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Dear Quentin,
I am 68 years old, do not own any real estate or an automobile, I am divorced and have two adult children. I am on Social Security and have approximately $750,000 invested. I continue to reinvest the dividends and interest so my investments continue to grow. I feel like I’m missing something. Besides a will and healthcare directive, I’m curious to know if I need to add a revocable trust?
Retiree
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Dear Retiree,
Get ready. I’m going to answer a lot of questions that you didn’t ask.
A revocable trust is necessary if you want to control how your assets are used after you die. If your estate is straightforward and you are happy for your two adult children to be your beneficiaries, you can — if you choose — split it down the middle 50/50.
Adding your children as beneficiaries on your bank accounts, brokerage accounts and any life insurance policies you may have will mean those assets won’t go through probate — the public accounting of your assets and liabilities.
Yes, there’s also a lot you can do for yourself. An advanced healthcare directive informs your doctors what action you want them to take if or when you are unable to make those decisions yourself. You could list your children as your healthcare proxies to carry out those decisions.
Having a long-term care policy would also help to alleviate the potential financial burden that lies ahead. Nursing-home care costs can vary significantly depending on the type of care, where you live and the kind of institution (up to $125,000 a year, believe it or not).
LTC policies cost more the older you get. A man who waits until 65 to purchase such a policy pays around $3,135 a year, according to the AARP. “The man who purchases a long-term care policy at age 65 will pay $3,135 in annual premiums or $47,025 by the age of 80.
“A 65-year-old couple waiting until age 75 to get coverage would see their premium nearly double,” it says, citing the American Association for Long-Term Care Insurance. “Seeking coverage at age 70 or older also reduces your odds of getting covered at all by nearly 50%.”
An elder-law attorney could cost $100 to $600 an hour, depending on the kind of services you may need. An attorney and financial adviser will help you take an accounting of your assets, income, expenses and projected long-term care costs, and help you plan accordingly.
Power of attorney
Other answers to questions you didn’t ask: Think about appointing one or both of your sons as a financial power of attorney (assuming they get along) should you become incapacitated. Update your beneficiaries and write and/or review your will to ensure it’s up to date.
You have $750,000 invested in the stock market. Do you have other less risky investments? At 68, employing the “100 minus your age” rule, you should have no more than 32% of your assets in the stock market; if there’s a major downturn you will have less time to recover.
Tax diversification is another priority in your 60s. “If you don’t currently have money saved in a Roth IRA, you may want to consider Roth contributions, if you qualify, or a Roth conversion during lower-income years,” according to T. Rowe Price.
“Roth IRAs and Roth 401(k) assets aren’t subject to required minimum distributions — the minimum withdrawals required by the IRS from retirement accounts once you turn 73. Therefore, you can leave the money to continue growing tax-free if you don’t need it.”
It’s all to play for — with or without a revocable trust.
More columns from Quentin Fottrell:
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