Retirement Planning

5 Considerations If You Plan to Move to A Continuing Care Retirement Community

by

You may be asking yourself “What is a Continuing Care Retirement Community?” A Continuing Care Retirement Community (CCRC) is a community that consists of graduated levels of residential and health care options to accommodate elders who are looking to downsize but remain independent and ensure that their health care needs are met as they “age in place” in a familiar setting. Generally, a couple or single person’s financial and health eligibility are rigorously reviewed by the CCRC and a signed agreement outlining the terms of residency, services, fees, transfers between types of residency units, and other matters (Agreement), along with a large Entrance Fee deposit (similar to a security deposit from renters), are required to join a CCRC. Here are five things to consider if you are contemplating moving to a CCRC.

  1. How are CCRCs Regulated?

There are currently about 30 CCRCs throughout the Commonwealth of Massachusetts. Under Massachusetts’ consumer protection law (G.L.c. 93, §76), CCRCs are required to disclose specific information regarding the terms of residency and services prior to or at the time the Agreement is signed or a deposit is paid, and to provide the same to the Executive Office of Elder Affairs (EOEA), which had made several CCRCs’  Agreements and other information available here. If a CCRC knowingly and willfully fails to disclose this information, the resident may recover damages, costs and attorneys’ fees, and in certain cases, a refund of the Entrance Fee, sometimes less certain costs outlined in the Agreement. However, in Massachusetts there is no state agency that has authority to oversee and enforce the CCRCs’ adherence to the statute.

  1. I Meet the CCRC’s Financial Requirements – Does It Meet Mine?

Typically, a large Entrance Fee deposit is required to buy in to a CCRC, and each CCRC treats the manner by which the Entrance Fee may be utilized during your lifetime and the process by which it is refunded differently.  For instance, some Agreements state that the Entrance Fee may be used by the CCRC to pay your monthly expenses if your other methods of payment have been exhausted. Other Agreements state that you, or your family if you are deceased, will not receive a refund until a new resident buys in to the CCRC, unless you are willing to receive a greatly reduced refund. Yet other Agreements may link the Entrance Fee refund to your period of residency, which means the refund may be significantly less than the deposit you paid if you reside there for several years. Carefully consider the Entrance Fee refund provisions and decide if they are acceptable to you and your family when reviewing an Agreement.

Also pay attention to the financial strength of the company that supports the CCRC, especially if the Agreement makes it clear that your receipt of a refund is dependent upon the buy in of a future resident.  If the company declares bankruptcy, you may lose your entire refund.   The Commission on Accreditation of Rehabilitation Facilities (CARF) is a nonprofit accreditor of health and human services providers and provides a Guide to Understanding Financial Performance and Reporting in CCRCs on its website.

Another matter to consider is what happens if you no longer have adequate funds to pay your monthly expenses, especially if you are in the skilled nursing facility section of the CCRC. Carefully review the Agreement to determine if there are terms that explain the procedure by the CCRC to collaborate with you to pay your expenses, including applying for Medicaid benefits.  Most CCRCs do not accept Medicaid.

  1. What Are the Monthly (and Other) Fees I Will Pay?

The CCRC should provide you with a detailed written description of the services included with the monthly fee you will be paying them as well as a list of fees for additional services.  For example, is transportation to local grocery stores, laundry services or light cleaning of your unit included in the monthly fee or are these additional fees? It’s a good idea to calculate the fees for the additional services you anticipate utilizing along with the monthly fees you will be paying.  Be aware that these fees generally increase annually.

  1. What Happens If My Health Declines?

The major appeal of CCRCs is that you can remain within a familiar community that provides more residential and health care support if and when your health declines. Many Agreements include provisions that broadly describe the process, factors and decision-makers that influence when you may be temporarily or permanently transferred from an independent living unit to an assisted living unit or a skilled nursing facility unit or to another facility outside of the community if warranted. Some Agreements permit residents or their legal representatives to weigh in and appeal the decision to permanently transfer the resident to another unit while others do not. A move to assisted living or skilled nursing can significantly increase your monthly expenses.  Additionally, the decision to permanently move you to a potentially more expensive unit may be out of your hands.  Carefully consider the factors and individuals involved in deciding if you require transfer to another unit, and note whether the Agreement clearly explains the fees if your healthy spouse remains in your independent living unit.

