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You Can Limit Financial Costs if You Predecease Your Spouse, if Not the Emotional Ones

The transfer of assets when a spouse dies can be fairly simple—if you learn from my mistakes.

I pride myself on keeping meticulous financial records. But since my wife died on Jan. 1, I discovered I had made some real rookie mistakes that led to hours of extra work and substantial fees. The transfer of assets between spouses can be fairly simple—if you learn from my mistakes.

Dr. Lisa Jane Krenzel and I shared everything throughout our marriage. Like many couples, we split responsibilities. I paid the bills and made investments. She took care of our health insurance, plus the house. We maintained individual checking and savings accounts, as well as separate retirement accounts from various jobs throughout our careers. What went wrong?

  • Issue One:When we opened those checking and savings accounts, we never named beneficiaries. I had assumed, incorrectly, that our accounts would simply transfer to the other in case of death. The banker who opened the accounts never suggested otherwise. With a named beneficiary, her accounts would have simply been folded into mine. Instead, I had to hire a lawyer—at $465 an hour—to petition the court to name me as the executor of her estate. I needed this power to transfer her accounts. Filing costs in New York City for the necessary document was $1,286. The running bill for the lawyer stands at $7,402.00, and I expect it to rise.

I also needed the documents for the companies that managed her retirement accounts and a mutual fund, because, as at the bank, we never named a beneficiary. By the way, this paperwork also required signature guarantees or a notary seal, which can take up an afternoon.

  • Issue Two: The highly charged question of funeral and burial. Last summer, when I was told Lisa would not survive this illness, I tried to raise the issue of burial with her. She refused to have the conversation, but I quietly went ahead and purchased a plot of graves in the cemetery in Wisconsin where my parents, grandparents and great-grandparents are buried. This was something I actually did right.

We had to employ two funeral homes—one in New York and one in Wisconsin—and her body had to make the journey out there. All told, I spent $46,359 to cover funeral expenses, graves, transportation, a headstone and a basic casket.

I noticed something interesting in this process. All of my fellow baby boomer friends I have since asked have so far refused to deal with the issue. They wince when I even raise the question. Hear me: You don’t want to have to make this decision at the time someone close to you dies. You simply are not thinking straight.

  • Issue Three: Our health insurance plan covered the long hospital stays and doctors’ visits. However, shortly after Lisa died, I still received bills, even though our deductibles and copays had long since been covered. I paid them immediately, which was a mistake. I was incorrectly billed and I have been fighting the hospitals and insurance company since January to get a refund, even though everyone agrees the bills were incorrect. Before you pay any medical bills, make a simple call and determine their legitimacy. Mistakes are constant: The systems are so complicated, even people in these offices don’t always understand the intricacies.
  • Issue Four:Lisa had two life-insurance policies—one through her work and the other we purchased privately. The former was handled quickly and efficiently by her job and a check arrived almost immediately. Although the insurance company sent me a check for her private policy soon after her death, it took three months of constant calls and emails to determine a refund of the premium I had already paid for three months past her death. I kept getting wrong information from the company, because the people I dealt with didn’t understand it themselves.
  • Issue Five: Over the course of Lisa’s working life—from her first job at a fast-food restaurant to medicine—she paid more than $100,000 to Social Security. Since she died at 60, and our 19-year-old daughter is one year past the age of receiving a monthly benefit, all this money has simply disappeared into the lockbox in Washington. Nothing you can do about this one.

Finally, there is the major psychological trauma of grief. I think most people believe death will never intrude on their lives and when it does, we will be so old and decrepit that it won’t much matter. Trust me on this—even when it’s been expected for a while, it still shocks deeply. There is absolutely no way you can prepare yourself for the shattering heartbreak of loss. When it did come to me, I found the support of friends, family and faith to be invaluable. Amazingly, that cost nothing.

Mr. Kozak is the author of “LeMay: The Life and Wars of General Curtis LeMay” (Regnery, 2009). Appeared in the April 28, 2018, print edition.

