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Presented by MidAmerica Financial Resources. You can reach them at 618.548.4777 or greg.malan@lpl.com or on the web at www.mid-america.us

 

Preparing to Retire Single

Preparing to Retire Single

Unmarrieds need to approach retirement planning pragmatically.

Provided by MidAmerica Financial Resources

 

In an ideal world, it would be simple to prepare for a solo retirement. You would just save half as much as a couple saves, buy half as much insurance coverage, and expect to live on half the income. Reality dictates otherwise.

 

Real-world planning for a solo retirement begins with an assumption. You assume, at some point, that you will retire alone. You may be ready to make that assumption at age 40. Or, that distinct probability may emerge at age 55. These midlife assumptions aside, you should acknowledge the possibility that you may end up spending some of your retirement alone, even if you retire with a spouse or partner.

 

As a solo ager, your retirement becomes a test of self-reliance. As ABC News notes, the Elder Orphan Facebook Group recently polled its 8,500 members about the “safety net” they had and collected 500 responses. Thirty-five percent lacked “friends or family to help them cope with life’s challenges,” and 70% had no specific idea of who their caregiver would be in event of mental or physical decline.1

 

Think about what you do for your elderly parents or what you have done. Look ahead and consider who or what resource could provide that help to you someday.

 

Insuring yourself is critical before and after you retire. If you retire before becoming eligible for Medicare, could you lean on COBRA or remain on a group health plan a bit longer before having to find your own health insurance? Disability insurance is also important while you are still working, to protect your income. As Dave Ramsey says, your income is your most powerful wealth building tool. When you lose your income, that tool is broken, and that restricts your retirement savings effort.2

 

How about long-term care insurance? Opinions are divided, and even affluent single retirees may find it hard to afford. Look into it, but also look at other possible methods for coming up with the money you may need for your eldercare. As for assistance with daily living, some creative seniors who age alone take in a younger relative, friend, or roommate who lives with them rent free in exchange for helping them with daily tasks.

 

It is also crucial for a solo ager to assign powers of attorney. Through a durable power of attorney for health care and a living will, you can respectively identify who will make medical decisions for you if you become incapacitated and the degree of care you want (or do not want) if that occurs. (Some states fuse both documents into one, called an advance directive.) There is also the matter of assigning a financial power of attorney. What trustworthy person can make good financial decisions on your behalf, if you are no longer capable of doing so?3

 

Tax-favored investing is vital before and after retirement as well. As a single, childless person, you cannot qualify for federal tax breaks like the Child Tax Credit, and you will not gain the tax benefits that come with being a married, joint filer. Building up retirement savings in a workplace retirement plan and traditional IRA is good, because you can lower your taxable income through the pre-tax contributions and position the invested assets with taxes deferred.4

 

You may want to consider partly or fully converting a traditional IRA to a Roth before retiring. Traditional IRA owners must take Required Minimum Distributions (RMDs) once they reach age 70½, and each RMD is taxed as regular income. For a single, retired taxpayer, that can be rough: you can find yourself tossed into a higher tax bracket, but without the tax breaks afforded to married couples. Original owners of Roth IRAs never need to take RMDs.4,5

 

Want a larger monthly Social Security benefit? Then work longer and wait longer to claim Social Security. If you are divorced, and were married for ten years or longer, you are likely eligible for spousal benefits reflecting your former spouse’s income history. If your ex-spouse was a comparatively high earner, your total benefits could see a boost.4

 

In retiring solo, you do have a flexibility that married couples do not. If you feel like moving and downsizing, go right ahead. If you want to bring in roommates or decide you want to retire to French Polynesia, Chile, or Italy, the only “yes” you need is yours. If you decide to retire later or earlier, you can make that decision independent of spousal approval. All this freedom is nice, and it is perhaps the greatest retirement perk a single person has. Just be sure to prepare for the future pragmatically.

 

MidAmerica Financial Resources may be reached at 618.548.4777 or greg.malan@lpl.com www.mid-america.us

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Securities and advisory services offered through LPL Financial, a Registered Investment Adviser, Member FINRA/SIPC.
MidAmerica Financial Resources and Malan Financial Group are separate and unrelated companies to LPL.

Citations.

