Leonard J. Hansen

Even if late at the investment gate, mature adults can fund retirement

By Leonard J. Hansen

Financial planning experts advise all adults to start investing for retirement 8-10 percent from pay checks starting in one’s 20s, and for sure by their early 30s. But what if you didn’t? What if through most of your career there was month left at the end of your money, and retirement savings could be classified as myth or even a good intention unfulfilled? Don’t beat yourself up; it is never too late to save and invest for retirement, advises journalist, author and expert John F. Wasik in an interview. Baby Boomers, in particular, who may have spent actively for their lifestyle, may yet be able to salvage financially to fund their retirement years. The secret is not in expecting a million dollar lottery win or chasing the moon by investing in high-risk investments, for such returns may be not only fantasy but financially calamitous, states Wasik, a long-time financial writer and editor for Consumers Digest magazine. He recommends that mature adults learn how to cut costs in dozens of realistic ways, what to do with the money you save, and how to find the best stocks and mutual funds that will consistently yield steady, long-term growth. Wasik’s practical tips include: Examine your tax return. If you expect a large income tax refund, “you’re lending earned money to the government without interest. Consider adjusting your number of dependents to reduce the tax deduction and, therefore, receive a very small refund, while investing the newly-found cash," recommends Wasik. Consider re-financing your home if the mortgage deduction from the tax bill will provide significant cash for investment. "Refinance at no-points, if you can, and at low interest through a mortgage broker," states the award-winning journalist and author. Check your property tax bill very carefully. Chances are that there are errors, such as higher valuations, for the number of rooms or bathrooms for which you are being taxed. Nearly one-third of property tax bills nationwide have such errors, reports Wasik. "Challenge the errors, reduce the property tax bill and invest the savings." If you have a company retirement plan with matching contributions from the employer, "max it out to save not only your own money but gain the added funds into the investment," advises Wasik. Consider downsizing your home. "If the children have left the nest, switch to a smaller home or condominium and invest your savings," stated Wasik. "It won’t affect your lifestyle, but you’ll put your assets to better use through investing." Payment savings may include utilities, property taxes and insurance in addition to any debt service. Examine your expenses realistically. "You may be paying for services, toys or items you don’t really need and can live without. Identify those savings and invest them," said the author. Start thinking about what you want to do, be and accomplish in your retirement years, recommends Wasik. "It is only then, and not by generalized financial formulas, that you’ll know what income you will need to fund that retirement effectively and successfully." Social Security is designed to be a supplement to retirement - not a total retirement income - so the expert advises that, at whatever age, individuals can, through a number of ways, identify already-existing funds to invest to provide for the retirement years. Wasik’s The Late-Start Investor may remove the guilt from those who have come to today without retirement investments, while providing scores of effective ways to correct the path and creating a positive plan and ongoing program. The Late-Start Investor: The Better-Late-Than-Never Guide to Realizing Your Retirement Dreams, by John F. Wasik, is an Owl Book published by Henry Holt (ISBN: 0-8050-5502-9; 228 pages, paperback; $14.95), and available at bookstores nationwide. AVOIDING ESTATE TAXES If you have amassed a significant estate, be concerned that, if you die, the tax collector doesn’t march in to confiscate 37 to 55 percent of the value over a threshold, demanding the sale of property on an immediate basis to enrich federal coffers. It doesn’t matter that the estate has been created with after-tax income or that you have paid income and other taxes on it throughout your life. The law says "tax it again, Sam" on estate valuations that exceed $650,000. Federal estate taxes may be the most confiscatory and the least justified of any levies but they are a fact of life on death. The $650,000 estate value may be considered "out of sight" by many people, but it may become an awesome reality when calculating a life insurance payment on death, home equity value, cash, securities, collectibles and more. Transferring the estate to a spouse may avert tax implications now but create a major and even more costly financial burden later, because "the tax man never forgets," advise attorneys. There are nine legal and effective ways to avoid estate taxes, according to attorneys Mary Randolph and Denis Clifford in a book published by Nolo Press. Some of the steps to bring the estate value below the taxable threshold include: Making gifts of $10,000 or less; Paying for someone’s education or medical bills; Giving or leaving property to a spouse; Establishing an AB trust to save on a couple’s overall estate taxes; Giving generously to your favorite charity; Transferring ownership of your life insurance to someone else or an irrevocable trust; Disclaiming an inheritance willed to you, so that it can go to someone who needs it more; and/or creating a QTIP or QDOT trust. Any of the steps may be accomplished effectively to protect the transfer of estate proceeds to heirs. Randolph and Clifford define the possible steps in layperson’s terms in 9 Ways to Avoid Estate Taxes. Both attorneys are experts in the subject and successful authors of self-help legal and financial books. From this starting point, the mature adult may be better prepared to discuss the best steps with an attorney or financial consultant. The book is published by Nolo Press (ISBN: 0-87337-466-5; 226 pages, paperback; $22.95).