RETIREMENT REPORT Your Guide to a Richer Retirement VOLUME 27 | NUMBER 8 | AUGUST 2020 | $5.00

the financial blow as they watched their investment ac- count values plummet. Then, stocks lurched ahead and have since been volatile, leaving many retirees to won- der if they should adjust their game plan for retirement income as the econ- omy opens up. “The first quarter IN THIS ISSUE of this year repre- sented the very defi- INVESTING nition of sequence 8 | Best Vanguard Funds risk,” notes Patrick TAXES Nolan, a BlackRock 10 | Capital Gains Tax Rates portfolio strategist. “Early in retirement, CAREER it’s the most chal- 11 | Ageless Resumes lenging situation for 14 | Information to Act On a retiree who has be- 16 | Your Questions Answered gun to take cash flow from retirement ac- ESTATE PLANNING counts. You’re sell- 17 | Health POAs ing assets, locking in YOUR FAMILY losses and impairing 20| Helicopter Children Drawing Down the future value of the portfolio.” RETIREMENT LIVING in a Pandemic To be sure, draw- 21 | Cars for Older Drivers ing down the right as the coronavirus shut down the economy last percentage amount spring, many consumers had their budgets cut by from a portfolio each year is complex business. There default. Trips and shows were canceled, nonessen- are tax implications, so drawing from the right ac- tial medical procedures were postponed and restau- counts at the right time matters. But knowing how rants closed. much a retiree can spend each year without running For retirees living on portfolios—or those forced out of savings in old age is even more important. into retirement unexpectedly due to the virus—the Plenty of tax and financial pros like to argue over

JOHN W. TOMAC W. JOHN forced spending slowdown may have helped cushion the most tax-efficient ways of drawing down a portfo- The Studio Job Number: KIPS_KRR_Aug-20_CD-12_2450858_FINAL_an Client: Deposits Publication: Kiplinger’s Retirement Report Document Size (WxH): 7.875” x 10.5” Bleed: 8.125 x 10.75” Live: 7” x 10” Colors: CMYK KEEP DREAMING

KEEP SAVING

Create a future you can look forward to with Synchrony Bank. Our competitive rates and convenient mobile app make it easier to save in a way that fits your life. It’s banking in sync with you.

Scan to learn more. synchronybank.com 800-753-6592

© 2020 Synchrony Bank The Studio Job Number: KIPS_KRR_Aug-20_CD-12_2450858_FINAL_an Client: Deposits Publication:lio once Kiplinger’s retirement Retirement has begun. Report Far fewer enjoy talking The RMD Method Document Size (WxH): 7.875” x 10.5” Bleed:frankly 8.125 x 10.75”about overall spending levels. Who wants to Other retirees try to limit spending to the amount cal- Live: 7”wade x 10” into the weeds of telling couples that trip to the culated for their annual required minimum distribu- Colors:Galapagos CMYK is off the table? tions from tax-advantaged retirement accounts. This But let’s go there, because the economic fallout from calculation is based on the ending balance of the ac- KEEP DREAMING the pandemic is challenging old assumptions about counts on the last day of the previous year, divided by withdrawal strategies, leaving some retirees cash- the person’s life expectancy. strapped and in a bind while others aren’t forced to cut As this year demonstrates, however, this strategy back at all. Here’s a look at some of the most common can be tough to follow in volatile times. Had RMDs not methods financial planners use to figure out how much been skipped in 2020 because of the CARES Act, for people can safely spend from a retirement portfolio example, retirees would have been forced to take big each year, and how sudden market shifts (like the one withdrawals based on 2019’s high balances and, poten- we saw in the spring) can affect them. The results may tially, much lower withdrawals next year if this year surprise you. ends sharply lower than last.

4% Revisited ‘Dynamic’ Strategies Consider someone who retired this year and decided The trick, experts say, is to smooth out withdrawals to use the withdrawal method popularized by William over time, hitting a sweet spot that allows retirees to Bengen, the financial adviser who in the 1990s came keep a fairly steady income even when markets are up with the Bengen rule. It involves withdrawing tanking, while not becoming so conservative that roughly 4% of a portfolio in the first year of retirement important lifestyle goals are sacrificed. That’s the and adjusting for inflation thereafter, regardless of definition of a dynamic withdrawal strategy. market conditions. Interestingly, experts who advocate dynamic with- Using the Bengen rule, a retiree with a $1 million drawal strategies haven’t been pulling in the spending nest egg would withdraw $40,000 for living expenses reins too tightly thus far. the first year. In year two, if inflation was 3%, the with- “We had one client who, out of the blue, wanted to drawal amount would increase to $41,200. make a big purchase that was beyond the expected an- But what if stocks had plunged, say, 15%? If after nual withdrawal, and we said, ‘This isn’t the time to do taking out the $40,000 at the beginning of the first this,’” says Stephanie McElheny, president of wealth year, and the portfolio then declined to $816,000, planning at Aspen Wealth Strategies in Arvada, Colo., our retiree would now be removing 5% of the actual who uses financial modeling software that calculates portfolio value by withdrawing $41,200 in year two. the probability of clients maintaining their assets KEEP SAVING That’s the problem with the 4% rule; it doesn’t throughout their life expectancy. account for portfolio performance. Amid lower For other clients, however, she saw no reason to expectations for both stocks and bonds ahead, it’s trim planned withdrawals right away, even as markets little wonder why more experts are suggesting retirees were in freefall in March. Using modeling software to Create a future you can look forward to with Synchrony Bank. Our competitive walk away from withdrawal rules that don’t respond at simulate possible market returns based on the March rates and convenient mobile app make it easier to save in a way that fits your life. all to market changes. portfolio lows, the probability that her firm’s clients It’s banking in sync with you. EDITOR EMERITUS EDITORIAL OFFICES SUBSCRIBER SERVICES Kiplinger’s Retirement Report Knight A. Kiplinger 1100 13th St., N.W., Suite 1000 Telephone: 800-544-0155 (ISSN# 1075-6671) is published monthly; E-mail: kiplingerretirementreport@ $59.95 for one year; $114.90 for two years; Washington, DC 20005 $169.85 for three years. MANAGING EDITOR emailcustomerservice.com Catherine Siskos Telephone: 202-887-6491 E-mail: [email protected] Copyright © 2020 by The Kiplinger Email: [email protected] REPRINT SERVICE Washington Editors Inc., 1100 13th St., N.W., facebook.com/KiplingersRetirementReport PARS International Corp. Suite 750, Washington, DC 20005. CONTRIBUTING WRITERS Scan to learn more. 253 W. 35th St., 7FL Periodicals postage paid in Washington, DC, Harriet Edleson CHIEF EXECUTIVE OFFICER New York, NY 10001 and additional mailing offices. Katherine Reynolds Lewis Denise Elliott Telephone: 212-221-9595 Ann Marie Maloney POSTMASTER: Send address changes synchronybank.com 800-753-6592 E-mail: [email protected] to Kiplinger’s RETIREMENT REPORT, Jeff Reeves SENIOR VICE PRESIDENT FOR CONTENT P.O. Box 420308, Palm Coast, FL 32142-0308. Janet Kidd Stewart Sarah Stevens ONLINE SUBSCRIPTIONS Joy Taylor Subscribers may sign up PUBLISHER Alina Tugend for free online access, The Kiplinger Washington Paul Vizza including past issues Editors, Inc., is part of the ART DIRECTOR Telephone: 202-887-6558 and annual indexes, at Dennis Publishing Ltd Group. Natalie Kress E-mail: [email protected] KiplingerRetirement.com.

