Planning for Retirement

Do you want to get away? Play more golf? Spend more time with a long neglected hobby? How about just spending more time with family? However you want to spend your retirement, it’s never too early or too late to plan for what will eventually be right for you. As you navigate your way to retirement, County Bank has all of the information and tools you need to implement a successful plan. Let us help you to compare. Where are you today? Where do you want to be?

Getting Started

Take the first step toward reaching your retirement goals by saving money in your company-sponsored retirement plan. Here are a few things to consider:

As we all know, Social Security is probably not going to support the retirement lifestyle you will want. Realistically, the largest part of your retirement income will need come from personal savings, including money from your company-sponsored retirement plan. Today, Social Security provides only about 40 percent of the average retiree’s income. And of course that amount could shrink in the near future. During the next several decades, 76 million Baby Boomers will retire, squeezing the Social Security system’s ability to pay out benefits. Employer pension plans help some retirees. But currently, they provide even less on average than Social Security does-just 19% of a retirees’ income.
The earlier you start saving, the more you’ll benefit from the power of compounding. In fact, if you start saving small amounts each payday when you’re in your 20s, you’ll have more money at retirement than if you save larger amounts but put off starting until you’re in your 30s or 40s.
Of course, contributing to your company-sponsored retirement plan can also reduce the amount of taxes you pay. The money you contribute to your retirement account is tax deferred, which means it is deducted from your paycheck before income taxes are taken out. Talk to someone at County Bank to learn more about this affects your take-home pay.
Finally, before you even start investing in your retirement plan, it’s important to determine what type of investor you are. Your retirement goals, risk comfort level, and how many years you have until retirement are all important factors to consider when developing your investment strategy. Take time to determine how aggressive you want to be with your retirement plan contributions.

Any amount of savings is better then no savings, so contact County Bank to get started today!

Already Saving?

Do you need to increase your contributions? Are you concerned that you’re not saving enough to meet your retirement goals? Below are some things to consider and a few tools to help you find out if you’re on the right track for meeting your goals.

Time Horizon and Goals

If you retire at 65 or 67 you may want to consider that you may have 20 years or more of retirement to enjoy. And even while your retired, you’ll need to keep your savings growing as much as you can. Use the information below to help you determine if you’re saving enough or if your investment strategy needs to change.

Social Security: To find out how much retirement income Social Security may provide, go to the Social Security Web site and request a Social Security benefit estimate.
Impact of Inflation: Inflation wipes out 3% of your investment return. If your investments make a 6% return, after inflation your money actually only grew 3%. To help reach your goals, select investments with the potential for the highest rate of return.
401(k) Planner: Are you on track to meet your savings goal, or will you run short? You need to take time to evaluate this. Talk to County Bank to learn more about how you can better evaluate your current 401(k) savings plan.
Risk Tolerance; Have your retirement goals, risk comfort level or time horizon changed? If so, there’s no better time than now to review your current investment to determine if your current strategy is still appropriate for you.

Increase Your Savings

If you think you’re going to fall short of your savings goal, consider making the following changes to your savings strategy.

Increase your contributions. If you’re contributing 5%, increase your contribution rate to 7% or 8%. Increasing your contributions by just 1% will make a difference.
Change your asset allocation. Put your savings into investments with potentially higher rates of return. Principal preservation (or stable value) funds offer the lowest rates of return. Bond funds offer the second lowest and stock funds offer the highest. While stocks are also considered the “riskiest” investment, time reduces that risk. Call County Bank to make a change today!

Save Outside Your Plan

If you’re already making your maximum contribution and putting your money in high-return investments, but still falling short of your retirement savings goal, consider opening an IRA, Roth IRA, or both. You can apply for an IRA or Roth IRA at a nearby County Bank. Read on to learn more about IRAs:

Saving Outside the Plan: Tax-Advantaged IRA’s

Traditional IRA

If you are under the age of 70½ in the 2007 tax year, you may contribute up to $4,000 (up to $5,000 if you are age 50 or over) of your earned income to a Traditional IRA (Individual Retirement Account) each year. In the 2008 tax year, the IRA limit will increase to $5,000 ($6,000 if you are age 50 or over).

