Election Time, What does it all mean for Retirees?

This is not a political blog, nor shall it be in the future. But we are about to cast our ballots for the next President of the United States and we also will determine the fate of both houses of Congress and the oft underestimated state and local offices. Retirees have much to be concerned about all the way down the ballot.

At the top of this cycle's ballot are the presidential candidates. Our two major political parties both gave us big duds in my opinion and I didn't have to go out on the limb to make this suggestion. But for those of us nearing retirement or already in it, we still have to consider which candidate makes the best case for our situation. Down ballot the same. Although we are all mired in this rather ugly top ticket campaign, do not let that keep you from voting. State and local races are just as important as the big statewide and national seats up this time.

As this is not a political blog, I will refrain from endorsing any specific candidates. I also don't wish to get mucked up in the rhetoric of these politicians. There are many issues in any political campaign especially when looking at national campaigns. A President for example will appoint Supreme Court justices, write budgets, set general policy across the full spectrum of politics from social issues to fiscal management. All of these are very important to most Americans.

From a retirement standpoint, I believe that the fiscal issues have the most impact to retirees and near retirees. Frankly they are the most important issues we have regardless of one's age in my opinion.

If we go back to 1976, Jimmy Carter won the election and became the 39th President of the United States. Mr. Carter surely benefited from the events surrounding the Watergate scandal and the divided Republican party as Ronald Reagan made a very serious nomination challenge to the sitting incumbent, Gerald Ford, that went all the way to the convention. President Carter had a difficult time managing the crisis in Iran and also the economics of the time and ultimately lost his re-election bid to Ronald Reagan in 1980. Mr. Reagan was the last Republican President to truly stand on the traditional Republican platform of smaller government and lower taxes. His tax cuts were approved by congress but his budgets, that were filled with deep cuts in spending, were not. Unfortunately this led to large increases in the national deficit. Although the deficit was a problem, Reagan's policies led to the longest streak of economic expansion in US history that continued all the way through the Clinton Administration. One can only wonder what things may have looked like if Reagan had one party control.

Hillary Clinton. (image from her website)

Unfortunately for all of us, the national party platforms are not what they once were. Republicans had an opportunity in 2000 when Bush defeated Al Gore. President Bush came into office with his party controlling the house of representatives and a 50-50 Senate, the Vice President held the tie breaking vote. Mr. Bush, like his fellow Republican Ronald Reagan managed to get tax cuts passed. Contrary to commonly heard rhetoric his tax cuts were much different than Reagan's. Ronald Reagan slashed the top bracket that was at 70% and brought it down first to 50% then later to 39.9% where it stood till 2003. Mr. Bush lowered the top bracket a bit further to about 36%, an unnecessary move in my opinion. More importantly, the Bush tax cuts were by far the largest income tax reduction for poor and middle class Americans in the 100 year history of the income tax. Opposition politicians focused heavily on the small tax cut for the "rich" and ignored the deep cuts offered to poor and middle class Americans. Herein lies the problem, Mr. Bush did not submit budgets with cuts to offset the the reduced income tax. He had full one party control and yet failed to make the tax cuts pay for themselves. This runs counter to the party platform and in stark contrast to Reagan who did cut the budgets and it was the Democrat congress led by Tip O'Neil that blocked those budgets. President Bush enjoys no such excuse, he got the cuts and didn't bother to try and reduce spending.

Donald Trump, (image from his website)

I am not bringing these issues up to push the right over the left or vice-versa. Rather, I want to bring up the notion that since the departure of Ronald Reagan as President and later, Newt Gingrich as the Speaker of the House, the Republicans have gone off the rails fiscally. Yet the same can be said of the Democrats. Mr. Obama had one party control and in fact he entered office in 2009 with a super majority of Democrats in BOTH houses. His campaign platform was heavy on rhetoric about eliminating the Bush tax cuts, yet once in office and with a filibuster proof super majority, he chose not to do so. He increased government spending but failed to increase taxes to support it. The old Democrat platform was tax and spend, yet Obama chose to just spend. We have two political parties that have both gone off the reservation regarding their traditional party platforms. Republicans are cutting taxes and not cutting spending and Democrats are increasing spending without increasing taxes. This is a fail scenario either way my friends.