  1. What Else Is Important to Me?

Arbitration: Another part of a CCRC Agreement to consider is the arbitration/dispute resolution provision. Some Agreements state that any disagreement you have with the CCRC may only be resolved with arbitration and/or dispute resolution and not via the court.  This will limit your ability to pursue an outcome that may be more beneficial to you. Consider carefully if it is important to you to have all legal options available to you in the event the CCRC violates its Agreement with you.

Resident Rights: Beyond any rights described in the Agreement, residents may establish a residents’ association, submit comments to the CCRC regarding resident health and welfare, and request information about construction and the financial reserves of the CCRC under Massachusetts law. Think carefully about whether you will be comfortable with a limited ability to effect change within your community as a resident. Also keep in mind that you will be sharing common space with people that have different lifestyles from you; for instance, would you be bothered if your neighbor smokes cigarettes or has a noisy pet?

Activities: Review the activities, events and meal schedules of the CCRC and consider whether they appeal to you and fit your lifestyle.

For more information, an extensive consumer guide to questions and other topics for consideration regarding Massachusetts CCRCs can be found at the EOEA’s website.

If you are considering making a Massachusetts CCRC your future home and wish to better understand the terms and legal ramifications of the Agreement for you and your loved ones, contact an experienced elder law attorney to thoroughly review and discuss the Agreement with you.

Attorney Abigail V. Poole is an associate attorney with the Dedham firm of Samuel, Sayward & Baler LLC which focuses on advising its clients in the areas of estate planning, estate settlement and elder law matters. She is an active member of the Massachusetts Chapter of the National Academy of Elder Law Attorneys (NAELA).  This article is not intended to provide legal advice or create or imply an attorney-client relationship. No information contained herein is a substitute for a personal consultation with an attorney. For more information visit www.ssbllc.com or call 781/461-1020. 

February, 2019

© 2019 Samuel, Sayward & Baler LLC

Retirement Account Caution: Change in Firm or Provider Requires Confirmation of Beneficiaries

by

Here is something to be aware of if you have IRA, 401(k), 403(b) or other retirement account.  At Samuel, Sayward & Baler  we are careful to advise you about how to designate the beneficiaries of your retirement accounts consistent with your estate plan.  In some cases, customized beneficiary designations are required to ensure these accounts are distributed properly to achieve your planning goals.

There are two circumstances in which these beneficiary designations can be disrupted and over which you have no control:

  • If your financial advisor changes firms. Although your accounts may move with your advisor to the new firm (if you so choose), your beneficiary designations may not necessarily move along with your retirement accounts.  If your financial advisor has changed firms, be sure to confirm with your advisor that beneficiaries have been correctly designated on your new retirement accounts established at the advisor’s new firm.
  • If your employer or former employer changes its 401k or 403b provider. Beneficiary designations on employees’ or former employees’ accounts typically do not move over to the new provider, and beneficiaries must be re-designated. This is another circumstance where action is needed to ensure that beneficiary designations are correct.

If the owner of a retirement account passes away with no beneficiary designated on that account, the account is payable to the account owner’s estate. Although the funds in the account may still be distributed consistent with the owner’s estate plan (assuming the account did not have a beneficiary designation different from the rest of the owner’s estate plan), there will be no opportunity for continued tax deferral or a so-called “stretch” payout of the retirement account over the life expectancy of the beneficiary.  The account instead must be distributed in a lump sum to the owner’s estate, or at best over a 5-year period, and the income tax payable on the account must be paid all at once.  This is a very bad result from a tax planning perspective.

If one of these situations occurs, do not delay in ensuring that your beneficiary designations are in place and are consistent with our recommendations and your estate plan.  In all cases, we recommend that you request written confirmation of beneficiary designations so that you can confirm that beneficiaries are designated correctly.  If you would like us to review your designations we are happy to do so.

Retirement Planning: Are You Taking Steps to Assure Peace of Mind?

by

By Steven Joshua Samuel JD, MBA, AIF®

If you plan to stop working within 10 years or so, you may be taking steps to prepare or at least be wondering what you should be doing to feel financially secure.  A Brighthouse Financial survey recently asked people nearing retirement about their concerns and the issues with which they needed help. Here’s what the survey found.

