Fong Law Group

Medicare Open Enrollment - and New Benefits - Are on the Way

Medicare open enrollment is on the horizon. Now is the time to start thinking about any changes you may want to make to your Medicare coverage. Thanks to the Inflation Reduction Act, some significant changes have come along for Medicare, and more will take effect in the near future.

Medicare Open Enrollment

Medicare open enrollment happens once each year. In 2024, the open enrollment period is between October 15 and December 7. Any changes to your Medicare plans will take effect on January 1, 2025. During the open enrollment period, you can:

• Join or drop a Medicare Advantage Plan, switch between Medicare Advantage Plans, or add or drop Medicare prescription coverage.
• Switch from Original Medicare to a Medicare Advantage Plan or vice versa.
• Join or drop a Medicare prescription drug plan, or switch to a different drug plan if you are enrolled in Original Medicare.

If you are already in a Medicare Advantage Plan, you will also have an open enrollment period between January 1 and March 31 of 2025, during which you can:

• switch to another Medicare Advantage Plan (with or without drug coverage);
• drop your Medicare Advantage Plan and return to Original Medicare; or
• join a separate Medicare drug plan.

Learn more about Medicare enrollment periods and how to join the various plans.

Lower Drug Prices for Medicare Members

One of the most significant changes Medicare beneficiaries will see in the coming years is the lowering of prescription drug prices. Under the Inflation Reduction Act (IRA), the federal government was granted the authority to negotiate the prices of certain high-cost medications covered under Medicare. This historic move is designed to reduce out-of-pocket expenses for beneficiaries and lower costs for the Medicare system.

In 2026, the first round of negotiated prices will take effect, affecting the cost of 10 widely used prescription drugs. These drugs were chosen because of their high cost, they are each available only from single sources, and there are no generic or biosimilar competitors.

The following chart outlines the initial 10 drugs that will be affected by the lower negotiated prices. The prices in the chart are rounded and represent estimates of the Wholesale Acquisition Costs (WACs) based on a 30-day supply in calendar year 2022.

The manufacturers of the drugs are participating in the Negotiation Program voluntarily. The below information is subject to change. Learn more on the Centers for Medicare & Medicaid Services (CMS) website.

Negotiated Prices for 10 Medicare Drugs (going into effect in 2026)

Drug Name	Commonly Treated Condition	List Price for 30-Day Supply in 2023	Discount of Negotiated Price From 2023 List Price	Agreed-to Negotiated Price for 30-Day Supply for 2026
Januvia	Diabetes	$527	79%	$113
Fiasp, Fiasp FlexTouch, Fiasp PenFill, NovoLog, NovoLog FlexPen, NovoLog PenFill	Diabetes	$495	76%	$119
Farxiga	Diabetes, Heart failure, Chronic kidney disease	$556	68%	$178.50
Enbrel	Rheumatoid arthritis, Psoriasis, Psoriatic arthritis	$7,106	67%	$2,355
Jardiance	Diabetes, Heart Failure, Chronic kidney disease	$573	66%	$197
Stelara	Psoriasis, Psoriatic arthritis, Crohn’s disease, Ulcerative colitis	$13,836	66%	$4,695
Xarelto	Prevention and treatment of blood clots, Reduction of risk for patients with coronary or peripheral artery disease	$517	62%	$197
Eliquis	Prevention and treatment of blood clots	$521	56%	$231
Entresto	Heart failure	$628	53%	$295
Imbruvia	Blood cancers	$14,934	38%	$9,319

If you take any of these 10 drugs, you will want to monitor developments closely. Keep in mind the lower prices will not take effect until 2026. Planning ahead can help you anticipate future savings and make informed decisions during the 2025 open enrollment period.

In addition to the 10 drugs listed above, the CMS will pick 15 more drugs by February 1, 2025, that are covered under Medicare Part D to negotiate lower prices for starting in 2027. For 2028, CMS will negotiate lower prices for 15 more drugs that are covered by Medicare Part B and Part D. Up to 20 more Part B and Part D drugs will be chosen for lower negotiated prices each year after 2028.

