Category: Financial and taxes in retirement
Updated Oct. 10, 2020, originally published April 15, 2013 -- For a significant percentage of retirees, finding a tax-friendly location to retire is very important. But, while indeed there are many states and localities that are very tax friendly, making a decision based simply on taxes could lead you to a poor choice. For example, how your personal situation interacts vs. different state scenarios might be surprising. And more importantly, lifestyle and other considerations might be a lot more important to your retirement happiness.
This is Part 1 of a 2 part series: In this article we will explore the various kinds of taxes that might affect you as a retiree; Part 2 is "Finding a Tax Friendly State for Retirement: A Checklist", and it features a helpful checklist for you to evaluate your tax situation vs. states you might be considering for retirement. See also this MarketWatch article on "Tax Friendliest States" for a slightly different perspective.
Major Taxes in Retirement
The major state taxes you need to be concerned about are property taxes, income taxes, sales taxes, estate and inheritance taxes, and how your pensions, IRA distributions, and social security will be taxed. All of these factors
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Published on April 15, 2013
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Category: Financial and taxes in retirement
February 26, 2013 -- If you search on the Internet for "live like a cheapskate" you will strike a frugality bonanza. There are authors like Jeff Yeager who have written best sellers on the subject ("The Cheapskate Next Door"), plus plenty of websites offering their advice. There's even a TLC show, "Extreme Cheapskates". Our friend Robert Powell over at MarketWatch had a particularly helpful article earlier this year, "How to Retire Like a Cheapskate and Live Well". This article will roll up advice from all over into our 15 top tips for living like a cheapskate.
First of all, a little etymology - if you are going to be a cheapskate you might as well understand where the term
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Published on February 26, 2013
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Category: Financial and taxes in retirement
January 23, 2013 -- There is no polite way to say this, so we will just be blunt - America's baby boomers have a frighteningly poor command of the facts on when to start claiming Social Security. We not only aren't acquainted with the facts, but we also have some wide-ranging misconceptions. That's the conclusion of most experts we talk with, as well as a steady beat of newspaper and web articles. The latest came in today from WSJMarketWatch, "Most Fail to Maximize Social Security Benefits".
Your editor regularly experiences this lack of knowledge on a first hand basis - even among college educated, highly successful, and otherwise financially savvy folks. To help overcome the knowledge gap, this article will cover the 7 major myths that
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Published on January 23, 2013
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Category: Financial and taxes in retirement
January 8, 2013 -- By now you have probably heard the projections that Social Security will have exhausted the trust funds it built up for future payments by 2033. Unless something is done before then, starting that year payments coming in will only be able to fund about 75% of promised benefits. The New York Times just reported a new study by researchers at Harvard and Dartmouth, "Social Security: It's Worse Than You Think", that shows that the government is underestimating how long Americans will live and how much Social Security will need to pay out - which makes things even worse than
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Published on January 8, 2013
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Category: Financial and taxes in retirement
December 19, 2012 -- Legislation coming out of Congress in the next few weeks is likely to affect all Americans. Most of our federal tax rates will either stay the same, or we will fall off the fiscal cliff and rates will go up. As both parties state and restate their positions, there have been some new proposals that could potentially affect both social security and Medicare, both popular programs for baby boomers. Also in the news - cars that make driving easier for aging baby boomers.
Medicare
The latest proposal being discussed to help keep Medicare solvent is to raise
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Published on December 18, 2012
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Category: Financial and taxes in retirement
December 18, 2012 -- Long term care insurance is one of the more difficult products in the insurance world. Unlike most insurance products, the decision to buy it or not is not clear cut. While it's easy to see why you need insurance on your car, home, or health - justifying long term care insurance is a a bit tricky. According to some reports, only 10% of people over age 60 have long term care insurance.
The market has not been kind to providers of long term care insurance. Some, including Prudential and MetLife, have stopped selling new policies in recent years, while others have had to ask for rate increases of over 40%. Life insurers sell some "flexible" life policies that provide a cash benefit before death as a kind of long term care hybrid. Recently we've seen some helpful articles on long term care insurance (see end of article). Here is a brief primer; we recommend the references to get a fuller understanding.
Long term care insurance provides
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Published on December 18, 2012
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Category: Financial and taxes in retirement
December 8, 2012 -- Researchers at DePaul University and the Rush University Medical Center think they have found the underlying reason for an alarming rise in fraud committed against our rapidly aging baby boom generation. The explanation often arises from “that combination of not knowing but thinking you know", according to Keith Gamble, an assistant finance professor in DePaul’s Driehaus College of Business. In other words, overestimating what you think
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Published on December 8, 2012
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Category: Financial and taxes in retirement
December 4, 2012 - You've probably seen the ads for reverse mortgages- "Use the cash in your home to solve your retirement money problems". They sound simple enough - instead of you sending money each month to your mortage company, they send you a check! At the end of a specified period, after you either sell your home or have joined the big Kahuna in the sky, the payments are finished and the mortgage company gets paid back.
Unfortunately, as the New York Times recently reported in "Reverse Mortgages Costing Some Seniors Their Homes", it's not always that simple. Most companies offering reverse mortgages are legitimate and trustworthy, but as smaller companies with questionable ethics enter the market, there is also a lot of high pressure salesmanship and hype. The combination often results in unwary and poorly qualified
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Published on December 3, 2012
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Category: Financial and taxes in retirement
Nov 20, 2012 -- New research suggests that the traditional rule of thumb for how much you can safely take out of your retirement funds, 4% per year, is not the ideal tool for the job. Originally popularized by Bill Bengen in 1994, it was at least partially based on the assumption that traditional stocks and other investments would return 6% or more over the long haul. As reported by Robert Powell at WSJ MarketWatch in "Retirement Income: What's Wrong with the 4% Rule" and the Center for Retirement Research in "Can Retirees Base Wealth Withdrawals on the IRS’ Required Minimum Distributions?", several exciting new theories challenge
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Published on November 20, 2012
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Category: Financial and taxes in retirement
November 14, 2012 -- As we baby boomers age there is a good chance that we might inherit an IRA from a parent, spouse, or sibling. Likewise your spouse and/or heirs will probably inherit yours when you go to the pearly gates. The rules governing inherited IRAs can be complicated, so it is important that you understand the basics that apply so you can make the best decisions. Here are the major issues to consider.
Transferring inherited IRA assets
If you inherit a traditional or Roth IRA from someone who isn't your spouse, your options are fairly limited. You can't roll the proceeds over to your own IRA, treat the IRA as your own, or make any additional contributions to the IRA. What you can do is transfer the assets to a different IRA provider, as long as the registration of the account continues to
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Published on November 14, 2012
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