Unintended Consequences of Transferring Your Home to Your Kids | Advice4Life

Are you concerned about losing your home due to a long-term care need?

One of the most significant risks as we age is long-term care. Throughout the years, we have had clients who wanted to protect their homes in the event of an extended long-term care need.

One solution often considered is transferring your home to your children. Before this is done, one needs to consider the unintended consequences and additional risks that may occur.

In the example below, we walk you through a family considering this option. The family has a home, cottage, other equipment, and investment accounts, including IRA accounts of $1,000,000.  The question of transferring the title of their home to their adult children arose.

The following are some of the unintended consequences.

  • Transferring the house does not protect their other assets. The protection of the house will only come into play after they have spent down their liquid assets, including the IRAs. Then the non-liquid assets, such as the home, cottage, equipment, vehicles, etc., will come into play.
  • In a worst-case scenario (if both parents are in a nursing home), they would be spending about $200,000 per year for their care from their investments.  They would have about five years of spending down their IRAs alone before the house would even be considered.  Since the average stay in a nursing home is three years, the transfer potentially would do nothing to protect the home.
  • The house would be subject to the liabilities of their children (bankruptcy, lawsuit, etc.).
  • If the children ran into financial difficulty or were at fault in an accident, the home could be lost even while they are living in it.
  • The house would be an asset to their children and would be included in any divorce agreement.
  • Transfer of title to the house moves the house from a tax-free asset, due to step-up in basis upon either of the parents passing, to taxable as capital gain with no step-up at deaths.
  • Scenario A – Transfer house to children.
    • House value = $500,000 (original cost, plus improvements of $250,000)
    • Husband passes – No step-up.
    • Five years later, wife passes – No step-up.
    • Children sell the house for $750,000
      1. $750,000 sale price – $250,000 basis = $500,000 realized capital gain, split between the children.
      2. Depending on their tax situation, this realized gain could be taxed between 20% and 28% between federal and state taxes.

$500,000 realized capital gain x 28% = $140,000 tax due.

  • Scenario B – No transfer of house
    • House value = $500,000 (original cost, plus improvements of $250,000)
    • Husband passes – Basis steps up to $500,000 current value.
    • Five years later, wife passes – basis steps up to FMV = $750,000.
    • Children inherit the house and sell it for $750,000
      1. $750,000 sale price – $750,000 new basis = $0 realized capital gain = $0 tax due.

Other solutions to consider: These options will effectively transfer their house while maintaining the tax benefits without incurring additional risks but will not protect the home from long-term care costs.

  • Establish a living (revokable) trust and transfer the house and other non-IRA assets into it.
  • Complete a Transfer on Death Deed naming the adult children as direct beneficiaries of the house.

If the situation warrants the transfer of one’s home, most of the above risks could be mitigated through a properly written irrevocable trust.  This option does lose the step-up in basis on the house, and therefore, it needs to be thoroughly analyzed before being implemented.

Most often, one of the best ways to protect your assets from potential long-term care costs is using an insurance option.

If you are concerned about protecting your home and other assets you have spent a lifetime obtaining, schedule a time to have one of our wealth managers provide options to avoid unintended consequences.

New Year Financial Check-Up | Advice4Life

Many of us make New Year’s resolutions to lose weight, eat healthier, exercise more, read more… This year why not make a resolution to review some overlooked areas of your financial life?

Review Retirement Savings

Contribution limits have increased for 2023 – do you need to update your deposit or payroll instructions to take advantage of the new savings limits? Will you turn 50 in 2023 and  are now eligible to make catch-up contributions?

2023 Contribution limits

  • 401(k)/403(b)/457 = $22,500 + $7,500 catch-up
  • SIMPLE IRA = $15,500 + $3,500 catch-up
  • IRA/Roth IRA = $6,500 + $1,000 catch-up
  • HSA = $3,850 Individual or $7,750 Family

Review Insurance Policies

When was the last time you reviewed your Home/Renter/Auto/Umbrella policies to ensure coverage limits are adequate? Can you afford to raise your deductibles to save on premiums? Do you qualify for any discounts (veteran, bundling policies, senior rates, good student, etc.)? Contact your agent and schedule an insurance review.