AUGUST 2020 KIPLINGER’S RETIREMENT REPORT | 3 © 2020 Synchrony Bank For his model portfolios to trigger a 10% cut in spending, withdrawals would have had to exceed 6.4% of his clients’ current portfolios, meaning a portfolio FROM THE EDITOR drop for both stocks and bonds of 22%. At the market lows in March, he says, the withdrawals got to 5.9% of This is not the easiest time for retirees to live off of the model portfolios. (Individual portfolios vary savings. That 4% withdrawal rate, traditionally seen slightly due to clients’ age or other circumstances.) as a safe percentage for savings to last, can pinch a The model allocations are 65% stocks and 35% bonds, portfolio in seesawing stock markets like this one. As the sweet spot, he says, for maximizing withdrawals. of early July, experts still can’t agree if we’re at the be- “When events make you question if your retirement ginning of a new bull market or in the middle of a dia- income plan is still sustainable, dynamic withdrawal bolically misleading bear. policies can tell you when you need to make a change,” With no end in sight to the volatility, our cover story says Guyton, who described the decision rules in detail compares how some common withdrawal strategies in a 2006 Journal of Financial Planning article. “We stand up in turbulent markets. All methods have their went into the year with slightly lower equity positions drawbacks, but if the goal is to smooth out withdraw- because valuations had gotten so high and withdrawal als over time, the clear winner is a “dynamic” strategy. rates were slightly lower than normal.” As the story shows, that strategy requires other com- That doesn’t mean clients were taking out less ponents to work. Meanwhile, if you’ve been forced to money to spend but that the amount withdrawn simply retire early, check out “Now What?” on page 6. accounted for a slightly lower percentage of the total Investments are another way to shore up savings because asset levels had increased. that have been sorely taxed by poorly timed withdraw- When the stock market had declined 35% in March als, and this issue features some of the best Vanguard from the highs earlier that month, he rebalanced client funds to own. You’ll want to be prepared to capitalize portfolios. Then stocks recovered, and by mid-June on that bull market whenever it arrives. his 65/35 portfolios were down just 2%, so they never triggered a cut in retiree withdrawals. “We were getting close to the guardrail, but then the recovery came and we never hit it.” Catherine Siskos Dynamic Withdrawals in Action Let’s say our hypothetical retiree withdraws $50,000— 5%—from the $1 million nest egg, leaving $950,000. would run out of money rose by about 15 percentage The market stays flat, and the next year our retiree points at the market lows in March, she says. So why takes a 2% “raise” for inflation, to $51,000. That’s fine, the lack of concern? The simulations at any given time because it amounts to a withdrawal rate of about 5.3%. are based on a portfolio’s current value, and the range But the next year, if the portfolio takes a big hit—say, of bad outcomes can appear much worse than they to $760,000—that $51,000 is 6.7% of the remaining nest might if an investor looked at the numbers over a egg, which could cause trouble down the road, Guyton period of months. says. So, our retiree instead cuts 10% off the $51,000, to “Nobody likes to see their probability of success $45,900. The process is repeated annually until the go down, but I told clients it’s just one point in time,” withdrawal is within the acceptable range—6.4% of re- she says. “Now, if a client wasn’t retired and had just maining assets. (You could also round the 6.4% to 6% lost their job, that would be a different scenario.” (See without affecting the strategy, Guyton says.) “Now What?” on page 6.) Had the market return merely been slightly negative Jonathan Guyton, founder of Cornerstone Wealth and the withdrawal rate only up a bit from the previous Advisors in Edina, Minn., also hadn’t altered client year, the investor would have simply not taken an infla- withdrawals by mid-June. He devised “guardrails” tion adjustment that year. A caveat: Older retirees more on portfolio withdrawals—rules for taking higher than 15 years into retirement may not need to take a amounts with the caveat of adjusting spending slightly spending cut, or as large of a cut, because their time if markets decline significantly. horizon is shorter.

4 | KIPLINGER’S RETIREMENT REPORT AUGUST 2020 In booming years, when the withdrawal rate falls cluding a trip to Maine, creating a budget surplus. below 4% of remaining assets, the retiree can boost Bernie and Kathy Raidt, of Shakopee, Minn., have spending 10%. also spent less over the last few months as the pan- demic curbed their activities. Even with Guyton’s A Fund for the Unexpected assurances they could safely spend more, that has It’s important to note that Guyton’s strategy works been a difficult concept to embrace, Bernie, 66, says. best for couples who have discretionary wiggle room “We just bought a place in Florida, and when we in their retirement budgets and money set aside in a had the discussion with Jon about how much we could contingency fund—typically 10% to 20% of a total nest spend, we cut that by 40%,” he says. His caution egg—for occasional expenses like cars, weddings and stemmed, not from market conditions, but from a more major trips that go beyond the routine budget. Invest general fear of running out of money at the end of life. that money according to “If I had it to do all over, how often you expect to I’d probably be less conser- raid the account, he says. If vative.” it’s going to be every year, PART OF THE“ GAME OF It’s an interesting senti- invest more conservatively, RETIREMENT IS DECIDING ment for younger retirees and vice versa. Some clients to consider. Countless stud- also carve out a chunk of WHERE TO LAY YOUR CHIPS. ies show Americans have this money to help fund YOU’VE GOT SO MANY CHIPS AND under-saved for retirement, long-term care costs if they leading to lean retirement exceed the regular annual A FINITE NUMBER OF YEARS. budgets. But regrets about withdrawal from the port- Michael Finke not using savings in early folio, Guyton says. Or, they Professor of wealth management retirement—foregoing a trip can get a long-term care here or there or not going insurance policy to cover for the extra bedroom in a about half the cost of a condo—can have conse- nursing home; he counts on the portfolio for the rest. ”quences, too. Even at Guyton’s more aggressive with- As a general rule, he says, couples whose monthly drawal rates, if retirees are stockpiling cash elsewhere, retirement income from all sources (Social Security, are they actually being too conservative with spending? pensions and portfolio withdrawals) is at least Maybe. But when his models did call for 10% spend- $6,000—or $3,000 to $4000 for singles—are candidates ing cuts during the Great Recession a decade ago, Guy- for the strategy. It’s just not realistic to ask retirees liv- ton says, most clients realized the adjustments were ing on the bare essentials to take a 10% hit to their bud- worth it to be able to spend more in other years. gets, he acknowledges. “These static rules that assume you have to have a Several of Guyton’s retired clients said the spending raise every year, no matter what, is just not the way strategy helped them navigate the stock market volatil- people behave,” he says. “People feel like they should ity earlier this year. dial back spending when things get bad.” “We’ve been fully prepared to have a 10% reduction in spending when markets are bad,” says Al Washko, Smaller Legacies 76, a retired health care executive. There is no free lunch, of course. In typical retirement Before hiring Guyton, Washko and his wife, Judy, 74, scenarios, the higher withdrawals Guyton’s method a retired critical care nurse, were banking on what they allows for will mean most retirees using the strategy now say were inflated expectations for both invest- will die with smaller piles of cash leftover for heirs ment returns and withdrawal rates. than will people who used the 4% rule. For many, that’s “We now have several contingency accounts and a good tradeoff, however, because it means they used areas of spending where we could cut back, and we’re their money more effectively in retirement. willing to do it, even if it hurts,” Judy says. “We could “That’s the ultimate goal, isn’t it?” asks Bernie Raidt, always find places to cut without making us crazy.” the retiree who now questions some of his conserva- This year, though, it was the pandemic that prompted tive spending patterns early in retirement. “Dying the the Milwaukee-area couple to cancel travel plans, in- day after you spend the last dollar.”

AUGUST 2020 KIPLINGER’S RETIREMENT REPORT | 5 Michael Finke, a professor at The American College a strategy retirees can live with. For most retirees, he of Financial Services who has written extensively says, sticking with an initial withdrawal percentage of about sustainable withdrawal rates, echoes the senti- 3% to 4% (lowered from Bengen’s original system be- ment about retirement spending. cause of market expectations) will get retirees to their “Part of the game of retirement is deciding where financial goal. to lay your chips. You’ve got so many chips and a finite “If an investor’s lifestyle can withstand their dynam- number of years,” he says. “Do you want to lay more ically reducing spending at critical moments in the re- chips on your 60s and 70s? I think that’s the way to do tirement journey, then they are in a stronger position it. It may mean spending less in your 80s and 90s, but than those who can’t,” he says. “But the idea of cutting you’re not spending a lot of money then, anyway.” spending may not be realistic. It’s great if you can do it, For BlackRock’s Nolan, it comes down to picking but not everybody can.” K JANET KIDD STEWART

trimmed assumptions on her mod- realize it comes at the cost of a Now What? erate portfolios to 5.73% annual- higher risk of portfolio failure down Both of Stephanie McElheny’s par- ly, far lower than many calculators the road. To qualify, you must have ents had personal experience with typically assume. experienced a pandemic-related a retirement that came at the ■ Minimize taxes. Previous- layoff or business closure, or you or worst possible time. Her dad was ly, experts recommended pulling a loved one must have been diag- about to retire in 2008 and decid- retirement income first from tax- nosed with the disease. ed to delay a few years. able accounts, then from tradi- ■ Delay Social Security if you “Then this year my mom retired tional IRAs and finally, from Roth can. Older workers may also be in February at what looked at the IRAs. Today, the goal is to pull just tempted to file for Social Security time like almost comically bad tim- enough income from IRAs to stay benefits early now, but Finke says ing,” McElheny says. Her mom re- within your lowest possible income the bonus for delaying to age 70 tired at 62 on Feb. 28, right into the bracket, then fill in the remainder is hard to beat. For every year be- market meltdown. “But I told my of needed income from taxable ac- yond your full retirement age that mom to go ahead because there counts and, lastly, Roth accounts. you delay taking Social Security, was a lot of flexibility in her plan.” But if that’s not possible, don’t your benefit grows 8% per year un- The adviser had built plenty of worry too much about accelerat- til age 70. One caveat from Jona- contingencies into the retirement ing IRA withdrawals now, McElheny than Guyton: If your life expectancy income projections she had made says. With tax rates almost certain- is shorter than average, remember for her parents, including a longer ly heading higher, making with- that it takes years to make up for life expectancy and higher-than- drawals now that have a lower tax the time when benefits were de- necessary set-asides for health bite might turn out to be a good layed. care spending. strategy anyway. ■ Consider buffer assets. If your situation has just dras- ■ Understand the CARES Act. Home equity lines of credit and tically changed, take a hard look Under the new law, the 10% ear- cash value in a life insurance policy, at all your options, including these ly withdrawal penalty for taking up Michael Finke says, can be tapped five rules in the time of COVID. to $100,000 in distributions before for income when stocks are down. ■ Review your income game age 59½ from qualified retirement “For some folks, it may be about plan. Do you even have one? Es- plans, including IRAs and 401(k)s, applying for unemployment ben- tablishing a budget and a discipline is waived for people affected by the efits (or) searching for even just for keeping portfolio withdrawals pandemic. The law allows for the a part-time job,” McElheny says. within an acceptable range is crit- taxes on the money to be stretched “Even a reverse mortgage could ical. Keep in mind the return as- over three years. If you’ve been be on the table. It’s about finding sumptions baked into any income thrust into early retirement, this some wiggle room. You have calculator you use. McElheny has could be a lifesaver, but you should to work with what you have.”

