The retire overseas challenge no one talks about-Kathleen Peddicord

Planning for a retirement that includes spending some or even all your time in another country is an increasingly appealing idea. As a result, it's easier than ever to find help making a plan to retire overseas. However, one challenge you will face as you launch your new life in a new country is seldom discussed. I call it the panic stage.

No matter how long you've planned for this or how much research you've carried out, there is a good chance that, sometime during your first year in your new country, perhaps even during your first month in your new home, you'll wonder what in the world ever possessed you to think leaving home was a good idea.
What were you thinking? You must have taken leave of your senses. Paradise? This place is no paradise. This place is a nightmare. This isn't an adventure. This is nuts.
My best advice is to wait out the panic. It will pass.
Moving to Ireland 17 years ago, my husband and I thought the transition would be transparent. We Americans think we know the Irish. They're just like us, aren't they? No, they're not.
Wherever you decide to chase your dreams overseas, even if it's somewhere as seemingly familiar as Ireland, you're going to discover that the people living there aren't like you either, in ways that won't be apparent at first. You're going to find that life is more difficult than it was wherever you came from. It will be more complicated and less predictable.
My husband and I arrived as full-time residents in Waterford, Ireland, in November. By February, I was sad. I felt indescribably sad for no reason I could identify. We were comfortable in our rental cottage on the river. We were making friends and settling in. All was well, but I was, frankly, miserable.
Then we took a trip to Nicaragua. After a few days on that country's sunny southern Pacific coast, my sadness disappeared. What was going on?
It was the Irish winter. Though I'd traveled in Ireland for years, I'd never lived through an Irish winter. Some days the sun rises after 9 a.m. and sets before 4 p.m. in the afternoon. In between those hours, it's typically gray, drizzling, overcast and damp.
Ireland can be a great place to call home, but before you commit to retirement in the Auld Sod, experience it in winter. Spend time in the country in January and February. Or consider spending only part of the year in the country. Ireland is a place that makes good sense as a part-time retirement haven. You could retire to Ireland each summer, then spend your winters someplace bright and sunny. That was our strategy. After our first long winter in Waterford, we escaped to the tropics every December and returned to the Emerald Isle in early March, in time to appreciate Irish spring and summer.
A few years ago, I mentioned the phenomenon to a friend preparing to move overseas for the first time, suggesting that he shouldn't worry about the panic stage he'd eventually experience because it would pass. My friend smiled and nodded politely, humoring me.
It can be hard to imagine during the excitement of the pre-move phase that after maybe only a month or two in your new home, you might find yourself questioning the move altogether. My friend insisted that it wouldn't happen to him. "I've spent months researching and making my plan," he explained with confidence. "I understand what I'm getting into. I've thought this through from every angle, and I'm fully prepared."
A couple of years later, over drinks one night, he remarked, "You know, before my move, when you talked about the panic stage that everyone goes through at some point after relocating to a new country, I laughed to myself. Panic, I thought. Why would I panic? The idea seemed extreme and, frankly, silly." But then he continued, "But, I have to tell you, it happened to me. It was maybe a year into my move to Ecuador. I realized that I was feeling out of my element and uncertain in a fundamental way, unsure of myself and my new situation. I was experiencing a feeling that, I had to admit, could best be described as panic."
I asked what he decided to do. He responded, "I remembered what you'd recommended. I waited it out. I realized that I was feeling overwhelmed by the frustrations of living in the third world. I reminded myself why I'd wanted to make the move in the first place and of all the things about Ecuador that I love. There are many. After a little while, the panic passed."
Your panic phase in your new home could be a result of the weather and the seasons, as it was for us in Ireland. It could be a reaction to the trials and frustrating tribulations of life in a developing country, as it was for my friend. It could be homesickness, which you should be prepared for. You're going to experience it from time to time.
No country is perfect. Everywhere has its pluses and minuses. The minuses eventually are going to get to you. Living high in the mountains in Panama may provide glorious views and a gentle, spring-like climate, but you won't be near a real city or an international airport. You'll be living a country life among neighbors who, in this part of Panama, speak only Spanish. Sometimes the remoteness will overwhelm you.
Ecuador offers an extremely affordable cost of living, but it is also a third world country. Retirement in the third world isn't for everyone.
Although it was our third international move and our third country of residence since we left the United States, my husband and I experienced the panic stage in Panama, where we've struggled adjusting to the tropical climate and to the inconvenience factor. Panama is working hard to earn recognition as a first world nation, but, right now, it's not. This is a land where things don't always work as you'd like or expect.
The key to being happy in your new home, wherever you decide to make it, is to keep your perspective and your sense of humor. When doubt and frustration creep in, as they will, remind yourself of two things. First, don't make any hasty decisions. The moment of panic will pass.
Second, while you're waiting for that to subside, remember why you chose this country in the first place. Was it for the beach? Then escape to the coast for a few days of relaxation beneath the palms. Was it for the super-low cost of living? Take yourself out for a nice dinner on the cheap. What do you enjoy most in your new home? If you moved there for the fishing, then make time to catch some fish and then have your new friends over for an authentic home-cooked American dinner.
Think about why you're feeling uncertain about your decision. Once you identify why you're second-guessing your move, you can address those points. If you don't like the current season, go somewhere else until it passes. If you're missing family back home, invite them to come visit. If you're not happy in the neighborhood where you've initially settled, consider another.

Be prepared, at some time during your first year of retirement overseas, perhaps even during the first month or two, to wonder what in the world you've done. No, this wasn't crazy, and it wasn't a mistake. Wait it out. The panic will pass. Just on the other side is the new life you came to find.

Culled from Us News

10 retirement benefits you need to have-Emily Brandon

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Diversify your retirement income.