Review Budget

Inflation was the talk of 2022, and it is not going away so it may be time to review and update your household budget or consider starting one by tracking spending for 3 months using an App (Mint, Rocket Money, NerdWallet), spreadsheet, or pen & paper.  Can you save money on subscriptions you no longer need (Streaming services, online services, etc.) or making coffee at home more?

Review Savings

Is your emergency fund adequate? We recommend 3-6 months of expense in a savings or money market account.  Additional cash reserves should be working for you – consider putting excess cash in CDs, I-bonds, or other safe options to take advantage of higher interest rates.

Review Debt

Interest rates have increased over the past year, are you paying more on your debt? Could you save by consolidating debt or taking advantage of a lower balance transfer promotional rate?  Can you increase your payments and accelerate debt payoff?

Review Charitable Giving

Do you regularly or periodically give to church or charities?  Review who, what and how you give.  Is it the most tax-advantageous option available to you? Are there organizations you no longer want to give to or new causes you want to support? Review charities you support on Charity Navigator, CharityWatch or GuideStar to evaluate the organization on a number of metrics. Do you want and can you afford to give more?  Have you incorporated your charitable giving into your estate planning?

If you would like any help with these areas of your financial life or have any questions or concerns, please reach out to us here at AEGIS Financial.  We are always happy to help.

End-of-the Year Money Moves | Advice4Life

What has changed for you in 2022? This year has been as complicated as learning a new dance for some. Did you start a new job or leave a job behind? That’s one step. Did you marry? There’s another step. Did you retire? That’s practically a pirouette.

If notable changes occurred in your personal or professional life, you might want to review your finances before this year ends and 2023 begins. Proving that you have all the right moves in 2022 might put you in a better position to tango with 2023.

Even if your 2022 has been relatively uneventful, the end of the year is still an excellent time to get cracking and see where you can manage your overall personal finances.

Do you engage in tax-loss harvesting? That’s the practice of taking capital losses (selling securities worth less than what you first paid for them) to manage capital gains. If you are thinking about this move, and haven’t done so already, consider seeking some guidance from one of our wealth managers.

You could even take it a step further. Consider that you can deduct up to $3,000 of capital losses over capital gains from ordinary income. Additional capital losses above that amount can be carried forward to offset capital gains in upcoming years. 1

Do you have the opportunity to convert IRA funds to a Roth IRA?  You may benefit from converting a portion of your IRA to a ROTH if your income is down or if you have room to add income to your tax return without going into a higher tax bracket.

Are you thinking of gifting? How about donating to a qualified charity or non-profit organization before 2022 ends? Your gift may qualify as a tax deduction. You can also donate appreciated assets and receive a tax deduction without paying capital gains tax on the appreciation. If you are over 70 1/2 you can also make a Qualified Charitable Deduction (QCD) if you donate to a qualified charity directly from your IRA.

Do you want to itemize deductions? You may want to take the standard deduction for the 2022 tax year, which has risen to $12,950 for single filers and $25,900 for joint filers. If you think it might be better for you to itemize, now would be an excellent time to get the receipts and assorted paperwork together.2

While we’re on the topic of year-end moves, why not take a moment to review a portion of your estate strategy? Specifically, take a look at your beneficiary designations. If you haven’t checked them for some time, double-check that these assets are structured to go where you want them to go, should you pass away. Lastly, look at your will to ensure it remains valid and up to date.

Check on the amount you have withheld. If you discover that you have withheld too little on your W-4 form, you may need to adjust your withholding before the year ends.

What can you do before ringing in the New Year? New Year’s Eve may put you in a dancing move, eager to say goodbye to the old year and welcome 2023. Before you put on your dancing shoes, consider speaking with a financial or tax professional. Do it now rather than in February or March. Little year-end moves might help you improve your short-term and long-term financial situation.


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. Please note – investing involves risk, and past performance is no guarantee of future results. 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. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Cyber Crime: Phishing Scams and Identity Theft – What You Need To Know? | Advice4Life

Phishing scams and identity theft reports are all too common in today’s world. In fact, it seems that every day we are inundated with story after story of someone falling victim to one of these scams. Sometimes it’s even people we know. Cybercrime is constantly on the mind of most consumers and it’s important that we continue to educate on the risks associated with today’s technology-infused world and mitigate potential issues. Knowledge is the number one weapon in fighting against cyber-crime.

