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A1. SETTING UP AUTOMATIC RETIREMENT WITHDRAWALS by Barbara Krueger
In 2010, it's again mandatory to withdraw a proscribed portion from your tax-deferred retirement accounts (IRAs, Defined Benefit Plans, 401Ks) and pay the income taxes due on the amount you take out. For those aged 73 and over this is not a new requirement. They had to take out the mandated portion of their tax-deferred retirement investments the year they turned 70 1/2, in 2008 or earlier. But in 2009, the requirement was suspended. Those who turned 70 1/2 last year were given a reprieve and will be required to make their first withdrawal this year, in 2010, when they turn 71 1/2. (If you do not take the required minimum distribution (RMD) by the date required, the amount not withdrawn is taxed at 50%.)
Some people have made voluntary withdrawals from retirement plans – IRAs, Defined Benefit Plans, 401K and other pension plans – before the mandatory age, to supplement income or social security payments. After the ages of 59 1/2, such withdrawals can be made at any time, without penalty. Income taxes have to be paid in the year money is withdrawn, as with any tax-deferred withdrawal.
The IRS publishes a chart to calculate the required minimum distribution (RMD) each year, based on your age and the amount you have in each tax-deferred retirement account. (Roth IRAs have different rules, since they are not tax-deferred accounts.) Each year you age, and your retirement portfolio totals change (they go down because you withdraw money, or your market investments decline, or they go up in spite of withdrawals because of the strength of your investments), so the percentage for calculating your RMD changes, as well.
Is it starting to sound complicated? Well, it can be, and the greater number of separate tax-deferred accounts you have, the greater the complications. Are your accounts invested in different banks, pension companies, or brokerage houses? Complicate it further with a husband and wife each having their own retirement accounts!
So, if the IRS chart says divide 27.5 into your total retirement money to calculate the amount that must be withdrawn the year you turn 70 1/2, based on the actuarial calculations of your life expectancy, you must take out that amount from each of the separate accounts, or from one of the accounts. (If they are all IRAs you can take the total from one account based on the total of all of your accounts, but don't mix IRA balances with defined benefit balances (which are accounts with their own rules for withdrawals); each of those account types must have the correct withdrawal made separately, each year. Once you've calculated the total of required minimum distribution for 2010, withdraw the correct amount sometime during the year in a lump sum or take it out in increments during the year, as long as you withdraw at least the required amount before Dec. 31, 2010.
Find the chart to calculate withdrawal in 2010 at the bottom of http://www.irs.gov/publications/p590/ar02.html in Appendix C, Uniform Lifetime Table, and divide the amount in the chart corresponding with your age into the amount in retirement plans as of the end of 2009. (At 70 years of age, dividing 27.5 into your retirement balance at the end of 2009 will result in a required withdrawal in 2010 of a bit less than 4 percent.)
Another option is to set up your accounts to withdraw 1/12 of the amount from each of the accounts transferred to your checking, savings, or non-IRA brokerage account. If you use the money to live on each month, this seems like the better budgeting option. Each month the money can be transferred automatically. However, this can present its own nightmares. You want all the transfers to be done at no cost and as painlessly as possible.
For a number of years, "Derek" had a non-required amount transferred, at no cost, from a brokerage IRA to his personal checking account. When he turned 70 1/2 he had to start taking the required minimum amount of the total of all his retirement accounts. He thought that meant dealing with multiple investment houses to take the required amount from each prorated. The first time he went to set up the new automatic transfer they had trouble because the checking account that was to receive his transfer was a trust account. He should have been asked to give them a voided check to set up the transfers. When the transfer failed because of name and number errors, he went back to get it corrected, and they sent a check for the withdrawal amount to his home. When he took the check back, not wanting to be responsible for personally depositing a monthly check, they corrected it by making a wire transfer to his checking account at a steep cost to him; the bank charged $13 to accept the wire transfer and $2 to notify him by mail the wire had been received. No way was he going to put up with that charge each month to receive his own money! A fourth trip to the brokerage house set up the transfer the way he wanted it--a free bank-transfer of a set amount on a set date each month. No effort on his part, no cost to him.
This example points up the different ways to access the required percentage of money from retirement accounts. It also shows why you might prefer one distribution method to another. Distribution directly into a checking account also produces a running record, in addition to one from the brokerage house of the amount of withdrawal you must declare as income to the IRS when you file your income taxes that year.
If multiple accounts make keeping track of distributions harder, go the IRS FAQs and learn about transfers between IRA accounts in order to simplify accounting.
Investigate options for withdrawing mandated taxable funds and select the means that make the most sense for your financial needs. Never pay to get your own money!
Visit http://www.irs.gov/retirement/article/0,,id=96989,00.html for retirement plans' Required Minimum Distribution FAQs.
