Paying Off Your Mortgage In Retirement Years, With Mark Miller, Journalist with Reuters

People over the age of 65 are most likely to be homeowners vs. renters, with 65% of them to be mortgage-free.  Mark Miller, journalist with Reuters, says there's a lot of home equity out there, which is a significant asset for many older homeowners. 

The financial advisors that Miller has spoken with say to net out the cost of borrowed funds, including the tax break, against a risk-free return, which is where the argument comes into play where it may make sense to pay down a mortgage. 

Older homeowners are less likely to be underwater, as they've owned homes longer than people who bought at the peak of the bubble, who are more likely to be underwater, says Miller, adding that about 14% of homeowners over the age of 65 are underwater.  He notes that no matter how far underwater you may be, you're still servicing a debt and as long as you plan on still living in the home, the basic math on the debt doesn't change.  It's a matter of the efficiency of owning the property, Miller says. 

Miller believes the best way to pay off a mortgage is by accelerating the payments when younger, if possible.  He knows this is not easy to do if you're of modest means and don't have a pot of asset that can be traded off for the mortgage. 

For people at retirement, if they haven a significant amount of assets, they need to ask "what's the holistic view of their balance sheet," as you can't just look at it as two different buckets, advises Miller. 

Mark Miller

Reuters.com

Of the different strategies out there to tap into the equity of the home, including reverse mortgages, Miller recommends downsizing as an excellent way to extract equity without borrowing against it and invest in those proceeds. 

Mark Miller is a journalist with Reuters.  For more information on his article, click here.   Mark spoke with Retirement News Today, providing online, on-demand, retirement news video content.

Required Minimum Distribution, With Journalist Mark Miller

Required minimum distributions, or RMD's, affect people at the age of 70.5.  It is the tax code's way of making sure funds from tax-deferred accounts, such as IRA's and 401K's are drawn down at this age, says Mark Miller, journalist with Reuters.  The penalty is 50% of the amount that you were supposed to take and any interest on the delay of payment, adds Miller.  The exception, he notes, is that for the first year, you can delay the RMD until April 1, but you still owe an RMD later that year, so you end  up taking two in one year, which could have tax consequences.

Miller says this money comes out of one's account as ordinary income, so one needs to pay careful attention to what these RMD's do to their tax brackets.  It could push one into a higher bracket or cause one to pay more of one's social security income. 

There is a special formula, called the provisional income formula, to determine how much of your benefit is taxed, Miller says.  It's determined by adding your adjusted gross income, any tax-exempt income and half of your social security benefits all together.  He says that you are taxed if all of that exceeds $25,000 as an individual and $32,000 as a married couple. 

Mark Miller

Reuters.com

To offset all of this, Miller says advance planning before one gets to their RMD is important.  A lot of financial advisors will advise people to think about diversifying assets in terms of location in different accounts, well ahead of retirement, he adds. 

Mark Miller is a journalist with Reuters.  For more information on his article, click here.   Mark spoke with Retirement News Today, providing online, on-demand, retirement news video content.

How Obamacare Can Actually Help in Retirement Planning, With Steve Vernon, CBS Moneywatch

The vast majority of people who want to retire before the age of 65 cannot, as medical care is a deal breaker, says Steve Vernon, writer for CBS Moneywatch.  These people have resigned themselves to work until the age of 65 so they can be covered by Medicare.

Obamacare allows people to buy health insurance before the age of 65 and Vernon thinks Obamacare is a very real improvement in helping those who want to retire or start their own business before the age of 65. 

Medicare has a prescription drug program called Plan D, which allows for prescription drug coverage of low amounts.  Once a certain limit is reached, a donut hole exists, where then people have to pay out of pocket beyond that limit.  Obamacare has a phased in closing of the donut hole which will fully phase in by 2020, Vernon says. 

Vernon expects premium costs to come in as expected but says that regardless, people have to realize healthcare is expensive and it will cost money to buy a medical premium. 

Obamacare is not socialized medicine, says Vernon.  Socialized medicine only has doctors or hospitals employed by the federal government.  With Obamacare, you have insurance companies offering insurance and a vast majority of doctors and hospitals that are privately owned and operated. 

Vernon does seem some flaws in Obamacare, one of which is that it puts too much power in the hands of insurance companies, squeezing healthcare providers out of the business.  He also says that Medicare can't negotiate for prescription costs with the big pharma companies under Obamacare. 

Steve Vernon

Source:  

blog.soa.org

Vernon says despite these flaws, it's important to work with them and correct them because "we need this type of coverage." 

Steve Vernon, writer for CBS Moneywatch, spoke with Retirement News Today, providing online, on-demand retirement planning video content.