News and Media

Evie Preston’s new article, New But Not Improved, appears in this quarter’s issue of  Active Over 50.

When my children and I voice the same complaints, I know there are pervasive problems out there: those “big, double” bathroom rolls grow smaller; airlines layer extra costs, and from Nordstrom’s Rack to Outlet Malls, discounted, high-end merchandise is often low-end seconds or cheaply made knock-offs.  Without being penny pinchers or Grinches, seniors need to be vigilant about the not so subtle changes in new rules and practices eroding confidence and quality so they can bank on their buying power. The same scrutiny and caution applies to investments.

Question:  For financial protection, I invested in municipal bonds, securities that must be repaid by government agencies.  However, with California carrying deep deficits, I’m worried that the state may default.  Do you think Munis are still a good deal?

Answer:  Historically, muni default rates have been remarkably low.  According to a 2010 Kiplinger’s Retirement Report, most state constitutions mandate debt repayment as a priority. Plus, these revenue bonds are secured by on-going funding sources like tolls and set fees.  The downside: insurance guarantees no longer prop up some formerly A rated bonds. However, due to recent sell-offs driven by investor fears, seasoned Munis currently offer an attractive discount, a good deal indeed. 

 

Question:  I’m a retiring teacher without a large pension because I worked in industry for many years. If the military brass and politicians can collect several full pensions, why can’t I?

Answer:  Having two careers or more is the new new thing.  No matter that you paid into the Social Security system in a private sector job, federal law mandates that Soc. Sec payments will be reduced for government employees who earned wages not covered by Soc. Sec. benefits.  Ditto for spousal payments which can plunge to zero!  It’s imperative to check out these formulas (local Soc. Sec. office/STRS/PERS Admin.) and calculate future payments prior to retirement.

Question:  With my 401K only partially recovered from the recent downturn and retirement not that far off, should I play it safe and invest in target-date mutual funds?

Answer:  These “fund of funds” type savings are supposed to mitigate risk by going on auto pilot—juggling equities and bonds for bigger returns and better safety until some specified future retirement date. A poor substitute for insured or money market type holdings, target-date funds lack clear info, any standard portfolio and are over-loaded with fees. Sen. Herb Kohl, Chairman of the Special Committee on Ageing, criticizes these funds as needing more transparency and regulation. Others believe they shouldn’t be considered as a 401K default destination due to their risks and complexities.  There’s no substitute for individual responsibility in assessing fund performance, costs and objectives to meet personal financial goals.  Few investors will hit a bull’s eye with most target-date funds any time soon.     

 

Question:  I’ve been notified that I will receive part of my uncle’s IRA when he dies.  What are the inheritance rules for IRA’s? 

Answer:  Too numerous and complicated for a short answer!  Instead, here are the questions you need answered before seeking IRA distribution advice from an accountant or financial professional.  1) Was the IRA (SIMPLE or SEP) plan owner 70½ and already taking Required Minimum Distributions, or younger? 2) Are you the direct beneficiary or is the IRA part of an estate? 3) Are there other beneficiaries?  4) Is it a Traditional or Roth IRA?   Spouses have  different options and Qualified Plans have different rules!

 Question: With slow job creation and continued global problems from climate change to wars to governments’ insolvencies, I’m afraid the markets will tumble again.

Answer:  They might—no one knows!  But remember, the markets survived WWII, Vietnam, Watergate, savings & loan scandals, ruble and peso crises and 9/11 among other setbacks.  According to Morningstar, we need to protect ourselves in the time honored way touted in this column:  low debt, long term planning, diversification, personal risk management.  You can’t psych out the economy, but you can know thyself and stay in charge for the long haul. 

 Click Here for magazine URL.  The article is on Page 26.

 

 

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