4 RETIREMENT PLANNING 2018

CONTENTS

The big picTure

10 Time for a reality check Are you on target to retire when you want? These steps will help you get there.

17 You can retire a Millionaire What you need to save each month to reach seven figures by age 65.

18 Make Sure You’re Saving enough Use our worksheet to crunch your numbers to see if you’re on track.

22 roth irAs rock You don’t get a tax deduction for contributions, but with-drawals are tax-free.

24 Taxes on Snowbirds Read this if you own a second home in another state.

26 The 401(k) plan Turns 40 Now it’s the cornerstone of retirement.

30 how i picked the Day Our columnist shares her decision process.

32 how to invest to reach Your goal These portfolios will get you from your peak-savings years to retirement and beyond.

38 inflation-proof Your investments Guard against inflation’s insidious drag on your earning power with these hedges.

41 hitting the Target Target-date funds simplify saving for retirement.

42 100 biggest Funds in 401(k) plans Three steps to help you decide which mutual funds are worth owning in your retirement savings account. plus: Total returns for the 100 biggest holders of 401(k) assets.

44 get good Advice That Suits You We help you pick the right financial adviser at the right price.

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80 5 great places to Live in retirement These destinations are within an hour or two of big-city amenities.

86 help Aging parents With Their Finances Use our strategies to protect your parents’ money and dignity.

90 get continuing care and commu-nity Retirement communities offer peace of mind—for a price.

93 The new rules for giving to charity You can support your favorite causes and still get a tax break.

96 best and Worst States for retiree Taxes

Living WeLL

48 Social Security: get it right Don’t let a bum steer at a Social Security office prevent you from maximizing your benefits. plus: Good news about the dreaded earnings test.

54 Making the Most of rising rates Most income investors look to bonds to provide some combination of stability for their portfolio, income, and diversi-fication. Here are savings and invest-ment ideas to help you reach each of those goals.

58 Stretch Your retirement income One of the biggest challenges for retirees is making sure you don’t outlive your money. These strategies will gener-ate extra income and extend the life of your portfolio.

64 31 Ways to Save on health care We show you how to get the most bang for each buck you spend.

70 new to Medicare? The answers to these frequently asked questions will help you navigate an often tricky system.

73 how to Afford Long-Term care With insurance companies jacking up their rates, our strategies can help you trim your premiums or pay less for a new policy.

76 Manage the cost of cancer care

Scope out what your insurer will cover, then be ready to appeal if you are denied benefits.

79 get These Forms Lining up these legal documents in advance will save you precious time and hassle.

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CONTENTS

Kiplinger.com free, trusted retirement planning advice at your fingertips year-round

Copyright 2018 • The Kiplinger Washington Editors, Inc. • 1100 13th Street, NW • Washington, DC 20005-4051 • www.kiplingerincome.com

Investing for Income

continued on next page ...

Strategies to Boost Your Cash Yield

There are sensible

strategies and ideas

to help navigate these

cross-currents.

APRIL 2018, VOL. 7, NO. 4

Inside This Issue...

Many of us are hard-

wired to link advanc-

ing interest rates to

escalating market risk and

explosive daily swings. The

prospect of rate increases might

be so unnerving as to put you on

the cusp of liquidating your

long-term bonds and high-divi-

dend stocks. Is it time? Perhaps,

if you can live forever off your

savings ... pension and annuities

... rental income ... and Social

Security. But that’s rare, and

although higher interest rates

complicate investing, they can

also offer extra income. So relax,

and reserve the high anxiety for

true horrors: rampant inflation,

failing banks, slashed dividends.

Do The Math

Interest-rate pressure can attack

specific sectors. The most direct

peril is to Treasury bonds because

their returns are mathematical.

When the government pays more

to borrow, older, lower-coupon

T-bonds lose value. Less evident

is that the smaller a bond’s origi-

nal yield, the faster its principal

erodes when rates ascend; when

rates rise from a higher plane,

principal doesn’t erode as fast.

The prospect of forfeiting years

of yield is why we have refused

to endorse long-term Treasuries

since we started this letter in 2012.

There’s more emotion and

less precision in how markets treat

utilities, real estate investment

trusts, corporate and municipal

bonds, and preferred stocks.

For now, sellers and would-be

sellers are getting air cover from

Warren Buffett, who is breath-

lessly bashing bonds and beseech-

ing believers to avoid the “terrible

mistake” of holding too many

fixed-income investments or their

equivalents. Much as we admire

Buffett, though, we don’t share

his dark view. Nor would it apply

uniformly to everyone.

We concede Buffett’s point

for brief intervals. We doubt the

Dow Jones industrial average

would have crashed in February

had the 10-year Treasury yield

held at 2.5% instead of approach-

ing 3%. But it still hasn’t crossed

3%, and besides, bonds remain a

haven and a hedge against politi-

cal and economic shocks. Trea-

sury yields fell as stocks threw a

fit over President Trump’s steel

and aluminum tariffs, which

threaten bull-market engines such

as Boeing, Caterpillar and Deere.