1 – abcnews.go.com/Health/safety-net-kids-spouse-elder-orphans-fearless-fallback/story?id=58281018 [10/4/18]

2 – daveramsey.com/askdave/20-somethings/8431

3 – nolo.com/legal-encyclopedia/living-will-power-of-attorney-29595.html [10/4/18]

4 – wisebread.com/7-ways-retirement-planning-changes-when-youre-single [7/14/17]

5 – forbes.com/sites/catherineschnaubelt/2018/05/03/reducing-your-future-tax-burden-with-a-roth-ira-conversion/ [5/3/18]

Filling Out the FAFSA

Filling Out the FAFSA

There is really no reason to wait.

Provided by MidAmerica Financial Resources

 

October is here – the ideal time for college students to apply for financial aid. October 1, in fact, marks the first day a current or future college student can submit a Free Application for Federal Student Aid, or FAFSA, for the 2019-20 academic year. Since some states offer aid on a first-come, first-serve basis, submitting a FAFSA as soon as possible is wise.1,2

 

You can even apply using your phone. Install the new myStudentAid app created by the Department of Education, available for iOS and Android operating systems. While filling out the FAFSA takes time whether you use a PC, tablet, phone, or pen, it may feel easier to start on a phone. In fact, Mark Kantrowitz, publisher of SavingForCollege.com, just remarked to CNBC that the mobile app was “much easier to use, even fun.” The FAFSA asks students and parents more than 100 questions, so any degree of “fun” is good. (Thanks to the new app, you can start filling out a FAFSA on a computer and finish it on a phone, and vice versa.)1,2

 

Due to the new phone app, more FAFSAs might be filed this year. Slightly more than 20 million FAFSAs were submitted for the 2014-15 award cycle; in contrast, just over 10 million were filed for 2018-19. This decline might reflect an improved economy and a boost in household wealth, but it may be temporary.2

 

What should your student have handy while filling out the form? After creating an FSA ID (a username, a password), your student will need to reference all kinds of personal information, some of which will be yours. The FAFSA asks for birth dates, Social Security numbers, and driver’s license numbers. It asks for financial information: savings account balances, home values, investment account values. (It does not require you to report balances of workplace retirement plan accounts, pension plans, or IRAs.) Untaxed income must be figured; interest income and child support fall into that category.1

 

All FAFSAs now require federal tax information from the year that is two years prior to the current award cycle. In other words, on this year’s FAFSA, you need to include federal tax information from 2017. This may not be as arduous as it sounds because you can use the Internal Revenue Service Data Retrieval Tool (irsdataretrievaltool.com). This online tool lets you import your 2017 federal tax information straight into the FAFSA; it is accessed through a “Link to I.R.S.” button. (Information input into the Data Retrieval Tool must match what appeared in the federal tax return.)2,3

 

A FAFSA must list at least one college or university that the student currently attends or wants to attend. When multiple schools are listed, grant awards are made to the school listed first. (Colleges and universities can also be removed from a list of multiple schools.)1

  

Anyone who provides data for a FAFSA (a student, a parent, a college access advisor) must also sign that FAFSA. Without the appropriate signatures, the application is invalid. When it comes to these signatures, here is a tip all parents should remember: never hit the “Start Over” button when you log in to add your signature. If you accidentally click on that, all the information that your student has spent hours entering will be erased.1,2

 

Financial questions should not be left blank on the FAFSA. If the answer to a question is “none,” put a zero instead of nothing at all. Every monetary amount that includes cents should be rounded to the nearest dollar.1

 

Unsurprisingly, some families want help when filling out the FAFSA. Recognizing this, the Department of Education offers a 66-page guide to completing the form; you will find it at studentaid.ed.gov. It also provides a FAFSA hotline: (800) 433-3243. You may want to chat with a financial professional who focuses on college planning or a university financial aid officer for additional insight.1

 

The FAFSA is often a pathway to considerable financial assistance: grants, work study programs, federal student loans. The average FAFSA applicant for the 2015-16 school year received roughly $8,500. A FAFSA costs nothing to fill out or send around, and there is absolutely nothing to lose in submitting one.2

MidAmerica Financial Resources may be reached at 618.548.4777 or greg.malan@lpl.com www.mid-america.us

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Securities and advisory services offered through LPL Financial, a Registered Investment Adviser, Member FINRA/SIPC.
MidAmerica Financial Resources and Malan Financial Group are separate and unrelated companies to LPL.

Citations.

1 – tinyurl.com/yd7l9u9z [9/12/18]

2 – cnbc.com/2018/09/18/you-can-now-apply-for-financial-aid-on-your-phone.html [9/18/18]

3 – studentaid.ed.gov/sa/resources/irs-drt-text [9/27/18]

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