Category Archives: Retirement

Remarriage: Altering Your Financial Plan to Meet Your Needs

Untitled-logo trustIn previous generations, husband’s traditionally handled the family finances. While this arrangement may have worked well during the husband’s lifetime, the consequences of the wife’s lack of involvement in the family’s finances often became clear after her spouse died. Today, more women are actively directing the outcome of their personal finances, and for good reason.

Women need to plan for a time when they may be on their own. Through divorce, widowhood, or personal choice, the odds are high that a woman will be independent at some point in her lifetime. Financial planning is essential for women throughout life, but it becomes especially important in the event of remarriage, as financial arrangements may need to be made for ex-spouses and children.

If you are in a second marriage or about to remarry, you may want to consider the following important points about managing your personal finances:

Bank Accounts. Should married couples combine their bank accounts or keep them separate? Or, perhaps combine certain accounts and keep others separate? There is no right or wrong choice—this is a personal decision. An open and honest discussion may reveal whether or not you and your spouse are financially compatible regarding spending habits, saving, investing, debt, etc. If there is a marked difference in the way you both handle money, then separating your finances may be a better plan.

Prior Debt. Will each spouse be responsible for the other’s prior debt, and if so, to what extent? Keeping the indebted spouse’s prior debt separate may help ensure that the other spouse’s property remains out of reach from creditors.

Property Acquired before Remarriage. Owning previously acquired property in your own name can prevent the risk of losing personal property to your spouse’s potential creditors. Also, doing so may have estate tax benefits. Keeping your property in your own name can help to minimize estate taxes while providing an inheritance for children from a previous marriage.

Home Ownership. Many married couples choose to title property jointly as tenants by entirety. When one spouse dies, the home passes to the surviving spouse tax-free. However, there may be estate tax consequences when the surviving spouse dies. Be sure to consult with a qualified tax professional beforehand.

Retirement. Saving for retirement is one of the major financial goals for married couples. Women, in particular, have unique concerns when planning for retirement. First, women typically live longer than men, so their retirement income needs to last longer. In addition, women often spend more time out of the workforce than men as a result of caregiving responsibilities, and therefore are less likely to have pensions and full Social Security benefits. According to the U.S. Department of Labor in 2013, when women work, they typically earn 82 cents for every dollar earned by their male counterparts. Consequently, the gap between gender incomes makes it especially important for women to prepare for retirement.

Insurance. Disability income insurance can help replace a portion of your income in the event you are unable to work due to sustaining an injury or illness. This type of insurance provides funds that can be used for bills and expenses. Similarly, life insurance provides a death benefit that can be used by your family. Proceeds can help ensure that children from a prior or current marriage can attend college, the mortgage can be paid, and the surviving spouse has some replacement income.

Estate Planning. It is important for blended families to plan for the final disposition of assets. Trusts can be a valuable tool to minimize estate taxes and to help ensure that your assets are distributed to heirs according to your wishes. For example, at your death, your assets can pass to a trust, from which your surviving spouse will receive income without direct access to the assets. At the death of the surviving spouse, the assets can then pass to children from your current or previous marriage. This provides ongoing income for your surviving spouse and an inheritance for your children, as well. In addition, if the surviving spouse later remarries, the trust can be designed to preclude your assets from their marital or community property.

Every woman who remarries needs to balance her financial past with her financial future. By addressing the management of your personal finances as soon as possible, you can avoid disputes and build financial independence for your extended and blended families.

If you have questions about the financial implications of divorce, email our Certified Divorce Financial Analyst, Marcia.Henderson@syb.com, for help!

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Financial Considerations for Single Women

Untitled-logo trustIf you’re divorced or separated, money management will become an important part of your life. While it may be true that money can’t buy or ensure happiness, your ability to manage your finances can play a large role in your financial future, and to a large extent, your ability to live life on your terms.

A huge amount of time is not necessarily required to get your finances moving in the right direction. It is often simply a matter of attending to the “basics.” The following steps may help you stay on track:

1. Pay Yourself First. Transfer a set amount from your earnings to your savings each month. Even a small amount in the beginning helps.

