Sandwiched
Have you heard of the ‘sandwich generation’? The definition of Sandwich Generation is ‘a generation of people who care for their aging parents while supporting their own children’ (Wikipedia). According to the Pew Research Center just over 1 out of every 8 Americans aged 40 to 60 is caring for a parent and raising their own child. With longer life spans, this will become a growing trend as the ‘Boomer Generation’ continues to age. US Census Bureau Statistics indicate that the number of Americans 65 and older will double by 2030, to over 70 million.
If you are ‘sandwiched’ between the generations as a care giver, looking for resources to assist you and asking for help will become more important. You are possibly still working and taking care of a parent full time is not possible without leaving your job.
Your parents may or may not have long term care insurance to cover care as they age. The time prior to a long term care insurance claim being started can be difficult if you’re unable to find resources to assist you. Here are a few ideas that may help you:
- Consider friends and neighbors of your parent(s). You may be unable to be present every day for your parent. Communicating with others that are close to your parent can help you determine if there is a change in their health, behavior, or other situations.
- Hire a Care Manager. Hiring someone to help with cleaning, grocery shopping, and taking your parent to appointments can relieve you of some of the time constraints on your own schedule that may take you away from work, or other commitments. The care manager is a resource that will notify you of changes in your parent.
- Monitor paying bills and spending accounts through the internet. If your parent has asked you for assistance, make sure that there is documentation in place for you to legally monitor accounts and represent your parent. Consulting an attorney prior to assist with this is recommended
- Familiarize yourself with The Family and Medical Leave Act. Under this act, you are allowed to take leave from your employer in order to care for a parent. This applies in the same way it would for yourself, your child, or spouse needing care.
Remember the RMD!
With the end of the year approaching it is important that you take any Required Minimum Distributions (RMD) from your retirement accounts by December 31. This is a requirement for those who are 70 ½ or older and who have retirement accounts such as an IRA, a 401(k), a 403(b) and other similar retirement accounts. This may apply to beneficiaries of an inherited IRA who are younger than 70 ½.
Your account custodian is required to notify you of the amount of your RMD and required to notify the IRS. There is a 50% penalty on any amount not taken in addition to any income tax due. Not all custodians notify you of RMDs for inherited IRAs.
The amount of your distribution for the current year is based upon the balance in your account as of December 31 of the prior year and your age. There is an IRS Publication with an age-based table that is used in the calculations.
The rules for your first RMD can be a bit confusing. You have until April 1 of the year following the year in which you turn 70 ½ to take the RMD for your first year. It may or may not be advantageous for you to delay as you will then be required to take two RMDs in that year.
There are other nuances in the RMD rules such as potential exceptions for those who are employed and 70 ½ or older. Please feel free to contact me with any questions concerning taking your RMD.
Old Year, New Plan
The end of the year signals deadlines and also new beginnings. It’s a great time to reflect on what financial moves you made this year, and those that need to be put in place for next year. You still have time to make changes before the December 31st deadline:
- Max Out the 401K. If you haven’t contributed the full amount allowed into your account, you can still defer your last paychecks.
- Review your Insurance Coverage. If you’re employed, you need to make the new elections or changes before the end of the calendar year. In addition to insurance through your employer, review personal insurance on your property and risk insurance(s) you may carry outside of your employer such as long term care, disability, etc.
- Review your portfolio and rebalance. Meet with me to review all of your investment accounts and rebalance if necessary. You may need to make a contribution this year in order to offset income for 2015 (Discuss tax planning with your tax professional).
- Take advantage of tax benefits for this year (home improvement, donations, etc). Visit with your tax professional for information on what is deductible for 2015, and keep receipts ready for filing.
- Review all of your Beneficiary information on all securities related accounts, insurance policies, and will or trust documents. There is no deadline, but since you’re in review mode, you can add this to your ‘old year, new plan’ list.
Changes in Social Security Filing For Couples
As part of the recent Congressional budget bill, the popular couples Social Security claiming strategy, ‘file and suspend with a restricted application‘ , will end after April 30, 2016. The strategy works like this:
One spouse files for their benefit once they reach their full retirement age (FRA) and then suspends their benefit. This allows their benefit to continue to grow to age 70. Once the other spouse reaches their FRA they file a restricted application in order to receive a spousal benefit based on the other spouse’s earnings record. Their own benefit continues to grow until age 70 when they can switch to their own benefit if it is higher.
For couples already doing this there will be no changes. Those who will have reached their FRA by April 30, 2016 can still execute this before the deadline. After April if one spouse were to suspend their benefit, it would suspend benefits for anyone receiving a benefit from the spouse’s earnings record.
For those born in 1953 or earlier the ability to file a restricted application for spousal benefits will still be there as long as the other spouse is actually receiving a benefit.
These new rules will have an impact on couples who may have been planning to execute this claiming strategy (that can throw off $35,000 to $60,000 or more during the four years from the spouse’s FRA) to age 70. In addition, divorcees who might have wanted to claim a benefit from their ex’s earnings record may be impacted. Widows and widowers will not see any impact in terms of collecting a survivor’s benefit.
If you would like to discuss your Social Security options or have retirement planning questions in this new environment please contact me.