All of this is important to consider as 20 trillion in national debt coupled with some 60 trillion in unfunded liabilities weighs heavy on retirees. Our government may not be able to keep the promises of social security, medicare, and medicaid. These are programs that are very import to all but the wealthiest among us.

As someone considering their retirement, voting for candidates with strong fiscal ideas is important. If you support a larger more involved government, Democrats tend to fill that void. But be wary of these modern Democrats that spend, spend, spend but fail to take the unpopular position of paying for it with needed tax increases. Likewise, if you believe that our government should be lean and trim with lower taxes and less intrusion, Republicans are generally the way to go. But be aware of these modern Republicans that like to slash taxes but won't make the tough and often unpopular cuts to the budget to pay for it. This notion of borrowing to pay for services we can't pay for has to stop. All the way down the ballot look for candidates that support the ideal you believe in whether it is tax and spend or small government and don't be fooled by the lies of those new modern politicians that think we can have both. It is one or the other my friends, low taxes and minimal government or high taxes and bigger government.

My personal beliefs are that the federal government should be lean and out of our lives. The old school fiscal ideas of Reagan are true and solid. Unfortunately there are not many Republicans that actually follow those ideas anymore. That said, tax and spend with a balanced budget is better than low taxes with a huge deficit. Are there any Republicans out there willing to make the hard decision to cut spending to support lower taxes? In Congress, yes there are, but at the top level, not since Reagan.

Get out and vote, you don't get to whine about the system if you fail to participate in it. Do not overlook the local and state level races. These are often low paid and even part time positions that are held by everyday people like us, not power hungry establishment politicians with high levels of corruption. Vote down ballot and make a difference in the place that you live and yes try to figure out which one of these two turds we have at the top will best serve your interests and vote appropriately. Remember as the wheels fall off the federal cart, and they will, the lug nuts are very loose; local and state governments will have to carry the load. Down ballot we have great control over how that plays out and the people that run for state legislature and local commissions are accessible unlike our federal level politicians that rarely have time for us lowly commoners.

    

Oregon vs. Washington

Two great states in the mighty Pacific Northwest. Ducks versus Huskies, Beavers versus Cougars, Washington wins in the college football mascot contest, what about retiring? This region is arguably the top non-sun belt place in the country for retirees. What is the draw? The gorgeous scenery? The relatively mild climate for the latitude? The friendly people? All of the above my friends and in the case of Washington State the tax friendly environment is an added bonus.

I have discussed on this very blog numerous times the taxation difference between these two fabulous states, and Washington generally comes out on top. A couple of articles to review, here and here. If you have a strong taxable income from a healthy 401k or a pension, Washington State will save you thousands of dollars in taxes that our neighbor to the south will strip away from your bank account.

But what if you have a predominately tax sheltered income source? When the income tax issue is removed as a problem, Oregon can become competitive with Washington for retirees. Southern Oregon has a few areas that are very similar in climate to Northern California and the Oregon Coast has some breathtaking properties that are well suited to the retired. Oregon has no sales tax and that saves retirees that like to buy cars and other big ticket items more often than average a lot of money.

For Washingtonians, the sales tax issue is generally less a burden than the income tax. Although the state of Washington does have a "use" provision on the sales tax that requires residents to declare items purchased in Oregon but "used" in Washington, it is nearly impossible to enforce on things that are not registered, like vehicles. Many people flock to the stores in nearby Portland to buy TVs and other expensive items and as long as those items are not delivered in Washington the sales tax is generally avoided. Again the tax is technically still owed, it is just not economically enforceable. In principle Washington residents are supposed to pay the sales tax on all taxable items used in state and if items are purchased in Oregon, the store will not deliver to Washington State without charging the appropriate sales tax. In practice those items schlepped across the bridge in ones own private pickup or van are at the discretion of the buyer to report. Sales tax rarely is a larger burden than income tax and in Washington State it is even more prevalent due to the taxation dichotomy between the two states. As always any decisions being made based on taxation should involve a consultation with a professional tax advisor.