What are phishing scams and identity theft?

Phishing scams are a fraudulent practice of sending emails to individuals trying to convince them to reveal personal information, such as passwords, credit card information, banking accounts numbers and other personal data. To take that a step further, identity theft is the acquisition of this information, usually for financial gain. This information can be used to open bank accounts and new credit cards, or even sell the information to third parties to use it for illicit and illegal purposes.

How can I recognize a possible scam?

Cyber criminals will try to get information from you by sending you a link via an email or a text that looks like it is from a legitimate source. Once you click on this link, you have now provided them access to your information on your phone or your computer. They will likely provide you a number to call so you

can speak with someone directly. Once they get you on the phone, cyber criminals will try to convince you that your information, your money, and your investments are not safe. Through building rapport with you and discussing how they are going to protect you; they will attempt to gather personal information. In most cases, they will also tell you that you cannot tell anyone about what is happening.

How can I protect myself?

There are certain steps individuals can take to prevent taking any unnecessary risks in their day or day technological interactions. Below are a few considerations to help protect yourself from falling victim to a cyber-crime.

  Create a unique and complex password for each account and do not share those passwords with anyone. A legitimate company will never ask you to provide them your personal password to access your account.

  Never give out personal information on a call you did not initiate. If you are provided a number to call, look up that company separately and verify the number you received is a listed number for that company.

 Check statements for your financial accounts, credit cards etc. and report any suspicious activities.

 Do not click on any links, open any attachments or respond to emails from unfamiliar or untrusted sources.

What steps should I take if I think I was a victim?

  • Change passwords to your
  • Contact banks, credit card companies, investment companies, the social security office etc., to add a security protection to your account. In some cases, cancelling or closing accounts and opening new ones may be
  • File a police
  • Contact at least one credit bureau to report the identity theft.
  • File a report with the Federal Trade The FTC also has guidance on recovery plans at www.identitytheft.gov.

If you believe that you or someone you know has been a victim of a cyber-crime, please reach out to our office. We will help you navigate what steps to take to protect your information and report the crime to authorities.

If you have any questions or concerns or would like to discuss potential cyber security measures you should take, please contact Amanda Ross, Compliance Manager at (920) 233-4650.

How Can You Benefit from a Donor Advised Fund? | Advice4Life

 The Tax Cuts and Jobs Act of 2017 made some significant changes in Tax law. One of the changes increased the standard deduction to $25,900 (for 2022) for married couples. This change has benefited many taxpayers and simplified tax preparation by eliminating the need to itemize deductions. Taxpayers can still itemize but many receive a larger tax benefit from the standard deduction. One drawback of the higher standard deduction is the inability to benefit from your annual charitable deductions. Donor Advised funds can be a solution to this drawback. 

Donor Advised Funds are the fastest-growing charitable giving means in the United States because they are one of the easiest and most tax-advantageous ways to give to charity. We recently had the opportunity to work with a few clients using a Donor Advised Fund. 

In our first example, the client sold his business and wanted to set aside funds to give to charitable causes over the next five years. By placing the amount he wanted to give over the next 5 years in a Donor Advised Fund, he was able to take an immediate tax deduction for the full amount of the gift used to offset the gain on the sale of the business. He then can disburse the funds to charities over the next five years from the Donor Advised Fund. 

In our second example, the client was giving $10,000 each year to a charity. When combining their annual gifting with other itemized deductions they did not have enough deductions to exceed the $25,900 standard deduction. Therefore, they received no benefit from charitable giving. We recommended taking the next ten years of gifts and placing the money in a Donor Advised Fund. The client would then receive an immediate tax deduction for the full contribution to the Donor Advised Fund and can disburse the funds to the charity over the next ten years. 

There are limitations on the use of a Donor Advised Fund so if you or someone you know would like to determine if they would benefit from a Donor Advised Fund, please set up a time to meet with one of our Wealth Managers. 

