Merry Christmas and Happy
Holidays to all my clients and friends. Thank you for a wonderful
year as well as all your support and referrals. We wish you and your
family a Very Happy and Healthy Holiday Season.
- A Sound Strategy For Income in Retirement
my 30+ years in the insurance business, nothing has surprised me as
much as what I see today.
Many retirees and those intending to retire soon are coming to my
office without a retirement income strategy. They’ve saved and
invested, and thought for sure they had their “plan.” But, as the
saying goes, “The best laid plans of mice and men often go awry.”
Not too long ago, if a retiree had $1 million in bank CDs, he or she
could find a 4 or 5 percent long-term rate; that plus Social
Security and other investments allowed them to live comfortably.
Today bank rates are near 1 percent, so the same $1 million in a
bank yields just $10,000 in income!
In response, some have shifted cash from banks and other investments
into the stock market hoping to solve their problem. Unfortunately
they find that the S&P’s average dividend is now just 1.97 percent,
according to The Wall Street Journal.
While the stock market has roared to new heights recently, between
January 2000 and January 2013, the S&P 500 only increased by a total
of 4.9 percent when adjusting for dividends and splits, according to
Yahoo! Finance. Otherwise there was virtually no gain for 13 years!
If you are interested in a strategy that includes the guarantee of a
“retirement paycheck” to last a lifetime, even if you live beyond
100, I suggest you consider an annuity or life contract that offers
these guarantees no matter what happens at the banks or in the stock
**Guaranteed Lifetime Income
**Guaranteed Optional Inflation Indexing
**Guaranteed Lump sum to Survivor
**Optional Tax Free Lifetime Income.
Every Working Woman Should Know About Social Security
you can recall the 1968 advertising slogan, "You’ve come a long way,
baby," you’re likely starting to think about your Social Security
benefits. With women accounting for nearly 50 percent of the U.S.
workforce, it’s important to understand the basic rules that will
affect the amount of your Social Security benefit when you become
From a retirement professional’s experience, here are the top five
things you need to know:
1. Nothing keeps you from receiving your own Social Security
If you’ve worked for at least 10 years, and earned a minimum of 40
work credits, you’re eligible for your own Social Security benefit
whether you’re single or married. For married women, this rule
applies whether or not your husband is receiving Social Security or
if he chooses to work beyond full retirement age.
However, if you’re also eligible for a pension from a job in which
you didn’t pay Social Security taxes (a civil service or teacher’s
pension, for example), your Social Security benefit may be reduced.
In the event you become disabled before full retirement age, you may
qualify for disability benefits if you paid Social Security taxes in
five of the preceding 10 years.
2. There is no marriage penalty or limit to benefits paid to a
A working woman is not limited to one-half of her husband’s Social
Security benefit. This rule only applies to women who have never
worked outside the home.
You and your husband will each receive your own Social Security
benefit. For example, if your monthly Social Security benefit is
$1,200, and your husband’s is $1,400, as a couple you will receive
$2,600 per month in total benefits.
3. If you’re due two benefits, you get the one that pays the
higher rate, not both.
Most working women are potentially eligible for two Social Security
benefits: your own and the spousal benefit on your husband’s record.
You’ll receive the higher benefit of the two but not both.
For example, a spousal benefit ranges from a third to one half of
your husband’s Social Security rate. But, if the your own benefit is
calculated at more than a third or one half your husband’s, you will
receive the higher amount. If your husband predeceases you, you can
then apply for the higher widow’s rate (see 5).
4. If you were married at least 10 years before divorcing, you’re
eligible for Social Security calculated on your ex-husband’s record.
If you’ve been divorced for 10 or more years, you’re eligible to
receive Social Security based on your ex-husband’s earnings if you
are unmarried at time you apply for benefits. Keep in mind, the
amount you receive on you ex-husband’s record does not reduce Social
Security benefits paid to him or to his current spouse.
In some divorce cases, women have signed divorce agreements
relinquishing their rights to their ex-husband’s Social Security
record. But if you were married at least 10 years before divorcing
him, this clause in a divorce decree is never enforced.
5. When your husband or ex-husband passes away, you’re probably
eligible for a widow’s benefit.