Those that might want to live on the lush green third of the two states west of the Cascade Mountains will find Washington and Oregon north of Eugene to be on relatively equal footing. South of Eugene Oregon begins to transition into a more California style topography and weather pattern, albeit a little cooler.

Oregon has well over 300 miles of coastline with charming little hamlets dotting the coast where as Washington is limited to just the Southwest corner of the state since the Olympic National Park occupies a huge chunk of the gorgeous Washington Coastline. Oregon has the advantage on coastal living in volume of properties but Washington has the best deals on coastal real estate so call it a tie, I suppose.

Ellensburg, Washington

Things get real iffy for the Oregon side of the issue when considering a drier climate east of the Cascades. Oregon shares the high desert plateau with Nevada and the elevation of places like Bend and Klamath Falls is well above 3000 feet and over 4000 in the case of the latter. This translates into significant snow in the winter and cold temperatures as well. Generally retirees are looking to avoid bitter cold and heavy snow. In Washington State, the central portion is just barely above sea level at the Tri-Cities and right around 1000-1500 feet at places like Ellensburg and Wenatchee. Although the winter climate is notably colder in Ellensburg than it is in Vancouver it is not as severe as the higher elevations in Central Oregon. Advantage: Washington State.

The state of Oregon does an excellent job of promoting both the Central Oregon communities and the Oregon Coast. So well in fact, that real estate prices in those two places are significantly higher than comparable spots in Washington State. This contrasts with the overall higher prices in Washington State for real estate when compared statewide with Oregon.

The bottom line is that taxation favors Washington State and geography is neutral with the advantage lying purely in the eye of the beholder.

Reverse Mortgage is worth a look, not for everyone but great for some.

Thinking Reverse Mortgage? There is a lot of bad information out there so just take a look. Reverse mortgages are not as good as the sales guys says but they are not the rip-off that some claim they are either. Under the right circumstances a reverse mortgage could be the ideal tool for you retirement needs. Read the article below for more information.

Originally published, May 22, 2014 by Rod Sager

The Reverse Mortgage has been around for quite awhile but many people are unaware that the FHA has made them very viable and affordable in recent years. Early reverse mortgages were burdened with outrageously high fees that made them a poor option for nearly everyone. The feds however cracked down on the less desirable practices and the result is a fabulous opportunity to get paid for living in your own house.

The ideal situation for a reverse mortgage for the retiree looking to downsize that giant house that the kids were raised in. Let's say a homeowner is 62 years old and lives in a house that is worth $300,000 and has a debt owed of $150,000. That homeowner can sell the house and walk with roughly $130,000 in cash. Options include buying a smaller house valued at say $225,000 and putting $100,000 down and making a small payment for the next 30 years which is likely the rest of his life.

What if he were to take that $130,000 profit and put it down on a reverse mortgage for a nice smaller but upscale home valued at $260,000. Now that homeowner has a nicer home say in Fairway Village and instead of making payments to the bank the he lives in the house free of charge until he dies. Each month interest is added to the principle balance.

After the reverse mortgage is over the bank will sell the home. If the home clears more money than is owed after the owner dies, his estate will receive the remaining proceeds. If the balance owed is higher than the proceeds the bank takes that as a loss and no action is due on the part of the heirs.

These programs are not for everyone, but for many they are ideal. Any person nearing the age of 62 should sit down with a qualified reverse mortgage professional and take a look at the options. Although the cost of doing a reverse mortgage is much better than it used to be, they are still a bit more expensive than a traditional loan.

I have seen many happy folks retire right here in the great state of Washington with a reverse mortgage and cash to spend on the things you are supposed to do when you retire. Relax, travel and have fun!

Health Care in Southwest Washington

For retiring people health care will be an important aspect in choosing a place to retire. Here in Southwest Washington and across the Portland-Vancouver Metro Area, healthcare for seniors is in pretty solid shape.

Clark County, Washington has two major hospitals, Peace Health Southwest Washington Medical Center and Legacy Salmon Creek. The region also has a tremendous variety of cottage healthcare organizations in the area. Kaiser Permanente has a strong foothold in the region with several medical offices in Clark County and two large hospital complexes in nearby Portland, OR.