Most retirees get their income from a variety of sources, including Social Security and personal savings. It's important to diversify your retirement income in case one of your benefits doesn't work out. You will be much more comfortable in retirement if you have these 10 benefits:
Social Security
After paying into the Social Security system their entire working life, retirees finally get to collect payments. Social Security is the foundation of your retirement income that the rest of your savings and investments should build upon. Take steps to maximize your benefit by making sure you have paid in for an appropriate number of years, and sign up at the best age for you.
Medicare
Significant health care expenses could easily consume a significant part of your retirement savings, but Medicare largely makes sure that doesn't happen. You can sign up beginning three months before your 65^th birthday, and it's a good idea to do so then to avoid higher premiums if you sign up later. If you retire before age 65, you will need an alternate plan to obtain and pay for health insurance.
401(k)
Workers who contribute to a 401(k) plan often get valuable employer contributions, tax breaks and the opportunity to have the money withheld from their paychecks before they get a chance to spend it. A worker in the 25 percent tax bracket who contributes the maximum amount of $18,000 in 2015 will save $4,500 on his federal income tax bill. Workers age 50 or older can make catch-up contributions of up to $6,000 in 2015, which will save them even more in taxes.
Roth 401(k)
A Roth 401(k) has the same contribution limits as a traditional 401(k), but the tax treatment is different. Roth IRA contributions are made with after-tax dollars, but withdrawals in retirement from accounts at least five years old will be tax-free, meaning you won't have to pay tax on the earnings you accrue in the account.
IRA
Individual retirement accounts offer similar tax treatments to 401(k)s, but the contribution limits are lower. The IRA contribution limit is $5,500 in 2015, and savers age 50 and older can contribute an additional $1,000 as a catch-up contribution. However, many people build a larger IRA balance by rolling over their 401(k) balance to an IRA each time they change jobs. IRA contributions aren't due until April 15, while 401(k) contributions typically must be made by the end of the calendar year.
Roth IRA
A Roth IRA allows you to prepay tax on your retirement savings, and then you will not owe tax on withdrawals in retirement. Roth IRAs are especially beneficial to people who are young and in low tax brackets, especially if they suspect they will be in a higher tax bracket in retirement. Investors can also convert traditional IRA assets to a Roth if they are willing to pay tax on the amount converted.
Savings account
An emergency fund that will cover unexpected expenses such as medical bills or home and car repairs is a necessity. Maintaining a savings account allows you to avoid triggering taxes and penalties by raiding retirement and investment accounts early or, even worse, taking on debt to cope with emergencies.
Paid-off home
Owning a home that is paid off can help you enormously in retirement. No longer needing to make rent or mortgage payments gives you more money to spend on other things. And if you ever need extra cash in retirement, owning a home gives you options to downsize and pocket the extra cash or take on a reverse mortgage.
Part-time job
Continuing to work part-time in the early part of your retirement gives you opportunities to get out of the house, meet new people and, of course, earn a little cash. Having money coming in allows you to delay or take smaller withdrawals from your retirement nest egg, which gives your savings more time to grow.
Pension
If you're fortunate enough to get a traditional pension in retirement, it can contribute significantly to your retirement security. Pensions provide a steady stream of payments that will last the rest of your life, no matter how long you live, which reduces your risk of spending down savings too quickly.

Culled from US News

Big homes can complicate retirement-Jonathan Clements

The pricier the house, the bigger the financial drain

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Once you’ve paid for your house, how much will it cost you?

This is a crucial issue for anyone looking ahead to retirement. The more expensive your home, the more of a drain it’ll likely be in terms of property taxes, maintenance, homeowners insurance and more.
Suppose you own a home that, in addition to any mortgage payment, costs $1,000 a month. You then get a fat pay raise, prompting you to trade up to a larger house, which has double the monthly expenses.
Result: If you stay in the larger home during retirement, you’ll need to come up with $2,000 a month, equal to $24,000 a year. Based on a 4% annual portfolio withdrawal rate, that would mean $600,000 in retirement savings just to pay your housing costs, versus $300,000 for the smaller home.
“I’ve always been an advocate of modest homes,” says Charles Farrell, chief executive of Denver’s Northstar Investment Advisors and author of “Your Money Ratios.” A large house “means higher costs in retirement and it makes it more difficult to save while you’re working.”
Hitting Home
Whatever price you pay for a house, it’ll often end up costing you at least 2½ times as much over the long term, Mr. Farrell reckons. Say you buy a $500,000 home, put down $100,000 and borrow the other $400,000.
You’ll pay back the $400,000 with that portion of every mortgage payment that goes toward principal. In addition, you might cough up another $250,000 or so in interest, even after figuring in the tax deduction. This assumes a 4.5% 30-year fixed-rate mortgage and a 25% federal income-tax bracket. Add that to the purchase price and you’re up to $750,000.
On top of that, Mr. Farrell figures the house might cost $20,000 to $25,000 a year, between property taxes, insurance, maintenance and occasional improvements. To generate that income in retirement, you might need $500,000 in savings, and probably more once you figure in the taxes on any investment gains. That brings the total tab to $1.25 million, or 2½ times the purchase price.
Mr. Farrell’s estimate for housing costs might strike some readers as high. It’s easy enough to get a handle on property taxes and insurance. Annual property taxes typically run 1% to 2% of a home’s value, while insurance might equal 0.5%.
It’s harder to get a grip on maintenance and occasional improvements, in part because homeowners may go a few years without any major expenses, but then fork over hefty sums for a new roof or a kitchen remodeling. These projects, which are often necessary just to maintain a property’s value, are easy to dismiss as one-time expenses—and yet they seem to roll around with fair frequency.
Whether you think Mr. Farrell’s numbers are too low or too high, he makes an important point: High housing costs can make it tough to retire, because they crimp our ability to save while we’re working and increase the nest egg we’ll need to retire in comfort.
Indeed, Mr. Farrell advises folks to buy homes that cost no more than 2 to 2½ times their gross income. That’s doable in many parts of the country, but it’s almost impossible if you live in a major city on the East or West Coast.
“The coasts are tough,” Mr. Farrell concedes. “I know people aren’t happy with those figures, but they’re prudent.”
Two Lessons
This issue of housing costs brings together two themes I often harp on. First, you’ll have more financial breathing room—and less financial stress—if you hold down your fixed living costs, including mortgage or rent, car payments, property taxes, insurance premiums and utilities. One rule of thumb: Try to keep these costs to 50% or less of your pretax income. That way, if you’re laid off, you know you can get by on half of your old salary.
Second, temporarily cutting back spending is a key financial tool, especially for retirees faced with rough financial markets. The lower your fixed living costs, the more flexibility you’ll have.
Still tempted to buy the big home? Keep Mr. Farrell’s math in mind.

“If you’re going to buy an $800,000 house, the real cost is close to $2 million,” he says. “You have to ask yourself whether you can afford it. It’s a tough one to fight against, because people still have this perception that a home is a good investment. But most of the time, it’s a money pit.”

Culled from wall street journal

AVOIDING SCAM AND LOSS DURING RETIREMENT-Odunze Reginald

                   Image credited to iaf.org

Schuller (1988:112) noted that success without social respect can be an ultimate and dismal failure.

Old age has one problem according to psychologist, it tend to make old people vulnerable to issues of money making, as they have dream idea of trying to achieve what they fail to achieve during their working career. They now want to achieve it     during old age and by so doing enter into one wrong investment decision or the other.