Americans Are Still Paying More for Medications

Even with these discounts, Americans are still paying more for brand-name prescription medications than people in most other countries. According to The Commonwealth Fund, Americans’ per capita spending on pharmaceuticals is nearly three times the average of citizens of other Organisation for Economic Co-operation and Development (OECD) nations.

A 2022 study published by JAMA found that about a fifth of U.S. adults over the age of 65 were trying to reduce their prescription drug costs by skipping or delaying filling their prescriptions, reducing or skipping doses, or using another person’s medication. Some survey respondents said they had to forgo basic needs or start accruing debt so they could afford their medications. Such desperate measures can have serious consequences for people with chronic health conditions.

More Changes Coming to Medicare

The IRA offers additional changes that will help Medicare beneficiaries on other fronts as well.

• Medicare beneficiaries will have a yearly cap on how much they will have to spend on out-of-pocket prescription drugs covered by Medicare. The cap for 2025 is to be set at $2,000.
• Insulin costs are capped at $35 per month per covered prescription for those who are enrolled in Medicare Part D. This cap may not apply to all insulin products. Check with your care provider to determine whether this applies to you.
• Recommended vaccines will be available at no cost to people who have Medicare prescription drug coverage.
• The Medicare Part D low-income subsidy program (LIS), also known as Extra Help, has been expanded to 150 percent of the federal poverty level (FPL). If your annual income is 150 percent of the FPL, then you may qualify for the Extra Help program.
• Companies that raise the prices of certain drugs faster than the rate of inflation must pay a rebate to Medicare.

Learn More About Medicare and Late-Life Planning

As is typical of health insurance and health care, Medicare and its related plans have nuances. Speak with a health care professional or your elder law attorney. They can discuss your specific situation and potential options with you.

Can an IRA Affect Medicaid Eligibility?

For many Medicaid applicants, individual retirement accounts (IRAs) are one of their biggest assets. If you do not plan properly, IRAs can count as an available asset and affect Medicaid eligibility.

Medicaid applicants can have only a small amount of assets in order to be eligible to receive benefits ($2,000 in most states). Certain assets -- i.e., a house, car, and burial plot -- are exempt from eligibility determinations. Whether your IRA counts as an exempt asset depends on whether it is in "payout status" or not.

At age 72 (or if you turned 70 ½ in 2019 or before), individuals must begin taking required minimum distributions from their IRAs, which means the IRA is in payout status. You may also be able to choose to put your IRA in payout status as young as age 59 ½ if you elect to take regular, periodic distributions based on life expectancy tables. If an IRA is in payout status, depending on your state, it may not count as an available asset for the purposes of Medicaid eligibility, but the payments you receive will count as income. Medicaid recipients are allowed to keep a tiny amount of income for personal use and the rest will go to the nursing home. 

If the IRA is not in payout status, the IRA is a non-exempt asset, which means the total amount in the IRA will probably be counted as an asset, affecting your Medicaid eligibility. In order to qualify for Medicaid, you will need to cash out your IRA and spend down the assets. Alternatively, you could transfer the money to your spouse or someone else, although there will likely be an income tax penalty for doing this. (Roth IRAs have no required minimum distributions and cannot be put in payout status, but they are usually counted as assets.)

The rules for a 401(k) are similar to an IRA. If the 401(k) is not in payout status, Medicaid may count as an asset any funds you are eligible to withdraw from the 401(k)--even if you have to pay a tax penalty to withdraw the funds. 

Note that the rules for a Roth IRA may be different. If you have a Roth IRA, depending on the rules in your state, it may not be exempt at all because Roth IRAs do not require minimum distributions.

The rules regarding IRAs and Medicaid are complicated and vary from state to state. You should talk to your attorney about your IRA to determine the best course of action for you.

How to Fix a Required Minimum Distribution Mistake

The rules around required minimum distributions from retirement accounts are confusing, and it’s easy to slip up. Fortunately, if you do make a mistake, there are steps you can take to fix the error and possibly avoid a stiff penalty.  

