The Senior Scene

By Scott Staton

Concerned about how taxes may affect your retirement? If so, you’re part of a growing cadre of Americans, some of whom are beginning to reassess their finances as a result of the COVID-19 pandemic and the uncertainties it brought about.

In a recent Harris poll conducted in conjunction with Nationwide, 62 percent of those surveyed said they think it’s more important now than it was previously for them to develop a strategy to address taxes in retirement.

Actually, it was always important, so it’s good to see that more people are coming to realize they should be proactive in accounting for taxes as they stash away money for what they hope will be their golden years.

We all realize taxes are important. Otherwise we wouldn’t have roads, bridges, a military, and all the other services our contributions to the government help pay for. But that doesn’t mean we enjoy paying taxes – or that we have any interest in paying more than what is necessary. The trick, of course, is making sure you take steps to ensure you pay what you owe – but not a dollar more. That’s not always easy, and lawmakers routinely change the rules and the allowable deductions, making it that much harder. Sometimes changes to the tax code benefit you, sometimes they don’t.

That Harris poll showed that 60 percent of Americans expect their taxes to go up significantly in the next four years. Also, 62 percent say it’s more important to minimize taxes now than to wait until they reach retirement.

With all that in mind, let’s take a look at a few tax issues retirees, pre-retirees, and others need to know about:

Tax-deferred accounts.

When you set aside part of your income to contribute to a traditional IRA or 401(k), you can postpone paying taxes on that money. You also can gain interest on those accounts each year without paying taxes. Of course, with tax-deferred accounts, the key word is “deferred.” Eventually, the tax bill comes due. When you retire and start withdrawing money from those accounts, the IRS will want its share. But what if you decide not to withdraw money from your tax-deferred accounts because you have other income that can pay your bills? Once you reach age 72, you have no choice. That’s when required minimum distributions come into effect. The government requires you to withdraw a certain percentage of your money each year so it can claim those taxes.

Roth conversions.

Let’s say you’re worried about tax-deferred accounts and the tax bill that’s going to come due down the road. One solution that’s become popular in recent years is a Roth conversion. In such a conversion, you move money from your tax-deferred accounts to a Roth IRA. You pay taxes when you make the conversion, so typically you move portions of the money over several years to avoid a big tax hit all at once. But once it’s in the Roth, the money draws interest tax-free and you pay no taxes when you make withdrawals in retirement.

Capital gains.

President Joe Biden has proposed raising the capital gains tax on investors who make over $1 million. Capital gains are profits made from selling investments. Currently, the top capital gains tax rate is 20 percent, but Biden’s plan essentially would eliminate that and tax the capital gains as ordinary income, which could mean a rate as high as 37 percent. As you can imagine, that has some people concerned. What can those investors who would be affected do? One option would be to spread out the sale of their assets over several years to avoid having more than $1 million in gains in a single year.

One of the other findings of the Harris poll was that 41 percent of retirees said they wish they had been better prepared for paying taxes in retirement. In truth, you won’t find many investments that allow you to escape paying taxes completely, and no generic advice can account for everything that might affect your individual situation.

Scott Staton is the founder and president of Staton Financial Group Inc., which specializes in retirement planning and income planning.

Today’s real estate market remains challenging for many buyers. With a limited supply of homes and a high number of buyers, prices have soared to record heights over the past two years.

One of the underlying factors contributing to the current state of the market is generational. Real estate experts have noted that with an increasing number of older Americans aging in place, fewer homes are available for younger buyers, according to industry analysis.

With millennials (America’s largest generation) currently age 26 to 41—a peak period for first or second-time homebuying—competition in the real estate market has been fierce. And as prices rise, younger buyers with lower savings or less pre-existing home equity than older buyers may have an even harder time purchasing.

