RETIREMENT REPORT

Your Guide to a Richer Retirement VOLUME 28 | NUMBER 8 | AUGUST 2021 | $5.00

seniors in Northern California. “It’s so hard to get out

of it.”
Then one day Lee heard personal finance guru Dave
Ramsey on the radio extolling the value of getting and
staying out of debt.
She became a regu-
lar program listener IN THIS ISSUE
and began reading
personal finance TAXES
blogs. After attend- 6| Energy-Efficient Homes
ing a local Ramsey MANAGING YOUR FINANCES
seminar, the Lees 8 | Qualifying for Life Insurance
sold possessions
they no longer 10 | Information to Act On
needed and worked 12 | Your Questions Answered
part-time jobs for
LONG-TERM CARE
extra cash. They also
14 | Choosing a Nursing Home
stopped using credit
cards. In more than INVESTING
a year, they paid off 17 | The Cost of Too Much Cash
roughly $44,000 in

Taming the Senior

CAREER
consumer debt.
20 | Sabbaticals as a Job Perk
The 2008 finan-

Debt Monster cial crisis ended

their progress
abruptly. Lee’s hus-
RETIREMENT PLANNING
22 | Pension Risk Transfer

THE DEBT JUST CREPT UP ON KATHY LEE , 59, AND HER
husband over time. The couple made some home
improvements thinking it would boost Lee’s in-
home day care business. Then there were the costs of
an international adoption that never happened. In all,
JOHN W. TOMAC
band, who worked
in commercial construction, struggled to find employ-
ment. Meanwhile, parents who had lost their jobs
withdrew their kids from Lee’s day care. She was
forced to close the business and find other work.

the Lees racked up about $72,000 in credit card debt Eventually, the couple filed for bankruptcy.
and a car loan on top of their $582,000-plus mortgage. Today, about a decade after declaring bankruptcy,
“We had so much debt,” says Lee, a social worker for the couple lives debt-free, and they remain committed
Upper Class Just Got
Lower Priced
Finally, luxury built for value—
not for false status
U ntil Stauer came along, you needed an inheritance
to buy a timepiece with class and refinement.
Not any more. The Stauer Magnificat II embodies
the impeccable quality and engineering once
found only in the watch collections of the idle
rich. Today, it can be on your wrist.
The Magnificat II has the kind of
thoughtful design that harkens back to
those rare, 150-year-old moon phases that
once could only be found under glass in a
collector’s trophy room.
Powered by 27 jewels, the Magnificat II
is wound by the movement of your body.
An exhibition back reveals the genius of
the engineering and lets you witness the
automatic rotor that enables you to wind
the watch with a simple flick of your wrist.
It took three years of development and
$26 million in advanced Swiss-built watch-
making machinery to create the Magnificat
II. When we took the watch to renowned
watchmaker and watch historian George
Thomas, he disassembled it and studied
the escapement, balance wheel and the
rotor. He remarked on the detailed
guilloche face, gilt winding crown, and
the crocodile-embossed leather band. He
was intrigued by the three interior dials
for day, date, and 24-hour moon phases. He
estimated that this fine timepiece would cost
over $2,500. We all smiled and told him that
the Stauer price was less than $100. A truly
magnificent watch at a truly magnificent price!
Try the Magnificat II for 30 days and if you
are not receiving compliments, please return
the watch for a full refund of the purchase price. The Stauer
The precision-built movement carries a 2 year Magnificat II is
warranty against defect. If you trust your own good
taste, the Magnificat II is built for you.
powered by your
Stauer Magnificat II Timepiece $399*
own movement
Offer Code Price $99 + S&P SAVE $300!
You must use the offer code to get our special price.

1-800-333-2045
Your Offer Code: MAG573-08 Rating of A+ • Luxurious gold-finished case with exposition back
14101 Southcross Drive W., • 27-jeweled automatic movement
Stauer ®
Ste 155, Dept. MAG573-08
Burnsville, Minnesota 55337 www.stauer.com
• Croc-embossed band fits wrists 6¾"–8½"
† Special price only for customers using the offer code versus the price on • Water-resistant to 3 ATM
Stauer.com without your offer code.
Stauer… Afford the Extraordinary.®
to the fundamentals they learned while paying down
debt. “Now we have more peace of mind,” Lee says.
“We don’t have to worry about debt collectors.”
Adults today are nearing and entering retirement
with more debt than previous generations. Americans
ages 50 to 59 had $3.39 trillion in debt in 2021’s first
quarter, twice as much as 20 years ago after adjusting
for inflation, according to data from the New York Fed
Consumer Credit Panel and Equifax. For people 60 and
older, it was $3.58 trillion, more than three times as
high after inflation compared to first quarter 2001.
Much of that is mortgage debt. The number of
adults carrying a mortgage in retirement has doubled
in the last 20 years, says Caezilia Loibl, a professor of
consumer sciences at Ohio State University in Colum-
bus. Mortgage debt in retirement is tied to increased
food insecurity and trouble paying for medications.
“Being able to borrow against the equity in your home
can be important later in life,” she says, because it
“eases other financial burdens for an older couple.”
“Debt is kind of evil when you go into retirement,”
says Mike Riffel, private wealth manager at Lucco Fi-
nancial Partners in Highland, Ill. “You are stuck with a
guaranteed payment you have to make when the focus
in retirement should be to minimize your expenses.
That is something that will haunt you until it’s repaid.”
And the strategies for taming that debt don’t get any
easier late in life.
How Much Debt Is Too Much?
You’ll need to decide if your debt is manageable—pref-
erably before you retire. One gauge is your debt-to-
income ratio, which compares monthly gross income
with monthly debt payments, says Jonathan Howard, a
financial planner at SeaCure Advisors in Lexington, Ky.
To calculate, divide your monthly pretax income—re-
tirees should include pensions and Social Security ben-
efits—by your monthly debt payments. The lower this
number the better, though a ratio under 15% is healthy,
Howard says. Banks frequently use this ratio to deter-
mine creditworthiness and often won’t consider bor-
rowers with a ratio over 43%.
The debt-to-income ratio is also used in another
gauge, the 28/36 rule. With this ratio, no more than
28% of your monthly gross income should be spent on
housing, including rent or a mortgage, insurance and
taxes, says Jay Guyer, a senior financial planner at Jan-
ney Montgomery Scott in Philadelphia. Your total debt-
to-income ratio shouldn’t exceed 36%.
You should also estimate your total expenses in re-
tirement and practice living on that amount while you
are still working, recommends Mike Sullivan, director
of education at Take Charge America, a nonprofit
credit counseling agency in Phoenix. If you struggle
to do this while carrying debt, you’ll need to develop a
repayment plan. Having one in place before you turn
55 gives you time to make adjustments, including pay-
ing off more debt or even delaying retirement. “You
will earn more at the job you have now than the job
you will be forced to take if you realize later you don’t
have enough to live on,” he says.
Lower Rates Are Better
You’ll pay off debt faster by lowering the interest. If
you own your home, refinancing the mortgage can
reduce the interest rate and the monthly payment.
The savings can be used to pay off higher-rate debt like
credit cards. Don’t refinance your home unless you can
lower the interest rate by at least three-quarters of a
percent, Riffel says. Also, avoid lengthening the term of
your loan, says Paul Humphrey, founder of Humphrey
Financial in Forest Lake, Minn. Lenders used to charge
more for originating mortgages with an unusual term,
like 22 years instead of 30, but now they are more open
to it, he says. If you have a nonstandard number of
years left on a mortgage, ask your bank to refinance it