The deductible amount of your annual contribution depends on your adjusted gross income (AGI) and whether you and your spouse are covered by a retirement plan at work.

The tax advantage of a Traditional IRA is that your contribution may be fully or partially deductible. Similar to a company-sponsored retirement plan, you don’t pay taxes on contributions or earnings until you make withdrawals at retirement.

Roth IRA

In the 2007 tax year, you may contribute up to $4,000 (up to $5,000 if you are age 50 or over) of your earned income a year, offset by any contribution you make to a Traditional IRA for that year. In the 2008 tax year, the IRA limit will increase to $5,000 ($6,000 if you are age 50 or over). You can even make contributions after reaching age 70½ as long as you continue to have earned income.

The difference between your contributions to a traditional IRA and a Roth IRA is that Roth IRA contributions are made with after-tax dollars, meaning you pay income taxes on them. But they are not tax deductible.

Here’s the Roth IRA advantage: If you meet certain requirements, withdrawals of interest earnings from a Roth IRA are completely tax-free! What’s more, a Roth IRA can be a powerful tool to build wealth for your estate and your heirs. Of course, we suggest you consult your tax professional for further details.

Education Savings Account

If you’ve ever thought about borrowing money from your company-sponsored retirement plan to fund your children’s higher education, consider a better alternative: an Education Savings Account.

An Education Savings Account allows you to save for your children’s education expenses on an after-tax basis. Your children may receive contributions of up to $2,000 each per year in an Education Savings Account until the age of 18. Contributions are not tax deductible.

Contributions and earnings may be withdrawn, income tax free, to help pay for education expenses that include:

Tuition for elementary, secondary, and post-secondary education
Room and board
Fees
Books
Extended day programs
Equipment and uniforms
Computer equipment, software, or internet access used for educational purposes

Nearing Retirement?

Are you ready? There is still time to increase your retirement plan contributions or change your investment strategy. Consider the following:

Review Your Investment Strategy: When you’re 10 years or more from retirement, you have time to ride out most bumps-even big ones-in the market. When you’re five years or less away, you may not. That’s something to consider.

If you’ll begin living on your retirement savings immediately, you may want to shift to a more conservative asset allocation-more money market and fixed income investments than stocks. You’ll protect your principal and reduce the risk of having to sell your investments when their value is down.
If, on the other hand, you plan to be employed or you have personal savings to draw on, you may want to gear up to a more aggressive allocation - mainly stocks. You’ll increase the potential to build wealth that will support you throughout your retirement years.

It’s always smart to draw from taxable accounts first. They are built on after-tax money and you pay income taxes annually on their earnings whether you withdraw them or not. Let your savings in non-taxable accounts grow tax deferred as long as possible.

Decide How To Take Your Distribution: When you change jobs or retire, one of the most important financial decisions you will ever make is what to do with money in your company-sponsored retirement plan. Generally, when you terminate employment or retire, as specified by your plan, you can withdraw the money in your retirement account. Here are your distribution options:

Leave the money in the plan.
Roll the money into an IRA or your current employer’s plan.
Take the money

Note: The option you select may have significant tax consequences. Explore your options and consult your tax professional before you decide.

Option 1: Leave the Money in Your Plan: Plans must allow you to leave your money invested when you retire, especially if your balance is $5,000 or more. Are you generally satisfied with your plan, your investment choices, and the performance of your investments? Are you happy with the service you receive? If the answer to these questions is yes, you may want to leave your money where it is. It will keep growing tax deferred until you withdraw it. Make sure the plan will allow you to withdraw funds as often as you need after you retire. Fees are also worth considering because they can eat into your savings. Your Summary Plan Description and other savings plan materials are a good source of information as you consider the information above.

Option 2: Roll the Money into An IRA Or Your Current Employer’s Plan: If you continue to work, your current employer may sponsor a retirement plan that permits you to roll your money into it. Check the Summary Plan Description to see whether this is possible, and what limitations may apply, such as restrictions on future access to the funds. Perhaps your most flexible option is a rollover Individual Retirement Account or IRA. You can withdraw money as you need it, subject to the IRA rules, and pay income tax only on the amount you withdraw. If you are under age 59½, there generally is a 10% IRS penalty for early withdrawals. There are two ways to rollover to an IRA-direct and indirect; here are the pros and cons of each.

