Kiplinger's Personal Finance Winter 2022

Retirement is supposed to be the time when you put a lifetime of work in the rearview mirror and relax. But more often these days, the leadup to retirement is a time of financial anxiety, fraught with tough questions. Have you saved enough so you won’t run out of money? Have you invested your savings wisely, and can it weather a bear market? What if you (or your spouse) need long-term care? Such worries have intensified ever since America transitioned from defined benefit plans (company pensions) to defined contribution plans (retirement plans that you’re on your own to manage). According to a recent Kiplinger–Personal Capital poll of retirees and near-retirees, their top financial concerns are inflation, the cost of health care, and the financial strength of Social Security and Medicare. The…

RETIREE TAX MAP Updated every year with the latest tax changes, our state-by-state guide helps you choose the right home for you and your assets in retirement. See how states tax various forms of retirement income, offer property tax breaks for retirees, and tax your estate. kiplinger.com/links/retireetaxmap PODCAST Listen to our Your Money’s Worth podcast for insights on saving for retirement, investing for income, cutting your tax bill and much more. kiplinger.com/links/podcasts MORE HELP FOR YOUR RETIREMENT Boost Your Cash Yield Kiplinger’s Investing for Income will show you how to generate steady income with moderate growth and manageable risk, no matter what the market is doing. kiplinger.com/go/investing Retire on Your Terms Whether you’re almost there or have a few years to go, Kiplinger’s Retirement Report will show you how to retire on your schedule. kiplinger.com/go/retirementreport RESOURCES Social Security Retirement Age Determine when you’re eligible to…

Ideally, you should start planning for retirement the day you receive your first paycheck. But in reality, most of us don’t focus on retirement until much later—and that’s fine, as long as you’ve been saving throughout your career. Once you reach your fifties, though, it’s time to start thinking about when you’ll retire, where you’d like to live, and how you’ll spend your time once you stop working. While the pandemic has thrown a wrench in some retirement plans, it has created opportunities, too. The personal savings rate has soared, as Americans who were able to keep their jobs stashed their stimulus checks, along with money they would normally spend on restaurants and travel, in savings accounts. Instead of allowing that money to languish in a low-interest account, consider using it…

The economy is well on its way to full recovery following a big hit from the pandemic, but many workers have not gone back to work or are working part time, and some have voluntarily taken time out to care for children or aging parents. If you fall into that camp, you may be able to take steps that will reduce your tax bill when you retire. If the reduction in your income caused you to drop into a lower tax bracket but you’re still in good financial shape, this year may be the ideal time to convert some of the money in your traditional IRA to a Roth, says Karen Van Voorhis, a certified financial planner in Norwell, Mass. You’ll pay taxes on any money you convert, but you’ll pay…

It’s hard to put a price on the peace of mind that comes from retiring debt-free, and there’s no question that you should strive to pay off high-interest debt before you stop working. But with mortgage rates still low, paying your mortgage off early may not be the best use of your money, financial planners say. For example, you shouldn’t pay off your mortgage unless you’re already contributing the maximum to your retirement-savings plans. If you have a 30-year mortgage with a 3% interest rate, there’s a good chance you’ll earn more on your investments than you’ll save on interest. Likewise, don’t drain your emergency savings to pay off the mortgage. And even if you check both of those boxes, you should pay off your mortgage only if you have enough…

One of the challenges facing retirees is pre serving enough of their savings to protect them from bear markets while keeping enough invested in stocks to stay ahead of inflation. A system that divides your savings into three “buckets” can solve this dilemma. Set aside enough cash in the first bucket to cover living expenses for the first year or two of retirement that won’t be covered by Social Security, a pension and/or an annuity. In the second bucket, invest what you expect to need in the next 10 years in short- and intermediate-term bond funds. The third bucket will hold money you won’t need until much later, which means you can invest it in stocks and alternative investments. Review your cash bucket annually to determine whether it needs to…