As retirement approaches, we may wonder about downsizing our living space, or even moving to a new area entirely. The perfect retirement has many elements and is more than just having enough money to make work an option instead of a requirement. One of the hardest things is realizing that you are the boss of your own retirement, and therefore you need to take charge of structuring all your new-found time during each day. For some, that may mean spending more time with family, new hobbies, or travel.
 
One might even consider living on sea to be able to travel all the time and provide the stimulus needed to keep life exciting as travel destinations open back up again. Living on the seas is not just for the ultra-rich. In fact, the idea that one would want to spend their retirement traveling from place to place has been around for a while, and the lower cost and more accessible option is to consider a cruise ship. The average spend for a cruise ship passenger including lodging and food is $214.25 per day according to Cruise Market Watch, or $78,201.25 annually. Still considerably higher than the average projected retirement cost, but that cost might come down further if one considered buying a cruise condo rather than booking consecutive cruises. That becomes more comparable to the average senior living cost. Some cruise ships cater to seniors and have more medical options as well as accessibility and wheelchair options.

Where can this cruise retirement formula go wrong? The first and largest issue is healthcare. Even if a cruise ship has more healthcare options, that doesn't mean that it is setup to have assisted living or full-time nursing care. Most often one would need to be dropped off at the next port if health issues become severe, and how is that going to be paid for? Conventional insurance may not be accepted during international travel, whether on the boat or in port, so additional insurance costs may be needed, and treatment options may vary considerably depending on where you are in the world.

The cruising life doesn't have to be forever and could still be considered for early retirement when one is healthier and more adventurous. That may have a hidden negative as well, though. As we grow older, it becomes harder to create new lasting friendships. Being on a cruise ship with passengers that are constantly changing may place an additional barrier to creating the new relationships that could be steadier in an independent senior living facility.

There are the ordinary barriers to going on a cruise ship as well, from a small living space to the novelty of the same cruise entertainment and ports wearing off. You may have possible interruptions between booking cruises and need to stay in hotels or be forced to stay on the boat if there is an outbreak.

Some interruptions could be more inconvenient than others, too. There could be times when you are inaccessible to the internet or family. In terms of financial management, that is where Garden State Trust Company could step in, providing continuous financial management in the background in accordance with your wishes.

For most retirees, the desire and goal are to stay in their home as long as possible. However, for those that have been looking forward to more travel throughout their careers, it may be worth considering living on the seas for the early part of retirement and crossing off those bucket list places you've always wanted to see.
FAMOUS WILL FOR THE MONTH WHITNEY HOUSTON
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Whitney Elizabeth Houston was born August 9, 1963, in Newark, New Jersey, and became one of the world's best musical artists of all time. Whitney died February 11, 2012. Her last will and testament left her entire estate in trust for her daughter, Bobbi Kristina Brown, with 1/10th distributed to her at age 21, 1/6th at age 25, and the rest at age 30. ©LIVING TRUST NETWORK
In the Informational Article, How To Hit Two Targets With One Account there is a bipartisan proposal that would provide an off ramp for 529 Plans that would permit a direct rollover of unused 529 account assets into a Roth IRA. In another Article, IRS Focus on Digital Assets read that the IRS is ramping up scrutiny of virtual currencies and NFTs.

In our Of Interest Articles read from Maine down to Florida and many places in between, 10 underrated East Coast attractions.

Enjoy the rest of your summer and stay safe.

Sincerely,
Ira J. Brower, Founder
How to Hit Two Targets With One Account
Families with children typically have three important financial objectives: buying a home, saving for college, building retirement capital. That is a daunting challenge.

There are savings plans that come with tax benefits, which makes growing the account easier. For example, the traditional IRA offers tax deductions for contributions, and the Roth IRA provides the potential of tax-free payouts (contributions are subject to income limits). Both accounts defer taxes on account earnings.

The 529 plan is a popular approach for saving for college. Again, account earnings accumulate tax-deferred, and withdrawals used for qualified education expenses are tax free. However, earnings on funds not used for education may be subject to taxes and penalties. Many families cannot fund both education and retirement, so which one is better? 

