John Lane Law

Rolling Stone Jagger Needs Estate Planning for Expected Arrival

“Careful financial planning is key to making this work.”

When Rolling Stone Mick Jagger isn't on stage later this year, he'll probably be at home changing diapers at age 72. Mick is awaiting the arrival of his eighth child. Although becoming a parent or having a child in older age is the exception and not the norm, experts in financial planning say it's becoming more common.

CNBC’s recent article, “Jagger’s changing diapers at 72. How to manage that,” notes that when people get remarried, they may—lo and behold—have more children.

Jagger isn’t alone in the senior rocker dad club because bandmate Stone Ronnie Wood, 68, and his wife just had twins in May, and Billy Joel at age 66 became a dad last year for the second time.

Becoming a parent later in life brings its own set of unique issues. Preparation is critical if you're going to juggle both day care and retirement.

The first issue to consider is guardianship, especially how you’d like your child to be raised if you pass away or become incapacitated. In this situation, the child's older sibling may be a good choice as guardian.

Next, as far as assets, you should think about creating a trust with certain provisions concerning how and when the money will be disbursed to the child, which can be important for those with multiple children. Parents should protect the minor child first.

To make a fair distribution of the assets and to keep the estate out of probate, consider a living trust, which can hold the assets to put the child through college. Then the estate can distribute assets to the adult children.

In addition, titling your property correctly is another important part of estate planning. Incorrect titling can mean assets falling outside of the trust, entering probate or being distributed in a manner not in accordance with the parent’s wishes.

Insurance raises some important considerations. With a child later in life and no work-based medical coverage, most retiree healthcare plans don’t cover minor children—and neither will Medicare. You’ll need to buy private coverage for your child. If you’re able to buy life insurance in your 60s or 70s, get a 20-year term policy that will protect your child through the age of majority in the event you pass away. If you are already claiming Social Security, your minor child may be able to get a payment of up to 50% of your benefit. The child must be single and under age 18, under 19 if he or she is still in high school, or 18 and over but disabled by a condition that started prior to age 22.

Parents can’t directly deposit their child's Social Security benefits into a 529 college savings plan, but it's common for them to spend the benefits on the child and invest a similar amount of money from their personal funds into a 529.

One piece of good news is that if you’re no longer working and are living off retirement savings, you’ll have a low employment income. If the majority of your savings is in exempted retirement accounts, you may be able to maximize financial aid.

Contact John M. Lane Law, PLLC to discover the Simplified Solution to your estate planning needs. Everyone has an estate, no matter how large or small, complex or simple.  For more information about how we can help you, visit our website at www.JohnLaneLaw.com.

Reference: CNBC (July 21, 2016) “Jagger’s changing diapers at 72. How to manage that”

Don't Postpone Your Retirement because of These Mistakes

"As older Americans approach retirement, many may be realizing their financial planning isn't what it should have been."

If we don't do a bang-up job with our financial planning, it could mean postponing retirement—or abandoning the idea altogether. That's what the CPA Practice Advisor says, and gives some examples of avoidable errors in the article, "3 Retirement Errors to Avoid."

Unfortunately, many folks don't spend a lot of time even thinking about retirement because they think it's a far-off time when money will have magically accumulated. That means no money to buy the condo in Cozumel, pay for the grandkids' education, or live a life of leisure. Someone in this situation might have to find a part-time job to make ends meet—and it's not out of the question that they could outlive their money. Don't end up without the money you need for retirement. Avoid these common mistakes.

1. Not understanding taxes. We know that most of the time our money is taxable right away, like earnings from employment or interest on savings. But with individual retirement accounts, the taxes can be deferred. There's also tax-free money, like municipal bonds, life insurance proceeds, and 529 education savings plans. You should try to move as much taxable money as you can to the tax-deferred or tax-free categories.
2. Acting without specialized advice. Don't think that one person can be an expert in all areas of planning. A financial advisor may handle your investment needs, but you should also work in concert with an eldercare and estate-planning attorney, especially if you are 60 or older.
3. Not appreciating the longevity risk. Modern medicine lets us live longer. But that can create a problem of outliving your money, and it also can mean increased odds of needing nursing home or other long-term care. These can be expensive. So ask yourself if you have enough money to deal with these expenses for your entire lifetime. The sooner you tackle the longevity risk, the more prepared you'll be to live a rich life.

You still have time to get this going even if you are nearing retirement—it is never too late to make a plan.  Contact John M. Lane Law, PLLC to discover the Simplified Solution to your estate planning needs. For more information about how we can help you, visit our website at www.JohnLaneLaw.com.