Whatever they have not achieve they tend to believe that retirement will afford them that opportunity, by so doing they enter into wrong hands who will fleece them of their hard earned money. The result is that most of the retirees return back to work in order to survive and enjoy their old age. But what these scammers do not know is that wealth do not bring happiness as it is stated in Ecclesiastics 5 verse 10-11 “ How absurd to think that wealth brings happiness, the more you have, the more people come to help you spend it and  continuing  in Ecclesiastics 5 verse 12, 14, it sates “ But the rich are always worrying  and seldom get a good night sleep” Riches are sometimes hoarded to the harm of the saver, or they are put into risky investment that turn sour and everything is lost”

And continuing in Ecclesiastics 5 verse 19 and 20, “And it is good thing to receive wealth from God and the good health to enjoy it” “To enjoy your work and accept your lot in life- that is indeed a gift from God, people who did this rarely look with sorrow on the past ,for God has given them reason for joy”.

And so in making wealth, it is pertinent for us to have that God given joy that gives one happiness- a lasting happiness.

Anything short of that may not augur well especially for con artist as Robert Kiyosaki in his book Rich dad Poor dad, noted that there are so many ways, one can be rich, and he included the following, through inheritance, playing lottery, investing or by being a crook or an outlaw but there is a price, you risk going to jail. Kiyosaki  (1995:351) continuing he stated that ‘A great story must interest , excite and cause people to look into the future and dream a little, there should also be integrity behind the story, because our jails are filled with great story tellers without integrity”.

So what should do during old age as it regards investment and business as majority of the retirees are interested in working and making more money , thereby creating wealth.  And according to Walter Updegrave in an article captioned “ Three Little mistakes that can sink your retirement,  which appeared in Yahoo Finance it states that “It’s almost become a cliché. Virtually every survey asking pre-retirees what they plan to do in retirement shows that the overwhelming majority plan to work.

 Indeed, a recent Merrill Lynch survey found that nearly three out of four people over 50 said their ideal retirement would include working. Which is fine. Staying connected to the work world in some way can not only offer financial benefits, it can also keep retirees more active and socially engaged”

But what happens if retiree involve in spurious contract that may be a scam, intended to dispossess him of his wealth?  There is need for the retiree to embark on the services of investment adviser even if he was investment guru during his career, the reason is that in what concerns you , there may be likelihood of mistake unlike when you hand it over to an independent investment adviser, as it has been that lawyers find it difficult to handle their own cases as doctors are also in the same dilemma in treating their own diseases.

The idea of getting an expert is to safeguard the retirees fund from con artist during old age.

How retirement benefits will change in 2015- Emily Brandon

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Social Security and Medicare will be making important changes to their programs next year. Individual retirement accounts and 401(k)s will also be tweaked in significant ways. Here's a look at the new features your retirement benefits will have next year.

Social Security. Social Security recipients will receive 1.7 percent bigger payments in 2015, due to the annual cost-of-living adjustment. Most workers will continue to pay 6.2 percent of their earnings into the Social Security system, but the maximum taxable earnings amount will increase next year from $117,000 in 2014 to $118,500 in 2015. The Social Security administration will also mail Social Security statements to workers turning ages 25, 30, 35, 40, 45, 50, 55 and 60 in 2015 who have not created an online account.
Medicare. The standard Medicare Part B premium will remain $104.90 monthly in 2015, although high-income beneficiaries pay more, and the deductible is unchanged at $147 per year. The Medicare Part A hospital inpatient deductible will increase from $1,216 in 2014 to $1,260 in 2015. Medicare Part D premiums vary by plan and are expected to increase by 4 percent to an average $38.83 in 2015, assuming retirees stick with their current plan, according to an analysis of Part D plans by researchers at Georgetown University, the University of Chicago and the Kaiser Family Foundation. The maximum possible Part D deductible will be $320 in 2015, but some plans may charge smaller deductibles or no deductible. "Some plans, including many of the most popular plans, are increasing their premiums next year," says Juliette Cubanski, a policy analyst at the Kaiser Family Foundation. "The open enrollment period is a good time to look to see whether the plan will continue to be offered next year and, if so, look to see how that plan might be changing in terms of the premiums you pay every month to be enrolled as well as the costs you pay for coverage, including the annual deductible and the costs that you pay for your prescription medications." Beneficiaries have an opportunity to switch Part D plans each year during open enrollment.
401(k)s. The 401(k) contribution limit will increase by $500 to $18,000 in 2015. The catch-up contribution limit for workers age 50 and older will also grow by $500 to $6,000 in 2015. "There's a considerable amount of tax deferral you can get on those savings," says Kevin Brosious, a certified financial planner and president of Wealth Management Inc. in Allentown, Pennsylvania. A worker under age 50 who is in the 25 percent tax bracket and contributes the maximum amount to a traditional 401(k) in 2015 will save $4,500 on his federal income tax bill, compared with a tax break of $4,375 for maxing out in 2014.
IRAs. The IRA contribution limit will remain $5,500 in 2015, and savers age 50 and older can contribute an additional $1,000 as a catch-up contribution. Workers who have a retirement account at work can claim a tax deduction for making a traditional IRA contribution until their modified adjusted gross income is between $61,000 and $71,000 for individuals and $98,000 to $118,000 for couples in 2015, up $1,000 and $2,000, respectively, from 2014. Spouses without a workplace retirement plan who are married to someone with a 401(k) can claim the IRA contribution tax deduction until their income is between $183,000 and $193,000 in 2015. The Roth IRA income limits will also increase by $2,000 in 2015 to between $116,000 and $131,000 for individuals and $183,000 to $193,000 for married couples. However, investors who earn more than these limits may be able to convert traditional IRA assets to a Roth IRA. "High-income employees typically aren't eligible for Roth IRAs, but they can add after-tax dollars and then roll that directly into their Roth IRA," says Michael Hollars, a certified financial planner for Client First Finance in Sunnyvale, California.
Saver's credit. Workers who save in a 401(k) or IRA may be eligible for the saver's credit if their AGI is less than $30,500 for singles, $45,750 for heads of household and $61,000 for married couples in 2015. These limits are between $500 and $1,000 higher than in 2014. This valuable tax credit is worth 50 percent, 20 percent or 10 percent of your 401(k) or IRA contributions up to $2,000 ($4,000 for couples), with the biggest credit going to savers with the lowest incomes. The maximum possible saver's credit is worth $1,000 for individuals and $2,000 for couples.

New retirement account. The Treasury is expected to offer a new type of retirement account, the myRA. These Roth accounts with be funded with after-tax dollars via payroll deduction, but they are not tied to your job and are guaranteed by the government to never lose value. The myRA will be available to workers with an annual income of less than $129,000 for individuals and $191,000 for couples, and they can use the account for up to 30 years or until their account balance hits $15,000, after which the balance will transfer to a private-sector retirement account.