MANAGING EDITOR EDITOR EMERITUS SUBSCRIBER SERVICES Kiplinger’s Retirement Report

Catherine Siskos
SENIOR EDITOR
Jackie Stewart
CONTRIBUTING WRITERS
Patricia Mertz Esswein,
Katherine Reynolds Lewis, David Rodeck,
Adam Shell, Joy Taylor, Alina Tugend
ART DIRECTOR
Natalie Kress
EDITORIAL OFFICES
1100 13th St., N.W., Suite 1000
Washington, DC 20005
Telephone: 202-887-6491
E-mail: retire@kiplinger.com
facebook.com/KiplingersRetirementReport
Knight A. Kiplinger
E-mail: kiplingerretirementreport@
CHIEF EXECUTIVE OFFICER
Denise Elliott
SENIOR VICE PRESIDENT
FOR CONTENT
Sarah Stevens
DENNIS PUBLISHING LTD
E-mail: reprints@parsintl.com
NORTH AMERICAN
CHIEF EXECUTIVE OFFICER
Randy Siegel
PUBLISHER
Paul Vizza
Telephone: 202-887-6558
E-mail: pvizza@kiplinger.com
Telephone: 800-544-0155
emailcustomerservice.com
REPRINT SERVICE
PARS International Corp.
253 W. 35th St., 7FL
New York, NY 10001
Telephone: 212-221-9595
ONLINE SUBSCRIPTIONS
Subscribers may sign up
for free online access,
including past issues
and annual indexes, at
KiplingerRetirement.com.
(ISSN# 1075-6671) is published monthly;
$59.95 for one year; $114.90 for two years;
$169.85 for three years.
Copyright © 2021 by The Kiplinger
Washington Editors Inc., 1100 13th St., N.W.,
Suite 1000, Washington, DC 20005.
Periodicals postage paid in Washington, DC,
and additional mailing offices.
POSTMASTER: Send address changes
to Kiplinger’s RETIREMENT REPORT,
P.O. Box 420308, Palm Coast, FL 32142-0308.
The Kiplinger Washington Editors,
Inc., is a part of the
Dennis Publishing Ltd. Group.