See books on retirement planning books here: http://www.seniorresource.com/SRBaz.htm#books
A2. THE RETURN OF THE MULTI-GENERATIONAL FAMILY HOUSEHOLD
Home foreclosures and job losses, along with longstanding demographic shifts, mean that the number of multi-generational family households is growing. A recent report by Pew Research Center shows that as of 2008, a record 49 million Americans, or 16.1% of the total U.S. population, lived in such a household, up from 28 million, or 12.l% in 1980. Such households had been more common a century ago, but began to fall out of favor after World War II. Why are they coming back?
A brief summary of the findings is below. The full report may be found at
The report documents major changes in family household living arrangements that have unfolded over the past three decades and accelerated during the Great Recession. Its principal focus is on the revival since 1980 of the multi-generational family household.
It also chronicles a range of recent trends in the living arrangements of older adults, and it explores the correlation between living alone at an older age and various life experiences, including health, happiness, and depression.
The report is based on the Pew Research Center's analysis of U.S. Census Bureau data as well as their public opinion surveys.
1. In 2008, an estimated 49 million Americans, or 16% of the total U.S. population, lived in a family household that contained at least two adult generations or a grandparent, and at least one other generation. In 1980, this figure was just 28 million, or 12% of the population.
2. This 33% increase since 1980 in the share of all Americans living in such households represents a sharp trend reversal. From 1940 to 1980, the share of Americans living in such households had declined by more than half (from 25% in 1940 to 12% in 1980).
3. The growth since 1980 in these multi-generational households is partly the result of demographic and cultural shifts, including the rising share of immigrants in the population, and the rising median age of first marriage of all adults.
4. But at a time of high unemployment and of rising foreclosures, the number of households in which multiple generations of the same family double-up under the same roof has spiked significantly. Our report finds that from 2007 to 2008, the number of Americans living in a multi-generational family household grew by 2.6 million.
5. This trend has affected adults of all ages, especially the elderly and the young. For example, about one in five adults aged 25 to 34 now live in a multi-generational household. So do one in five adults ages 65 and older.
6. After rising steeply for nearly a century, the share of adults aged 65 and older who live alone flattened out around 1990, and has since declined a bit. It currently stands at 27% -- up from 6% in 1900.
7. Older adults who live alone are less healthy, and they more often feel sad or depressed than their counterparts who live with a spouse or with others. These correlations stand up even after controlling for demographic factors such as gender, race, age, income, and education.
*Pew Research Center, Social & Demographic Trends Project, Paul Taylor, Project Director, 3/18/2010
Learn more about Aging at http://www.seniorresource.com/ageproc.htm
B. DID YOU KNOW...?
1. FTC Warns Consumers to Give Wisely
The FTC, the nation’s consumer protection agency, has these tips to help consumers give wisely:
Donate to recognized charities that you have given to before. Watch out for those that have sprung up overnight. They may be well meaning, but lack the infrastructure to provide assistance. And be wary of charities with names that sound like familiar or nationally known organizations. Some phony charities use names that sound or look like those of respected, legitimate organizations.
You don’t have to donate to someone who contacts you out of the blue with an unsolicited e-mail, phone call, or text message. It’s better to give through a Web site or phone number that you know is legitimate.
Do not give out personal or financial information – including your Social Security number or credit card and bank account numbers – to anyone who solicits a contribution from you. Scam artists use this information to commit fraud against you.
Check out any charities before you donate. Contact the Better Business Bureau’s Wise Giving Alliance at http://www.give.org
Don’t give or send cash. For security and tax record purposes, contribute by check or credit card. Write the official name of the charity on your check. You can contribute safely online through national charities like http://www.redcross.org/donate
Ask for identification if you’re approached in person. Many states require paid fund-raisers to identify themselves as such and to name the charity for which they are soliciting.
For more information, visit http://www.ftc.gov/charityfraud In addition, the director of the FTC’s Bureau of Consumer Protection, David C. Vladeck, has a blog post on this subject at: http://consumer.gov/ncpw/blog/
2. Guide to Modifying Your Home
C. THOUGHTS FOR THE MONTH
We present here some words from those with a birthday this month.
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D. SPECIAL SURFING SITES
1. Audio Reading for Magazines.
2. Have you Checked Up on Your Physician or Hospital?
Quality Check® -- http://www.qualitycheck.org -- is a comprehensive guide to health-care organizations in the United States. Visitors can:
Learn more about Health issues at http://www.seniorresource.com/health.htm
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E. OH MY AGING FUNNY BONE
1. More Zen Humor
2. Social Security Sign-Up
In lieu of his going home and coming back later, the clerk said, "Unbutton your shirt." So he opened his shirt, revealing his curly silver hair. The clerk said, "That silver hair on your chest is proof enough for me," and she processed his Social Security application.
When Kent got home, he excitedly told his wife about the experience at the Social Security office. His wife replied. "You should have taken off the rest of your clothes. From what I see, you might have gotten disability, too."
"Oh My Aging Funny Bone" is at: http://www.seniorresource.com/jokes.htm
SPONSOR AN ISSUE
This issue has been edited by Betsy Day (Betsyjday@aol.com).
Aging in Place