Culled fro m US News

Retiring in a bear market (when one arrives)-Scott Bishop,

Jacob Wackerhausen | Getty Images

Who would want to retire into a bear market? Certainly stocks are roaring now, but the problem is, we never know when one will happen.

Bear markets are defined as a decline in the S&P 500 Index (^GSPC) of at least 20 percent from the previous high. They are not infrequent and have happened, on average, about every three years over the last 80 years, with an average decline of 35 percent.
So for all the talk of 2008-2009 being the "worst recession since the Great Depression," the S&P 500 losing 37 percent in 2008 was very close to that average decline. Even with this in mind, it seems that we, as investors, are surprised every time there is a market correction or bear market.

Each year that we work allows us to earn and save more money to replace capital lost in a market correction. Moreover, the money we invest toward the bottom of that correction earns a great return during the recovery.
However, in retirement-when you are not working-not only can you not replace that lost capital with future income, your predicament is compounded by three additional factors: You have less time for the market to correct itself; the loss of the market is compounded by the fact that you are withdrawing money from your portfolio to live on each year; and bear markets can lead to uncertain times, which leads to bad investment decisions.


As a financial planner, I work with clients as they prepare to enter retirement. Like many financial planners, I utilize sophisticated financial-planning tools to project various outcomes in retirement so that I can help retiring clients answer their No. 1 question: "Will I run out of money if I retire?"
In running all the scenarios, whether using traditional straight-line financial-planning software assuming 6 percent to 7 percent average returns, or even using more sophisticated, Monte Carlo simulations, it is very possible for a client whose projections show a very high likelihood of success to still run out of money if they retire into a bear market.
A Monte Carlo simulation is a problem-solving technique used to approximate the probability of certain outcomes by running multiple trial runs, called simulations, using random variables.

A 2014 T. Rowe Price retirement research report ran Monte Carlo simulations to show that a client with a balanced portfolio who withdrew 4 percent of the portfolio assets the first year and grew that distribution by 3 percent annually had an 89 percent probability of sustaining those withdrawals for 30 years of retirement. In the financial-planning world, it was a winning plan.
I wanted to test that "winning plan" to see how it would fare in the first 10 to 20 years of retirement using recent market returns. To do this, I used the return figures from 1991 to 2010 for the S&P 500 Index, the iShares Core U.S. Aggregate Bond ETF (NYSE Arca: AGG) and even a balanced (50/50) split of both indexes.


I used the same withdrawal and inflation assumptions from the T. Rowe Price study, gave the retiring individual a portfolio of $1 million and started his first year in retirement with a $40,000 distribution for living expenses and taxes.
If all of the assets were from an individual retirement account, he would actually have less to live on as these distributions would be fully taxable. I used two retirees, one starting in the year 2000 and the other in 2010. I had some startling results.
If a "bull market retiree" who started with $1 million in January 1991 took annual distributions totaling $40,000 and increased the distributions each year for inflation, he or she ended Dec. 31, 2000, with $2.9 million if invested 100 percent in stocks; $1.4 million if 100 percent in bonds; or $2.1 million if in a balanced portfolio. Not too shabby, and it gets even better for bull market retirees.
They were still in great shape by 2010, even if they lost 37 percent in the stock market in 2008, as well as stock market losses of 12 percent and 22 percent back in 2001 and 2002, respectively.


By 2010, the bull market retiree would have $2.4 million if he or she invested 100 percent in stocks; $1.6 million if 100 percent in bonds; and $2.2 million if in a balanced portfolio. By this time, annual distributions after inflation total $84,000. After 19 years of retirement, our retiree took out $1.2 million dollars in distributions and still had more than he or she started with.
In contrast, how did a "bear market retiree" fare when beginning retirement in 2001? Not so well, actually.
If the bear market retiree started with $1 million in January 2001, took out the same $40,000 per year and followed the same strategy 10 years later-on Dec. 31, 2010-he or she was left with only $567,000 if invested 100 percent in stocks; $1.1 million if 100 percent in bonds; and $880,000 if in a balanced portfolio.

By early 2009-at exactly the wrong time-bear market retirees were probably thinking about "going to cash" in their portfolios to stop the losses. They are not feeling good about things, and they are wondering what the next decade has in store for them. 

Culled from CNBC

How to feel secure in retirement-Dave Bernard

When I retire I don't want to worry about anything. I want to spend my hard-earned free time doing whatever I want for as long as I want. I have done more than enough worrying along the way. Retirement is the time to leave stress behind and learn to savor the moments.

The problem is an unpredictable future can create new kinds of stress. It is difficult to know how our second act is going to play out in spite of our best efforts to plan and prepare for it. Here's what it takes to feel secure in your retired life.
Accumulate a nest egg sufficient to realize your retirement vision. If you have not saved enough for retirement, rather than planning your next trip or relaxing stress-free, you may find yourself distracted by money concerns. You need to have enough saved to fund a quality retirement lifestyle, but the exact amount you need depends on the type of lifestyle you want to lead. If you plan to spend your retirement years enjoying all the luxuries you can, your required savings will be significantly greater than if you plan to live a more frugal life. To feel financially secure in retirement you need to understand what lifestyle you hope to live, and figure out what it will cost. Then compare that cost to your savings and investments to see if your expectations are realistic. If you start planning a reasonable period of time ahead, you can make adjustments to your savings strategy to better fund the lifestyle you desire.
Develop multiple and varied interests. With 20 or more years ahead and plenty of time to do as you please, having a wide variety of hobbies, interests and passions will help to fill your days. If you are someone who gets easily bored it is even more important to expand your options. Variety and new experiences help keep retirement fresh and exciting. Not only will the time pass faster, but you will enjoy a feeling of accomplishment looking back on the day's events.
Take steps to facilitate retiring in place. Most of us would prefer to stay in our current home throughout retirement. We know where everything is from the stores and restaurants to public transportation and hospitals. The neighborhood is full of familiar faces and good memories. With that desire in mind there are things we can do to improve our odds of aging in place. Architectural upgrades that take into consideration the challenges of aging can make your current dwelling more senior friendly for a longer period of time. A good support network of family and friends provides peace of mind in case of emergencies. If you cannot care for yourself there are in-home services that can allow you to stay in place longer. And should it get to a point where you cannot safely live at home, it helps to know the options for retirement communities in your area. Investigating the choices ahead of time gives you a better overview of what is available and helps you consider where you might ultimately have to live.

