Planning by the Decade

As we start this New Year, what are you looking forward to? Yes, you will be another year older. But the years show that age is largely a state of mind.  Noted Supreme Court Justice Oliver Wendell Holmes, Sr. said, ” To be seventy years young is sometimes far more cheerful and hopeful than to be forty years old.”

Regardless of your outlook, the years do bring estate planning matters to attend to through the decades. Here’s a brief overview of considerations you may want to think about and take action on, depending on your age.

In your 30’s and 40’s (and possibly 50’s)

At these ages, growing an estate and protecting an inheritance for underage children will take precedence. That means naming guardians for your children, and having trust arrangements to handle an inheritance if a sudden death occurs. Also, retirement plans (such as your IRA, 401k, or 403b plan) deserve need careful consideration for beneficiaries, particularly for young children. You don’t want to leave your IRA to a child who is not yet 18, and often it is better to keep the IRA managed by someone other than a young adult who has never had experience managing money (other than spending it, of course.) You should also consider life insurance and start considering options to insure future long-term care.  If you’ve gone through a divorce you likely will need to reconsider who will be your executor and trustee, and also who would make decisions for you if you become incapacitated.

In your 60’s

Two major considerations for nearly every Baby Boomer in the United States are “When should I start taking Social Security?” and “What should I do about Medicare?” About 10,000 Boomers each day will be turning 65 between now and 2030. If you’re nearing age 65, you should be thinking about Medicare in advance. The age for Medicare eligibility is still age 65; unlike full retirement age for Social Security, the date for Medicare eligibility has not changed. Delaying enrollment can result in costly and unexpected penalties so it’s important to know your options and act promptly.

Medicare does not cover all medical costs. You may want to consider a Medigap policy to help cover some of the Medicare deductibles and copayments. You can also consider a Medicare Advantage Plan, in lieu of traditional Medicare. You’ll also want to look into Medicare Part D to cover prescription drug costs. You can search online for a Medigap policy at the www.Medicare.gov website. Also in North Carolina you can get help on Medicare and insurance through the NC Department of Insurance SHIIP program, at www.ncdoi.com/SHIIP/

Social Security is more of a moving target. You have three options for retirement benefits, as follows:

The right answer for you will depend on your health, life expectancy, continued employment, family dynamics, your retirement assets and IRAs, and financial goals. The rules for Social Security are the same for everyone, but everyone’s situation is different.

Everything mentioned for earlier years still applies, and you should plan ahead for what happens if you have long-term care concerns and possible Medicaid. It is also a good time to consider how to simplify your overall estate, since many people find themselves with quite a few accounts started over the years that should be consolidated for simplicity and easier management.

In your 70’s

Get ready for your Required Minimum Distributions (RMDs) since you’re going to have to start taking them the year that you turn age 70-1/2. The RMD rules do not apply to the original Roth IRA owner. RMD rules do apply for inherited IRAs (both traditional IRAs and Roth IRAs).  Not only will you need to consider when and how much to withdraw, you will also need to decide what to do with your distribution to minimize taxes and coordinate your larger retirement plan.