Friday, August 26, 2016

Retirement Plans for Small Businesses -by John Jastremski

If you're self-employed or own a small business and you haven't established a retirement savings plan, what are you waiting for? A retirement plan can help you and your employees save for the future.

Tax advantages

A retirement plan can have significant tax advantages:
• Your contributions are deductible when made
• Your contributions aren't taxed to an employee until distributed from the plan
• Money in the retirement program grows tax deferred (or, in the case of Roth accounts, potentially tax free)

Types of plans

Retirement plans are usually either IRA-based (like SEPs and SIMPLE IRAs) or "qualified" (like 401(k)s, profit-sharing plans, and defined benefit plans). Qualified plans are generally more complicated and expensive to maintain than IRA-based plans because they have to comply with specific Internal Revenue Code and ERISA (the Employee Retirement Income Security Act of 1974) requirements in order to qualify for their tax benefits. Also, qualified plan assets must be held either in trust or by an insurance company. With IRA-based plans, your employees own (i.e., "vest" in) your contributions immediately. With qualified plans, you can generally require that your employees work a certain numbers of years before they vest.

Which plan is right for you?

With a dizzying array of retirement plans to choose from, each with unique advantages and disadvantages, you'll need to clearly define your goals before attempting to choose a plan. For example, do you want:

• To maximize the amount you can save for your own retirement?
• A plan funded by employer contributions? By employee contributions? Both?
• A plan that allows you and your employees to make pretax and/or Roth contributions?
• The flexibility to skip employer contributions in some years?
• A plan with lowest costs? Easiest administration?
The answers to these questions can help guide you and your retirement professional to the plan (or combination of plans) most appropriate for you.

SEPs

A SEP allows you to set up an IRA (a "SEP-IRA") for yourself and each of your eligible employees. You contribute a uniform percentage of pay for each employee, although you don't have to make contributions every year, offering you some flexibility when business conditions vary. For 2015, your contributions for each employee are limited to the lesser of 25% of pay or $53,000. Most employers, including those who are self-employed, can establish a SEP.

SEPs have low start-up and operating costs and can be established using an easy two-page form. The plan must cover any employee aged 21 or older who has worked for you for three of the last five years and who earns $600 or more.

SIMPLE IRA plan

The SIMPLE IRA plan is available if you have 100 or fewer employees. Employees can elect to make pretax contributions in 2015 of up to $12,500 ($15,500 if age 50 or older). You must either match your employees' contributions dollar for dollar--up to 3% of each employee's compensation--or make a fixed contribution of 2% of compensation for each eligible employee. (The 3% match can be reduced to 1% in any two of five years.) Each employee who earned $5,000 or more in any two prior years, and who is expected to earn at least $5,000 in the current year, must be allowed to participate in the plan. SIMPLE IRA plans are easy to set up. You fill out a short form to establish a plan and ensure that SIMPLE IRAs are set up for each employee. A financial institution can do much of the paperwork. Additionally, administrative costs are low.

Profit-sharing plan

Typically, only you, not your employees, contribute to a qualified profit-sharing plan. Your contributions are discretionary--there's usually no set amount you need to contribute each year, and you have the flexibility to contribute nothing at all in a given year if you so choose (although your contributions must be nondiscriminatory, and "substantial and recurring," for your plan to remain qualified). The plan must contain a formula for determining how your contributions are allocated among plan participants. A separate account is established for each participant that holds your contributions and any investment gains or losses. Generally, each employee with a year of service is eligible to participate (although you can require two years of service if your contributions are immediately vested). Contributions for any employee in 2015 can't exceed the lesser of $53,000 or 100% of the employee's compensation.

401(k) plan

The 401(k) plan (technically, a qualified profit-sharing plan with a cash or deferred feature) has become a hugely popular retirement savings vehicle for small businesses. According to the Investment Company Institute, 401(k) plans held $4.3 trillion of assets as of March 2014, and covered 52 million active participants. (Source: www.ici.org/401(k), accessed February 5, 2015.) With a 401(k) plan, employees can make pretax and/or Roth contributions in 2015 of up to $18,000 of pay ($24,000 if age 50 or older). These deferrals go into a separate account for each employee and aren't taxed until distributed. Generally, each employee with a year of service must be allowed to contribute to the plan.

