A Retirement Strategy

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Retirement Paychecks - A Sound Strategy For Income in Retirement


In 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 market.

**Guaranteed Principal
**Guaranteed Lifetime Income
**Guaranteed Optional Inflation Indexing
**Guaranteed Lump sum to Survivor
**Optional Tax Free Lifetime Income.


5 Things Every Working Woman Should Know About Social Security

If 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 eligible.
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 benefit.

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 married couple.

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 passes away.



Top 5 Estate Planning Mistakes

1.) 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 situations happens.

2.) Not having an Expanded Durable Power of Attorney for finances.

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 capacity.

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 plan.

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 email at jblanco@smeefinancial.com


Juan Pablo Blanco, Gina Castaneda and the Rest of the Smeed Financial Team
201 Sand Creek Rd. Ste. E
Brentwood, CA 94513




SMEED CPA, Inc | 201 Sand Creek Road, Suite F | Brentwood, CA 94513
The Next Frontier CPA Firm | www.SmeedCPA.com | info@smeedcpa.com
Phone: 925-634-2344 | Fax: 925-634-2346 | Cell: 925-207-6771