Clark County offers a substantial advantage in personal transportation as traffic flows more smoothly, more often than neighboring Portland. Although Portland has a much better than average public transit system, retirees often find that public transportation does not provide the access they need, when they need it. There can be security concerns as well especially in the winter months when we have only eight hours of daylight.

Having convenient access to a variety of local health care professionals becomes increasingly important as we get older. I am fortunate to be able to see my doctor, fill prescriptions and get 90% of my health care needs serviced at a facility less than five minutes from my house.

Having all of this great health care located locally and being free of state income tax shines a warm and friendly light on South West Washington State and Clark County for those seeking to retire full time or even part time.

For veterans, Vancouver has a local VA hospital and a PX shopette near Fort Vancouver. Portland has a very large VA hospital complex as well that serves the entire region. Once again having a convenient local VA hospital and medical complex nearby with easy in and out access is wonderful.

Check out these links to some of the local healthcare organizations serving Southwest Washington State and the greater Portland-Vancouver metro area.

Providence
Kaiser
Legacy
Peace Health
Veterans Administration

Healthcare, Taxes, Mild winters and gorgeous scenery all combine to create a retirement wonderland. So it's time to Retire to Washington.

Nearing Retirement? When was the Last Time You Looked at the 401k?

Anyone over the age of 50 needs to stop what they are doing and look at the assets in their retirement account. Whether it's the title mentioned 401k company account or an IRA, any self directed accounts need to be, well, self directed.

Since the economic crash in late 2008, the stock market indices have roughly doubled, some better some worse but about double. There has been a nice run up in values and many people that were in their early to mid-40s in 2008 may have been aggressively invested post-crash.

Now they find themselves precariously perched on the edge of what could be the top of the market and retirement is no longer that way off distant event. You can practically smell it from here. A major market correction could derail plans and postpone retirement. Unless that is, you start making adjustments to your portfolio to protect assets. Too many Americans stay aggressive way too long.

It is difficult to move assets to slower performing asset classes when the market continues to grow, but it is necessary to preserve the wealth already acquired. No one knows when the next big bust is coming, only that it is coming.

50 somethings need to begin sheltering some of those holdings in to safer havens that grow slowly but often weather storms. Assets such as treasuries, government bonds, long term cash assets and such. The small cap stocks and exploratory type investments are no longer a wise choice when you reach the half century mark, unless you are abundantly wealthy. Most of us are not.

Real estate is a solid long term investment but it can be laborious. Be very careful when considering a home refinance as well. If retiring with a free and clear house is important, then taking another 30 year note that matures when your 80+ is not a good move. Perhaps you can look at 15 year note to capitalize on the crazy low interest rates and stay on target for a free and clear home at retirement. A mortgage is not always a bad thing for empty-nesters and retirees with income. At this stage in life people often find themselves with good income and no tax shelter. A mortgage can offer an income tax deduction that may be quite beneficial. A chat with your trusted tax pro is a good idea.

The most important thing for the 50s crowd is to look at your financial picture and start making the necessary preparations for retirement. Too many people fail to make what often amounts to simple corrections that could protect them from the fallout of another big market adjustment. If you are underfunded, start packing in the cash now.

Young people that happen to read this, if you are in your twenties and you have the diligence to sock away 5-10% of your income into savings or an organized retirement account, you will get to 50 with a huge bankroll of cash. Huge bankrolls of cash are always a good thing.

Talk to you trusted pros in taxes and retirement and get your house in order, otherwise you have to work forever. If working forever is your plan, remember, sometimes your body won't let you do what your brain plans.      

Long Term Care, Ready?

I posted an article about this a couple of years back, but it still looms as a major concern for many of us. I read this interesting article in Motley Fool as well.

Originally posted August 28th, 2014

Long term care is an issue that faces nearly every American. Advances in medical science have resulted in an extension of our quality of life and health. This has also resulted in many more people living into their 80s and 90s. There comes a point where help with daily activities becomes a necessity.

