Friday Financial Five – July 28, 2017
Friday, July 28, 2017
Dan Forbes, GoLocalPDX Contributor
Health expenses a huge concern for retirees
The alarm bell rings for retiree health expenses, as each new projection is eye opening. The “2017 Retirement Health Care Costs Data Report” from Healthview Services calculates the total expense for a 65-year-old couple retiring this year to be over $400,000. This includes Medicare, supplemental insurance, deductibles, copays, hearing and vision. While being aware is nice, it is going to take a proactive approach to account for these expenses. This may include healthy lifestyle changes or the use of Health Savings Accounts to accumulate tax-advantaged funds to help cover expenses.
403(b) plans slowly getting some attention
The movement for investment transparency and education has focused on 401(k) plans, and the recently implemented Fiduciary Rule ignores 403(b) plans. It is a missed opportunity, especially given the amount of money municipal and non-profit workers have put away in these plans. Insurance company products have penetrated this space for many years, but that might change if more states follow Connecticut’s lead. A new law there requires 403(b) plan providers to disclose fee ratios and provide more transparency. All states should consider doing the same.
Wallethub surveys the banking landscape
The Fed’s commitment to raising interest rates has not yet greatly influenced bank rates, according to Wallethub’s 2017 Banking Landscape Report. In the Northeast, the average checking account pays .19% interest and charges $53 per year in fees. The average 1-year CD rate for the region was .75%. Overall, the study found that Northeasterners receive significantly less in banking returns than the rest of the country.
Rethinking that retirement age
It is getting more popular to stop visualizing age 65 as a target retirement age and instead look at it as the turning point for another phase of life. For many, there are still 30 or more years of life left. People are working longer and various sources predict 30 to 40% of current workers plan to work into their 70’s. This may be out of need, as the focus on savings may not have been there during the accumulation phase. As time goes on, more and more will work out of want, allowing retirees to follow passions or parlaying part time work into peace of mind as they use that extra income to pay expenses.
Business owners and RMDs
While those still working and contributing to a 401(k) may not need to take an RMD from that particular account, business owners need to be wary. Those who own more than 5% of their business are still required to take money out. Not taking a Required Minimum Distribution (RMD) when necessary can result in a 50% penalty of the RMD amount.
Dan Forbes, a CFP Board Ambassador, is a regular contributor on financial issues.