Rich Arzaga, CFP® & David Winkler
Cornerstone Wealth Management, Inc.
info@cornerstonewmi.com

2400 Camino Ramon, Suite 175
San Ramon, CA 94583
925-824-2880

CA Insurance Lic# 0D92796 & Lic# 0G10586. Rich Arzaga and David Winkler are registered representative with, and Securities and Advisory services offered through, LPL Financial, a registered investment advisor, Member FINRA/SIPC. Financial planning is offered through Cornerstone Wealth Management, Inc. a registered investment advisor and a separate entity from LPL Financial. The information contained in this e-mail message is being transmitted to and is intended for the use of only the individual(s) to whom it is addressed. If the reader of this message is not the intended recipient, you are hereby advised that any dissemination, distribution or copying of this message is strictly prohibited. If you have received this message in error, please immediately delete.

This article was prepared by a third party for information purposes only. It is not intended to provide specific advice or recommendations for any individual.

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Where Retirees Underestimate Spending

Where Retirees Underestimate Spending         

Underestimating how much you’ll spend can be costly, so it’s key to know the common pitfalls

 

Navigating retirement can be difficult for lots of reasons. One of the biggest is that it forces people to make plans based on spending assumptions that won’t become a reality for decades.

Guessing wrong can be the difference between a comfortable retirement and one that is a struggle.

“It’s a lot more difficult to recover in retirement,” says Adam Van Wie, a financial planner in Jacksonville Beach, Fla. “You can try to find another job, but that’s not an option for everyone.”

We spoke to financial advisers about some of the most frequent mistakes people make when it comes to estimating how much they’ll spend in retirement.

Helping family. You may be willing to slash your own expenses in retirement if times get tough. What will you do if your children, or grandchildren, get in a bind? Saying no is much harder.

  • In Defense of thsy Retirement

But saying yes can imperil your own retirement. A number of parents who guaranteed their children’s school loans have seen their own finances ruined when the child defaulted on the loan.

Mark McCarron, a financial planner in Charlottesville, Va., is working with a retired couple who paid for the wedding of one daughter, and expect to pay shortly for the wedding of their other daughter as well.

They have the cash, says Mr. McCarron. The rub is that they just hadn’t planned on paying for weddings when they retired, and it reduces the funds they can draw upon for other purposes.

Big-ticket periodic items. Would-be retirees often meticulously estimate day-to-day expenses, but forget to factor in more periodic, and mostly predictable, expenses like a new car or a new roof. And those big-ticket items inevitably blow holes in their budgets.

Dana Anspach, a financial planner in Scottsdale, Ariz., recommends that clients set aside 3% of the value of their house each year for maintenance—as well as plan on setting aside money for the periodic new car.

One caveat: Beware of taking big chunks of money out of a 401(k) or other tax-deferred accounts, Ms. Anspach says. Such withdrawals are treated as taxable income and can push retirees into a higher tax bracket. A better approach is to withdraw the money gradually over a two- or three-year period for an expected expense.

Belinda Ellison of Greenville, S.C., who recently retired as a lawyer, sets aside money for unforeseen landscaping expenses. So she was ready when she had to spend $10,000 recently to remove a huge tree on her property. Ms. Ellison owns a 100-year-old home, and has another fund set up for renovation expenses.

It’s not so with everybody she knows. “I have friends who have trouble when they need a new set of tires,” Ms. Ellison says.

Entertainment. Many retirees are surprised at how much their entertainment costs rise when they stop working, says Neil A. Brown, a financial adviser in West Columbia, S.C. Instead of working five or six days a week and playing one, it can be the opposite. “You’ve got five or six days to play,” Mr. Brown says.

Americans age 65 to 74 spent an average $5,832 on entertainment in 2015, according to a study from the Employment Benefit Research Institute, based in Washington, D.C. Entertainment spending declines with age; people 85 and over in the study spent $2,232 on average.

Health care. Even Medicare recipients are frequently shocked by the cost of health care, says Joan Cox, a financial planner in Covington, La. Ms. Cox says a married couple in their late 60s can expect to spend close to $13,000 a year in medical expenses. That assumes $8,000 in Medicare premiums and supplemental insurance premiums, $1,200 for drug coverage, and $3,700 in out-of-pocket expenses.

 

“I’ll do their financial plan, and it looks like they have plenty of assets” for retirement, she says. “Then I’ll put in health-care costs, and all of sudden their plan doesn’t work.”

Drugs costs, in particular, surprise retirees, says David Armes, a financial planner in Long Beach, Calif., who specializes in helping clients evaluate Medicare options. “Many of these cost drivers cannot be accurately predicted when you’re in your 60s,” he says. “There’s no way for 65-year-olds to know, for instance, whether they will need to take expensive brand-name drugs when they reach their 80s.”

