The 'Couv'

The 'Couv'

Tuesday, August 27, 2019

What's a Good Age to Retire?

This can be a very challenging decision. The answer is likely different for each individual or couple. Sometimes life makes the decision for you, perhaps one becomes unable to continue their career due to physical limitations. Sometimes one is just tired and ready.

Choosing the right time can be a very important decision, however as no one has a crystal ball to peer into the future. The old adage that says, "hope for the best but prepare for the worst", is wise advice. Age and health aside there are some real financial considerations before giving yourself a self imposed pink slip.

If there is a pension involved then sitting down with a pension expert is important. One must fully understand the terms of the pension and the difference between early retirement and full retirement can be dramatic. One must consider their healthcare situation. Does the company provide full or partial healthcare in retirement, have you qualified for it, is there a minimum age to get it?

Many people choose to retire at 62 and take the early Social Security path. There are some real disadvantages to this. Now someone that is disabled or truly unlikely to have any significant earned income is really only taking a monthly payment hit by retiring at 62 instead of the "full" retirement age that is somewhere between 66 and 68 depending on your current age. If you are planning on having some earned income after "retirement" the government will dip into that and even tax some of your Social Security as a penalty. Check with your tax pro to see how this works, it is very important. Once you reach the "full" retirement age then you can collect your Social Security and make as much money as you want. Of course Uncle Sam will tax your earned income accordingly. Again, check with a tax pro about these and other financial income and taxation issues. 

Those with a 401k type account have other issues such as the early withdrawal penalties if you take money prior to the minimum age of 59.5 years, and mandatory withdrawals at 70.5 years of age. All of this plays into the income picture.

Healthcare is pretty important. I know people who have retired at 62 but had to pay through the nose for health insurance for three years until they qualified for Medicare which kicks in at age 65. Medicare does not cover 100% but it is pretty easy and fairly cheap to get Medicare Supplement Insurance to take care of the 20% co-pay. Choosing to retire before age 65 without a good healthcare plan can be very dangerous.

Keep in mind that Social Security and Pensions do not always keep up with your cost of living. Often they are connected to a national metric like CPI or something. Your personal cost of living due to health or other unique conditions could easily outstrip your fixed income sources even if they have an inflation adjustment.

Be very slow and methodical about the process of retirement. It is easy to retire it is very hard to un-retire. Remember too that where you live can be just as important and Washington State is a great place to retire with no state income tax and an excellent health system.   

Tuesday, July 23, 2019

I'm Away on Vacation!

My wife and I are celebrating 25 year of marriage by taking a visit to her home town. Lucky me, her home town is Aberdeen, Scotland. :) I'll be back here next month with another article :)

Tuesday, June 25, 2019

Should Empty-Nesters Sell to their Kids?

Empty-nesters often decide to downsize their homes after the kids leave the "nest." This is particularly true among those nearing retirement that have a large family and thus a large house with more bedrooms than they need.

Often is the case that one or more of those children are starting their own lives and families and may find themselves interested in just the type of house that Mom and Dad have. What about selling to the kid?

This can be an effective way to downsize. Of course there can be some family squabbles over this arrangement especially if their is more than one child. Those issues aside, parents can make it easier for their kids to buy the house by offering to gift them the down payment. Most lenders will allow a gift directly from parents.

Parents could even carry a note for the kid, but that is less desirable if the parents were hoping to pull out a lump sum. If parents wish to sell their house to their kid(s) then they should consult a local Realtor® about the value, what price the home might get if it were exposed to the market at large. They can use that information as a baseline for selling to the child. Obviously they have the ability to sell it to the kid cheaply if they want to, but they should still know what the market would likely bring.

Many Realtors®, myself included offer services to aid in the purchase process for a low processing and paper work handling fee. A Realtor® can make sure both the parents and child know the requirements and regulations regarding the transfer of property and help both parties through the closing process. Perhaps the savings on traditional real estate fees can offset the 'discount' to the kid or the gifted down payment.

Parents concerned with legal concerns regarding the transfer of property to children named in a will or trust or any other legal concerns should absolutely consult and attorney prior to any transfer of real property.

Tuesday, May 28, 2019

Washington is Great for Washingtonians Too!

How's that for a title twist? Huh? Well it's true, most of the themes about 'Retire to Washington' are centered around the idea of someone coming to Washington State form another state for a better retirement opportunity. Though it is true, Washington is one of the best states in America for retirees, it is also great for locals.

There are a great many Washingtonians that may be looking for a place to retire. They just might be perusing information on those classic sun-belt locales, Like Florida, Arizona, or even Texas. But what about Washington? The same great attributes that make Washington a great place to retire for people current residing in other states, certainly still applies to locals.

