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Category: IRA Resources

Find comprehensive information on IRA Resources from Ubiquity Retirement + Savings. Find easy to understand rules and regulations on IRA plans, along with tips and advice from our team of IRA investment experts. Call Ubiquity today for a Free Consultation at 855.466.5825.

Medical advancements have greatly improved our quality of health and have allowed us to live longer, extending our retirement years and related costs. Diligent savings combined with the many tools and resources available – such as individual retirement accounts (IRAs) and company-sponsored 401k’s, make it possible to protect today’s otherwise taxable earnings and save for our future. However, one very real and often overlooked threat to our hard-earned savings is the unexpected cost of long-term care and home health care. Are your IRA and 401k protected?

Many of us depend on the following for the security of our retirement savings:

  • Health Insurance
  • Social Security
  • Medicare
  • Personal savings

It’s important to realize that all of these do not ensure the protection of your hard-earned IRA and 401k savings from the potential costs of long-term care.  Hidden out-of-pocket costs for which can drastically impact these savings.

Our lifespan is now projected to extend up to 30+ years after retirement – 65 by traditional standards.

70% of us can anticipate needing some form of long-term care, according to the U.S Department of Health and Human Services.  As older models of retirement planning are based on a shorter life expectancy, we now must consider how long-term care costs–and the tax burden of IRA and 401k withdrawals–can deplete your savings quickly and ruthlessly.

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According to Genworth’s Cost of Care Survey, the projected annual cost for a senior living nursing home facility can easily reach $100,000/year, or over $8,000/month.

While this number should give most Americans a bit of anxiety, some still believe that they have nothing to fear if they have planned carefully with IRA and 401k savings. The catch is in the hidden details: taxes and penalties from taking funds out of your IRA and 401k sooner than your withdrawal schedule.  Paying for long-term care costs can quickly make your money disappear into thin air.

5 tips to avoid drawing funds from your IRA or 401k for long-term care costs.

1. Have a Plan

Avoid being overly confident about your control over the future of your health. In order to save money, many people skip planning for future long-term care costs, thinking: “I won’t need long-term care because my family will take care of me”, or, “IF something happens…my IRA and 401k is my insurance policy.”  This is a set-up for potential disaster.

Certainly, we have control over making good lifestyle choices to maintain optimal health, but none of us truly has total control over the course of our health and aging. Furthermore, don’t be misled into thinking that losing your independent living is limited to the elderly–health issues may arise anytime and could require a period of long-term care even before retirement.

Did you know that sizable withdrawals from your IRA or 401k within a single year can double or triple your tax rate? In some cases, this also means penalty fees if you need this money before age 65. Poor planning can have shattering consequences. Read more information on the downsides of using your IRA or 401k to cover out-of-pocket health care costs.

2. Take Preventative Measures

Take advantage of preventive medical tests available to you through your health and life insurance policies.  Early detection of illness can make a life changing difference in treatment outcomes and maintaining independent living – both of which could have a direct impact on your IRA and 401k resources.

As you prepare to enroll in Medicare Part B (around age 65), make yourself aware of and plan to use preventative doctor visits that are covered with no copay for the first 12 months of enrollment. Read more information on what Medicare covers for preventative services.

3. Educate Yourself

Use resources online and in your community to educate yourself on the details of long-term care costs – it’s expensive! Learn everything you can about your entitlement to free and affordable Medicare and Medicaid health plans. Some are optional and require a premium with some copay, but these supplemental plans are far less expensive and could serve you well in saving money down the road.

While these plans do not cover long-term care costs, they will help protect your IRA and 401k by covering many other medical and prescription costs, including preventative and medical treatments:

  • Medicare (required)
  • Medicare Supplemental Insurance (optional/supplements Medicare enrollment)
  • Medicaid (for qualifying low-income only)
  • Medigap (optional/supplements Medicare)
  • Medicare Advantage plans (optional/supplements Medicare)

Make it a priority to be in close touch with these plans’ enrollment deadlines since they all differ, and missing their deadlines can have significant consequences on your access and coverage.  These plans can help protect you from having to draw funds from your IRA or 401k savings. Make a calendar to help you remember deadlines for when the time comes. Click to learn more about enrollment deadlines.