For affluent retirees, there can be another surprise with Medicare. Couples whose modified adjusted gross income exceeds $170,000 a year must pay higher premiums. To lessen those expenses, a couple might try shifting income to one year so that they will avoid higher Medicare premiums in other years, says Mr. Armes.

Long-term care. The need for long-term care is perhaps the most costly unexpected expense in retirement.

 

About 15% of retirees will spend more than $250,000 on such care, according to a research report to be released this spring by Vanguard Group The problem is it is impossible to know who will be part of that 15%. Some 50% of retirees won’t spend anything at all, and 25% will spend less than $100,000, the Vanguard report says.

“It’s hard to plan for,” says Colleen Jaconetti, a senior investment analyst with Vanguard.

For years, financial planners urged people to buy long-term care insurance. But that market has shrunk dramatically in recent years after insurers underestimated costs and were forced to jack up premiums or withdraw from new sales. Some insurers now offer hybrid policies that combine life insurance and long-term-care insurance. These policies allow consumers to tap their death benefits early to pay for costs such as help with feeding, bathing and other personal needs.

Living a long life. One of the biggest mistakes people make in estimating retirement expenses is underestimating how long they will live.

The average 65-year-old in the U.S., for example, is likely to live an additional 19.4 years, according to data from the National Center for Health Statistics.

Obviously, the longer the life, the more the spending. It can be a good problem to have—but one that surprises too many people.

“Everybody worries about dying young,” says Prof. David Littell of the American College of Financial Services. “People should be more worried about living too long.”

Mr. Templin is a writer in New Jersey. He can be reached at reports@wsj.com.

Appeared in the April 23, 2018, print edition.

 

This article was prepared by a third party for information purposes only. It is not intended to provide specific advice or recommendations for any individual. It contains references to individuals or entities that are not affiliated with Cornerstone wealth Management, Inc. or LPL Financial. LPL Tracking# 1-723395

 

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LPL Ranks #1 in Customer Loyalty in 2018

The most meaningful measure of how well we’re serving our clients is whether we exceed their expectations in delivering the value and commitment they need to pursue their life and financial goals.

That’s why I wanted to share with you the news that LPL and its affiliated advisors, including Cornerstone Wealth Management, were recently ranked No. 1 in customer loyalty among 21 leading financial distributor firms. It means a great deal for us to be part of a network that’s a recognized industry leader in providing quality personal service—and it’s an even greater honor that LPL has risen in these rankings in each of the past three years.

The rankings were among the findings in Investor Brand BuilderTM, a Cogent ReportsTM study released by Market Strategies International, in which 4,408 affluent investors nationwide were surveyed.*

The study explored the key aspects of client experience that drive investor loyalty. On each of the top 5 drivers of investor loyalty, LPL earned No. 1 rankings by exceeding client expectations in the following areas:

  • Quality of investment advice
  • Financial stability
  • Easy to do business with
  • Range of investment products and services
  • Retirement planning services

In addition, LPL ranked No. 1 in the likelihood of its investors recommending the firm and its advisors to their friends, families, and colleagues.

As an advisors affiliated with LPL Financial, I we are proud of this recognition by investors of the value of the objective financial advice we offer to help clients pursue their goals, and of the innovative products and services our affiliation with LPL allows us to provide access to.

I appreciate the opportunity to partner with you, and I look forward to our continued work together. Thank you for your business.

This letter was prepared by LPL Financial LLC. This is not a recommendation to purchase, or an endorsement of, LPL Financial stock. LPL Financial and Cogent are unaffiliated entities.

*Market Strategies International, Cogent Wealth Reports, “Investor Brand Builder™: Maximize Purchase Intent Among Investors and Expand Client Relationships,” November 2017.

ABOUT THE REPORT: Market Strategies International’s Cogent Wealth Reports: Investor Brand Builder™ provides a holistic view of key trends affecting the affluent investor marketplace. The November 2017 report is based on a web survey of over 4,000 affluent investors, who hold $100,000 or more in investable assets. A total of n=82 LPL advisor clients were represented in the study. Customer Loyalty is based on how likely the participant would recommend each of their investment account companies to friends, family, or colleagues. Participants also evaluate their investment account companies using a 5-point rating scale across 10 aspects of client experience.