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2016 Brings a Big Birthday for Baby Boomers

Whether you are among the oldest boomers turning 70 or still in your mid 50s, chances are you feel good, physically and mentally. While you are still feeling good, it's time for a fiscal tune-up.

Seventy may not exactly be the new 50, but it's not that far off. According to a recent article in Money, "Happy 70th Birthday, Boomers!" researchers say that members of this generation – born from 1946 through 1964 – are healthier from a physical and mental standpoint than previous generations. This also means that the oldest boomers, who will turn 70 in 2016, are more likely to see their 85^th birthday. Their grandparents at 70 had only a 28% chance to reach age 85. Want to feel even better? More than one in 10 of the oldest members of the baby boom generation will live to age 95, compared to their grandparents' generation of only three in 100.

You've plenty of time left to invest, protect, and enjoy your money. So, Roll Over Beethoven! Here's a financial to-do list that rocks!

To keep from pulling money out of a declining market for living expenses, have at least 12 months of cash on hand to cover day-to-day costs. Also, you should be taking Social Security now, since there's no upside to delaying once you hit 70. However, you shouldn't assume that you need less risk in the rest of your portfolio. If most of your everyday costs are covered by Social Security and other guaranteed income, you can keep your money primarily in stocks, especially if you want to leave an inheritance. If you need your portfolio for living expenses, step it back but don't get out. A good stock allocation for most people age 70 and over ranges from 40% to 60%.

Pretty soon after you turn 70, you will have your first mandatory withdrawals from your retirement accounts. These are known as required minimum distributions from retirement accounts like 401(k)s and traditional IRAs. The clock starts ticking on these the year you turn 70½. You are required to take each distribution by Dec. 31^st—except for the RMD for the year you turn 70½, which can be up to April 1^st of the next year. If you miss these deadlines, you'll pay a hefty 50% of the money you were supposed to withdraw. Ouch! It's a good idea to have your brokerage or 401(k) plan automate your RMDs.

A longer life, with a better quality of life, means that you've got more time to rock on!

Reference: Money (December 28, 2015) "Happy 70th Birthday, Boomers!"

Married or Not Married, Parents Need to Protect Children with Estate Planning

We tend to think of estate planning as something for older people, but estate planning includes planning for children and guardianship issues. When couples have children out of wedlock, planning becomes even more important for their child's well-being.

An unmarried father-to-be asked what he needs to do to protect the mother of his child in the column "Having a baby, but not married? Some financial advice," from New Jersey 101.5. His concern is well founded because if something unfortunate happened to him, she would not be first in line for his assets. He also asks if the necessary documents are prepared while they are unmarried, what needs to be changed when and if they do get married?

In many states, the rights of unmarried couples are different than those of married couples. As far as a minor child, child custody issues are the same whether or not you are married, as the courts make decisions based upon the best interest of the child. Of course, the surviving parent will be the default guardian, but in the event that both parents die, issues can arise without a will and the designation of an alternate guardian. In addition to an unforeseen death, you also need to consider what could happen if you and your partner split up.

Distribution of property is very different between married and unmarried couples that break up. If you are married, almost all property will be distributed equitably and alimony can be awarded. However, when unmarried couples split up, individual property is retained by the original owner—and only jointly-owned property, like a home with both names on the deed, is divided between the parties. Further, neither party of an unmarried couple gets alimony, but this can be addressed by an unmarried couple if they sign a Cohabitation Agreement.

Also, the laws in most states treat married and unmarried couples differently if you die without a will. When you die without a will, you are subject to the intestacy laws of your home state. This means property typically goes to a surviving spouse. Otherwise, the law states that it goes in a certain order—usually after the spouse, first to children, then to parents and other relatives. If you have drafted a will, you can specify who inherits your assets, so this will solve the issue.