If you have a tax-deferred retirement plan such as a traditional IRA or 401(k), you are required to begin taking distributions once you reach a certain age, with the withdrawn money taxed at your then-current tax rate. If you were age 70 1/2 before the end of 2019, you had to begin taking required minimum distributions (RMDs) in April of the year after you turned 70. But if you were not yet 70 1/2 by the end of 2019, you can wait to take RMDs until age 72. If you miss a withdrawal or take less than you were required to, you must pay a 50 percent excise tax on the amount that should have been distributed but was not.

It can be easy to miss a distribution or not withdraw the correct amount. If you make a mistake, the first step is to quickly correct the mistake and take the correct distribution. If you missed more than one distribution – either from multiple years or because you withdrew from several different accounts in the same year -- it is better to take each distribution separately and for exactly the amount of the shortfall. 

The next step is to file IRS form 5329. If you have more than one missed distribution, you can include them on one form as long as they all occurred in the same year. If you missed distributions in multiple years, you need to file a separate form for each year. And married couples who both miss a distribution need to each file their own forms. The form can be tricky, so follow the instructions closely to make sure you correctly fill it out. 

In addition to completing form 5329, you should submit a letter, explaining why you missed the distribution and informing the IRS that you have now made the correct distributions. There is no clear definition of what the IRS will consider a reasonable explanation for missing a distribution. If the IRS does not waive the penalty, it will send you a notice.

For more detailed information on how to correct an RMD mistake, click here.

New Law Makes Big Changes to Retirement Plans

President Trump has signed a spending bill that makes major changes to retirement plans. The new law is designed to provide more incentives to save for retirement, but it may require workers to rethink some of their planning. 

The Setting Every Community Up for Retirement Enhancement (SECURE) Act changes the law surrounding retirement plans in several ways:

• Stretch IRAS. The biggest change eliminates “stretch” IRAs. Under current law, if you name anyone other than a spouse as the beneficiary of your IRA, the beneficiary can choose to take distributions over his or her lifetime and to pass what is left onto future generations (called the "stretch" option). The required minimum distributions are calculated based on the beneficiary’s life expectancy. This allows the money to grow tax-deferred over the course of the beneficiary’s life and to be passed on to his or her own beneficiaries. The SECURE Act requires beneficiaries of an IRA to withdraw all the money in the IRA within 10 years of the IRA holder’s death. In many cases, these withdrawals would take place during the beneficiary’s highest tax years, meaning that the elimination of the stretch IRA is effectively a tax increase on many Americans. This provision will apply to those who inherit IRAs starting on January 1, 2020.  
• Required minimum distributions. Under prior law, you have to begin taking distributions from your IRAs beginning when you reach age 70 ½. Under the new law, individuals who are not 70 ½ at the end of 2019 can now wait until age 72 to begin taking distributions. 
• Contributions. The new law allows workers to continue to contribute to an IRA after age 70 ½, which is the same as rules for 401(k)s and Roth IRAs.
• Employers. The tax credit businesses get for starting a retirement plan is increased and the new law makes it easier for small businesses to join multiple-employer plans.
• Annuities. The newly enacted legislation removes roadblocks that made employers wary of including annuities in 401(k) plans by eliminating some of the fiduciary requirements used to vet companies and products before they can be included in a plan.
• Withdrawals. The new law allows an early withdrawal of up to $5,000 from a retirement account without a penalty in the event of the birth of a child or an adoption. Currently, there is a 10 percent penalty for early withdrawals in most circumstances. 

Given these changes, workers need to immediately reevaluate their estate plans. Some people have used stretch IRAs as an estate planning tool to pass assets to their children and grandchildren. One way of doing this has been to name a trust as the IRA’s beneficiary, and these trusts may have to be reformed to conform to the new rules. If a stretch IRA is part of your estate plan, consult with your attorney to determine if you need to make changes.

To read the legislation, click here.  For more on the new law, click here and here.

Five Tips for Starting Retirement Planning in Your 50s

When it comes to retirement planning, many Americans find themselves underprepared. A majority of baby boomers (born between 1946 and 1964) and Generation X’ers (born between 1965 and 1978) often end up without retirement savings or don’t have realistic expectations about post-retirement costs. According to the Insured Retirement Institute, only 25 percent of boomers are confident of having sufficient savings in retirement. If you are in your 50s and nearing retirement without substantial savings or a plan, don’t despair -- it is never too late to start planning.

