Long-term planning is crucial to caregiving

The family is headed toward a crisis in caring for the elderly. It will impact all of us, so if you have aging parents, don’t think you can just close your eyes and hope for the best. You are likely setting yourself up for a world of hurt. All too often, the adult children of aging parents are blind-sided when presented with the realities of taking care of parents in need. This is usually precipitated by some sort of health crisis. In my own business, I see it time and time again. What follows is pure chaos, anxiety and hard feelings. There is no way to stop the inevitable, because aging and declining health are part of living, so what can you do? “It is critical that families begin the conversation now to create a long-term care plan. Do not wait for it to become an immediate crisis,” says Annalee Kruger, President of Care Right, a Florida-based expert in the area. The crisis in caregiving has grown exponentially in this country. So much so that Kruger and others like her have been able to establish thriving businesses by providing solutions for families caught up in a care crisis. Her line of work ranges from providing solutions in caring for aging loved ones to acting as a third-party facilitator in family meetings. She coaches family caregivers (who may be dealing with dementia or are just plain burnt out), but her most satisfying work is developing a plan for the future in order to avoid most of the pitfalls ahead. Unfortunately, crisis management is still a large part of her business....

The coming crisis in caregiving

If you thought the nation has problems with Social Security and Medicare, you ain’t seen nothing yet. Today, more than two-thirds of Americans assume they will be able to rely on a family member to meet their long-term care needs if needed. My advice: don’t count on it, and here’s why. As it stands today, one-third of all U.S. families provide long-term care for a disabled or elderly family member. You may have guessed that two-thirds of those caregivers are women, although why it should be deemed a woman’s task alone is beyond me. If you want to look at the upside to caregiving, you could say that caring for a loved one, who needs our help, is a chance to pay back all the love and support we received when growing up. On a good day of caregiving, there may be an immense satisfaction in helping to preserve an individual’s quality of life, whom you love, while lifting their increasingly difficult burden of completing daily tasks. The downside of caregiving is well-documented. The economic, emotional and mental strain of caregiving is, at times, overwhelming. And it snowballs. Family relationships often suffer and tension among spouses is commonplace. Caregiving also takes a toll on your health and plays havoc with your work-life balance. In 2013, according to the AARP, about 40 million families provided 37 billion hours of care, which was worth an estimated $470 billion. That nearly equaled the yearly revenues of the country’s four largest tech companies combined. In 2016, AARP estimated that, in addition to the physical caregiving, the average out-of-pocket expense per family was almost...

Don’t take loans from your tax-deferred accounts

It sounds too good to be true. Why borrow from a bank when you can take a loan out from your 401(k) or 403(b) and pay yourself back in both interest and principal? If that sounds like a great deal, it’s not. Money purchase plans, profit-sharing plans, 457(b) plans and both 401(k) and 403(b) plans may offer loans, but IRAs, SEP IRAs, and SIMPLE IRAs do not. The IRS does have some restrictions on the borrowing. It limits how much you can borrow at any one time. In general, you are limited to the smaller of 50% of your vested account balance, or $50,000. However, there is one exception (hardship) that allows you to borrow up to $10,000 even if it exceeds 50% of the balance. It also requires you to pay yourself a reasonable rate of interest on your loan. Generally, you have five years to repay the loan, although you are required to pay at least quarterly payments. Recently a Thirty-something-year-old client told me he had taken out a $7,000 loan from his $50,000 403 (b) tax-deferred retirement plan years ago. He was surprised to find that it was not an interest-free loan and that he was required to pay off the loan in its entirety before he could draw from the account in retirement. What’s worse, if he quit his job, his company required that he pay off the amount in 60 days. He thought it was the IRS that laid down the rule provisions, but that is not the case. It is the company you work for that offers the plan Some companies won’t let...

What does your 401(k) investments look like?

By Nate Tomkiewicz and Bill Schmick It might surprise you to know that many retirement savers religiously contribute to their tax-deferred savings plans but have no idea what investments they own. Many plan representatives simply suggest that if you don’t know, just invest in a target date retirement fund. Is this a good idea? Most 401(k)s and 403(B)s plans, for example, have between 20 and 30 investment options you can choose from. This menu of choices normally includes bond and stock funds as well as international funds. There are also balanced or blended funds, which invest in a mixture of stocks and bonds. Many plans also have some kind of annuity-like investment as well as target date funds. Supposedly, target date funds take the thinking out of investing. Let’s say you plan to retire in 2040, so you select a target date fund that approximates that year. The rule of thumb states that the closer you get toward retirement, the more conservative one should be. That means you should have more bonds than stocks (according to Modern Portfolio Theory) in your investment portfolio as you age. Each year you draw closer to retirement, the computer model that actually manages these funds simply put more bonds in your portfolio and less stocks. As a diligent saver who wants to make as much as one can before retirement, let’s look at the track record of bonds versus stocks over the last ten years. In this case we have used Vanguard’s intermediate term bond fund versus Vanguard’s S& P 500 Index fund. But wait, you may say, the last ten years stocks...

Retirement savers could see positive news this year (maybe)

In this acrimonious political environment, little in the way of new legislation is expected to pass both chambers of Congress. One exception may be the Secure Act. Last Tuesday, a key House committee unanimously approved the bill, which would greatly enhance some private retirement plans. The bill would not only increase the flexibility of 401 (k) plans but would also provide much greater access for small business owners and their employees. The changes would hopefully encourage many more small businesses to offer private retirement benefits to their workers. It is the most sweeping legislation to come out of Congress in over a decade. The sponsors, including the top Democrat and Republican on the tax-writing Ways and Means Committee, intend to allow smaller companies to join together to provide these plans and provide a $500 tax credit for companies that establish plans and provide their workers with automatic enrollment. It would also offer the opportunity for long-term, part-time workers to participate in retirement savings plans. A case in point is Brothers Landscaping and Construction of Hillsdale, NY. The McNamee’s established their business back in 2007. Twelve years later, the company’s revenues are just shy of $1 million/year. I have known these guys ever since they started cutting my lawn in 2007. Hard-working, conscientious, and honest to the bone, it is men like these who are the back-bone of this country. James, 29, called me a few weeks ago to explore opening a 401 (k) plan for he and his 28-year-old brother, Tucker, as well as four additional employees. “We felt we had to do it,” James explained, “in order to...

The IRS has its hands full this year

The government’s partial shutdown has everyone on edge this year. Despite assurances from the powers that be, many taxpayers are concerned that their tax returns won’t be processed on time. Should you be worried? One misconception many have is that the Internal Revenue Service (IRS) is closed. Not true, the IRS remains open, despite having no budget since December 21, 2018. The agency is running under a contingency plan, which includes operating with only 12% of its staff. Usually, you can e-file your returns in late January, and that remains doable. The IRS announced it will be accepting 2018 tax returns starting January 28, 2019.   They also said they would be issuing refunds. To do so, they will be bringing back a large portion of their laid-off workers. Those workers, like the other 800,000 furloughed Federal workers, won’t be getting a pay check until the shutdown is over. The question remains: how many of those workers are willing to return to their jobs without a paycheck? We are already seeing some departments (such as Homeland’s TSA workers) balk at working for free any longer. But the government shutdown is not all the IRS needs to worry about. Thanks to the Tax Cuts and Jobs Act passed in a hurry by Congress last year, the IRS has been working overtime to deal with the mountain of new changes and adaptions necessary to reflect the new tax laws. To add insult to injury, it took months before the new rules were actually delivered to the IRS from the legislative branch. At the time, the Inspector General said that it would take...