From Shared Val­ues To Shared Quar­ters

Bloomberg Businessweek (Europe) - - FOCUS ON/ RETIREMENT - −Lewis Bra­ham

thorny tax is­sues. “Once you hit 70 ½, you’re re­ally out of the sweet spot of tax plan­ning, be­cause you’re forced to take dis­tri­bu­tions and So­cial Se­cu­rity,” says Bob Mor­ri­son, a fi­nan­cial plan­ner at Down­ing Street Wealth Man­age­ment near Den­ver. Re­ceiv­ing too much money at once can knock you into a higher in­come tax bracket or de­prive you of de­duc­tions. “Once your in­come ex­ceeds $250,000, the IRS phases out your per­sonal ex­emp­tions—$4,000 per in­di­vid­ual—and then at about $300,000 your item­ized de­duc­tions start phas­ing out,” he says. Those could in­clude de­duc­tions for med­i­cal ex­penses and mort­gage pay­ments.

For this rea­son, Mor­ri­son rec­om­mends that clients start con­vert­ing a por­tion of their tra­di­tional IRAs into Roth IRAs be­fore age 70. Roth IRAs not only of­fer tax-free with­drawals but also have no RMDs. The IRS even lets you add money to a Roth ac­count as long as you’re still work­ing past 70. Roth con­ver­sions are tax­able events them­selves, but one could con­vert just enough each year prior to reach­ing 70 to keep from be­ing bumped into a higher bracket. Even this strat­egy has wrinkles, de­pend­ing on where you live and where you plan to re­tire. “If you live in New York City and have a high in­come, you’re prob­a­bly pay­ing very high state and lo­cal in­come taxes,” says Matthew Kenigsberg, vice pres­i­dent for fi­nan­cial so­lu­tions at Fi­delity Strate­gic Ad­vis­ers. “But Florida has no in­come tax. So if you’re plan­ning to re­tire there, it would make sense to wait till you’re in Florida to con­vert to a Roth to avoid pay­ing those lo­cal New York taxes on the con­ver­sion.” On the flip side, some­one liv­ing in a no-in­cometax state like New Hamp­shire who plans to re­tire in a high-tax one such as Cal­i­for­nia should con­vert to a Roth early to avoid the fu­ture tax­a­tion.

Per­haps the big­gest de­ci­sion many boomers will face upon reach­ing 70 is whether to re­tire. Steven Pod­nos, a fi­nan­cial plan­ner with Wealth Care in Co­coa Beach, Fla., of­ten coun­sels clients to keep work­ing at least part time for psy­cho­log­i­cal rea­sons, “be­cause they have some anx­i­ety over liv­ing off a pool of money,” he says. “We see that a lot.”

For the most dili­gent savers the psy­cho­log­i­cal trauma of spend­ing down as­sets may be the great­est chal­lenge. “They’ve worked so hard to build their port­fo­lio, they’re hes­i­tant to take any­thing from it,” says fi­nan­cial plan­ner Bron­wyn Shone of BlueSky Wealth Ad­vi­sors in Pleasan­ton, Calif. “In one case, I had to give clients per­mis­sion to buy ten­nis rack­ets and hik­ing boots. ‘Please go buy them,’ I said. ‘You can def­i­nitely af­ford it.’” The bot­tom line Baby boomers start turn­ing 70 this year—and they have to be­gin with­draw­ing from re­tire­ment ac­counts or face penal­ties. Scan­di­na­vian-style co-hous­ing is gain­ing trac­tion among boomers

“Peo­ple who live in a com­mu­nity live health­ier and hap­pier”

The rhythms of EcoVil­lage Ithaca echo those of any small up­state New York town. On a re­cent week­day morn­ing, three home-schooled boys whiz by on bikes. A woman adds top­soil to raised beds of spinach and kale, re­joic­ing that the plants sur­vived the win­ter.

But this isn’t just an­other sprawl­ing res­i­den­tial de­vel­op­ment. EcoVil­lage is a planned co-hous­ing com­mu­nity whose 240 res­i­dents share kitchens, car rides, and a com­mit­ment to sus­tain­able liv­ing. Born in Den­mark in the 1970s, the co-hous­ing con­cept has been gain­ing ground in the U.S., where more than 150 such com­mu­ni­ties ex­ist, ac­cord­ing to the Co­hous­ing As­so­ci­a­tion of the United States. While most are in­ter­gen­er­a­tional like EcoVil­lage, se­nior-only co-hous­ing de­vel­op­ments are grow­ing in pop­u­lar­ity, with 10 com­pleted in re­cent years and 14 in progress. “One part of the ap­peal is co-hous­ing com­mu­ni­ties are mostly, if not en­tirely, run and or­ga­nized by res­i­dents,” says Stock­ton Wil­liams, ex­ec­u­tive di­rec­tor of the Ter­williger Cen­ter for Hous­ing at the Ur­ban Land In­sti­tute in Wash­ing­ton, D.C. “It’s an ap­proach to cre­at­ing a more tightly knit sense of com­mu­nity among peo­ple with sim­i­lar val­ues, which seems to be an as­pi­ra­tion that many baby boomers have.”

Quim­per Vil­lage will be a 55-andup co-hous­ing com­mu­nity in Port Townsend, Wash., when it’s com­pleted in 2017. The 28 sin­gle-fam­ily con­dos will range from $277,000 to $425,000. “Peo­ple who live in a com­mu­nity live health­ier and hap­pier and have more fun,” says Pat Hund­hausen, 75, who co-founded the com­mu­nity with her hus­band, David. “We wanted to be more proac­tive about ag­ing and not get caught up in some cor­po­rate or med­i­cal model,” she adds.

An­drew Carle, an ad­junct pro­fes­sor and ex­pert on se­nior hous­ing at Ge­orge Ma­son Univer­sity, says that de­spite its many at­trac­tions, co-hous­ing isn’t al­ways an ideal choice for se­niors, many of whom “are in de­nial” about the kind of care they’ll need as they age. “They be­lieve they can live in co-hous­ing and help meet each other’s needs,” he says. “The re­al­ity is they will in most cases reach a point where that will not be prac­ti­ca­ble or achiev­able.”

EcoVil­lage con­sists of three dense neigh­bor­hoods, each with its own 5,000-square-foot com­mon house for meals and gath­er­ings. The first, named Frog , was com­pleted in 1997, and the most re­cent, Tree, was fin­ished last Novem­ber at a cost of about $9.4 mil­lion. The first two neigh­bor­hoods each have 30 town­houses, while the lat­est is a mix of 40 sin­gle-fam­ily homes, apart­ments, and town­houses, a third of which are oc­cu­pied by re­tirees.

The 175-acre cam­pus in­cludes three or­ganic farms. So­lar pan­els gleam from rooftops and are mounted on the ground, and a re­use room en­ables res­i­dents to re­cy­cle clothes, toys, and books. Some vil­lagers use a ride-shar­ing app to co­or­di­nate car trips. Af­ter down­siz­ing from a 5,000-square-foot New Jersey house to a one-bed­room, $187,000 co-op apart­ment in EcoVil­lage last year, Ar­lene Muzyka says she and her hus­band have re­duced their driv­ing by 65 per­cent and their util­ity us­age by 75 per­cent.

The co­op­er­a­tive na­ture of

Newspapers in English

Newspapers from Bahrain

© PressReader. All rights reserved.