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ITN Monterey County provides a great service for senior citizens looking for a ride but not wanting to go with Uber or take a cab! This non-profit is staffed mostly by volunteers. A good opportunity to talk to them is at their party celebrating their new location at 236 Monterey Street in Salinas on Thursday January 20th from 4:30 to 6:00 p.m. Please RSVP by January 13, 2022 to Jessica.McKillip@itnmonterycounty.org or 831-233-2337. Wine and appetizers will be served!
A long-time rule of thumb for retirees is that they can safely take out 4% of their nest egg each year without the possibility of running out of funds before they pass away. However, with the bull market run we have recently seen, many question whether this is still a safe bet. Of course, much depends on your asset allocation. If you are in all cash, you are probably looking at only a 2% withdrawal rate until interest rates start rising significantly. Those who keep 20-50% in stock can reasonably draw between 2.5-2.8% per year and the money should last for 40 years, a little over 3% and it should last for 30 years, and just over 6% if you want the portfolio to last for 15 years, according to Morningstar Direct.
https://www.barrons.com/articles/retirement-withdrawal-strategy-4-percent-rule-51639177201
The www.AARP.org web site has rolled out enhanced benefits. In addition to the discounts they have always offered on travel, goods and services, members now have on-demand access to movies, lectures, audio interviews, exercise classes and other events in their Virtual Community Center. To gain access, go to www.aarp.org/moa
More than a million plan participants who were in danger of having their pension payments slashed were bailed out in a recent stimulus package. It gave $86 billion to shore up employee pension plans covering retirees at a myriad of companies. AARP fought hard for the measure, says David Certner, AARP’s legislative policy director.
After offering group dining for more than 35 years in Pacific Grove at the Sally Griffin Center (which was disrupted by the COVID-19 Pandemic), the senior center has now reopened under the moniker Meals on Wheels Community Center. It now has new flooring, updated restrooms and furniture and has been freshly painted, thanks to the generosity of donors. Jacob Safer, the center’s director of development, said that founder Sally Griffin will be honored with a prominent portrait in the building and the “Griffin Gazette” will be sent to all members. Masks are required when guests are inside. Go to www.mowmp.org for more information.
Tax rates are likely to go up under the Biden administration, and one hedge against this is to convert an existing IRA or 401(k) to a Roth IRA. You will have to pay taxes on the amount converted but then the IRA grows tax free. Talk to a tax advisor—and make sure you wait closer to year-end before doing it in case tax rates increase this year. Or let Monterey Bank or one of our other local banks walk you through the rules. There are few—for instance, there are no Required Minimum Distributions from this type of IRA. Talk to Monterey Credit Union, Monterey County Bank or many of the other local financial institutions to open an account, or a financial advisor for advice.
For decades, many financial planners advising retirees have recommended using the 4% rule. It states that if you withdraw 4% of your portfolio each year in retirement, your nest egg could last 30 years or longer. The problem is, if you enter retirement when the stock market is tanking and start withdrawing 4% each year while we are in a bear market, your portfolio may evaporate very quickly. Some investment advisors are now recommending taking out less than the 4% in down markets and more during good markets. San Francisco financial advisor David Yeske uses rules based on research done by Jonathan Guyton and William Klinger in the 200’s and he says that because of its flexibility, his clients are able to take out 5-6% in good years. However, in down years there will be some belt tightening so retirees need to figure out which expenses they can cut during down years.
https://www.wsj.com/articles/retirement-nest-egg-11617929631
The Wall Street Journal recently posted a story about the fact that your financial portfolio might quickly start unraveling if you don’t prepare for the financial consequences of your spouse’s death in advance. Not only will you see two Social Security checks go down to one, some people have pensions that don’t have survivorship benefits and those would expire immediately. In addition, since you will have to file single, your tax rate may go up. “When that plan is disrupted by the tragic death of a spouse, there isn’t a lot you can do besides cut expenses or go back to work,” Jennifer Murray, a financial advisor, told The Wall Street Journal. The bottom line: discuss this issue with your financial planner.
The Wall Street Journal recently ran a story entitled, The Biggest Mistakes People Make With Social Security, and in the number one position was thinking they will die young and opting to take early Social Security. For the typical American between the ages of 55 and 64, the present value of their lifetime stream of Social Security payments amounts to about 60% of their retirement assets, according to Boston College’s Center for Retirement. And it’s true for the wealthy, not just middle and low-income retirees. “If you have a high-earner couple who earned the max and don’t claim until 70, you’re talking about getting the better part of $100K per year,” says Alicia Munnell, the center’s director. “You have to be very wealthy before you don’t consider that important.” If you claim Social Security at the age of 70 rather at the age of 62, your benefit will be at least 76% higher. That’s a lot of money over what could be decades of retirement!
https://www.wsj.com/articles/the-biggest-mistakes-people-make-with-social-security-11620561601
Tax rates are likely to go up under the Biden administration, and one hedge against this is to convert an existing IRA or 401(k) to a Roth IRA. You will have to pay taxes on the amount converted but then the IRA grows tax free. Talk to a tax advisor—and make sure you wait closer to year-end before doing it in case tax rates increase this year. Or let Monterey Bank or one of our other local banks walk you through the rules. There are few—for instance, there are no Required Minimum Distributions from this type of IRA. Talk to Monterey Credit Union, Monterey County Bank or many of the other local financial institutions to open an account, or a financial advisor for advice.