AUGUST 2021 KIPLINGER’S RETIREMENT REPORT |3


FROM THE EDITOR
Sometimes, everything seems to conspire against
Americans enjoying their golden years. If it’s not mi-
serly interest rates, rickety pensions and rising levels of
senior debt, it’s nursing home expenses that rival a
second mortgage. This is the perfect storm that many
people face as they near or settle into retirement. This
month’s issue touches on all of those topics.
Take our cover story, for example. If you’re 50- or
even 60-something and nowhere near debt-free,
you’re not alone. Debt of all kinds, even lingering stu-
dent loans, weighs down both the old and the young,
but it is especially burdensome in retirement. Check
out our tips for cutting that ball and chain.
Meanwhile, our investing story explains why too
much cash is never good for portfolio returns, and our
guide to choosing a nursing home takes you through
the steps of evaluating these facilities.
A growing trend has insurers taking over some em-
ployers’ pension plans, as we describe on page 22. Find
out why that’s both reassuring and worrisome.
Catherine Siskos
for that period. “I hate to see a 50-year-old take out a
30-year mortgage,” he says.
If that’s not possible, pay more than the required
monthly amount to eliminate the mortgage sooner.
(Just make sure the lender won’t penalize you for pre-
paying the mortgage.) Although this strategy can leave
you with less cash to repay other debt, the total cost of
your mortgage is reduced in the long run.
Homeowners who are at least 62 years old may be
eligible for a reverse mortgage, which eliminates the
monthly mortgage payments while freeing up a large
portion of the home’s equity as cash to pay off other
debt. In exchange, you or your estate repays the princi-
pal plus accrued interest when you move out or die.
A reverse mortgage isn’t recommended for every-
one. Although you remain the owner and retain the ti-
tle to your home, repayment is triggered if you stop liv-
ing there for 12 months, no matter the reason. “If you
4 | KIPLINGER’S RETIREMENT REPORT AUGUST 2021
could guarantee that you will stay in that home for 20
years and then die in your sleep, that would be ideal,
but that is also unlikely,” says Todd Christensen, educa-
tion manager at Money Fit, a nonprofit credit counsel-
ing agency in Bohemia, N.Y.
Double-digit annual percentage rates on high credit
card debt can demolish retirement savings. Transfer-
ring the balance to a new card with a low or zero intro-
ductory interest rate reduces the cost of the debt. “If
you are not able to pay it off rapidly, at least you can
find a more competitive rate,” says Bruce McClary, se-
nior vice president of communications at the National
Foundation for Credit Counseling in Washington, D.C.
This tactic comes with a few caveats. Some card is-
suers charge a balance transfer fee, usually about 3% to
5% of the amount transferred. Also, that 0% APR typi-
cally expires after a set number of months, and there
could be an annual card fee. Before transferring a bal-
ance, check these fees and look for a card without
them. Transferring an existing balance to a new card
won’t help you if you continue to use the old one, so ei-
ther cancel or stop using it.
These options aren’t always possible. Lenders can
still reject your application for new credit because of a
poor credit score or high debt-to-income ratio.
Snowballs and Avalanches
Taming debt doesn’t always involve refinancing, and
despite their names, these next two strategies won’t
leave you out in the cold. Under the “snowball”
method, you attack your smallest debt first, regardless
of interest rate, while paying the minimums on all
other balances. Once the smallest debt is paid off, put
the extra cash toward repaying the next smallest debt.
Lee, who used the snowball method to pay off her debt,
says it “gives you a sense of winning, that you are mak-
ing progress.”
The “avalanche” method resembles the snowball
strategy except that you target the debt with the high-
est interest rate first, regardless of the amount owed.
In the long run, though, using the snowball strategy to
pay off all your debt will cost you more and take longer,
Christensen says. He recommends that if you need the
quick win from the snowball method, start with that
strategy and then switch to the avalanche method after
eliminating one or two balances.
If you have medical debt, experts say you should
never pay those bills using a credit card. Instead, con-
tact the provider and discuss repayment options. Most
medical providers are open to working out a repay-
ment plan, often with little or no interest. “A lot of peo-
ple may hesitate to do this because they are afraid their
request will be rejected or will accelerate sending them
to a debt collector, but this actually improves your
chances of avoiding that,” McClary says.
Nonprofits to the Rescue
If you can’t make any headway repaying the debt, get
professional help from a nonprofit credit counseling
agency. Counselors charge a startup fee, usually about
$20 to $40, and then a monthly fee, ranging from $20
to $30, for a debt management plan; by law, the charges
are capped in all 50 states. Budgeting plans are free.
Once you sign on to a debt management plan, the
agency works with your lenders to waive fees and
lower interest rates on unsecured debt, such as credit
cards and medical bills, with the goal of repayment in
two to five years. Creditors are often willing to negoti-
ate with a credit counselor because these plans usually
require that you repay the principal.
Look for a nonprofit credit counseling agency affili-
ated with the National Foundation for Credit Counsel-
ing. It requires counselors to meet 18 quality standards,
such as accreditation by a third party and debt manage-
ment plans that are only provided to clients who can
repay the money in 60 months. Be wary of for-profit
credit counseling agencies, which don’t come with
NFCC’s seal of approval. For-profit counselors often
have an incentive to sell the agency’s products and ser-
vices instead of working in the client’s best interest.
Credit counseling agencies are not debt settlement
companies, which negotiate with your creditors to ac-
cept less than what you owe on unsecured debt. Typi-
cally, borrowers are told to stop repaying their loans to
strengthen the debt settlement firm’s bargaining
power, but this destroys the consumer’s credit score
with no guarantee that your debt will be resolved.
Linda Jacob, director of education at the nonprofit
credit counseling agency Consumer Credit of Des
Moines, had a client who paid a debt settlement com-
pany more than $2,000 to settle a debt for $367.
Bankruptcy should be a last resort because creditors
may be able to seize assets, such as real estate or tax re-
