1] Suppose your married client is aged 66 and his wife is 62; his income is much higher than hers, and the couple is trying to decide when to start taking Social Security benefits. If both start taking benefits now, she will receive permanently reduced benefits whether she relies on her work record or her husband’s.

According to a study by Pool, Sialm, and Stefanescu, trustees of 401(k) plans often show favoritism toward their own funds. For example, from 1998 to 2009, the study found nonaffiliated mutual fund trustees were 2.5 times more likely to remove a poor-performing mutual fund than if the trustee were affiliated with the fund family.

• 50% of U.S. workers age 45+ do not know what they need to retire
• 20% of employees plan on retiring later than they had planned
• 25% of people now age 65 will live to age 90
• 62% of married couples disagree on when to retire
• 67% of investors with $250k in investable assets are concerned about outliving their assets