Retirement Security

This is from personal experience. I don’t know if this will shock you, but it did me and my family and I thought I would alert you so you can take steps before signing a lease.

My dad signed a 1 year  lease for a senior living apartment this past April. He was always worried he would forget a payment as his memory was deteriorating so he would pay in advance at times. My sisters and I were always scrambling to keep up with things so he did not pay too much.

About 4 months into his lease his health deteriorated and he spent the next few months going back between the hospital and rehab facilities. Unfortunately he lost the fight in September of this year.

We notified the apartment and the lady said since he had only been in the apartment for less than 6 months, we should be fine just paying the rent for October, which was fine as he died near the end of September and we were in no state of mind to clean out his place. She said they would also keep the security deposit. OK – We could live with that. We were cleared out completely by the end of October.

Then she hedged. Pay for November and December and we keep the deposit. Our attorney said they had no legal right so we said no. They countered with us to pay November and they keep the security.

That’s still not right. Think of it. A person dies and they do not consider that a reason to close the lease?! Well, we intended to fight it but the bottom line was it is the holidays as I write this and it’s just not worth it.

My advice is to check the senior facilities in your area and see what all their policies are before you or your loved one signs on the dotted line. You or your family could be put through even more trying to close an estate if things are not taken care of beforehand.

In a 401(k) plan, your account balance will determine the amount of retirement income you will receive from the plan. Even though contributions to your account and the earnings on your investments will increase your retirement income, any fees and expenses paid by your plan may substantially reduce the growth in your account. Take the following example.

Assume that you are an employee with 35 years until retirement and a current 401(k) account balance of $25,000. If returns on investments in your account over the next 35 years average 7 percent and fees and expenses reduce your average returns by 0.5 percent, your account balance will grow to $227,000 at retirement, even if there are no further contributions to your account. If fees and expenses are 1.5 percent, however, your account balance will grow to only $163,000. The 1 percent difference in fees and expenses would reduce your account balance at retirement by 28 percent.

In recent years, there has been a dramatic increase in the number of investment options that are typically offered under 401(k) plans as well as the level and types of services provided to participants. These changes give today’s employees who direct their 401(k) investments greater opportunity than ever before to affect their retirement savings. As a participant you may welcome the variety of investment alternatives and the additional services, but  beware; you may not be aware of their cost. As the example above shows you, the cumulative effect of the fees and expenses on your retirement savings can be substantial.

You should be aware that your employer also has a specific obligation to consider the fees and expenses paid by your plan. ERISA requires employers to follow certain rules in managing 401(k) plans. Employers are held to a high standard of care and diligence and must discharge their duties solely in the interest of the plan participants and their beneficiaries. Among other things, this means that employers must:

• Establish a prudent process for selecting investment alternatives and service providers

• Ensure that fees paid to service providers and other expenses of the plan are reasonable in light of the level and quality of services provided

• Select investment alternatives that are prudent and adequately diversified

• Monitor investment alternatives and service providers once selected to see that they continue to be appropriate choices

These insurance benefits are paid to a worker’s biological child, adopted child or dependent stepchild. In some cases, the child also could be eligible for benefits based on his or her grandparents’ or step grandparents’ earnings.

To receive this benefit, a child must have the following:

• parent(s) who is disabled or retired and entitled to Social Security benefits, or
• parent who died after having worked long enough in a job where he or she paid Social Security taxes.

The children must  meet the following requirements as well:

• unmarried
• younger than 18 years old, or
• must be 18-19 years old and a full-time student (no higher than grade 12), or 18 years old or older and disabled (the disability must have started before age 22).

The following information will lead you to the next steps to apply for this benefit.

Application Process
If you would like to find out if you may be eligible for any of the benefits SSA administers, visit http://best.ssa.gov.

Once you have completed the eligibility screening questionnaire, you will be provided with a list of benefits for which you may be eligible.

An annuity is when you pay money to an insurance company in return for its agreement to pay either a regular fixed amount when you retire or an amount based on how much your investment earns. There is no limit on how much you can invest in a private annuity, and earnings aren’t
taxed until you withdraw them.

However, annuities present complex issues regarding taxes, fees, and withdrawal strategies that may not make them the best investment
choice for you. Consider discussing this type of investment first with a financial planner.

• Don’t borrow from your retirement plan or permanently withdraw funds before retirement unless absolutely necessary. Use a credit card or borrow money for unexpected expenses if they come up but do not withdraw money from your retirement plan early.

• Your retirement plan may allow you to borrow from your account, often at very attractive rates. However, borrowing reduces the accounts earnings, leaving you with a smaller nest egg. Also, if you fail to pay back the loan, you could end up paying income taxes and penalties. As an alternative, consider budgeting to save the needed money or pursue other
affordable loan options.

• Also avoid permanently withdrawing funds before retirement. This often happens when people change jobs. According to a study by the Employee Benefits Research Institute, 47 percent of workers changing jobs rolled over into an IRA or a new employer’s retirement plan at least some of the money they received from their former employer’s
retirement plan.

• Pre-retirement withdrawals reduce the ultimate size of your nest egg. In addition, you’ll probably pay federal income taxes on the amount you withdraw (10 percent to as high as 35 percent) and a 10 percent penalty may be tacked on if you’re younger than age 591/2. In addition, you may have to pay state taxes. If you’re in a SIMPLE IRA plan, that early withdrawal penalty climbs to 25 percent if you take out money during the first 2 years you’re in the plan.