Money that Buys Good Health is Never Ill Spent

According to the Kaiser Family Foundation, the average person covered by Medicare has out-of-pocket medical expenses in excess of $4,700 a year. Premium costs accounted for 42% of the total, while long-term facility costs, medical supplies, prescription drugs, and dental care claim the rest.¹

With healthcare expenses in the spotlight, it’s incumbent upon us to make sure our retirement strategy anticipates these costs.

But that’s not enough.

Remember, healthcare coverage (including Medicare) typically does not cover extended medical care. And it’s a prospect we shouldn’t overlook.

The Department of Health & Human Services estimates that about 70% of people will need extended care at some point in their lives.²

These annual costs can range widely based on geographic location, from over $60,000 in Oklahoma to over $300,000 in Alaska.³ When workers were surveyed, only 14% said they were “very confident” they would have enough money to pay for long-term care in retirement.⁴

Finally, you may want to consider a Medigap policy, which may help cover some of the healthcare costs not covered by Medicare.

Making sure that you are properly insured for your medical costs may help strengthen the foundation of your retirement.

MedicareResources.org, October 24, 2015 (Based on 2010 data, which is the latest available.)
Department of Health & Human Services, 2015
Genworth Cost of Care Survey, 2015
2015 Retirement Confidence Survey, Employee Benefit Research Institute

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2016 FMG Suite.

Certain Uncertainties in Retirement

The uncertainties we face in retirement can erode our sense of confidence, potentially undermining our outlook during those years.Indeed, according to the 2015 Retirement Confidence Survey by the Employee Benefits Research Institute, only 37% of retirees say they are “very confident” about having enough assets to live comfortably in retirement. Almost 28% were either “not too confident” or “not at all confident.“Today’s retirees face two overarching uncertainties. While each on their own can lead even the best-laid strategies to go awry, it’s important to remember that remaining flexible and responsive to changes in the landscape may help you meet the challenges of uncertainty in the years ahead.

An Uncertain Tax Structure

A mounting national debt and the growing liabilities of Social Security and Medicare are straining federal finances. How these challenges are resolved remains unknown, but higher taxes—along with means-testing for Social Security and Medicare—are obvious possibilities for policymakers.Whatever tax rates may be in the future, taxes can be a drag on your savings and may adversely impact your retirement security.¹ Moreover, any reduction of Social Security or Medicare benefits has the potential to place a further strain on your retirement.Consequently, you’ll need to be ever mindful of a changing tax landscape and strategies to manage their impact.

Market Uncertainty

If you know someone who retired, or looked to retire in 2008, you know what market uncertainty can do to a retirement blueprint.

The uncertainties haven’t gone away. Are we at the cusp of a bond market bubble bursting? Will the Euro Zone find its footing? Will U.S. debt be a drag on our economic vitality?

Over a 30-year period, uncertainties may evaporate or resolve themselves, but new ones historically have emerged. This means understanding that the solutions for one set of economic circumstances may not be appropriate for a new set of circumstances.

Scottish Philosopher Thomas Carlyle said “He who could foresee affairs three days in advance would be rich for thousands of years.”² Preparing for uncertainties is less about knowing what the future holds as it is about being able to respond to changes as they unfold.

The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation.Brainy Quote, 2015

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2016 FMG Suite.

Participants Back Bigger ‘Nudges’

Plan sponsors are often reluctant to take big steps in making plan changes — but a new participant survey finds that workers would welcome more aggressive defaults.

According to a national survey conducted by American Century Investments:

  • Some 70% believe automatic enrollment at 6% is something their employer should do.
  • More than half feel automatic enrollment should be implemented retroactively.
  • Seven in 10 show at least some interest in a regular, incremental automatic increase.
  • Eight out of 10 employees want at least a “slight nudge” from their employers in helping to save and invest for retirement.
  • Seventy percent support plan investment re-enrollment into target-date solutions.

Additional findings:

  • A DC plan is viewed by more than 80% of participants as one of their most important benefits.
  • More than 8 out of 10 participants strongly agree that their employer offering a retirement plan makes them feel better about working there.
  • Roughly two thirds of employees would choose to work for a company offering a retirement plan over one that does not, even if a competing company offered a 5% higher salary.
  • Eight out of 10 participants would prefer a 100% company match on their retirement contribution up to 3%, rather than a 3% salary increase — and three-fourths of those surveyed feel the same even when the figure is raised to 6%.
  • Despite giving themselves a ‘C’ grade on saving and a ‘C+’ on investing for retirement, participants gave the help offered by their employers a ‘B-’.
  • Looking back, participants’ single biggest regret is not saving enough for retirement.

