RETIREMENT INSIGHTS

News and information for current and future retirees.

Unemployment Rate for Older Adults Jumps to 13.6 Percent

Coronavirus outbreak takes a toll on workers 55 and older in April

The unemployment rate for Americans 55 and older soared to 13.6 percent in April, according to a report from the U.S. Bureau of Labor Statistics (BLS) that shows the devastating impact the coronavirus pandemic has had on the nation’s workforce. More than 20.5 million people overall stopped working during the period the report covers.

 

The number of unemployed Americans 55 and older grew by more than 3.7 million during the period of the April report. The unemployment rate for those 55 and older was just 3.3 percent in March, showing how rapidly the workforce shed jobs as businesses shut down temporarily to deter the spread of the coronavirus.

 

“In a highly challenging economic climate, there’s plenty of pain to go around for workers,” says Mark Hamrick, senior economic analyst at Bankrate. “As we all know painfully well, the current situation is unprecedented in modern history.”

 

The overall unemployment rate for all workers leaped to 14.7 percent last month, up 10.3 percentage points since March, producing the largest one-month increase in the report’s history. And, even as it sets a record, the increase does not fully measure how many workers lost their jobs in April. The BLS surveys employers in the middle of the month, which means the latter half of the month is not covered in the April report. According to the U.S. Department of Labor’s weekly reports on first-time jobless claims, roughly 33.5 million people have filed new claims for unemployment during the seven weeks since the pandemic started.

 

The dramatically increasing unemployment rates could lead to long-term problems for older workers, both professionally and economically.

 

“When it comes time to cut costs, some employers zero in on senior staffers, seeing them as costly,” Hamrick says. “An unfortunate consequence of that [for older workers] is a forced reduction in income, unemployment for a prolonged period and damage to retirement savings. In some cases, older workers will not be able to return to the quality of compensation they enjoyed before. With a reduced pace of hiring, many will find it difficult to return to the employment rolls.”

 

The career prospects for older adults may be uncertain for a while, according to WalletHub analyst Jill Gonzalez.

 

“After the crisis passes and older workers are able to return to the labor market, how many jobs will there be available for them?” Gonzalez says. “It’s an answer no one really has yet.”

 

Written by Kenneth Terrell, AARP, May 8, 2020

Will vs. Trust: know the difference

Retirement saving is not just about accumulating assets. It is also about laying the groundwork for retirement spending.

Wills and trusts are common documents used in estate planning. While each can help in the distribution of assets at death, there are important differences between the two.

 

What Is a Will? A last will and testament is a legal document that lets you direct how your property will be dispersed (among other things) when you die. It becomes effective only after your death. It also allows you to name a personal representative (executor) as the legal representative who will carry out your wishes.

 

What Is a Trust? A trust is a legal relationship in which you, the grantor or trustor, set up a trust, which holds property managed by a trustee for the benefit of another, the beneficiary. A revocable living trust is the type of trust used most often as part of a basic estate plan. “Revocable” means you can make changes to the trust or even revoke it at any time.

 

A living trust is created while you’re living and takes effect immediately. You may transfer title or ownership of assets, such as a house, boat, automobile, jewelry, or investments, to the trust. You can add assets to the trust and remove assets thereafter.

How Do They Compare? While both a will and a revocable living trust enable you to direct the distribution of your assets and property to your beneficiaries at your death, there are several differences between these documents. Here are some important ones.

 

1. A will generally requires probate, which is a public process that may be time-consuming and expensive. A trust may avoid the probate process.

2. A will can only control the disposition of assets that you own at your death, including property you held as tenancy in common.

 

Different Documents, Different Features

Even if you have a revocable living trust, you should have a will to control assets not captured in the trust.

*Depends on applicable state laws

 

It cannot govern the distribution of assets that pass directly to a beneficiary by contract (such as life insurance, annuities, and employer retirement plans) or by law (such as property held in joint tenancy).

 

3. Your revocable trust can only control the distribution of assets held by the trust. This means you must transfer assets to your revocable trust while you’re living, which may be a costly, complicated, and tedious process.

 

4. Unlike a will, a trust may be used to manage your financial affairs if you become incapacitated.

 

5. If you own real estate or hold property in more than one state, your will would have to be filed for probate in each state where you own property or assets. Generally, this is not necessary with a revocable living trust.

 

6. A trust can be used to manage and administer assets you leave to minor children or dependents after your death.

 

7. In a will, you can name a guardian for minor children or dependents, which you cannot do with a trust.

 

Generally, most estate plans that use a revocable trust also include a will to handle the distribution of assets not included in the trust and to name a guardian for minor children. In any case, there are costs and expenses associated with the creation and ongoing maintenance of these documents. Keep in mind that wills and trusts are legal documents generally governed by state law, which may differ from one state to the next. You should consider the counsel of an experienced estate planning professional and your legal and tax advisers before implementing a trust strategy.

 

HOW SHOULD PRE-RETIREES VIEW ILLIQUID ASSETS?

Some people approach their retirement years owning illiquid assets worth more than their liquid ones.

While long-held illiquid assets, such as a business or home, may become highly valued or appreciated over time, it can be wise to be frank and conservative when estimating their worth, especially if an owner wants to sell them to help fund their “second act.”   

