Talking about Covid-19 with People with Disabilities

Posted by Haddad Nadworny on Tue, Mar 17, 2020 @ 08:16 AM

The Special Needs Financial Planning Team John Nadworny, CFP, CTFA | Cynthia Haddad, CFP | Alexandria Nadworny, CFP,  CTFA

Talking to people with disabilities about Covid-19

 

Please view and feel free to share this Coronavirus plain language booklet, Covid-19 Information By and For People with Disabilities, created by Green Mountain Self- Advocates. Its target audience is people with intellectual and developmental disabilities. Simple language is also good for people with low literacy and non-native language speakers.

Click to View, Covid-19 Information By and For People with Disabilities

 

 

 

Tags: Blog

5 Ways To Feel Good When You Are Stuck Inside

Posted by Haddad Nadworny on Sat, Mar 14, 2020 @ 06:00 AM

The Special Needs Financial Planning Team John Nadworny, CFP, CTFA | Cynthia Haddad, CFP | Alexandria Nadworny, CFP,  CTFA

As financial professionals, we always talk to our clients and our audience about the money but let’s not talk about the money today. The markets and the world are upside down, all of our social and business engagements are being cancelled, and we are all worried about the coronavirus.

The most important thing you can do is to stay calm. Stress and anxiety have been shown to reduce the immune system’s effectiveness. Many of us are experiencing the adult version of a two-year-old’s time out: while we don’t have to sit on the stairs, we are advised to stay safe and stay put as much as possible.

Here are 5 things to do when you are stuck inside that can make you feel good and are not on-line shopping, (Sorry- the financial planner in us just came out).

Calling a loved one

 

1. Talk, FaceTime, or Call people who make you happy.

  • Call someone whom you haven’t spoken to recently: you’ll have a lot more to catch up on than the recent events.

  • Your children, whether they are in school or working, are impacted and talking with a parent can help them stay calm about all the cancellations and uncertainty around them. Just open the conversation and then sit back and listen…

Duomo Puzzle

 

2. Plan a vacation and then do a puzzle of the place!

Pick a destination you would like to visit when all of this blows over –and it will end at some point- and then order a puzzle of it!  Not only will the puzzle keep you focused on how beautiful your destination will be, when you get there you will know every inch of the site!  

Feng Shui Bagna

 

3. Check the Feng Shui of your home.  

Since you are spending a lot of time inside your home, why not check out its Feng Shui? Feng Shui is living in harmony with nature. There is a tool called a Feng Shui Bagua, that directs you on how to align your home or office space harmoniously. In Feng Shui, every home and room is divided into different energy centers that represent important areas of life. In brief, the areas are Career, Knowledge, Family, Wealth, Fame, Relationships, Children, Travel and Health and the Bagua, which means eight areas in Chinese, is a map of their locations.

Chocolate Lasagna

 

4. Bake or cook something delicious.

Indulge in a treat you would normally not have – chocolate lasagna anyone?

5. What is more productive than getting organized?

Pick your project: closet, basement, garage, desk, junk drawer- the list of things in need of organization is endless. Set out to do one thing and then bask in the feeling of accomplishment!

 

 

The "10- Year Rule" and After-Tax Strategies to Consider

Posted by Haddad Nadworny on Sat, Feb 29, 2020 @ 06:00 AM

We are committed to presenting complimentary educational workshops to  organizations and parent groups. We are currently booking presentations for 2020. Please contact Alex Nadworny(anadworny@affiniafg.com / 781-365-8586) to  schedule a talk for your group. 

 

the stretch is goneThe SECURE Act* eliminates the “stretch” IRA distribution option for non-eligible designated beneficiaries (see Who is effected). It requires all assets be distributed to non-eligible designated beneficiaries by the end of 10 years - called the "10 year rule"- however annual RMDs are no longer required from these accounts.

In our last blog, When a Special Needs Trust is the Beneficiary of a Retirement Account, we discussed the strategy of having a Special Needs Trust (SNT), with the family member with a disability as eligible designated beneficiary of the SNT, become the owner of an IRA or other qualified retirement plan. 

