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Month: May 2019

Giving the Gift of Education

Giving the Gift of Education

It’s graduation season, and along with all the wonderful things a college degree comes with are also student loan debts. If you’re attending high school or college graduations, no one may be talking about it, but the graduates and their parents likely have the high cost of college on their minds. You might be writing a check or slipping a $20 into the graduate’s card if they are someone close to you, but what about your own family? You likely experienced or are experiencing the burden of paying for your child’s tuition and might be wondering how high tuition will rise by the time your grandchildren are 18. Considering the high cost of college tuition, giving the gift of education to your grandchildren could be the most generous thing you ever do.

College tuitions have been rising at a rate higher than that of inflation. There are 44 million student loan borrowers in the U.S. with a total of $1.5 trillion in debt. There’s not much you can do about this, but you can help to save for your grandchildren’s education – even if they don’t exist yet – using a 529 plan.

Once you contribute to a 529 plan, the funds can grow and be withdrawn tax-free for educational costs. Some states will give you a tax credit for putting money into a 529, and most states offer a tax deduction if you contribute to a 529 provided by that state. If your grandchild isn’t born yet, you can name your son or daughter as the account beneficiary. Then, if grandchildren come along later, you can name him or her the beneficiary instead. If you pass away, your adult child can take over the account and name their child as the beneficiary. If they do not end up having children, they or you can give the funds to any relative.

Contributing to a 529 plan can be a good way to pass on your values, as well as wealth. If you want to emphasize the importance of education and saving to your children and grandchildren, giving the gift of education with a 529 plan could be part of estate planning for your loved ones.

Here at Peak Financial Freedom Group, we understand the importance of planning for the future. We can help you create a comprehensive retirement plan that includes an estate and legacy plan. Click here to schedule your complimentary financial review today.

Life in 2050

Life in 2050

2050 seems like a long time away, but 2019 seemed far away in 1989. Back then, did you think a cell phone would fit into your pocket? Or that you could shout at Alexa to order you more paper towels without getting off the couch? Technology has transformed the way that we live over the last 30 years, and there’s no telling how it will change life by 2050. Here are some predictions for what your retirement in 2050 could look like.

By 2050 there will likely be 9 billion people on earth, and the majority will live in cities. Our cities may not look like a science-fiction fantasy, but virtual and augmented reality will transform the way we get information and interact with our surroundings. The augmented reality market is expected to reach $55 billion by 2021 and there is increasing demand for augmented reality in healthcare, construction, retail, and e-commerce. For example, augmented reality will help engineers and architects see what a building project would look like before it’s built and make alterations to the plans ahead of time. This will mean our cities can be built faster and better.

The population will have a higher average age due to increased lifespans. Scientists predict that on average, women will live to be 89 to 94 and men will live to be 83 to 86 by 2050. Expert foodies are hopeful that there will be less factory farms and more small and regional producers. If this is the case, it will be easier for people to eat fresh, local food instead of processed food. This could not only contribute to your happiness, but your health as well. A longer life is a gift, but one you must plan for: Think about if your nest egg will support you in the year 2050 and beyond. An evolving retirement plan could be necessary if your retirement is going to last 30 plus years.

The healthcare industry may also focus more on individual health in relation to happiness, and general wellness. There are already breakthroughs in the fields of gene therapy and personalized medicine. Medical advancements come at a cost, and there is already a rising cost of healthcare in retirement that you should plan for. A solid retirement plan anticipates the costs that Medicare care will not necessarily cover.

There are many reasons to look forward to the future, and also reasons to worry. There’s no telling how retirement could be different in 2030, let alone 2050. If you’re concerned about outliving your nest egg or market volatility, contact the professionals at Peak Financial Freedom Group. We can help you create a retirement plan that makes you look forward to your future. Click here to schedule you no cost, no obligation financial review today.

Check Your Blind Spots When Planning for Retirement

Check Your Blind Spots When Planning for Retirement

It’s not enough to save for retirement, you have to plan for it. And planning for retirement is more than deciding where to go on a trip or when to start collecting Social Security – it’s anticipating your healthcare needs as you age, including your long-term care needs. These are often distinct from medical costs, and include help with daily activities like bathing, housekeeping, and mobility. Since most long-term care costs are not covered by Medicare, they can end up in our blind spots when we’re planning for retirement.

Many Americans don’t consider the fact that they will likely require some form long-term care during their lifetime. In fact, 70% of people aged 65 today will, according to the government. This means that even if you don’t end up needing long-term care, your spouse probably will. And according to a Bipartisan Policy Center report, a 65 year old today can expect to spend $138,000 on long-term care costs over their lifetime. Even if you’ve taken the rising cost of healthcare in retirement into account, you may not have considered that the average cost for a year in an assisted living facility is $45,000 and a year in a nursing home is $97,000.

