Personal Finance After 50 For Dummies

Introduction 1 About This Book 2 Foolish Assumptions 3 Icons Used in This Book 3 Beyond the Book 4 Where to Go from Here 4 Part 1: Working Toward Retirement 5 Chapter 1: Looking Ahead to Your Future 7 Planning for the Longer Term 8 Identifying long-term planning issues 9 Taking personal responsibility for your financial future 13 Saving and planning sooner and smarter pays off 13 Eyeing Keys to Successful Retirement Planning 16 Saving drives wealth 16 Keeping your balance 17 Understanding that planning is a process 17 Chapter 2: Protecting Your Employment Income and Your Health 19 Assessing Your Need for Life Insurance 20 Understanding the purpose of life insurance 20 Determining your life insurance need 21 Assessing your current life coverage 23 Figuring out what type to buy 25 Choosing where to buy life insurance 26 Protecting Your Employment Income: Disability Insurance 27 Why most people lack disability insurance and why you need it 28 Identifying needed disability coverage 30 Shopping for disability coverage 31 Investing In and Protecting Your Health 33 Take care of your ticker 33 Exercise (and sweat)! 34 Hydrate with good-quality H2O 36 Include fiber in your diet 36 Manage your stress 36 Get your calcium 38 Chapter 3: Developing a Retirement Plan 39 Deciding When to Retire 40 Knowing How Much You Really Need for Retirement 42 Figuring out what portion of income you need 42 Grasping what the numbers mean 43 Eyeing the Components of Your Retirement Plan 44 Social Security retirement benefits 44 Pensions 47 Investments 48 Your home's equity 50 When Setting Up Your Couples Plan 50 Crunching the Numbers 51 Understanding assumptions and how they work 52 Making the numbers work 54 Dealing with excess money 55 Making Plans for Nonfinancial Matters 56 Personal connections 57 Personal health 57 Activities, hobbies, interests 57 Chapter 4: Identifying Retirement Investments and Strategies 59 Defining Investments 60 Understanding risk 60 Eyeing your returns 63 Considering how investments are susceptible to inflation 64 Being aware of tax consequences 64 Monitoring sensitivity to currency and economic issues 65 What You Need to Do Before You Select and Change Investments 66 Knowing your time horizon 66 Factoring some risk into your investment plan 67 Keeping the bigger picture in mind 67 Allocating your assets 68 Surveying Different Investments 69 Comparing lending investments to ownership investments 69 Looking into stocks 70 Investing in mutual funds and ETFs 72 Comparing investments and risks 76 Managing Investment Portfolios 78 Funds of funds and target-date funds 78 Index and exchange-traded funds 80 Assessing and changing your portfolio 83 Chapter 5: Grasping Retirement Accounts and Their Rules 85 Eyeing the Characteristics of Retirement Accounts 86 Focusing on the tax benefits 86 Being aware of restrictions and penalties 88 Identifying the Different Types of Retirement Accounts 90 Employer-sponsored retirement accounts 90 Self-employed retirement savings plans 90 Individual Retirement Accounts (IRAs) 92 Rolling Over Retirement Balances 93 Deciding what road to take 94 Choosing a custodian and rolling over your balance to an IRA 95 Choosing Beneficiaries for Your Retirement Accounts 98 Taking Required Minimum Distributions, or RMDs 100 Calculating your RMD for an IRA 100 Computing the RMD for other retirement plans 101 Part 2: Making Money Decisions in Retirement 103 Chapter 6: Managing Budgets and Expenses 105 Pointing Out Some Retirement Worries You May Have 106 Running out of money 106 Supporting others 107 Addressing your worries 109 Spending Your Nest Egg 110 Considering the 4 percent rule 110 Naming the factors affecting your use of retirement assets 111 How Spending Really Changes in Retirement 112 Managing Your Expenses 115 Bigger-picture issues 116 Taxes 117 Housing 118 Utilities and communication 120 Food 122 Transportation 122 Personal care and fashion 123 Travel and fun 123 Health care 124 Insurance 124 Children and grandchildren 125 Chapter 7: Guiding Investments and Distributions in Retirement 127 Guiding Your Investments through Retirement 128 Estimating your investment income 128 Rebalancing your investments 130 Looking Closer at Annuities 132 Annuities: A cross between a retirement account and insurance 132 Contributing in your working years 133 Annuitizing in your retirement years 134 