How Your Spouse Can Affect Your Social Security | Advice4Life

A client of ours was able to retire after a career in law enforcement in her mid-fifties.  She had taken the accelerated pension benefit, which provides a higher income stream from retirement until age 62 at which point the pension drops by the amount of the individual’s social security benefit. The plan for this client was to turn on her social security benefit at age 62.  However, while reviewing her situation with our planning experts, we noted that she was eligible for a survivor’s benefit from her deceased husband.  We then called the social security office during her review to get the benefit estimates for the survivor’s benefit and her own benefit.  One of the complexities of social security benefits is that widows or widowers are able to take their survivor benefit as early as age 60, while still allowing their own benefit to continue to grow until age 70.  After receiving the benefits estimates, we were then able to confirm this client should indeed take the survivor’s benefit at age 60, and then switch to her benefit at a later date.  This resulted in a substantial raise in income for two years which she had not planned on but will now be able to complete several projects much sooner than expected.

Probate can be very expensive and a time-consuming process, we think there’s a better way. | Advice4Life

Here’s an example:

We recently had a client reach out to us to let us know his wife’s health was declining quickly and she was moved to hospice. We immediately had a meeting with him to discuss anything that needed to be completed.  At times like these, we pride ourselves on bringing a voice of reason and logic along with the necessary compassion and empathy.

This client’s wife had a checking account which was titled solely in her name only, and it did not have a “Payable on Death (POD)” designation.  Due to the size of the account, it would have gone through Probate when she passed away without the POD designation.  The account would then have been declared to all pass to her husband, but only after a lengthy and costly court process. The client then noted that he had the Power of Attorney documents in force at that bank and was able to act on his wife’s behalf to pay the bills out of that account which he had been doing. We then encouraged the client to instead write a very large check to virtually empty this account into one of their jointly owned checking accounts.

This creative method saved the client a substantial amount of fees and hassle.  Losing a loved one is an incredibly painful and emotionally draining process, at times such as those, we want to be there to guide and support however we are able. We are always here to help.

What if I do not Want to be a Beneficiary? | Advice4Life

When a Client passes away there are alternative options for Beneficiaries

 Having a conversation with your AEGIS Financial advisor will provide you with straight- forward answers and a clear picture on how to move forward …

When one of our clients passed away earlier this year, he left all his investment and IRA accounts to one Beneficiary. While grateful for the windfall, the Beneficiary asked if there was a way, she could refuse some of the money and instead have it pass directly to her adult children. Although inconceivable to some people, there is a legal process that one can employ if they choose to refuse an inheritance. This process is referred to as Disclaiming an Inheritance. Once the decision was made to disclaim, the team at AEGIS Financial contacted the Estate attorney to help ensure that all the proper steps were taken and the proper documents were completed.

When might it make sense for me to disclaim an inheritance?

There are no specific rules for when you can or cannot disclaim an inheritance; it is more a matter of personal choice. With that in mind, you may choose to refuse an inheritance for any of the following reasons:

  • You would rather have someone else, such as a sibling, child, or charity, inherit the assets that were intended to go to you, and you want a workaround for paying gift
  • Inheriting assets would increase the size of your estate and potentially create tax planning complications for your own heirs once it is time to pass your assets
  • Accepting certain assets, such as money held in an IRA, would push you into a higher tax bracket and you would rather avoid getting stuck with a large tax
  • Allowing the inheritance to pass to someone else would allow for the wishes of the deceased person to be more accurately
  • Receiving an inheritance would affect your ability to qualify for certain types of federal benefits, such as student loans or
  • You just do not need the inheritance because you are financially stable and would rather someone else benefit from

Those are all valid reasons to disclaim inheritance, but in some instances, it may come down to simply not wanting whatever it is you are supposed to inherit.

Say, for example, a relative leaves you their home, which needs extensive repairs or has back taxes due. If the will stipulates that you cannot sell the property and renting it out is not an option, then disclaiming it may be the best choice for shifting the financial burden of owning it to someone else.

What are the general guidelines for Disclaiming?

Any primary or contingent IRA beneficiary can disclaim all or a portion of his or her beneficial interest in a deceased participant’s IRA but only if certain conditions are met. The disclaimer must be a “qualified disclaimer” under Internal Revenue Code section 2518 and is an irrevocable election.