funds, to settle what you owe. Besides badly damaging
your credit, a bankruptcy stays on your credit report
for up to a decade.
Be Inspired
No debt repayment plan is complete without consider-
ing what caused the debt. Financing strategies are “just
a debt shuffle,” Christensen says. “I’m rarely a fan of
debt shuffles because they don’t address the problem,
just the symptoms.”
Once you create a budget, find like-minded people
with similar goals to help you stay on track, says Lee,
who now helps others become financially independent
with her Baby Boomer Super Saver blog. Her advice:
Look for positive and uplifting examples of people who
have paid off their debt. Those examples, she says, can
inspire you to reform your own financial habits and
may even spark ideas for ways to become debt-free. K
JACKIE STEWART
Programs to Help Retire
Your Student Loans
A particularly disturbing trend is the number of older
adults who continue to be dogged by student loans.
At the end of 2020, roughly 8.5 million Americans who
were at least 50 years old owed about $349 billion in
federal student loans, up 37% from the fourth quarter
of 2017, according to Federal Student Aid. Worse, that
debt lingers past their working years.
“Every year, thousands of seniors are carrying stu-
dent loan debt into retirement, and a lot of that is un-
necessary,” says Martin Lynch, compliance manager
and director of education for the nonprofit Cambridge
Credit Counseling in Agawam, Mass., which provides
free counseling on student loans.
If you’re struggling to repay federal student loans,
ask your loan servicer if you’re eligible for one of four
income-driven repayment plans. Payments are set as
a percentage of your discretionary income, which is
based on a comparison of your income and family size
to the federal poverty guideline. The remaining bal-
ance may be forgiven after 20 or 25 years, depending
on the plan. If you work for a state, municipality or
nonprofit, you could qualify for forgiveness of your
remaining balance after making 120 qualifying pay-
ments. For more information on how to qualify for
each program, visit studentaid.gov, go to the “man-
age loans’’ section and then select “qualify for loan
forgiveness.”
Although you could consolidate federal student
loans with a private lender to get a lower rate, doing
so will make you ineligible for federal loan forgiveness
and income-driven repayment programs.
AUGUST 2021 KIPLINGER’S RETIREMENT REPORT |5
TAXES
Getting Credit for an Energy-Efficient Home
TWO FEDERAL INCOME TAX CREDITS REWARD ENERGY-EFFICIENT
home improvements very differently. Which credit
you use depends on the improvements you make.
Under federal tax law, new energy-efficient windows
and doors don’t count for much, but a system that uses
renewable energy to power a home gets you a juicy tax
break. The credits differ in other ways, with one im-
posing a cap and the other, for the most part, placing
no such limit. Whether home improvements to a vaca-
tion home can qualify is another differentiator.
Neither of these tax credits is refundable; they can
only be used to reduce the amount of income tax owed.
If the credit exceeds your tax liability, the IRS won’t re-
fund you the difference. Eligible homeowners claim
the credits on IRS Form 5695. Although the clock is
ticking for the use of both home improvement credits,
it may be less of a problem than you think.
The residential energy efficiency property credit. If you
installed an alternative energy system in your home
that relies on a renewable source, this credit is for you.
Renewable energy sources include solar, wind, geo-
thermal or fuel cell technology to generate power.
Solar panels, solar electric equipment, solar-powered
water heaters and wind turbines are all eligible for the
credit, whether they are installed in a primary resi-
dence or vacation home. A residential fuel cell, how-
ever, must be installed in your primary home to qualify.
The size of the tax credit varies and equals 26% of
the cost of equipment and installation for renewable
energy systems that were put in between 2020 and
2022. The credit falls to 23% in 2023 before expiring
in 2024. Pre-2020 installations qualified for a 30% tax
credit. There is no maximum dollar limit for solar,
6 | KIPLINGER’S RETIREMENT REPORT AUGUST 2021
wind or geothermal equipment, but the tax credit for
fuel cells is capped at $500 for each half-kilowatt of
power capacity. Any unused portion of the credit can
be carried over to future tax years.
Keep in mind you can only qualify for the credit
once the alternative energy system has been installed.
If you buy solar panels at the end of 2021 but don’t in-
stall them until early 2022, you cannot claim the 26%
tax credit on your 2021 return. Instead, you must wait
and claim it when you file your 2022 taxes.
Homeowners who install a renewable energy sys-
tem sometimes qualify for a rebate from their utility
company, which will affect the tax credit amount. Al-
though these rebates are nontaxable, the cost of the
system is reduced by the rebate amount when you
calculate your tax credit. For example, if you install a
$20,000 solar system this year and the utility gives you
a one-time installation rebate of $1,000, your tax credit
is $4,940 (26% x [$20,000 - $1,000]).
The nonbusiness energy property credit. Although less
valuable, this credit works for homeowners who make
smaller energy-saving purchases for a primary resi-
dence in 2021. The credit applies to 10% of the cost of
certain types of insulation, external windows and
doors, and skylights. The credit also includes 100%
of the cost of electric heat pumps and water heaters,
some central air-conditioning systems, stoves that use
biomass fuels, or similar energy-saving investments.
This may sound like a generous tax break, but it’s
not. The total credit is worth at most $500, and
amounts taken in prior years count against it. For in-
stance, if you claimed a $300 credit on your 2014 re-
turn for a natural gas furnace, you are only entitled to
$200 more until the credit expires in 2022. The credit
is also capped for many items. No more than $150 can
be claimed for water heaters and furnaces, $200 for
windows and $50 for a furnace-circulating fan.
Don’t worry about the expiration dates for these
tax credits. Congress has extended both credits many
times, including retroactively. Some lawmakers want to
make both credits permanent and even expand them.
One Senate bill calls for raising the residential energy
ISTOCKPHOTO.COM
efficiency property credit to 30% and the maximum
nonbusiness energy property credit to $1,500 per year.
Whether these proposals will be enacted is unclear, but
Democrats are pushing for them. K JOY TAYLOR
Everyone has a book in them