You can also make employer contributions to your 401(k) plan--either matching contributions or discretionary profit-sharing contributions. Combined employer and employee contributions for any employee in 2015 can't exceed the lesser of $53,000 (plus catch-up contributions of up to $6,000 if your employee is age 50 or older) or 100% of the employee's compensation. In general, each employee with a year of service is eligible to receive employer contributions, but you can require two years of service if your contributions are immediately vested.

401(k) plans are required to perform somewhat complicated testing each year to make sure benefits aren't disproportionately weighted toward higher paid employees. However, you don't have to perform discrimination testing if you adopt a "safe harbor" 401(k) plan. With a safe harbor 401(k) plan, you generally have to either match your employees' contributions (100% of employee deferrals up to 3% of compensation, and 50% of deferrals between 3 and 5% of compensation), or make a fixed contribution of 3% of compensation for all eligible employees, regardless of whether they contribute to the plan. Your contributions must be fully vested.

Another way to avoid discrimination testing is by adopting a SIMPLE 401(k) plan. These plans are similar to SIMPLE IRAs, but can also allow loans and Roth contributions. Because they're still qualified plans (and therefore more complicated than SIMPLE IRAs), and allow less deferrals than traditional 401(k)s, SIMPLE 401(k)s haven't become popular.

Defined benefit plan

A defined benefit plan is a qualified retirement plan that guarantees your employees a specified level of benefits at retirement (for example, an annual benefit equal to 30% of final average pay). As the name suggests, it's the retirement benefit that's defined, not the level of contributions to the plan. In 2015, a defined benefit plan can provide an annual benefit of up to $210,000 (or 100% of pay if less). 

The services of an actuary are generally needed to determine the annual contributions that you must make to the plan to fund the promised benefit. Your contributions may vary from year to year, depending on the performance of plan investments and other factors.

In general, defined benefit plans are too costly and too complex for most small businesses. However, because they can provide the largest benefit of any retirement plan, and therefore allow the largest deductible employer contribution, defined benefit plans can be attractive to businesses that have a small group of highly compensated owners who are seeking to contribute as much money as possible on a tax-deferred basis.

As an employer, you have an important role to play in helping America's workers save. Now is the time to look into retirement plan programs for you and your employees.








This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.
The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.

Wednesday, August 24, 2016

Changing Jobs? Take Your 401(k) and Roll It -by John Jastremski

If you've lost your job, or are changing jobs, you may be wondering what to do with your 401(k) plan account. It's important to understand your options.

What will I be entitled to?

If you leave your job (voluntarily or involuntarily), you'll be entitled to a distribution of your vested balance. Your vested balance always includes your own contributions (pretax, after-tax, and Roth) and typically any investment earnings on those amounts. It also includes employer contributions (and earnings) that have satisfied your plan's vesting schedule.

In general, you must be 100% vested in your employer's contributions after 3 years of service ("cliff vesting"), or you must vest gradually, 20% per year until you're fully vested after 6 years ("graded vesting"). Plans can have faster vesting schedules, and some even have 100% immediate vesting. You'll also be 100% vested once you've reached your plan's normal retirement age.

It's important for you to understand how your particular plan's vesting schedule works, because you'll forfeit any employer contributions that haven't vested by the time you leave your job. Your summary plan description (SPD) will spell out how the vesting schedule for your particular plan works. If you don't have one, ask your plan administrator for it. If you're on the cusp of vesting, it may make sense to wait a bit before leaving, if you have that luxury.

Don't spend it, roll it!

While this pool of dollars may look attractive, don't spend it unless you absolutely need to. If you take a distribution you'll be taxed, at ordinary income tax rates, on the entire value of your account except for any after-tax or Roth 401(k) contributions you've made. And, if you're not yet age 55, an additional 10% penalty may apply to the taxable portion of your payout. (Special rules may apply if you receive a lump-sum distribution and you were born before 1936, or if the lump-sum includes employer stock.)

