Category Archives: Retirement Planning

Saving for Retirement


How much should you save for retirement? Marlena Lee, PhD, discusses important factors that can help you meet your goals, like determining your savings rate, monitoring your progress, and making adjustments over time.



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Advisory services offered through Larson Financial Group, LLC, a Registered Investment Advisor. Securities offered through Larson Financial Securities, LLC, member FINRA/SIPC.

This video is for Informational purposes only and is an authorized reprint from Dimensional Fund Advisors LP (“DFA”). Larson Financial Group (“LFG”) and Larson Financial Securities (“LFS”) are separate from and unaffiliated with DFA. LFS has entered into a selling agreement with DFA whereby LFS may sell and receive compensation for the sale of DFA funds. Material is believed current and accurate but is not guaranteed. Retirement plans are subject to various market, political, currency, economic, and business risks, and may not always be profitable; further, neither LFG nor LFS guarantee financial or investment results. This material is not to be construed as an offer to buy or sell securities or other products and services of LFG or its affiliates. Before taking action on a financial plan, please review any offering documents available, including prospectus and consult an appropriate investment professional regarding your specific needs. Past performance is not an indicator of future results.

Building Healthcare Costs into Retirement Planning

By Amy E. Buttell

Healthcare planning is a sensitive subject that often takes you and your advisor places you don’t want to go. But given rising expenses, no retirement plan is complete without some kind of provision for healthcare needs. Here are some guidelines and resources for estimating your needs and expenses.

Healthcare costs are rapidly emerging as a major expense item both before and during retirement. With lifetime employment a relic of the past and longevity on the rise, it’s more important than ever to estimate how much to save to cover costs in retirement and include those expenses in your financial plan.

Not only are health care costs a huge factor in retirement, but they are also becoming a larger concern for pre-retirees. So the conversation about health care costs should not be confined to the years immediately before and during retirement.

Health concerns and health care costs should be an agenda item at each year’s meeting with your financial advisor — no matter what your age is. There are a number of issues surrounding health care and health care costs to be aware of, including the impact of how you take care of health care costs, what issues you potentially face pre-retirement, what you need to do to prepare for health care costs in retirement, and continuing adjustments you might need to make in your spending and planning during retirement.

Healthcare Status

There is one aspect of health care and healthcare costs that is controllable amid many that are not: whether you are in good health or not. For many with poor health, discretionary spending on items such as vacations may have to be diverted into health care in retirement, an outcome that is preventable in most cases.

To determine the state of your current health, visit the MedicareNewsWatch.com website. It defines three states of health—good, fair, or poor—very concretely in terms of number of doctors’ visits per year, number of hospital admissions, and number of prescriptions.

Doctor Financial Advisor

Based on data from the site and your location, you can determine the impact your health status might have on your expenses in retirement. The table below provides an example for residents of several different cities of the average annual out-of-pocket costs for Medicare Advantage plans based on the lowest-cost health plan in the site’s database. These costs include Part D (drug benefit) costs.

Doctor Financial Advisor

For many people in their early 50s, this is enough to motivate them to go home and get on the treadmill. Of course, there are circumstances that you have little control over, such as a cancer diagnosis. But even when disease cannot be avoided, becoming aware of the potential health care costs in retirement can make a difference in how you save and execute your financial plan.

Preparing for Retirement

While it’s good to start thinking about retiree healthcare issues and Medicare in your 40s, 50s, and early 60s, discussions should begin in earnest by age 63. Prior to that, it’s difficult to get a handle on the specific costs you are likely to incur.

However, at 63, it’s time to sit down and project actual costs. For couples, those costs are doubled— there are no health care discounts for couples. Topics to be reviewed include costs directly related to Medicare, including premiums and co-pays, out-of-pocket costs for items Medicare doesn’t cover, and costs for unexpected events, like a major health crisis such as cancer.

Many experts recommend computing health care costs going forward with a higher average rate of inflation than other retirement costs – maybe as much as two to four times the Consumer Price Index. It’s high, but rising health care inflation has been the norm for many years.

Your 63rd birthday is also a good time to get serious about digging into which specific Medicare plans you will choose. You may even want to enroll in Medicare when you turn 64 and through that year before you turn 65 because it can be a stressful and emotional time. Consider creating a step-by-step calendar of the dates involved in signing up for the various parts of Medicare.

In Retirement

The numbers involved in paying for health care costs in retirement are so large that it’s easy to shy away from incorporating those numbers into your retirement plan.

Some experts believe that a 65-year-old couple will need about $220,000 for overall medical expenses in retirement. For instance, Medicare Part B, which covers outpatient care, preventive and ambulance services, and medical equipment, will cost each person about $1,260 annually. The Medicare Part D drug benefit will cost an additional $580 per person per year. Medical expenses are usually at least an annual $5,000 per person at the start of retirement.

The good news is that this amount is something you can save up front, as well as fund as you go. As you age, your health care costs typically continue to increase beyond even inflation, mostly because you are sicker and likely to require more hospital visits, more medications, and more care in the home or in a nursing home. A large portion of health care costs in retirement occurs in the last few months of life.

