Here are some important tips to consider prior to entering retirement.

10 Last-Minute Retirement Tips

Visit investopedia.com to view the entire article

1. Prepare a Retirement Income Plan
The very first step that every soon-to-be retiree should do is to construct a written budget and balance sheet. In the budget, you’ll need to look into the future and determine your cash inflows (income) and cash outflows (expenses). Hopefully, your inflows exceed your outflows, or you’re already off to a bad start. 

Next, you should draw up a simple balance sheet listing your assets and debts to help determine your net worth. Since many retirees will need to live off a portion of their savings, it’s important to know your bottom line. You’ll also need to factor taxes into your retirement equation, which could be higher or lower depending on your situation in retirement.

2. Apply for Social Security
If you’re eligible to receive Social Security retirement benefits, you should contact the Social Security Administration (SSA) for an estimate of your entitlement approximately six months prior to your actual retirement date. Once you’ve obtained this quote, you can review the current benefits associated with the various retirement dates. When you’ve decided on a retirement age, you should file your SSA application three to four months prior to actually retiring. You can do this by calling SSA directly or using their online application.  

3. Set Up Healthcare
As you contemplate your retirement, you’ll need to consider your health insurance and how you plan on paying for it. If you retire early, do you have the option to still use employer-provided health insurance for you and your spouse or do you need to seek out private insurance? Even at the normal retirement age Medicare will help but you’ll still have to foot some of the bill. (Getting your own policy isn’t easy or cheap, but in some cases it’s well worth the effort.

4. Discuss Pension Options with Current Employer
If you’re still one of the “lucky ones” that qualified for a company pension plan, you’ll want to contact your administrator about six months prior to retirement for your payout options. One of your most difficult decisions will be whether to take a single or joint life payout, so you’ll need to think it through carefully. For most of us not receiving a pension, we’ll still need to think about 401(k) rollovers or other distribution options. If you have company stock options, you may want to consult a financial professional so you don’t end up paying a large, avoidable amount of taxes when cashing out. 

5. Consider Long-Term Care Insurance
One of the most frequently overlooked areas of life planning is long-term care insurance in the event that you or your spouse needs some form of specialized care or assistance. Consider policies that have coverage for help with daily activities, adult day care, assisted living services, visiting home nurses and nursing care. A policy that covers both spouses will afford you the best rates and eliminate the gamble of which spouse will need care first. Some companies now allow you to pay off the policy with a lump-sum payment, thus avoiding monthly or annual premiums.

6. Establish a Cash Emergency Fund
An emergency cash fund is there to get you through the hard times. It acts as a safety net in case something expensive or unplanned happens, such as medical expenses, market downturns or expensive home maintenance issues, just to name a few. During normal economic conditions, most retirees should have three to six months of emergency cash reserves available separate from their investment portfolio. If economic times are tough and you’re living off your savings then you should also consider adding 12 to 18 months of cash to your investment portfolio to allow bonds and stocks to recover during bad times. 

7. Update Estate Documents
Many people think that just because they have a small estate or low net worth that they do not need any estate planning. This couldn’t be further from the truth; retirement requires even more life planning solutions than during the working years. Some of the more common items to consider include power of attorney, healthcare surrogate, beneficiary updates (IRAs, annuities, 401(k) plan, etc.). If your net worth happens to be high, you may want to consider charitable trusts, generational trusts, or outright gifting techniques.

8. Get Organized
Why do we tend to have several different and sometimes identical accounts at several different banks, brokerage firms or even past employers? Retirement is a great time to take your finances by the horns and round up the paperwork posse. Consider consolidating all of those 401(k) plans into an individual IRA or possibly working with only one or two custodians.  

Make a written list of all of your savings and investment accounts, along with all of the insurance policies on both spouses. In many cases, one spouse writes the checks for all the bills around the house. It’s good to alternate which spouse pays the bills every once in a while to make sure that you both understand the family expenses, investments and insurance policies. In the event of one of your deaths, the other spouse will need to assume those responsibilities.

9. Avoid Large Purchases
As you prepare for retirement, you may have your sights on one or several big-ticket items such as a boat, new car or home. Consider making such large purchases and paying them off before you hit retirement, while you are still earning income. You may also want to pay off existing or new insurance policies, start on your estate plan earlier due to attorney costs and take care of other debts prior to retirement. 

