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Personal Finance After 50 For Dummies, 2nd Edition



Personal Finance After 50 For Dummies, 2nd Edition

Eric Tyson, Robert C. Carlson

ISBN: 978-1-119-54366-4 August 2018 480 Pages

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Personal Finance After 50 For Dummies, 2nd Edition (9781119543633) was previously published as Personal Finance After 50 For Dummies, 2nd Edition (9781119118770). While this version features a new Dummies cover and design, the content is the same as the prior release and should not be considered a new or updated product.


Manage your finances in your golden years—enjoy your retirement!

Numerous life changes come with the territory of getting older—as we're reminded every day by anti-aging campaigns—but one change the media doesn't often mention is the need for a shifting approach to personal financial management. Personal Finance After 50 For Dummies, 2nd Edition offers the targeted information you need to make informed decisions regarding your investments, spending, and how to best protect your wealth. You've worked your whole life for your nest egg—why not manage it as effectively as possible?

Enjoying your golden years hinges on your ability to live the life you've dreamed of, and that's not possible unless you manage your finances accordingly. The right financial decisions may mean the difference between a condo in a more tropical climate and five more years of shoveling snow, so why leave them to chance?

  • Explore financial advice that's targeted to the needs of your generation
  • Understand how changes in government programs can impact your retirement
  • Consider the implications of tax law updates, and how to best protect your assets when filling out tax forms each year
  • Navigate your saving and investment options, and pick the approaches that best fit the economic environment

Whether you're heading into your senior years or your parents are getting older and you want to help them take care of their finances, Personal Finance After 50 For Dummies, 2nd Edition offers the insight you need to keep financial matters on the right track!

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