There are a few different ways to pay for long-term care such as Medicare and Medicaid, traditional long-term care insurance, and using your personal savings. There are a few long-term care myths, and one is that all costs are covered by Medicare. Medicare only provides limited benefits for long-term care, and does not cover extended stays in nursing homes or non-skilled living assistance. Medicaid benefits are typically only available after you’ve depleted your savings.

Long-term care insurance is becoming more expensive, but if you already have a long-term care policy, it is typically less expensive to keep it rather than buy a new one. The older you get, the more expensive a policy tends to be. If you don’t have a policy and plan on using your savings, keep in mind that withdrawing large amounts from your traditional retirement accounts may have a significant impact on your taxes.

It’s likely that relatives will be involved with long-term care, whether by contributing money, time, or making decisions on behalf of the person needing long-term care. That’s why it’s important to start planning now with your relatives and a financial planner to avoid placing too large of a burden on your family members when it comes to daily activities like bathing, housekeeping, and mobility.

At Peak Financial Freedom Group, we can help you take long-term care costs into account when creating a retirement plan. There may be many retirement costs in your blind spot, and long-term care is a significant one. Don’t wait until you need long-term care to figure out how to pay for it, click here to schedule your no cost, no obligation financial review today.

Why You Should be Worried About Inflation

Why You Should be Worried About Inflation

You may have heard that we’re on the brink of war – a trade war that is, with China. Trump’s proposed tariffs on imported Chinese goods and services has already affected the market, and could affect inflation. If tariffs are imposed on $300 billion worth of Chinese goods, the core inflation rate would rise noticeably above 2% next year, according to Goldman Sachs Group.

If you think that diligently saving for retirement means you are all set for a long, prosperous 30 plus years, think again: Inflation hasn’t been high recently, but it still poses a major threat to your retirement. Even if the inflation rate were to stay around 2% like it has been for the past few years, it will still erode the value of your nest egg over time: If you retire at 65 and prices increase by 2% a year, $75,000 will have the same buying power as $50,000 when you are 85.

There’s no telling what the inflation rate could be 15 years from now when you’re already retired – in the 1970’s prices increased at an annual pace of more than 7%. To complicate things further for retirees, the price of some services increases faster than others, such as health care, which is the third largest expense for Americans 65 and older. So, what can you do to protect your retirement from inflation?

You can start saving more for retirement while reducing your taxes by increasing your savings rate as you get closer to retirement. Once you turn 50, you can contribute an additional $1,000 to your IRA for a total of $7,000 a year, and an additional $6,000 to a 401(k) for a total of $25,000 a year for 2019. A bigger nest egg can help to protect your savings from inflation.

Investing always involves some risk, but a diversified portfolio with stocks and bonds tends to outpace inflation over time. More aggressive investing could also outpace the inflation rate. But, as you get closer to retirement you’ll want steady income you can rely on. While Social Security payments rise with inflation, they may not keep pace with it exactly, and there are several reasons why you can’t rely solely on Social Security in retirement.

If you’re concerned about the threat inflation can pose to your retirement and how the trade war could raise the inflation rate, contact the professionals at Peak Financial Freedom Group. We can help you create a comprehensive retirement plan that helps to protect your nest egg against inflation. Click here to schedule your complimentary financial review today.

When Retirement Isn’t Your Choice

When Retirement Isn’t Your Choice

If you’re nearing retirement age and know you’re not financially prepared for retirement, your solution may be to work longer. While forgoing an early retirement can be prudent, your career might not last as long as you’d like it to. According to the Center for Retirement Research, 37% of retirees had to stop working sooner than they anticipated. And, the longer they planned to work, the less likely they were to reach their goals. The truth is that retirement isn’t always voluntary. There are many reasons why Americans end up retiring earlier than they planned, such as job loss, health issues, and unexpected caregiving responsibilities.

According to the Employee Benefit Research Institute, almost a third of American workers predict that they will work until age 70 or older, but only 7% of people surveyed actually ended up working until age 70. This can be an issue because older workers tend to have a harder time getting hired, and when they do, they often have to work for a lower salary. Spending what would normally be your highest earning years unemployed can be especially detrimental to your retirement plan, especially if you’ve waited to prepare for retirement until your 50’s.

Your mind might be ready to work into your 70’s, but your body might not be. Workers are sometimes forced to retirement earlier than they planned because of health issues. No matter how healthy you are now, anything could happen in the next few years. And, your job may be taking a toll on your health if it is physically demanding, or requires you to sit for long periods of time or lose sleep.

