Helpful miscellaneous articles regarding our
retirement plan and planning. Like you,
I review my retirement nestegg and plan from time to time. Recently, I went though some continued
education for some credentials I maintain and it occurred to me that we all
could use a review about these issues.
So with your help, we will share and post articles and info that may be
helpful and of interest to many of you in this section.
Financial
Checkup for Retirees
This page reproduces all of the information from the workshop
handout for Financial Checkup for Retirees. Most importantly, it has clickable
links to all of the resources mentioned during the workshop.
Financial Checkup is a series of checklists, each on a different
financial topic. The goals of Financial Checkup are to help you:
Simplify your finances.
Plan for the future.
Protect yourself and your money from scams.
Organize important information so that it’s easily accessible for
you and your representatives.
Select and prioritize financial tasks to create your personal To
Do list.
How to Use the Checklists
The information is organized into 11 checklists that cover broad
tasks or strategies. This is not a prioritized list; you will decide which
items are important for you to do. Make this handout your plan of action by
marking each item on the list with one of the following:
X – Strike out items that are not relevant for you.
Checkmark – Check tasks you have already done and that are
still current.
* Star the ones you need to do now.
⇒
Forward things you need to do, but that aren’t a top priority.
If you’re married, please do these tasks together so that the
spouse who has been less involved in managing the couple’s finances becomes
more familiar.
1. Simplify your finances. Make money management easier for you
and your representatives.
Automate
Set up direct deposit for regular income payments.
Set up auto-debit for monthly bills.
Set up Required Minimum Distributions (RMDs) from retirement
accounts to be withdrawn and deposited automatically into your checking or
savings account.
Use Automatic Rebalancing in your retirement account, if
available.
Streamline
Reduce the number of accounts: checking and savings, credit cards,
and investment or brokerage accounts.
Fewer accounts will make it easier to maintain minimum balances
for bank accounts, detect suspicious transactions on credit cards, and take
RMDs.
Cautions:
For checking, savings, and CDs, avoid exceeding FDIC/NCUA
insurance limits at any individual bank. Learn more at https://www.fdic.gov/resources/deposit-insurance/ and https://www.mycreditunion.gov/share-insurance.
Cancelling credit cards can have a negative impact on your credit
score if your balance or monthly charges on the remaining card(s) exceeds 30%
of your credit limit. In that case, focus on paying down your debt and making
on-time payments.
Combine retirement accounts using only direct transfers.
Direct transfers go directly from Custodian #1 to Custodian
#2. You never have control of the money. This includes direct rollovers (from
employer plans) and trustee-to-trustee transfers (from IRAs). You may
receive a 1099, but the taxable amount will be $0 because it was rolled over.
Cautions
You must take your RMD before doing the rollover, unless the
transfer is between IRAs.
Indirect rollovers from an IRA, where you receive a check
made out to you or the money is deposited into your personal account, are
limited to one per 12-month period and must be completed in 90 days. Taxes will
be withheld, even though there may not be any taxable income. To avoid tax on
the withheld amount, you must re-deposit the full amount of the distribution –
replacing the withheld amount with money from some other source.
Choose investments that require little monitoring.
Target Date Funds
Index (passive) mutual funds
Reduce the number of different investments you own.
Example: Choose funds that cover broader categories, i.e. a Total
US Stock Index Fund instead of large, mid, and small cap US stock index funds.
2. Make a spending plan for right now. Make a 2nd one for “What
if?”
Base your plan on past spending patterns. Track your expenses for
1 to 3 months, or review checking and credit card statements from the past
month or two to re-create an estimate of expenses. Record and total the
expenses by category. For example, use Karen’s monthly expenses worksheet that
you can download at https://bit.ly/PastMonthExp .
Add non-monthly expenses (both planned and unplanned) such as
property taxes, vacation, medical procedures, car repair, gifts, memberships,
and home repair and maintenance.
Create a plan based on those past spending records. Use pen and
paper, an Excel template, or look for sample forms online. The US Dept. of
Labor’s Savings Fitness book has an interactive spending plan tool.
Go to http://bit.ly/Savings_Fitness_Worksheets.
Think about how your life – and your expenses – could change in
the future. Create a second spending plan for that “what if” scenario.
Examples:
Moving to an apartment, a different state, or into assisted living
or nursing care.
New expenses for help with housekeeping, meal prep, yard care, or
driving.
Divorce or marriage.
Death of spouse. Here are some ways your income and expenses might
change:
Some expenses, such as property taxes, cable/phone/internet, won’t
change. Others may decrease, but probably by less than half.
