Investment Concerns by Age / Part 3: 60-70's - Hilton Head Monthly, January 2008

60’s and 70’s

You are retired or nearing retirement, and may need to make decisions regarding benefits packages, pension payouts, company provided life insurance and healthcare benefits. Strong relationships with investment and financial advisors are often formed in this period, since many of these decisions are complex and cannot be changed. You may have adult children with financial issues of their own, and they may need help. Young grandchildren are likely, and its an ideal time to establish and help fund 529 plans with their parents. You may have the ability to increase your gifting, both to family members and charities. Consider funding an IRA or Roth IRA for a working child, rather than a cash gift. Or consider funding a family vacation, rather than a cash gift. Remember, when making charitable donations, you can use appreciated stock and avoid capital gains tax.

Income issues are now primary, and portfolios need to be adjusted. You will probably depend on a combination of Social Security, investment income, and possibly a pension. If investments are to provide a significant proportion of income, asset allocation and a coherent investment strategy are of paramount importance. Now is the time to have an income projection done. If the future seems uncertain there are many things you can do to avoid or mitigate a shortfall. It’s a lot more enjoyable to start a second career early in retirement to provide a more secure future, than to wait till later on in retirement and find out you need to work to make ends meet.

If you’re over 59 ½ you’re free to withdraw from IRAs and some sheltered plans without penalty; you just have to pay the tax. Have a professional review required withdrawal rules beginning the year you are 70 ½. A mistake on required distributions can cause a headache and a 50% penalty. Be sure to account for any after tax contributions to your IRA.

Now may be the time to learn more about bonds, as you value stability and income along with growth. Consider Government and corporate bonds for all accounts, Tax-free Municipal bonds for non-retirement accounts only. Evaluate no-load bond funds that can provide diversification and reliable income. As with any fund purchase, read the prospectus and be aware of charges and fees, they vary tremendously and have a significant effect on your ultimate returns.

Put your estate in order. Men’s mortality rates increase dramatically in these years, many women become widows, many will remarry, and many will inherit significant wealth and the responsibility of managing it for themselves and their families. You might still have the will you wrote when your children were young. Go to an attorney, specializing in estate planning, and have wills, powers of attorney and health care documents drawn up. If you are subject to estate taxes the attorney may suggest a system of trusts that will enable you and your spouse to benefit from the full estate tax exemption.


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