2. Reduce Consumer Debt. Avoid high credit card finance charges by paying off the balances each month, or if you must carry a balance, use only cards offering low finance rates beyond the introductory period.

3. Maintain Good Credit. You can obtain one free annual credit report from each of the three major credit bureaus: TransUnion, Equifax, and Experian. Good credit is required for obtaining loans and low interest rates. Monitoring your credit can also help you guard against identity theft.

4. Diversify Your Savings. Develop a plan for your short- and long-term needs. Consider your liquidity needs, risk tolerance, and time horizon for retirement. Be sure to consult a qualified financial professional to determine an appropriate strategy for your financial future.

5. Take Advantage of Tax Benefits. If you qualify, contribute to an Individual Retirement Account (IRA), an employer-sponsored 401(k) plan, or another similar retirement plan. These plans offer tax benefits that may help enhance your retirement savings.

6. Update Your Estate Plan. Have your will and any trusts reviewed by a legal professional. Prepare advance directives, such as a durable power of attorney, living will, and health care proxy. This is important for everyone at any time, regardless of age.

7. Review Your Insurance Needs. Periodically review your risk management program. Your life, health, and disability income insurance needs will likely change as you progress through various life stages.

8. Plan for Future Care. Consider your possible long-term care needs. Have you ever thought about your future care needs, should you one day require help with activities of daily living, such as meal preparation, personal care, dressing, and housekeeping? Long-term care insurance increases your care options, should the need arise by helping to cover care at home, an assisted living facility or in a nursing home.

9. Build a College Fund. College tuition, at a public or private institution, continues to rise. So, relying on your children to receive scholarships or financial aid may not be the most practical strategy. Look into opening a 529 college savings plan or other college planning account. As soon as possible, begin saving for your child’s education. Eighteen years can pass quickly.

10. Set Long-Term Financial Goals. Establish one-, three-, five- and10-year goals. Evaluate your progress yearly and make adjustments, as appropriate, to achieve long-term success.

Whether you’re divorced or separated, straightening out your finances can become a top priority. Make a commitment now to start this planning process. Attention to the basics may help you meet your financial goals and improve your emotional and financial well-being.

Visit https://www.syb.com/wealth-management-and-trust/how-we-serve-our-clients/ to see how Stock Yards Bank and Trust can help you.

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Resource information provided by Financial Media Exchange

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Divorce and Retirement Plan Proceeds

Untitled-logo trustDivorce can be “taxing” enough, but need not be made more difficult by the mismanagement of the division of assets in a retirement plan. As more Americans participate in 401(k) plans and other defined contribution retirement plans, dividing vested retirement plan assets in divorce situations can be complicated. In addition, defined benefit plans can involve numerous concerns, such as the participant’s death before retirement, and the form of the benefit payments at retirement.

A Qualified Domestic Relations Order (QDRO) is a legal document that enables a retirement plan to transfer money or other plan assets to the non-employee former spouse. A QDRO must meet very specific requirements of the Internal Revenue Service (IRS) and the Employee Retirement Income Security Act of 1974 (ERISA). Note that without a QDRO, a transfer of retirement plan assets cannot occur.

Entitlement to your former spouse’s retirement plan benefits depends on the type of plan. For a defined contribution plan, whereby each plan participant has his or her own individual account, a former spouse may be entitled to 50% of the vested and non-vested benefits that were credited or accrued during your marriage. Depending on the type of defined benefit plan, you can receive a portion of the retirement benefit based on the amount of time of your marriage during plan participation and the total amount of time the employee former spouse participates in the plan through retirement.

Since many issues need to be thoroughly discussed regarding divorce and retirement plan benefits, be sure to consult your tax and legal professionals for guidance about your unique circumstances.

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7 Tips for Choosing a Financial Caregiver

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According to the National Council on Aging, almost 90 percent of the financial abuse committed against older Americans is done by someone they know. More than ever, it is imperative for seniors to select a trustworthy person to properly manage their finances and personal affairs.