Retirees should be prepared financially for this outcome. Long term care is very expensive and is not typically covered by traditional health care plans. Having a long term care need without adequately planning is usually financially devastating. The government will require that you be destitute before they pay for it. Who wants to rely on government care and be poverty stricken?

Insurance companies of course offer long term care products and these can be very expensive if then insured waits too long to purchase. Once a chronic condition exists getting private insurance may proving to be a daunting task. Having large amounts of cash in retirement accounts can be a great security blanket but long term care costs can easily run into the 6-7 thousand a month range. Funds become depleted quickly at that rate of consumption. Planning is critical. Consultations with professional financial planners is a wise idea.

Furthermore young retirees in their early 60s should consider proximity to long term care facilities and or services when relocating. I have spent a fair amount of time writing about neighborhoods and great places to retire to, but what about long term care?

Vancouver, WA is a big enough city that it has a virtual cornucopia of offerings in the long term care arena. Relocating to Vancouver provides retirees with the peace of mind that they will not have move far or even at all should they need assisted living or convalescent care.

Planning ahead makes for a much easier transition when the time comes for assistance. Often times couples find themselves with one in care and the other still at home. A short drive is always better than a long drive for visits. Above and beyond all the great reasons to relocate to Washington State, taxes, moderate weather, etc. proximity to these types of facilities should also be taken into consideration.

Vancouver proves again to be a very wise choice for retirees.

Best Place To Retire

In recent years, Washington cities and towns have become conspicuous by their absence among the various 'Best Places to Retire' lists in magazines and news articles. Washington used to routinely appear on these 'Top Ten' type lists. I decided to sniff around and find out why Washington State has fallen from favor among these so-called elite retirement locales.

I am finding a running theme lately among the likes of Forbes, US News and World Report, Bankrate.com and others. Housing costs, housing costs, and some housing costs. This is the Achilles heel for the Pacific Coast states. California has long since been largely absent from top retirement lists due largely to the phenomenon of high housing costs. Oregon and Washington are now in that same 'boat'.

Fargo North Dakota has found its way into favor as well as Lincoln Nebraska. Weather clearly has lost its luster among the editors of these various best places to retire articles. Read about Washington weather, here. The economy has played a role but I find that a strong economy is less important for retirees than it is for those working. In fact a strong economy tends to make the cost of living higher. Don't get me wrong, a good economy my is always a good thing, but for retirees it is less of a factor since retirees generally are not concerned with jobs. Retirees tend to benefit more from the national economics than local economics. Washington state however, has a very strong economy and yet it remains estranged lately from the lists of retiree havens.

California, Washington and Oregon all find themselves in the top ten among the 50 US states for median home price. California is #1 among states with Washington at #6 and Oregon at #8. This my friends, is what has created a drain on the Pacific Coast's ability to find its way onto the various "best to" lists for retirees.

This at least partially explains why so many of the new residents of Washington and Oregon are from California. Californians are among the very few that don't view the Northwest as "expensive" for housing. Even Oregon with its oppressive state income tax is far more tax friendly than the tyrannical fiends in Sacramento.

The cost of living is higher in the west than most of the rest of the USA, But living in the west is just better in nearly every measurable way. Among the western states Washington is by far the best place to retire. There are many areas in Washington that offer highly affordable housing near the national average and even below. King County, (Seattle) has over 2 million people and its over-puffed housing market skews the state average to make Washington as a whole seem more expensive than it is. Spokane for example has a median home price very near the national average. Just north of us here in Clark County, both Cowlitz and Lewis counties have median home prices well below the national average.

Even with the West Coast housing penalty, Washington State remains a top choice for retirees. Especially those retiring from another state with relatively high housing costs, such as California. The income tax cannot be overlooked when retiring. Anyone that expects to have pension style income, will be bludgeoned in a state with an income tax.

Vancouver, Washington could easily find itself on just about any 'top ten best to retire' list if housing costs were not included in the formula. Even with its relatively high housing costs, the 'Couv' offers in close access to the Portland Metro area, Oregon's sales tax free shopping and Washington's lack of an income tax. Plus you get the slightly damp but very mild year round weather and some of nature's most spectacular scenery. Washington is still one of the best places to retire.