If your vested balance is more than $5,000, you can leave your money in your employer's plan until you reach normal retirement age. But your employer must also allow you to make a direct rollover to an IRA or to another employer's 401(k) plan. As the name suggests, in a direct rollover the money passes directly from your 401(k) plan account to the IRA or other plan. This is preferable to a "60-day rollover," where you get the check and then roll the money over yourself, because your employer has to withhold 20% of the taxable portion of a 60-day rollover. You can still roll over the entire amount of your distribution, but you'll need to come up with the 20% that's been withheld until you recapture that amount when you file your income tax return.

Should I roll over to my new employer's 401(k) plan or to an IRA?

Assuming both options are available to you, there's no right or wrong answer to this question. There are strong arguments to be made on both sides. You need to weigh all of the factors, and make a decision based on your own needs and priorities. It's best to have a professional assist you with this, since the decision you make may have significant consequences--both now and in the future.

Reasons to roll over to an IRA:

• You generally have more investment choices with an IRA than with an employer's 401(k) plan. You typically may freely move your money around to the various investments offered by your IRA trustee, and you may divide up your balance among as many of those investments as you want. By contrast, employer-sponsored plans typically give you a limited menu of investments (usually mutual funds) from which to choose.

• You can freely allocate your IRA dollars among different IRA trustees/custodians. There's no limit on how many direct, trustee-to-trustee IRA transfers you can do in a year. This gives you flexibility to change trustees often if you are dissatisfied with investment performance or customer service. It can also allow you to have IRA accounts with more than one institution for added diversification. With an employer's plan, you can't move the funds to a different trustee unless you leave your job and roll over the funds.

• An IRA may give you more flexibility with distributions. Your distribution options in a 401(k) plan depend on the terms of that particular plan, and your options may be limited. However, with an IRA, the timing and amount of distributions is generally at your discretion (until you reach age 70½ and must start taking required minimum distributions in the case of a traditional IRA).

• You can roll over (essentially "convert") your 401(k) plan distribution to a Roth IRA. You'll generally have to pay taxes on the amount you roll over (minus any after-tax contributions you've made), but any qualified distributions from the Roth IRA in the future will be tax free.

Reasons to roll over to your new employer's 401(k) plan:

• Many employer-sponsored plans have loan provisions. If you roll over your retirement funds to a new employer's plan that permits loans, you may be able to borrow up to 50% of the amount you roll over if you need the money. You can't borrow from an IRA--you can only access the money in an IRA by taking a distribution, which may be subject to income tax and penalties. (You can, however, give yourself a short-term loan from an IRA by taking a distribution, and then rolling the dollars back to an IRA within 60 days.)

• A rollover to your new employer's 401(k) plan may provide greater creditor protection than a rollover to an IRA. Most 401(k) plans receive unlimited protection from your creditors under federal law. Your creditors (with certain exceptions) cannot attach your plan funds to satisfy any of your debts and obligations, regardless of whether you've declared bankruptcy. In contrast, any amounts you roll over to a traditional or Roth IRA are generally protected under federal law only if you declare bankruptcy. Any creditor protection your IRA may receive in cases outside of bankruptcy will generally depend on the laws of your particular state. If you are concerned about asset protection, be sure to seek the assistance of a qualified professional.

• You may be able to postpone required minimum distributions. For traditional IRAs, these distributions must begin by April 1 following the year you reach age 70½. However, if you work past that age and are still participating in your employer's 401(k) plan, you can delay your first distribution from that plan until April 1 following the year of your retirement. (You also must own no more than 5% of the company.)

• If your distribution includes Roth 401(k) contributions and earnings, you can roll those amounts over to either a Roth IRA or your new employer's Roth 401(k) plan (if it accepts rollovers). If you roll the funds over to a Roth IRA, the Roth IRA holding period will determine when you can begin receiving tax-free qualified distributions from the IRA. So if you're establishing a Roth IRA for the first time, your Roth 401(k) dollars will be subject to a brand new 5-year holding period. On the other hand, if you roll the dollars over to your new employer's Roth 401 (k) plan, your existing 5-year holding period will carry over to the new plan. This may enable you to receive tax-free qualified distributions sooner.