For everyone who is not an eligible designated beneficiary, the financial impact of the "10 year rule" and deferring distributions is more substantial than one might think.

Case Illustration:

Considering Roth Conversions when subject to the "10 year rule"

Note: This is a hypothetical example and is not representative of any specific situation.  Your results will vary.  The hypothetical rates of return used to do not reflect the deduction of fees and charges inherent to investing. 

Consider the case of Michael, a 40-year-old doctor whose mother passed away suddenly last month leaving him an IRA with a balance of $1 million.

His pre-SECURE Act plan had been to establish a legacy from his mother to his children.  He would draw out the minimum required distribution from the account each year and leave the balance to grow tax -deferred to pass on upon his death.

Now with the mandatory 10-year distribution rule, Michael needs a new analysis to make an informed choice of how to handle the distributions from his inherited IRA.

He reached out to his financial advisor who modeled 2 options for him given the current law. It was shocking to see the massive effect tax- deferred investing has on savings; the SECURE Act potentially cost Michael more than $1 million over a 30-year period.

Michael’s action with the inherited IRA

After-tax account value in 30 years

assuming a 6% pre-tax earnings rate and 30% income tax rate on the earnings and distributions

BEFORE the Secure Act (not an option now)- just take RMDs, let balance stay in the account

$3, 375,243

Leave the money to grow in the tax deferred account for 10 years and then withdraw a lump sum.

$2,805, 905

Take the $1,000,000 distribution today and pursue growth in a taxable account for 10 years.

$2,308,139

 

Watch out for bracket creep

Michael has an established medical practice and is entering his peak earning years. Taking distributions from a qualified tax deferred account does not seem appealing but he has to do something within the next 10 years. The chart above shows taking a large distribution at the end of 10 years as the optimal choice under the new law but there could be drawbacks for Michael. It is important that the distributions not increase his income to the point of increasing his marginal tax rate, effecting his eligibility for qualified business deductions or subjecting his investment income to an additional surtax.

Key_backdoor_ROTHCould converting to a Roth IRA be helpful?

Michael’s advisor asked him to consider converting a portion of the inherited IRA to a Roth IRA. He has space available within his current tax bracket to take a distribution without raising his marginal tax rate and he also has the cash available to pay the taxes that would result from this action. 

Having the full amount of money invested in the new Roth could potentially reap the yield benefits of being allowed to grow tax- free and although Michael’s beneficiaries would also be subject to the 10-year rule upon his death, there would be no tax liability under current laws on distributions from a Roth.  

* The Setting Every Community Up for Retirement Enhancement or SECURE Act was signed into law on December 20, 2019, becoming effective January 1, 2020. The law provides important changes for individuals and small businesses to consider in their retirement, estate and tax planning.

 

The Roth IRA offers tax deferral on any earnings in the account.  Withdrawals from the account may be tax free, as long as they are considered qualified. Limitations and restrictions may apply.  Withdrawals  prior to age 59 ½ or prior to the account being open for 5 years, whichever is later, may result in a 10% IRS tax penalty. Future tax laws can change at any time and may impact the benefits of Roth IRAs. Their tax treatment may change.

 Traditional IRA account owners should consider the tax ramifications, age and income restrictions in regard to executing a conversion from a traditional IRA to a Roth IRA. The converted amount is generally subject to income taxation.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor

Financial planning and investment advice offered through Affinia Financial Group, LLC, a registered investment advisor. Securities offered through LPL Financial, member FINRA/SIPC. Special Needs Financial Planning LLC, Affinia Financial Group, LLC and LPL Financial are separate entities.