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Amy E. Buttell has written about retirement planning for 14 years. She’s been published in many recognized financial publications.

Amy E. Buttell is not affiliated with Larson Financial Group.

Copyright © 2016 by Horsesmouth, LLC. All Rights Reserved

IMPORTANT NOTICE: This reprint is provided exclusively for use by the licensee, including for client education, and is subject to applicable copyright laws. Unauthorized use, reproduction or distribution of this material is a violation of federal law and punishable by civil and criminal penalty. This material is furnished “as is” without warranty of any kind. Its accuracy and completeness is not guaranteed and all warranties expressed or implied are hereby excluded.

Advisory Services offered through Larson Financial Group, LLC, a Registered Investment Advisor. Securities offered through Larson Financial Securities, LLC, Member FINRA/SIPC.

Physician Retirement Planning

Using Life & Health Expectancy Scenarios

Financial planning for physicians shouldn’t stop at retirement. It’s unpleasant, but necessary to imagine what your situation might look like after the death or incapacitation of a partner. An early dose of reality can help you build a financial foundation in case you survive your spouse.


Why it’s necessary to imagine possible scenarios

Scenario planning is fun when you’re planning vacations, but not so enjoyable when it involves contemplating life’s worst events. Attempting to imagine the death of a long-term partner and then organizing the financial (and emotional) resources to carry on for up to 25 more years seems like too brutal an exercise to put yourself through. But if thinking about it for a minute would help you prepare for such an eventuality, the pain of imagining worst-case scenarios can be replaced by relief that the necessary insurance policies and investment plans are in place to preserve your financial security and protect your assets, should that scenario play out.

To keep financial planning realistic, and practically, rather than emotionally oriented as you lay the groundwork, make sure to keep projections within the context of your overall life plan. What do you see for yourself in the years ahead? How do you want your life to play out? What do you want to accomplish? How do you want to live? Then… what if something goes wrong? Can you imagine yourself getting old? Can you imagine yourself acquiring a debilitating disease? Can you imagine yourself becoming widowed? Can you imagine yourself dying?

The current trend in retirement planning is to focus on the positive. It’s exciting to dream of all the trips and leisure activities that await in retirement while putting an investment portfolio in place to fund that eagerly anticipated lifestyle. Naturally, nobody wants to think about how those dreams might be shattered by illness or an untimely death.

But this type of worst case financial planning is exactly where financial advisors can help doctors the most. By helping guide your mind to those darker places, a well-informed, trusted financial advisor can make it easier to contemplate scenarios you may never consider on your own. Then, working together, you can develop solutions that recast those scenarios in a less terrible light.

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Copyright © 2012 by Horsesmouth, LLC. All Rights Reserved.

It Takes a Family to Plan Retirement

Let clients know financial planning is not a solo project for retirees—annual family meetings can ease the transition into senior status.

It is no secret that we have an aging population: Each day 10,000 baby boomers turn 65 and start collecting Social Security and Medicare benefits. This trend is expected to continue for the next 19 years.

Physician Retirement Planning

However, what’s less well known is that the vast majority of retirees are underfunded for retirement. The reasons for being underfunded are many: lack of savings, poor investment choices, excessive spending, or unforeseen expenses.

No matter what the cause, it is becoming clear that neither they nor we can rely on the federal government to take ample care of our senior citizens.

In fact, it truly does take a family to care for their elders, and we are seeing more and more situations where children are pitching in to help out parents with both care and financial support.

To facilitate this, having annual family financial meetings is a critical yet simple step that can help a family find the best available solutions for their finances. Every situation is slightly different, of course, but we see two specific areas that seem common to most situations where it pays to be proactive in getting all members of the family on board, before a crisis hits.

The key areas to discuss are long-term care and real estate, because they are two areas that often cause the most significant pressure on the next generation of a family.

One of the biggest financial burdens of a retiree is long-term care, which can run around $100,000 a year with an average stay of three years. Who is going to foot the bill? Who is going to manage the parents’ transition into a nursing home? With the right planning, the next generation can provide the care needed without a slew of sudden emergency expenses.

As a part of the family planning process, options for long-term care insurance should be investigated. Traditional long-term care insurance is a use-it-or-lose-it type of insurance policy with premiums that are inexpensive relative to the benefit amount. Another option is a life insurance policy with long-term care benefits, in which case you will use the long-term care insurance for elderly needs or a loved one will receive a death benefit upon your passing.

Thinking about long-term care needs today can save you both dollars and heartbreak and/or financial discomfort in the long run.

Next is real estate: Who is going to be responsible for the care and disposition of the family home? What is the plan for the succession of the family vacation home? Who will take care of the maintenance, upkeep, and taxes from year to year? Who will take the tax deductions and/or rental income, if any?

Real estate can be part of a family’s financial solutions since it can be leveraged to help out the underfunded retiree. This could take several forms, but one is by having a working child move in and do a buyout of the home, and another is a reverse mortgage.

