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THE DOWNLOAD MONEY MATTERS


EQUIFAX HACK The bad news just got worse for


tens of millions of Americans exposed by the hack of credit bureau Equifax. Besides names, Social Security numbers, driver’s license numbers, birth dates, and addresses, the company recently informed Congress it also compromised tax IDs, email addresses and personal phone numbers. All the more reason to set up a credit freeze on your account.


MEDICARE SAVINGS ACCOUNTS The Trump budget proposal


doing well before taking a bath when the market plummeted,” Koos says. “As Warren Buffett once said, ‘Only when the tide goes out do you discover who’s been swimming naked.’” He adds that investors can be caught off guard: “Like all mutual funds, managed payout funds invest according to an investment policy statement and when — not if — the market corrects, or worse, crashes, I predict there will be a lot of investors who will feel quite naked in the aftermath, considering they’ve been sold a product on the premise of safety.”


YOUR RISK TOLERANCE The best way to help a client address the risk of managed payout funds is to ask a simple question, says Bill Kardos, a financial adviser with Mutual of Omaha in Pittsburgh, Pa. That is, “How much of your


retirement funds are you willing to leave unprotected?” Asking this helps clients determine


if a managed payout fund should be part of their income stream in retirement, Kardos says. If they want more protection, they should consider


an income annuity, he says. “All of the (managed payout)


funds generally promise a payment of around 4 percent of the fund balance,” Kardos says. “But in a sustained down market with the value of the fund decreasing, clients will usually be unhappier with their standard of living decreasing as they have to make budget cuts than they are with the size of their nest egg decreasing.” The investment performance risk


creates challenges for retirees because they don’t really know how long they might live. This is what’s known in the industry as “longevity risk.” If distributions remain high and


markets don’t keep up, the fund could run dry years earlier than expected.


THE 4% CONUNDRUM Yet another issue with managed payout funds is the promise of 4 percent retirement withdrawals — that rate may have made sense at one point, but the premise supporting the ability of someone to continue withdrawing 4 percent from a portfolio over a long time frame may no longer hold water.


includes a sweetener for Medicare recipients. If approved, it would allow enrollees to add tax-deductible money to a MSA to cover out-of- pocket healthcare expenses. To do this, you would need to be enrolled in a high-deductible Medicare Advantage insurance plan.


FEE DISCLOSURES If your stockbroker hands you some dense legalese to read this year, take it seriously. The Securities and Exchange Commission (SEC) is allowing financial advisers a one-time pass to disclose high-cost mutual funds they may have purchased for clients in the past. At issue are 12b-1 fees, money paid by the investor that can be as high as 1 percent of invested assets paid to the adviser annually. This money usually ends up in the pocket of the broker as a commission.


REFUND DELAY Don’t count on your tax refund


showing up quickly — or even on getting a refund at all next year. Under the proposed 2018 budget, refunds could be delayed due to new requirements to claim certain tax credits, such as the requirement for a Social Security number (instead of a tax ID number) to claim the child tax credit. Review your withholding status with your employer now. Get your most recent pay stub and search for “tax withholding calculator” online at IRS.gov.


MAY 2018 | NEWSMAX MAXLIFE 63


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