Retirement

You can have a happy retirement even if it arrives sooner than you planned … even if you never got around to planning it. But without planning, your income will drop significantly —so you must study all of the options to make the most of your assets…and to cut expenses.
Lower living expenses: Most people who are approaching retire­ment have substantial equity in their homes. If you sell and move to a lower-cost area, you can relieve many retirement financial pains—and if you’re over 55, $125,000 of your capital gains is tax-exempt.
If you choose to stay where you are, you can still convert your equity into cash via a reverse mortgage—or via a sale-leaseback arrangement.
If the thought of moving doesn’t faze you, investigate places with lower housing costs—including utilities—and lower local taxes and find those most compatible with your pre­ferred lifestyle. Some may be quite close to home.

Many people think of their IRAs and other retirement funds as money in the hank. But when they try to make a withdrawal, they’re surprised to run into severe restrictions im­posed by the tax laws and enforced by heavy tax penalties.
There are, however, ways to escape the penalties…
Premature distributions: The general rule is that distributions to peo­ple under age 59% are subject to a 10% pen­alty—in addition to the regular income tax on the distribution. This rule applies to IRAs, Keogh plans, 401(k)s, most company pen­sions and tax-sheltered annuities. Like most rules, however, this one has its exceptions…
Exception: Annuity distributions. There’s no penalty if you take the money as an annuity —a series of substantially equal periodic pay­ments (made at least once a year) over your lifetime (or that of you and your beneficiary).
Limits: This method of distribution must continue for at least five years or until you reach age 59%, whichever is later. You can then switch to any distribution method you choose, including a lump-sum payout.
Exception: Special cases. No penalty is charged on distributions that are made to…
Support you in the event you become totally disabled.
Settle a domestic relations court order—a property settlement, for instance.
Cover medical expenses exceeding 72%  of your Adjusted Gross Income. Note: This is not allowed for IRAs.
What if you receive a lump-sum distribution because you change jobs … or lose your job… or your company goes out of business? If You’re under 59 1/2, this could mean a 10% pen­alty plus a whopping tax hill, since the pension money will push you into a higher tax bracket.
Exception: Rollovers. To avoid this dou­ble disaster, you have 60 days in which to make a rollover of the money into another retirement fund.