Although every working professional should contribute towards retirement from their early days, for various reasons they often delay the process. If you are nearing your 50s without a post-retirement plan and see yourself working for another 10 to 15 years, this is an opportunity to plan judiciously and save for your retirement right away.

Here are five strategic steps for achieving the best retirement plan:

1. Set Specific and Practical Goals

Proper retirement planning begins with setting specific goals. Calculate your current income, total savings, and ongoing investments to understand how much you could save, and be sure to set realistic goals.

While providing for emergency expenses and paying off a mortgage can be your short-term and intermediate goals, saving up for retirement should be your long-term goal. An annual financial review is helpful in evaluating your past goals and understanding your earnings as well as liabilities.

2. Plan a Realistic Budget Focusing on Retirement

Review your monthly and yearly expenses and list the factors that are likely to remain constant for the next few years. Now allocate funds to each category in a way that will allow you to save more for your retirement.

According to financial experts, if you are saving for retirement after 50, it is best to contribute 30 percent of your salary towards this end. If you find that goal difficult to meet, look at your budget list and reduce optional expenses.

3. Pay Off Debts

Paying off debts early will help you meet your retirement budgets and ease the financial burden. According to an AARP report, 44 percent of Americans continue to pay for their home after they retire.

Clearing off outstanding debts, credit card bills, loans, and mortgages will make it much easier to prioritize retirement funds.

4. Invest in Retirement Plans

401(k)s, 403(b)s and IRAs are some of the retirement plans available in the U.S.  While 401(k)s are one of the most popular plans, not all companies offer them and those that do have their own, often restrictive, investment rules. Then there are two types of IRAs:  traditional and Roth IRAs.

To make the best choice among the many retirement plan options, it is essential to have a thorough understanding of IRA vs 401(k), Roth IRA vs 401(k) and other investment alternatives, as well as contribution limits.

5. Diversify Your Investments

Investment diversification will help keep you on a firm financial footing. Do not stash all your money in banks; instead, create an investment portfolio and explore your options.

It is important to diversify and distribute your money among multiple sectors. Considering the volatility of markets, diversification of your investment portfolio safeguards your capital and helps it grow.

It’s Time to Step Up a Gear

A concrete retirement plan with emphasis on savings is essential to ensure a comfortable and healthy post-retirement life. Saving for your retirement is the first priority and the sooner you start, the better your chances of achieving your retirement goals.

A Final Retirement Account Distribution Must Still Be Made After Death 最後的退休賬戶分配仍必須在去世後進行(中英對照)

Federal law requires that beginning on April 1 of the year after you reach age 70 1/2, you must beginwithdrawing a minimum amount from your non-Roth individual retirement account (IRA) or 401(k) accounts. These withdrawals are called required minimum distributions (RMDs).

But what if you die after age 70 1/2 and before all the account funds have been distributed? In the eyes of the law, death is no excuse not to take RMDs from an IRA or 401(k). Your heirs must take the final RMD before they can take control of the account.  

Congress created the rules governing the minimum distribution of retirement plan funds to encourage saving for retirement and to allow retirement assets to build up tax-free during the plan owner's working years. But lawmakers built in provisions so the money wouldn’t simply keep accumulating tax-free forever. The funds you withdraw are treated as taxable income in the year you take the distribution. If you don’t start taking the RMDs from your retirement accounts and pay taxes on the withdrawals, you will face a 50 percent penalty on what should have been withdrawn but wasn’t.

The rules for inheriting an IRA as a spouse are different than the rules for a non-spouse beneficiary, but regardless of who is inheriting the IRA, the heir must take the RMD for the year the account owner died. The full RMD must be taken by December 31 in the year the account owner died, even if he or she died at the beginning of the year. To take the RMD, beneficiaries must contact the custodian of the account and submit a death certificate. If the account owner died before he or she was required to begin distributions, then the beneficiaries do not need to take an RMD. 