Fraudsters often prey on seniors experiencing cognitive decline, limited mobility and other disabilities that require them to rely more heavily on others for help. Appointing someone you trust to handle your financial matters aids tremendously in the fight against these crimes.

In recognition of May as Older Americans Month, we want to share seven tips to help choose the right financial caregiver and prevent financial abuse:

  • When delegating financial decisions, make sure it’s someone you trust. If you are unable to facilitate financial transactions, carefully choose a trustworthy person to act as your agent in all financial matters.
  • Know who is in your home. Conduct a thorough background check on all individuals you hire for personal care or home care services. Check references and credentials before you let them into your personal space.
  • Never sign something you don’t understand. Consult with a financial advisor or attorney before signing any document that appears suspicious or unclear.
  • Understand the terms of assigning a Power of Attorney. Granting someone POA gives them the authority to act and make decisions on your behalf, including managing and having access to your bank and other financial accounts. Make sure you fully understand the terms and conditions of consenting a legal agent before you do so.
  • Always trust your instincts. Exploiters and abusers are very skilled. They can be very charming and forceful in their efforts to exploit you. Don’t be fooled – if something doesn’t feel right, it may not be.
  • Safeguard your personal information. Shred old bills, junk mail, bank statements and other personal documents you no longer need. Leaving unwanted personal documents around the house could lead to the misuse of your information. If you come across keepsake documents opt to store them in a locked cabinet or safe deposit box at your nearest bank.
  • Keep personal items out of plain sight. Lock up checkbooks, credit cards and other monetary instruments to prevent unauthorized use.Resource information provided by the American Bankers Association.

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7 Worthwhile Ways to Use Your Tax Refund

 

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According to the Internal Revenue Service, more than 70 percent of the nation’s taxpayers received a tax refund averaging nearly $3,000 in 2017 and will get a similar amount this year. As Americans receive their refunds along with additional benefits coming from the Tax Cuts and Jobs Act passed in December, we have highlighted seven tips to help them use their money wisely.

To help consumers make the most out of their money, We have provided you with the following tips.

  • Save for emergencies.  More than 60 percent of Americans are not prepared for unexpected expenses. You can prepare by opening or adding to a savings account that serves as an “emergency fund.” Ideally, it should hold about three-to-six months of living expenses in case of sudden financial hardships like losing your job or having to replace your car.
  • Pay off debt.  Pay down existing balances either by chipping away at loans with the highest interest rates or eliminating smaller debt first.
  • Save for retirement, your child’s education or future health expenses. Open or increase contributions to a tax-deferred savings plan like a 401(k) or an IRA. Your bank can help set up an IRA, while a 401(k) is employer-sponsored. Look into opening a tax-advantaged 529 education savings plan to ensure school expenses will be covered when your child reaches college age. Or save for future health expenses with tax-free dollars by investing in a Health Savings Account.
  • Pay down your mortgage or student loans.  Make an extra payment on your mortgage or student loans each year to save money on interest while reducing the term of your loans. Be sure to inform your lender that your extra payments should be applied to principal, not interest.
  • Invest safely with U.S. savings bonds or municipal bonds. The U.S. Treasury allows for savings bond to be purchased using your tax refund for as little as $50. Savings bonds earn interest for a maximum of 30 years.
  • Invest in your current home.  Use your refund to invest in home improvements that will pay you back in the long run by increasing the value of your home.  This can include small, cost-effective upgrades like energy-efficient appliances that will pay off in both the short and long term – and with tax credits (as long as Congress continues to renew the program).
  • Donate to charity.  The benefit is two-fold: Giving to charity will make a difference in your community, and you can also claim the tax deduction, if you itemize.

Resource information provided by the American Bankers Association.

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4 TIPS TO GET FINANCIALLY FIT

The New Year is an ideal time to set new goals, as many vow to become more physically fit or get organized.  The New Year is also a great time to assess your finances, gain control and stick to a new budget or saving plan. Taking control of your personal finances will allow you to save and prepare for unexpected expenses.