Be happy with who you are (or make changes). The person you are in retirement will impact your feeling of well-being and the lives of those around you. Getting old gives us plenty to be bitter about, from aching backs to challenged memories. It is easy to become angry and grumpy. Rather than take out that frustration on those who love us, we can try to come to grips with the realities of aging. There will be plenty of difficulties, and you may need to learn to accept help. I hope to have the strength to see the upside where it exists. I don't want to become the old guy perpetually complaining about medical issues to anyone who will listen. I would like my grandkids to look forward to spending time with me. I will try to maintain a sense of humor and occasionally make those in my life laugh out loud. I hope others will be happier after hanging around me.

Culled from US News

Jumbo-loan challenges for retirees-Anya Martin

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A lifetime of saving and investing can make retirees feel secure, but showing that assets translate into income remains key when qualifying for a jumbo mortgage.

Debt-free retirement has its allure, but with interest rates so low for jumbo mortgages, some retirees are calculating bigger returns if they leave cash invested and borrow to buy their retirement home, says Brad Blackwell, executive vice president of Wells Fargo Home Mortgage. Jumbo mortgages have higher loan limits than government-backed loans, which top at $417,000 in most places but go up to $625,500 in some high-price areas. Average interest rates were 4.11% for the 30-year, fixed-rate jumbo and 3% for a five-year, adjustable-rate jumbo on the week ending Nov. 14, according to HSH.com.
A retiree, like any other borrower, generally must meet a 43% debt-to-income ratio (DTI), mandated by federal mortgage rules. This number reflects the borrower’s percentage of monthly debt payments relative to monthly income.
Retirees who plan ahead can qualify, and lenders have methods to translate investments into eligible income even if a borrower can’t produce a W-2, Mr. Blackwell says.

Today’s typical retiree will receive income from Social Security; distributions from IRAs, 401(k)s, annuities and other retirement accounts; and possibly a pension. Business owners may no longer get a salary but still receive profit shares and/or have significant wealth tied up in an enterprise, and many high-end retirees may draw revenue from commercial real-estate ownership, residential rental properties or other sources, says Tom Wind, executive vice president of home lending at EverBank.

High-net-worth individuals often will argue that they clearly have enough money in assets to pay off a loan at any time, says Bill Banfield, vice president at Quicken Loans. “They may be thinking that they have a big IRA and they could use that to take a distribution to make the loan payments,” he adds. “That’s all good and fine, but we’d like to see that all set up before they apply for the loan.”

The key to qualifying is to demonstrate that a retiree’s assets translate into income via tax returns, bank statements and other documents, he adds. “The lender is going to want to make sure you have receipts for distributions and a schedule for receiving them,” he adds.
Retirees also need to show proof that the payments will continue in the same amounts for at least three years into the future, Mr. Banfield says. If a borrower is an early retiree under 59½ years old, the threshold for taking withdrawals from IRAs without tax penalties, the lender will adjust income estimates accordingly, he adds.

For retirees who don’t want to increase their distributions, another possible option is a nonqualified jumbo mortgage, which offers flexibility on the federal DTI rule, Mr. Wind says. Lenders have to waive liability protection to issue nonqualified mortgages, but some lenders will take that risk with retirees who have substantial invested assets they don't want to liquidate, he adds.

To calculate an income estimate in such cases, EverBank will assign a conservative earnings rate to the total dollar amount of the assets and amortize the amount to the loan’s term length, Mr. Wind says. Wells Fargo uses a similar method to calculate DTI for nonqualified mortgages for borrowers with multimillions of dollars in assets, Mr. Blackwell says.

The first step for any retiree or person approaching retirement is a financial adviser, Mr. Blackwell says. An adviser can look at a retiree’s overall financial picture and advise whether to pay cash or borrow when buying as home. The adviser can also calculate retirement-account distributions that will help the borrower qualify for a loan, he adds.

Here are some more considerations that retirees may want to weigh when deciding whether to apply for a jumbo mortgage:

• Credit scores. Retirees with a sufficient income stream but lower credit scores still may not qualify for a mortgage or will receive a higher interest rate from a lender.

• Trusts. Retirees who want to buy a home and hold it in a revocable trust as part of their estate plan still have to demonstrate their ability to repay the loan, Mr. Blackwell says. Still, assets in the trust are considered in the ability-to-repay debt calculation, he adds.

• Capital-gains taxes. When deciding whether to cash out investments to buy real estate, remember to calculate not just lost returns but also the potential capital-gains-tax hit, Mr. Banfield says.

Culled from wall street journal in yahoo finance

Offa pensioners build secretariat

Members of the Nigerian Union of Pensioners (NUP) in Offa Local Government Area of Kwara State have built and inaugurated an ultra modern secretariat as part of their self-help community project.
Speaking at the event, the national president of the association, Dr. A.O. Afolayan, commended members of the association, saying NUP in Offa was the first branch to construct such a befitting secretariat in the country.
The NUP national president, who was represented by the vice-president of the association, Comrade Oyewale Jolaoye, urged all other branches to emulate the success story.
He said that the national headquarters of the union was addressing various problems facing pensioners in the country, assuring that the problems would be settled soon.
Also speaking, the Chairman of Kwara State branch of NUP, Alhaji Haliru Mohammed, praised members for being good managers of meagre resources, charging them not to rest on their oars.
He said the state NUP officials were poised to solve problems of pensioners such as delay in payment of gratuities to retirees, especially local government retirees in the state.
In his speech, the Chairman of Offa Local Government Area, Alhaji Abdulwaheed Olanipekun, attributed the numerous achievements by pensioners in Offa Local Government Area to members’ unity and sense of purpose.
The council boss, who said Offa town was leading in self-help development projects, urged members to continue to keep the flag flying.

Source:: Nigerian Tribune

Don't forget these year-end retirement planning tips-Emily Brandon

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You only have a few weeks left to make a 401(k) contribution that will get you a tax deduction on your 2014 return. The deadline is also rapidly approaching for retirees to take required minimum distributions from their retirement accounts. Here's a look at the retirement planning moves you need to make before the end of the year.

Make last-minute 401(k) contributions. Workers age 49 and younger can contribute up to $17,500 to their 401(k) plan in 2014. Income tax won't be due on the amount deposited in a traditional 401(k) account until the money is withdrawn. An employee in the 25 percent tax bracket who is able to max out his 401(k) would save $4,375 on his federal income tax bill, compared with $1,250 in tax savings for someone who deposits $5,000 in a 401(k). Contributions are typically due by Dec. 31, but it's a good idea to avoid waiting until the last minute. "You can't call on Dec. 29 and say you want to put in an extra five grand," says Joyce Streithorst, a certified financial planner for Frisch Financial Group in Melville, New York. "They need to have a little lead time of at least one paycheck and sometimes two." In some cases, you can also allocate part or all of a year-end bonus to your 401(k) account and avoid the extra tax bill on it. Workers age 50 and older can contribute an extra $5,500 to a 401(k) account as a catch-up contribution in 2014, or a total of $23,000.