6 | KIPLINGER’S RETIREMENT REPORT AUGUST 2020 H1924_2020KPF07-1_M insurance that INVESTS IN YOUR HEALTH

A MEDICARE ADVANTAGE MSA PLAN ADDS VALUE TO A HEALTHY LIFESTYLE

KEY FEATURES OF THE MSA INCLUDE: The Lasso Healthcare MSA • A deposit of money from Medicare into your MSA bank account ($3,240 in 2020) (Medical Savings Account) gives you money toward your health • Keep any unused funds at year-end care. You decide how to spend, • $0 monthly premium

save or invest the funds. • No network — access to any Medicare provider

• Special tax advantages

• Earn up to $250 in gift card rewards to major retailers via our health incentives

LassoHealthcare.com/kip | (800) 918-2795

Deposit and deductible prorated for within-year enrollments. 2020 enrollment available in AZ, AR, DC, DE, GA, HI, IL, IN, KS, KY, LA, MD, MN, MS, MT, NC, ND, NM, NV, OH, PA, RI, SC, SD, TX, UT and WY. Lasso Healthcare MSA is an MSA with a Medicare contract. Enrollment in the Plan depends on contract renewal. INVESTING 7 Vanguard Funds to Power a Portfolio

many investors rely on vanguard funds to keep ■ Vanguard Health Care Fund Investor (VGHCX, $212.29) their portfolios diversified and costs low. That’s a shouldn’t be confused with Vanguard’s index fund that strategy you can stick with long term, even if this plays the health care sector. VGHCX is an actively year’s market roller-coaster ride has made you nervous managed fund with a tremendous long-term track in the short run. record of outperformance. After a decent start to 2020, the stock market en- Specifically, VGHCX has a five-year return of 6.2% tered bear territory in the spring as the severity of the annually, which is about half a percentage point better coronavirus pandemic became clear. Wall Street than the category average. More recently, Vanguard quickly recovered in April, but lately we’ve seen signs Health Care has squeaked out a modest 2% gain year- of serious economic distress return—for instance, to-date even as its peers and the S&P 500 index alike when the Dow Jones Industrial Average shed 7% in a have stumbled. single session in mid-June with a drop of more than VGHCX invests in a highly concentrated list of 1,500 points after a gloomy economic outlook from the about 90 health care stocks ranging from mega-cap Federal Reserve. pharmaceutical players such as AstraZeneca to lesser- But one thing remains clear: Over the long term, known growth names. And with experienced manager stocks always trend higher. Bear markets, recessions Jean M. Hynes at the helm of this fund since 2008, in- and even a once-in-a-generation financial crisis cannot vestors can have confidence in an experienced stock keep Wall Street down for good. Vanguard mutual picker who knows how to allocate assets for maximum funds and exchange-traded funds let investors enjoy potential. that long-term growth without paying exorbitant fees. The fund is a tad top-heavy, with more than 40% Whether you’re convinced stocks will keep power- of assets in its 10 largest positions. But that’s not unex- ing higher in the near term or just optimistic that the pected given the comparatively smaller list of holdings next bull market will arrive soon, here are seven Van- than broad-based index funds. guard funds to invest in. ■ Vanguard Mid-Cap Growth Fund (VMGRX, $28.05), an ■ Vanguard U.S. Growth Fund Investor (VWUSX, $53.57), actively managed mid-cap mutual fund, is worth a look the money manager’s oldest growth-oriented mutual for more aggressive investors who want to stray be- fund, has been around since 1959. The actively man- yond the conventional large-cap indexes and instead aged fund concentrates on well-known blue-chip com- seek out hand-picked growth opportunity in the mid- panies that have dominant positions in their industries dle tier of Wall Street stocks. and exhibit strong growth potential. VWUSX’s advisers Mid-Cap Growth’s managers look for strong reve- have built a portfolio of about 260 stocks, screened for nue or earnings growth, along with sustainable com- positive earnings growth and historical outperfor- petitive advantages that will keep a stock growing. mance over the long term. Right now, the focused portfolio of 155 names has The goal of picking the best stocks among domestic about a third of all its assets in tech stocks such as large-cap corporations is perfect for a bull market en- RingCentral and Lam Research. Top holdings also vironment when stocks have the wind at their backs. include discount retailer Dollar General and auto However, since inception, this Vanguard fund has aver- parts merchant O’Reilly Automotive. aged 10.9% annual total returns over the past 15 years— Many of the aforementioned stocks are a little larger more than a percentage point better than the category than the typical mid-cap, which ranges from $2 billion average. This tremendous track record shows VWUSX to $10 billion in market value. Many others do fall has what it takes to thrive in any environment. within that window, however, and all of these names Case in point, the fund is up an impressive 17% are smaller than more recognizable mega-caps. in 2020 even as the broader S&P 500 fell nearly 5%. That results in a bit more volatility, but if you be- That’s thanks to a focus on Silicon Valley giants; tech- lieve the bull market is here again to stay, VMGRX is nology represents more than 40% of the portfolio, one of the best Vanguard funds you can buy to capture led by stocks like Amazon.com, Microsoft and Apple. that growth.

8 | KIPLINGER’S RETIREMENT REPORT AUGUST 2020 ■ Vanguard Small-Cap Growth Index Fund Admiral While the portfolio contains just 40 stocks, VDIGX (VSGAX, $70.74) looks beyond the biggest stocks for relies less on the top 10 holdings compared with some the most growth potential by going after the smallest of the more diversified Vanguard funds on this list. growth names on Wall Street. Those holdings right now include insurer United- As the name implies, this is a low-cost passive fund Health Group, beverage giant Coca-Cola and fast-food that is benchmarked to an index of about 575 U.S.- king McDonald’s. listed small-cap stocks. Although index provider CRSP ■ Vanguard Emerging Markets Select Stock Fund isn’t quite as well-known as MSCI—the firm that up (VMMSX, $21.04) is an actively managed fund that until 2013 was benchmarking VSGAX and a few dozen provides investors exposure to emerging markets other Vanguard funds—investors might recognize its stocks outside of the United States in a single holding longer name: the Center for Research in Security at relatively low cost. Sure, there are a few cheaper in- Prices, which is run out of the University of Chicago’s dex funds out there, but particularly in emerging mar- Booth School of Business. kets such as Brazil, Russia, India and China, you might Vanguard Small-Cap Growth is a fairly diversified want to rely on the expertise of a seasoned manager. fund; the top 10 components only make up about 8% of You also might prefer the more focused list of about the fund at present. However, there is a noticeable bias 280 stocks in VMMSX over some other international toward health care, with about 25% of the fund in this funds that cast a tremendously wide net. sector. That’s not necessarily a bad thing, given the big It’s worth noting that emerging market stocks tend growth potential in smaller health care plays, but it’s to be more volatile than domestic companies or even something investors should be aware of. foreign investments in developed countries such as ■ The Vanguard Dividend Growth Fund (VDIGX, $28.57) Canada or Europe. However, emerging markets unde- is a great option for investors looking for a regular pay- niably have potential for greater long-term returns as day, as well as strong fundamentals in their invest- these regions see increased productivity, a rising mid- ments. This fund is designed around roughly 40 high- dle class and big economic gains while they try to catch quality dividend payers hand-picked for their ability up to the U.S. and its peers. to both maintain and grow distributions over time. About a third of the fund’s assets are in China. That Growing dividends can signal that a company is includes popular Chinese stocks you’ve heard of such on the upswing, as you can’t set aside significant (and as Alibaba Group, as well as smaller picks you might increasing) amounts of cash for shareholders if your never discover otherwise. operations are running in the red or future profits ■ Vanguard Total World Stock Index Fund Admiral aren’t a sure thing. So it stands to reason that a focus (VTWAX, $27.08) checks “all of the above” if you can’t on firms raising their payouts means exposure to in- decide between these flavors of tech vs. health care, vestments that are delivering more income each year. smaller vs. larger stocks, or domestic vs. international markets. As the name implies, this Vanguard mutual fund has the whole world in its hands, with a stagger- ing 8,400 total holdings across the U.S., other devel- Fund Size and Cost oped international markets such as Japan and the ASSETS UNDER EXPENSE ETF TICKER United Kingdom, and emerging markets in Asia and MANAGEMENT RATIO VERSION beyond. If you believe global stocks generally are going VWUSX $30.5 billion 0.39% None to trend higher in the next bull market, this Vanguard VGHCX $48.4 billion 0.32% None fund ensures you’ll leave no stone unturned in the quest for profits. VMGRX $4.4 billion 0.36% None A little more than half of the assets of this fund are VSGAX $25 billion 0.07% VBK allocated in American equities, including big-name VDIGX $40.5 billion 0.27% None stocks such as Microsoft and Johnson & Johnson. That VMMSX $561.5 million 0.93% None outsize exposure is to be expected given the domi- nance of the U.S. economy, and investors who truly VTWAX $18.3 million 0.10% VT want to invest in the next bull market would be foolish