10. Review Life Insurance Needs
Life events such as marriage, divorce, new babies, changing jobs and retirement change everything. These events are prime opportunities to review beneficiaries on life insurance policies, obtain more or less insurance and maybe even qualify for senior reduced rates (maybe not life insurance but auto perhaps). Maybe you lost your current life insurance coverage from your employer, your new estate plan requires additional insurance or you elected single pension payout and you’re concerned about spousal income at your death. Whatever the case may be, a review should definitely be considered.

The several months prior to retirement require lots of research, planning and time in order to make prudent and knowledgeable decisions. Several pre-retirees will want to get their CPA, financial planner and estate attorney in on the process in order to cover all of the different avenues. Doing so will ensure that nothing is missed and to confirm retirement is a sustainable reality. It’s one of the biggest decisions of your lifetime, so don’t take it lightly. Proper planning and wise decisions will make it an everlasting reward.

Paragon Wealth Management is a provider of managed portfolios for individuals and institutions.  Although the information included in this report has been obtained from sources Paragon believes to be reliable, we do not guarantee its accuracy.  All opinions and estimates included in this report constitute the judgment as of the dates indicated and are subject to change without notice.  This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.  Past performance is not a guarantee of future results.

If you are among the increasing number of people who continue to work into their retirement years, keep these tips in mind when planning for your financial future.

8 Financial Tips for Seniors Who Work

Visit USNews to view the complete article

The percentage of persons past the age of 65 who are still employed has risen because of the Great Recession. Even without a downturn, however, there has been a longer term trend of more people wanting to keep working. There is the money, to be sure. But many people stay on the job to retain professional relationships and a degree of social engagement they think will be hard to match in retirement. Much of our personal identity is related to our work; it can be tough to give up a big hunk of self worth along with the paycheck.

Whatever the reason for continuing to draw a paycheck at age 65, here are eight recommended actions that older employees should consider:

1. Watch Your Tax Bracket. The Bush tax cuts expire next year. Even if the Republicans regained control of the House and Senate, keeping the cuts would not be a slam dunk. There is just so much red ink everywhere. So, assume that marginal income tax rates will be rising. Check out the current IRS tax brackets and see where the income breaks are for tax-rate changes. Look at your taxable retirement income from Social Security, pensions and retirement accounts. Understand the impact of employment earnings on your tax bracket. Higher taxes may not drive your employment decisions. But it could make good sense to explore tax-deferred retirement accounts so you can avoid higher taxes and park your earnings until you can withdraw them when your taxable income has declined and you are paying lower rates.

2. Beware of Losing Social Security Dollars. Social Security rules calculate a full retirement age, which is 65 or 66 for most people. If you elect to begin receiving Social Security benefits before your full retirement age (you can start getting benefits when you turn 62), your benefits may be reduced if you also earn outside income.

3. Review Social Security Claiming Decision. If employment earnings reduce your need for Social Security benefits, deferring the date when you begin claiming those benefits may be a smart decision. You are entitled to 100 percent of your benefit when you reach full retirement age. However, for each year you delay, your benefit will rise by 8 percent a year. That’s a nice increase, and it’s adjusted for inflation as well. The longest you can delay and still get higher benefits is age 70, at which point your benefit will be 132 percent of what it was when you turned 66 (assuming this is your full retirement age). Outside income may also influence the way couples approach Social Security benefits. The Center for Retirement Research at Boston College has a useful Social Security Claiming Guide.

4. Seek Higher Investment Returns. Financial planners Carnathan and DeCarolis both say it may be appropriate for employees of retirement age to build a more growth-oriented investment portfolio if they are continuing to work and earn employment income. They are not subject to as much risk of a stock-market decline as a fixed-income retiree who has no other source of income and doesn’t have time to wait for depressed market holdings to recover. However, they stress that asset allocation decisions must reflect a person’s risk tolerance. Even “doing the right thing” won’t seem that way if it runs counter to your feelings. “You can’t make someone do something they don’t want to do,” DeCarolis says.

5. Keep Employer Healthcare Coverage. “Health care is the big reason my clients don’t retire before 65,” DeCarolis says. No wonder. Private health insurance for people in their late 50s and early 60s is very expensive, assuming you can find coverage at all. The health reform law will help here but its provisions don’t take full effect until 2014. In the meantime, keeping employer health insurance is an important consideration in the work or retire equation. Turning 65 and qualifying for Medicare hardly resolves this issue. Basic Medicare has big coverage gaps. So, if you can retain some form of health insurance along with a paycheck, consider yourself fortunate.