4. Consider Supplemental Insurance

In order to be truly well prepared for unexpected long-term care costs, look into a supplemental “back-up plan” that’s right for you. A private long-term care insurance policy covers much of what traditional health insurance does not, including: care coordination, home modification, adult day-care, assisted living facilities, and even nursing home care.

However, it is fairly expensive and there is no guarantee that your application will be accepted due to preexisting conditions. You’ll want to consult with an independent insurance broker while you’re still fairly healthy (ages 50-60) to determine if this option is right for you and your budget.

Fortunately, there is now a growing marketplace for more affordable supplemental alternatives that are well worth looking into as well:

  • Friends and Family Care
  • Short-term Care (Convalescent) insurance
  • Critical Care and Critical Illness insurance
  • Life Insurance with a LTC Rider
  • Annuities with Long-Term Care Riders
  • Deferred Annuities for after Retirement
  • Medical Savings Account

For more information on insurance alternatives, visit https://www.investopedia.com/articles/personal-finance/100515/4-best-alternatives-longterm-care-insurance.asp

https://www.dummies.com/health/long-term-care-provided-by-family-or-friends/

5. Take Accountability

When you consider the reality of what needing long-term care means, think about the possibility that you may become quite disabled and unable to be accountable for making sound decisions. The responsibility often falls upon your family.

This could be in a variety of ways: tending to your daily care, taking on your financial burdens, and making difficult decisions related to everything from your medical care to the management of your personal finances. Having plans laid out in advance can offer peace of mind for everyone.

A living will (which can assign things like advance directives and power of attorney) is one of the ways to help the family protect you, and your IRA or 401k, when you aren’t able to yourself. Click here to learn more information on drawing up legally binding online wills that circumvent expensive attorney fees.

Ubiquity Retirement + Savings: Stay Up-To-Date.

Download our 2020 Contribution Guide

Curious how much you can invest toward your retirement in 2020? The IRS has announced the 2020 contribution limits for retirement and health savings accounts. Changes include increased contribution limits for 401(k) and 403(b) plans, as well as income limits for IRA contribution deductibility. Additionally, the salary threshold to classify “key” and “highly compensated employees” has been announced. Review our quick guide of the updated limits below.

2020 401(k) and 403(b) individual contribution limits (IRS 402(g) Limit)

2020

Age 49 and under

$19,500

Age 50 and older

Additional $6,500

The IRS has also set limits for the total amount that may be contributed to your retirement savings 401(k) account from all sources combined (IRS section 415 limit). This includes any employer matching or profit-sharing contributions, and any employee after-tax contributions. For 2020, the maximum is $57,000.

Every plan is different, so it’s important to refer to your Plan Document for any compensation or other applicable limits.

Cut through the complexity of choosing and customizing the right 401(k) for your small business. Get an instant quote.

How many employees do you have?
I am a sole proprietor
(just me/or my business partner/spouse)

2020 Highly Compensated and Key Employee definitions and limits

2020

Key Employee Officer Compensation

$185,000

Highly Compensated Employee

$130,000

Annual Compensation Limit

$285,000

2020 Roth and Traditional IRA contribution limits

2020

Age 49 and under

Up to $6,000 (must have earned income)

Age 50 and older

Additional $1,000

2020 Traditional IRA modified adjusted gross income limit for partial deductibility

2020

Single

$65,000 – $75,000

Married – Filing joint returns

$104,000 – $124,000

Married – Filing separately

$0 – $10,000

Non-active participant spouse

$196,000 – $206,000

2020 Roth IRA modified adjusted gross income phase-out ranges

2020

Single

$124,000 – $139,000

Married – Filing joint returns

$196,000 – $206,000

Married – Filing separately

$0 – $10,000

2020 Simple IRA contribution limits

2020

Age 49 and under

$13,500

Age 50 and older

$16,500

2020 Health Savings Accounts (HSA) contribution limits

2020

Individual (employer + employee)

$3,550

Family (employer + employee)

$7,100

Age 55 or older**

Additional $1,000

**Catch-up contributions can be made at any time during the year in which the HSA participant turns 55.

If you need more detailed guidance, see IRS Notice 2019-59.

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44 Montgomery Street, Suite 3060
San Francisco, CA 94104
Support: 855.401.4357

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© 2020 Ubiquity Retirement + Savings
Privacy Policy
44 Montgomery Street, Suite 3060
San Francisco, CA 94104
Support: 855.401.4357

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