When evaluating whether to initiate a rollover always be sure to (1) ask about possible surrender charges that may be imposed by your employer plan, or new surrender charges that your IRA may impose, (2) compare investment fees and expenses charged by your IRA (and investment funds) with those charged by your employer plan (if any), and (3) understand any accumulated rights or guarantees that you may be giving up by transferring funds out of your employer plan.

What about outstanding plan loans?

In general, if you have an outstanding plan loan, you'll need to pay it back, or the outstanding balance will be taxed as if it had been distributed to you in cash. If you can't pay the loan back before you leave, you'll still have 60 days to roll over the amount that's been treated as a distribution to your IRA. Of course, you'll need to come up with the dollars from other sources.









This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.
The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.

Monday, August 22, 2016

Trusteed IRAs -by John Jastremski

The tax code allows IRAs to be created as trust accounts, custodial accounts, and annuity contracts. Regardless of the form, the federal tax rules are generally the same for all IRAs. But the structure of the IRA agreement can have a significant impact on how your IRA is administered. This article will focus on a type of trust account commonly called a "trusteed IRA," or an "individual retirement trust."

Why might you need a trusteed IRA?

In a typical IRA, your beneficiary takes control of the IRA assets upon your death. There's nothing to stop your beneficiary from withdrawing all or part of the IRA funds at any time. This ability to withdraw assets at will may be troublesome to you for several reasons. For example, you may simply be concerned that your beneficiary will squander the IRA funds.

Or it may be your wish that your IRA "stretch" after your death--that is, continue to accumulate on a tax-deferred (or in the case of Roth IRAs, potentially tax-free) basis--for as long as possible. IRA owners sometimes select much younger IRA beneficiaries because their young age means a longer life expectancy, and this in turn requires smaller required minimum distributions (RMDs) from the IRA each year after your death--allowing more of your IRA to continue to grow on a tax-favored basis for a longer period of time. Your intent to stretch out the IRA payments may be defeated if your beneficiary has total control over the IRA assets upon your death.

Even if your beneficiary doesn't deplete the IRA assets, in a typical IRA you normally have no say about where the funds go when your beneficiary dies. Your beneficiary, or the IRA agreement, usually specifies who gets the funds at that point. And in a typical IRA, particularly a custodial IRA, your beneficiary is responsible for investing the IRA assets after your death, regardless of his or her inclination, skill, or experience.

A trusteed IRA can help solve all of these problems. With a trusteed IRA, you can't stop the payment of RMDs to your beneficiary but you can restrict any additional payments from this IRA. For example, you could maximize the period your IRA will stretch by directing the trustee to pay only RMDs to your beneficiary. Or you can ensure that your beneficiary's needs are taken care of by providing the trustee with the discretion to make payments to your beneficiary in addition to RMDs as needed for your beneficiary's health, welfare, or education.

Another option is to impose restrictions on distributions only until you're comfortable your beneficiary has reached an age where he or she will be mature enough to handle the IRA assets.

In each case, the balance of the IRA (if any) passing, upon your beneficiary's death, can be paid to a contingent beneficiary of your choosing (the contingent beneficiary will continue to receive RMDs based on your primary beneficiary's remaining life expectancy). For example, if you've remarried, you may want to be sure your current spouse is provided for upon your death, but also that any IRA funds remaining on your spouse's death pass to the children of your first marriage. Or you may want to ensure that if your spouse remarries, his or her new spouse won't be the ultimate recipient of your IRA assets.

A trusteed IRA can also be structured to qualify, for example, as a marital, QTIP, or credit shelter (bypass) trust, potentially simplifying your estate planning.

Finally, a trusteed IRA can even be a valuable tool during your lifetime. For example, the IRA can provide that if you become incapacitated the trustee will step in and take over (or continue) the investment of assets, and distribute benefits on your behalf as needed or required, ensuring that your IRA won't be in limbo until a guardian is appointed.

How do you establish a trusteed IRA?