It’s called
a
n autobiog
raphy

Call oouirr
mem rts
expe y Why wait? Turn the story of your life into a
toda beautiful, handcrafted book with LifeTime Memoirs,
the world’s leading autobiography service. Create
a unique piece of family treasure to be shared by
generations to come. It’s time to tell your story.
+1-833-225-7536 lifetimememoirs.com/RR The gift of a lifetime
MANAGING YOUR FINANCES
It’s Not Too Late to
Buy Life Insurance
THINK YOU WON’T QUALIFY FOR LIFE INSURANCE IN RETIREMENT?
Guess again. “It’s easier to qualify than in the past
as underwriting has gotten better,” says Rafael Ru-
bio, president of Stable Retirement Planners in
Huntingdon Woods, Mich. “There are options available
in your later years,” says Paul LaPiana, a financial plan-
ner and head of MassMutual’s U.S. products.
You may wonder why you should care. After all,
hasn’t life insurance outlived its usefulness once the
kids are grown, the mortgage is paid off and the policy-
holder is retired? Not necessarilly. These days, life ex-
pectancies are longer, the cost of long-term care is
higher, and that mortgage isn’t always retired when
you are. A life insurance policy can ease the burden of
an outstanding mortgage for your survivors and pro-
vide other estate-planning benefits.
The policies don’t come cheap, and just because you
qualify for life insurance doesn’t mean you should get
it. Life insurance only makes sense for retirees who use
it in estate planning and can afford to keep paying the
premiums, which can be thousands of dollars per year.
Otherwise, the policy will lapse, coverage will end, and
you will have wasted your money.
Your health risks and the type of life insurance,
whether term or permanent, affects your premium as
well as your chances of qualifying. Because medical un-
derwriting differs by insurer, you should have some
idea of what companies look for in applicants before
shopping around for a policy.
Different Ways to Use the Policies
When the Setting Up Every Community for Retirement
Enhancement Act passed in 2019, life insurance took
on greater significance by becoming the new stretch
IRA. The legislation eliminated the option for most
heirs to “stretch” distributions over their lifetime. Now,
most heirs other than a spouse must empty the IRA
within a decade of the original owner’s death, forcing
them to take larger distributions than they would for
a stretch IRA and potentially pay more in taxes if the
money pushes them into a higher bracket. Those distri-
butions are generally taxed as income for beneficiaries,
whereas the death benefits from a life insurance policy
are income-tax-free.
8 | KIPLINGER’S RETIREMENT REPORT AUGUST 2021
If most of your assets are in qualified retirement ac-
counts, like a 401(k) or IRA, and you don’t need the re-
quired minimum distributions, put the RMDs toward
a life insurance policy, says Rubio. This bolsters what
you leave for your heirs and helps them cover the taxes
on an inheritance from a qualified retirement plan.
Although the life insurance payout is considered
part of your estate, the money is taxed only if the es-
tate’s total value exceeds $11.7 million. The policy can
also be used to cover funeral costs, medical bills and
probate court fees after you die.
Life insurance doesn’t just support your heirs but
can also be used to pay for health care. “Some life in-
surance policies offer chronic care and terminal illness
acceleration riders so they can be part of a long-term
care planning strategy,” says LaPiana. A policy with
this extra feature pays out while you’re still alive to
cover expenses for long-term care or a chronic illness.
Buying life insurance can also boost a surviving
spouse’s income, particularly if one Social Security
check is unlikely to be enough. It could make even
more sense if you have a pension. When retirees start
taking their pension, they have to decide if payments
should continue for their spouse after they die. “Select-
ing the survivor benefit reduces the pension payments
by about 10%,” says Greg Klingler, director of wealth
management at the Government Employees’ Benefit
Association in Fort Meade, Md. “For a pension paying
$100,000 a year, this survivor benefit costs $10,000 a
year—$200,000 over a 20-year retirement.” If your
spouse outlives you by many years, then adding the
survivor benefit to your pension was a good move; oth-
erwise, there’s no financial gain. By buying life insur-
ance, however, you can choose the larger, single-life
pension, knowing that if you pass away first your
spouse gets the insurance payout.
Getting Past Underwriting
Life insurance may be easier for seniors to get, but it’s
far from assured. Most policies require health under-
writing, with the insurer reviewing your medical his-
tory to determine if you qualify and at what rate. This
often scares people away from applying.
Unless you are terminally ill, you have a reasonable
chance of qualifying, even with a health condition, Ru-
bio says. But you’ll probably pay a higher premium. A
70-year-old male in excellent health might pay $3,293
per year for a policy with a $100,000 death benefit,
while an applicant with a health issue like controlled
diabetes might pay $5,449 per year, Klingler says.
 Before applying, LaPiana recommends proactively
managing your health. For example, if you have high
cholesterol, bring it down through medication and diet.
“Be sure to follow and document treatment plans as
insurers often look at one’s behavior,” LaPiana says. In-
surers will consider if an applicant is trying to live their
healthiest life, which can make the difference between
qualifying or not, he says.
The life insurance company you choose matters be-
cause each one has different guidelines, says Klingler.
For instance, one insurer may think diabetes is less of
a risk than another company or define smoking differ-
ently. “One company may classify someone who
smokes a cigar a week as a nonsmoker while another
may consider this person a smoker, which entails much
higher rates,” he says.
An insurance broker who represents multiple com-
panies often knows the nuances of each company’s
guidelines and can match you with the best fit. Another
option is to apply directly with multiple insurers for
quotes, though this takes more time. Some financial
advisers also specialize in life insurance and can help
you navigate the market.
If you’re unsure that you’ll qualify, experts recom-
mend still applying. “Even if it’s a 50/50 shot, why not
try if you need coverage?” asks Klingler. It doesn’t cost
anything to apply, and if you aren’t happy with the of-
fer, you don’t have to accept it. One of Rubio’s clients
even found the health review valuable because it un-
covered a medical condition. “Thanks to the medical
review, he was able to get it treated and then he quali-
fied for insurance.”
can include additional benefits to pay for long-term
care and a critical illness, which a term policy typically
won’t cover. Permanent life insurance is also more
likely to accept older applicants, with some companies
selling policies to healthy applicants up to age 90.
There are variations of permanent life insurance,
depending on the premium and benefits. For example,
universal policies let you adjust the premiums each
year whereas whole life premiums are inflexible.
You’ll have a better shot at qualifying if you set up
permanent life insurance as a second-to-die policy.
This means that the death benefit won’t be paid until
you and your spouse die. If your goal is estate planning,
these policies can help you qualify for a lower rate and
more coverage because a joint life expectancy is longer
than just one person’s.
If you have serious health issues, you could sign up
for guaranteed issue life insurance. As the name im-
plies, these policies generally can’t turn you down no
matter what your health is like. But they charge higher
premiums for smaller death benefits and impose re-
strictions. For instance, the policies won’t pay out if
someone dies during the first two years. Still, if you
need life insurance but can’t qualify for other options,
Rubio says this type of policy may be your best option.
K DAVID RODECK

Term or Permanent?
There are two main categories of life insurance—term
and permanent—and the one you choose can deter-
mine whether you will qualify for the policy. Term life
insurance provides a death benefit for a specific time,
such as 20 years. When the term expires, so does your
protection. Term policies tend to have a maximum age
limit, typically 85 years old, says Klingler.
Term policies are also less expensive and make
sense for temporary needs—for instance, if you plan to
work part-time for the first decade of retirement and
want to protect that income for your spouse. A term
policy is generally not a good fit for protection meant
ISTOCKPHOTO.COM

to last your entire life and beyond, such as covering

end-of-life expenses or leaving an inheritance.
By contrast, permanent life insurance policies won’t
expire as long as you pay the premiums. These policies

