Boomers thinking twice about retiring. As the eldest baby boomers turn 62 in
2008, many are
thinking about leaving work for good, but “early” retirement may not be so
convenient for many. After
all, retiring at 62 will mean monthly Social Security benefits of at least
25% less than those that would
be granted at the “full” retirement age of 66. Another factor to consider:
Medicare benefits do not start
until age 65, and some boomers approaching retirement age lack private health
and long term care
insurance. For years, maturing Americans have tapped into home equity to
support their retirement
dream, but with new Federal Reserve data showing debt exceeding equity for
the average American
homeowner, that financial option now looks less attractive to many.
Healthcare costs: perception vs. reality. A 2007 survey from the nonprofit
Employee Benefit
Research Institute found a disturbing perception gap when it came to
estimating retirement health care
expenses: 32% of workers surveyed believed that they and their spouse will
need less than $100,000 for
their retirement healthcare costs; 52% believed they would need less than
$250,000. In contrast, one
recent EBRI study (presuming Medicare benefits stay at their current levels)
determined that couples
will need about $300,000 for retirement health expenses if they both live to
average life expectancy. If
a couple lives to age 95, that figure may be as much as $550,000.
Are retirement villages cheaper? Some couples choose to move into retirement
communities
after age 55, but find that the lifestyle is not necessarily inexpensive
compared to the neighborhood
they once called home. Retirement villages and continuing care retirement
communities (CCRCs)
commonly charge move-in fees – sometimes as much as six figures – and
association dues, facts that are
often under publicized. Maintenance fees at the typical retirement community
can run from $2,000-
5,000 per month.
Roth IRA conversions easier in 2010. With current IRS rules, you can only
convert a traditional
IRA to a Roth IRA if your Modified Adjusted Gross Income (MAGI) is under
$100,000 a year. Beginning in
2010, however, that will change: the MAGI limit goes away, and if you convert
a traditional IRA to a
Roth IRA during the year 2010, you have an interesting option to spread out
the tax payments on the
conversion across the following two years (you would pay tax on half of the
converted assets in 2011,
and tax on the other half of the converted assets in 2012). However, tax
rates may be rather different
in 2011 and 2012 compared to 2010, which shapes up to be a year of remarkably
low taxes thanks to
Congressional action earlier in the decade. Of course, those who might not
wish to pay taxes on a
conversion in one year could elect to convert small amounts of IRA assets
over several years.
Monthly helpful hint. Did you know that credit card interest rates are often
negotiable? If you have
good credit and regularly pay off your credit card balances, try calling your
credit card company. Ask a
representative if you can get a better interest rate on your card. Most
people never make this request,
but those that do are often surprised by how accommodating credit card
companies can be. The worst
your representative can do is say no – and if your representative says yes,
you can position yourself to
save some money.
April Newsletter