To qualify under section 2518 of the Code, the disclaimer must:

  • The disclaimer must be in writing, in accordance with, and specifically reference, sections 2518 (a) & (b) of the IRS
  • The disclaimer must be received by Custodian not later than the date which is 9 months after the later of:
    • the date of death of the participant, or
    • the date the beneficiary attains age 21
  • The disclaimer must include the disclaimant’s name, the name of the deceased and the Custodian’s IRA
  • The disclaimer must reference the disclaimed amount (i.e. entire account, 20% of their beneficial share, $30,000).
  • In the disclaimer, the beneficiary disclaiming the IRA account cannot designate who is to receive the funds once they
  • The disclaimer must be notarized but does not have to be signed by the
  • The beneficiary cannot have taken any distributions or have claimed any interest from the deceased participant’s IRA. A very limited exception applies in the case of a deceased participant’s RMD that has already been taken or will be taken by the beneficiary. Under this exception, all the conditions of IRS Revenue Ruling 2005-36 must be followed. See IRS Revenue Ruling 2005-36 for more information.

What is the best option?

Every situation is different. Just know that the clock is ticking, taking money from any account impacts your ability to disclaim, and it is one of those “forever decisions”. We pride ourselves on always giving advice which benefits you, the client, first and putting your interests before ours. If there is someone you care about who needs unbiased client-first advice, please feel free to refer them to the advisors at AEGIS Financial.

What’s Happening at AEGIS? | Quarter 3 2023

Past Events

Quarter 2 Professional Development Day

On Wednesday, June 14th, we had our second quarter professional development day. This quarter we continued our DISC Training at Fox Valley Tech and learned how to communicate for better results. Afterward, we headed to Badger Sports Park to play some Putt-Putt with a twist; check out the pictures!

Making Appointments Online

Attention all valued clients! Starting August 1, 2023, you will have the convenient option to schedule your investment portfolio reviews online. Keep an eye out for an email that will include the link to schedule your appointment yourself. Act fast if you require immediate assistance.

We appreciate your patience and understanding as we move to our online platform. As always, if you have any questions or concerns, please contact us. We are more than happy to help.

Lunch & Learn Educational Series!

Will I have enough to retire? How will I replace my paycheck? Should I take Social Security early or wait until full retirement age? How will I minimize taxes and protect my benefits? Will my money last? Do you know of anyone asking these questions? We can help!

Our Lunch and Learn series will kick off on Wednesday, August 16th, at the Oshkosh Chamber of Commerce!

We will continue the series at the Chamber on September 19th and October 12th.

Not only are we offering this series for free, but we can present these topics and more right at your office! Our FREE Lunch & Learn Series includes a complimentary lunch and a presentation by our wealth managers to give employers or organizations information on any of the following categories or any other topic upon request.

  • Retirement Planning
  • Long-Term Care
  • Social Security
  • Charitable Giving Strategies
  • Roth Conversions to Reduce Taxes Over a Lifetime

Contact us at marketing@aegis4me.com to book a FREE Lunch & Learn Session today! 

Exciting News! AEGIS Documents to Become Automated and Esignable!

At AEGIS, we are always striving to enhance our efficiency for our customers and ourselves. In the near future, we will be introducing automated and E-signable documents to eliminate the hassle of dealing with physical documents and speed up our procedures. Additionally, we provide automated forms that can be accessed on our website, via email, and in Office, with multi-factor authentication to guarantee security. Stay tuned for the release date of these exciting new features!

New Website Coming Soon!

We are currently working with another website developer to give our website a fresh and new look! This update will make our website more user-friendly with a modern look and clear and concise web pages. We plan to go live before the end of August at our current domain, aegis4me.com. Stay tuned to find out when we go live! 

Team Member Spotlight – Mike Villeneuve

Have you met Mike? Click on the video below to learn more about him and his role at AEGIS!


Social Media:

Visit us on our Facebook page, “AEGIS Financial,” and find out what’s happening around the office! We will be posting frequently with birthdays and important events for our team members as well as sharing some helpful articles that could help you with your finances!

Market Update Videos!