 

 

Tags: Retirement Planning, Roth IRA

When a Special Needs Trust is the Beneficiary of a Retirement Account

Posted by Haddad Nadworny on Sat, Feb 22, 2020 @ 06:00 AM

We are committed to presenting complimentary educational workshops to  organizations and parent groups. We are currently booking presentations for 2020. Please contact Alex Nadworny(anadworny@affiniafg.com / 781-365-8586) to  schedule a talk for your group. 

stretching into the futureThe SECURE Act* eliminates the “stretch” IRA distribution option for non-exception beneficiaries. It requires all assets be distributed to beneficiaries by the end of 10 years however annual RMDs (Required Minimum Distributions) are no longer required from these accounts.

What was the “stretch” IRA anyway?  

Prior to the SECURE act, retirement account beneficiaries were able to “stretch” the distributions from inherited accounts over the course of their lifetime.  This practice was an especially great benefit to young heirs and heiresses, as RMDs from the inherited accounts were based upon the age of the beneficiary.  The younger the beneficiary, the smaller the RMD, allowing the bulk of the assets to grow tax-deferred over the course of their lifetime and to potentially be inherited by the next generation.  

What it means:

Non-exception beneficiaries inheriting 401(k)s and other defined contribution plans, traditional IRAs and Roth IRAs from individuals who died after 1/1/2020, are subject to the “10-year distribution rule”; they are required to receive a full distribution of all assets of an inherited retirement account by the end of 10 years.

Who is effected: 

Non-exception beneficiaries of people inheriting 401(k)s and other defined contribution plans, traditional IRAs and Roth IRAs from individuals who died after 1/1/2020, are subject to the “10-year distribution rule”. 

If you own an inherited IRA from a person who died before 12/31/2019, the 10-year rule does not apply to that IRA over your lifetime. At your death, beneficiaries of this IRA will be subject to the 10-year rule.

Exception beneficiaries are NOT subject to the 10-year rule. They may treat the inherited IRA as their own and take distributions over their lifetime.

  • Spouses
    • A designated beneficiary will inherit the account, and overrides any provisions in a will.
    • If there is no will or beneficiary designation, the spouse will generally inherit the IRA. 
    • There are some exceptions, specifically in community property states.  
  • Disabled or chronically ill individuals
  • Individuals who are not more than 10 years younger than the account owner
  • Minor children. But once the child reaches the age of majority, he or she has 10 years to withdraw the money from the account.

   (Source: Elder Law Answers) 

Impact on the retiree/ IRA owner's planning:

The elimination of the stretch provision impacts both the retirement account owner and the beneficiaries. Given the current demographics, many recipients of inherited IRAs will have to take distributions during their peak earning years, potentially bumping them into a higher marginal tax bracket. It may make sense for retirees to consider strategies to mitigate this effect. Individuals with sizable retirement accounts are advised to speak with their tax advisor to discuss the impact of this change on their estate planning 

When a Special Needs Trust (SNT) is the beneficiary of the IRA.

There are 2 types of trusts that are often set up as beneficiaries of a retirement account: (1) a conduit or pass-through trust and (2) an accumulation or complex trust. The diagram below depicts the treatment of distributions from the inherited IRA when a trust is the beneficiary.

IRA RMD

 

Special Needs Trusts (SNTs) are accumulation or complex trusts. The trustee will have the authority to use the funds on behalf of the beneficiary over their lifetime. The RMD will be calculated using this “stretch” formula.

Even though the stretch provision still applies for beneficiaries with special needs, the elimination of the stretch provision for beneficiaries who do not have special needs may necessitate a change in planning strategy. In the past, many estate planners recommended that non-qualified assets be designated for funding a SNT upon a parent’s death. Individuals who have pursued this strategy may want to revisit both their own and their beneficiaries’ situations to determine if this still makes sense given the eligibility of the family member with a disability for the “stretch’ provision of an inherited IRA.

New Strategy: The SNT, with the family member with a disability as an exception beneficiary of the SNT, will inherit the IRA and become the owner.

In addition to the inherited IRA, the SNT will also own a non-retirement account for the purposes of receiving distributions (annual RMDs) from the inherited IRA and will pay taxes on this distribution.  The trustee may utilize this money to pay for expenses for the individual while also protecting their eligibility for government benefits.