Even if your health remains perfect as you age, you might have a family member who requires your care. Caring for aging parents, a spouse, or grandchild can make you need to catch a retirement curveball if they require enough of your time and attention that you leave your job. Unfortunately, caring for your loved ones can be a time consuming but unpaid job that might disrupt your retirement plans.

If you get hit with a retirement curveball, a financial advisor can asses your situation and help you create a plan. Don’t assume you’ll be able to work for as long as you want – unexpected job loss, health issues, and unexpected caregiving responsibilities happen all too often. To prepare for the unexpected, contact the professionals at Peak Financial Freedom Group. We can help you create a comprehensive retirement plan that may help you if you have to stop working earlier than you expected to. Click here to schedule your no cost, no obligation financial review to learn how prepared for retirement you are now and how you can protect yourself from the unexpected.

Finding Happiness in Retirement

Finding Happiness in Retirement

There’s no doubt that our culture is obsessed with youth and often overlooks the benefits of aging. You may not have looked forward to getting older when you were younger, but now that you’re nearing retirement you may have gained a different perspective. The fact is, older Americans tend to be happier, according to a Gallup-Healthways poll that measured various aspects of well-being like sense of purpose, social relationships, financial well-being, community involvement, and physical health. There could be many reasons for these findings, from financial stability, to an active social life. However you plan on finding happiness in retirement, remember that aging is associated with an increased sense of well-being from a financial and emotional standpoint.

Older Americans were reportedly more satisfied with their standard of living and financial stability, and experienced less stress and worry related to these things. At a certain point in life, you learn that money doesn’t buy happiness, but it can make life easier and make you feel confident about your future well-being. When you begin planning for retirement, you may be surprised by how much wealth you’ve accumulated over the course of your career. It can be nice to know that you’ve worked hard to earn your nest egg, and can enjoy yourself in retirement without worrying about your financial stability.

Many say that people gain wisdom as they age. Part of being wise is understanding what makes you happy and orienting your life around those things. Older Americans were reportedly not only financially better off, but emotionally better off than those under 30. This was measured by asking people what they felt the day before: Smiling/laughing, learning/doing something interesting, being treated with respect, enjoyment, and happiness, or, sadness, anger and stress. Americans aged 60 to 99 were the age group most likely to be emotionally well off. The great thing about retirement is that you have the time to pursue activities you find interesting and enjoyable, be it spending time with your grandchildren, traveling, or volunteering.

After some people retire, they may feel a loss of purpose when they no longer have regular career-related goals to accomplish. Becoming involved in their community could be a solution if you want to enhance your happiness in retirement.  Community involvement may play an important role, as another study shows that Americans who receive recognition from their communities have a higher well-being. Volunteering and community involvement are important parts of retirement for some people who are interested in aging in place and want to use their free time to help others and improve the place they’ve called home for many years. And, Americans who have received recognition for their work are less likely to experience worry and stress.

Here at Peak Financial Freedom Group, we know how important your retirement is. After a successful career, retirement can be a time to slow down, enjoy what you’ve earned, and focus on your family, friends, and community. We can help you plan for a long retirement with a comprehensive plan that takes your unique goals into account. Click here to schedule your no cost, no obligation financial review today.

How the Rules of Homeownership Have Changed

How the Rules of Homeownership Have Changed

Are you thinking about downsizing in retirement? Maybe you plan to make your vacation home your primary residence once there’s no office to commute to everyday. Or, maybe you’re considering buying a property to rent out to generate income in retirement. Either way, if you’re thinking about buying a house you should probably take some time to learn how it will impact your tax situation. It may have been a while since you bought a home, and the rules of homeownership have changed in the past few years thanks to tax reform.

If you itemize your taxes, then you have the opportunity to deduct your mortgage interest. This is a way to help make homeownership more affordable. Around 21% of taxpayers claim this deduction, saving them an average of $1,950 in 2016. But the following year, tax reform almost doubled the standard deduction to $12,000 for single filers and $24,000 for married couples filing jointly, thus reducing the number of people who chose to itemize. If you used to itemize but now take the standard deduction, keep in mind that you can no longer deduct your mortgage interest on your current home, or any new home you might buy.

As an experienced home owner, you likely know that property taxes are a cost to consider and plan for. Tax reform capped the state and local tax deduction at $10,000. This now means you can deduct up to $10,000 in total, not per property. Therefore, this could make owning multiple homes more costly, especially in states and cities with high taxes. Also, you can no longer deduct mortgage interest on second homes bought after the new law took effect, which is one thing to consider if you are thinking about buying a second home.