Your income tax rate may increase.
If both spouses were receiving Social Security, you will continue
to receive the larger of the two benefits. The smaller benefit will end.
If the deceased was receiving a pension or annuity payment,
whether you will receive a payment, and how much it will be, depends on the
choices made by the deceased when the payments began.
3. Estimate how long your savings and investments will last.
If your guaranteed monthly income from Social Security, pensions,
or annuities doesn’t cover your expenses, you will need to take money from your
savings and investments. How long will your savings last?
Add up the value of your savings and investments, including
retirement accounts.
Don’t count the value of your home or other personal property such
as your car or jewelry.
List these assets on a sheet of paper, on a spreadsheet app, or in
the Assets section of a Net Worth form. Examples of Net Worth forms:
Worksheet #3 from Savings Fitness (http://bit.ly/SavingsFitnessNewPDF to
print and fill out or http://bit.ly/Savings_Fitness_Worksheets for
interactive)
Microsoft templates http://office.microsoft.com/en-us/templates/
Estimate how much you can spend each year from those assets, or
how long your money will last.
Use an online calculator such as https://bit.ly/Fidelity_Calculator or
http://bit.ly/Vanguard_How_Long.
Use the 4% Rule or some variation of it: In year 1, withdraw 4% of
your investable assets. Increase the withdrawal amount each year to keep up
with inflation. Based on research by various financial experts, your money will
likely last 30 years. Assumptions: at least 60% is in stock mutual funds and
the rest in bonds. Read more at https://bit.ly/4PercentRuleKitces.
4. Reduce expenses if your monthly expenses exceed your income,
you’re at risk of running out of money during your lifetime, or you simply want
to be more cautious with your finances.
Track your expenses. For the first month, compare your actual
spending with your spending plan at the end of each week to identify
problem areas and start making changes right away.
Envelope budgeting is a very effective way of sticking to you
plan. https://bit.ly/WikiEnvelope
Try to reduce expenses in areas where your daily choices make a
big difference, such as groceries, entertainment, and clothing. For example,
let’s look at groceries. Try some of these ideas if you aren’t doing them
already:
Sign up for loyalty programs at the groceries where you frequently
shop. Download the app to your phone.
Read weekly ads. Plan your meals around items that are on sale.
Some sale prices require you to load that coupon in the store’s app, and enter
your phone number or loyalty number at checkout.
Make a list. Organize it to match the store layout. For example,
list produce first, then canned goods and packaged products, followed by fresh
meats, and then frozen foods and dairy.
Shop when you aren’t rushed and when the store isn’t crowded so
you can take the time to compare prices of different brands, sizes, or
alternate products.
Follow your list through the store; skip aisles where you don’t
need to shop.
Did you pick up any items that weren’t on your list? At checkout,
it’s OK to hand an item to the cashier and say you’ve changed your mind and no
longer want it.
Look for suggestions from reliable sources about how to reduce
other expenses. Try these to start: https://bit.ly/CRSaveMoney and https://bit.ly/SaveMoneyAARP.
5. Stretch your income by using government or community resources.
Some programs have income or asset limitations.
Government assistance programs help lower-income households of all
ages with certain expenses. Go to https://bit.ly/KCGovtPrograms for
links for help with food expenses (SNAP), gas or electric bills (LIHEAP),
Medicaid, and discounts on telephone services.
Free tax preparation is provided through two programs authorized
by the IRS:
VITA for people with income $55,000 or less, or disabled.
Tax Counseling for the Elderly which serves all taxpayers,
but especially those aged 60 and older. Find sites at https://irs.treasury.gov/freetaxprep/
Many Tax Counseling for the Elderly sites are operated by AARP’s
Tax Aide program. Beginning in late January, find a location at https://www.aarp.org/money/taxes/aarp_taxaide/ 1-888-AARPNOW
(1-888-227-7669)
Eldercare Locator is a service administered by the National
Association of Area Agencies on Aging (n4a). It can connect you with
help in your neighborhood.
Call 1 (800) 677-1116 or search using your zip code at https://eldercare.acl.gov/
Search results typically include your Area Agency on Aging, SHIP
(health insurance counseling), legal services, and a long-term care ombudsman.
You will need to inquire to determine your eligibility for these
individual services.
The Illinois Department on Aging website can also direct
you to local services. You may get a more complete list of services here than
from Eldercare Locator.
On the state map at https://bit.ly/ILAgingServices,
click on your county for a list of service providers and services. For many
services, it will instruct you to contact your AAA (Area Agency on Aging). That
contact information is listed higher up on the page. You can also call
800-256-8966.