Of course, these are idealized solutions. In real life, there are usually more complications, especially when more children and grandchildren are involved.

Often the party that does not want his or her parent to give up the family home is not the party that is dealing with the day-to-day care issues. Similarly with vacation homes, it’s sometimes the side that frames the issue in terms of memories, nostalgia, and emotion that is the least able to step up and take on the responsibilities in terms of finances and time commitment.

All of these issues can be dealt with in advance of an emergency, a time that forces the issue and heightens the emotions.

When trying to set up an advance meeting, communicate that the goal is to get to a win-win solution for everyone: to provide financial relief and liquidity to the retiree and give all adult children an opportunity to weigh the pros and cons of various solutions.

Too often we see people think only in terms of potential inheritance, forgetting about the potential expenses for their parents or conflict within the family that can arise. For all of these reasons and more, it is important for families to sit down and develop a plan while everyone can be at the table in a relatively calm and unstressed condition, before it is too late.

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Copyright © 2013 by Horsesmouth, LLC. All Rights Reserved

Roth Conversions Offer Tax-Friendly Benefits

As the filing deadline for tax returns approaches, many people are taking a step back to analyze their finances and determine whether they’re paying more taxes than necessary. Retirement plans are one area where the decisions you make today can have lasting tax implications further down the road. It might be easy to take a “set it and forget it” approach to saving for retirement, but proactive planning can help you save more efficiently by reducing your tax burden.

Roth IRA plans, which offer tax-exempt savings, have been a popular option since Congress created them in 1998, but there are limitations on eligibility. For example, couples that earn more than $194,000 annually cannot fund a Roth IRA account. However, a few years ago congress enacted a new law allowing more affluent families the opportunity to enjoy the benefits of the Roth IRA.

Conversion Process

Since 2010, anybody can make the conversion from a traditional IRA to a Roth IRA regardless of income. This is called a backdoor Roth IRA, and it’s a completely legal and even standard investing practice for high-income earners. As always, it’s a good idea to consult with a tax professional before taking action.

Physician Retirement Planning

Basically, the process starts by making a regular, non-deductible contribution to a traditional IRA through your IRA custodian. After the contribution posts, you can convert it by buying shares in a Roth IRA and selling shares of your traditional IRA to fund it.

Because the initial contribution was already non-deductible, the taxes on it have essentially been paid. You’ll only need to pay taxes on the difference between the converted value and the amount contributed, which should be minimal if the money was in your account for a short period of time.

One thing to consider before making a conversion is the IRA pro-rata rule. This rule stipulates that when calculating the taxable income from a Roth conversion, you must include all non-Roth IRAs in your name (including SIMPLE and SEP IRAs). To calculate the amount of the conversion that is not taxed, you must divide the total of after-tax contributions by the total balance across all IRAs (excluding Roth IRAs).

To get around this, you can either roll all your traditional IRAs over to a Roth account or an employer-sponsored 401(k). However, it could cost you a lot in taxes and earnings depending on your circumstances. If you own a practice that’s operating at a loss, you can avoid paying the conversion tax by offsetting losses from the business against income from the conversion.

Timing Your Conversion

Whether or not a Roth conversion makes sense for your situation can only be answered on a case-by-case basis. One important guideline is if you cannot afford to pay the taxes owed out of pocket or out of a taxable account, than a conversion would probably not be recommended since the benefits are substantially less. Most people have a tendency to postpone paying taxes as long as possible, but if you can afford to take the hit now it will limit your exposure to taxes on your investment profits down the road.

In general, if you have to use IRA savings to pay taxes triggered by shifting them to a Roth, you might be sacrificing too much principal up front to make the deal worthwhile. It’s definitely not advisable to execute a conversion during your peak earning years. Delaying the conversion until you reach retirement age makes sense if you’ll be in a lower income tax bracket during retirement than you are currently. Other factors to consider are how you plan on paying for the income tax bill due on the conversion, how long the Roth IRA will remain untouched and the size of the IRA in the context of your estate.

At the end of the day, you want to make sure the taxes you pay to convert the account are less than what you would save on subsequent tax-free withdrawals. If you have a large enough net worth, you could also avoid potential estate tax liabilities because the income tax created by the conversion would reduce the value of your gross estate.

If you don’t have other pre-tax IRAs at your disposal, than a backdoor Roth would be an ideal option for high-income individuals looking to gain IRS-approved access to these tax-free accounts. Doing so will allow you to profit handsomely from your investments without having to give Uncle Sam his cut. It might sound too good to be true, and for complex transactions like this it’s best to consult with a tax professional before taking any action, but it’s definitely an option to be explored.

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Advisory Services offered through Larson Financial Group, LLC, a Registered Investment Advisor. Securities offered through Larson Financial Securities, LLC, Member FINRA/SIPC.

This article should not be construed as tax advice. You should consult with a tax professional that is familiar with your individual circumstances before taking any action.

Larson Financial Group, LLC, Larson Financial Securities, LLC and their representatives do not provide tax advice or services. Please consult the appropriate professional regarding your tax planning needs.