The survey was conducted during the first quarter of 2016 among a total of 1,504 full-time workers between ages 25 and 65, participating in their employer’s retirement plan, intending to retire at some point, and not working for the government.

Check-Ups: Routine Maintenance For Your Body

With apologies to rapper Ice Cube, you better check yo self before you wreck yo self! And while I’m sure he wasn’t talking about getting regular health check-ups, his lyrics definitely apply.

Should You Borrow from Your 401(k)?

The average credit card balance in June 2015 was $15,706, down from its peak of $18,600 in 2009.¹ With the average credit card annual percentage rate sitting at 14.9%, it represents an expensive way to fund spending² which leads many individuals to ask, “Does it make sense to borrow from my 401(k) to pay off debt or to make a major purchase?”³

Borrowing from Your 401(k)

  • No Credit Check—If you have trouble getting credit, borrowing from a 401(k) requires no credit check; so as long as your 401(k) permits loans, you should be able to borrow.
  • More Convenient—Borrowing from your 401(k) usually requires less paperwork and is quicker than the alternative.
  • Competitive Interest Rates—While the rate you pay depends upon the terms your 401(k) sets out, the rate is typically lower than the rate you will pay on personal loans or through a credit card. Plus, the interest you pay will be to yourself rather than to a finance company.

Disadvantages of 401(k) Loans

  • Opportunity Cost—The money you borrow will not benefit from the potentially higher returns of your 401(k) investments. Additionally, many people who take loans also stop contributing. This means the further loss of potential earnings and any matching contributions.
  • Risk of Job Loss—A 401(k) loan not paid is deemed a distribution, subject to income taxes and a 10% penalty tax if you are under age 59½. Should you switch jobs or get laid off, your 401(k) loan becomes immediately due. If you do not have the cash to pay the balance, it will have tax consequences.
  • Red Flag Alert—Borrowing from retirement savings to fund current expenditures could be a red flag. It may be a sign of overspending. You may save money by paying off your high-interest credit-card balances, but if these balances get run up again, you will have done yourself more harm.

Most financial experts caution against borrowing from your 401(k), but they also concede that a loan may be a more appropriate alternative to an outright distribution, if the funds are absolutely needed.

  1. NerdWallet, June 25, 2015. Average for U.S. Households
  2. CreditCards.com, April 2015
  3. Distributions from 401(k) plans and most other employer-sponsored retirement plans are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty. Generally, once you reach age 70½, you must begin taking required minimum distributions.

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2016 FMG Suite.

IRA Withdrawals that Escape the 10% Tax Penalty

The reason withdrawals from an Individual Retirement Account (IRA) prior to age 59½ are generally subject to a 10% tax penalty is that policymakers wanted to create a disincentive to use these savings for anything other than retirement.¹

Yet, policymakers also recognize that life can present more pressing circumstances that require access to these savings. In appreciation of this, the list of withdrawals that may be taken from an IRA without incurring a 10% early withdrawal penalty has grown over the years.


Penalty-Free Withdrawals

Outlined below are the circumstances under which individuals may withdraw from an IRA prior to age 59½, without a tax penalty. Ordinary income tax, however, generally is due on such distributions.

Death — If you die prior to age 59½, the beneficiary(ies) of your IRA may withdraw the assets without penalty. However, if your beneficiary decides to roll it over into his or her IRA, he or she will forfeit this exception.²
Disability — Disability is defined as being unable to engage in any gainful employment because of a mental or physical disability, as determined by a physician.³
Substantially Equal Periodic Payments — You are permitted to take a series of substantially equal periodic payments and avoid the tax penalty, provided they continue until you turn 59½ or for five years, whichever is later. The calculation of such payments is complicated, and individuals should consider speaking with a qualified tax professional.⁴
Home Purchase — You may take up to $10,000 toward the purchase of your first home. (According to the Internal Revenue Service, you also qualify if you have not owned a home in the last two years). This is a lifetime limit.
Un-reimbursed Medical Expenses — This exception covers medical expenses in excess of 7.5% of your adjusted gross income.
Medical Insurance — This permits the unemployed to pay for medical insurance if they meet specific criteria.
Higher Education Expenses — Funds may be used to cover higher education expenses for you, your spouse, children or grandchildren. Only certain institutions and associated expenses are permitted.
IRS Levy — Funds may be used to pay an IRS levy.
Active Duty Call-Up — Funds may be used by reservists called up after 9/11/01, and whose withdrawals meet the definition of qualified reservist distributions.

With an IRA, once you reach age 70½, generally you are obligated to begin taking required minimum distributions.

Your required minimum distribution (RMD) may be based on your age or the deceased’s age at the time of death. Penalties may occur for missed RMDs. Most are required to begin by December 31 of the year following the date of death. Any RMDs due for the original owner must be taken by their deadlines to avoid penalties. You will pay taxes on any distributions you take. Consider speaking with a financial professional who can help you evaluate the potential impact an inheritance might have on your overall tax situations.

The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Federal and state laws and regulations are subject to change, which may have an impact on after-tax investment returns. Please consult legal or tax professionals for specific information regarding your individual situation.

The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties.

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2016 FMG Suite.

David Hatter Named to 2016 Financial Times 401 Top Retirement Plan Advisers!

September 20, 2016 – Arista Financial Group is pleased to announce that David Hatter has been named to the 2016 edition of the Financial Times 401 Top Retirement Plan Advisers. The list recognizes the top financial advisers who specialize in serving defined contribution (DC) retirement plans.

This is the second annual FT 401 list, produced independently by the Financial Times in collaboration with Ignites Research, a subsidiary of the FT that provides business intelligence on asset management.

Financial advisers from across the broker-dealer and RIA channels applied for consideration, having met a set minimum of requirements. The applicants were then graded on seven criteria: DC assets under management; DC AUM growth rate; specialization in DC plans; years of experience; DC plan participation rate; advanced industry credentials; and compliance record. There are no fees or other considerations required of advisers who apply for the FT 401.

Awarded to financial advisors advising at least $50 million in defined contribution (DC) plan assets where DC plans represent at least 20% of total AUM. Graded on several criteria, including growth in DC plans and assets, plan participation rates, experience and industry certifications, and compliance record.

Once again, the final FT 401 represents a cohort of elite advisers: the “average” adviser in this year’s FT 401 has 18 years of experience advising DC plans and manages $950 million in DC plan assets. The FT 401 advisers hail from 41 states and Washington, D.C., and DC plans on average account for 74% of their assets under management.

The FT 401 is one in a series of rankings of top advisers developed by the FT in partnership with Ignites Research, including the FT 300 (independent RIA firms) and the FT 400 (broker-dealer advisers).

About Arista Financial Group

Arista Financial Group is a focused, mission-based, and independent resource for institutional and private investors.

Our goal is to create FINANCIAL SECURITY FOR ALL AMERICANS.
As retirement plan advisors, we strive to help companies design, deliver, and manage retirement plans that provide employees the best possible opportunity to become financially secure. We help to create a future in which financial security empowers all working Americans to discover and serve THEIR calling.

The Financial Times 401 Top Retirement Plan Advisors is an independent listing produced by the Financial Times (September 2016). The FT 401 is based on data gathered from financial advisors, regulatory disclosures, and the FT’s research. The listing reflects each advisor’s status in seven primary areas, including DC plan assets under management, growth in DC plan business, specialization in DC plan business, and other factors. This award does not evaluate the quality of services provided to clients and is not indicative of this advisor’s future performance. Neither the advisors nor their parent firms pay a fee to Financial Times in exchange for inclusion in the FT 401. 

Does Your Portfolio Fit Your Retirement Lifestyle?

Most portfolios are constructed based on an individual’s investment objective, risk tolerance, and time horizon.

Using these inputs and sophisticated portfolio-optimization calculations, most investors can feel confident that they own a well-diversified portfolio, appropriately positioned to pursue their long-term goals.¹

However, as a retiree, how you choose to live in retirement may be an additional factor to consider when building your portfolio.

Starting A Business?

Using retirement funds to start a business entails significant risk. If you choose this path, you may want to consider reducing the risk level of your investment portfolio to help compensate for the risk you’re assuming with a new business venture.

Since a new business is unlikely to generate income right away, you may want to construct your portfolio with an income orientation in order to provide you with current income until the business can begin turning a profit.

Traveling For Extended Periods Of Time?

There are a number of good reasons to consider using a professional money manager for your retirement savings. Add a new one. If you plan on extended travel that may keep you disconnected from current events (even modern communication), investing in a portfolio of individual securities that requires constant attention may not be an ideal approach.² For this lifestyle, professional management may suit your retirement best.

Rethink Retirement Income?

Market volatility can undermine your retirement-income strategy. While it may come at the expense of some opportunity cost, there are products and strategies that may protect you from drawing down on savings when your portfolio’s value is falling – a major cause of failed income approaches.

Diversification and portfolio optimization calculations are approaches to help manage investment risk. They do not eliminate the risk of loss if security prices decline. Keep in mind that the return and principal value of security prices will fluctuate as market conditions change. And securities, when sold, may be worth more or less than their original cost. Past performance does not guarantee future results. Individuals cannot invest directly in an index.

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2016 FMG Suite.

Acronym Soup

When it comes to healthcare terminology, some people may feel like they’re at a spelling bee.

Bloated Investment Lineups Invite Litigation – NAPA Net

Fred Barstein

At a recent TPSU event for DC plan sponsors held at the University of Georgia, an ERISA attorney on the panel commented on the recent rash of lawsuits against major universities, noting that one of the allegations is that because the 403(b) plans had too many funds, their buying power was compromised, resulting in higher-than-necessary fees.

Having too many fund options in a plan is debilitating in other ways. Behavioral economists note that people are immobilized when given too many choices. According to Columbia professor Sheena Iyengar, plans with fewer funds enjoy better participation and participants make better decisions. UCLA professor Schlomo Benartzi recommends that DC investment lineups include seven to nine options, not including TDFs.

But many plans have bloated investment lineups at least partly because some advisors and providers recommended that more was better in order to comply with ERISA 404c, while other plans are reluctant to remove older options that might have failed their IPS screen. The new lawsuits may give advisors ammunition to help prune these bloated menus and improve outcomes.

Many plans, especially bigger ones or those that include educated professionals, have bloated lineups because the plan sponsors think that they are serving the needs of their more sophisticated employees. Turns out that 90% of all participants would rather delegate the decision to a professional using, for example, TDFs; 9% want to dabble; and 1% want lots of choice, which can be satisfied through a brokerage window.

There have been allegations in the past that providers working with plan sponsors have split up investments unnecessarily to provide more revenue sharing to offset costs. It seems harmless enough at the plan level, but at the individual investor level, not so much.

At the heart of the issue, beyond behavioral best practices and choice architecture, is revenue sharing and the spider web of share classes that recently led Edward Jones to eliminate commissioned mutual funds with from IRAs going forward as a result of the new DOL rule. Like commissions, the target of the new DOL rule, revenue sharing can result in conflicts of interest damaging to the individual investor.

Like excessive fee and self-dealing lawsuits brought in the past, bloated investment lineups resulting in higher fees for investors, not to mention unequal plan subsidies by participants, point out conflicts and issues that the industry needs to address – not just because of the lawsuits or to comply with new rules. Revenue sharing is at the heart of the problem; it should be part of our past, not our future.

Opinions expressed are those of the author, and do not necessarily reflect the views of NAPA or its members.

Little Things To Increase Happiness

Your alarm goes off and the day-to-day drudgery beings. Hurray. It’s often tough to get excited about the daily events, and some days are more challenging than others to get motivated, yet there are a few simple things everyone can do to inject a little happiness and higher productivity into their lives.

Social Security: What’s Changing in 2016?

Whether you will soon be applying for Social Security, or are already receiving benefits, here’s what you need to know about what’s changing (and not changing) in 2016.

What’s Not Changing

No Cost-of-Living Increase: Because inflation was unchanged from the third quarter 2014 to the third quarter 2015, there will be no increase in benefit payments to current recipients in 2016.¹

Tax Cap Remains Unchanged: For workers, the cap on wages subject to Social Security withholding stays at $118,500.²

Earnings Limit: The amount that any Social Security recipient can receive in compensation without a reduction in his or her Social Security benefits remains unchanged from 2015 at $15,720 (under the full retirement age) and $41,880 (the year an individual reaches full retirement age).³

Medicare Part B Premium: Since the law prohibits Medicare premiums from rising faster than Social Security benefits, most retirees will see no increase in Part B premium costs. However, first-time enrollees in 2016 and high-income Medicare beneficiaries may pay a higher premium.

What’s Changing

Better Customer Service: Look for online services to expand, self-service kiosks at field offices to increase and reduced wait-times for a hearing decision.

Benefit Maximization Strategies: The file-and-suspend and restricted application strategies that worked to maximize the income benefits from Social Security have been eliminated, though the law does provide some grandfather protections.

Elimination of Revoking Suspended Benefits: Individuals who filed for benefits and then suspended them to gain a future, higher payout previously had the flexibility to “un-suspend” benefits in the event of a life-threatening illness or change in financial circumstances and receive a retroactive lump sum payment. This flexibility will no longer exist.

1Social Security Administration, 2016. The Social Security Act specifies that cost of living are based on increases in the Consumer Price Index for Urban Wage Earners and Clerical Workers.

2“Fact Sheet: 2016 Social Security Changes,” Social Security Administration

3“Fact Sheet: 2016 Social Security Changes,” Social Security Administration

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2016 FMG Suite.