Reference: CPA Practice Advisor (March 22, 2016) "3 Retirement Errors to Avoid"

Make Math Work for You

"It's amazing how the power of math can boost wealth."

The way to make investment math work for you in most instances is to save more and spend less. Duh!

But a recent Forbes article, "The Most Potent 401(k) Booster," says that if you have the self-discipline and the ability to plan, you can shrink your debts and add to your emergency, college, or retirement funds.

Saving is essential. A recent Wells Fargo survey says that 71% of those over 40 who are consistent savers believe they will have enough for retirement. The more you save, the more confident you will become in your ability to live the life you want.

Start saving when you hit the workforce. But if you're in your 50s, you can start to save more aggressively. Contribute the maximum amount allowed to the 401(k) plan—$18,000 in pre-tax dollars in 2015 and make catch-up contributions to help make up some ground. You can also save an additional $6,000 if you're over 50 as a "catch-up" contribution and deduct these amounts from your federal income tax (unless they are made to a Roth IRA or Roth 401(k), which tax contributions but not withdrawals).

If you aren't saving on your own or through a 401(k), set up an automatic savings plan that contributes money to your 401(k) or IRA. Most employers have this. Then look at your savings rate—this number makes a big difference in how much you can save.

By increasing your contribution, you can boost your nest egg dramatically. For example, let's say you're 30 and you make $50,000 a year. If you receive an annual raise of 2%, and your employer matches half of your 3% contribution, after 35 years, you'd have just over $400,000 at 6% annual rate of return. That's with a starting balance of only $10,000.

But what if you double your contribution rate to 6% and all other factors remain the same? You'll have more than $730,000 with a modest rate of return and low starting balance.

This works only if you save more and take your employer's match. Why not? It's free money. If you set it up on an automatic plan, you'll save even more because when you get a raise, your contribution amount will also increase.

The math works all the time. 

Contact John M. Lane Law, PLLC to discover the Simplified Solution to your estate planning needs. Everyone has an estate, no matter how large or small, complex or simple.  For more information about how we can help you, visit our website at www.JohnLaneLaw.com.                                                                                                                   

Reference: Forbes (December 7, 2015) "The Most Potent 401(k) Booster"

Live Like a College Student and Retire a Millionaire?

Retiring as a millionaire might seem like a lofty goal for millennials, but if having financial security in your future is important, it is a good benchmark to work towards in your twenties and thirties. It also isn't impossible. With some thriftiness, smart planning and the benefit of time, having a million in retirement accounts is more than possible , even if you aren't earning a million a year. In a study in 2014, Fidelity Investments looked at the habits of 1,000 clients who had more than $1 million in their Fidelity-managed 401(k)s—and earned less than $150,000. With the advice of two other personal finance experts, here are nine ways to become a retirement millionaire.

Forbes' recent article "Nine Ways To Be A Millionaire In Retirement," says that the one thing all 401(k) millionaires have in common is that they save at a higher amount. So start early in your career path, whatever you're making.

While millennials often have a competing priority with paying student loan debt, it's still important to make sure some of your money is going into retirement.

Live like a college student. Even if you are making very little, you should "mind the gap" - that is, the gap between what you spend and what you earn. Make sure there is a gap and keep your expenses low. Try to live like a college student when you're earning your first salary. Maybe have Ramen noodles and hot dogs on at least some evenings.

Track and evaluate. If saving seems like a task that is impossible to fathom, just look where your money is going. Take a three-month period and track all of your spending. You can use a tool like Quickbooks, Quicken, Mint, or, just use a debit card for all expenditures during that time so that your finances are automatically tracked. Keep track of where you spend your money, with that data, categorize things.

Slowly bump up your contribution rate. By the age of 25, you should be contributing at least of 10-15% (including your employer match) to your 401(k) savings plan. In order to ramp up to that contribution amount, start small (such as 6% if possible), then increase that percentage every six months.

Match…no, but really. Contributing enough to your 401(k) to take advantage of your employer's full match is one of the most effective personal finance tactics.

Check your "vest." If you've been taking advantage of your employer's 401(k) match, take a look at your company's vesting schedule. All of the money you put into your retirement account is yours, but you have to be fully vested to keep all of your employer's contributions.

Talk to an expert. It always helps to talk to an expert. Estate planning attorneys are always ready to assist you.

The most important thing is to start saving early.

Contact John M. Lane Law, PLLC to discover the Simplified Solution to your estate planning needs. Everyone has an estate, no matter how large or small, complex or simple.  For more information about how we can help you, visit our website at www.JohnLaneLaw.com.

Reference: Forbes (October 9, 2015) "Nine Ways To Be A Millionaire In Retirement"