Bill Bowman, CPA, and Brian Rogers, CFP, frequently share the Investment Committee’s insights on the market and economy. These videos are emailed to you and available on our YouTube Channel, “AEGIS Financial,” and our Facebook and LinkedIn pages! Be sure to like and subscribe!


A Plan for All Seasons | Fall 2023


Under 50 | Taking Advantage of Employer-Sponsored Retirement Plans

Employer-sponsored qualified retirement plans such as 401(k)s are some of the most powerful retirement savings tools available. If your employer offers such a plan and you’re not participating in it, you should be. Once you’re participating in a plan, try to take full advantage of it.

Understand your employer-sponsored plan

Before you can take advantage of your employer’s plan, you need to understand how these plans work. Read everything you can about the plan and talk to your employer’s benefits officer. You can also talk to a financial planner, a tax advisor, and other professionals. Recognize the key features that many employer-sponsored plans share:

  • Your employer automatically deducts your contributions from your paycheck. You may never even miss the money — out of sight, out of mind.
  • You decide what portion of your salary to contribute, up to the legal limit. And you can usually change your contribution amount on certain dates during the year or as needed.
  • With 401(k), 403(b), 457(b), SARSEPs, and SIMPLE plans, you contribute to the plan on a pre-tax basis. Your contributions come off the top of your salary before your employer withholds income taxes.
  • Your 401(k), 403(b), or 457(b) plan may let you make after-tax Roth contributions — there’s no up-front tax benefit but qualified distributions are entirely tax free.
  • Your employer may match all or part of your contribution up to a certain level. You typically become vested in these employer dollars through years of service with the company.
  • Your funds grow tax deferred in the plan. You don’t pay taxes on investment earnings until you withdraw your money from the plan.
  • You’ll pay income taxes (and possibly an early withdrawal penalty) if you withdraw your money from the plan.
  • If your plan allows loans, you may be able to borrow a portion of your vested balance, up to specified limits.
  • Your creditors cannot reach your plan funds to satisfy your debts.

Contribute as much as possible

The more you can save for retirement, the better your chances of retiring comfortably. If you can, max out your contribution up to the legal limit (or plan limits, if lower). If you need to free up money to do that, try to cut certain expenses.

Why put your retirement dollars in your employer’s plan instead of somewhere else? One reason is that your pre-tax contributions to your employer’s plan lower your taxable income for the year. This means you save money in taxes when you contribute to the plan — a big advantage if you’re in a high tax bracket. For example, if you earn $100,000 a year and contribute $10,000 to a 401(k)

plan, you’ll pay income taxes on $90,000 instead of $100,000. (Roth contributions don’t lower your current taxable income but qualified distributions of your contributions and earnings — that is, distributions made after you satisfy a five-year holding period and reach age 59½, become disabled, or die — are tax free.)

Another reason is the power of tax-deferred growth. Your investment earnings compound year after year and aren’t taxable as long as they remain in the plan. Over the long term, this gives you the opportunity to build an impressive sum in your employer’s plan. You should end up with a much larger balance than somebody who invests the same amount in taxable investments at the same rate of return.

For example, say you participate in your employer’s tax-deferred plan (Account A). You also have a taxable investment account (Account B). Each account earns 6% per year. You’re in the 24% tax bracket and contribute $5,000 to each account at the end of every year. After 40 years, the money placed in a taxable account would be worth $567,680. During the same period, the

tax-deferred account would grow to $820,238. Even after taxes have been deducted from the tax-deferred account, the investor would still receive $623,381. (Note: This example is for illustrative purposes only and does not represent a specific investment.)

Capture the full employer match

If you can’t max out your 401(k) or other plan, you should at least try to contribute up to the limit your employer will match. Employer contributions are basically free money once you’re vested in them (check with your employer to find out when vesting happens). By capturing the full benefit of your employer’s match, you’ll be surprised how much faster your balance grows. If you don’t take advantage of your employer’s generosity, you could be passing up a significant return on your money.

For example, you earn $30,000 a year and work for an employer that has a matching 401(k) plan. The match is 50 cents on the dollar up to 6% of your salary. Each year, you contribute 6% of your salary ($1,800) to the plan and receive a matching contribution of $900 from your employer.