First, you'll need to find a trustee that offers IRA planning services. Not all do, and the ones that do don't all provide the same amount of flexibility. So you may need to shop around to find a trustee that can meet your particular needs. As with a typical IRA, you'll name the beneficiary of the IRA. You and your attorney will work with the trustee to draft a beneficiary designation form and trust agreement that contain any custom language that you need.

Is a trusteed IRA right for you?

While trusteed IRAs can be as flexible as a particular trustee will allow, they're not right for everyone. The minimum balance required to establish a trusteed IRA, and the fees charged, are usually significantly higher than for typical custodial IRAs, making trusteed IRAs most appropriate for large IRA accounts. You may also incur significant attorney fees and other costs. And in some cases, another approach might be more appropriate. For example, you may be able to achieve the same results as a trusteed IRA by instead naming a trust as the beneficiary of your IRA.

The "see-through" trust

Unlike a trusteed IRA, where the trust is the IRA funding vehicle and you select the beneficiary of the IRA, with a see-through trust you name the trust itself as the IRA beneficiary, and you also select the beneficiary of the trust.

Normally, when you name an IRA beneficiary that isn't an individual (i.e., a trust, charity, or your estate), that beneficiary must receive the entire balance of your IRA within five years after your death. However, special rules apply to trusts. If specific IRS rules are followed, then the trust beneficiary, and not the trust itself, will be deemed the beneficiary of the IRA, allowing RMDs to be calculated using the trust beneficiary's life expectancy and avoiding the five-year payout rule. Because the IRS looks beyond the trust to find the IRA beneficiary, this is commonly referred to as a "see-through trust."

To qualify as a see-through trust, the following four requirements must be met in a timely manner:

• The trust beneficiaries must be individuals clearly identifiable (from the trust document) as
designated beneficiaries as of September 30 following the year of your death.

• The trust must be valid under state law. A trust that would be valid under state law, except for the fact that the trust lacks a trust "corpus" or principal, will qualify.

• The trust must be irrevocable, or (by its terms) become irrevocable upon the death of the IRA
owner or plan participant.

• The trust document, all amendments, and the list of trust beneficiaries (including contingent and remainder beneficiaries) must generally be provided to the IRA custodian or plan administrator by the October 31 following the year of your death.

If you have multiple trust beneficiaries, then the life expectancy of the oldest beneficiary will be used to calculate RMDs. IRS regulations provide that trust beneficiaries can't use the "separate account" rule that might otherwise allow each IRA beneficiary to use his or her own life expectancy. If you want each beneficiary to be able to use his or her own life expectancy to calculate RMDs, then you'll generally need to establish separate trusts for each beneficiary to accomplish that goal.

Generally, see-through trusts are structured as "conduit trusts," where all distributions received by the trustee from the IRA must be passed on to your beneficiary. While an accumulation trust (where the trustee can accumulate distributions, even RMDs, received from the IRA instead of paying them out) might also qualify as a see-through trust, the IRS's rules governing these trusts are not as clear.

Trusteed IRA or see-through trust?

Trusteed IRAs are generally less expensive, less complicated, and have less uncertainty than see-through trusts. However, it's important that you make your decision with an eye toward your total estate plan. You should consult an estate planning professional who can explain your options and help you choose the right vehicle for your particular situation.

And a word about spouses ...

In most cases, if your primary goal is that your IRA stretch for the longest period of time, this can be best accomplished by simply naming your spouse as the sole IRA beneficiary, with no withdrawal restrictions. Upon your death your spouse can roll the IRA assets over to his or her own IRA, or simply treat your IRA as his or her own. Your spouse can then name a beneficiary who'll receive RMDs over the beneficiary's life expectancy upon your spouse's death. But while this may provide the longest potential RMD payout period, it doesn't solve the problem of your spouse using the funds sooner than you'd like, or naming a contingent beneficiary that's unacceptable to you. With a trusteed IRA, even if your spouse is the sole beneficiary, your spouse can't treat the IRA as his or her own if his or her withdrawal rights are limited.








This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.
The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.