Some services are income based, others – such as congregant meals
– are not.
BenefitsCheckUp, operated by the National Council on Aging, asks
you lots of personal questions to check your eligibility for various federal,
state, and private benefits and services. This may be a more efficient way to
find services for which you actually qualify. Go to https://www.benefitscheckup.org/
If you would rather not answer personal questions, you can browse
their Resource Library to read about programs and their eligibility
requirements at https://www.benefitscheckup.org/resources/
Calling 211 in many Illinois counties will connect you
with a non-profit agency providing confidential information & referral to
services such as help with health issues, housing & utilities, food,
crisis, emergencies and disasters. You may also be able to get information
about assistance with prescription costs, transportation, adult day care,
community meals, respite care, home health care, and homemaker services.
Senior Health Insurance Program (SHIP) is a free statewide health
insurance counseling service for Medicare beneficiaries and their caregivers.
Counselors can answer questions about Medicare and long-term care insurance,
help you file claims with Medicare and Medicare Supplement policies, and
analyze Medicare Supplement and long term care insurance policies. Go to https://www2.illinois.gov/aging/ship/ or
call (800) 252-8966. You can also check the county-by-county list to see which
agencies near you have a SHIP counselor. See https://ilaging.illinois.gov/content/dam/soi/en/web/aging/ship/documents/ship-site-list-by-county.pdf.
6. Plan for future housing and care needs.
If you own your home, assess its current condition and costs for
maintenance, repair, or remodeling.
What maintenance is needed now? In the next 3 years?
How old are appliances, furnace and air conditioner, roof, water
heater, etc.?
What would it cost to make your house marketable, such as
painting, new carpet, repairs, etc.?
Evaluate alternate housing solutions for the future.
Aging in place: What changes would make your home safer as you age
and allow you to stay in your home longer?
Install lever-style door handles, anti-scald faucets, bathroom
grab bars, and D-handles on cabinets and drawers instead of knobs.
Remodel to widen doorways, replace a tub with a walk-in shower, or
build a ramp at the entrance.
Remodel or add on to create 1st floor bathroom and bedroom.
Look into the cost of in-home care.
To learn more: National Association of Home Builders remodeling
checklist https://bit.ly/NASB-Aging and
United Disabilities Services https://bit.ly/AgingDesign.
Moving: Would moving to a smaller home, a less expensive area, or
to an apartment cost less? Be easier to manage?
Assisted living, nursing care facility, or CCRC (Continuing
Care Retirement Community)
Visit facilities to learn about their services, fees, and entry
requirements before you need them. Discuss your impressions and preferences
with your family.
Plan how you will pay for the costs of housing and care.
Do you have sufficient savings and investments to cover the costs?
In Illinois, the median annual cost of assisted living in 2021 was $53,850.
Nursing home care was $75,190 for a semi-private room and $85,866 for a private
room (https://bit.ly/GenWorth).
If you are staying in your own home, you could use your home
equity.
Home equity loan or line of credit based on income, credit
history, and amount of home equity.
Reverse mortgages allow you to borrow a portion of the value of
your home in a lump sum, monthly payments, or as a line of credit that you draw
on as needed. You do not need to repay any of the loan, or the interest, until
you move out of the house.
Links to more information: https://bit.ly/RevMortgageKC.
For an estimate of how much you might be able to borrow, use the
calculator at https://bit.ly/RevMortgageCalc.
Learn about long term care insurance. It can cover some or all of
the costs of your care, depending on the amount of coverage you choose, if you
need assistance with at least two activities of daily living, referred to as
ADLs.
Health problems can prevent you from qualifying for a policy, so
don’t wait to apply if you think you will eventually buy a policy.
Long term care policies have had a history of large price
increases, but that may be ending.
Compare policies using the tool from University of Illinois
Extension: https://bit.ly/LTCcompareUofIL.
Familiarize yourself with how Medicaid works in Illinois. Medicaid
is a needs-based program that pays for long term care for people with limited
income and assets. You must qualify based on income and assets. There are
protections against impoverishing the “community spouse.” See https://bit.ly/ILMedicaidRules.
Visit http://www.longtermcare.illinois.edu/ to
help you evaluate all funding options. Go to https://bit.ly/LTCcompareUofIL to
compare individual long term care policies.
