Ask the CFP® Professional

My husband and I are in our 60’s and we have started to talk about Long Term Care Insurance. I’m worried that it may be out of our budget, your thoughts?

Anonymous, Boston, MA

If the premiums exceed 5-7% of your income, it might not be financially suitable for you to purchase Long term care Insurance. If it does work within your budget remember that the premiums are not necessarily the same premiums you will have forever. While the Long term care insurer cannot raise premiums to an individual’s policy, it can raise premiums if it is raised to the whole class of insured. I would make sure you are comfortable with a premium that could be at least 10-20% higher as you look to see if a LTC policy is financially suitable.

Keep in mind that it is advantageous for married couples to apply together as there can be large couple’s discounts. Sometimes the discount can be as much as 40% compared to if they were separate individual policies.

I heard that if I give money, even if it’s to my own children there could be gift tax issues, is this true?

Winnie, Malden , MA

Yes, whenever you make a gift of money to someone, you will have to file a gift tax return unless that amount is under the annual exclusion. This year the amount of the annual exclusion is $13000. So this is the amount you are able to gift to someone in a single year without gift tax consequences.

There is no limit to how many people you want to give to using the annual exclusion. You and your spouse have your own annual exclusion so if you would like to give to a child without gift tax issues, you are able to give a total of  $26,000.

If your spouse is a U.S. citizen, you can gift any present interest amount under the unlimited marital deduction without any gift tax consequences. If your spouse is a non U.S. citizen there is an annual exclusion amount of $136,000 for 2011.

I am 67 years old, retired and I have a lot of assets in an IRA rollover account. I don’t need the money right now, but is there a time I need to start withdrawing the money?

Anonymous, Newton, MA

Yes, It is called the Required Minimum Distribution or (RMD). The year in which you turn 70 ½, you are required to make a withdrawal of a certain amount from your IRAs. This includes, Traditional IRA’s, SEP’s, 401k’s, 457 plans, 403b’s and the Roth 401k. However, the RMD does not apply to ROTH IRA’s.

The first year of your RMD payment you are able to delay until April 1st of the following year, but all consequent years the deadline is December 31st.

The amount of the RMD is a formula based on your age, a life expectancy factor and the value of your IRA assets. Many times the firm that holds your IRA will calculate the RMD for you but it can be tricky if you have multiple accounts at different places.

Don’t forget to take your RMD as there are stiff penalties if you fail to withdraw. The amount not withdrawn is taxed at 50%.


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CERTIFIED FINANCIAL PLANNER ™, Michael Tow is President of New Boston Financial. He is a registered representative of, and offers securities and advisory services through Commonwealth Financial Network- a member firm of FINRA/SIPC and a Registered Investment Adviser. He is located at 58 Harvard Street in Brookline and can be reached at 617-734-4400 or

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