A new, bipartisan proposal made in June would resolve that question for many. The "College Savings Recovery Act," proposed by Democratic Senator Bob Casey of Pennsylvania and Republican Senator Richard Burr of North Carolina, would permit a direct rollover of unused 529 account assets into a Roth IRA. Funds not spent for education would be eligible for retirement funding.

There are some limits imposed on the rollover, however. The contribution limits for 529 plans are far greater than those for Roth IRAs. There is the potential for abuse of 529 plans to get around the Roth IRA limits, and that would be foreclosed in the legislation by requiring that the 529 plan be in existence for at least ten years and the rollover be no larger than the plan balance five years earlier.

Still, if this liberalization of 529 plans is adopted, it may tilt the savings priority decisively in that direction.

(August 2022)
© 2022 M.A. Co. All rights reserved.
Expanded Relief
For married couples, the credit against the federal estate and gift tax has been "portable" since 2010. Each spouse has a credit that will shield the first $12.06 million from the estate tax for a death in 2022. However, if the first spouse to die leaves everything to the survivor, there is no federal estate tax due, thanks to the unlimited marital deduction. That means there is a "deceased spousal unused exemption" (DSUE) which passes to the surviving spouse. That effectively doubles the exemption from estate and gift taxes for married couples.

However, the DSUE is not automatic. It must be claimed on an estate tax return filed when the first spouse dies. The return must be filed even though no estate tax will be due; without it, the DSUE is lost.

What happens if an inexperienced executor fails to file the necessary estate tax return? The surviving spouse may ask the IRS for an extension of time, filing the estate tax return late. If the estate was below than the filing threshold in the year of the spouse's death, the IRS has been very lenient in permitting the late filing. In fact, the IRS ruled in 2017 that such requests made within two years of death would be automatically granted (normally an estate tax return must be filed within nine months of death).

Requests for late estate tax filings to claim the DSUE have continued to mount, however. The reason is uncertain. It may be that rising asset prices have lifted more estates into potentially taxable territory, or that the prospect of the exempt amount falling in half in 2026 (as provided under current law) has focused more attention on the matter. In any case, the IRS ruled in July that the grace period is now expanded to five years after the first death. 

(August 2022)
© 2022 M.A. Co. All rights reserved.
IRS Focus on Digital Assets
The IRS has long held that virtual currencies, such a bitcoin, are property, not currency. As such, transactions conducted with a virtual currency may trigger taxable profits or deductible losses. Since 2019 the Service has required taxpayers to report purchases of cryptocurrency with their tax returns.

A change is coming with the 2022 tax return. First, the term "virtual currency" will be replaced by "digital asset," a broader category that includes non-fungible tokens (NFTs). Second, the form will ask "At any time during 2022, did you (a) receive (as a reward, award, or compensation); or (b) sell, exchange, gift, or otherwise dispose of a digital asset (or a financial interest in a digital asset)?" The significance of this is that gifts of digital assets are not subject to income tax. In asking this question the IRS is opening the door to more widespread tracking of all digital assets.

Under the Infrastructure Investment and Jobs Act enacted last year, digital assets will have the same reporting requirements as securities, beginning in 2024. New Regulations implementing the requirements are expected later this year.

(August 2022)
© 2022 M.A. Co. All rights reserved.
Articles of Interest
Whether you're standing inside a stained-glass globe, playing musical rocks, or searching for clams during a boiling tide, the East Coast offers something for every traveler. Read More


Adult children worried about their parents' ability to spot and avoid fraud have several options to help protect them. Read More


August is the last full month of summer, and we're celebrating with dishes that make the most of the season's produce before cooler fall temperatures hit.  Read More
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Because of the rapidly changing nature of tax, legal or accounting rules and our reliance on outside sources, Garden State Trust Company makes no warranty or guarantee of the accuracy or reliability of information contained herein nor do we take responsibility for any decision made or action taken by you in reliance upon information provided here or at other sites to which we link. ©2022. All rights reserved.