Examining the newest annuity 136 Choosing Your Pension Options 137 Selecting between a lump sum or monthly payments 138 Deciding among monthly payment options 143 Eyeing Withdrawal Strategies for Your Investment Accounts 144 Chapter 8: Making Important Housing Decisions 147 Analyzing Moving 148 Considering the pros and cons of moving 148 Eyeing the options for where you can move 150 Tapping Your Home's Equity: Reverse Mortgages 154 Defining terms and costs 154 Determining whether a reverse mortgage is right for you 156 Searching for more information on reverse mortgages 157 Looking at Tax Issues Regarding Your Housing Decisions 157 Being aware of capital gains exclusion rules 158 Converting your home to a rental: Yes or no? 158 Chapter 9: Considering Your Long-Term Care Insurance Needs and Options 161 Understanding Long-Term Care 162 Naming the types of long-term care 162 Predicting who will need long-term care 164 Estimating how much long-term care will cost 166 Planning to Pay for LTC 169 Considering LTC Insurance 170 Knowing the basic features of LTCI 171 Checking out two more important LTCI factors 178 Using Hybrid Insurance Products 180 Exploring annuities to finance LTC 181 Financing LTC with life insurance 182 Assessing the LTC hybrids 183 Financing LTC Yourself 184 Figuring out whether you can finance your own LTC 184 Deciding when to buy LTCI 187 Comparing tax-qualified and nonqualified policies 188 Opting for life insurance instead of LTCI 190 Taking advantage of the reverse mortgage 191 Evaluating Employer and Group Coverage 192 Combining LTCI and Self Insurance 193 Part 3: Dealing with Government Programs 195 Chapter 10: Making Your Best Choices under Social Security 197 The Lowdown on Social Security 198 Determining When You're Eligible for Benefits 200 Reviewing your earnings history 201 Defining when you can retire 203 Taking a Closer Look at Spouses' and Survivor Benefits 207 Understanding the choices for spousal benefits 208 Ensuring spouses are taken care of: Survivor's benefits 211 Identifying When You May Need to Receive Benefits 214 What are your cash flow needs? 215 Will waiting pay off? 215 What other income do you have? 217 Do you want to continue to work? 217 What are the potential income taxes on benefits? 218 What's your life expectancy? 218 Noting How Working Reduces Benefits 219 Taking the penalty for exceeding the annual income limit 219 Determining the penalty on a monthly basis 220 The penalty isn't always bad 221 Preserving Your Benefits 222 Deferring income 222 Using your corporation 223 Considering exempt income 224 Relying on special income 225 Being Aware of Potential Income Taxes on Your Benefits 226 Understanding how modified adjusted gross income works 226 Reducing taxes on benefits 228 Changing Your Mind: A Do-Over 231 Deciding whether you should take a do-over 232 Doing the do-over 232 Looking at What the Future Holds for Social Security 233 Chapter 11: Getting the Most Out of Medicare 237 Starting Medicare: A Broad Overview of Enrollment Deadlines 238 Understanding Part A 240 Seeing who's eligible and signing up for Part A 241 Defining Part A coverage 243 Exploring Parts B and C 245 Scoping out Part B 246 Probing Part C: Medicare Advantage 252 Qualifying for Prescription Drug Coverage with Part D 257 Examining Part D plans 258 Enrolling in a Part D plan 264 Eyeing a Medicare Supplement 266 Understanding Medigap policies 266 Standardizing Medigap policies 267 Choosing a Medigap policy 269 Obtaining quotes for Medigap insurance 271 Resolving Some Sticky Issues 272 Changing plans 272 Monitoring changes at work 273 Making a foreign move 274 Chapter 12: The State Health Care System Backup: Medicaid 275 Discovering What Medicaid Is 276 Considering Medicaid Eligibility 277 Establishing Functional Eligibility 277 Meeting Financial Requirements 278 Understanding income limits 279 Understanding asset limits 281 Examining Planning Strategies 291 Spending down 292 Creating a life estate 292 Setting up trusts 293 Buying an immediate annuity 296 Going the spousal refusal route 297 Recognizing the downsides of Medicaid eligibility strategies 298 Using Both Medicare and Medicaid 299 Eyeing Reasons Not to Seek Medicaid 300 Part 4: Estate Planning: It's More Than Just Dead People and Lawyers 303 Chapter 13: The Basics on Estate Planning 305 Understanding Estate Planning 306 Studying Some Strategies Before Starting Your Estate Plan 310 Finish your plan no matter what 310 Keep track of your estate 311 Estimate cash flow 312 Don't wait for the perfect plan 313 Carefully choose executors and trustees 313 Anticipate conflicts 314 Answering Key Questions to Gather Critical Information 315 Who's in charge? 