Retirement How much income do you need? Usually 60 to 80 percent of pre-retirement income. Keep the House? Equity is the property’s market value minus the amount of the mortgage not yet paid. Reverse mortgage is a loan against the equity in the borrower’s home in which the lender makes tax-free monthly payments to the borrower. The loan must be repaid when you sell home. Heirs Are people who receive property from someone who has died. What type of investment strategy? Usually low risk How much insurance? Need medical insurance and other types. Medicare does pay health insurance over 65, may be 67 for you. Medicare is government run health insurance. Beat inflation Is the goal of retirement investing. Estate Planning Estate- is all that a person owns, less debts owed, at the time of the person’s death. When people die, their possessions pass to other people, either as directed by the person who died (called the decedent), or by the laws of the state in which the person died. Estate Planning Is preparing a plan for transferring property during one’s lifetime and at one’s death. Will Is a legal document that tells how you want your estate to be distributed after your death. Executor A person to carry out the transfer of your estate when you die. Testator The person who makes the will. Any person who is 18 or older and of sound mind can make a legally valid will. 5 requirement of a will 1) Sound Mind 2) Must be written 3) Testator must sign 4) Must have a witness 5) Must be notarized Types of Wills Simple Will Holographic Will – Valid in 19 States Will Terms Intestate – people who die without a will. Codicil – lists the modifications and then reaffirms a previous will. Beneficiary – Receives property. Power of Attorney Is a legal document authorizing someone to act on your behalf. Trust Is a legal document in which an individual (the trustor) gives someone else (the trustee) control of property, for ultimate distribution to another person (the beneficiary). Living Trust – inter vivos Testamentary Trust – takes effect upon the death of a trustor. Valuable for minor children or if you wish to avoid high taxes on your estate. When should a child receive an inheritance? What age? Probate Is a court supervised process of paying your debts and distributing your property to your heirs upon your death. An attorney is required. Property held in trust is not subject to probate. Ownership? who gets what at death? Joint Ownership Right of Survivorship – Living Spouse automatically becomes sole owner. Ownership Singly – Asset becomes part of estate. Estate Tax The Federal Government Tax estates. Tennessee has inheritance tax estates after 1 million. Gift Tax Is a tax on a gift of money or property, to be paid by the giver, not the receiver, of the gift. You can give up to 11,000 without paying gift tax. Retirement Accounts Individual Retirement Account (IRA) – savings plan for retirement that has a fixed amount per year, and can’t be withdrawn until age 59.5 or later. Types of IRA’s Traditional IRA – Delay paying taxes on contributions, withdrawals will be taxed. Roth IRA – Contributions are taxed now, but withdrawals will not be taxed. Education IRA – IRA for qualified school expenses. Keough Plan Is a tax-deferred retirement savings plan available to self-employed individuals and their employees. Is restricted to $30,000 or 25 percent of earned income in any one year, whichever is less. Contributions fully tax deductible and earnings are tax-deferred. SEP Simplified Employee Pension – Authorized by Congress to encourage smaller employers to establish employee pension plans with IRAs as a funding method. The employer makes an annual tax deductible contribution of up to 25 percent of the employee’s salary or $40,000, whichever is less. Employee contributions to these plans are tax deductible. Annuity Is an insurance company investment that provides a series of regular payments, usually after retirement. Employer Sponsored Retirement Plans Defined-benefit plan Defined-contribution plan 401(k) Plans – (Profit Companies Plan) employees choose a percentage of salary they want to contribute to account. It is not taxable until withdrawn. 403(b) Plans – Government or not for profit business. Much like 401(k) Government Retirement Social Security Benefits – Is safety net, not meant to be one’s only retirement. Maximum benefits start at 65, possibly 67 for you. Can receive reduced benefits at 62. Military Benefits Retired Military receive benefits after 20 years. Receives pension without regard to other benefits. Vested Entitled to the full amount of the plan. This is a word to know, very important.