7. Reduce the chance of identity theft and financial abuse.
Freeze or place fraud alerts on credit reports. Freezes must be
set up with each credit bureau. For a fraud alert, you need only notify one of
them.
https://www.equifax.com/personal/credit-report-services or
800-685-1111
https://www.experian.com/help or
888-EXPERIAN (888-397-3742)
https://www.transunion.com/credit-help or
888-909-8872
Check your credit reports at least once a year using the official
website and phone number below. Dispute any information that doesn’t belong to
you, including previous addresses, alternate names, and accounts you don’t
recognize.
877-322-8228
Opt out of preapproved credit card offers.
1-888-5-OPT-OUT (1-888-567-8688)
Give your banker, broker or investment adviser the name of a
trusted contact, whom they can reach out if they think someone might be
exploiting you financially.
Brokers are required to ask for this. Other financial
professionals may ask.
The Senior Safe Act allows bankers and other financial
professionals to report suspected senior financial exploitation or abuse.
Be suspicious of any unexpected message or call from someone
claiming to be from a government agency, Social Security, your bank, a delivery
service such as UPS, or one of your accounts such as Amazon, PayPal, or a
credit card. Fraudsters are moving more and more to text messages.
Never click a link or attachment in a suspicious message.
If you answer a robocall, simply hang up. Do not answer any
questions.
Do not try to opt out of future calls or messages by pressing a
number, replying to a text, or clicking “unsubscribe” on an email. That simply
tells the scammer that this is a live number or email.
Block or report the phone numbers used by robocallers and
suspicious texters.
If you divulged your login or other personal information,
immediately change your password on that account.
Contact the “real” company using a phone number, website, or email
address you know to be correct, such as from your most recent statement or on
the back of your credit or debit card.
File a report at https://reportfraud.ftc.gov/ and
take the actions they recommend, which will be based on the type of fraud you
encountered.
Prevent the identity of a deceased loved one from being stolen.
Follow the instructions from USA.gov. Go to http://bit.ly/AfterSomeoneDies to
reach the exact section of the lengthy webpage that contains this info.
8. Designate people who can act in your place when needed and
express your wishes about healthcare and end-of-life care.
Name Personal Representative(s) to whom medical care providers can
release your private medical information under HIPAA rules (Health Insurance
Portability and Accountability Act).
You must complete a form for each healthcare provider naming those
individuals as your personal representatives. There is no standard, universally-accepted
form; each provider will have their own. It might be called a Communication
Consent, Medical information Release, or HIPAA release form. You can view a
sample form at https://www.hipaajournal.com/hipaa-release-form/.
Execute a Power of Attorney for Healthcare.
Use the Statutory Short Form at https://bit.ly/IL-POA-Health-2021 or
have your attorney draft it for you.
This document requires one witness. It does not have to be
notarized.
This person can:
Make healthcare decisions if you are unable.
Obtain healthcare info from your doctors and other providers
Make decisions about organ donation, autopsy, and disposition of
the body.
The following documents communicate your wishes; they do not
designate someone to make decisions for you the way a Power of Attorney does.
A Living will:
Only applies if you are terminally ill.
Provides instructions about death-delaying procedures.
Requires 2 witnesses.
Do Not Resuscitate/Practitioner Orders for Life-Sustaining
Treatment (DNR/POLST)
Express your desires about life-sustaining treatment including
CPR.
Require signatures of you, your doctor, and 1 witness.
Learn more and get statutory forms at https://bit.ly/AdvanceDirectivesIL.
You can download a booklet that includes all these statutory forms along with a
helpful discussion about each one from the Illinois State Medical Society
at https://www.isms.org/resources/patients/personal-decision.
9. Designate people and provide instructions for managing your
finances both before and after your death with a will and/or trust(s), and a
Power of Attorney for Property.
Name an “Authorized signer” on your checking account if you don’t
have a joint owner.
Learn how this works by reading about convenience accounts or
agency accounts from the Consumer Financial Protection Bureau at http://bit.ly/AuthSigner
Usually preferable to adding a joint owner. An authorized signer
cannot legally use the money or asset for their own use.
Execute a Power of Attorney for Property to name who
will manage your affairs if you are unable to to do.
Use the Statutory Short Form at https://www.illinois.gov/services/service.poa-property.html or
have your attorney draft it for you.
This document must have at least one witness and must be
notarized.
Work with an attorney to draft a will. Pretty much everyone
needs one.
Your attorney can advise you whether a trust is helpful
in your situation.
Review your will and trust documents every 5 years or whenever
changes have occurred, including:
Family structure: marriages, divorces, deaths, births.
Financial situation: increase of assets from investment growth,
inheritance or settlement; decrease of assets from spending down in retirement;
sale of a business, family farm or home.