AUGUST 2021 KIPLINGER’S RETIREMENT REPORT |9

Information to Act On
Economy
■ A booming economy in
2021. Gross domestic product is
expected to increase 7.2% this
year and 5.5% in 2022 before
slowing to about 2% in 2023.
Significant levels of savings and
wealth are fueling spending.
The federal government’s stim-
ulus spending is also spurring
growth, with the potential for another boost to the economy if
Congress passes a federal infrastructure package. Those effects
would be felt in 2022 and beyond.
■ A cooling housing market in 2022. Home price appreciation,
which should be 12% this year, should taper off to about 2% at
the end of 2022. Interest rates are also expected to rise over the
same period. At year-end 2022, the interest rate for a 30-year
mortgage is projected to be 4%, compared with a forecast of
3.5% for the end of 2021.
Home prices have risen this year beyond what some buyers are
willing to pay. The sticker shock is prompting some home shop-
pers to rethink their plans. Real estate investors, however, are un-
fazed by the higher prices and continue to snap up properties, es-
pecially in metro areas such as Nashville, Houston and Los
Angeles. Home builders are also trying to take advantage of the
large demand for housing but have struggled with the high prices
of materials and a labor shortage.
Taxes
■ Child and dependent care tax credit expanded. The Ameri-
can Rescue Plan introduced temporary, but significant, changes
to the child and dependent care tax credit for 2021. The credit ap-
plies to the cost of care for a child under the age of 13. The credit
can also be used for a spouse who is physically or mentally inca-
pacitated, and in some cases, another adult with similar limita-
tions who lives with you.
This year the credit is fully refundable, with a maximum per-
centage that is increasing from 35% to 50%. The credit can be
used for up to $8,000 (previously it was $3,000) in expenses for
one child or disabled person and $16,000 (compared with
$6,000 before) for more than one. This means the highest credit
amount for the 2021 tax year is $4,000 for one child or disabled
person and $8,000 for more than one.
The credit phases out for families that have an adjusted gross
income between $125,000 and $438,000. These changes are
temporary and right now only apply to the 2021 tax year. But
President Joe Biden hopes to expand the tax credit permanently.
10 | KIPLINGER’S RETIREMENT REPORT AUGUST 2021
Medicare
■ It pays to shop around for a Medicare Part D plan. Medicare
Part D enrollees pay thousands of dollars each year out of pocket
for specialty drugs, but the costs varied, sometimes dramatically,
by plan, according to GoodRx. The Centers for Medicare & Medi-
caid Services considers a drug a specialty if it costs more than
$670 for a 30-day refill. When GoodRx reviewed out-of-pocket
costs for 20 common specialty drugs for Medicare Part D enroll-
ees for 2021, Revlimid, an oral cancer medication, topped the list,
costing beneficiaries an average of $17,142. Isentress, an HIV anti-
viral, was the least expensive on GoodRx’s list with an average
cost of $3,274.
The differences in out-of-pocket costs for specialty drugs de-
pending on the Part D plan are a stark reminder that the wrong
plan will cost you. For example, enrollees paid between $2,818 to
$20,013 for Revlimid, a difference of almost $18,000, depending
on the plan. For half of the
drugs that GoodRx studied, the
difference between the mini-
mum and maximum that bene-
ficiaries paid was at least
$3,500. Before selecting a Medi-
care Part D plan, use the Medi-
care Plan Finder to compare
Part D plan premiums and co-
payments for your medications.
■ The cost of care depends on where you live. MedicareGuide
ranked all 50 states and Washington, D.C., for senior health care.
Minnesota was rated No. 1 with an overall score of 66.7 and had
the best average cost of monthly insurance premiums and heart
disease mortality rate. Oklahoma ranked last with a score of
34.74 and the worst mortality rate for heart disease in the coun-
try. North Dakota, Massachusetts, California and Nebraska
rounded out the top five while Louisiana, Mississippi, the District
of Columbia and Georgia completed the bottom five.
To determine the rankings, MedicareGuide evaluated cost, ac-
cess and quality of health care for seniors by rating 24 metrics on
a 100-point scale. Metrics included prescription drug prices per
capita, the average deductible for Medicare Part D, physicians per
capita and life expectancy.
■ Telemedicine is likely here to stay. Changes made to tele-
health services for Medicare beneficiaries are set to expire at the
end of the COVID-19 public health emergency, but lawmakers are
ISTOCKPHOTO.COM (3)
considering a number of bills that would make telemedicine a
permanent feature. For instance, one proposed bill would make
audio-only telehealth permanent so that Medicare enrollees
without reliable internet can benefit from the service.
 In early 2020, Congress and the Centers for Medicare & Medi-
caid Services expanded access to telehealth and made it easier
for Medicare patients to use. Before, these services were restricted
to people who lived in rural areas, and patients generally had to
travel to a medical setting for the appointment instead of re-
maining at home. There were also limits on which providers could
be paid for telehealth visits.
The number of telehealth appointments for Medicare benefi-
ciaries exploded during the pandemic. Twenty-seven percent of
Medicare beneficiaries said they had a telehealth visit between
the summer and fall of 2020, according to the Kaiser Family
Foundation. In 2016, just 0.3% of enrollees in Part B used tele-
health services.
Social Security
■ Public pension plans versus Social Security benefits. About
25%, or 6.5 million, of local and state employees are not covered
by Social Security and instead participate in an employer pension
plan. Federal law requires these pension plans to provide equiva-
lent benefits to Social Security. A study from the Center for Re-
tirement Research at Boston College found that the plans pay
similar benefits at full retirement age and often allow workers to
collect full benefits at a younger age than Social Security.
But there were some shortcomings. For instance, many pension
plans have long vesting periods and may not provide full cost-of-
living adjustments for retirees. The study found that 43% of pub-
lic pension plans “fall short of Social Security for a significant mi-
nority of noncovered new hires.” Another concern is that some
pension plans are underfunded and could exhaust their trust
fund assets.
Consumer Spending
■ Holiday shoppers may give the mall a pass. As the pandemic
eases, many consumers are in no hurry to wrangle over parking
spaces or stand in long lines at the mall. They know those Black
Friday deals can be found just as easily online. Some major retail-
ers, including Walmart and Target, have taken note and plan to
close stores on Thanksgiving,