Unfortunately for younger homebuyers, homeownership among older Americans remains high. In 2012—the year after the first Baby Boomers turned 65—the homeownership rate among those aged 65 and over peaked at 81.1%. Beginning in 2013, that rate declined slightly each year until 2018, when the rate fell to 78 percent. But by 2020, that number increased to 80 percent—approximately 27 million owner-occupied households out of the 33 million total U.S. households of retirement age.

This trend may in part be attributable to larger numbers of wealthy Baby Boomers entering the 65-and-over age bracket. With more than 71 million Boomers controlling an estimated $70 trillion in wealth, the share of 65-and-over homeowners may continue to increase as the last of the Baby Boomer cohort reaches that age. Despite recent fluctuation in the rate of homeownership among older Americans, the raw number of retirement-age homeowners is up by more than 40 percent over the last decade.

But beyond simple demographic trends, many older Americans are also active buyers, looking for homes that suit their lifestyle preferences late in life. Not necessarily in the Seattle-Tacoma metropolitan area, though, which reportedly has the fourth-fewest senior homebuyers in the country.

According to data from the National Association of Realtors, the most common reasons for older buyers to purchase are to be closer to friends and families or to find a smaller home. Older homeowners with these motivations are often exchanging one home for another, rather than exiting homeownership altogether. Retirement-age adults also faced many of the same pandemic-related motivations for buying in 2020, which was reflected in broad homeownership rate increases across all age cohorts.

Many of the locations where older Americans are buying homes are Sun Belt locations that have been attracting retirees for years. States like Arizona, Florida, and Nevada have high numbers of seniors moving in, attracted by pleasant climates and more affordable cost of living than many northern cities. But the top state where seniors are buying homes is actually Delaware, where homebuyers aged 65 or older made up 15.1% of home purchase loans in 2020. Among Delaware’s benefits for seniors are low property taxes, tax breaks on pension and 401k income, and an absence of state sales and estate taxes, all of which help seniors keep more disposable income and allow them to transfer more of their wealth to their heirs.

But at the metro level, the major Sun Belt retirement destinations are home to most of the top locations for older homebuyers. Among major metros, an overwhelming majority are located in Arizona, Florida, California, and the Carolinas. In some of these locations, homebuyers over 65 accounted for more than 20%—and up to nearly 50%—of all home purchase loans in 2020.

The data used in this analysis is from the Federal Financial Institutions Examination Council’s Home Mortgage Disclosure Act. Only conventional, home purchase loans originated in 2020 were considered. To determine the locations where the most seniors are buying homes, researchers at Construction Coverage calculated the share of home purchase loans in 2020 accounted for by homebuyers 65 years or older.

The analysis found that in the Seattle metro area, homebuyers aged 65 or older accounted for 4.3 percent of home purchase loans in 2020. Out of all large metropolitan areas nationally, Seattle has the fourth-smallest share of senior homebuyers.

Here is a summary of the data for the Seattle-Tacoma-Bellevue area:

• 65-plus share of home purchase loans:4 percent.
• Median loan amount:$345,000.
• Median property value:$525,000.
• Median loan-to-value ratio:74 percent.
• Median interest rate:25 percent.

For reference, here are the statistics for the entire United States:

• 65-plus share of home purchase loans:8 percent.
• Median loan amount:$205,000.
• Median property value:$305,000.
• Median loan-to-value ratio:79 percent.
• Median interest rate:25 percent.

Construction Coverage’s full report is online at https://constructioncoverage.com/research/where-are-seniors-buying-homes-2022.

By Bruce Carlson

Would you like to learn more about protecting yourself from online scammers and criminals? Could you use answers to your questions on personal Internet security? How do you keep a bank account safe? How can you recognize scam e-mail or text? These are the types of questions we answer on AARP Washington’s Fraud Watch Fridays.