Evaluate your investment choices carefully

Most employer-sponsored plans give you a selection of mutual funds or other investments to choose from. Make your choices carefully. The right investment mix for your employer’s plan could be one of your keys to a comfortable retirement. That’s because over the long term, varying rates of return can make a big difference in the size of your balance.

Note: Before investing in a mutual fund, carefully consider the investment objectives, risks, charges, and expenses of the fund. This information can be found in the prospectus, which can be obtained from the fund. Read it carefully before investing.

Research the investments available to you. How have they performed over the long term? How much risk will they expose you to? Which ones are best suited for long-term goals like retirement? You may also want to get advice from a financial professional (either your own, or one provided through your plan). He or she can help you pick the right investments based on your personal goals, your attitude toward risk, how long you have until retirement, and other factors. Your financial professional can also help you coordinate your plan investments with your overall investment portfolio.

Know your options when you leave your employer

When you leave your job, your vested balance in your former employer’s retirement plan is yours to keep. You have several options at that point, including:

  • Taking a lump-sum distribution. Before choosing this option, consider that you’ll pay income taxes and possibly a penalty on the amount you withdraw. Plus, you’re giving up the continued potential of tax-deferred growth.
  • Leaving your funds in the old plan, growing tax deferred. (Your old plan may not permit this if your balance is less than

$5,000, or if you’ve reached the plan’s normal retirement age — typically age 65.) This may be a good idea if you’re happy with the plan’s investments or you need time to decide what to do with your money. Rolling your funds over to an IRA or a new employer’s plan (if the plan accepts rollovers). This may also be an appropriate move because there will be no income taxes or penalties if you do the rollover properly (your old plan will withhold 20% for income taxes if you receive the funds before rolling them over, and you’ll need to make up this amount out of pocket when investing in the new plan or IRA). Plus, your funds continue to potentially benefit from tax-deferred growth.

This information was developed by Broadridge, an independent third party. It is general in nature, is not a complete statement of all information necessary for making an investment decision, and is not a recommendation or a solicitation to buy or sell any security. Investments and strategies mentioned may not be suitable for all investors. Past performance may not be indicative of future results.

Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2023

Under 60 | Evaluating an Early Retirement Offer

In today’s corporate environment, cost cutting, restructuring, and downsizing are the norm, and many employers are offering their employees early retirement packages. But how do you know if the seemingly attractive offer you’ve received is a good one? By evaluating it carefully to make sure that the offer fits your needs.

What’s the severance package?

Most early retirement offers include a severance package that is based on your annual salary and years of service at the company. For example, your employer might offer you one or two weeks’ salary (or even a month’s salary) for each year of service. Make sure that the severance package will be enough for you to make the transition to the next phase of your life. Also, make sure that you understand the payout options available to you. You may be able to take a lump-sum severance payment and then invest the money to provide income, or use it to meet large expenses. Or, you may be able to take deferred payments over several years to spread out your income tax bill on the money.

How does all of this affect your pension?

If your employer has a traditional pension plan, the retirement benefits you receive from the plan are based on your age, years of service, and annual salary. You typically must work until your company’s normal retirement age (usually 65) to receive the maximum benefits. This means that you may receive smaller benefits if you accept an offer to retire early. The difference between this reduced pension and a full pension could be large, because pension benefits typically accrue faster as you near retirement.

However, your employer may provide you with larger pension benefits until you can start collecting Social Security at age 62. Or, your employer might boost your pension benefits by adding years to your age, length of service, or both. These types of pension sweeteners are key features to look for in your employer’s offer — especially if a reduced pension won’t give you enough income.

Does the offer include health insurance?

Does your employer’s early retirement offer include medical coverage for you and your family? If not, look at your other health insurance options, such as COBRA, a private policy, dependent coverage through your spouse’s employer-sponsored plan, or an individual health insurance policy through either a state-based or federal health insurance Exchange Marketplace. Because your health-care costs will probably increase as you age, an offer with no medical coverage may not be worth taking if these other options are unavailable or too expensive. Even if the offer does include medical coverage, make sure that you understand and evaluate the coverage. Will you be covered for life, or at least until you’re eligible for Medicare? Is the coverage adequate and affordable (some employers may cut benefits or raise premiums for early retirees)? If your employer’s coverage doesn’t meet your health insurance needs, you may be able to fill the gaps with other insurance.

