RETIREMENT?  THAT’S SO FAR OFF.  OR IS IT?

We’re told that, since you should plan on living at least 20 years after normal retirement at age 65, it is important to manage pension money in a way that funds won't run out. Unfortunately, we come across numerous situations where people have made unwise decisions that get them into financial trouble at the point in their lives when they have little no chance of supplementing what is left of their pension funds. Common errors include:

• Not heeding the minimum distribution rules and incurring unnecessary penalties.
• Withdrawing excessive amounts in the early years of retirement.
• Failure by eligible individuals to convert to a Roth IRA.
• Failing to properly diversify a retirement portfolio so that there is excessive risk, or insufficient income to replenish funds that are withdrawn.

Of course, there are other common administrative mistakes such as naming the wrong beneficiaries and failing to take advantage of rollover possibilities that could extend tax deferral.  Since most people are not conversant with all of the retirement planning possibilities, we encourage pension plan participants to seek professional financial and tax planning assistance regardless of how straight-forward they think their planning needs are (yep, even during these tough times-perhaps especially during these times)

A large percentage of the baby-boom generation will be retiring in the next decade, and many of them (OK then, us, Woodstockers) are restless. A survey we came across a while ago by the Del Webb Corporation indicated that 59% intend to relocate upon retirement. What's more, 31% intend to move more than 3 hours distant from the pre-retirement locale. These findings bear out that many people will change their state of domicile after retirement. It's important for retirees to assess the tax ramifications of a move to another state. Different states have vastly different tax structures with respect to income taxes, personal property taxes, sales taxes, and inheritance taxes and the rates at which taxes are imposed also differ appreciably. Thus, the decision to retire to a particular state can have major financial implications for retirees and their heirs.

With W-2s, 1099s, 1098s, annual brokerage statements, amended brokerage statements, and, yes, corrected amended brokerage filling your mailbox this time of year, can you possibly avoid thinking Abo and Company’s metaphor of “…four pockets on the same pair of pants…tax planning, financial planning, retirement planning, estate planning.”