The money from the RMD will go directly to the beneficiary listed on the account, not the estate. That means it will be taxable income for the beneficiary. If there is more than one beneficiary, it will be split evenly. 

To find out the best way to deal with an inherited IRA, contact an elder law attorney. 

聯邦法律規定在您70 歲半之後的一年的4月1日開始，您必須從您的Roth非個人退休賬戶（IRA）或401（k）賬戶中開始提取最低金額。這些提取稱為最低的必須提取額（RMDs）。

但是，如果你在70歲半過世,而過世時帳戶資金還沒被提取, 那怎麼辦？在法律的眼中，死亡不是不從IRA或401（k）中提取RMD的藉口。您的繼承人必須先提取最後的RMD才能控制該帳戶。

國會立例去管理退休計劃資金最低提取的規則，以鼓勵為退休而儲蓄，並允許退休資產在計劃擁有人的工作年間免稅。但立法者建立了條款，所以累積這筆錢不會永遠地免稅。您提取的資金在您進行分配的那一年被視為應稅收入。如果您沒有從退休賬戶中開始使用RMD並對提款付稅，那麼您應該提取而沒有提取的金額將面臨5成的罰款。

作為配偶去繼承IRA的規則與非配偶受益人的規則不同，但無論由誰去繼承IRA，繼承人必須在賬戶擁有人去世的那一年提取RMD。整個RMD必須在帳戶擁有人去世的那一年的12月31日之前提取，即使他是在年初去世。要提取RMD，受益人必須聯繫帳戶的管理人並提交死亡證明。如果帳戶擁有人在他需要提取之前去世，那麼受益人不需要提取RMD。

RMD的資金將直接轉給賬戶上列出的受益人，而不是遺產。即是說這將是受益人的應稅收入。如果有一個以上的受益人，它將被均分。

要找到最佳的處理繼承IRA的方法，請聯繫老人法律師。

Due Diligence Needed, If Retirement Depends on Inheritance, Selling Business

“I am 60 years old, divorced and have never taken an active interest in my finances. I’ve never worried about saving for retirement. I felt that when I retired, I’d be able to sell my business and that along with the inheritance I would receive from my parents, I would be in good shape.”

The first sentence in this article from Hometown Life, “Playing off charge card debt a major priority,” tells the entire story: “I…have never taken an active interest in my finances.” The person never had his business evaluated by a professional and learned at age 60 that his business had no resale value. In addition, he learned that his parents were supporting a sister and any inheritance he was anticipating would not be enough to live on.

Making matters worse, he has more than $80,000 in credit card debt on various cards, at interest rates between 18% and 21%. With next to no equity in his home and a home equity loan and a mortgage, this person has only one asset: an IRA worth around $100,000.

At some point in their lives, most people realize that they must be active participants in their financial lives. They need a budget to contain spending and a savings plan, so they can enjoy their retirement and control of their credit card debt. It sounds like this man just got a wake-up call.

He wonders how to resolve his credit card debt, but it seems there are a number of other issues that need to be addressed.

First, he should pay off his credit card debt. At 18% to 21%, there is no investment he could make that would come near that rate. One way to do this, is to increase his monthly payments. It may take many years to knock down such a large debt, so another option is to use his IRA to pay off the money immediately.

Equally important is for him to commit to use the money he would have otherwise used to pay off credit card debt and invest that into a retirement fund. It doesn’t matter if he uses an IRA, a SEP or a Roth, but he needs to be disciplined and start putting money away for his retirement.

Potential inheritances are troublesome for people who count their chickens before they hatch. Until the inheritance is safely in your own bank account, you cannot count on it. In a time where living expenses are high and people are living longer, fewer and fewer people are expecting to receive inheritances. Basing a lifestyle around an expected inheritance, can only lead to financial disaster.

Preparing for retirement and taking an active role in managing your finances, is a life-long task and part of our responsibility as adults. Another responsibility is to have an estate plan in place, so even people who die in debt, can be assured that what assets they do have will go to their heirs.