316 How much should I give now? 316 Should I apply controls and incentives? 317 Should heirs get equal shares? 318 Should I exclude someone? 319 How should my blended family be handled? 319 Should I leave only money? 320 Should my wealth stay in the family? 321 Knowing How Estate Taxes Work 321 Reviewing the estate tax 322 Considering state taxes 323 Finding Good, Affordable Advice 325 Doing it yourself 325 Using an expert: Yes or no? 326 Chapter 14: Eyeing Wills and Other Legal Documents 329 Writing Your Will 329 Pointing out some important details 330 Facing the limits of wills 335 Excluding family members 336 Avoiding things you can't do with your will 336 Assigning a Financial Power of Attorney 337 Recognizing the importance of a POA 338 Choosing the right POA 339 Delegating Medical Decisions 340 Understanding living wills 341 Signing DNRs 342 Assigning a health care proxy or POA 343 Authorizing HIPAA 344 Combining documents 344 Passing Other Assets 344 Naming beneficiaries for your assets 345 Examining the special case of IRAs 345 Looking Closer at Probate 348 Avoiding probate: Yeah or nay? 349 Considering joint tenancy 349 Making use of living trusts 351 Chapter 15: Tackling the Federal Estate Tax When You Have Too Much Money 355 Understanding the Estate Tax 356 Examining how your estate tax is calculated 357 Decreasing your estate taxes 359 Tallying Your Assets 359 Making sure you don't overlook certain factors 360 Assessing included assets 360 Reducing Your Estate 363 Considering strategies to lower your estate's value 363 Maximizing tax-free gifts 367 Taking Deductions 371 Looking at the marital deduction 371 Understanding portability of the lifetime exemption 372 Giving charitable gifts 373 Choosing Family Estate Strategies 375 Equalizing estates 375 Using the bypass trust 376 Taking advantage of marital deduction trusts 377 Putting the strategies together 378 Contemplating Life Insurance 380 Paying obligations with life insurance 380 Purchasing life insurance to enhance inheritances 381 Avoiding the Tax on Gifts to Grandkids: The GSTT 382 Chapter 16: Focusing on Estate Taxes and the Many Types of Trusts 385 Identifying the Cast of Characters 386 Naming the Types of Trusts 387 Looking at when trusts take effect 388 Revoking or retaining rights 388 Determining how income is distributed 389 Addressing the trustee's powers 390 Using Trusts in Estate Planning 391 Donating to charity with charitable trusts 392 Opting for retained income trusts 394 Taking care of special needs with SNTs 395 Spreading the wealth through dynasty trusts 397 Creating life insurance trusts 398 Part 5: The Part of Tens 401 Chapter 17: Ten Common Retirement and Estate Planning Mistakes 403 Not Having at Least a Basic Financial Plan 404 Procrastinating about Estate Planning 404 Underestimating Life Expectancy 406 Miscalculating Inflation 407 Believing You'll Retire When You Expected To 408 Ignoring Nonfinancial Planning 409 Failing to Coordinate with Your Spouse 410 Expecting to Age in Place 411 Thinking Most Medical Expenses Will Be Covered 412 Missing the Initial Enrollment for Medicare Plans 413 Chapter 18: Ten Things to Know about Working in Retirement 415 Some Work Is Good for You 416 The Social Security (Tax) Impact Can Be Huge 417 Number Crunching Can Show You How Different Scenarios Work 418 Life Is Short and You Owe It to Yourself to Do What You Love 418 Investing in Education Can Boost Your Employment Value 419 Some Employers Are More User-Friendly for Older Workers 419 Taking Some Employment Risk Is Important 420 Starting/Buying a Small Business May Be a Rewarding Option 420 Your Spouse May Not Want What You Want 421 Volunteering Makes You Happy and Benefits Your Community 421 Chapter 19: Ten (or So) Tips to Know about Caring for Your Aging Parents 423 Leverage Off Others' Experiences 424 Ask for Professional Help 424 Invest in Their Health 425 Get Your Parents' Affairs in Order 425 Examine Housing and Medical Care Options 426 Use Caregiver Agreements 426 Separate Living Spaces if Parents Are Going to Move In 427 Take Care of Your Family 428 Take Care of Yourself 428 Index 429