Direct Rollover: With a direct rollover, your employer transfers the money from your retirement account into an IRA at a financial institution of your choice. There are no federal or state income taxes withheld when rolling the money directly into an IRA. And the mandatory 20% federal tax withholding does not apply to direct rollovers. Detailed tax information is provided at the time of distribution.
Indirect Rollover: With an indirect rollover, your employer issues a check payable to you for 80% of your account balance; 20% is withheld for income taxes as required by the IRS. You have 60 days to rollover the funds into an IRA at a financial institution of your choice. In this situation, to avoid being taxed on a portion of the distribution by the IRS, you must write a personal check for the 20% difference. Because you are temporarily making up the difference for the amount that was withheld for tax purposes, you can get that 20% back without paying taxes on it later. If you do not replace the withholding amount at the time of the rollover, the 20% will be considered a distribution and subject to standard taxation and penalties. Obviously, this is a more complex option than a direct rollover.

Option 3: Take the Money: With this option, federal, state and local taxes and possible early withdrawal tax penalties can take a big bite out of your retirement savings. However, if you hold a large amount of company stock in your plan, special tax considerations may make this an option to consider. You may be able to take the money in a single payment or in monthly, quarterly, or yearly installment payments. Your plan materials will contain information about available payment options.

Other Factors: Decide Where You’ll Live

Where would you like to live out your retirement? In a Sunbelt Condominium? A villa in Tuscany? Split between a winter home at the seashore and a summer place in the mountains? No matter where you end up in your retirement, there’s no place like home. Did you know that 9 out of 10 retirees stay right where they are? If you’ll miss your friends, family, church, and activities, maybe you’re exactly where you should be. Your decision will be whether to stay in your current home or move to a smaller home or condominium in the same area.

An area may seem perfect on your first impression. And if you are considering a move, be sure to conduct plenty of research and make several visits. Meet the locals-shop where they shop, dine where they dine. See it from a day-to-day perspective, not through a tourist’s eyes. Your new locale might be a great place to visit but less than a great place to live.

Each year, financial magazines publish lists of the Best Places to Retire. These are good resources to help you in your decision making.

As you consider making a move, look into these factors:

Home Prices: In some places, the real estate market remains strong, but for the most part, the current real estate market favors buyers, but diminishing returns in home equity and the continuing credit crunch continue to make home buying a risky business.
Cost of Living: Check prices on everything from food and utilities to teeth cleaning and greens fees.
Taxes: An essential reason why so many people retire to Florida and Nevada is because there is no state income tax. Consider state and local income taxes and property and sales taxes as well.
Health Care: Look into the quality of and distance to hospitals, clinics, doctors, and dentists.
Arts, Education, and Recreation: Does the area offer the things that interest you? Theater and symphony, professional and collegiate sports, ongoing education, recreational activities. Whatever your interests, see if they’re available and at what times of year.
Faith-based Institutions: If religion is important in your life, make sure you’ll be near churches, synagogues, mosques, or other institutions and practitioners of your faith.
Crime: Check out the type and extent of crime in the area and the quality of the police force.
Shopping: Is it convenient, accessible, varied, and priced right for your income?
Transportation: If you plan to travel the country or globe by air, check the distance to the nearest major airport. If you want to live in the city, check taxi fares and bus availability.

Consider Whether To Work or Not To Work

For some people, retirement is much-wanted leisure time. For others, it’s an opportunity to work at something new and different. Will you travel or volunteer your time? Consult? Open a bed and breakfast? Is it finally time to pursue that dream job? Here are some advantages and disadvantages to working after retirement:

Advantages	Disadvantages
Supplements other income sources	Reduces time with friends and family
Keeps you socially in touch	May limit volunteer opportunities
Offers new challenges	May limit vacation time
Prevents boredom	Possible tax consequences

Apply for Social Security Benefits

Although you’ve earned your Social Security benefits, they don’t start automatically when you retire. You must apply for them as follows:

When to Apply: Apply 3 months before you want to begin collecting benefits. You can begin collecting at age 62, but the earlier your benefits begin, the smaller your monthly benefit check will be.