Extra time for IRA contributions. While 401(k) contributions typically need to be made by the end of the calendar year, you have until April 15, 2015, to make IRA contributions that count toward tax year 2014. "For a lot of my clients, we wait until 2015 because we want to see what their tax return looks like," says Robert Reed, a certified financial planner for Partnership Financial in Columbus, Ohio. "We can see if it will make more sense for us to do a traditional IRA and get the tax break this year or do a Roth IRA and pay the tax this year and then not pay tax again ever." You can type a hypothetical IRA or Roth IRA contribution into tax preparation software to see how much you could save on your tax bill. However, if you wait until 2015 to contribute to an IRA for tax year 2014, make sure you specify which tax year the contribution should be applied to. Financial institutions may automatically apply contributions to the calendar year when they are received unless you indicate otherwise.
Take your required minimum distributions. Distributions from traditional 401(k)s and IRAs are required after age 70½, and income tax will be due on each withdrawal. The penalty for missing a distribution is a 50 percent tax on the amount that should have been withdrawn. You have until April 1 of the year after you turn 70½ to take your first required minimum distributions, but subsequent distributions are due by Dec. 31 each year. And if you delay your first distribution until April, you will then need to take two distributions in the same year, which could result in an unusually high tax bill. "If you have to take two distributions in that year, you may want to be careful because it could push you up into a higher tax bracket," Reed says. "You're just looking at a difference of a few months, so for the vast majority of people, when you get to be 70½, just take it."
Get the saver's credit. Workers who earn up to $30,000 for individuals, $45,000 for heads of household or $60,000 for married couples in 2014 and save in a 401(k) or IRA are eligible for an additional tax perk, the saver's credit. This valuable tax credit available to moderate-income households can be worth as much as $1,000 for individuals and $2,000 for couples, with the biggest credits going to people with the lowest incomes who manage to save for retirement.

Reset your contributions for 2015. In tax year 2015, the 401(k) contribution limit will increase by $500 to $18,000, and the catch-up contribution limit will also grow by $500 to $6,000. So if you can, consider setting your 401(k) direct deposits a little higher next year to get the biggest retirement savings tax break you can. "Make sure you take full advantage of your 401(k), especially if there is an employer match," says Gwen Gepfert, a certified financial planner and principal of Oaktree Financial Planning in Basking Ridge, New Jersey. You can even use part of your 2014 tax refund to get a jump-start on saving for next year.

Culled from US news

A JOURNEY TO A SUCCESSFUL AND HAPPY RETIREMENT-Odunze Reginald

In the film Transcendence, a film on Artificial Intelligence, Dr Caster and his team noted that the journey is far more important than the destination. So is all aspect of life, the journey of any event, program, study is by far better than its destination. If the journey is well planned, the destination will be great, and if the journey is haphazard then its destination can be a failure. Pension is not an exception.

In his books, The magic of getting what you want, and The magic of thinking big Schwartz noted that human beings and individuals expecting to make change in their immediate environment should be willing to prepare their 5 minutes obituary and by preparing their 5 minutes obituary, they will be able ascertain if they have achieve their expectations in life. So also should workers be able to prepare for their own retirement even when they are still working, by carrying their pension calculations, they will be able extrapolate in advance, their likely expected pension pot and their pension’s benefits.

From these two illustrations, it can be observed that in every aspect of life careful planning, checks, measures are necessary for a better deal. Even life, James Schwartz noted in preparing ones obituary, you will be able to ascertain what you have achieved at a particular age. In pension one should make it a duty to at one time or the other to ascertain what his or her pension pot is, bench mark it with your benefits, salaries , allowance accruable to you now, by so doing you will know whether you are making a headway or not in achieving the required pension pot. There is also need for a pension calculator.

There are steps to achieving that and according to Wall Street cheat sheet “TCRS offers the following three strategic steps for achieving retirement readiness and success:

1. Save for retirement. Start saving as early as possible — and as much as possible to maximize potential compounding of investments. Save consistently over time. Avoid taking loans and early withdrawals from retirement accounts as they can severely inhibit the growth of long-term retirement savings.
2. Calculate retirement savings needs, develop a retirement strategy, and write it down. In creating a plan, consider lifestyle, living expenses, healthcare needs, government benefits, and other factors, as well as a backup plan in case retirement comes early due to an unforeseen circumstance.
3. Get educated about retirement investing. Whether relying on the expertise of professional advisers or taking a more do-it-yourself approach, gain the knowledge to ask questions and make informed decisions. Seek assistance from a professional financial adviser, if needed.” (Wall street cheat sheet)

But in having a worthwhile retirement is a basically a function of the strategies put in place in achieving that.  Strategies according to Anao are schemes, maneuvers, and methods, plans which organizations or individuals hope to deploy in order to function effectively, Retirement is essential one of the basic facts of life, and people save for two basic reasons, to make lots of money and to provide for the retirement. And according to a recent research, people are more likely save to cater for their retirement than to be rich.

The problem of financial crises and the increasing in the working age in United Kingdom and the United states has made people to start planning heavily on the retirement, coupled with a recent development where scammers target retires because of their vulnerability indicate a positive trend in having a good retirement strategies as most whites return back to work having discovered that their pension pot could not carry them through during their retirement. These are the basic strategies for retirement:

1 Save for retirement: saving for retirement is a basic requirement in life especially in Africa where there is no social security. Saving for retirement in Africa is fast becoming important as the modernization has gradually eroded African system of social communism where in most communities; people gather together build houses for old people who do not have children to cater for them. As this has eroded, it becomes increasingly important to start saving for old age

It is also important to embark on voluntary contribution as the mandatory provision of 15 percent is not quite enough and I strongly commend the Federal government of Nigeria for increasing to 18 percent.

2 Make s rough estimate of retirement savings needs, the saving need is a strategic issue as most retirees came to the sudden realization that what they are getting as their lump sum is not enough, coupled with their desire to get a house and a car from their lump sum which is barely enough to cater for their immediate needs.