Friday, August 12, 2016

Medicare Prescription Drug Coverage -by John Jastremski

If you're covered by Medicare, here's some welcome news--Medicare drug coverage can help you handle the rising cost of prescriptions. If you're covered by original Medicare, you can sign up for a drug plan offered in your area by a private company or insurer that has been approved by Medicare. Many Medicare Advantage plans will also offer prescription drug coverage in addition to the comprehensive health coverage they already offer. Although prescription drug plans vary, all provide a standard amount of coverage set by Medicare. Every plan offers a broad choice of brand name and generic drugs at local pharmacies or through the mail. However, some plans cover more drugs or offer a wider selection of pharmacies (for a higher premium) than others, so you'll want to choose the plan that best meets your needs and budget.

How much will it cost?

What you'll pay for Medicare drug coverage depends on which plan you choose. But here's a look at how the cost of Medicare drug coverage is generally structured in 2015:

A monthly premium: Most plans charge a monthly premium. Premiums vary, but average $33.13. (Source: Centers for Medicare and Medicaid Services.) This is in addition to the premium you pay for Medicare Part B. You can have the premium deducted from your Social Security check, or you can pay your Medicare drug plan company directly.

An annual deductible: Plans may require you to satisfy an annual deductible of up to $320. Deductibles vary widely, so make sure you compare deductibles when choosing a plan.

A share of your prescription costs: Once you've satisfied the annual deductible, if any, you'll generally need to pay 25% of the next $2,640 of your prescription costs (i.e., up to $660 out-of-pocket) and Medicare will pay 75% (i.e., up to $1,980). After that, there's a coverage gap; you'll need to pay 100% of your prescription costs until you've spent an additional $3,720. (Some plans offer coverage for this gap.) However, once your prescription costs total $6,680 (i.e., your out-of-pocket costs equal $4,700--you've paid a $320 deductible + $660 + $3,720 in drug costs--and Medicare has paid $1,980), your Medicare drug plan will generally cover 95% of any further prescription costs. For the rest of the year, you'll pay either a coinsurance amount (e.g., 5% of the prescription cost) or a small co-payment for each prescription.

Again, keep in mind that all figures are for 2015 only--costs and limits may change each year, and vary among plans.

Note: Health-care legislation passed in 2010 gradually closes the prescription drug coverage gap. In 2015, if you have spending in the coverage gap, you'll receive a 55% discount on covered brand-name drugs, and a 35% discount on generic drugs. Other changes will take effect in future years.

 Total prescription costs in 2015
What you pay
What Medicare pays
$0 to $320
You pay deductible of $320 (some plans may offer lower deductibles)
Medicare pays nothing until deductible is satisfied
$320 to $2,960
You pay 25% of costs
Medicare pays 75% of costs
$2,960 to $6,680
You pay 100% of costs
Medicare pays nothing
Over $6,680
You pay 5% of costs
Medicare pays 95% of costs


What if you can't afford coverage? 

Extra help with Medicare drug plan costs is available to people who have limited income and resources. Medicare will pay all or most of the drug plan costs of seniors who qualify for help. If you haven't already received an application for help, you can get one at your local pharmacy or order one from Medicare.

When can you join?

Seniors new to Medicare have seven months to enroll in a drug plan (three months before, the month of, and three months after becoming eligible for Medicare). Current Medicare beneficiaries can generally enroll in a drug plan or change drug plans during the annual election period that occurs between October 15 and December 7 of each year, and their Medicare prescription drug coverage will become effective on January 1 of the following year. If you qualify for special help, you can enroll in a drug plan at anytime during the year. Certain other events may qualify you for a Special Enrollment Period outside of the annual election period when you can enroll in a plan or switch plans.
If you already have Medicare drug coverage, remember to review your plan each fall to make sure it still meets your needs. Before the start of the annual election period, you should receive a notice from your current plan letting you know of any important plan modifications or additional plan options. Unless you decide to make a change, you'll automatically be re-enrolled in the same drug plan for the upcoming year.

Do you have to join?

