The 'Couv'

The 'Couv'

Tuesday, January 23, 2018

2018 off to a good start

I wrote this on my real estate blog and it applies to retirees as well.

Originally published in Real estate News, by Rod Sager

OK I'll admit that title is anecdotal. But I am seeing a nice flow of listings and buyers poking around, finding homes, and making offers. Many analysts feel that 2018 will slow the crazy pace in the real estate market to a more healthy and normal 4-5% price appreciation over the course of the year. This is fine by me. I think the fact that the "threat" of higher rates is now the reality of higher rates, people that we dangling their feet over the fence are starting to jump in. I have made the point time and again that rates are far more important the price. Most people will pay far more in interest than any price deal they might negotiate. The federal tax revisions that take effect this tax year (2018) many middle income earners will no longer need to itemize and as such the mortgage deduction will no longer benefit them. A married couple paying less than $20,000 a year in mortgage interest may not have enough itemized deductions to exceed the new and improved standard deduction of $24,000 for a family. As I always state my standard disclosure anytime taxation is discussed: always consult a professional tax prepared or CPA when making decisions based on taxation. That out of the way, the new tax law increased the standard deduction for a married couple from $12,000 to a whopping $24,000. W2 wage earners are those who have a job and the boss cuts a paycheck, withholding money for taxes. W2 wage earners will receive a standard deduction of $24,000 for a married couples and $12,000 for single filers. This is nearly double from previous years! In general this is a good thing. But in order for it to matter you must have more than $24,000 in deductions for a couple or $12,000 for single. That may be a problem for some. Lets look at a hypothetical taxpayer for a moment, we shall call her Sally. Sally made $40,000 in 2017 and has a mortgage of $200,000 on her home. She paid $8,700 in interest last year. The standard deduction for 2017 was $6,350. Her mortgage interest exceeds that so filing the "long form" IRS 1040 with a schedule A for itemized deductions makes sense. Why take the standard $6,350 when you have $8,700 in mortgage interest alone. Now Sally can also write off other job related and business expenses. Here is where talking to the tax pro is CRITICAL. Sally needs to make sure that she doesn't take deductions that are not supported by the IRS. OK Sally is smart and she has a trusted tax pro handling her filing each year and he helped her find an additional $2,200 in legit tax deductions. No Sally can't write off those coffee break lattes ;) Now two 'problems' will arise for Sally this year. First the amount of interest paid on a mortgages drops each year as the balance is reduced. Let's say Sally will pay $8,500 in interest in 2018. She will likely have a similar amount of other deductions. So at the end of the year she has $10,700 in deductions which is now less than the new standard deduction of $12,000. The good news is, Sally will get a larger deduction and save the extra expenses of having to file the schedule A. Her tax guy is not happy, but Sally is. But now for many the extra bonus value of home ownership that was an effective tax break, has been eliminated for those with smaller mortgages. This could have a net effect of slowing down some of the pressure on entry level homes and first time home buyers. Of course the idea of home ownership should not revolve around tax deductions, but rather the idea of owning real property, gaining equity by reducing the balance on the loan and enjoying appreciation in price over time. These are really the hallmarks of home ownership. It's all about the equity asset and the lack of a landlord that can kick you out or raise your rent. Over all the new tax system will be a bonus, but it could lead to some minor softening mostly near the bottom of the market. Frankly the bottom needs a little price relief anyway. 2018 is looking good.

Tuesday, November 28, 2017

Year End Tax Evaluation Time

I do hope you all had a fantastic Thanksgiving. December is upon us and the last chance to make adjustments for the tax year is now. The twelfth month is one that tend to fly by by at light speed. Unless of course your under the age of twelve in which case December is the LONGEST month of the year ;)

Yes even when one makes it to the golden days of retirement... does that exist anymore? Well anyhow, taxes are still important and one should meet with their trusted tax professional at the end of each year to take a peek at their situation. There are many things one can do in December to help strengthen the tax position. Most things however cannot be done after the New year. So take the time to chat with your accountant and make sure you are not giving the flag waving uncle more than your fair share.

For the retired it is often the case that tax deductions are few and far between. The nest is probably empty, the huge pretax deductions are not there, and the legit business expenses are all but vanquished. To make matters worse, the tax laws are tweaked every year, so a meeting with a professional can help you save money. Every dollar you keep is a dollar the feds can't make poor decisions with.

1040 long baby, that's the ticket to savings, but without a little help form the CPA mind vault, you could be spinning your proverbial wheels. Although a good burnout is fun, it is a bit wasteful. Waste the rubber don't waste your retirement funds on the behemoth we call the Federal Government.

That's all I got this time round, Retire to Washington State and enjoy the Holidays.

Tuesday, October 24, 2017

New Tax Talk Favors Washington State.

Retirees may have yet another reason to hang out in the Evergreen State if the President gets his tax package through the Congress. Talk is that state and local income taxes may be removed as a deductible expense on the new federal tax law. This has Californians, Oregonians and New Yorkers in a fit as those states have notoriously high income taxes.

Here in the great State of Washington, we have no income tax and that means retirees can breathe a sigh of relief. Income tax for retired people is a serious drain on what is typically limited resources. Down south of the border, in the Beaver State, they get hit hard with most middle income retirees seeing state taxes in the 9% bracket.

Whether the new law eliminating the local tax deduction actually gets passed into law is yet to be seen and there are some who feel that provision will die in the negotiation process as the bill circulates the house of representatives. But live or die, Washingtonians need not worry.

Take a peek at some of the tax related articles I have posted over the last few years and get ready to retire to Washington State.

Don't fret the taxes, come to Washington State keep more of your income and enjoy the gorgeous Evergreen State!