SOURCE: VANGUARD; DATA AS OF JULY 7, 2020 to exclude Wall Street’s biggest names from their port- folio. K JEFF REEVES

AUGUST 2020 KIPLINGER’S RETIREMENT REPORT | 9 TAXES The Lowdown on Capital Gains Tax Rates

selling taxable investments held for more than a and $6,000 is taxed at 15%. If the couple instead has year has tax implications. Long-term gains from $110,000 of taxable income, the 0% rate doesn’t apply, the sale of stocks, mutual funds and other capital and the full $12,500 of gains and dividends is taxed at assets are taxed favorably at 0%, 15% or 20% compared 15%. with the top 37% tax rate on ordinary income. A few notes of caution: Gains and dividends taxed These rates for long-term capital gains are based on at 0% do raise your adjusted gross income. Also, your set income thresholds that are adjusted annually for in- state income tax bill may rise, as many states tax gains flation. For 2020, the 0% rate applies to taxable income as ordinary income. of up to $40,000 on single returns, $53,600 for head- You may have heard about indexing capital gains for of-household filers and $80,000 for joint filers. The inflation. This intriguing concept, which has been ban- 20% rate starts at $441,451 for single filers, $469,051 for died about for decades, has gained steam recently. heads of household and $496,601 for joint filers. The Here’s how it would work: Taxpayers would be able to 15% rate is for taxable incomes between the 0% and increase their tax basis for capital assets by the rate of 20% break points. These rates also apply to qualified inflation between the purchase and sale dates. Say you dividends. Short-term gains from the sale of assets held bought stock in early 2012 for $20,000 and sold it for for a year or less are taxed at ordinary income rates. $35,000 in early 2020. Using one inflation measure Single taxpayers with modified adjusted gross in- supporters have proposed, the GDP deflator index, comes over $200,000 and joint filers over $250,000 your $20,000 original cost basis would jump to owe a 3.8% surtax on net investment income, on top $22,860. Absent indexing, you would have a $15,000 of the 15% or 20% capital gains rate. The surtax is due capital gain ($35,000 - $20,000). With indexing, your on whichever is smaller: NII or the excess of modified gain is $12,140 ($35,000 - $22,860). AGIs over the set income thresholds. NII includes, Capital gains indexing has lots of complexities, among other things, taxable interest, dividends, gains, starting with choosing the appropriate inflation index. passive rents, annuities and royalties. Also, tax basis isn’t always static, so adjusting for infla- For 2020, if taxable income other than long-term tion gets tricky. Though Congress has no stomach to capital gains or dividends does not exceed $40,000 for enact capital gains tax relief now, don’t be surprised if singles or $80,000 for joint filers, then dividends and Donald Trump’s re-election campaign supports index- long-term capital gains aren’t taxed until they push you ing or some other form of capital gains tax relief. over those thresholds. Here are three scenarios to Joe Biden has a different idea for taxing capital illustrate the rules. In the three examples, we gains. He wants to increase the tax rates for the have a married couple with $12,500 of wealthy. His plan would tax capital gains as qualified dividends and long-term ordinary income for filers earning over capital gains, which are in- $1 million. He also wants to raise cluded in taxable income. the top ordinary income tax rate In the first example, back to 39.6% for people the couple has making more than $65,000 of tax- $400,000. As a result, able income. under his tax plan, The full filers reporting $12,500 of gains over $1 million and dividends are in income could taxed at 0%. Now as- pay a 43.4% fed- sume the couple has taxable eral tax rate on income of $86,000; $6,500 of their long-term capital the gains and dividends ($80,000 gains compared with 23.8%

- ($86,000 - $12,500)) is taxed at 0%, now. K JOY TAYLOR ISTOCKPHOTO.COM

10 | KIPLINGER’S RETIREMENT REPORT AUGUST 2020 CAREER less, Too”), as well as a resume that will get past the computerized applicant tracking system, which most Land a New Job With major companies use to winnow down candidates. As a result, 75% of resumes are never seen by human an Ageless Resume eyes, and if yours does get past these electronic gate- keepers, the initial glance at a resume is just 10 sec- onds, says Amanda Augustine, a certified professional career coach and resume writer with Talent Inc., a career services company.

Emphasize Recent Experience In an age of social media, networking through profes- sional and personal contacts to land a job matters more than ever, but to secure the initial interview you’ll still need a resume. Howard had to submit one even though he knew someone who worked at the company that ultimately hired him. Professional resume writers describe three types of resumes: the chronological (organized by dates), the functional (jobs grouped according to skills), and a hybrid of the two, which Augustine considers the ideal format. Using a functional resume can signal to em- working as a real estate broker wasn’t giving ployers that you are trying to hide something, whether Cort Howard the steady income he wanted or it is age or employment gaps, Augustine says. enough time with his family, so last October he At the same time, older job seekers should provide began looking for a new job. In addition to networking, only select details to guard against age discrimination, Howard, 54, hired Joe Konop, owner of One Great Augustine advises. “Cut back on what you’re sharing,” Resume, to help him craft a resume that highlighted she says. Generally, it’s best to remove dates of gradua- his relevant experience and skills, not his age. tion unless they are within the past year or two. The ageless resume omitted key dates while empha- Your resume also shouldn’t list every job you’ve ever sizing Howard’s sales experience and the 15 online had. Only the past 15 years of work experience belong technology courses he’d recently completed. The $350 on the resume. If a position you’ve held in that time Howard spent for the resume, cover letter and an ed- began earlier—say, in 2000, lasting until 2013—include ited LinkedIn profile produced a big payoff: By late it anyway. Older relevant experience can be noted in December, Howard landed a salaried position as a a short paragraph with the heading “earlier roles,” territory sales manager with a software manufacturer. “career notes” or “earlier career experience” to show Even in the best of times, older workers may have the progression of your career, Augustine says, but de- difficulty attracting prospective employers, who typi- scribe the role or title without dates. cally prefer tech-savvy younger generations that can Age discrimination isn’t the only reason to limit be hired for less money. But these are not the best of work experience from long ago. Technology and indus- times. Between February and May, unemployment tries evolve rapidly. From an employer’s perspective, soared from 3.5% to 13.3% because of the pandemic. it’s not just what you know that counts but how cur- Although some businesses have started hiring, many rent that knowledge is, says Rich Feller, a professor of jobs may be slow to return, if they do so at all. counseling and career development at Colorado State Whether you’re looking for work later in life to ad- University and a past president of the National Career vance your career, supplement retirement income or Development Association. replace a job lost to the pandemic economy, you’ll need to market yourself to prospective employers without Highlight Your Selling Points scaring them off. That will require a LinkedIn account A resume is a marketing tool with you as the marketed

ISTOCKPHOTO.COM (see next page for “Make Your LinkedIn Profile Age- product, so think about the details that might catch an

AUGUST 2020 KIPLINGER’S RETIREMENT REPORT | 11 employer’s eye. A professional summary at the top of tive assistants, retail salespeople and security person- the first page or a list of key skills in the top third of nel. “With higher-skill jobs, recruiters are looking for that page should give a quick snapshot of why you skills and fit rather than demographics,” making age qualify for the position you seek. discrimination less likely, says Patrick J. Button, an as- The resume should also tout major accomplish- sistant professor of economics at Tulane University. ments at each job. Hiring managers want to see how Still, age discrimination only worsens in a bad econ- you have used your skills and qualifications to the ben- omy. “When unemployment increases, discrimination efit of past employers. Did you generate savings and increases,” he says. Many employers believe “it’s more profits, or develop new ideas and products? Show what difficult for older workers to work safely” during the you accomplished for a particular employer such as pandemic. Recruiters and hiring managers think older “grew sales by 25%” or “saved the company 30%,” says workers will be bored in a job that requires less experi- Dawn Fay, senior district president for the Northeast ence and won’t stay long, adds Augustine. at staffing agency Robert Half. Although it’s easy to fall into the trap of believing Keep it short; limit the resume to two pages. “‘nobody’s going to hire me, I’ve been around too long,’ don’t assume the objection,” Fays says. “You have so Use Key Words much knowledge and experience to add value to an Although it’s useful to have a base or foundational re- organization.” K HARRIET EDLESON sume, make sure it will “suit the role you are going af- ter today,” Augustine says. That will require tailoring the resume as much as possible to each position. Be- Make Your LinkedIn Profile cause that takes more time, only apply for jobs that are Ageless, Too a good fit. “Slow down to go faster,” Fay says. “You may apply to fewer positions but may get more traction.” In a digital world, a LinkedIn profile rules. Although One way to tailor a resume is to pick up many of the it began as a networking tool, the profile, which de- same key words used in the ad to describe the skills, scribes a person’s experience and accomplishments, training, education and experience the position re- has morphed into something more. quires. “Go into the job description and take out all “LinkedIn is clearly the new resume,” says Rich Fell- the competencies and put them in your resume,” Feller er of Colorado State University. “Employers look for that first. They think you’re not tech savvy if you don’t says. Check for descriptors, even the kind of lingo used have one. It’s a screening device. It was the college de- in the job description, adds Fay. gree; now LinkedIn is.” The more key words the resume has, the better the Some employers encourage candidates to apply chances are that it won’t be eliminated by the applicant for a job through LinkedIn, and it’s also where recruit- tracking system in a search for skills and experience ers go to fill positions. If your LinkedIn and Facebook that match the position. But don’t just parrot essential profiles don’t match your resume, the discrepancies will raise red flags, and recruiters look for them. words; you must be able to document the skills you Here’s how to ensure your social media profiles and have, experts say. your resume tell the same “ageless” story: If you don’t have a key requirement, take a course ■ Change the privacy settings on your social me- in it right away. “You have to demonstrate that you’re dia accounts so that any information that might give learning,” Feller says. Search coursera.com for an online away your age, such as photographs of you or your class from a top-tier university, or obtain a certificate grandchildren, is limited to friends and family. in a specific technology or area of expertise that im- ■ If your resume is limited to the last 15 years or so, edit your social media profile to match. “Don’t focus proves your qualifications. This is particularly impor- on the length of time you’ve been in the field,” says tant if you are segueing into a related or different field. One Great Resume’s Joe Konop. If so, you may want to research the qualifications em- ■ If you’re not working full-time, keep your skills ployers seek. Websites like onetonline.org describe dif- sharp with temporary, consulting or pro bono work ferent types of work and the specific skills required. and webinars. Just as you would include those things Keeping skills current is a good way to go even if on a resume, make them part of your LinkedIn pro- your career isn’t changing direction. Researchers have file. “We see people get hired permanently from doing consulting work,” says Dawn Fay of Robert Half. found that age discrimination is higher for women and for those in lower-skilled positions such as administra-

