News

By Sarah Ruef-Lindquist

Sarah Ruef-Lindquist, JD, CTFA

My first post about goal setting might have gotten you thinking about or reinforced your resolve to decide “when do I want to retire?” or “I want to be able to buy or build a house in 10 years, so I need to save for a down payment”.  If that is true, then your next thought might have been “Well, how do I go about getting there?” The simplest answer I have for that question is “Discipline; Not a lot necessarily, but some”.  Technically, it involves dollar cost averaging. Practically speaking, it’s just intentional saving. Let’s look at an example that applies to most of us: retirement planning.
Say you are 35 years old and your goal is to retire at 65.  You are self-employed car mechanic with steady income having built your business up since high school, pay all your household bills and credit cards on time and tuck money away for emergencies, holidays and a vacation, but you haven’t started saving for retirement.  You are married, and contributing to social security.  If your life expectancy is 85, you have 20 years after retirement at 65 to plan for.
If you are starting at -0- retirement savings now at age 35, you need to start saving 12% ($400 a month, for $4800 a year) in a qualified retirement plan (IRA, SEP IRA, 401(k)) in order to have “sufficient” retirement savings.  There are many assumptions about this calculation, like a 2% annual income increase, a low rate of inflation, 90% of your income needed at retirement for living expenses, a 7% rate of return before retirement on those savings invested in the market and 4% after, having shifted assets into more income-producing, reduced-risk securities upon retirement.
But you get the idea: a disciplined approach, putting a predetermined amount into your retirement plan – a 401(k), SIMPLE, SEP or other kind of qualified plan – can help get you where you want to go. One of the reasons is dollar cost averaging, which essentially is the practice of investing an amount over time that tends to allow the investor to average a cost lower than the price of their investments over time. You’d also be taking advantage of the tax-deferral and reinvestment of dividends and income that is possible with qualified retirement plans. But it takes discipline. Not a lot, but enough. Take advantage of an automatic monthly withdrawal from your checking account to your qualified retirement account and revisit it every year as your income, presumably increases, to increase the amount of the monthly transfer, and you will begin on the path to reach your goal. See a financial advisor to help you determine what your retirement plans should include now and as you work toward success in achieving your retirement goals.
This article was first published at PenBayPilot.com

Print page as PDF

By Sarah Ruef-Lindquist

Sarah Ruef-Lindquist, JD, CTFA

Fail to plan? Plan to fail. Your family’s financial future should not be left to chance. A thorough, thoughtful plan that provides for you and your family as you desire is a gift you give to those close to you and those you will leave behind.
The law lets us say who we want to take care of us and our property through mechanisms like powers of attorney, health care powers of attorney, advance directives and trusts, so we don’t burden our families with having to guess or subject ourselves unnecessarily to interference from courts deciding what they may think is in our best interests.
Power of Attorney documents can give another person the ability to transact on our behalf, and if they are “durable” can survive our incapacity. But caution is needed: One granting another power of attorney must be completely sure that the person will always act in your best interests as your agent, and understands your personal preferences in how you want to live and how you want your resources managed. This can avoid a court proceeding to have someone appointed as your conservator, which requires a public proceeding to determine incapacity, which can be humiliating.
Health Care Power of Attorney (HCPOA) documents can give someone the ability to communicate and decide on your behalf about your medical care when you are no longer in a position to do so. Again, it is very important that the person granted the power acting as your agent understands your personal preferences for medical care, including end-of-life treatment preferences. This can help us avoid guardianship proceedings which, like conservatorship, involve a public proceeding to determine our incapacity.
What is known as a Living Will is a document that instructs health care providers on whether you want life-sustaining treatment in the face of a terminal condition in a persistent vegetative state. It takes the decision out of the hands of a family member or anyone named as an agent in a HCPOA, communicating preferences directly from you to medical providers. It usually says that no heroic measures will be used to prolong your life, but only comfort care will be provided.
Trusts can include provisions for managing our assets and our personal affairs and care, by naming a “trustee” and placing assets into the trust that will then be used for our care, and distributed at death as the trust directs upon death. This usually avoids the public probate process for not only guardianship or conservatorship while we are alive, but the probate at death that distributes estates. People usually have a will that “pours” everything into the trust that the person didn’t place into the trust before their passing.
Beneficiary Designations on life insurance, retirement plans like 401(k) and IRA’s, provide to whom any balance will be paid when you die. Those should be reviewed annually to be sure they still reflect your wishes.
Don’t have a will? Then the state has written one for you, and you probably wouldn’t like what it says! Each state has what is known as an “intestacy statute” (Maine’s is 18-A MRSA Section 2-101, et seq) which provides what will happen with your estate after you die if you did not leave a validly executed will. In Maine, the intestacy statute first looks at whether you left a surviving spouse, children, parents, grandparents, great grandparents and others, and depending on who survived you, your estate will be divided among them in varying share amounts. These amounts may be quite different from what you would want, so it makes sense to decide what those amounts should be – if any – on your terms. There are limits on the ability to not include a spouse, because of their rights in property. Most charitable gifts through estates need to be specified in a will or trust, so intestacy will not address those.
So take the time to plan, and create certainty around how you will be cared for, your assets managed for you and then distributed as you would want them to be, rather than leaving it all to chance.
This article was first published at PenBayPilot.com

Print page as PDF