Some are blaming the recession and it looks like a great place to start, but for many Americans, that classic 401(k) is no longer the golden child in estate planning. When the recession kicked into overdrive in 2008, many recall watching in horror as the indexes tumbled. The S&P alone lost a massive 37 percent that year. Translated, Americans with 401(k)s lost their assets, not to mention their faith in these financial planning vehicles.
Before then, you’d be hard pressed to find anyone who didn’t sing the praises of the retirement tool. Many incorporated other vehicles, such as the IRA or Keogh, but the overwhelming majority were on board with the 401 (k). Now, though, Gallup has a new report and in it, less than half of Americans say they’re opting for this method. Taking it a step further, those who were polled say they’re opting for savings accounts, IRAs, CDs – either alone or for those who’ve not abandoned the 401 (k), along with it.
Nearly 60 percent say their biggest worries involve their retirement, especially that they’ll have no money at all when they retire. Others are already are planning to work longer.
Other findings include:
54 percent, in 2008, said they still considered the 401 (k) as the biggest part of their retirement, though they didn’t rely solely on it. In one year, the number of those who said the 401 (k) encompassed the lion’s share of their retirement planning fell to 42 percent. The number’s been falling ever since.
Another disturbing finding: those not-yet retired who do plan to rely on their 401(k) accounts, only 22 percent are actually doing so.
Those nearing retirement say they are not relying solely on Social Security. Twelve years ago, between 50 and 61 percent of those nearing retirement considered it a “major source of income”. Today, between 25 and 34 percent agree. Half of those polled say they will consider it a “minor” source of income.
So how does estate planning factor into these revelations? For those who are planning past their retirement, many are considering trusts and tax free gifts. Further, new focus is being placed on eliminating debt prior to their retirement date. With higher interest rates on credit cards, this is a big one.
Insurance coverage is always a big factor and many are looking to the future with a bit more caution. Needs change and life and health insurance policies are beginning to reflect those shifting mindsets.
Also, estate planning lawyers are encouraging clients to carefully schedule Medicare applications. Because age and other benefits determine premiums, attention paid to the details can mean significant differences. The same goes for Social Security benefits. If a spouse is deceased, the surviving spouse can begin collecting benefits at the age of 60 – or 50 if the surviving spouse is disabled. For those applying for Social Security, applying three months before their 65th birthday is still the best timing. Applying earlier could mean reduced benefits.
Finally, the standard estate planning should also maintain a priority. Putting the proper powers of attorney in place, setting up trusts for a disabled child or adult child and kicking in the gift giving option if you’re concerned about taxes are all as important now as they were before the recession.
Nashua Estate Planning Legal Help and Guidance
While no one knows for sure how the landscape will look after the effects of the recession have finally waned, covering your bases now can make a huge difference. Our Nashua estate planning attorneys offer free estate planning consultation to help you get started. Contact us today.
Daniel DeBruyckere
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