There are also federal and state estate taxes to consider. If you are not married, planning for the tax-efficient transfer of assets at death (especially important for a high-net worth unmarried couple) is tougher than planning for a married couple. A married couple won't have any estate tax due upon the first death if the estate plan fully utilizes the unlimited marital deduction. However, this deduction doesn't apply to the survivor of an unmarried couple. Plus, some states have both an estate tax and an inheritance tax. If you're not married, you'll have to pay whichever tax is more or perhaps both.

As far as who can make decisions about your final wishes, if you are not married, there will be problems. Unless you state otherwise in your will, many state laws say that a surviving spouse can decide everything from the funeral to the disposition of your remains. If you aren't married, the closest surviving adult family member gets to decide these issues. That could be a parent or your siblings.

There are basic documents that Robert A. Gordon of Redkey Gordon Law Corp, an experienced estate planning attorney can help you with, including a Will, Durable Power of Attorney, and an Advanced Healthcare Directive. And in the event you choose to get married, you and your new spouse will need to have these documents reviewed.

Reference: New Jersey 101.5 (December 28, 2015) "Having a baby, but not married? Some financial advice"

Don't Get Phooled Again!

The spelling may be different, but the meaning is similar. We all hate to think that someone else is smarter than us. But it turns out, fighting multi-billion dollar ad campaigns, retailers, or Wall Street is a losing proposition for the average person.

Expect to see the word "phool" a lot in 2016 if a book by Nobel Economics Prize winners George Akerlof and Robert Shiller, "Phising for Phools," becomes a runaway hit this year. The two coined the phrase to describe a person who gets caught in a "phishing" scam, which covers a wide variety of financial scams. Save yourself by being smart enough to know what you don't know so you can focus on making money and building up your retirement nest egg.

The recent Forbes article, "One Powerful Money-Making Move for 2016," explains that most of us believe we know what's good for us, but when it comes to money we shoot ourselves in the foot—and wallet!

The root of phoolish behavior, Akerlof and Shiller say, is the self-conceit that you think you know more than all of the smart people who are trying to take your money every day. Can you compete with computers and sophisticated programs that take advantage of pricing glitches and make trades in milliseconds, as well as robots who move at the speed of light?

Despite our tendencies, we don't have to be phools. Here are some wise suggestions to consider:

• Adopt a Long-Term Investment Strategy. Don't jump into a stock or product based on a newspaper headline. If other people think something is hot, it could very well be overpriced. It'll eventually come down in value. Decide what you want to do with your money decades down the road for things such as college, retirement and estate planning.
• Buy and Hold. This can be less than glamorous, but you have no advantage timing any market because thousands of professionals will have much better information than you do. If you need stocks for growth, examine their risk and adjust your portfolio accordingly.
• Select Index Funds. You can't buy last year's returns, so select index funds that cover global stocks, bonds, and real estate. Check them once a year. If you get sick to your stomach when you look at the risk you're taking, make a change, only do so annually.

Try to not to worry too much about the fact that there are so many people who are much smarter than the rest of us. They win Noble Prizes, but you don't have to. By planning in advance and taking these smart steps, you'll be able to build financial security and peace of mind.

Reference: Forbes (December 28, 2015) "One Powerful Money-Making Move for 2016"

Boomer Parents Willing to Put Retirement at Risk for Millennials

It's not new, but the numbers are different. A third of parents with young adult children ages 18 – 34 reported that they would accept a less comfortable retirement to help support their adult children.

According to a recent study, "The Bank of Mom and Dad: a Source of Comfort for Everyone," an increasing number of parents in the U.S. are worried about their adult children's financial status and would be willing to sacrifice their own fiscal health. The study, issued by the BMO Wealth Institute and described in CNN Money's "Half of U.S. Parents Would Retire Later to Support Adult Children Financially," makes it clear that parental worry needs to be balanced with concerns about the parents' own finances.

An experienced estate planning attorney can assist parents with this concern to reach their own financial goals, including retirement—and to add in financial support to their children into a comprehensive plan.