when e-commerce sales are ex-
pected to surge 50% this year.
■ Retailers plan sales with an
eye on shipping. Some retailers
may extend sales for longer pe-
riods, especially if shipping de-
lays continue. A large number of
imports and the potential for a
strong back-to-school shopping
season could further strain transpacific shipping capacity before
the holidays.
Travel
■ The next generation of supersonic travel goes green. The
last Concorde flight was in 2003, but supersonic travel didn’t die;
it just took a hiatus. Now United Airlines wants to bring it back
better. The carrier will purchase 15 Overture commercial airplanes
from Boom Supersonic. The airliners are expected to be net-zero
carbon, running on sustainable aviation fuel at twice the speed of
airplanes today, according to United. That should cut flight times
in half to more than 500 destinations, with passengers getting
from San Francisco to Tokyo, for example, in just six hours. The
airplanes are expected to begin carrying passengers by 2029.
TAX TIP
Give the Gift of Education
As students head back to school this month, there’s
no better gift to your grandchildren than easing the
burden of college tuition, and the IRS gives you a va-
riety of tax-free ways to do that. For instance, in 2021
you can give up to $15,000 ($30,000 with a spouse)
to anyone, with no limit on the number of recipients
or tax consequences for either you or the person get-
ting the gift. If you have three grandchildren in col-
lege, for example, you and your spouse can give each
grandchild up to $30,000 this way tax-free in 2021.
To give more than the annual exclusion amount at
once, the IRS lets you consolidate five years’ worth of
gifts—up to $75,000 per person—into one big tax-
free gift, with the exclusion spread out over five years
as if you had given the money annually. You will need
to report the five-year gift, and you cannot make any
additional gifts to that individual until the exclusion
is used up. The money won’t count as part of your es-
tate unless you die before the five years have ended.
Then, the remaining portion allocated to any post-
death tax years becomes part of your estate.
If the tuition is paid directly to the school, you can
give an unlimited dollar amount tax-free without
having to file a gift tax form. The direct payment
must be for tuition only and cannot be used for any
other education-related costs, such as books, sup-
plies or room and board.
AUGUST 2021 KIPLINGER’S RETIREMENT REPORT | 11
FROM THE MAILBOX
Your Questions Answered
QLACs, QCDs and Taxes
A
Your June issue had interesting
articles that mentioned quali-
Q fied longevity annuity contracts
and qualified charitable distri-
butions. Is the amount trans-
ferred to a QLAC or QCD taxable?
Although a QLAC, which is a type of deferred annu-
ity, isn’t taxable when you fund it, the payments that
you eventually receive from it are taxed as income. A
QCD isn’t taxable at all because by donating your IRA
distribution directly to charity, you avoid the income
tax on the required withdrawal.
What Social Security Assumes About You
I plan to retire at age 62 but will delay taking Social Se-
curity until my full retirement age of 67. My benefit at age
62 is $1,550 per month; it’s $2,550 per month at 67. Are
these amounts based on me working until age 67, and if
so, will my benefit grow for those five years?
When Social Security estimates your benefits, “it as-
sumes you will continue working to your full retire-
ment age at your current level of earnings,” says Jim
Blair, co-owner of Premier Social Security Consulting
in Cincinnati. If you stop working at 62, your benefit
won’t increase from earnings past that age, but the
amount will continue to grow because you’ll get any
cost-of-living adjustments for those five years as well
as credit for waiting until your full retirement age, a
bonus of 25% to 30%, he says. As a result, your benefit
will be more than the one at age 62 but less than that
shown for your full retirement age.
Your Last Benefit Comes With a Catch
Why does the government take back the final benefit
payment the month you die when Social Security pay-
ments are paid in arrears?
It’s true that you are paid in arrears, but “you have to
survive the entire month for the benefit to be payable,”
Blair says. For example, the deposit you receive in
August is for the month of July. If someone dies July 31,
Social Security takes back the money deposited in
August. That deposit is only payable if the person dies
Aug. 1 or later. “So if they’re asking you to pull the plug
and it’s 11:50 p.m. on the 31st, you may want to give it
10 minutes. It’s a little morbid humor,” Blair says.
12 | KIPLINGER’S RETIREMENT REPORT AUGUST 2021
How the Windfall Elimination Provision Works
Later this year, I will begin to receive U.S. and U.K. state
pensions. What effect will the Windfall Elimination Provi-
sion have on my Social Security benefit? Will the amount
of the U.K. pension be factored into the calculation of my
Social Security benefit in the U.S?
The windfall provision changes how your benefits
are computed and generally applies if you are eligible
for a monthly pension based on work for which you
didn’t pay Social Security taxes, Blair says. The compu-
tation works the same way whether it is for a pension
from another country or one for a public school
teacher in Ohio, he adds.
First, Social Security separates your average monthly
U.S. earnings, which have been adjusted for inflation,
into three amounts, with the first $996 multiplied by
90%. Earnings between $996 and $6,002 are then mul-
tiplied by 32% and the balance by 15%. Your primary
insurance amount (or full retirement age benefit) con-
sists of those three amounts added together. “There is
a guarantee that Social Security won’t reduce your ben-
efit by more than half,” Blair says. As for the U.K. pen-
sion amount, it’s only factored in if it’s less than $1,000.
Then, Social Security “will lower the windfall offset”
so that your benefits aren’t reduced more than 50%.
Dividend Tax Rates
I understand that the capital gains tax rate will jump
from 15% to 20% if taxable income for a married couple
filing jointly is more than $501,600 in 2021. Is this also
true for dividend income?
It depends which type of dividends you’re talking
about. Qualified dividends are taxed at the same rates
as long-term capital gains—0%, 15% or 20%. Most divi-
dends paid on common stock are qualified, but there is
a time test they must meet. To be considered qualified,
the stock must be held for more than 60 days during
the 121-day period that begins 60 days before the ex-
dividend date. Nonqualified or ordinary dividends are
taxed at the federal income tax rates of 10% to 37%, the
same rates for taxing wages and ordinary income. For
more information about what constitutes a qualified
dividend, see IRS Publication 550. K
DO YOU HAVE A RETIREMENT-PLANNING QUESTION?
EMAIL IT TO RETIRE@KIPLINGER.COM.
Make your home more comfortable than ever

“To you, it’s the perfect lift chair.