6. Play Catch Up With Retirement Accounts. Tax rules generally allow older employees to park an extra $1,000 in tax-deferred retirement accounts. This is on top of existing annual maximum contributions. Assuming you don’t need the current income, plow as much as you can in these tax-deferred accounts. You’ll be storing money you will need in retirement, and lowering current taxable income as well.

7. Keep Good Expense Records. Understanding exactly what you spend is great training for retirement and should be part of your retirement planning. Having such a record will make it easy for you to estimate your post-retirement spending needs and whether you will have enough retirement income to live comfortably. In addition, you might be able to deduct certain employment expenses on your taxes. With more and more people telecommuting, home office expenses can be considerable. Also, if you volunteer, there are deductible expenses that can reduce taxable income.

8. Watch Your Cash Flow. Carnathan says a solid cash flow analysis is a fundamental part of a client’s retirement thinking. He recommends doing scenarios with different time frames, looking out a year, three years, and five years. This helps clients better understand the merits of continuing to work. Equally important, it moves them into a life transition process. This process is really a more accurate description of retirement than a specific trigger date. “People tend to gravitate toward a specific scenario,” he says. “From there, we go on to figure out the best mix of assets” that will support their longer-term income needs.

Paragon Wealth Management is a provider of managed portfolios for individuals and institutions.  Although the information included in this report has been obtained from sources Paragon believes to be reliable, we do not guarantee its accuracy.  All opinions and estimates included in this report constitute the judgment as of the dates indicated and are subject to change without notice.  This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.  Past performance is not a guarantee of future results.

In addition to getting your finances organized, keep these 10 important tips in mind when preparing for the New Year.

10 year end financial planning tips you don’t want to miss

by Alan Haft

visit alanhaft.com to view the complete article

1.)  Take your required minimum distributions (RMDs).

If you’re not yet retired, this first thought likely won’t apply to you but who knows? With a little of this knowledge, you just might score some points with maybe your folks who just might be in retirement. Score some points and you just might score that new Nano you’ve been hoping for.

2.)  Spend the balance of your Flexible Spending Account (FSA).

If you participate in an FSA for either health or dependent care, check to see if the plan has implemented the new 2½ month extension provision, which allows 2010 FSA money to be used for expenditures through March 15, 2011. If the plan doesn’t have the extension, be sure to use up any balances before the end of the calendar year or they will be forfeited. One way to do so: stock up on over-the-counter medicines for next year.

3.)  Make last-minute charitable contributions.

Maximize itemized deductions by making donations in the form of cash, property, or appreciated stock. The latter could help you avoid capital gains taxes too.

4.)  Make an extra mortgage payment.

Making that one extra payment will, over time, cut the amount of interest you’re paying on your mortgage and actually reduce the number of years you’ll need to make payments before your house is free and clear. It will also help you maximize itemized deductions. Depending on whether or not you see paying your house off as a good thing, this thought could make a tremendous difference in your long-range plans.

5.)  Consider making deductible business purchases by the end of the year.

If you’re self-employed, and know you’ll need to buy deductible business-related items in the following year, you may want to buy them now to maximize your deductions in the current year (and take advantage of holiday sales).

6.)  Think about gifting.

At the time of this writing, you can gift up to a total of $13,000 per year (per person) to as many people as you want. That $13,000 may be given to one person, or distributed to any number of individuals. Your taxable income will be reduced by the amount that you gift.

7.)  Review and balance your capital gains and losses.

Make note of capital gains you’ve realized this year from the sale of stocks or mutual funds. Also find out if any of your mutual funds will be distributing capital gains. When you’ve added up your gains, check to see if there are any losses you can carry forward from previous years to offset these gains. If there aren’t, consider selling underperforming securities. Taxes should never be the sole reason you buy or sell investments, but it may be possible to improve your tax and your investment situations at the same time. Think of it as being a good time to “clean out the closet.” Especially with the likelihood that tax rates are going up next year, this could be my list’s most important idea to pay attention to.

8.)  Consider increasing your final 401(k) contribution.

If you haven’t already contributed the maximum of $16,500 (an additional $5,500 for those 50 and older) to your 401(k), consider increasing your contribution amount from your final paycheck. You have until December 31^st to make your final contribution for the year.

9.)  Open and fund a 529 plan college savings account.

