Boatman: Planning for a secure retirement
By Gary Boatman
Published: Tuesday, Nov. 19, 2013, 6:32 p.m.
A recent study by Genworth Financial finds that many people have unrealistic expectations about retirement.
Although 73 percent of pre-retirees are confident they will retire as planned, only 48 percent actually do. Some workers are forced to retire earlier than planned because of job loss, health or family issues.
Two things that used to be expected in retirement were that you only needed 70 percent of your income during retirement and that your income taxes would be lower. These things are not certain in today's economy. The Genworth study found that 65 percent of retirees found that their expenses stayed the same or increased during retirement. This is partially because many people start their bucket list when they retire or have more time to do expensive activates such as golf and traveling.
Another big reason expenses are more than expected during retirement is medical costs. This may well be your biggest expense during retirement. Anyone retiring before age 65 must deal with the total cost of health insurance. Once you reach 65, you probably qualify for Medicare. However, Medicare is not free. Medicare Part A covers hospital care. It is funded through payroll taxes that we pay while working.
Part B covers doctor visits and outpatient services. Part D covers prescription drugs. These two parts are funded with subscriber premiums. There is a sliding scale based on your income. If you withdraw a large amount of qualified funds to make a large purchase, it may increase your next year's Medicare cost. This should be a consideration if you are making a Roth conversion while receiving Medicare.
Your Medicare premiums are calculated using the Medicare modified adjusted income. This is figured differently than MAGI figures used in other areas of retirement planning. To calculate yours, look at your 1040 and add line 37 to the tax exempt interest amount on line 8b. Remember, the premiums you are calculating are for a single person, so you need to double them for a couple.
While a Roth conversion while receiving Medicare will increase your cost, a conversion before starting Medicare can give tax free income that does not increase your insurance cost. Many people use tax exempt bonds to avoid the 3.8 percent Medicare surtax. This tax free income is included when calculating your Medicare cost.
It is important to consider medical costs while you are planning your retirement income. If you do not take this into consideration, you may not have enough funds to fulfill all of your retirement dreams.
Next week, we will look at all of the confusion with the Affordable Care Act. Many things are up in the air with the president's announcement this week that some parts are being pushed back for a year.
To help you plan for Medicare, we are offering a free 24-page Life Guide…Social Security and Medicare. To get your copy, e-mail your name and address to firstname.lastname@example.org.
Gary Boatman is a certified financial planner and a local businessman who serves as president of the Monessen Chamber of Commerce.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Rostraver landfill fined $160,000 for bad odors
- Photo gallery: Ringgold High School students stage ‘Tarzan: The Stage Musical’
- Photo gallery: California Area High School drama club stages ‘The Pajama Game’
- Ringgold pushing ahead with school construction?
- New Eagle dance on as scheduled; ‘Porky’ Chedwick tribute in works
- Charges mounting in Monessen drug case
- St. Molokai parish ruling imminent
- Belle Vernon students show grasp of history
- Event to highlight economic opportunities provided by Mon River
- Belle Vernon theft suspect, wife taken into police custody
- Ringgold students to stage ‘Tarzan’ for spring musical