This is particularly true for people living in King or Snohomish Counties when we consider the exchange of property concept. What do I mean by this exchange? Simply put people that live in very expensive parts of the country such as the 9 County Greater Bay Area in California, Southern California's Coastal Counties, New York City, or Metro Seattle, will have tremendous buying power when they leave those areas to settle in a less expensive market.

The median home price in King County is among the highest in the US. One can sell a modest 3 bedroom 1100 SF ranch home on a dinky little lot in King County for $800,000 and buy a spacious 2500 SF one level home on 5 acres with a view for that in Clark County, Washington. Yikes!

For some, selling that little ranch in Seattle and exchanging it for a similar ranch in SW Washington could lead to a massive surplus of cash as the equivalent home might be $350,000 in Vancouver, WA. That's a tidy $450,000 in cash to pad the retirement.

Retiring to Washington is not just about coming from another state to escape unfavorable retirement conditions, but also about staying in Washington State to continue in retirement what you have enjoyed all along.

Tuesday, April 23, 2019

For Many Retirees, Income Tax is a KILLER!

Let's look at why an income tax is more of a killer than a sales tax especially for retirees. Retirees often do not have many tax deductions or exemptions. So a retired couple earning a taxable household income of 35,000 will pay about $3150 in Oregon State income tax. Contrast that with the a typical annual sales tax paid in Washington at $1200.

Sales tax is something you only pay when you buy a taxable item. In Washington food for example is not subject to sales tax. An income tax is levied before you receive your net check. You are going to pay it whether you buy things or not. Sales tax is almost always a lower expense than income tax with the notable exception of being poor. Those in Oregon who have a taxable income of $0 will not pay any income tax, obviously. But in Washington a person with a taxable income of $0 will still need to buy things and some of those things will be subject to sales tax.

Please take note I am using taxable income, because retirees are not subject to income taxes on a sizable portion of their Social Security, ROTH IRA's are tax free, and standard exemptions and deductions reduce taxable income. So someone earning $20,000 could in fact have a taxable income of $0.

So the rule of thumb is, if you are poor live, in Oregon, if you are middle or upper income, move to Washington. Well it isn't always quite that simple, but that simple solution is not to far from reality in actuality.

Tuesday, March 26, 2019

High-rise Condo Living, well suited to Retirees

Many retirees are looking for living arrangements that don't require a bunch of yard work or travel to get to activities. Downtown urban condo living could fit the bill quite nicely for some. In SW Washington, Vancouver has a nice opportunity to own a high-rise condo unit with views of the Columbia River, Esther Short Park, and as many as five Majestic Cascade Volcanoes.

A short ride down the elevator to the street offers up everything your need in a few blocks. restaurants, post office, stores of all kinds, the park, waterfront, government agencies, banks, insurance, you name it and you can walk there.

This style is not for everyone, but it could be for quite a few retirees. 2 bedroom units range from $300,000 to well over a million dollars depending on the view and of course the interior decor and quality. Vancouver's downtown and waterfront area is rapidly becoming the hot spot for urban living in the Portland-Vancouver metro area.

You can visit Urban Living in the 'Couv' for updates on condos for sale and project status for new and upcoming high-rise projects.

Tuesday, February 26, 2019

Limits on SALT Makes Washington State Even Better!

SALT an acronym for "state and local taxes." The recent tax changes now caps state and local tax deductions at $10,000. So high income retirees are limited to that figure for deducting these "SALT" payments from their federal taxes.

Washington State levies no personal income tax so their is another benefit against states like Oregon and California that have a heavy income tax. In Oregon one needs to make only a bit more than 100k with average property taxes to cap that SALT limit out. Be sure to check with your tax professional to see how the federal taxation changes will affect your personal situation, but the mass exodus from high 'SALT' states such as California, New Jersey, New York, and Connecticut is a clear indicator that it is making a difference.

Washington is already one of the best if not the absolute best high latitude state in the US in which to retire. Sun Belt states continue to out poll Washington due almost exclusively to the warm winters and not the economic advantages. Washington State has excellent weather with something for everyone, really. Well you won't find any 75 degree January days, but aside from balmy winters, we have it all.

Washington and in particular Southwest Washington, offers an amazing blend of mild weather, favorable taxation for the retired, and proximity to Oregon for the interstate economics. Playing in Oregon is not subject to sales tax, living in Washington is not subject to income tax. Best of both.

It is more than just a bit likely that thousands will again flee the 'salty' states of California and Oregon to the beautiful Evergreen State of Washington.