12 | KIPLINGER’S RETIREMENT REPORT AUGUST 2020 Make your home more comfortable than ever “To you, it’s the perfect lift chair. To me, it’s the best sleep chair I’ve ever had.” — J. Fitzgerald, VA NOW also available in Genuine Italian Leather (and new Chestnut color)

Three Chairs in One Sleep/Recline/Lift

Pictured: Leather chair chestnut ACCREDITED BUSINESS color. Chestnut color also A+ available in Duralux fabric

You can’t always lie down in bed and sleep. back pressure relief, to prevent back and muscle Heartburn, cardiac problems, hip or back pain. The overstuffed, oversized biscuit style back aches – and dozens of other ailments and and unique seat design will cradle you in comfort. worries. Those are the nights you’d give anything Generously filled, wide armrests provide enhanced for a comfortable chair to sleep in: one that reclines arm support when sitting or reclining. It even has to exactly the right degree, raises your feet and a battery backup in case of a power outage. legs just where you want them, supports your head White glove delivery included in shipping and shoulders properly, and operates at the touch charge. Professionals will deliver the chair to the of a button. exact spot in your home where you want it, unpack Our Perfect Sleep Chair® does all that and more. it, inspect it, test it, position it, and even carry the More than a chair or recliner, it’s designed to packaging away! You get your choice of Genuine provide total comfort. Choose your preferred Italian leather, stain and water repellent custom- heat and massage settings, for hours of manufactured Duralux with the classic leather look soothing relaxation. Reading or watching TV? or plush microfiber in a variety of colors to fit any Our chair’s recline technology allows you to pause decor. New Chestnut color only available in the chair in an infinite number of settings. And Genuine Italian Leather and long lasting best of all, it features a powerful lift mechanism Duralux. Call now! that tilts the entire chair forward, making it easy to stand. You’ll love the other benefits, too. It The Perfect Sleep Chair® helps with correct spinal alignment and promotes 1-888-834-8953 Please mention code 113282 when ordering. REMOTE-CONTROLLED EASILY SHIFTS FROM FLAT TO Chestnut A STAND-ASSIST POSITION Genuine Leather

Chestnut Burgundy Tan Chocolate Blue Long Lasting DuraLux

Footrest may Burgundy Cashmere Chocolate Indigo vary by model DuraLux II Microfi ber

Because each Perfect Sleep Chair is a custom-made bedding product, we can only accept returns on chairs that are damaged or defective. © 2020 fi rstSTREET for Boomers and Beyond, Inc. 46547 Information to Act On

Taxes Health Care ■ Everyone gets RMD roll- ■ Nursing homes cannot seize your stimulus money. The IRS over relief. The IRS has really has told nursing homes in no uncertain terms that economic in- delivered this time. In a new come payments are off limits and cannot be intercepted to pay ruling, the agency now says a resident’s bill. that anyone who took a re- “The payments are intended for recipients, even if a nursing quired minimum distribution home or other facility or provider receives the payment, either in 2020 from an IRA or 401(k) directly or indirectly by direct deposit or check,” the IRS says. account can repay the with- The Social Security Administration has also ruled that the drawn funds—yes, even early payments belong to the recipient. A representative payee man- birds who took the distribution in January. aging another person’s benefits must disclose the payment and The repayment will be treated as a tax-free rollover and is not hand over the money to the beneficiary if the person wants it. subject to the “one-rollover-every-12-months” rule. Beneficiaries ■ COVID-19 drug remdesivir will soon be released. The price of inherited IRAs also can roll over their 2020 RMDs tax free, and tag for a five-day treatment course: $3,120. That’s how much pri- the rollover deadline has been extended. Now, retirees who took vate insurers in the U.S. will pay. Drugmaker Gilead Sciences will an RMD between Jan. 1 and June 30 have until Aug. 31, 2020, to discount the price of remdesivir for Medicaid and Veterans Affairs repay the distributed funds. hospitals, after receiving fed- ■ IRS paying interest on delayed refunds. If you filed your eral help to develop the drug. 2019 return by this year’s extended deadline of July 15 and Discounts will also be available haven’t received your tax refund, the IRS will pay you interest on to other countries, with those in your overpayment from April 15, 2020, to the date of the refund. the developing world paying Many taxpayers, particularly those who filed paper returns, are substantially less. Gilead says still waiting for their money as the IRS works through a backlog of the treatment will more than returns that have yet to be processed. The interest rate paid on pay for itself by reducing the refunds, which is adjusted quarterly, is 5% for the second quarter, length of hospital stays. Short- ending on June 30, 2020, and 3% for the third quarter, ending ening a patient’s stay by four Sept. 30. The interest will compound daily, and interest payments days could save up to $12,000. may arrive separately from the refund. But note the pandemic’s potential long-term impact on drug pricing. Calls for greater transparency and lower costs will only get louder. The main question drugmakers will have to answer: If Check Out Kiplinger.com’s they can keep prices in check to help fight COVID-19, why not can- cer, diabetes or other public health threats? Don’t be surprised if New Design Congress revisits the issue after the November elections.

Kiplinger.com has a sleek new “mobile-first” Travel design. The entire website has been fully ■ Cruises aren’t ready to sail. All members of the Cruise Lines redesigned to adapt automatically to whatever International Association are voluntarily suspending cruises from device you prefer to use—cellphone, tablet or U.S. ports at least until Sept. 15 because of the pandemic. This in- desktop. The new design makes it easier to find cludes scheduled voyages of well-known cruise lines like Carnival, the articles you’re looking for. Clean, light pages Princess, Disney, Holland America, Norwegian and Royal Carib- help the site load quickly, and moving around it bean. The “no sail order” was put in place by the Centers for Dis- is faster than ever. What hasn’t changed is ease Control and Prevention on March 14 and has already been the trustworthy advice and practical guidance extended three times. The cruise industry is consulting with the you’ve come to rely on from Kiplinger. Visit www. CDC to make ocean-going voyages possible once it’s safe for kiplinger.com to experience the enhancements them to resume. Even then, the CDC may not recommend cruises yourself. for older adults and travelers with underlying health issues, who

are at greater risk of dying from the virus. ISTOCKPHOTO.COM (4)

14 | KIPLINGER’S RETIREMENT REPORT AUGUST 2020 ■ American visitors are banned from Europe. The Euro- try, as long as they self-quaran- pean Union reopened to visitors on July 1 but only to citizens tine for 14 days. of countries where the number of coronavirus cases are stable ■ Airlines resume flights. or decreasing. The United States did not make the cut. The 15 Most airlines require wearing a countries listed will include China if it approves a reciprocal mask during the flight and at agreement, which is still pending. The list is a recommenda- the airport, but policies vary for tion to EU member nations, not a requirement, and will be up- leaving middle seats vacant. dated every two weeks. The United Kingdom, which left the For example, Southwest extended its ban on the sale of middle EU, allows Americans and other foreign visitors into the coun- seats to Sept. 30, but American Airlines fills flights to capacity.