What other benefits are available?

Some early retirement offers include employer-sponsored life insurance. This can help you meet your life insurance needs, and

the coverage probably won’t cost you much (if anything). However, continued employer coverage is usually limited (e.g., one year’s coverage equal to your annual salary) or may not be offered at all. This may not be a problem if you already have enough life insurance elsewhere, or if you’re financially secure and don’t need life insurance. Otherwise, weigh your needs against the cost of buying an individual policy. You may also be able to convert some of your old employer coverage to an individual policy, though your premium will be higher than when you were employed.

In addition, a good early retirement offer may include other perks. Your employer may provide you and other early retirees with financial planning assistance. This can come in handy if you feel overwhelmed by all of the financial issues that early retirement brings. Your employer may also offer job placement assistance to help you find other employment. If you have company stock options, your employer may give you more time to exercise them. Other benefits, such as educational assistance, may also be available. Check with your employer to find out exactly what its offer includes.

Can you afford to retire early?

To decide if you should accept an early retirement offer, you can’t just look at the offer itself. You have to consider your total financial picture. Can you afford to retire early? Even if you can, will you still be able to reach all of your retirement goals? These are tough questions that a financial professional should help you sort out, but you can take some basic steps yourself.

Identify your sources of retirement income and the yearly amount you can expect from each source. Then, estimate your annual retirement expenses (don’t forget taxes and inflation) and make sure your income will be more than enough to meet them. You may find that you can accept your employer’s offer and probably still have the retirement lifestyle you want. But remember, these are only estimates. Build in a comfortable cushion in case your expenses increase, your income drops, or you live longer than expected.

If you don’t think you can afford early retirement, it may be better not to accept your employer’s offer. The longer you stay in the workforce, the shorter your retirement will be and the less money you’ll need to fund it. Working longer may also allow you to build larger savings in your IRAs, retirement plans, and investments. However, if you really want to retire early, making some smart choices may help you overcome the obstacles. Try to lower or eliminate some of your retirement expenses. Consider a more aggressive approach to investing. Take a part-time job for extra income. Finally, think about electing early Social Security benefits at age 62, but remember that your monthly benefit will be smaller if you do this.

What if you can’t afford to retire? Finding a new job

You may find yourself having to accept an early retirement offer, even though you can’t afford to retire. One way to make up for the difference between what you receive from your early retirement package and your old paycheck is to find a new job, but that doesn’t mean that you have to abandon your former line of work for a new career. You can start by finding out if your former employer would hire you as a consultant. Or, you may find that you would like to turn what was once just a hobby into a second career. Then there is always the possibility of finding full-time or part-time employment with a new company.

However, for the employee who has 20 years of service with the same company, the prospect of job hunting may be terrifying. If you have been out of the job market for a long time, you might not feel comfortable or have experience marketing yourself for a new job. Some companies provide career counseling to assist employees in re-entering the workforce. If your company does not provide you with this service, you may want to look into corporate outplacement firms and nonprofit organizations in your area that deal with career transition.

Note: Many early retirement offers contain non-competition agreements or offer monetary inducements on the condition that you agree not to work for a competitor. However, you’ll generally be able to work for a new employer and still receive your pension and other retirement plan benefits.

What will happen if you say no?

If you refuse early retirement, you may continue to thrive with your employer. You could earn promotions and salary raises that boost your pension. You could receive a second early retirement offer that’s better than the first one. But, you may not be so lucky. Consider whether your position could be eliminated down the road.

If the consequences of saying no are hard to predict, use your best judgment and seek professional advice. But don’t take too long. You may have only a short window of time, typically 60 to 90 days, to make your decision.

This information was developed by Broadridge, an independent third party. It is general in nature, is not a complete statement of all information necessary for making an investment decision, and is not a recommendation or a solicitation to buy or sell any security. Investments and strategies mentioned may not be suitable for all investors. Past performance may not be indicative of future results.

Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2023