For married women, your survivor benefit amount is based on the
earnings of your husband. The more he paid into Social Security, the
higher your benefits will be. However, the monthly amount depends on
your age when he passes away. The rate ranges from 71% at age 60 to
100% at full retirement age. To bring your Social Security benefit
up to the higher “widow’s rate,” you’re first paid your own
retirement benefit then the difference is added to your benefit.
The same rule generally apples for divorced women who are not
married at the time of their ex-husband’s death. This means a
divorced woman collects her own Social Security while her ex-husband
is alive but she can apply for the higher widow’s rate when he
Top 5 Estate
Not protecting a child or other beneficiary's inheritance.
Many people don't realize that you can add asset protection to the
inheritance that you leave to your child or other beneficiary. The
way to do this is to have either a beneficiary-controlled trust that
springs from your revocable trust or a continuing trust that is
managed by a separate Trustee. There should be no beneficiary demand
rights in the trust. If you want a beneficiary-controlled trust in
which your child may act as Trustee at a stated age, he or she would
need to resign as Trustee if they were ever faced with a divorcing
spouse, bankruptcy, creditor issue or lawsuit. If you have an
Independent Trustee in place, instead of your child at a stated age,
there's no need for your Trustee to resign if one of these bad
2.) Not having an Expanded Durable Power of Attorney for
One mistake I often see when I review estate plans is that the
client only has a Statutory Form Power of Attorney. The Statutory
Form Power of Attorney is helpful when dealing with banks and
financial institutions in California because they are usually very
familiar with them and less likely to reject them. However, they are
not all inclusive in what they cover. We recommend that an Expanded
Durable Power of Attorney be a part of your plan in addition to your
Statutory Form Power of Attorney to cover many unknown situations to
help your family have more planning options if you were to ever
become incapacitated. The Expanded Durable Power of Attorney can be
drafted to cover such things as disclaimers, the funding of a
revocable or irrevocable trust, the creation of an irrevocable
trust, gifting powers, application for Medicaid and/or other
government benefits, dealing with online passwords and digital
assets, and much more. These are all just some of the examples of
powers that your family might need down the road if you ever lacked
3.) Underfunding or a lack
of trust funding.
One of the biggest mistakes we commonly see in estate plans is when
the trust either doesn't own all of the assets or doesn't own any of
the assets of the Grantor of the trust. Having a trust is a great
thing, but it only works if the assets are transferred into the
trust. If you died and the assets were not funded in proper trust
title, there's a likelihood that your estate would go through
probate. The reason probate is so bad in California is that it's
expensive, time-consuming, and it opens up your estate to public
view - including all of the names and addresses of your
beneficiaries as well as your executor. Not to mention that you went
to the trouble to put together a solid trust and now the thing will
not work because it has no gas (no assets).
4. Failure to plan for
larger retirement accounts.
In most circumstances, if you have a collective value of $200,000 to
$300,000 or more in retirement funds, you should be looking at how
you're going to pass those funds to your children in the most
tax-efficient and advantaged way as well as providing them
asset-protection. There are three main factors to consider. First,
the stretch out. Most beneficiaries do not realize that they can
stretch these accounts after they inherit them. This means that they
do not have to take the entire account in one lump sum distribution.
They can stretch the account out over their life expectancy which
typically amounts to the account growing in value 5-10 times what it
was when they initially inherited it. The second factor is asset
protection of the account from a child's future bankruptcy,
divorcing spouse, a creditor or lawsuit. And the third is better
control of the downstream beneficiaries. What that means is who
would inherit the account after your child passes. Retirement
Protector Trusts are a huge planning advantage in an estate planning
that most people are unaware of.
5. Not including a HIPAA
Authorization for Release of Medical Information in your estate
A HIPAA Authorization controls who can have access to information
that you are at the hospital or gain access to your medical records
in order to make the decisions about your health care if you're
unable to do so yourself.
Since we are not attorneys and do not practice law, please see your
personal attorney or contact us for a referral.
And as always we are available for any questions or concerns you may
have. So feel free to call or email us at 925-757-6018 or send me an
Juan Pablo Blanco, Gina Castaneda and the Rest of the
Smeed Financial Team
201 Sand Creek Rd. Ste. E
Brentwood, CA 94513