You have likely heard how important it is to save for your retirement since you starting working. Likewise, you probably starting stashing as much money as possible as soon as your started working. There is certainly no debate that saving for your retirement is essential; however, if you end up significantly over-funding your retirement you can run into another problem as a result. If you have significant assets left at the time of your death as a result of over-funding your retirement accounts, those assets can be subject to income taxes or estate taxes — or both. Given the often high rate of both income and estate taxes, you could lose over 50 percent of your estate assets to taxes upon your death.

While experts can be easily found who claim to know how much we need to save in order to live a comfortable retirement, the truth is that there are simply too many variables to know how much you will actually need. This uncertainty typically requires people to err on the side of caution and save more. If, however, you are lucky enough to remain relatively healthy until the day you die and do not have any significant financial emergencies, you still have a large portion of your retirement left when you die.

Although leaving the remainder of your retirement to a spouse does avoid estate taxation pursuant to the unlimited marital deduction, this also results in over-funding your spouse’s estate in many cases. When your spouse dies, there may then be an even bigger sum of money and assets subject to taxation without careful estate planning. There are, thankfully, ways to avoid, or at least decrease, your tax exposure if you have over-funded your retirement. The key is to start planning early with your estate planning attorney just as you started planning early for your retirement.

Levine & Furman, LLC is a member of the American Academy of Estate Planning Attorneys.

If you want to keep active during retirement, a business is a great way to do so. Choosing the right retirement business may seem tricky, but it doesn’t have to be.

Consider the Market

The first step is understanding your local economy and the current market. Consider what is missing. Do you have an idea for a one-of-a-kind product that you could sell online? Open your own Internet Store. Or perhaps there is a particular chain store or restaurant that you feel would do well in your town. If so, you could buy a franchise.

Consider What You Know

Picking a retirement business is also about what and who you know. You can use your connections in a variety of ways: to help advertise, to purchase supplies from, or to be your customers.

You can also use what you know, such as a long time hobby for your business idea. For example, if wood working is your passion you might enjoy opening a specialty furniture shop. If you are unfamiliar with any aspects of your chosen business you may want to spend a little time becoming knowledge on those areas.

Consider the Effect on Your Retirement

Opening a business during retirement is a riskier than opening one when you are younger. If you lose funds on your retirement business, they can be harder to recoup. To safeguard your retirement funds, choose a business with little start-up costs. If shipping is an option, consider selling your goods on the Internet so you don’t have to pay for a storefront.

Don’t forget, retirement is about enjoying life. Be sure that the business you sign up for doesn’t require large amounts of time. Working forty plus hours per week at a retirement job may take away some of the joys of retirement such as time with family and for traveling.

Levine & Furman, LLC is a member of the American Academy of Estate Planning Attorneys.

Do you know how you will pay for your living expenses when you retire? If you don’t have enough retirement savings, you may have to continue working longer than you would like, or if you are unable to work, you may have to sell assets to pay bills. If you don’t currently have a plan in place, or if you haven’t given much thought to your plan, you should consider your retirement savings options.

Work Retirement Account

The first place to start any retirement savings plan is at work. Many employers offer a 401K or pension plan. If your employer offers a pension plan, you will receive a certain amount each year after you have retired. With a 401K plan you can allot part of each paycheck, before taxes, to go into your account.

If your employer offers a 401K match program, this means they will contribute a percentage of what you put into your account. This employer contribution is free money, so take advantage of it by contributing as much as you can up to the yearly limit. The limit for 2010 is 16,500. If you are over 55, you can contribute an extra 5,500.

Personal Retirement Account

Beyond a work retirement account, you should also consider a personal retirement account. Two common types are Roth and Traditional IRAs. With a Roth, the money you put in is taxed and your later withdrawals are tax free (and if you don’t need funds in a particular year, you are not required to take out any part of the Roth IRA). A traditional IRA, is tax-free contributions like your 401K.

You will also have a yearly contribution limit for your IRAs. The 2010 limit is 5,000 with a 1,000 catch-up provision for those over fifty. If you are over fifty make sure to take advantage of any catch-up retirement programs.

Social Security

Social Security retirement benefits are available to any American who works for at least ten full years. Once you reach 62, you can apply for benefits. If, however, you wait until your full retirement age which is currently 65 to 67 depending upon birth year, your payment will be much larger. At full retirement age, you will receive about forty percent of your pre-retirement income.

Investment

Besides saving money, you must also focus on investing. To find good investments you can either research your options or speak with a financial advisor. Investing your savings allows your money to work harder so you don’t have to. But be careful, there is always a risk.

Levine & Furman, LLC is a member of the American Academy of Estate Planning Attorneys.

Medicare is a Federal health insurance program that falls under the Social Security Program. It provides benefits primarily for people age 65 or older, but people younger than age 65 can qualify for Medicare, including those who have certain disabilities and those with permanent kidney failure.

While Medicare helps with the cost of health care, it does not cover all medical expenses or the cost of most long-term care. Since the Medicare program is complex, we’ve put together a sampling of our clients’ top frequently asked questions.

How do I enroll in Medicare coverage?

Most people assume you contact Medicare, the CMS (Centers for Medicare and Medicaid Services), to enroll in the Medicare program. This is not the case. Your first point of contact is the Social Security program, although you do not have to be receiving Social Security benefits to enroll in Medicare. If you are already drawing Social Security before the age of 65, you are automatically enrolled in Medicare’s Part A and Part B. Your Medicare card is sent to you approximately 3 months before you turn 65. If you will not be receiving Social Security benefits at 65, you have to contact Social Security to enroll in Medicare – they will not contact you.

Is Medicare free?

Medicare consists of several parts, and only Part A is free for most citizens:

• Part A – Hospital Insurance – free when the individual qualifies for social security benefits.
• Part B – Medical Insurance – The cost is a monthly premium
• Part C – Medicare Advantage (Parts A and C combined) – The cost is a monthly premium
• Part D – Prescription drug coverage – The cost is a monthly premium

While the costs of the coverage may be free or involve premiums, there are often co-pays and additional costs for health care similar to standard insurance policies.

Does everyone qualify for Medicare when they turn 65?

Every U.S. citizen qualifies for Medicare Part A when they turn 65. Even those who do not qualify for Social Security benefits qualify for Medicare Part A, but there may be a premium involved if either you or your spouse worked for less than ten years.

Does Medicare cover long term care?

No! Medicare only offers extremely limited coverage for long term care. While it may cover up to 20 days in a nursing home, a large co-pay amount comes into play after that time. The bottom line determining coverage normally is whether the care offered is medically necessary or strictly custodial, which means the care provided assists with the activities of daily living (ADL).

Part of a comprehensive estate and retirement plan is understanding the Medicare program and planning for the expenses and coverage that it does and does not offer senior citizens.

Levine & Furman, LLC is a member of the American Academy of Estate Planning Attorneys.