It may take months or years to sell an illiquid asset. Moreover, the process of selling that asset often involves expenses: payments to third parties facilitating the transaction, upgrades, or concessions to a new owner, moving costs, and legal fees. A pre-retiree can view a future home or business sale with optimism, but that optimism may be tempered by these realities when the time comes. In addition, liabilities linked to illiquid assets may persist well into retirement; according to Federal Reserve data published in 2019, 68% of the debt of Americans is rooted in homeownership. If you are considering what the sale of an illiquid asset might do for your financial future, think about how to position your more liquid investments. Liquidity is a financial plus at any stage of life, and especially, during retirement.

Brookings.edu, June 25, 2019

RETIREMENT CONCEPTS

Social Security eGuide: Understanding the Basics of Social Security

This guide was developed as an educational tool to help individuals and families understand the basics of required minimum distributions (RMDs), and to support further discussions with a qualified financial professional on the complexities of RMDs and how they may affect individuals differently.

What is covered:

  • Getting the most out of Social Security
  • How your claiming decision could affect your spouse
  • Survivor benefits
  • How to apply and what you will need

 

Contact your advisor today to get your complimentary Social Security eGuide.

Keeping Cool: Investment Strategy vs. Reaction

Tune Out the Noise

The media generates news 24 hours a day, seven days a week. You can check the market and access the news anywhere you carry a mobile device. This barrage of information might make you feel that you should buy or sell investments in response to the latest news, whether it’s a market drop or an unexpected geopolitical event. This is a natural response, but it’s not wise to react emotionally to market swings or by the news that you think might affect the market.

 

Read “9 Rules that Encourage Successful Investment Strategies

 

Stay the Course

Consider this advice from John Bogle, famed investor and mutual fund industry pioneer: “Stay the course. Regardless of what happens to the markets, stick to your investment program. Changing your strategy at the wrong time can be the single most devastating mistake you can make as an investor.”*

 

This doesn’t mean you should never buy or sell investments. However, the investments you buy and sell should be based on a sound strategy appropriate for your risk tolerance, financial goals, and time frame. And sound investment strategy should carry you through market ups and downs.

 

It can be tough to keep cool when you see the market dropping or to control your exuberance when you see it shooting upward. But overreacting to market movements or trying to “time the market” by guessing a future direction may create additional risk that could negatively affect your long-term portfolio performance.

 

 

*MarketWatch, June 6, 2017

All investments are subject to market fluctuation, risk, and loss of principal. When sold, investments may be worth more or less than their original cost. U.S. Treasury securities are guaranteed by the federal government as to the timely payment of principal and interest. If not held to maturity, they could be worth more or less than the original amount paid.

How long should you keep financial records?

Once tax season is over, you may want to file your most recent records and discard older records to make room for the new ones.

According to the IRS, personal tax records should be kept for three years after filing your return or two years after the taxes were paid, whichever is later.* (Different rules apply to business taxes.) It might be helpful to keep your actual tax returns, W-2 forms, and other income statements until you begin receiving Social Security benefits.

 

The rules for tax records apply to other records you use for deductions on your return, such as credit card statements, utility bills, auto mileage records, and medical bills. Here are some other guidelines if you don’t use these records for tax purposes.

 

Financial statements. You generally have 60 days to dispute charges with banks and credit card companies, so you could discard statements after two months. Once you receive your annual statement, throw out prior monthly statements.

 

Retirement plan statements. Keep quarterly statements until you receive your annual statement; keep annual statements until you close the account. Keep records of nondeductible IRA contributions indefinitely to prove you paid taxes on the funds.

 

Real estate and investment records. Keep these at least until you sell the asset. If the sale is reported on your tax return, follow the rules for tax records.

 

Loan documents. Keep documents and proof of payment until the loan is paid off. After that, keep proof of final payment.

 

Auto records. Keep registration and title information until the car is sold. You might keep maintenance records for reference and to document services to a new buyer.

 

Medical records. Keep records indefinitely for surgeries, major illnesses, lab tests, and vaccinations. Keep payment records until you have proof of a zero balance.

 

Other documents you should keep indefinitely include birth, marriage, and death certificates; divorce decrees; citizenship and military discharge papers; and Social Security cards. Use a shredder if you discard records containing confidential information such as Social Security numbers and financial account numbers.

 

 

*Keep tax records for at least six years if you under-reported gross income by more than 25% (not a wise decision) and for seven years if you claimed a deduction for worthless securities or bad debt.

On the Bright Side

Thanks to the Coronavirus Aid, Relief, and Economic Security (CARES) Act, you may deduct up to $300 in qualified charitable contributions made during 2020 on next year’s federal tax return. This applies even if you aren’t itemizing deductions for 2020. Remember, this tip is for informational purposes; it’s not a replacement for real-life advice. Make sure to consult your tax, legal, and accounting professionals before modifying your strategy.

Forbes.com, April 8, 2020

Did you know? 

France’s most famous landmark was rejected by Spain

Gustave Eiffel originally proposed constructing his landmark tower in Barcelona. Civic leaders thought the design was unappealing and turned his plan down. Afterward, Eiffel approached Paris and got the go-ahead. The Eiffel Tower was completed in time for the city’s 1889 International Exposition. Interestingly, it was intended as a temporary attraction.

Reader’s Digest, May 6, 2020

Investment Advisory Services offered through BCJ Capital Management LLC., a (SEC) Registered Investment Adviser. Information presented is for educational purposes only. It should not be considered specific investment advice, does not take into consideration your specific situation, and does not intend to make an offer or solicitation for the sale or purchase of any securities or investment strategies. Investments involve risk and are not guaranteed, and past performance is no guarantee of future results. For specific tax advice on any strategy, consult with a qualified tax professional before implementing any strategy discussed herein.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty.