(bright music) <v ->Hi, I'm Janae Wheeler and I'll be your host.</v> We often get questions from retirees about their finances and AARP is here to help. Stick with us for the answers to these and more from our finance and money experts. The content is intended as general guidance not specific legal or financial advice. So please consult a financial advisor for any specific guidance according to your individual situation. Taxes don't disappear in retirement. It can eat into a retirees income. What are some strategies to lower taxes in retirement? <v ->You always have to keep in mind</v> that if you have a traditional savings account with 100K in it, it's going to be less than that when you take it out 'cause you deferred the taxes on it, you didn't get rid of them. So you're gonna have to pay them eventually. One of the things that you can do is to take money from your tax deferred accounts first so that you can basically delay your social security and increase your social security payments each year. Another thing you can do is put some money aside into a taxable account, which sounds a little weird, but you have to remember that the taxes on capital gains and dividends are lower than ordinary income. And in fact, if you're a single person, you can have up to $80,000 a year in capital gains and pay no income tax on it. So that's another strategy to keep your taxes low. Every penny that you keep is a penny that you can spend. <v ->Two competing concerns for many retirees</v> are outliving their money and living comfortably. Not outliving their money might require retirees to keep a portion of their savings invested. What investing guidance do you have for retirees? <v ->When it comes to investing,</v> put your money into different buckets. You can have a safe bucket, which is very conservative, and then you can also have an income bucket, which is focused on providing some cash for you or some level of cash flow. They could be dividend stocks. And then you can have a growth bucket. This money may be invested a little more aggressively and it's working in your favor to grow. Regardless of how big or small these buckets are, having these buckets will allow your money to operate in different ways. That's a good way to diversify. The other thing is during a down market, you have to give your stocks a chance to rebound. During those times, tap into some cash, tap into some bonds. You don't want to start to pull your cash when it starts to drop in value. I know it's a scary time, it's an emotional time, but you want to be careful to give it time to rebound. It will have an opportunity to do so. At 65, you can expect to live on average another 22 years. So that's going be a significant amount of time. So within that time, you will want to have some exposure to some stocks and some bonds. We know the typical thought is that the older you get, the more conservative you become with your investments, but you're gonna have a long life to live, so you want to give your money some time to still grow. Send your money to work, even when you're not working. When we think about things like dividend paying stocks or some of those income stocks, these are going to be ways to help keep up with inflation. They also provide cash flow for you and there's gonna be some tax advantages in those cases as well. Now you also want to consider putting a part of your assets in an immediate annuity. Remember, they can pay out over time and they can pay you a specific amount over time plus have a little bit of growth. And remember that you can invest up to your retirement or invest through retirement. There's no one strategy. It's no one size fits all. There are a couple of different approaches that you can take there. And if you have money that you intend to pass down to some loved ones, then that money has more time that it can be in the stock market. So give that money time to grow. And with all of these things, I know that's a lot that I just threw at you, those are a lot of different concepts. It can be a little confusing. Talk to an advisor, talk to a professional because they'll be able to give you a plan that really works for you because personal finance is personal and you're gonna need a strategy that works best for your scenario. <v ->For a lot of retirees,</v> their homes are their largest asset or potential retirement nest egg. What should retirees keep in mind about a reverse mortgage? <v ->While a house may be the largest asset,</v> it's not a financial asset. There are two ways to access the value of a house, sell it or borrow against the accumulated value of home equity. Home equity is the value of the house minus any existing mortgages or home equity loans on the property. You can tap home equity by obtaining a home equity line of credit or a second mortgage. A reverse mortgage can also be a way to tap home equity. There are a few things you should keep in mind if you're considering a reverse mortgage. A reverse mortgage is a loan. It can provide funds to the borrower on an ongoing basis or as needed. Borrowers do not have to make loan payments. The loan is repaid when it terminates, which happens when the borrowers move out, sell the house or pass away. Any existing mortgages or home equity loans must be paid off prior to accessing reverse mortgage proceeds. Borrowers have certain requirements they must meet, such as living in the home as your primary residence, maintaining the property, paying property taxes and homeowners insurance or paying homeowners dues and assessments if the property is a condo. Most reverse mortgage loans are FHA insured Home Equity Conversion Mortgages or HECMs. HECM borrowers must undergo counseling with a HUD approved housing counselor prior to applying for a loan. This ensures that you understand the loan terms and obligations. HECM borrowers must also undergo a financial assessment to determine if you can pay ongoing expenses, such as property taxes and homeowners insurance, as well as basic living expenses. HECM borrowers cannot have unpaid federal debt, such as income tax debt or student loans. Before deciding whether to seek a reverse mortgage, consult a trusted elder attorney or financial advisor, someone who will not personally benefit from the transaction. Check out more information about reverse mortgages and tapping home equity from the Consumer Financial Protection Bureau at consumerfinance.gov and the National Council on Aging at ncoa.org. <v ->Any other money tips or suggestions for retirees, John?</v> <v ->Sure, talk about your finances with your family</v> so they know what's going on with your money, they know how to contact you and they know if push comes to shove that if they have to take over some of your finances or some of your tasks for taking care of yourself that they know where to go. Also, make sure you have a will, a medical power of attorney and other end of life arrangements. You don't like to think about it, but if you have it done, you don't have to think about it again. <v ->And Martin, what are your final thoughts?</v> <v ->Work with a financial professional</v> to get reassurance about your plans because your story is definitely your story. As I mentioned earlier, personal finance is very personal. And when we think about a financial professional, I know we think about the traditional way. You have a large sum of money and they'd only work with you if you had that large sum of money and that they're really expensive. But we've seen so many changes in the financial professional world. Now there are certified financial planners who provide pro bono work. There are also certified financial planners that work on a hourly cost basis or they're fairly free to low cost. There are some that also have subscription models, so you may want to do some research. Go on to, you could look at the CFP board, that's the Certified Financial Planners board, just to see who's out there, who could I work with that's within my price range. But then also, there are credit counselors that offer free to low cost models as well. So, you know, depending on where you are, there's a financial professional for you. There's gonna be someone at your price point, so definitely work with them. <v ->Thank you to our finance and money experts</v> for sharing all of this great information. To get the latest financial news and expert advice on money management to budget effectively, spend wisely, build a nest egg and live well in retirement, check out this website. For additional information about other money topics and resources, visit learn.aarp.org/money to access the Your Questions Answered tool. You can browse Frequently Asked Questions, and if you don't see what you're looking for, you can submit a question of your very own. Volunteer certified financial planner professionals from the Foundation for Financial Planning will answer every question submitted with a personalized response within 10 days via a private email. Thanks for watching. (bright music)

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