Upon the death of the beneficiary with special needs, proceeds of the IRA will flow to the contingent beneficiary and the 10-year rule will go into effect.

 

Stay tuned for Part 2 next week with further discussion of planning considerations and strategies in light of the SECURE Act.

* The Setting Every Community Up for Retirement Enhancement or SECURE act was signed into law on December 20, 2019, becoming effective January 1, 2020. The law provides important changes for individuals and small businesses to consider in their retirement, estate and tax planning.

 

This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.

Financial planning and investment advice offered through Affinia Financial Group, LLC, a registered investment advisor. Securities offered through LPL Financial, Member FINRA/SIPC. Affinia Financial Group and LPL Financial are separate entities.

 

 

Tags: Retirement Planning, Special Needs Trusts

The Secure Act and Your RMD 🎂

Posted by Haddad Nadworny on Sat, Feb 15, 2020 @ 06:00 AM

We are committed to presenting complimentary educational workshops to  organizations and parent groups. We are currently booking presentations for 2020. Please contact Alex Nadworny(anadworny@affiniafg.com / 781-365-8586) to  schedule a talk for your group. 

February is time to show your Retirement Planning some Love❤️.

The Secure Act and your RMD🎂

The Setting Every Community Up for Retirement Enhancement or SECURE act was signed into law on December 20, 2019, becoming effective January 1, 2020. The law provides important changes for individuals and small businesses to consider in their retirement, estate and tax planning. 

Congratulations You're 70 1/2- 72The SECURE act moves the age at which a retirement account owner must begin to withdraw from their account from 70½  to 72 years of age.  The account owner will need to take an RMD from each of their qualified retirement accounts by April 1 of the following year.

What it means:  Individuals  are able to defer taking distributions from their qualified retirement accounts for an additional 18 months.  

The fine print: For those between the ages of 70½ and 72, there is no grandfather clause. 

Case study: Who has to take distributions in 2020, 2021 and 2022.

Note: All individuals and situations cited in this case are fictional and for illustration purposes only.

Example 1: Sam’s birthday is June 30, 1949.  He turned 70 in 2019 and 70 ½ on December 30, 2019.  He is the youngest person to whom the old rules apply. Sam, and everyone older than Sam, are required to take an RMD beginning in 2019 and must do so by April 1, 2020.  Sam is also required to take a distribution for every year thereafter, meaning 2020, 2021, ….  

Example 2:  Sandy’s birthday is one day later than Sam, July 1, 1949. Under the new law, she is required to take a distribution from her qualified retirement accounts the year she turns 72 or 2021. Sandy will have until April 1 of 2022, to take the distribution(s) for 2021 and she will be required to take an RMD from her retirement accounts every year following 2021. She needs to be aware that if she does wait until 2022 to take the first distribution, she will be required to take a second distribution that same year (2022).  

 To read more, see our previous blog, 10 Answers You Need Before Planning for Retirement.

 

This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor

Financial planning and investment advice offered through Affinia Financial Group, LLC, a registered investment advisor. Securities offered through LPL Financial, member FINRA/SIPC. Special Needs Financial Planning LLC, Affinia Financial Group, LLC and LPL Financial are separate entities..

 

Tags: Retirement Planning

It's February: Show Your Retirement Some Love❤️

Posted by Haddad Nadworny on Sat, Feb 08, 2020 @ 06:00 AM

 

The Year in Special Needs Planning

Retirement Planning and The SECURE Act: It really is all about YOU.

grey-ceramic-landmark-during-daytime-62318 (1)The Setting Every Community Up for Retirement Enhancement or SECURE Act and its impact on retirement planning has been outlined extensively in the mainstream media.  The law contains significant changes that are important to understand and talk through with your financial, tax and legal advisors.

Throughout February we will offer a series of 4 blogs focused first upon general retirement planning strategies, followed by a discussion and case examples of the SECURE Act and its potential impact on your planning.