Expenses and Savings

Most people did not have a good estimate of their current spending or what they expected to spend after they stop working. That was true even for 2/3 of the people surveyed who had financial advisors.  Once you know roughly how much Social Security or pension income you’ll receive, having a spending estimate allows you to determine how much more income you’ll need and how close you are to having the investment amount that can reliably produce that income.  Knowing the amount you’ll need to achieve your spending goals and staying on track is one key to financial peace of mind, but 1/4 of the people surveyed hadn’t worked through this calculation.

Social Security

When to claim Social Security is sometimes a complex decision.  Sixty percent of the people surveyed did not seek guidance about Social Security.  The Social Security website, www.ssa.gov, allows you to see the earnings history on which your Social Security benefit is based, as well as estimates of your benefit at various ages.  It is well worth a visit, first because the earnings history is important, and second, it could be incorrect (mine was) and you can correct it. There is software that financial planners use and which you can also acquire that can help with the decision-making process.

Healthcare Costs

Healthcare costs are a major concern for people starting to consider retirement. Understanding Medicare and what it costs, as well as creating a plan for long term care are challenging but important and worth the time to carefully consider.  Still, 1/3 of the people surveyed had not done so.

Financial Plan

More than 3/4 of the pre-retirees surveyed had not taken at least some of the above basic steps to achieving peace of mind.  Surprisingly, this was the case even for those who had a professional financial advisor.  Whether or not you engage a financial advisor to help you create a formal financial plan, it makes sense to at least put together spending estimates, Social Security or pension income and an investment strategy that fits your goals and appetite for risk.

Residence and Long Term Care, Estate Planning, Taxation, Withdrawals from Retirement Savings, Part-Time Work

Brighthouse survey questions covered a lot of territory, though not all the issues important to people who are within 10 or fewer years of retirement.  For example, where you’ll live and if you become frail and how you’ll manage if you need help with everyday activities are often left to last minute decision making, when choices are limited.

Tax issues, such as whether to convert taxable traditional IRA to Roth accounts, if and when to take capital gains or losses, and other tax issues may be different in pre-retirement and retirement years.  You won’t know how much will be left after taxes for you to actually spend unless you give this some thought.  Similarly, to maximize the money available for you to spend, it helps to think through what order and proportion of withdrawals to take from taxable and tax deferred accounts during retirement.  If your plan includes working part-time during retirement, for financial reasons or for the social connection benefits, it is best to have a strategy in advance.

Samuel Financial LLC is located at 858 Washington Street, Dedham, MA 02026 and can be reached at 781.461.6886.  Securities and advisory services offered through Commonwealth Financial Network, member FINRA/SIPC, a registered investment adviser. Fixed Insurance products and services offered through CES Insurance Agency.

July, 2018

Estate Planning Considerations for Retirement Accounts

by

These days, I see fewer and fewer clients with pensions that pay them a monthly income for their lifetime, and perhaps for their spouse’s lifetime as well.  Most of my clients now have large retirement accounts to which they and perhaps their employer have contributed.  These accounts may be in the form of a 401k, 403b or other retirement savings plan through a current employer, a rollover IRA (holding funds rolled over from a former employer), an inherited IRA (holding funds from an IRA of which the client was named as beneficiary) or a traditional IRA or Roth IRA established by the individual client.    These types of assets all have certain things in common – the funds in them have for the most part not been subject to income tax (with the exception of a Roth IRA), they are subject to specific and detailed rules for withdrawals during the lifetime and after the death of the account owner, and they often comprise a large percentage of the account owner’s wealth.  These factors combine to make it extremely important for clients to pay close attention to how they plan for these accounts.

As an estate planner, my goal is to make sure that the designated beneficiaries of my clients’ retirement accounts are consistent with the rest of their estate plan, that if someone becomes incapacitated his or her retirement funds can be appropriately managed, and that when the account owner dies these valuable assets are properly administered.  Most people diligently designate their spouse as the primary beneficiary of their retirement accounts, but many people do not designate contingent beneficiaries on their retirement accounts.  Admittedly, the contingent beneficiary designation is a much harder exercise.  Should you name a charity, your children, your grandchildren, your second wife, your Trust?  What if your desired beneficiaries are young and have no idea what a retirement account is?   The decisions that must be made when designating beneficiaries can have far-reaching income tax, estate tax, and other implications for you and your beneficiaries.

