September 4, 2007
Feathering Your Retirement Nest
Tip! Join a Cause ? Retirement does not mean that you are worthless. To derive a feeling of self worth and fulfillment, commit yourself to a worthy cause that you truly believe in.
What will you look for as you approach your “golden” years? Will it be an affordable condo on the golf course with room for the grandchildren to visit? Must it be close to friends and family or new “senior” friends living close by? Should it be near good medical facilities?
The average householder 65 or above earns only two-fifths as much as earners age 45-54 (who are at their peak earning years). Even though many “goldenagers” are now free from the encumbrances of children and work-related expenses, the costs of daily life must be planned. Income must be protected to assure its availability for household expenses and higher health care costs.
The “goldenagers” have even more than lifestyle questions to consider in choosing their retirement nest. You should take a look at the effect of state tax structures on your projected retirement income. It’s important to look at the following key tax areas:
Tip! Follow Basic Investment Principles - Just remember that how much you have for retirement depends on the type of investments you make now. Learn how to multiply your savings using mutual funds, stocks, bonds, etc.
* TAXATION OF EARNED AND INVESTMENT INCOME
If you plan to continue working, you need to take a look at the way states vary in taxing your income. Some states do not make an exception for age, some give tax breaks and some do not tax earned income at all for “goldenagers.”
* PENSION INCOME TAXATION
Many “goldenagers” depend on the income from military, government or private pension plans to survive. Some states exempt all pension income from taxation , others exempt only certain types of pension income and other states place caps on non-taxable pension income.
* TAXES ON SOCIAL SECURITY BENEFITS
Social Security benefits are important to all “goldenagers.” Some states do not tax this benefit at all, some follow federal tax formulas for determining taxes on the benefits, but still other states have their own formulas to determine the tax due.
* PROPERTY TAX
Some states offer advantages to “goldenagers” such as homestead exemptions that can be helpful in reducing property tax burdens. Remember to check the tax laws regarding taxes on personal property, especially cars and boats.
Tip! Maintaining youthful attitude - Retirement from a job does not mean that you give up everything and retire to ?watering plants’. Just because you are s0 does not mean you have to act your age! It is the attitude that counts.
* SALES TAX RATES
Nearly every state, and often localities within each state, tax clothing, gas, household goods and sometimes even food and drugs. When you budget your fixed income for these items, remember to consider the sales taxes as you move to your retirement nest.
* ESTATE TAXES
Even though these taxes will not affect your cost of living as a “goldenager,” they should be considered as you build your nest. Some states tax the surviving spouse on a portion of the inheritance which in another state would pass to him or her without being taxed. States are studying how to make their financial environments “friendlier” to seniors so watch for changes in state estate tax codes.
A decision for your “golden years” cannot be based on any one tax consideration. You need to examine your overall financial situation and consider the options in the attempt to make your retirement nest free from financial stress.
Tip! Get educated ? learn as much as you can about money, investing and retirement. Take an active role in your finances even if you have a spouse who handles the finances for your family.
Fearing the American worker is being left in the dark, Mr. Morris, a fee based Investment Advisor Representative with Raymond James Financial Services, Inc., helps 401k participants get the most out of their retirement plan.