3 Develop a retirement strategy, it is very important to fashion a well defined retirement strategy. Transamerica Center for Retirement Studies (TCRS), noted that in developing a retirement strategy, it is important to do the following “create a plan , In creating a plan, consider lifestyle, living expenses, healthcare needs, government benefits, and other factors, as well as a backup plan in case retirement comes early due to an unforeseen circumstance

4 Know a lot about retirement investment, it is the inability for contributors knowing about investment that often drove them to annuity. Contributors should at one time or the other gets investment advice from their pension fund administrators. They can do this by attending forum organized by the various Pension Fund Administrators to get adequate information on investment strategies

5 Maintain a positive attitude towards life and pension inclusive; according to book of job what people fear most always comes to them. And according to Robert Schuler, in his book , “the power of positive thinking “ he noted that  one of the basic ingredient of success is maintaining a positive outlook to life, believe that you will make and you will make it, believe that you will not , and you will definitely not”

Therefore maintaining a positive attitude in all aspect of life is pre requisite for all facets of life and Le Boeuf (1987:21) noted that “your world is a mirror and your mind is a magnet what you perceived in this world is largely a reflection of your own attitudes and beliefs. And life will give you what you attract with your thoughts. Think, act and talk negatively and your world will likely be negative. Think, act and talk with enthusiasm and you will attract positive results.

Pension is a great destination, and it requires careful journey , which comprises planning, adequate contributions, monitoring pension pot and as you endeavor to that, you will discover like Dr Caster and his team that the journey is very important as its destination. 

Culled REGINALD ODUNZE.COM

Take care of yourself first in retirement By Dave Bernard

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When you retire you become personally responsible for your own happiness. How you spend your time and what you do is up to you. The freedom you feel can be refreshing, liberating and inspiring. However, if your retirement journey does not go the way you hoped, who is to blame? Your retirement happiness rests in your hands. Here's what you can do to maximize your chances of setting up a successful retirement.

Don't get caught up doing things you don't want to do. When the world learns you have free time on your hands, everyone will be knocking at your door. There is no limit to the number of worthy causes that will try to enlist you to do your part. Grown children will quickly translate your new freedom into an always open babysitting service available at their beck and call. Even a "honey do" list might get a bit out of control. It will be up to you to ration your time in a manner that satisfies you as well as the world around you. Learn to be selective and say "no".
As we age we need to maintain and expand our social network. It is important to interact with others and get involved. But if you really do not want to attend a particular dinner party or if the thought of attending the next symphony bores you, why force yourself to go? At a time when you are finally in charge of your calendar, choose what you want to do, not just what you feel obligated to do. This is your chance to look forward to your social life rather than dread it.
Set your own priorities. While on the job you typically focus on the things most important to your boss. Chances are you do not even have much input. Now that you are retired you get to do what is most important to you. Put goals at the top of your list that you consider the most important and also the most fun. Why not focus your attention on what you really enjoy? You can worry about less significant goals later.
It's OK to do nothing. Many of us find ourselves occasionally overwhelmed with all we have to get done and seemingly impossible deadlines. The thought of taking a break feels like an impossible dream. But in retirement it is OK to do nothing. In fact, finally getting to do nothing is an important part of retirement happiness. Look for the right mix of meaningful activities and serious downtime that best compliments your retired lifestyle. This balance can help keep you engaged and challenged while providing ample time to recharge and reset.
Keep active in mind and body. If we do not exercise our minds and bodies, they will not continue working the way we want them to. Obviously the biceps of a 65-year-old will not be as impressive as those of a 25-year-old, but that does not mean we cannot strive to be as fit as we can at any age. Exercising our bodies, challenging our minds, stretching beyond our comfort zone and keeping engaged with life are important ingredients for a healthy retired lifestyle. To give your mind a good workout, keep learning new things. Try to challenge your brain by learning a new language, signing up for a class, expressing your artistic side or taking a shot at something you have never done before. Each of these activities will challenge your brain to perform new tasks.

Enjoy the little things. With your calendar only as busy as you make it, retirement affords the opportunity to appreciate small moments that are frequently overlooked while caught up in the frenzy that life can be. This is your chance to slow down and take it all in. I love spending my mornings in the backyard with a nice cup of coffee and watching the sun moving up through the trees as it warms away the night coolness. Hummingbirds chase one another for the right to the feeder while my two cats vie for attention at my feet. This gradual start with time for reflection helps me prepare for the day ahead. Living at a less hectic pace helps me to take in the little details that make a moment special.

Us news

How much should a young worker save for retirement? By Walter Updegrave

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I'm a 22-year-old college grad who has recently started his first full-time job. How much should I be thinking about retirement and what is the appropriate amount to save? -- Henry, Charlotte, N.C.

Clearly, retirement isn't going be the biggest issue on your radar screen. As a recent college grad, I'm sure you've got a lot of other things on your mind: getting your career off to a good start, impressing your boss and, if you're anything like the person I was in my 20s, maybe having some fun with friends.

So I think it's impressive that you're giving retirement planning any attention at all. But I'm glad you are because to the extent you can get a leg up on it now, you'll find yourself in a much better position later in your career, whether that means being able to retire early, take a few years off without falling behind on your savings regimen or just not feeling the pressure of having to save every cent you can get your hands on in order to have a prayer of retiring at all.


So let's start with the biggie: How much of your income should you be saving for retirement?
It's impossible to know the precise amount. There are too many unknowns, including how much you'll earn during your career, the age at which you'll retire and how long and how well you'll live in retirement. But I'd say 15% is a reasonable target, assuming you want to have a decent shot at maintaining your pre-retirement lifestyle after you call it a career.
In fact, the Boston College Center for Retirement Research recommends a 15% savings rate for the typical household.
If you can't manage 15%, fine. Start with a lower percentage -- say, 10% -- but try to increase your savings rate by at least one percentage point each year until you get to 15%.
If your company offers a 401(k) or similar plan, you'll want to jump all over that. For one thing, the amount you contribute annually to a 401(k) -- $17,500 is the maximum this year, $18,000 in 2015 -- is deducted from your income. So you don't pay tax on your contribution and any investment gains until you withdraw the money, ideally in retirement.
In the meantime, your dough is sheltered from income taxes, which results in a larger retirement nest egg. The other big advantage of saving in a 401(k) is that most employers match a portion of what you contribute, which makes it easier for you to hit that 15% savings target.
Some employers also offer what's known as a Roth 401(k). With the Roth version, you invest after-tax dollars, which means you don't get a tax deduction. But you get to withdraw your money tax-free in retirement.
So if you think you'll be in a lower tax bracket in retirement than you are today, a traditional, or regular, 401(k) is the better choice. If you think you'll be in a higher tax bracket after retiring, you'll do better with the Roth. If you end up facing the same tax rate, it's a wash.