Get financially fit this January.  Follow the tips below to get started.

Get Organized Consider treating yourself to a post-holiday gift of a financial organization system.  Alphabetized file folders, or filing systems specifically for financial organization are available in January as people begin to prepare for tax season.  Take advantage and start the New Year with an organizational system.  While you’re getting organized, consider buying a shredder to keep your personal information safe from identity theft.

Create a Budget Track your income and expenses to see how much money you have coming in and how much you spend.  If you have debt, establishing a budget will help you to pay down your debt while saving. Use computer software programs or basic budgeting worksheets to help create your budget.  Include as much information as you can and review your budget regularly.  Print several copies of this budgeting worksheet to help you get started.

  • Identify how you spend your money.
  • Set realistic goals, especially if you plan to cut some of your expenses.
  • Track your spending and review your budget often.
  • Points to consider when cutting debt:

Lower Your Debt Debt from student loans, mortgages and credit cards is nearly unavoidable.  Most families carry about $10,000 in credit card debt.  Spending more money than you bring in can lead to financial stress.  Establish a budget to pay down debts while you save.

  • Pay more than the minimum due and pay on time.
  • Pay off debt with higher interest rates first.
  • Transfer high rate debt to credit cards with a lower interest rate.
  • Use credit cards and loans for purchases that will appreciate in value like a home.

Save for the Unexpected and Beyond Pay yourself first.  Saving is important; it ensures a comfortable future that can endure financial surprises.  No matter how old you are, it’s never too late to begin saving.

  • Save at least 10 percent of your income for retirement.  Enroll in a retirement plan or consider optimizing an established retirement plan.  Contribute at least the maximum amount that your employer will match.  Contributions made to these types of plans are tax deductible.  If your employer does not offer a retirement savings plan, many banks offer Individual Retirement Accounts.  IRAs offer tax-deferred growth, meaning you pay taxes on your investment gains when you make withdrawals.
  • Financial advisors often recommend keeping about three months’ salary in a savings account in case of financial emergencies like hospital bills or loss of job.
  • Increase your contribution as your income increases.
  • If you receive direct deposit at work, ask your employer to send a specific amount to your savings account.  Because the money is put into an account before you have a chance to spend it, automatic savings plans are an easy and convenient way to save.  If your employer doesn’t offer direct deposit, many banks allow for automatic transfers from checking to savings accounts.

Resource information provided by the American Bankers Association

INVESTMENT INSIGHTS

by Joan Schade

Stock Yards Bank Wealth Management & Trust


We all like to plan and dream about how we’ll spend our retirement years. What does your plan look like? Will you travel, play golf, garden, or visit with friends and family? Maybe you’re planning to move, or perhaps you’d simply like to spend some time relaxing and enjoying some well-earned rest. Sometimes, however, unplanned events arise that leave us stunned and thinking, “What just happened?” Fortunately, if we have the right type of insurance in place it can make dealing with the unexpected a whole lot easier.

When you start to plan for your retirement years it is always a good idea to review the insurance you already have in place. Consider if your needs or objectives have changed since you made the original purchase. For example, was your term policy to insure that your children’s education would be covered or that your house would be paid off should something happen to the main bread winner? If your children are grown and there are only a few payments left on the mortgage, your current policy may not be the right type of protection needed at this stage in your life.

Purchasing insurance to provide some income for a surviving spouse is common, but you may also want to look at a long-term care policy. Without the right kind of insurance, you could be forced to use all of your hard-earned savings, including your retirement savings to pay for care. The cost of such needs continues to grow by leaps and bounds. Long Term Care Insurance policy options have grown as well in the last decade. As opposed to the “use it or lose it” options in years past, many policies now offer a wide array of hybrid products that will allow you and/or your spouse to use what you need and pass any remaining dollars on to your beneficiaries tax-free.

Insuring for the right purpose today could protect the quality of your retirement years. Wouldn’t we all like our retirement dreams to come true?

For more information about Investment Plans, please contact our Wealth Management and Trust Department.