Don’t let a job loss derail your long-term care and estate planning goals

On Behalf of | Mar 2, 2016 | Estate Taxes |

In this blog, we often discuss the importance of establishing a comprehensive estate plan to provide for one’s own future financial needs as well as those of heirs. Unfortunately, at times, unexpected life events can result in an individual facing uncertain circumstances and force one to adjust his or her long-term financial goals and strategies for achieving those goals.

Whether the result of a lay off, debilitating medical condition or work injury; for individuals who are nearing retirement, the unexpected loss of a job can wreck havoc on one’s retirement plans and also necessitate that changes be made to an existing estate plan.

When faced with the reality of an unexpected job loss, finding a way to secure a steady income stream until an individual reaches age 62 is often a chief concern. Additionally, an individual is likely to have major concerns about depleting accounts and reserves that were intended to fund retirement and long-term care needs.

In addition to a financial advisor an individual who finds himself or herself in this situation may want to consult with an estate planning professional who can provide advice about short-term options to help ensure that an individual is still able to achieve his or her long-term financial goals.

First and foremost, an individual or couple who is affected by a job loss must closely review a monthly budget and look for practical ways to reduce expenses. Next, it’s important to take stock of existing assets and determine which, if any, can be accessed now to bridge any income gap before Social Security kicks in. For example, an individual may be able to sell an existing home and downsize or capitalize on the equity accrued in a current home and take out a home equity line of credit.

When examining potential income sources, it’s important to be aware of tax liabilities that may be triggered by certain actions. For example, for individuals who plan to tap into an IRA retirement account and who haven’t reached age 59 1/2, and funds that are withdrawn are subject to income taxes and also a 10 percent early-withdrawal penalty. Additionally, for those individuals who are forced to retire due to a disability, payments received from an employer are taxable, whereas those paid out via a private policy are tax-free.


Source: Forbes, “Unplanned Early Retirement?,” Feb. 5, 2016


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