I. Ten Answers You Need to Begin Retirement Planning

We often work with individuals and families having complex life situations. For families of people with disabilities, this means planning for two generations as many children with a disability will need support their entire lives.

Over the past 20 years, we have learned that a broader, multi-dimensional approach is required in order to take into consideration all of a family’s goals and responsibilities.

number-10-text-1339845It is also our experience that families are very busy and when making decisions may provide answers before all of the questions have been asked.  Here are 10 answers you need to have to consider in your analysis before beginning planning for retirement.

1. The ages of you and your spouse.
Are you a 67-year-old with a 55-year-old spouse? Your ages could significantly impact the decision on how to most effectively fund your retirement accounts.


2. Your health status.
Do you and/or your spouse have any significant or potentially significant health considerations? This could be important in funding and withdrawing from retirement accounts; you may consult your accountant to determine tax implications of allowable medical expenses.

 

3. Your health insurance coverage.
Be aware that your employment circumstances, compensation and benefits may change over the remainder of your working life. Understand your options including COBRA eligibility.
Many folks assume Medicare will cover everything they will need when they retire but dental, vision, hearing and long-term care are all examples of additional policies or out-of-pocket expenses,

 

4. If you are divorced, be sure you have designated your beneficiaries to align with your current wishes.
It is relatively common for a divorcing couple to enter into a property settlement agreement in which each spouse waives any interest in the other spouse’s retirement plans. It is still critical to amend your plan documents to reflect your new beneficiary designations. Courts have recognized that Plan Administrators are obliged to act in accordance with Plan documents and this supercedes the legal waiver. (Kennedy v. Plan Administrator For Dupont Savings & Investment Plan, 555 U.S. 285 (2009)).

 

5. You have a family member with a disability.
Individuals with a disability (consistent with IRS regulations) are exceptions to the SECURE Act. Is a Special Needs Trust one of the beneficiaries of your IRA?  The SECURE act may have a significant effect on this planning strategy. See our blog later this month, The SECURE Act: “Stretch” IRA no longer.

 

6. Know your financial position.
Be completely familiar with your personal balance sheet: what you have and what you owe.
Know and understand your marginal tax bracket and implications of state income taxes in retirement.

 

7. How much will you have coming in and what you will spend when you are retired.
Will you receive social security (over a certain level it is taxable), a pension or retirement plan distribution?
Many people assume their expenses will be lower when they retire but sorry, data does not support this assumption. You may want to start by assuming your expenses will be the same less what you contribute to retirement savings.

 

8. Know what percentage of your money is in retirement assets and non-retirement assets. 
This is a key determinant in choosing a strategy determining which accounts should be drawn upon for your income needs.
In the current low interest rate environment, you must be sure your asset allocation provides the opportunity to keep pace with inflation.

 

9. Know your level of financial security and understand what you need for your personal well-being.
It is easy to be mis-led by standard formulas and calculators. Even if you think you know what you want for your future, life is unpredictable. There is no magic number for everyone. How much you will need in retirement depends on how much you will spend when you retire. Think about it and add it all up.

 

10. Know your personal goals and objectives.
What do you want to work toward?  Is it about early retirement, paying off the mortgage, travel, a second home, downsizing, leaving money for your children or paying for college for the grandkids? Write it down and set your priorities!
While it is great to gather information, don’t let other people’s opinions influence your priorities and goals.
One thing is for sure and that is nothing is for certain.  Have a Plan B!

 

Coming next:

II.  The SECURE Act: If you keep working, you can keep saving
III.  The SECURE Act: You and your RMD -
IV.   The SECURE Act: “Stretch” IRA no longer

 

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Asset allocation does not ensure a profit or protect against a loss.

This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor

Financial planning and investment advice offered through Affinia Financial Group, LLC, a registered investment advisor. Securities offered through LPL Financial, member FINRA/SIPC. Special Needs Financial Planning LLC, Affinia Financial Group, LLC and LPL Financial are separate entities.