TAX TIP Are You Withholding with half the year gone, you may not be able to with- hold enough to offset your entire tax liability, leaving Enough in 2020? you with a hefty tax bill next year. And requesting a withholding change in the midst of a pandemic, when If you’re like many high-income retirees who don’t Social Security’s offices may not be fully operational, need a required minimum distribution to live off of, you is impractical. probably don’t make quarterly estimated payments Social Security also only allows set withholding but instead have your entire annual federal and state amounts of 7%, 10%, 12% or 22%, and doesn’t with- tax obligation withheld from a distribution. hold for state taxes. A pension or annuity will withhold “Withholding, even if it’s occurring in December, is for both, with no set amounts, but many of the other treated as if the taxes were paid throughout the year,” obstacles still remain. says accountant Ted Phillips of The DelRay CPA in Al- “You’ll have to remember to change them so that exandria, Va. you don’t create the same large withholding in 2021,” But if you’ve skipped taking an RMD this year, there says Naomi Ganoe, a CPA and managing director for goes your withholding strategy, and if you’ve missed CBIZ MHM in Cleveland, Ohio. the July 15 federal tax filing deadline for making esti- Before deciding which tactic to take, Ganoe sug- mated quarterly payments, it’s already too late to gests looking at ways to reduce your income tax liabil- avoid interest and a penalty on any state or federal ity for the year, which already may be lower than you taxes owed for the first half of the year. think. “By skipping the RMD, the tax liability will go You can avoid further pain by making estimated down,” she says. payments for the next two quarters, beginning with You can nudge the tax bill down further, she says, the third-quarter deadline of Sept. 15. “As long as by making several years worth of tax-deductible chari- you’re paying 90% of your 2020 taxes in estimated table contributions in 2020 from a taxable account. payments, you’re in a safe harbor,” says Phillips. They would have to be large enough to itemize. (In Another safe harbor is to base those estimated 2020, there is a $300 above-the-line deduction in payments on your 2019 tax liability and pay 100% of addition to the standard deduction of $24,800 for that. If your adjusted gross income in 2019 was more married couples filing jointly or $12,400 for single fil- than $150,000, you should pay 110% of your 2019 tax ers.) With the stock market still volatile and coronavi- liability to avoid penalties and interest, Phillips says. rus cases rising once more, consider selling off some You could also increase withholding amounts from investment losses to offset any taxable gains. your Social Security benefit using IRS Form W4-V irs.( Run the numbers and “get an idea of what your true gov/pub/irs-pdf/fw4v.pdf) or a pension or annuity with tax liability is for 2020,” Ganoe says. From there, “you Form W-4P (irs.gov/pub/irs-prior/fw4p--2020.pdf), but can look at any of these options or a hybrid of them.”

AUGUST 2020 KIPLINGER’S RETIREMENT REPORT | 15 FROM THE MAILBOX Your Questions Answered

Which Benefit Will She Get? The FDIC Still Protects Depositors If I postpone taking Social Secu- I have seen various publications claiming that savings rity to age 70, will my wife be accounts and certificates of deposit are vulnerable and A able to collect half of my age 70 “subject to seizure” because “due to a new law” custom- Q benefit or will it be half of my ers are no longer treated as depositors but rather as unse- full benefit that I would have re- cured creditors of the bank should it fail. Is there any truth ceived at age 66½? to this claim, and if so, what has happened to FDIC insur- If you delay taking Social Security until age 70, your ance, which is supposed to protect depositors? wife will still only collect half of the benefit for your These assertions are false. The Federal Deposit Insur- full retirement age of 66½, not half of the much larger ance Corporation says Monetary Gold, a California- delayed benefit you receive at 70. However, if you die based precious-metal trading company, is behind these before she does, she is then entitled to a survivor’s ben- spurious claims and has demanded that the company efit that is the same amount as the benefit you earned stop using this scare tactic in its marketing materials to by delaying until age 70. So, in essence, the delay only sell more gold products. benefits your spouse if she survives you. Rest assured, if your savings, checking and money market deposit accounts, as well as CDs, are in a feder- RMDs and Medicare Surcharges ally insured U.S. bank, up to $250,000 is protected per I take RMDs each year. You suggested that this year retir- depositor. Any funds in excess can be held at a differ- ees who don’t need their 2020 RMD should consider con- ent bank to be protected. Nearly all U.S. banks are fed- verting to a Roth an amount equal to that waived distri- erally insured. To confirm if your bank is one of them, bution. But won’t that affect the Medicare premium ask a bank representative, look for the FDIC sign at the surcharge for both me and my wife? bank, call the FDIC at 877-275-3342 or use the FDIC’s You are right to consider the effect of a Roth conver- “Bank Find” tool (research2.fdic.gov/bankfind/index.html). sion on your Medicare premium. Those surcharges, also known as income-related monthly adjustment How to Cash, Convert or Buy U.S. Savings Bonds amounts, are paid in addition to the Part B or Part D My generation purchased U.S. savings bonds, but many premium depending on adjusted gross income. banks and credit unions don’t cash or handle them at all. IRMAAs first kick in for married couples filing How can I convert, cash in or build those savings further? jointly with $174,001 ($87,001 for single filers) in AGI To cash your paper savings bond, download and fill out and continue to rise through four more income tiers FS Form 1522 (treasurydirect.gov/forms/sav1522.pdf) from with the following thresholds: $218,001 ($109,001), Treasury Direct. To request that a form be sent to you, $272,001 ($136,001), 326,001 ($163,001), and $750,000 email [email protected] or call 844-284- or more ($500,000 and above). If the Roth conversion 2676. Follow the instructions on the form; then mail it puts you into a higher income tier that triggers the sur- and the paper savings bond to Treasury Direct (check charge or an even higher surcharge than you pay now, the form for the appropriate address, which will vary it will hurt. In 2020, those monthly surcharges ranged depending on the bond series). Once your request is from $202.40 at the lowest tier to $491.60 at the high- processed, the money will be deposited directly in your est. The base premium is $144.60. bank account. IRMAAs are based on your income two years before, Paper savings bonds are no longer sold, but you can so the surcharge won’t hit you until 2022. To make buy electronic savings bonds online at Treasury Direct matters more complicated, Medicare’s 2020 income (treasurydirect.gov/RS/UN-AccountCreate.do). You can also tiers are not the same ones the IRS uses to determine convert your paper savings bonds online using Trea- your 2020 income tax bracket. So there are really two sury Direct’s Smart Exchange program. K sets of income brackets—the IRS’s and Medicare’s—to consider before deciding how much money to convert DO YOU HAVE A RETIREMENT-PLANNING QUESTION? to a Roth or if it makes sense to do so at all. EMAIL IT TO [email protected].

16 | KIPLINGER’S RETIREMENT REPORT AUGUST 2020 ESTATE PLANNING An Advocate for End-of-Life Care

imagine you had a stroke and can barely speak. Your doctor suggests an experimental drug that is risky but could be highly effective. Your daughter wants you to try it, despite the risk and cost. Your hus- band is hesitant but the state gives him higher priority in decision making. If you could communicate, you would say, “yes, absolutely.” It’s a scenario no one wants to think about, but hav- ing a health care power of attorney (also known as a medical power of attorney, proxy or agent) that desig- nates who will make health care decisions for you according to a New England Journal of Medicine review. when you no longer can is essential. Without a health Yet not all states have a process for handling challenges care proxy, your written instructions for future medi- to the surrogate’s choices, and some only establish de- cal care may not be carried out if you become incapaci- cision-making priority for life-sustaining treatment, tated. Like a living will or a do-not-resuscitate order, leaving a void for more routine matters. a health POA is a type of advance directive and one of As a last resort, a family member or someone else several forms addressing different medical decisions, could file a petition to become your guardian. At this including end-of-life care (see next page, “How to Cre- juncture, “you lose very important rights,” says Cathe- ate and Share Advance Directives”). For example, if rine McQueen, a principal attorney with Offit Kurman you had dementia or were critically ill, a proxy could: in Bethesda, Md., and it “can make the process longer ■ Consent or refuse diagnostic, surgical, or thera- and more expensive.” peutic procedures. If there is a dispute over guardianship, a court may ■ Approve or deny admittance to a nursing home appoint a third-party attorney. How that lawyer will or other facility. represent your interests will vary. For example, Mary- ■ Endorse post-mortem procedures such as an land law requires the guardian to advocate for what the autopsy or organ donation. person wants, no matter what, while Virginia law di- Few Americans complete advance directives, ac- rects them to advocate for what is in the person’s best cording to Dr. Timothy Quill, a national expert on palli- interest, says McQueen, who specializes in these cases. ative care and founding director of the University of One positive aspect of guardianship is accountabil- Rochester Palliative Care School of Medicine Program ity. The guardian must file a detailed report annually in New York. He estimates no more than 35% of people (or more frequently, depending on the judge’s order) with serious illnesses have advance directives. that lists care decisions and expenditures.