In any case, long-term interest

rates still have a gap to cover be-

fore they become menacing. The

10-year Treasury “would have to

go over 3.25% before the markets

would fall into negative feedback

loops,” says Matt Toms, chief

fixed-income officer for Voya In-

vestment Management (formerly

ING). We’ve read and heard from

others that the Rubicon is 4%.

If stock prices and economic

growth stall, we expect interest

rates to hold the current range

The Lowdown on Higher Rates

Unless otherwise noted, prices and data are as of March 16, 2018

Ask Jeff

6

Questions about individual municipals, CDs

versus Treasuries, and a lagging sector real

estate investment trust.

What’s New in Cash

7

Bonds flood the marketplace, MLPs get a

tax hit, and a noted bond bull sounds aw-

fully skittish now.

Rates and Yields

7

Model Portfolio: Dividend-a-Month 8

Our defensive-minded, high yielding as-

sortment seems in a holding pattern, but

the dividend trend is sweet.

Stormy Weather or Climate Change? 3

Stock and bond markets have gone from

quiet to violent in a few weeks, but don't tear

up what's been working. Do trim leverage.

Timely Tactic of the Month

3

This high-dividend ETF is built to with-

stand high-pressure market sell-offs and

still deliver income with growth.

Surprises in Closed-End Stock Funds 4

Equity CEFs are fewer, but may be better

than their sponsors' regular funds.

Kiplinger’s 25 for Income

5

The markets are in a tizzy, but our favorites

are moving sideways or even rising a bit.

retirement Savings calculator Determine how much you need to save each month to meet your goals.

n kiplinger.com/links/ retirementcalculator

rMD calculator Compute your required minimum distributions from a traditional IRA.

n kiplinger.com/links/rmd

boost Your cash Yield

Kiplinger’s Investing for Income will show you how to generate steady income with moderate growth and manageable risk, no matter what the market is doing.

n kiplinger.com/go/investing

retire on Your TermsWhether you’re almost there or have a few years to go, Kiplinger’s Retirement Report will show you how to retire on your schedule.

n kiplinger.com/go/ retirementreport

RetiRee tax Map Our state-by-state guide helps you choose the right home for you and your nest egg. See how states tax various forms of retirement income, which ones offer property tax breaks for retirees and how states ultimately ding your estate.

n kiplinger.com/links/retireetaxmap

Special RepoRtS

MoRe Help FoR YoUR RetiReMeNt

toolS

MaxiMiziNg Social SecURitY BeNeFitS n kiplinger.com/links/maximize

eState plaNNiNgn kiplinger.com/links/estateplan

UNdeRStaNdiNg aNNUitieSn kiplinger.com/links/annuities

ReqUiRed MiNiMUM diStRiBUtioNSn kiplinger.com/links/rmds

NavigatiNg MedicaRen kiplinger.com/links/medicare

MakiNg YoUR MoNeY laStn kiplinger.com/links/makeitlast

StaY coNNected!@Kiplingerretire

Facebook.com/

Kiplingersretirementreport

ciaries took advantage of the benefit in 2012, according

to the Dartmouth Institute for Health Policy and Clini-

cal Practice—and recent research suggests that number

hasn’t budged much since then.

That’s not the only Medicare benefit left lying on

the examining table. Many healthy seniors pass up a

host of free preventive services, ranging from bone

mass measurement

to cancer screen-

ing—“the kinds of

things that people

don’t generally think

of if they’re not

sick,” says Bonnie

Burns, a consultant

at California Health

Advocates. Other

benefits, such as

home health care,

often go unused

because they have

complex eligibility

requirements that

are poorly under-

stood by both pro-

viders and patients.

In other cases,

Medicare beneficia-

ries and their fami-

lies simply don’t

know about their benefits until it’s too late. Jim Whit-

worth’s first wife, Anique, spent the final months of her

life in a nursing home. “It wasn’t until a couple of days

before she passed away that somebody mentioned to

medicare is vital to the health of nearly

60 million Americans. Yet many of its benefits

are overlooked, underused or misunderstood.

Consider the annual “wellness” visit, during which

a doctor will assess your health risks, take your blood

pressure and other routine measurements, check for

cognitive impairment, and offer personalized health

advice. It’s free. Yet less than 11% of Medicare benefi-

7 Ways to Maximize

Medicare Benefits

RETIREMENT REPORT

Your Guide to a Richer Retirement

VOLUME 25 | NUMBER 3 | MARCH 2018 | $5.00

JOH

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MA

C

IN THIS ISSUE

INVESTING

6 | Sizzling Health Care Funds

TAXES

8 | Tips to Cut 2017 Tax Tab

10 | State Death Taxes

MANAGING YOUR FINANCES

11 | Income Spike, Medicare Hike

12 | Information to Act On

14 | Your Questions Answered

FRAUD

15 | Danger of Undue Influence

TRAVEL

16 | Girlfriend Getaways

YOUR HEALTH

18 | Strengthen Your Memory