Further, many people are not aware that when they die, a non-spouse beneficiary must begin taking minimum required distributions from an inherited retirement account by the end of the year following the year in which the account owner dies.  This holds true whether the beneficiary is age 2 or 72, and leads to the important discussion of how to designate the beneficiary of your retirement account if you want to benefit young children.  There are pros and cons and tax considerations to deciding whether to name the child individually, or a trust for the child’s benefit, as beneficiary.

It is of course important to get good financial advice about how your retirement accounts are invested.  Many of these plans are now self-directed, with on-line tools to help you pick investments that are appropriate for your age and goals.  However, if you have a retirement account with several hundreds of thousands of dollars in it, you really should have a conversation about your investments with a human, preferably an experienced financial advisor, rather than your computer.

While you are dreaming about how you will spend that money in retirement (hopefully on living well, doing good, and having great adventures), take some time to consider what will happen if you do not outlive your retirement funds (which is the goal, after all).  Consult with an experienced estate planning attorney for advice on how best to plan for those retirement funds consistent with your estate planning goals so that the next generation can continue those dreams!

January, 2018

© 2018 Samuel, Sayward & Baler LLC    

What Surprises and Worries Retirees?

by

If you’re old enough to be thinking about retirement, one way to get some insight is to ask individuals who have already retired. That’s what the Wall Street Journal (WSJ) did recently, and though many of the retirees’ reports do not seem all that surprising, they are worth attention if you are within 10 years of retirement or already retired. Here’s some of what WSJ reader retirees reported.

Money and Health

Worries about money (48%) and health concerns (42%) are at the top of the list for keeping retirees up at night. Of the 48% who worry most about money, more than half were concerned about not having saved enough to last their lifetime to accommodate their basic lifestyle needs. Almost a third were concerned they might not have enough even for emergencies and health care costs. For people worried about money, expenses for their cars, travel, healthcare and household exceeded what they had spent before retirement. A recent report of the Employee Benefit Research Institute cited in Financial Advisor, supports the view that travel and other household expenses are actually higher for at least the first two years of retirement than during work years, for close to half of newly retired persons. Many of the people who reported having money and health concerns said they were particularly surprised at how high their Medicare premiums were.

Relationships

Relationships were another area of concern, mainly the fear that leaving work will mean missing out on being part of the team or work “family.”  Retirees who dealt successfully with relationship concerns said that willingness to take risks was key. An example of taking risks was learning something new, which often was rewarded by successful second careers and new relationships. First time exercise classes, volunteering or part-time work had similar results for many people. Some WSJ readers said they were surprised at how quickly they shed their work lives and began to enjoy “the luxury of time” …. an unhurried life and control over the day’s activity or inactivity.  The most poignant comments about relationship concerns were the comments about mortality. For those whose spouses, partners or close friends passed away before they were able to enjoy each other in retirement, regret about time not well spent was profound.

Rewards of Planning

Careful retirement planning paid off for many retirees. Examples cited include researching decisions on when to file for Social Security, with a variety of different views given on the subject. Some favored waiting until age 70 to maximize social security payouts while others preferred taking it earlier to allow minimum use of savings. Understanding Medicaid choices and costs was another “careful planning” topic, as was reducing debt before retirement.

Some retirees did not plan well or perhaps at all. Although the WSJ reader report is not a scientific random sample survey, it offers a cautionary counterpoint to the suggestion that expenses during retirement are less than during work years.  Putting together a solid estimate of current and expected expenses and understanding Medicare do not require a great deal of time or cost. If you haven’t done this research yet, spending an hour with your checkbook and credit card statements and the Medicare website (www.medicare.gov) and your trusted advisor is a good first step. Updating your conclusions each year as your retirement timing goal gets closer will allow you to avoid surprises.

Samuel Financial LLC is located at 858 Washington Street, Dedham, MA 02026 and can be reached at 781.461.6886.  Securities and advisory services offered through Commonwealth Financial Network, member FINRA/SIPC, a registered investment adviser. Fixed Insurance products and services offered through CES Insurance Agency.