One of the most important decisions you nay make in your lifetime is where you will ive after your retirement.
Despite the widespread belief that many people who retire move to a warm climate, :he reality is that most people simply stay in he same place.
A recent survey conducted by the Harvard-011′ Joint Center for Housing Studies found hat only 20% of those over age 55 had moved ..and only an additional 5% were planning to Hove within five years.
For those over 65 years old, only 1% Manned to move in the years ahead. -conclusion:
The vast majority were content to stay in heir existing homes.
It’s also commonly thought that older people feel burdened by a house that is too large or their current needs. But surprisingly, very . ew survey respondents felt that their house vas too large or that they had more space han they could use.
yesterday vs. today:
These attitudes evolve from the time when )people didn’t live as long as they do now. In oday’s world, increasing longevity can have a major impact on how people approach the question of retirement housing. In the future, ongevity may mean much greater changes in retirements lifestyles.
As life expectancies reach into the 80s and 9Os, people will have to plan ahead and decide what they will do when they retire. -hat may not include staying in the same louse they’ve always lived in. In the past, when people lived to be only about 60 years, many worked right up until the time of heir death.
Today, the average person can expect to ive at least 20 to 25 years beyond actual re­irement—if he/she retires at the traditional age of 62 to 65.
Reasons to move:
The best reason to move is that your cur­ent surroundings are unsatisfactory. Situa­
tions that might suggest the necessity of a move:
Your home is too costly to maintain, es­pecially if high mortgage payments cut into limited retirement income. Your house may need major repairs because of its age, or con­stant maintenance.
Warning:
A 7% inflation rate means that prices would quadruple in 20 years. Under these condi­tions, if you are now age 65 and have a com­fortable $40,000 annual retirement income, You will be reduced to poverty-level pur­chasing power at age 85—if you have no in­flation protection.
The neighborhood is no longer safe—or friends have moved away.
The design of the house limits accessibil­ity. If the house has stairways or an inefficient floor plan, it may become a bigger problem as agility declines. If a wheelchair is needed, a stairway may make part of the home inacces­sible altogether.
Choosing a new home:
When thinking about a move, the most important considerations are your personal needs and preferences.
You also have to consider what you are physically capable of doing…and your finan­cial resources, now and in the future.
A home environment can he much more important during retirement than when you were working. A retiree will probably spend much more time in the home than before. Having pleasant surroundings, convenient shopping, recreational facilities and friends close by will become more important.
Other major factors:
The amount of privacy desired in daily life.
The type of lifestyle sought.
Requirements for both interior and out­door space.
Safety and personal security.
Design features that add convenience and utility.
Limited choices:
The widest array of housing choices are available for those who are independent or those who don’t depend on anyone else for care. As you lose independence—whether gradually or suddenly—choices become more limited.
A nonindependent person is someone who suffers some lack of mobility or other incapacity and requires assistance in the form of equipment or personnel.
The totally dependent person requires con­stant assistance—he/she needs help to perform basic life functions. For the totally dependent, housing choices are quite limited.
In some situations, if you choose one hous­ing option, you may find that it sets you up for other contingencies.
Example:
In certain types of retirement housing, you can buy the option to be moved to a nursing home if that’s needed. This makes it much easier than if you’re just out in the public try­ing to get into a nursing home.
It’s getting harder to get into good nursing homes because the demand is rising. But if your retirement community includes nursing-home care as an option, then you can move back and forth as you need.
Bottom line:
Your financial needs will not be uniform for the rest of your life. They will be composed of several stages. For this reason, financial plan­ning is important, starting right now. As retire­ment approaches, it is prudent to reduce debts and gain financial flexibility.
Early retirement may involve a transitional period in which one spouse continues work­ing, at least part-time. There is additional in­come, but there continue to he some work-related expenses.
The next period is one of complete retire­ment, meaning reduced income but lower expenses.
Finally, there may he a time of partial or complete infirmity that will require use of financial resources to their fullest.

High net worth individuals who have retired may not feel the need to withdraw.. maximum amount of retirement income their pensions. Instead, they may want : serve a substantial portion of the retirement benefits for their children or other heir,

Problem: Without careful planning, not much would be left for the children after estate  income tax have been taken out. There is a plan, however, for individuals  who are insurable, which yields the income to the retiree and spouse while  increasing the amount that the children ultimately get.

Estate taxes are the highest taxes in America today. Estate tax rates go as high as 55%.
When you take into account additional estate and generation Skiping transfer taxes, rates can run to over 80%.
But it could get even worse. Congressional leaders have advocated ffinancing the cost of a new long-term health insurance plan with, among other reduction in the current estate tax ex-amount to $200,000 down from the $6600,000). For a couple’s $2 million estate.
This means $400,000 in additional taxes a 25% increase.

Wills and revocable trusts.
Irrevocable trusts.
Family limited partnerships.
Charitable trusts.
Private foundations.
Wills and revocable trusts:
All individuals—from those with moderate estates to the very wealthy—must List select and combine the various categories for the great- est savings. Couples with combined estates Lip to $1.2 million can easily use wills and revocable trusts to ensure that the 5600,000 exemption equivalent for each spouse is fully used.

Leave your heirs a letter of instructions  execution of your will after your die.
Include:
Assets and liabilities list: Brokerage, bank accounts, insurance policies, realestate, art, debts, etc.
Location of important documents, certificates, will, marriage certificate.
Assets that pass out side the estate: owned bank accounts, real estate, etc.
Personal requests not in the will: Pet funeral preferences, etc.
Earned benefits: Social Security and related, veteran benefits, etc.