Guardianship or Surrogacy Whom Should You Choose? A health POA is your assurance that if your family can’t For people who have a health proxy, Wilson encour- agree on your care, the decision won’t fall to a court- ages them to talk with the person about their values appointed guardian or surrogate. “The big thing they and expectations. “It’s an uncomfortable position to (POAs) protect against is having to have a guardianship be in if you haven’t had that conversation,” he says, where the courts take your rights and give them to one that can lead to guilt for the proxy when forced someone else,” says Ryan Wilson, an elder law attorney to make an important decision, such as whether to au- in Silver Spring, Md. thorize life-prolonging treatments like a feeding tube. Before it gets to that stage, most jurisdictions allow The American Bar Association offers guidelines for default surrogates to make decisions, and over half of selecting an agent to carry out your wishes in a POA

ISTOCKPHOTO.COM them establish a hierarchy for relatives and friends, and notes that some states prohibit health care provid-

AUGUST 2020 KIPLINGER’S RETIREMENT REPORT | 17 ers and care facility operators from serving as a POA, have more choice over their end-of-life treatment, offers unless that person is a spouse or close relative. a general values worksheet, as well as a dementia values Wilson offers another caveat to consider: “Some toolkit, on its website (compassionandchoices.org) to help people make it a co-power of attorney, which can you clarify your priorities. cause problems.” He suggests picking one person as a primary proxy and another as a secondary if the pri- Types of POAs mary is unavailable or unwilling to serve. McQueen You will also need to choose one of two types of health agrees. She sees cases where a parent does not want POAs. A durable POA takes effect immediately while a to choose between children and makes them all prox- springing POA becomes valid only when the person is ies. If “one is a problem child and the other two can incapacitated. Which one is better? “It depends on the never get an agreement from the third to make a de- comfort level with whom the agent is,” Wilson says. cision,” she says, the siblings are forced to seek A springing POA requires certification by one or two guardianship. medical professionals, depending on state law, before While you cannot anticipate every potential sce- the agent can make decisions. nario, the more you can specify how you would like “In an emergency,” Wilson says, “that process may to be treated, the better. Compassion & Choices, a seem like a long time,” but “the extra hoop gives some national nonprofit that advocates letting individuals people peace of mind.” K ANN MARIE MALONEY

How to Create and Share Advance Directives

When John Hurley was in his early California School of Nursing. your intentions. Make copies of 50s, he sat down with his parents You may not need an attorney your advance directives and dis- to learn how they wanted to be to draw up advance directives, in- tribute them to your primary care cared for at the end of their lives. cluding a health POA. Hospitals physician and other doctors you At the time, both were in their early and some nonprofit organizations consult regularly. The documents 80s and had Parkinson’s disease. often have free forms that you can should be scanned and added to Now 64 and a nurse for almost use, but check that your state rec- your electronic medical record. Your 40 years, Hurley knew how impor- ognizes them and if they need to attorney, health care agent and du- tant advance directives could be. be witnessed, notarized or both. rable power of attorney (the per- After hearing what his parents The American Bar Association’s son you’ve named to handle your wanted, he turned to nonprofit or- form (ambar.org/HealthCarePOA), financial affairs if you are unable) ganization Aging With Dignity and for example, is valid in most states should all have copies as well. its Five Wishes program (five except Indiana, New Hampshire, Avoid storing the documents in wishes.org), which is a complete Ohio, Texas and Wisconsin. Five a safe or locked file cabinet where approach to discussing and docu- Wishes is also recognized in most no one can access them when menting end-of-life care with ad- states and the District of Columbia they’re needed, and make sure your vance directives. The program but needs an additional form in In- family knows where they’re kept. helped him and his siblings under- diana, Kansas, New Hampshire, Like any legal document, your stand the kind of life-saving mea- Ohio, Oregon and Texas. directives may need updating. sures his parents wanted. An attorney might charge $100 Charles Sabatino, an elder law at- His parents have since passed or more to draw up the documents torney with the American Bar As- away but had felt secure that their whereas online advance directive sociation, suggests doing so when family understood their wishes. forms like Five Wishes cost $5. any one of the five D’s occurs: “Who do you want to be the author Whichever path you choose, a new decade of life, death of a of your final days, a stranger or share the documents and your loved one, divorce, a new medical you?” asks Hurley, now an assis- choice of health proxy with family diagnosis or a decline in health. tant professor at the University of members so that everyone knows K HARRIET EDLESON

18 | KIPLINGER’S RETIREMENT REPORT AUGUST 2020 Introducing the future of personal transportation.

10”

e Zinger folds to a mere 10 inches.

It’s not a Wheelchair... It’s not a Power Chair... It’s a Zinger! More and more Americans are reaching the age to tables or desks. The controls are right on the where mobility is an everyday concern. Whether steering lever so it’s simple to operate, and its from an injury or from the aches and pains that exclusive footrest swings out of the way when you come from getting older– getting around isn’t as stand up or sit down. With its rugged yet lightweight easy as it used to be. You may have tried a power aluminum frame, the Zinger is sturdy and durable chair or a scooter. The Zinger is NOT a power chair yet convenient and comfortable! What’s more, it or a scooter! The Zinger is quick and nimble, yet easily folds up for storage in a car seat or trunk. it is not prone to tipping like many scooters. Best Think about it, you can take your Zinger almost of all, it weighs only 47.2 pounds and folds and anywhere, so you don’t have to let mobility issues unfolds with ease. You can take it almost anywhere, rule your life. It folds in seconds without tools and providing you with independence and freedom. is safe and reliable. It holds up to 275 pounds, and Years of work by innovative engineers have it goes up to 6 mph and operates for up to 8 miles resulted in a personal electric vehicle that’s truly on a single charge. unique. They created a battery that provides Why spend another day letting mobility issues powerful energy at a fraction of the weight of most hamper your independence and quality of life batteries. The Zinger features two steering levers, Zinger Chair® one on either side of the seat. The user pushes Call now and receive a utility basket both levers down to go forward, pulls them both up absolutely FREE with your order. to brake, and pushes one while pulling the other to turn to either side. This enables great mobility, 1-888-796-0588 the ability to turn on a dime and to pull right up Please mention code 113283 when ordering.

The Zinger Chair is a personal electric vehicle and is not a medical device nor a wheelchair. Zinger is not intended for medical purposes to provide mobility to persons restricted to a sitting position. It is not covered by Medicare nor Medicaid. © 2020 fi rst STREET for Boomers and Beyond, Inc. 85218 YOUR FAMILY Don’t Be a ‘Helicopter Child’

so-called “helicopter parents” hover over their children, anxious to prevent the slightest discom- fort. But there are also “helicopter children,” who are so worried about their aging parents that they end up infantilizing them. Both come from the same well-meaning place of wanting to protect their loved ones, says Jane Wolf Frances, author of Parenting Our Parents (Rowman & Littlefield, $34), a psychotherapist and founder of ParentingOurParents.org, which offers resources and an online community for children caring for their elderly parents. Like the parent of an infant, “you don’t walk in on day one and know how to do things,” she says. Plus, what may be appropriate for a senior who is physically and cognitively able won’t work for a parent commands. Lewis’s website JoansFamilyBillofRights.com with dementia. When a parent is still functionally and posts the guide and has other resources for patients, mentally capable, “they have a right to make any deci- families and health care professionals. sion they want, even if it’s a bad one, as long as they’re When Lewis visited her mother in the dining room not hurting someone else,” says Howard Gleckman, a of a skilled nursing facility, “I noticed how children, senior fellow specializing in aging policy at the Urban mainly women, hovered over their parents, many of Institute and author of Caring for Our Parents (Saint whom were cognitively impaired,” she says. “They Martin’s Press, $24.95). A decline in memory or taking used all imperative sentences: ‘Sit down, cut your food longer to understand something is not the same as be- with a knife.’ I was doing the same thing.” ing incapable of making a decision, he adds. At that point she decided she would always ask her If big changes are needed, do them in stages. Gleck- mother, who had dementia, questions or make sugges- man knew his father, who had been an accountant, was tions. “I would say, ‘Do you want a napkin on your lap? having trouble managing the bills. “That was an impor- Do you want orange juice?’ It allowed my mother some tant part of who he was. He saw himself as a guy who control because she had lost everything,” she says. knew numbers.” At first, Gleckman balanced the Determining cognitive ability isn’t easy. It’s not un- checkbook but had his father sign the checks. That common—whether from fear or lack of insight—for changed as he became sicker. Still, his father main- older people to believe they are more competent than tained some control while he could. they actually are. If that’s the case, ask your parent if You want to keep in mind the three “T’s”—timing, you can go together to consult a doctor, or you might tenderness and tonality, says Frances. She has first- call your parent’s doctor to make sure the health care hand experience balancing her fears with the needs provider is aware of certain symptoms. But unless of aging parents. Her father was taking care of her there is a real fear for their safety, respect your parents’ mother, who had Alzheimer’s, and they lived across rights, and don’t do things behind their backs. the country in New York while she was in Los Angeles. One question to ask yourself is if your helicoptering She wanted them to move to California, but her mother behavior stems from genuine concern for your parents wasn’t ready. Two and a half anxious years passed be- or a need to ease your own worries or guilt. fore her parents’ doctors and primary caregivers told “We tend to underrate autonomy and overrate Frances her parents couldn’t live independently. safety,” Gleckman says. “Children put older adults in a “That’s when I knew I couldn’t back off,” she says. very comfortable box—you’re old and you’re frail and Barbara Lewis, a marketing consultant who has de- the best we can do for the rest of your life is protect veloped a “Guide for Adult Children of Parents with you. It’s a very easy, unnuanced kind of view, and that’s

Dementia,” says one sign of a helicopter child is issuing not what people are like.” K ALINA TUGEND ISTOCKPHOTO.COM