Have kids? Have no idea how you’re going to get them through college? A 529 can help. For those that aren’t aware of it, a 529 plan account offers high maximum contribution limits and significant tax benefits. Money in the account can grow tax-free for years. And, withdrawals are tax-free if used for any number of expenses related to higher education. But some people are using them for estate planning as well, since the money you put into a 529 plan account is considered “a gift.” You’re allowed to contribute up to $55,000 - which is considered five years’ worth of gifting - at one time. The rule is based on a calendar year, so if you make a contribution in December, one of the five years (or $13,000) is applied to the current year. The balance of your gift will carry over and be credited in subsequent years ($13,000 per year).

10.)  Make Your IRA contributions.

You can make IRA contributions through April 17th, but why not consider doing it now so you don’t forget? For 2010 (year of this writing), the IRA contribution limit is $5,000, or and extra $1,000 if you reach age 50 before the end of the year.

One last very important point: I have known many people - especially business owners (sole proprietor, C Corporation, S Corporation, and others) - who amazingly have not set up programs such as Keoghs, SIMPLE IRAs, 401(k)s, etc. What a shame! The ability to “take income off the top” and place it into a qualified plan is a true misfortune. With enough time until the end of the year, it is still possible to set up a qualified plan. I cannot stress this enough: If you have no qualified plan for your business, you absolutely, positively need to make inquiries as to whether or not you can and which one is best for you. Speak to your accountant or a financial advisor. This could be the best thing you do for yourself before popping that cork!

Paragon Wealth Management is a provider of managed portfolios for individuals and institutions.  Although the information included in this report has been obtained from sources Paragon believes to be reliable, we do not guarantee its accuracy.  All opinions and estimates included in this report constitute the judgment as of the dates indicated and are subject to change without notice.  This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.  Past performance is not a guarantee of future results.

When it comes to your finances now is the time to start thinking about getting organized.  By following these simple steps you can be that much closer to organizing your finances and starting 2011 off right when it comes to managing your financial future.

Top 7 Organizing Tips to Get Your Finances in Order

By Stephanie L. H. Calahan. Visit Top7Business to view the entire article.

1. Use a Receipt Box -
   If you have not been good about saving all the receipts for tax deductions, put a smallish box, without a lid, where you unload your purse or briefcase and make the habit of doing nothing when you come home until you put the receipts in that box.
2. Bill Paying Made Simple -
   Do you have challenges keeping your bills and other tasks current? Try creating an expenditures file and keep an expandable system with pockets for 31 days and 12 months. When a bills arrive, open them and place in the pocket of the day to be paid. Eight days before the due date is usually enough time. Once paid, keep your expenditures in separate files for each creditor. Then it is easy to find the credit payment or any other bill when needed.
3. Paper Management — Tax Files -
   Divide your tax files into the categories you know you use of into the categories that your credit card company uses to summarize your expenses, such as travel (car rental, lodging, transportation); entertainment (restaurants, movies); merchandise (gasoline, automotive, household, retail stores); healthcare (medical, Rx); miscellaneous and education.
4. Designate 2 to 4 Days Per Month as Bill Paying Day -
   Ninety-nine percent of the time, you don’t have to drop everything you’re doing when you get a bill in the mail to pay it right away. Designate 2 to 4 days per month and do all of your bill paying on those days. For example, you could choose the 16th and 29th of each month. You may do the same, or perhaps you might want to pay any pending bills one day per week, such as every Friday.
5. Protect Your Personal Information -
   Have your checks imprinted with your name and address only. (Some businesses will not honor checks without addresses) There is no sense in providing individuals with any other information such as your telephone number and social security number, etc. (See our download section for more ways to protect your personal information.)
6. Create an Expenditure File -
   Do you have challenges keeping your bills and other tasks current? Try creating an expenditures file and keep an Everyday File by Globe-Weis. Their expandable system has pockets for 31 days and 12 months. When a bills arrive, open them and place in the pocket of the day to be paid. Eight days before the due date is usually enough time. Once paid, keep your expenditures in separate files for each creditor. Then it is easy to find the credit payment or any other bill when needed.
7. Keep Receipts Together -
   Keep an envelope in your purse or wallet to hold receipts needed for expense records or tax purposes. When you return to the office, put the receipts in pre-designated envelopes (business meals, fuel, rental expenses and so on), then keep all the envelopes in a larger expanding file or box.

Paragon Wealth Management is a provider of managed portfolios for individuals and institutions.  Although the information included in this report has been obtained from sources Paragon believes to be reliable, we do not guarantee its accuracy.  All opinions and estimates included in this report constitute the judgment as of the dates indicated and are subject to change without notice.  This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.  Past performance is not a guarantee of future results.