You may not be able to deduct all of your mortgage because the mortgage interest deduction is now capped at $750,000 instead of $1 million for new mortgages. Home equity loans are also no longer deductible, so be sure to review and plan carefully before committing to such an illiquid asset.

These homeownership rule changes could also impact your ability to sell your home, especially if it is worth over $750,000 or comes with high property taxes. This could ultimately change your decision to downsize in retirement, invest in a rental property, or buy a vacation home.

Buying a second home and moving in retirement are big decisions. If you need help navigating the new tax code when deciding how second homeownership will affect your overall retirement plan, contact the professionals at Peak Financial Freedom Group. We can help you create a comprehensive retirement plan that helps to minimize your tax burden, so click here to schedule your no cost, no obligation financial review.

3 Things to Keep in Mind When Estate Planning

3 Things to Keep in Mind When Estate Planning

Estate planning is an important part of retirement planning for many reasons: You’ve worked hard for your money and want to see your children and grandchildren benefit. And, you want to see it passed down in the most efficient way possible. Unfortunately, costly mistakes are all too easy to make, from forgetting to name a beneficiary to not updating your estate plan over time. Since your estate and legacy plan is a part of your overall retirement strategy, it is important to discuss how you plan to transfer your wealth before you pass with your trusted financial professional. So, try and keep these three helpful things in mind when estate planning.

Many people may not know that their will does not control who inherits all of their assets, such as retirement accounts, life insurance, and annuities. In order to pass these on, you must name a beneficiary for each retirement account, insurance policy, and annuity. If you don’t, these assets will likely be paid to your probate estate, possibly triggering income tax. Believe it or not, some people incorrectly name beneficiaries; don’t forget to distinguish family members of the same name with signifiers like Sr. and Jr., and update last names in the cases of marriage and divorce.

Estate planning becomes more complicated when it comes to how to pass on a retirement account to minors or individuals with special needs. Children cannot claim assets without a court-appointed conservator to manage the asset until they turn 18. Individuals with special needs could benefit more from a trust rather than directly inheriting assets because if they receive too many assets they could no longer qualify for government benefits. You should also consider how inheritance could affect your beneficiary’s tax burden, and consult a professional for a tax efficient strategy.

It’s important to review your estate plan regularly, and update it when there are major life changes like the birth of a new beneficiary, marriage, divorce, or when beneficiaries become eligible to receive money. How you distribute assets may change over time, as could your own financial situation. All of this is part of your financial and overall retirement plan, thus making it crucial for you, your family, and your trusted financial professional to discuss.

Here at Peak Financial Freedom Group, we understand the importance of properly passing on your hard-earned money to your loved ones the way you want when you pass. We want to help you create a comprehensive retirement plan that takes this into account by making sure your assets are passed on in the most efficient way possible. Don’t wait to start planning for the inevitable. You may need to create an estate and legacy plan from scratch or simply update your existing one, so click HERE to schedule your complimentary financial review today.

A Change to Social Security

A Change to Social Security

Social Security may be in jeopardy: The latest projection from the trustees of Social Security and Medicare shows that the program won’t be able to pay out full benefits by 2035 if Congress makes no changes. The program is already running low on funds, and there have been budget cuts over the past few years.

This is just one reason why you can’t rely solely on Social Security in retirement. Most recently, the Social Security Administration has slowly stopped mailing out most Americans’ Social Security benefit statement and encouraging people to access their statements online. From 2012 to 2018 the number of people who reviewed their online statement dropped from 96% to 43%.

The research shows that when these statements are only available online and are not mailed to recipients, they are less likely to make the optimal decisions when claiming their benefits. So if you’re under 60, be aware that the only Americans who will still receive paper benefit statements are those 60 and over who have not claimed their benefits and did not set up an online account. Most important, if you are nearing the age at which you’ll claim benefits you should create an online account and check your statements regularly.

Research shows that when people review their Social Security benefit statements they are less likely to claim at a younger age, as if you claim before your full retirement age your benefit will be reduced. Working longer and waiting to claim at, or past, your full retirement age could be a strategy to get the most out of your Social Security benefit. If you wait until age 70 to claim your benefit, it could be up to 132% of your benefit if you had claimed it at your full retirement age. However, there are many factors to consider when deciding when to start collecting.

To make an online account, either look for a letter with an activation code or go onto the Social Security administration’s website and use a valid email address to create an account with your Social Security number and address.

Even if Social Security is not in jeopardy, it’s important to have a comprehensive retirement plan in place. The professionals at Peak Financial Freedom Group can assess your finances and help to create such a plan for you. Take the first step by clicking here to schedule your no cost, no obligation financial review today.

Peak Financial Freedom Group
2520 Douglas Boulevard, Suite 110
Roseville, CA 95661

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