Laws governing estates. For example, a change in how much can be
left to a non-spouse heir without incurring estate tax.
Review titling and beneficiary designations on assets
and financial accounts to be sure there are no conflicts with your will or
trust.
For tools to help you find an attorney, see https://bit.ly/EstatePlanToolbox.
10. Review insurance coverages.
Considering adding or cancelling insurance policies, or changing
deductibles to match the risks you face at this stage of your life.
Insurance policies you may not have needed or wanted before:
Long term care insurance
Umbrella
Flood insurance
For people who choose regular Medicare:
Medicare Part D (prescription): Sign up when you are first
eligible (or ASAP) to avoid penalties that will last the rest of your life.
Medigap (Medicare supplement) – Open enrollment starts the month
you’re 65 and enrolled in Medicare Part B (Medical Insurance). Outside of open
enrollment, you may be denied or charged more.
Insurance policies you might not need – or qualify for – any
longer:
Disability
Life
Consider increasing deductibles if the cost savings seems worth
the potential higher out-of-pocket cost. Also check that the coverage is
sufficient.
Auto
Homeowners
Umbrella
Shop around. Consumer Reports buying guides for auto and
homeowners insurance are accessible without an online membership. However, a
login is required for to access ratings and recommendations; you may have
access through your library if it subscribes.
https://www.consumerreports.org/cro/car-insurance/buying-guide/
https://www.consumerreports.org/cro/homeowners-insurance/buying-guide/
11. List important information that you or your representative may
need. Tell your representative(s) where the list is located.
Your list could be relatively short, at least initially. You can
add categories of information as you see fit and as time allows. Looking at
sample forms or documents can give you ideas of what you want to include. Links
to some examples are provided in the last bullet point, but you can also create
your own paper document, or and electronic document that you can print and
revise easily. This list contains some of the most typical kinds of information
that people include.
Contact information for:
Professional services providers: healthcare providers, financial
planner, tax preparer, insurance agent, attorney, veterinarian, etc.
Other service providers: cleaning service, lawn service,
hairdresser or barber.
Persons you have designated as a representative or successor
representative: executor, agents for power of attorney for healthcare (health
proxy) and power of attorney for property, and authorized signer on checking
account.
Beneficiaries, including successor beneficiaries under your will,
trust, or POD/TOD/beneficiary designations on accounts or assets, as well as
anyone with whom you jointly own an asset.
Family, social and religious contacts: church/synagogue/mosque,
minister, social and fraternal organizations to which you belong, plus your
closest friends and relatives – including former spouses and step children.
Financial assets and accounts.
Include account number, website, phone number, and contact name as
well as how the account or asset is titled. For example, is the deed in your
name only, in the name of your trust, with another person as joint tenants with
right of survivorship, as a partnership, etc. Also list beneficiary, POD or TOD
designations.
Financial accounts, including bank and credit union accounts,
credit cards, mortgages, student loans, personal loans, investment accounts
such as mutual fund and brokerage accounts, employer retirement plans, and
IRAs, and utilities such as gas, electric, cell phone, television and internet.
Other titled assets such as real estate, automobiles, and boats.
Insurance policies: type of policy, carrier, policy number,
coverage, deductibles, contact information.
Income sources such as pension, Social Security, and annuities.
Important documents and their location. Include important
electronic documents and how to access them. Examples:
Originals and copies of wills and trusts.
Vital records: birth, marriage and death certificate, and divorce
papers.
Deeds to property, automobile titles.
Insurance policies and other contracts.
Review these documents to see if one of them will work well for
you, or to get ideas of what you want to include in your personal Important
Information
Estate Planning: Your Records and Information, University of
Kentucky Extension PDF document, includes most of the categories suggested
above. Print the file and fill out the forms. The publication was written for
people preparing to meet with their attorney, but you need the same information
for your master list. https://bit.ly/UKYRecords
Personal Information Organizer. The form appears to be published
by ARAG, a legal insurance company, but you can download it anonymously for
free from CIGNA at https://bit.ly/PersonalInfoOrganizer.
Print the pages out and fill out the forms.
Personal Estate Planning Course – RecordBook from AARP is a
fillable PDF document. You type your information onto the forms, save the form,
and edit as needed. Download to your computer from https://bit.ly/AARPEstate.
Put a reminder on your calendar each year, to review your
Important Information and keep it up to date.
Share this:
(As with any of these informative
articles, anyone who needs someone to talk to about
this very subject contact me
and I can direct you to a knowledgeable advisor).
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