No. The Medicare prescription drug benefit is voluntary. However, when deciding whether or not to 
enroll, keep in mind that if you don't join when you're first eligible, but decide to join in a future year, you'll pay a premium penalty that will permanently increase the cost of your coverage. There's an exception to this premium penalty, though, if the reason you didn't join sooner was because you already had prescription drug coverage that was at least as good as the coverage available through Medicare.

What if you already have prescription drug coverage?

Like many people, you may already have prescription drug coverage through the Medicare Advantage program, private health insurance such as Medigap, or your employer or former employer's health plan. You can generally opt either to keep that coverage or join a Medicare prescription drug plan instead. If you already have other prescription drug coverage, you'll receive a notice from your current provider explaining your options.

What happens after you join?

Once you join a plan, you'll receive a prescription drug card and detailed information about the plan. In order to receive drug coverage, you'll generally have to fill your prescription at a pharmacy that is in your drug plan's network or through a mail-order service in that network. When you fill a prescription, show the card to the pharmacist (or provide the card number through the mail) even if you haven't satisfied your annual deductible, so that your purchase counts toward the deductible and benefit limits.
What if you have questions?

If you have questions about the Medicare prescription drug benefit, you can get help by calling 1-800-MEDICARE (1-800-633-4227) or by visiting the Medicare website at www.medicare.gov. Look for information in the mail from Medicare and the Social Security Administration (SSA), including a copy of this year's "Medicare and You" publication that will give you details about the prescription drug plans available in your area.

Choosing a Medicare Prescription Drug Plan

• Start by making a list of all the prescription drugs you currently take and the price you pay for them to see how much you're spending on prescription drugs.
• Next, compare plans. Does each plan cover all of the drugs you currently take?
• What deductible and co-payments does each plan require?
• What monthly premium will you pay?
• What pharmacies are included in each plan's network?
• Finally, ask for help if you need it. A family member or friend can help you find information, or you can call a Medicare customer representative at 1-800-MEDICARE.










This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.
The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.

Thursday, August 11, 2016

Don't Let Your Retirement Savings Goal Get You Down -by John Jastremski

As a retirement savings plan participant, you know that setting an accumulation goal is an important part of your overall strategy. In fact, each year in its annual Retirement Confidence Survey, the Employee Benefit Research Institute (EBRI) reiterates that goal setting is a key factor influencing overall retirement confidence. But for many, a retirement savings goal that could reach as high as $1 million or more may seem like a daunting, even impossible mountain to climb. What if you're contributing as much as you can to your retirement savings plan, and investing as aggressively as possible within your risk comfort zone, but still feel that you'll never reach the summit? As with many of life's toughest challenges, it may help to focus a little less on the end result and more on the details that help refine your plan.*

Retirement goals are based on assumptions

Whether you use a simple online calculator or run a detailed analysis, remember that your retirement savings goal is based on certain assumptions that will, in all likelihood, change over time. Assumptions may include:

Inflation: Many goal-setting calculators and worksheets use an assumed inflation rate to account for the rising cost of living both during your saving years and after you retire. Although inflation has averaged about 2.5% over the last 20 years, there have been years (e.g., 1979 and 1980) when inflation has spiked into double digits. (Source: Bureau of Labor Statistics) No one can say for sure where prices are headed in the future.

Rates of return: Perhaps even more unpredictable is the rate of return you will earn on your investments over time. Although most calculators use estimated rates of return for pre- and post-retirement years, returns will fluctuate, and there can be no guarantee that you will consistently earn the rate that is used to calculate your savings goal.

Life expectancy: Retirement savings estimates also
usually use an assumed life expectancy, or other time frame that you designate, to determine how long you will need your money to last. Without a crystal ball or time travel machine, however, no one can make exact predictions in this arena.

Salary adjustments: Calculators and worksheets may also include assumptions for pay increases you might receive through the years, which could impact both the lifestyle you desire in retirement and the amount you save in your employer-sponsored plan. As in other areas, salary adjustments are just estimates.

Retirement expenses: Can you say for certain how much you will need each month to live comfortably in retirement? If you're five years away, the answer to this question may be much easier than if you're 10, 20, or 30 years away. In order to give you a targeted savings goal, retirement calculators must make assumptions for how much you will need in income during retirement.