Reference: Hometown Life (March 3, 2019) “Playing off charge card debt a major priority”

Tips to Boost Your Tax-Free Income in Retirement

“Although workers are told to put every spare pre-tax cent into a traditional 401(k) at work, the reality is that once the time comes to tap that account for income in retirement, income taxes will follow.”

There is a bright side to the income taxes that will follow you into retirement. Create a pool of tax-free income, advises CNBC, by following the advice in the article “3 tips to help boost your tax-free income in retirement.”

Introduce yourself to the Roth IRA and the Roth 401(k). Unlike a traditional IRA, with a Roth IRA you pay taxes when you make your contribution to the account. The funds then grow tax-free over time and, as long as you meet certain conditions, there are no taxes on withdrawals. With a Roth IRA, there are none of those pesky RMDs (Required Minimum Distributions). However, there are withdrawal distribution requirements for a Roth (401)k.

Most employers offer Roth IRA and Roth 401(k) accounts, so there’s a good chance they are offered by your employer.

Roth IRAs are often offered along with their counterpart, the traditional 401(k). Between the two of them, it’s possible to save as much as $19,000 in 2019. For those workers who are 50 and over, you can add $6,000 as a catch-up contribution.

The power of the Roth 401(k) is the tax-free compounding that takes place over time. Don’t miss out on this, if you want to max out your tax-free savings.

There are two different types of Roth plans: the Roth 401(k) and a Roth IRA. Roth IRA plans have income limits. If your modified AGI (Adjusted Gross Income) is more than $137,000 for a single and $203,000 for a couple filing jointly, you aren’t allowed to make a direct contribution to a Roth IRA. However, there are no income caps for Roth (401)k. You can also save more for retirement in a Roth 401(k), compared to a Roth IRA. Roth IRAs are also subject to annual contribution limits: $6,000 in 2019, plus a $1,000 catch-up contribution, if you are over age 50.

Here are three steps to make your retirement savings more tax free:

Can you do an in-plan conversion? If your employer offers a Roth 401(k), you may be able to convert some of your traditional 401(k) savings to the Roth. This is called an in-plan Roth conversion. Just like a direct contribution to a Roth 401(k), it will be taxable. Therefore, make sure that you run the numbers before moving funds. You’ll be responsible for taxes on pretax principal and earnings. Don’t do it all at once, so that you don’t find yourself moved into a higher tax bracket.

What does your plan allow? If you’ve left your employer and have money in both a traditional 401(k) and a Roth (401)k, you might want to convert those accounts — if your retirement plan allows it.  Remember that you may not write a check from an outside bank account to add after-tax money to a Roth 401(k).

What’s your time-frame? Just as young workers are in the best position to save early and often, they are also in the best position to make the most out of Roth savings accounts of all types. It’s likely that younger workers have not yet reached their full career and earnings stage, so now is the best time to put money into a Roth 401(k). When incomes are higher, so will taxes on Roth retirement account contributions. If you’re close to retirement, there are other timing factors to consider, primarily Medicare. How much you pay for Medicare Part B and D, which covers doctor’s visits and prescription drugs, depends upon your modified gross income from two years ago. Do the conversion to a Roth at age 62, if you intend to file for Medicare at age 65.

Reference: CNBC (Feb. 10, 2019) “3 tips to help boost your tax-free income in retirement”

 

How Am I Going to Have Enough Money to Retire?

“How much do you need to save? How much can you really afford to put away and still live the life you deserve today? How does anyone make it work?”

It can be very overwhelming to save for retirement. How are you expected to take care of your responsibilities to your family, enjoy life and put away enough to have an enjoyable retirement that might last 10, 20 or even 30 years? That’s the question posed in the Twin Cities Pioneer Press article, “Your Money: Helping you live in the moment and plan for the future.”

The question is asked frequently by people at all ages and stages of their lives. Here are some tips on how you can use comprehensive financial planning — by looking at a variety of retirement income savings methods and income strategies — to make the most of retirement savings. Some of them may not apply now, but you’ll need to know about them in the future, like Social Security.

