If you are under 40 or just approaching middle age, it is not too late to start long term planning for your retirement. It is common for most people to put off retirement plans or to assume that an IRA or 401(k) from an employer will be sufficient to meet retirement goals and provide for a comfortable life when the senior years begin.
If you are in your 40s, chances are that you may be caring for elderly parents or putting funds away for your children’s college education so that funding for your eventual retirement may seem impossible. Your lifestyle may also be straining your finances with yearly vacations, having multiple vehicles, a boat or a vacation home. If you are between 30 and 49 and have no retirement plans, you are one of 33% of Americans in the same situation.
However, depending on your age, even being 50 or 60 is not too late to begin long term care planning by buying long term care insurance. If Medicaid or MassHealth is contemplated, your elder law lawyer may well advise you to wait until you are in your 70s before transferring assets to a trust depending on your financial situation.
How Much Do You Need?
Maintaining the lifestyle you have become accustomed to requires that you replace 75% to 85% of your pre-retirement income with retirement income. You can at least approach that by implementing the following:
- Have your children apply for grants and scholarships for their college education. Other programs are work-study and low-interest loans. Many college loan programs will forgive student debt if your child enters certain professions such as teaching or government service.
- Look into purchasing long term care insurance for your parents and for yourself when you are at least 50. When you hit the age of 60, premiums can rise significantly.
- Fund your IRA with the maximum amount. It is $5500.00 annually and $6600.00 if you are 50 or older.
- For a 401(k), you can fund up to $18,000.00 yearly and an additional $6000.00 for catch-up contributions. Your employer may also match your contributions
- Meet with an estate planning or elder law lawyer to review or to structure a long term planning strategy now. Your attorney can refer you to a financial planner as well regarding safe and sound investments such as in bonds, stocks, real estate and gold.
Long Term Health Care Planning
Spending most if not all of your assets due to health conditions or the infirmities of old age is not a pleasant prospect, but it can be avoided with proper estate planning. MassHealth, or Medicaid, is a joint federal and state insurance program for low income, seniors and disabled individuals. You do have to qualify by having assets below a certain amount or by being considered “impoverished.” To meet the criteria, you can transfer assets to an irrevocable trust or provide for joint ownership of assets so as to spend down to meet the requirements. Be aware that any transfer can make you ineligible for benefits for 5 years. Consequently, it is best to consider doing this in your 70s and before health care becomes a major concern. However, because the laws pertaining to MassHealth change periodically, it is recommended that you maintain contact with your elder law attorney regarding changes that could affect trusts or other measures you are taking or considering.
Because long term health insurance becomes progressively expensive as you age, waiting too long can mean substantial premiums will have to be paid. But is you purchase it while in your 40s, you will be paying for coverage that may not be needed for several decades. Most advisers feel that purchasing coverage in your 50s is reasonable.
Consult Elder Law Lawyer Patricia Bloom-McDonald
If you have no long term plans or strategies regarding retirement or health care, consult elder law lawyer Patricia Bloom-McDonald . She can advise you on what plans you currently have in place, the laws that affect them and what you should consider depending on your current situation and future goals. She can also advise you on your or your loved one’s finances and eligibility for MassHealth.