Reducing expenses is everyone’s least favorite part of financial planning, but when overspending becomes a problem, it’s important to have a plan at hand that can help you quickly reduce expenses and eliminate further stress. An important consideration for all retirees who find themselves overspending is the following question: Are there any lifestyle changes that would help to save or free up money for other essential, unavoidable expenses?
With everything we have been through in the past year, I think it would be fair to recommend that all of us have reason to review our estate planning documents. And if you don’t have any, now is the time!
Especially if you are over the age of 60.
Typically, we tend to review our estate plan when we get older or if there has been a significant change in our circumstances. However, if you are over the age 60 and you haven't updated your estate plan in many decades, it’s time to update your documents. After everything has been updated, you should continue to review your plan every two and half years.
Here are a few age ranges and what they mean in terms of estate planning:
The longer you live, it makes sense to delay Social Security until your FRA or age 70. If you qualify for Social Security, you can take it as early as age 62 or delay it as late as age 70. However, there are pros and cons for each option, and the optimal choice will be unique to you.
If you decide that waiting is the right decision, needing the money could prevent you from following that choice, but there are some actions you can take in advance that can help prevent this.
Here is some information from a recent Fox Business article you may find useful:
Every day I hear stories or talk to folks who were doing just fine, thinking they had a firm plan in place for their future, until someone (typically a spouse or a parent) gets sick. As the illness continues, now faced with long-term care expenses, they realize their ‘plan’ did not include nearly enough to keep up with the ever-increasing health care costs.
“How will we pay for this?” Is the number one question I hear regarding long-term care. Long-term care costs have two components, the nursing home, assisted living, or living situation, and the indirect component, the unpaid caregiving. The people who come in to help you, your family members, or the things that long-term care insurance doesn't cover. Did you know over $500 billion a year is spent in ‘unpaid’ caregiving in this country? And these costs get higher every year.
Can we commit to being alone together yet?
How soon can we safely meet as a small group of family members or close friends, commonly known during the pandemic as a “pod?”
As you wait for your turn to get vaccinated, you may be wondering if it's worth creating a pod to ride out the lonely days of winter.
Employee contribution limits will remain unchanged next year. The IRS isn’t increasing employee contribution limits for 401(k)s or flexible spending accounts for 2021.
Limits will remain the same with employees being able to defer up to $19,500 into a 401(k), 403(b) and most 457 plans at work. The limits also remain the same for employee catch-up contributions for those 50 and older, at $6,500. Last year saw a $500 jump in the overall employee contribution limit for 2020 plus a $500 rise in the catch-up limit.
For 2021, the dollar limit for employee contributions to flexible spending accounts, made pretax through salary reductions, remains unchanged at $2,750. However, for health FSA plans that permit the carryover of unused amounts, the maximum carryover amount for 2021 is $550, an increase of $50 from the original 2020 carryover limit.