Four Questions to Ask Before You Retire

1. What are my Social Security benefits options?

When do you want to begin receiving Social Security benefits? Whichever date you choose, make sure to apply for benefits at least three months ahead of the time you wish benefits to begin. You can receive a reduced benefit once you reach age 62. The full benefit shown on the Social Security estimate statement you receive each year can be yours when you reach "normal retirement age" (no longer automatically age 65, but dependent upon your date of birth). Or, do you want to wait until later, to increase the amount of your benefit? You may want to run the numbers. If you plan to work in retirement, find out if your benefits will be reduced and by how much. You can make estimates of what benefits you can receive by using the benefits calculator at: www.socialsecurity.gov/OACT/ANYPIA.

Benefits aren't automatic. To find out about your benefits fill out a Social Security application online at www.socialsecurity.gov, call 1-800-772-1213, or visit your local Social Security office.

2. Do I have all my health insurance coverage in place?

There are three avenues to explore here:

First, Medicare. If you're already receiving Social Security benefits when you turn 65, your Medicare (Part A) starts automatically.

If you're not receiving Social Security, you should sign up for Medicare close to your 65^th birthday, even if you have not reached your full retirement age, or you aren't yet ready to retire. Part A is called hospital insurance and covers most hospital stay costs, as well as some follow-up costs. Part B, for which you must enroll, pays some doctor and outpatient medical care costs. Prescription drug coverage became available in January of 2006 (Medicare Part D). The rules are complicated, so you will want to familiarize yourself with them before you need to make any decisions. Plan providers, AARP and the Medicare Website (www.medicare.gov) can offer guidance.

Second, Medigap (and other) policies. About two-thirds of all Medicare recipients aged 65 or over buy this kind of supplemental private health insurance, designed to deal with some of the holes in Medicare coverage. Before buying Medigap, HMO or other managed care insurance, you'll need to do a thorough review of the kinds of policies available and their costs.

Third, retiree health insurance. Find out if you can obtain retiree health insurance from your or your spouse's company or union. You may find that the cost is less than that for a Medigap policy and provides more benefits. Make sure you read the policy's fine print. Especially important: Will premiums rise with inflation? If you are a veteran, find out if you are entitled to medical or prescription drug coverage from the government.

For detailed information about Medicare, go to www.medicare.gov.

3. How should I handle my company retirement plan distribution?

Your 401(k) or other qualified retirement plan may offer several kinds of distribution choices. One option may be to receive your benefits as periodic payments (an annuity). For pension plans there are choices within choices: your payments might be fixed or variable, paid out over your lifetime or that of you and your spouse.

Or you may be entitled to receive a lump sum payout of your account balance. In that case you will need to make a decision as to whether you should: (1) take the money in hand, pay tax on it and invest what's left or (2) arrange to roll over all or part of your payout into an IRA, avoiding all tax as long as the money remains in the IRA. (At age 70 ½ you are required to begin making withdrawals.)

If you are planning an IRA rollover, tread carefully, there may be tax traps. For example, arrange for a direct rollover of your account from the company plan to an IRA. If you don't, your employer is required by law to withhold 20% for income taxes.

4. Should I consider establishing a living trust?

Unfortunately, retirement from work isn't retirement from your financial responsibilities. You still must take time to manage the investments that fund your retirement and that will provide long-term financial security for your loved ones in your absence. You will have to devote time to the minor, but important, busywork that accompanies managing your investments. These responsibilities may take you away from the family and leisure activities you have looked forward to for years.

There is a potential solution: By incorporating a living trust into your retirement planning, you can lift these kinds of burdens from your shoulders and choose to put a knowledgeable and experienced corporate trustee, such as our institution, to work for you. Our professionals can help you devise an all-encompassing, individualized strategy for your retirement assets as well as develop an asset allocation strategy that makes sense for your age and personal circumstances.

There are a host of additional benefits available with a living trust: freedom from the record-keeping details associated with investment management. Protection of your securities from loss, theft or fire. Continued professional investment management in the event of your incapacity and, if you wish, even after your death. In addition, you may be able to avoid significant probate costs and delays as well as shield your private financial affairs from public scrutiny.

To find out more, please contact us.