How to Apply: Call toll-free 1-800-772-1213. A Social Security representative will make an appointment to take your application by telephone or at your local Social Security office.

What You Need: To apply for benefits, you will need the following information:

Your Social Security number
Birth certificate
Most recent federal income tax return
Military discharge papers - if you served
Your spouse’s birth certificate and Social Security number - if he or she is applying for benefits
Your children’s birth certificates and Social Security numbers - if applying for children’s benefits
Proof of U.S. citizenship or lawful alien status - if you or a spouse or child who is applying for benefits were not born in the U.S.
Name of your bank and the account number to which your benefits will be directly deposited
Submit original documents or copies certified by the issuing office - When you mail or take them to Social Security they will make photocopies and return your documents

Learn about Medicare

Medicare is the federal government health insurance program for people age 65 and over and for people under age 65 with certain disabilities.

Hospital Insurance Part A: Financed through Medicare payroll taxes, Hospital Insurance Part A provides coverage for inpatient hospitalization, post-hospital skilled nursing facility care, post-hospital home health care, and hospice care. You are eligible for Part A at age 65 automatically if you are entitled to monthly Social Security benefits, although you may still be working and not collecting benefits. If you want Part A benefits but are still working and not collecting Social Security benefits, you will need to apply for coverage at your Social Security office three months before your 65th birthday. You also are eligible if you are 65 or over and your spouse (or deceased spouse) is entitled to Social Security Benefits.
Medical Insurance Part B: Medical Insurance Part B covers doctor bills and other medical expenses and supplies, outpatient medical and surgical treatment, preventive care and home health care. You are enrolled in Part B automatically if you receive Social Security benefits; however, you may elect to decline this coverage. If enrolled, premiums are deducted from your monthly Social Security checks.
Medicare Prescription Drug Coverage Part D: Effective in 2006, Medicare offers drug coverage through private insurance companies. Medicare sets the minimum standards for such coverage, but the private companies determine the specific coverages and the premium costs. Anyone with Medicare can join the plan of his or her choice, although certain Medicare plans, such as Medicare Advantage Plans, may already include drug coverage in their programs. Enrollment in Medicare drug plans is voluntary for most beneficiaries, with the exception of dual eligibles (Medicare and Medicaid) and certain low-income beneficiaries who are automatically enrolled if they do not choose a plan on their own. However, unless beneficiaries have coverage that is at least as good as standard Part D coverage (”creditable coverage”), they face a penalty equal to 1% of the national average monthly premium for each month they delay enrollment. Generally, individuals who do not join a Medicare-approved prescription drug plan when they first become eligible for Medicare or between November 15th and December 31st of the year will have to wait until November 15th of the following year to join. Medicare has a program to help individuals with limited income and resources pay the cost of coverage.
Explore Supplementary Healthcare Coverage: It’s common that Medicare will not pay all of your medical expenses, so you may want to explore supplementary healthcare coverage. First, check to see if your current employer offers healthcare coverage for retirees. It’s a good place to start, but don’t assume it’s necessarily the best policy for you. Individual Medicare supplemental healthcare policies are available through many insurance companies offering health insurance. Prices and coverage can vary widely. When comparing plans, ask for complete lists of those items covered by the plan that are not covered by Medicare. Know what amount of coverage is paid for by the policy, and ask about coverage of pre-existing illnesses. Then decide whether you’re getting the coverage you want for a premium you find reasonable. Finally, inquire into the financial condition of the company offering the policy-be sure the company will be there when you need it.

Wrap Up: Make Retirement Great

As we all know, retirement is the start of a whole new life. Today, there are more options for retirees than ever before. With the right planning, you now get to choose whether to work or not to work, how you’ll spend your time, and what hobbies or interests you’ll pursue. Learn more about some of the following options to consider in retirement:

Volunteerism

According to the American Association of Retired Persons (AARP), 4 out of 10 Americans are involved in volunteer activities. Money magazine reports (based on a 1999 study by Independent Sector) that nearly 50% of Americans age 55 or older currently volunteer-up 4% from 1995.