Employer Sponsored Retirement Plans: What You Need to Know

by

While many employers offer retirement accounts as an employee benefit — even those that offer generous matching contributions — many do not offer adequate education on how to choose among the investments offered in the retirement plan. If you have engaged a financial professional to advise you, make sure that their advice about your overall investment strategy incorporates the money in your (and your spouse’s) retirement accounts.  If you don’t have a financial advisor and don’t have the time to educate yourself about investments, Target Date Funds (TDFs) may be a reasonable alternative if you do a bit of research yourself.  Here are the basics of what you need to know:

Employer Sponsored Retirement Account Basics

If you are employed and eligible to contribute to your employer sponsored retirement plan, congratulations!  Your employer is giving you the opportunity to contribute much more than the IRS maximum allowable contribution amount for Individual Retirement Accounts (IRA). Maximum contribution to a company retirement account in 2017 is $18,000 ($6,000 more if you are over 50 years old) compared with $6,500 to an IRA.  And, your employer may match some of your contribution.  That’s free money and worth a conversation with your employer to find out if you are eligible to contribute, as well as determine if you are taking full advantage of this opportunity.

Contributing to an employer sponsored retirement plan also requires choosing among the several investments offered by most plans. Investment choices are typically mutual funds and there may be many dozens from which to choose. Unless you are an experienced investor or have help from someone who is, deciding what funds to invest in and when to make changes bewilders most employees.  If your employer offers employee education, it will be time well spent; and, if you are an employee who has a financial advisor, make sure to ask for help with retirement plan investments — something many advisors overlook.  If none of these options apply to you, consider TDFs.

Target Date Funds

TDFs automatically spread an employee’s contribution among a mix of mutual funds that hold stocks, bonds and cash in proportions targeting a specific year of retirement.  About ten years ago, the U.S. Department of Labor began allowing the use of TDFs in retirement accounts.  TDFs alter the mix of stocks, bonds and cash, by reducing the percentage held in stocks and shifting the allocation toward more conservative investments the closer you are to retirement.

TDFs aren’t managed by the investor, who may make panicked decisions during turbulent markets that they may later regret.  But, not all TDFs are alike.  Before investing in a TDF, it is important to understand how it invests and adjusts its mix of stock, bonds and cash over time as well as what the TDF costs.

TDF Glide Path, Costs and Other Investments

Glide path is the name TDFs give to the timing of changes in the mix of investments as the years pass toward the targeted retirement, analogous to an airplane moving through take off and voyage to landing.  Some TDFs have a glide path that move entirely to cash at the target date, others continue to hold a significant amount of stock through the early retirement years or even through the entire retirement. Because the percentage of stock in an account is a major factor in how an account will perform during market up and down times, it is important to know and be comfortable with a TDF glide path before investing in it.

Some employees have not only an employer sponsored retirement account, but also a spouse’s employer retirement account and perhaps other investment accounts.  If you choose a TDF, check whether its mix of stocks, bonds and cash is consistent with the investment strategy in your other accounts.

Investing in a TDF costs more than putting money in individual mutual fund choices offered through an employer sponsored retirement plan.  TDFs offer the additional service of choosing the funds and adjusting the stocks, bonds and cash mix, so some additional charge is justifiable. However, some TDFs add more than 1 percent per year to the other costs of the retirement plan and can be a major drag on performance.

As always, when you have questions about important financial matters, consult your trusted financial advisor.

Investments in target date funds are subject to the risks of their underlying holdings. The year in the fund name refers to the approximate year (the target date) when an investor in the fund would retire and leave the workforce. The fund will gradually shift its emphasis from more aggressive investments to more conservative investments based on its respective target date. The performance of an investment in a target date fund is not guaranteed at any time, including on or after the target date, and investors may incur a loss. Target date and target retirement funds are based on an estimated retirement age of approximately 65.  Investors who choose to retire earlier or later than the target date may wish to consider a fund with an asset allocation more appropriate to their time horizon and risk tolerance.

Samuel Financial LLC is located at 858 Washington Street, Dedham, MA 02026 and can be reached at 781.461.6886.  Securities and advisory services offered through Commonwealth Financial Network, member FINRA/SIPC, a registered investment adviser.  

Wills • Trusts • Elder Law • Long-Term Care Planning • Estates

©2024 Samuel, Sayward & Baler LLP. All Rights Reserved. The information presented on this website should not be construed to provide legal advice, nor does it constitute the formation of an attorney/client relationship. Read the disclaimer.