Tuesday, September 26, 2017

Amboy Ambitions?

The little town of Amboy is not likely on the radar of anyone outside of Clark County, WA. This is nothing more than a chippy little hamlet. As a retirement spot however, it has some interesting possibilities.

Amboy is much more than just the little town itself, it is a much larger rural area around the tiny 'one horse' village. This is an area where one might find that perfect 5 acres of Northwest paradise without requiring Warren Buffet's brokerage account.

Amboy delivers that "way out in the country" feel yet resides just about ten miles from the heart of Battle Ground and less than 30 minutes to the greater Vancouver area that supports a full dose of urban amenities, with an additional 10-15 minutes placing an Amboy resident in Portland.

Amboy, like its incorporated brother, Yacolt have a local reputation for being way out there. In reality, they are not that far out at all. Make no mistake, one does not just take a short stroll to the market for some milk and eggs, but one need not drive an hour to do so either. For the retired person, Amboy could be a great location.

With the Vancouver Clinic, having opened a sizable facility in Battle Ground, health care services are much closer and more convenient for Amboy and the rest of North-Central Clark County. Battle Ground has most of the services people need to utilize on a daily or weekly basis.

For the outdoorsy types, its close proximity to Mount St. Helens and the three giant reservoirs on the Lewis River are hard to beat.

Check out Amboy and retire to Washington State.

Tuesday, August 22, 2017

Schools and Retirement Revisited

I thought I'd revisit this from a post in 2015...

Henrietta Lacks Health and Bio Science High School,
Vancouver, WA
Washington State is very proud of its public education system. Although it does suffer from many government related issues, they are well funded and heavily protected by the state constitution's iron clad wording. There is no down side to a strong education system aside from it taking a larger chunk of the budget. Many seniors that no longer have children in the school system take a less enthusiastic approach. It is often the older crowd voting against school bond measures. So what does all of this edu-speak mean to retirees?

Retirees gain many benefits to a strong local school system. First of all a well educated population leads to high paying jobs that help the local economy. A strong local economy is good for everyone, including retirees. Secondly and often overlooked by those on the sunset trail, is the fact that a strong education system attracts families. Many retirees find themselves a great distance from their families and grandchildren. Washington State offers many wonderful benefits to retirees as it is often rated as one of the best states to retire in. It also offers some of America's best public schools and a strong economy. That means the family can come here to!

How good are Washington State's Schools? Right here in America's Vancouver we have nine traditional high schools,the award winning Clark County Skills Center, the Washington State School for the Blind, the Washington State School for the Deaf, Arts and Academics High School, a Health and Bio Sciences High School, two alternative high schools, and an alternative programs center. These fantastic public schools are not just limited to the 'Couv'. It is a statewide affair. Here in Clark County according to US News and World Report, we have eight nationally recognized high schools and two nationally top ranked high schools.

Education is not something retirees traditional concern themselves with, but it can make a significant difference in their lives whether by drawing their extended family to them or by enhancing economic conditions around them it is yet another reason to retire to Washington.

Tuesday, July 25, 2017

Dog Days of Summer Lazy

Yes lazy is the word. These last several weeks have been fantastic with nothing but delicious golden rays of sunshine and mostly mild warm temps. You just gotta love summer in the great Northwest. This soul soaking sunshine leaves one feeling a tad lazy so I decided to take a lazy day and rerun a post from three years ago that still resonates today. And it has a shameless plug for my book ;)

From this blog on May 8th, 2014 by Rod Sager

This blog talks allot about the joys of retiring to the wonderful state of Washington. But will you have enough to retire at all? Their are alarming reports that nearly half of all middle income earners will retire poor. This makes the low taxation of retirees in Washington less of an advantage.

Retirees should consider value opportunities if their retirement is going to rely heavy on Social Security and part time work. Washington State does offer some great values at the coast and even in close to the metro area here in Vancouver. Check out my beach information here.

The general rule has been that you need about 20 times your annual income at age 62 in order to maintain your lifestyle throughout retirement. Most middle income earners don't have even one year's income in their retirement account.

Many will choose to work longer, maybe until they are 70 years old. Yikes that may or may not work out. Planning for retirement is very important. I wrote a book about finance and I am not adequately prepared for my own retirement which in theory looms menacingly close to the now.

Downsizing your current home before you retire could be a great way to stockpile money for your actual retirement. If you are 50 years old and already in the empty nest mode, perhaps a major home downsize now is in order. The real estate market is showing a resurgence locally in that "big move up" house market. This could be an opportunity to take advantage if you already live locally or if these conditions exist where you live now.

Washington State is a great place to retire, but you still have to be prepared. Check out my book "Don't Panic" on

Tuesday, June 27, 2017

Recent Market Gains Should Keep Retirees Cautious

Retirees beware, the fabulous stock gains over the last six or seven months could be an indicator of an overvalued market. In general retired people relying on market equities for income should be more conservative to protect assets designed to generate income. No one really knows when the next correction will arrive, only that it will arrive.

There is often a temptation to 'play on the beach' when rallies like this one take off. Retirees however should be prepared to leave something on the table to avoid getting caught in any downturn. Better to exit just shy of the peak than to exit at bottom of a large correction.

Young people have the advantage of years to earn losses back over time, retired persons do not. Large losses for those drawing cash from retirement assets will effect monthly income. Seniors are well advised to take council from professional financial advisers when making significant changes to their retirement portfolio.

Washington State has no personal income tax so take those profits fearlessly knowing the IRS will get a piece but Washington State will let it be. Caution is always a wise approach when nearing or in retirement. Even when you are in the amazing Evergreen State.