Parents should remember that today's young adults face unique financial challenges and may require different levels of support than they themselves received. If parents and children talk about the amount of support they expect to provide or receive, they can avoid misunderstandings that could jeopardize their financial futures. The report offers parents the following financial planning tips:

• Start Early. You should try to teach your children about money at an early age. Understanding the basics of personal finance at a young age can help set up a child for future financial success and independence.
• Implement a Roth IRA. A Roth IRA can make savings more tax efficient and extend parents' ability to use their resources to meet financial goals. Although annual contributions are limited by IRS guidelines, income earned in an IRA is generally not subject to any federal or state tax.
• Take Advantage of the Gift Tax. When possible, use the exceptions in the federal gift tax rules to increase the benefit available to children and dependent parents, such as gifts made for tuition or to pay medical expenses.
• Use Estate Planning to Provide Financial Support and Peace of Mind. Estate planning can be done to ensure that children receive the assets through the proper use of wills and trusts. Insurance planning can be a way of adding income to your estate, when done in a coordinated fashion. Robert A. Gordon of Redkey Gordon Law Corp, an experienced estate planning attorney will be able to help you understand the benefits and limitations of all estate planning tools and how they can be used to help your adult children.

Reference: CNN Money (December 22, 2015) "Half of U.S. Parents Would Retire Later to Support Adult Children Financially"

Advance Planning Advised When Trying to Assist an Incapacitated Family Member

There are many legal and medical aspects involved when a family member becomes or is starting to become incapacitated. Planning and communicating are perhaps the best way to prepare.

Even though the holiday season has passed, there are still ample reasons to get the family together and that is a good time for family discussions and decision making. This is particularly true for families facing the issues of legal incapacity, according to The Huffington Post.

The article, "Legal Issues for Concerned Family and Friends of a Possibly Incapacitated Individual," advises that functional capacity is contextual. The challenges an individual faces in daily living and how well they are being addressed is sometimes hard to pin down. The legal terminology is frequently vague and inconsistent. Terms such as "incompetent," "unsound mind," and "incapacity" are used interchangeably.

State statutes typically define an "incapacitated person" as someone who, because of a physical or mental condition, is substantially unable to provide food, clothing, or shelter for himself or herself, to care for the individual's own physical health or to manage the individual's own financial affairs.

The courts will often require expert testimony and reports as to the individual's physical or mental state before rendering a judgment. Many states use a required standardized "Certificate of Medical Examination" form to be submitted to a court, which has the specific statutory definition of incapacity. It will often have boxes for the physician to check and a space for his or her comments.

A progressive and gradual onset of dementia may be hard for both the individual and family members to recognize and appropriately address. As such, there are a variety of tasks that have significant personal and legal implications. Consider if the person can consistently and appropriately undertake the following tasks, although this isn't a complete list and they aren't listed in any particular order:

• Administer her or his own medications;
• Engage in daily activities like personal hygiene, bathing and dressing;
• Attend to shopping, food preparation, self-feeding and housekeeping;
• Safely drive a motor vehicle;
• Manage their finances and pay household expenses;
• Make appropriate decisions concerning marriage or intimate relationships;
• Keep his or her home clean;
• Collect and respond to mail or other communications;
• Recognize and avoid common scams and frauds; and
• Understand the need for and consent to medical and dental treatment.

There may be assistive devices, accommodations and part-time caregivers that might be less restrictive alternatives than legal guardianship and institutional living. Legally, an individual is presumed to be sane and have legal capacity. As a result, the family may have a hard time stepping in when an individual is stubbornly insistent on keeping the status quo in spite of signs that some changes are needed.

Make sure, well in advance, that you and your loved ones have created durable powers of attorney so that a trusted person may act when one becomes incapacitated. Similarly, a medical power of attorney and healthcare directives to physicians and medical staffs are extremely helpful. Finally, create an up-to-date will and talk to Robert A. Gordon of Redkey Gordon Law Corp, an experienced estate planning and elder law attorney about appropriate estate planning.

There is no way to make this an easy situation, but taking these steps can make the process a little more bearable.

Reference: Huffington Post (December 22, 2015) "Legal Issues for Concerned Family and Friends of a Possibly Incapacitated Individual"