Your Money At Work: January

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Want the Freedom to Spend? You Need a Second 'Bag'

By Karen E. Stawicki

Ever wonder why 80-year-olds today are meeters and greeters at the local Wal-Mart? A social interaction need? I doubt it. My guess is, they retired 15 or 20 years ago, when certificates of deposits were paying 10-15 percent (yes, they really did!) and because it was “safe,” they deposited their lifelong savings in the bank only to watch the interest rates fall and the prescription drug costs rise.
    Who says retirement living must be based on a fixed income generated only by the interest from our investments? I challenge the prevailing belief that invading the principal of investments risks running out of
dollars before heartbeats.
    If you think about the most-often implemented retirement strategy, most people are storing resources into a bag of accumulated wealth. Like a battery in a golf cart, it’s expected to discharge and last the entire 18 holes or the rest of their life.
    However, while the length of a golf course is definable, the length of your life is not.
    If that weren’t enough to worry about, keep in mind the IRS wants to collect a check for estate taxes if the net worth of the estate is more than the excludable amount at the time of death. Since most retirees will have one or more free and clear properties, this creates an even greater potential of being subject to the estate tax. This excludable amount continues to be a moving target, but the estate tax, if applicable, is very significant.
Continued...

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