Is Your Retirement Nest Egg in Danger of Flying the Coop?

(BLOOMFIELD, CT)- January 20, 2016- The good news is the average 65-year-old will enjoy 19 years or more of retirement. Unfortunately, that’s also the bad news. According to a February 2015 report from the Employee Benefit Research Institute, the prospect of “out-living” their retirement wealth is a very real risk for many Baby Boomers and Gen Xers. The main reason for this shortfall is failure to plan for the catastrophic cost of nursing home and home health care.

“With increased longevity, retirement planning needs to reflect the possibility of retirement lasting 2 or 3 decades or even longer,” said Attorney Henry Weatherby, Founding Principal of Weatherby & Associates, PC in Bloomfield, CT. “The only way to ensure you don’t run out of money is to create an estate plan in conjunction with a solid financial plan.”

For those of us who make it to 65, 70% of us will require long-term care before we pass. Long-term care expenses represent the single largest financial problem that retirees will face during their remaining lifetime. For nearly everyone, long-term care costs are prohibitively expensive. When your own savings and long-term care insurance run out you will need help paying for needed care.

That help comes in the form of Medicaid (Title XIX), the Connecticut Home Care Program for Elders, and the VA Aid and Attendance benefit. Be aware that Medicare only covers long-term care costs for rehabilitation purposes. Even those benefits are very limited (if you qualify at all) No longer than 100 days of nursing home level care is covered and that will require you to pay significant co-pays as soon as 20 days after an admission.

“The best time to act is more than five years before a Medicaid application is filed so that much of the family’s wealth can be fully protected,” said Weatherby. “Since few people know precisely when they will need the services of a nursing home, it is always better to start planning as early as possible. Generally, there are fewer planning options available once someone has to go into a nursing home immediately.”

Weatherby suggests having a plan that maximizes resources in the event of disability. Consider asset protection, long-term care pre-planning, and possibly long-term care insurance, by obtaining qualified, trustworthy advice from professionals in these fields.

To reduce the risk of running out of money in your golden years, Weatherby also suggests:

• Save as much as possible in tax-advantaged retirement accounts such as 401(k)s and IRAs, as well as taxable accounts for long-term investments. A married couple can contribute up to $36,000 in 401(k)s this year (up to $48,000 if they are 50 or older.)
 
• Evaluate a new product that qualifies as a Qualified Longevity Annuity Contract (“QLAC”). A QLAC may have a place in your plan because it allows you to invest the lesser of 25% of the funds you have in your IRA or other tax qualified retirement plan or $125,000. The advantage that it offers is that you do not have to start taking required minimum distribution from the QLAC until you are 85. But, if opt for this a part of your income longevity plan; make sure that it offers a guarantee of at least getting all of your money back. If you can qualify think about making long term care insurance part of your financial plan. You may want to consider investing in an annuity that qualifies under the Pension Protection Act to not only grow income tax differed but to also provide tax free long term care benefits. A life insurance policy that allows you to use the death benefit while you are alive to pay for home care, assisted living or nursing home care.
 
• When creating a financial plan, reduce the percentage that you plan to withdraw from your retirement savings each year from the typical 4% or 5% to 3.5% or even 3%.
 
• Pay off your house. It eliminates one of your biggest monthly bills and allows you to use your savings for other expenses besides housing. The equity in your home could also be tapped for extreme emergencies, via a second mortgage, home equity line of credit or a reverse mortgage.

“An estate plan can help you take reasonable and concrete steps to plan for a comfortable retirement regardless of how long you live,” said Weatherby.

For over 20 years, the attorneys at Weatherby & Associates, PC have helped Connecticut families set goals and turn them into reality, creating a better, more secure future through estate planning and asset protection strategies to probate, business succession planning and estate administration. Weatherby & Associates, PC takes a close look at the unique needs of every individual, family or business to develop a truly individualized strategy that is sure to achieve their objectives. Learn more at Weatherby-Associates.com.