It's tough to predict what tax rate you'll face when you retire decades from now, so here's my quick take on choosing between the two types of 401(k)s.
If you expect your earnings to rise substantially during your career -- which I think is likely for most college grads with good career prospects -- then you're probably now in the lowest tax bracket you'll ever be in. That suggests you should go with the Roth. If you do that and your employer offers a match, you'll still end up with money in a traditional 401(k) anyway, as all employer matching funds must go into a traditional 401(k).
If your employer doesn't have a 401(k) plan, do as much of your retirement savings as possible through an IRA. The maximum contribution you can make is $5,500 both this year and next. IRAs also come in two types -- a traditional IRA, which gives you a tax deduction, and a Roth IRA, in which you invest after-tax dollars. The same principle I described above applies to deciding between the two.
Don't get too hung up on the traditional vs. Roth question, though. The most important thing is to find ways to save, and get as close to that 15% as you can get to it, whether it's a traditional 401(k) or IRA or the Roth version -- or even a taxable account.
Whatever amount you end up putting away, be sure to invest it sensibly, which is to say put it in a broadly diversified blend of stock and bond funds, preferably ones with low annual costs. And don't let any stock market ups and downs spook you. You've got many years to recover from any setbacks. So keep saving and stick to the diversified blend of stocks and bonds regardless of what the financial markets are doing.
Related: Investing smart in a rocky market
As you're putting away money for retirement, try also to gradually build an emergency fund in a savings account or money-market fund equal to three months' living expenses. Doing that will require you to restrict your spending a bit more initially. But having such a fund will allow you to meet unexpected expenses or weather a layoff without having to dip into your retirement investments.
Once you've got your savings regimen going and have some retirement savings tucked away, you can periodically go to a tool like the Retirement Income Calculator in Real Deal Retirement's Retirement Toolbox to see whether you're on track or need to save more. For now though, focus on trying to hit that 15%-a-year savings target -- and, of course on working hard at your job and having fun with friends.

Culled from CNN money

Proposed Changes Put Roth IRA Advantages at Risk- Chris Kissell ( Bankrate.com)

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Millions of U.S. investors are smitten with the Roth IRA. Contributions to the retirement vehicle topped $500 billion by the end of 2013, according to a report by the Investment Company Institute, a mutual-fund trade organization.
But President Barack Obama's 2015 budget includes a pair of proposals that threaten to take away some of the Roth's most alluring features. Both involve changes to Roth IRA distribution rules.
The first change would compel all people with Roth IRAs to take required minimum distributions, or RMDs, beginning at age 70 1/2.
In addition, the president's budget would require nonspousal IRA beneficiaries to disburse inherited IRAs within five years of the owner's death. This would prevent these beneficiaries from "stretching" distributions over their expected lifetime to minimize tax consequences.
Changes would help Treasury pay bills
The proposed changes clearly are intended to raise revenue for a nation awash in red ink, says Michael Rubin, CFP professional and founder of Total Candor, a financial planning education firm based in Portsmouth, New Hampshire.
"We have a government with a significant amount of debt that has to be paid back," he says.
But the new rules could have a negative impact on many investors who have Roth IRAs, says PJ Wallin, CFP professional and founder of Atlas Financial in Richmond, Virginia.
"It's unfortunate," he says, adding that the moves primarily impact "those who have diligently saved throughout their lifetime."
Change No. 1: Mandatory minimum distributions
Not everyone agrees that such changes would have a significant impact on investors.
The rule to impose RMDs simply would bring Roth IRAs into line with traditional IRAs, which already require mandatory distributions at age 70 1/2, says Andrew Novick, CFP professional with The Investment Connection in Center Valley, Pennsylvania.
He also notes that under the new rules, all qualified distributions would remain tax-free.
"I don't think it would change people's perceptions of Roth IRAs much," he says. "They will still view them as excellent tax-free growth vehicles."
However, Wallin says requiring mandatory minimum withdrawals likely would hurt Roth IRA owners who plan to pass their assets on to loved ones.
Beneficiaries would benefit less
Because the new rule would compel Roth IRA owners to take withdrawals during their lifetimes, the money would have less time to compound tax-free before it is bequeathed to the beneficiary.
For example, a Roth IRA owner who lives to age 90 would face nearly two decades of required withdrawals. Money withdrawn from the Roth during that time no longer could grow tax-free.
That fact could result in a "substantially different inheritance" for beneficiaries, Wallin says.
Eric Roberge, CFP professional and founder of Beyond Your Hammock, agrees: "This will have a dramatic impact on those who have a good amount of money in retirement accounts."
Forcing Roth account owners to take RMDs at age 70 1/2 "will deplete this extra money" that account holders planned to pass to heirs, he adds.
Change No. 2: Quick disbursement for some beneficiaries
The second proposed change would require certain beneficiaries to disburse funds within five years of the owner's death.
The new rule would target so-called "stretch" IRAs. Currently, nonspousal beneficiaries of Roth IRAs must begin taking required minimum distributions after the Roth IRA account owner's death. However, beneficiaries can mitigate the tax consequences by "stretching" the distributions over an entire lifetime.
The new rule would change that by making nonspousal beneficiaries liquidate the accounts within five years.
"Accelerating distributions of inherited IRAs will result in more taxable income now, which the government wants," Novick says.
Novick believes this second change would have a more significant impact than the first change.
Changes would constrain conversions
"This is a much bigger deal," Novick says. "It makes inherited IRAs a lot less appealing."
If the new rule is approved, it is likely to result in one immediate change, Novick says.
"Older account holders will be less inclined to convert a traditional IRA to a Roth," he says.
"There won't be enough years of tax-free growth to warrant paying tax now on the conversion."
Conversions have become increasingly popular, especially among high-income earners. In 2010, conversions to Roth IRAs topped $64.8 billion, beating regular Roth IRA contributions for the first time, according to a recent report from the IRS. That year, new tax provisions opened Roth conversions to people of all income levels for the first time.
How should you prepare?
Keep in mind that the proposed changes to the Roth IRA distribution rules have not been approved.
After Obama unveiled his $3.9 trillion 2015 budget last spring, the House of Representatives rejected the budget by a vote of 413-2. Critics denounced the vote as a political stunt.
Given the dysfunction in Washington, it's not likely that a budget -- and the Roth IRA proposals within it -- will be approved anytime soon.
Novick says he is not recommending major overhauls to his clients' retirement strategies based on the potential changes. However, he is taking a second look at some strategies.
"I will be more cautious about recommending Roth conversions, especially to older clients," he says.
Wallin is taking a wait-and-see approach to the proposed changes. He says that in the past, many similar proposals have ended up "going nowhere."
"That said, never say never," he adds.
Continue to diversify
Even if the Obama administration does not succeed in changing Roth IRA rules at this time, Roth investors now have been put on notice for possible future changes, Rubin says.
"I firmly believe that there will be an attack on the sacred nature of the Roth IRA," he says.
Rubin urges investors to prepare for such a possibility by not putting too many eggs in the Roth IRA basket.
"You should be tax-diversified," he says. "The most important thing in investing is diversification, and it's the same thing here."

Culled from Fox business