If you’re interested in volunteer opportunities in retirement, here are some websites to check out:

AARP.org: Volunteers are the face of the AARP. They are involved in voter education programs, community service activities, advocacy efforts, and even helping people trace their genealogy on the Internet.

CNS.gov: The Corporation for National Service sponsors the Senior Corps, a volunteer program that leverages the talents and experience of retirees to get things done in communities across the country.

IdeaList.org: Lists volunteer opportunities in 150 countries around the globe.

Servenet.org: At Servenet.org, noted as one in Newsweek’ as one of the Top Websites of its kind, you can enter your zip code, city, skills, interests, and availability and instantly be matched with organizations in need of your help.

Score.org: The Service Corps of Retired Executives has opportunities for working and retired executives to advise small-business owners and aspiring entrepreneurs.

Long-term Care

MetLife’s 2002 Market Survey of Nursing Home and Home Care Costs found the average cost of nursing home care in the United States to be about $52,000 per year (or $143 per day) for a semi-private room. By 2030, that cost is estimated to be $190,600 per year (or $524 per day). These high costs that can literally wipe out a lifetime of savings continue to drive the popularity of long-term care insurance.

When the American Association of Retired Persons asked its members how they would pay for nursing home care, most responded that Medicare would cover the cost. It won’t. Medicare pays for skilled nursing care after hospitalization for a limited period of time. It does not pay for long-term custodial care. Neither does supplemental Medicare insurance. Only long-term care insurance does.

Long-term care insurance is now offered by many insurance companies that offer health coverage. Long-term care policies usually pay a daily benefit for two to six years in a nursing home. Premiums are set by age at the time the policy is purchased and typically remain fixed. If purchased in your 60s, annual premiums might be anywhere from a few hundred dollars to a thousand dollars or more, depending on the company and the benefits you select. If you wait until you are in your seventies before taking out a policy, premiums will be considerably more. When shopping for long-term care insurance, here are some questions to ask:

How much is the daily benefit, and when do benefits begin? (Amounts ranging from $10 to $120 or more per day are available. Waiting periods are often 15 to 20 days, with longer waiting periods available to reduce costs).
Exactly what is covered? Ideally long-term care policies should cover custodial care, such as meals and help with medications, and skilled nursing care.
Are any conditions excluded? Some policies bar pre-existing conditions, while others specifically exclude certain types of nervous or mental disorders.
Are benefits provided for home care? Some policies provide no home care coverage. Others pay a daily benefit for a specified period of in-home care after a hospital or nursing home stay.
Is the policy portable if you move to another state?

Estate Planning

In the next 15 years, $10 trillion dollars will be passed to the next generation. Whether your estate is valued at $50,000 or $5 million, it is good business to ensure that your assets are protected from high taxation and passed to your beneficiaries in the way you choose. Here’s what a sound estate plan can do for you and your family:

Ensure that your assets pass to your beneficiaries in the simplest - most cost-effective and orderly way possible
Ensure that your assets will be well managed when you pass away or are permanently disabled
Preserve your assets for future generations
Ensure that the minimum possible tax is paid within estate tax rules

Tools of Estate Planning: To many people, estate planning is little more than a will. But proper estate planning is much more than that. While a will provides for the disposition of assets and names an executor to administer the estate and distribute the assets, it’s only the beginning of an estate plan. Other tools include:

Trusts: A fiduciary agreement in which a trustee, following your directions, manages your assets for the benefit of your beneficiaries.
Living Documents: Documents that state your wishes and provide you and your family peace of mind such as powers of attorney for health care and financial affairs, health care directives, and pre-and post-nuptial agreements.
Life Insurance: Life insurance helps to pay estate taxes when due. The key value of life insurance is liquidity-it provides your beneficiaries with money when they need it, preventing any emergency selling off of your assets. With proper planning, it also has a big tax advantage. You’re taking money that would normally be taxed at up to 55% on your death and using it to fund a policy that will pay your beneficiaries in tax-free dollars.

County Bank is your Estate Planning Team. Successful estate planning involves a team of experts: an experienced Estate Planning Attorney, a Certified Public Accountant, and a Financial Consultant that you can trust to manage your estate and preserve and protect your wealth.