Do you have a retirement savings strategy? Not everyone takes advantage of the 401(k)s, 403(b)s and IRAs that are available. Some of these retirement accounts come through an employer, and a traditional IRA can be set up on your own. If you work for a company that offers the option of having a Roth IRA and you’re just starting your career, it could be a great option. You pay taxes on contributions now, when your income may be lower, but when you take distributions, you won’t pay income tax on them. There are no required distributions for a Roth IRA — other retirement accounts require a certain amount of yearly withdrawals. If you are in a high-income tax bracket, the Roth IRA is not for you.

Social Security strategies make a big difference in retirement income. Deciding when to take benefits is complicated. However, it is well worth the effort. It could be a difference of thousands of dollars over time. Realize that the later you start taking benefits, up until your 70^th birthday, the greater the benefits will be. Your Full Retirement Age or FRA is currently age 66 for Americans born between 1943–1954, and a few months older for those born later. You can apply for benefits as early as age 62, but you’ll get a reduced benefit — as much as 25%!

What about a Roth conversion? For some people, enhancing their retirement savings by moving existing savings into accounts that offer better tax advantages, adds up nicely for current and future tax brackets. A Roth conversion is when you pay the tax on all or a portion of a traditional IRA and move it into a Roth IRA, where it continues growing. If you have owned the account for at least five years, you can then take withdrawals out tax free, once you turn 59½. Note that this is a complicated decision that must be made in conjunction with all of your other retirement and investment funds.

Planning for retirement income is just that: planning. The alternative — winging it and hoping for the best — rarely works out. The earlier you begin planning for your retirement, the more likely it is that you’ll enjoy this phase of your life.

Reference: Twin Cities Pioneer Press (Jan. 26, 2019) “Your Money: Helping you live in the moment and plan for the future”

Empty Nest? Time to Focus on the Nest Egg

“Each child reduces the household wealth of Americans between the ages of 30 and 59 by about 3% or 4%, according to data from the Center for Retirement Research at Boston College.”

After decades devoted to rearing children, it happens: parents realize that they’ve neglected their own retirement savings. Once the nest empties out, says USA Today, it’s time to refocus on building up savings accounts. How do you do it? The answers are in the article “5 ways empty nesters can boost their savings and turbocharge their 401(k)s.”

Here’s a five-step plan for making this happen.

Up the savings side. Once you’re not spending cash on your kids for clothes, college funds, cars and car insurance, that cash can move into retirement savings. The maximum for a 401(k) in 2019 is $19,000, and if you are over age 50, you can add $6,000 as a “catch-up” contribution. For annual IRA contributions, the limit is $5,000 with a catch-up of $1,000. Increase your paycheck deductions to the percentage, that will get you to the IRS limits. Put savings first.

If there’s a match, don’t miss it. Lucky enough to work for a company that matches all or part of your retirement savings? Do whatever you can to take full advantage of that free money. The most common company match is 50 cents per dollar on 6% of pay, according to Vanguard Group, which says that 70% of 401(k) plans had this match in place in 2017. Let’s say you earn $75,000 and save 6% of your pay. The company would give you $2,250, which means you’d be boosting your savings to $6,750.

Max out savings. The more money that is saved, the faster the nest egg grows. A married couple that socks away a combined $50,000 in pretax dollars every year in their 401(k)s, can find themselves with an additional $250,000 in five years. That’s not counting company matches or any investment growth.

Catch-up as fast as you can. Over 50? The IRS promotes savings by allowing catch-up contributions. An additional $6,000 is allowed in a 401(k). Parents who were paying for summer sleep away camp or riding lessons, can move those dollars into their own retirement accounts.

Control spending. The natural inclination when cash flow loosens up, is to spend more. Many people decide to live it up during these years, feeling like they deserve to enjoy themselves after dedicating so many years to their children. There’s a balance that needs to be found between enjoying and over-spending. Most families increase their retirement savings when the children are gone, but not by enough. Ramping up spending, instead of saving, means years of missed opportunities to build your retirement accounts.

The best advice is to take the long view. Savings instead of putting a convertible in the garage or taking lavish vacations, when a more modest approach is equally enjoyable, could change the nature of your retirement.

Reference: USA Today (Jan. 14, 2019) “5 ways empty nesters can boost their savings and turbocharge their 401(k)s”