Social Security, pension, and other benefits: To be as accurate as possible, a retirement savings goal should also account for additional benefits you may receive. However, these types of benefits typically depend on your earning history, which cannot be accurately assessed until you approach retirement.

All of these assumptions point to why it's so important to review your retirement savings goal regularly--at least once per year and when major life events (e.g., marriage, divorce, having children) occur. This will help ensure that your goal continues to reflect your life circumstances as well as changing market and economic conditions.

Break it down

Instead of viewing your goal as ONE BIG NUMBER, try to break it down into a monthly amount--i.e., try to figure out how much income you may need on a monthly basis in retirement. That way you can view this monthly need alongside your estimated monthly Social Security benefit, anticipated income from your current level of retirement savings, and any pension or other income you expect. 

This can help the planning process seem less daunting, more realistic, and most important, more manageable. It can be far less overwhelming to brainstorm ways to close a gap of, say, a few hundred dollars a month than a few hundred thousand dollars over the duration of your retirement.

Make your future self a priority, whenever possible

While every stage of life brings financial challenges, each stage also brings opportunities. Whenever possible, put a little extra toward your retirement.

For example, when you pay off a credit card or school loan, receive a tax refund, get a raise or 
promotion, celebrate your child's college graduation (and the end of tuition payments), or receive an unexpected windfall, consider putting some of that extra money toward retirement. Even small amounts can potentially add up over time through the power of compounding.
Another habit to try to get into is increasing your retirement savings plan contribution by 1% a year until you hit the maximum allowable contribution. Increasing your contribution by this small amount may barely be noticeable in the short run--particularly if you do it when you receive a raise--but it 
can go a long way toward helping you achieve your goal in the long run.

Retirement may be different than you imagine

When people dream about retirement, they often picture images of exotic travel, endless rounds of golf, and fancy restaurants. Yet a recent study found that the older people get, the more they derive happiness from ordinary, everyday experiences such as socializing with friends, reading a good book, taking a scenic drive, or playing board games with grandchildren. (Source: "Happiness from Ordinary and Extraordinary Experiences," Journal of Consumer Research, June 2014) While your dream may include days filled with extravagant leisure activities, your retirement reality may turn out much different--and that actually may be a matter of choice.

In addition, some retirees are deciding that they don't want to give up work entirely, choosing instead to cut back their hours or pursue other work-related interests.

You may want to turn a hobby into an income-producing endeavor, or perhaps try out a new occupation--something you've always dreamed of doing but never had the time. Such part-time work or additional income can help you meet your retirement income needs for as long as you remain healthy enough and interested.

Plan ahead and think creatively

Chances are, there have been times in your life when you've had to put on your thinking cap and find ways to cut costs and adjust your budget. Those skills may come in handy during retirement. But you don't have to wait to begin thinking about ideas. Consider ways you might trim your expenses or enhance your retirement income now, before the need arises.

Might you downsize to a smaller home or relocate to an area with lower taxes or a lower overall cost of living? Will you and your spouse actually need two vehicles, or might you simply own one and rent another on the occasional days when you need two? Could you put that extra bedroom to use by taking in a boarder, who might also help out with household chores, such as mowing the lawn or shoveling the sidewalks? Or maybe you can cancel that expensive gym membership and turn the spare bedroom into a home workout room.

Jot down any ideas that come to mind and file them away with your retirement financial information. 
Then when the time comes, you can refer to your list to help refine your retirement budgeting strategy.

The bottom line

As EBRI finds in its research every year, setting a goal is indeed a very important first step in putting together your strategy for retirement. However, you shouldn't let that number scare you.
As long as you have an estimate in mind, understand all the various assumptions that go into it, break down that goal into a monthly income need, review your goal once a year and as major life events occur, increase your retirement savings whenever possible, and remember to think creatively both now and in retirement--you can take heart knowing that you're doing your best to prepare for whatever the future may bring.

*All investing involves risk, including the possible loss of principal, and there can be no assurance that any investment strategy will be successful.






This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.
The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.