20 | KIPLINGER’S RETIREMENT REPORT AUGUST 2020 RETIREMENT LIVING health issues that could affect your use and comfort in the car now and in the future? The Right Fit Car “If something is somewhat of an issue, it could get worse as time goes on,” says Jessica Caldwell, execu- for Older Drivers tive director of insights at Edmunds, a car-shopping resource, based in Santa Monica, Calif. when michael lowe turned 50 this year, he bought When Caldwell’s mother bought a car, she priori- a new Subaru Forester that he expects to drive for tized cargo space for a walker and a trailer hitch for the next decade. As a result, he thought ahead to attaching her electric scooter. “My mother is only 63. how his mobility might change and realized bending These mobility issues came on fast and furious,” over was proving to be more of a challenge. Caldwell says. Her mother got the trailer hitch and “Carrying grocery bags from the car to the house something more important: a car with a door that has become a little more difficult the last few years, opens wide, making it easier to get into the vehicle. mainly due to the bending over and reaching down in Test drive whenever possible to gauge comfort and the trunk,” says Lowe, who lives in Phoenix. “My new ease of use. “Seat comfort is hugely important, more so car has a raised trunk and seats so I don’t stoop to pick than ever once you get to a certain stage in your life,” up any goods or groceries anymore. It’s helpful now Brauer says. “You want to be able to drive without but will be vital in a few years.” worrying about lack of support.” The Goldilocks car Choosing the right car is never easy, but older buy- seat is one that’s not too squishy and unsupportive, but ers have the added problem of trying to anticipate how not so snug that it’s difficult to slide in and out. “You changes in lifestyle and health might affect the kind of want to be able to drive a long distance without spe- vehicle they will need over time. Traditionally, August cific components or aspects of the seat impinging on is when car buyers can expect bargains from dealers your comfort,” Brauer says. clearing out old inventory to make room for next year’s The same goes for choosing between a sedan and an models, but this year, the pandemic and recession have SUV. Depending on your height and the ingress of the upended things. Some dealers still have unsold 2019 vehicle, some sedans may seem too short and some models, even as they’re trying to unload 2020 vehicles SUVs will be too tall. to make room for 2021 models. Pay attention to the interior control panels and la- “The ’19s are going to be anvils sitting around on the bels. The larger, clearer and more legible they are, the dealer lots,” says Karl Brauer, executive publisher for better. “Some cars have more complex and busy control Autotrader and Kelley Blue Book, in Irvine, Calif. interfaces versus simple straightforward knobs, big For newer models, the deals will be hard to find buttons and displays that are easier to figure out and as dealers hold the line on price. With sinking demand read,” Brauer says. and shuttered factories during the spring, May inven- As you age, your range of motion can become more tory fell to the lowest point in 18 months, leaving fewer limited. Some vehicle features, like a backup camera or new cars on dealers’ lots. blind spot detection, can compensate so that you don’t need to turn your upper body to look for obstacles. Evolution of Use If you’re in your 50s or 60s, your next car may see you Safety Features through some big changes, from full-time work to re- Backup cameras also improve safety, which older tirement or from athleticism to arthritis. So think drivers often take more seriously. Lowe, for example, about how your use of the car might evolve over the wanted a car with adaptive cruise control that would life of your ownership. Along with features like passen- keep the car at a safe distance from other vehicles on ger capacity, fuel economy, comfort and storage space, the highway despite changing traffic speed. consider the ease with which you can park and get in “I’ve noticed my reactions slowing a little over the and out of the car. last few years,” he says. “This gives me peace of mind Are you a new or expectant grandparent who plans of reacting too late to a decelerating car.” to install a child’s car seat? Do you have older relatives Before John Zimmerman turned 60, he shopped for or friends who need more leg room? Will you be driv- cars based on style. Now that the retired county gov- ing long distances? Do you have back, hip or other ernment official is 64, safety matters more, especially

AUGUST 2020 KIPLINGER’S RETIREMENT REPORT | 21 with all the driving he’s doing. Between helping with Once you know what you want, cast a wide net to his brother’s furniture business and assisting his el- find the best deal, and if the features are similar, con- derly parents, Zimmerman drives twice as many miles sider buying an older model, which dealers will be now than he did before he retired. And sometimes he more eager to unload. carries precious cargo—his grandkids, ages 1 and 3. “If there’s a ’19 of exactly what you want, color and Last year, he bought a 2019 Honda CR-V, a midsize everything, you can negotiate hard,” says Brauer. Keep SUV with a wide body, providing easy access to two in mind that sedans may be more plentiful than pickup children’s car seats, and automatic emergency braking, trucks and SUVs, which had lower inventories earlier blind spot monitoring, rear cross-traffic alert and adap- this summer. tive cruise control. If the dealer with the best price is a long drive away, “It has all the nice features that an older driver ask if the car can be delivered to you. Many dealers are would want,” says Zimmerman, who lives in New offering free touchless delivery during the pandemic. Brunswick, N.J. The rear cross-traffic alert is especially K KATHERINE REYNOLDS LEWIS helpful when backing out of a parking space. “In a su- permarket or mall, it’s hard to see cars zipping past you,” he says. Of course, the newest computerized features can Some Models Seniors Like take some getting used to. Be sure you understand how ■ they work on a prospective vehicle. “A little bit of Honda Fit. This small five-door car has awareness can reduce confusion,” Brauer says. a tall roofline for get- For example, lane-keeping assist forces a car to stay ting in and out easily, within its lane, unless you signal. Drivers who don’t as well as brake assist understand this feature may think there’s something and electronic stability wrong with the car, because it feels like the steering control. MSRP $16,190 wheel’s pulling out of your hands. Not all safety features are high-tech. For Zimmer- ■ Toyota Avalon. man, the height of his new CRV gives him a better view This sedan has a big of the road compared with the Hyundai Sonata he pre- door opening and wide seats, and comes with viously owned. integrated turn signal “It was a nice four-door midsize car, but it was low mirrors, traction con- to the ground and it was hard for my passengers to get trol and lane departure in and out,” he says about his last vehicle. His in-laws warning as standard features. MSRP $35,875 who are in their 90s find the new SUV to be a more manageable height. Zimmerman originally looked at the Toyota RAV-4, ■ Mazda CX-3. Stan- but the model had just been redesigned in 2019. “I’m dard features on this always leery of buying a car the first model year they subcompact crossover redesigned it because it seems like they have bugs they SUV include automat- ed emergency braking, need to get out of it,” he says. blind-spot monitoring and rear cross-traffic Getting a Good Deal alert. MSRP $20,640

With the economy likely to continue struggling for some time, an older buyer in a position to make an ■ Hyundai Santa Fe. offer should still negotiate. Forward collision warn- “Older drivers often have better credit, so they’re ing, lane-keeping as- apt to take advantage of 0% financing and leasing of- sist and adaptive cruise fers,” Caldwell says. But deals on financing are getting control are standard on this compact SUV. scarcer, though Caldwell remains optimistic. “The MSRP $25,900 incentives have to stay because a lot of people are not

in that place to buy,” she says. COURTESY HONDA, MAZDA, TOYOTA, AND HYUNDAI

22 | KIPLINGER’S RETIREMENT REPORT AUGUST 2020

SCIENCE✚ ANIMALS✚ PUZZLES NEW! ✚ PEOPLE✚ THE WORLD’S BEST APPS ✚ PHOTOS WEEKLY MAGAZINE ANIMALS ✚ BOOKS ✚ SPORTS ✚ NEWS & FACTS Pet cat SPORTS PENGUINS ON THE LOOSE FOR YOUNG PEOPLE secrets New ON SCREEN revealed team for Explore p10 Tom Brady a mystery April 3, 2020 • Volume 1, Issue 2 p18 world • $5.99 p22 Making sense of the world

CREATE YOUR OWN RAINBOW COVER! Junior

As life changes around the world, people stay connected in creative ways

p2

MAGAZINETHE BEST FOR CURIOUS KIDS

#rainbowtrail A weekly news magazine for kids 8-14

Invest in your children’s future The Week Junior is brought to you by the publisher of The Week, America’s most trusted newsweekly. The Week Junior’s content is safe, informative, and entertaining. It’s packed with amazing news and stories for the 8- to 14-year-old kids in your life. JUST $1.40 PER To subscribe, visit us at theweekjunior.com/kiplinger2 ISSUE! to get our special introductory rate of just $1.40 per issue!

An exciting read in the mail every week Kiplinger_KIP80.pdf 1 5/29/20 11:59 AM

Free Financial Tools Wealth Management

C

M

Y

CM

MY Worried about your

CY

CMY retirement? It’s time K to talk to

Our free Retirement Planner can help you track your retirement accounts and take control of your financial life. And if you work with one of our advisors*, online or by phone, you also get access to our Smart Withdrawal tool, winner of the 2019 Real Simple Smart Money award. This innovative tool helps you plan for retirement spending just as thoughtfully as you save.

Get started with your free Retirement Planner or talk to an advisor today at:

personalcapital.com/kipretire FREE FINANCIAL TOOLS AVAILABLE ON WEB & MOBILE

*Advisory services are oered for a fee and provided by Personal Capital Advisors Corporation, a wholly owned subsidiary of Personal Capital Corporation. Personal Capital Advisors Corporation is a registered investment advisor with the Securities and Exchange Commission (“SEC”). SEC registration does not imply a certain level of skill or training. Keep in mind that investing involves risk. Past performance is not a guarantee of future return, nor is it necessarily indicative of future performance. The value of your investment will fluctuate over time, and you may gain or lose money. All charts, figures, and graphs depicted are for illustrative purposes only and do not represent an actual client experience. The actor portrayed in this advertisement is not an actual client of Personal Capital Advisors Corpora- tion. For more information, visit www.personalcapital.com/blog/personal-capital-news/personal-capital-named-top-wealth-managers/. © 2020 Personal Capital Corporation. All rights reserved.