Tags: Retirement Planning

January is Kickoff Time (even for us Patriots fans🙁)

Posted by Haddad Nadworny on Sat, Jan 11, 2020 @ 06:30 AM

The Special Needs Financial Planning Team John Nadworny, CFP, CTFA | Cynthia Haddad, CFP | Alexandria Nadworny, CFP,  CTFA

We are committed to presenting complimentary educational workshops to  organizations and parent groups. We are currently booking presentations for 2020. Please contact Alex Nadworny(anadworny@affiniafg.com / 781-365-8586) to  schedule a talk for your group. 

 

The Year in Special Needs Planning

Planning for the future is a process; there are many choices and options to learn about, think through, discuss and act upon.  Each month we will highlight a specific element of planning, along with a few possible action items, to help make the process more manageable.

The important thing is to get started!

January – Set Yourself Up

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  1. Set and prioritize your financial goals. A good way to begin might be to make a comprehensive list of goals and then rank them by urgency and achievability. 

 

               Here’s a hypothetical example:

      Need to do in 2020

     Will try to do in 2020.   

    Would be great to do in                     2020

    Replace the car that is          about to break down                    for good.         

    Put $100/month into a     college savings account                for each child.

        Max out my 401K.

 

  Pay down credit card debt.

      Save $5K more in a               retirement account.  

   Replace the deck on the                    house.       

        Make student loan                   payments.      

  Take a class to build skills      and work toward a job       change/promotion/raise.  

Save money for trip to Disney World. 

 

  1. Review your past year’s cash flow and construct your spending and saving plan.

    • Review 2019 cash flow

      1. Here’s why- It's a reality check; you’ve just listed what you want to do now look at what you did do. How in the world did you spend all that money at Target? Reviewing where and what you spent your money on is a great way to bring mindfulness to your spending.

      2. Here’s how- Most banks give account holders the ability to download their transactions and may even categorize the expenditures for you. Determine what was spent on filling needs- e.g. food, shelter, insurance, transportation and what was spent on discretionary items or wants - travel and entertainment, streaming services, the gym, restaurants- the things you choose to spend your money on but can keep calm and carry on without.

    • Build a spending & saving plan.

      1. A spending plan is a summary of how you project spending your money and provides a benchmark to check your actual spending against throughout the year. A general rule of thumb for making a spending & saving plan, also called a budget, is to aim for spending 50% of your after-tax income to pay for your needs, 30% to pay for your wants and 20% to pay yourself – your savings! We prefer to elevate the focus on saving and tweak this practice to be a 50/20/30 rule, when possible. This prioritizes paying yourself 20% before paying for your wants or discretionary expenses. If you know you are realistically unable to save 20% of your after- tax income, consider increasing your savings 1% per year until you get there.

      2. Be a Money Watcher. Keeping track of your money is a key action to help you stay on track and make mindful money decisions throughout the year. Just look at the decades of success subscribers to Weight Watchers have enjoyed. A key – maybe THE key- element of their program is tracking the points in what you eat against the points you are allotted in order to reach your goal weight. Without this tracking, no one will think about that extra half cookie they ate after lunch! The same is true of tracking your spending and keeping your budget and there is all manner of technology available to help you be a Money Watcher.

  1. Be sure your legal and estate planning documents are up to date and your key emergency contacts know how to access them. These documents would include:

    • Power of attorney

    • Health Care proxy

    • Wills & Trusts

  2. Special Needs Planning Focus

In addition to the planning documents above, for a child with a disability please include the following documents, when applicable:

    • Special Needs Trust

    • Guardians

    • Trustees

    • Advocates

    • Asset ownership

    • Beneficiary designations

And last but not least...

😍 Complete/Update a Letter of Intent. These are the details of your child’s daily life that will be an invaluable resource for those who will to carry on their care.  You may download a copy here.

You're on your way! 

landscape-photography-of-snow-pathway-between-trees-during-688660-1

This information is not intended to be a substitute for specific individualized tax or legal advice.  We suggest that you discuss your specific situation with a qualified tax or legal advisor.

 

 

 

 

 

 

Tags: financial planning

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