To help fight back against scammers, AARP Washington hosts two online events each month. Led by volunteers from the AARP Fraud Watch Network, the sessions are on the second and third Friday of each month, starting at 10:30 a.m., on Facebook (at aarp.org/FraudWatchFriday) and YouTube (at youtube.com/aarpwashington, where they are also available for later viewing). The second Friday features the latest topics in the field, such as robocall scams, Amazon scams, e-mail phishing, phony texts, romance scams, home repair scams, frauds targeting veterans, and more. The program on the third Friday covers online safety and cybersecurity; it features live questions from viewers and expert answers from AARP volunteer Dave Morrow.

Morrow, who lives in Bellingham, is co-lead of AARP Washington’s Fraud Watch Network of volunteers, along with Jean Mathisen of Island County, and is the driving force behind our online and cyber fraud education efforts. He’s had a nearly 40-year career in cybersecurity and counterintelligence for the military and private sector financial institutions. He was a special agent for the Air Force Office of Special Investigations,, specializing in computer crimes. After leaving his military career, he was head of cybersecurity for two multi-national corporations and head of incident response for a major bank.

“I’ve seen fraud’s impact on my own family members,” said Morrow. “Many people who are taken advantage of by fraudsters can avoid a lot of these problems by adopting some relatively simple precautions. This is especially true when it comes to cyber fraud. I hope our tidbits of information on frauds and how to avoid them will help develop a fraud-fighter mindset where they skeptically examine every e-mail, text, phone call, and interaction.”

“There’s almost no question Dave can’t answer,” said Fraud Watch Fridays co-host Anne O’Callahan of Issaquah. “And for the rare question where we don’t have a ready answer, Dave has the contacts and experience to find out. We want to do everything we can to ensure our members are safe from fraud online”.

While anyone can be targeted by fraud, older Americans are often victims. In 2021, the top two types of fraud Washington consumers reported to the Federal Trade Commission were impostor scams and identity theft.

“We hope we keep our participants aware of how fraud schemes work, how to lessen their chances of being victimized, and new types of schemes that constantly arise,” said Morrow. “It won’t make you a cybersecurity expert, but our sessions will give you the tools to make your online life safer and more enjoyable.”

You can register to participate in the next “Questions about Cyber Crime Fraud” session on June 17 by e-mailing aarpwa@aarp.org.

Bruce Carlson is an associate state director of communications for AARP.

FRAUD WATCH FRIDAYS: Hosted by AARP Washington at aarp.org/FraudWatchFriday and on YouTube at youtube.com/aarpwashington. The schedule, all at 10:30 a,m.: June 10, QR Codes. July 8, Password Manager Demo. Aug. 12, Gift Card Scams. Sept. 9, Medicare Scams. Oct. 14, Holiday and Charity Scams. Nov. 11, Veterans Scams. Dec. 9, Cyber Security. Information: aarpwa@aarp.org

To learn more about personal financial situations, OppU, an online source of financial advice for consumers, surveyed nearly 1,015 Americans—22 percent of them 60 or older. Respondents had mixed feelings about where they stood financially, with nearly one in five feeling “bad” or “very bad” about their circumstances in terms of debt, savings, spending habits, and the ability to pay their monthly bills. Specifically:

• Half said they’re in debt, and nearly half said they can’t pay their bills on time. Almost 2 in 5 live paycheck to paycheck, and 1 in 5 said spend more than what they earn.
• Budgeting is widely considered an important aspect of personal finance, but 1 in 10 said they didn’t have a budget at all.
• 47 percent have a savings account or emergency fund. Of those, nearly 1 in 5 said they could live off it for three weeks at the most.
• Half of respondents are in debt, and most of those say their debt isn’t manageable.
• 1 in 3 respondents have frequently experienced stress or anxiety about their finances since the COVID-19 pandemic started, and 1 in 4 took out a personal loan during the pandemic, mostly to cover food, clothing, housing and credit card debt.
• On an optimistic note, more than 2 in 5 expect their finances to improve this year.

Of the 1,000 plus people throughout the U.S. who were contacted in the survey beginning in January, nearly half were 45 or older. The rest were between 18 and 44.