To me, it’s the best sleep chair I’ve ever had.”
— J. Fitzgerald, VA
NOW
also available in
Genuine Italian Leather
(and new Chestnut color)

Three Chairs
in One
Sleep/Recline/Lift

Pictured: Genuine Italian

ACCREDITED
Leather chair chestnut color.
BUSINESS A+

You can’t always lie down in bed and prevent back and muscle pain. The overstuffed,
sleep. Heartburn, cardiac problems, hip or oversized biscuit style back and unique seat
back aches – and dozens of other ailments design will cradle you in comfort. Generously
and worries. Those are the nights you’d give filled, wide armrests provide enhanced arm
anything for a comfortable chair to sleep in: one support when sitting or reclining. It even has a
that reclines to exactly the right degree, raises battery backup in case of a power outage.
your feet and legs just where you want them, White glove delivery included in shipping
supports your head and shoulders properly, and charge. Professionals will deliver the chair to
operates at the touch of a button. the exact spot in your home where you want
Our Perfect Sleep Chair® does all that it, unpack it, inspect it, test it, position it, and
and more. More than a chair or recliner, it’s even carry the packaging away! You get your
designed to provide total comfort. Choose choice of Genuine Italian leather, stain and water
your preferred heat and massage settings, repellent custom-manufactured DuraLux™ with
for hours of soothing relaxation. Reading the classic leather look or plush MicroLux™
or watching TV? Our chair’s recline technology microfiber in a variety of colors to fit any decor.
allows you to pause the chair in an infinite New Chestnut color only available in
number of settings. And best of all, it features a Genuine Italian Leather. Call now!
powerful lift mechanism that tilts the entire chair
forward, making it easy to stand. You’ll love the The Perfect Sleep Chair®
other benefits, too. It helps with correct spinal
alignment and promotes back pressure relief, to 1-888-731-3920
Please mention code 115298 when ordering.
REMOTE-CONTROLLED
EASILY SHIFTS FROM FLAT TO Chestnut
A STAND-ASSIST POSITION
Genuine Italian Leather
classic beauty & durability
Mahogany Tan Chocolate Blue
Long Lasting DuraLux™ (Burgundy)
stain & water repellent

Burgundy Cashmere Chocolate Indigo

Footrest may MicroLux™ Microfiber
vary by model breathable & amazingly soft
46562

Because each Perfect Sleep Chair is a made-to-order bedding product it cannot be returned, but if it arrives damaged
or defective, at our option we will repair it or replace it. © 2021 firstSTREET for Boomers and Beyond, Inc.
LONG-TERM CARE
The Search for the Right Nursing Home
AFTER A STAY IN THE HOSPITAL, MOST OF US WOULD PREFER
to go home to recuperate, but that may not be pos-
sible. If you or your loved one needs more medical
care, rehabilitation or supervision, you’ll have to find a
nursing home or skilled nursing facility before your
loved one is discharged.
Families are often given little time and guidance to
make an informed choice. The hospital’s discharge
planner will provide a long list of facilities but no rec-
ommendations. Choose the wrong facility, and stress,
confusion and regret will be the result, with profound
implications for everyone. Your search should begin as
soon as realistically possible. Even better, before a
health crisis, create a list of places you would be will-
ing to consider. “The saying goes, ‘Discharge starts at
admission,’” says Eilon Caspi, a gerontologist at the
University of Connecticut, Storrs.
But what should you look for, and who is a good
source of impartial information? Nursing homes are a
business with marketing personnel whose job it is to
sell you on the place, but you need more than glossy
brochures and vague promises to go on. Because many
nursing homes didn’t fare well during the pandemic,
you should be especially vigilant in your search now.
Screen for Quality of Care
Nursing homes often specialize in areas of care, like
stroke recovery or long-term ventilator support, so ask
the hospitalist assigned to your case, as well as your
family physician, about the kind of care your loved one
will need. A geriatric care manager can often recom-
mend facilities and coordinate the transition from hos-
14 | KIPLINGER’S RETIREMENT REPORT AUGUST 2021
pital to nursing home (see “Don’t Go It Alone” on fac-
ing page).
Whether you have names of places you want to
check out or are starting from scratch, kick off your
search at Care Compare (medicare.gov/care-compare) for
nursing homes certified by Medicare and Medicaid,
which most are. Facilities are rated for overall care
with one to five stars, from lowest to highest quality,
based on health inspections, staffing levels and evalua-
tion measures.
Search by facility name or location, and filter the re-
sults for those rated with four or five stars. If few op-
tions turn up, expand your search geographically and
include three-star facilities, which are considered aver-
age. Avoid one- or two-star facilities and those that are
“special focus facility” candidates or have already been
designated that way, as they have been cited for serious
deficiencies or problems over multiple years and need
additional oversight.
Next, filter your results for nursing homes rated
four or five stars for their staffing of nurses and aides.
This represents the level of care that residents receive,
such as the number of services they get, how long they
must wait for them and the amount of time that the
staff spends attending to each person, says Lori
Smetanka, executive director of the National Con-
sumer Voice for Quality Long-Term Care. After win-
nowing down your choices, compare the information
for up to three facilities simultaneously.
Care Compare isn’t perfect; nursing homes self-re-
port the information, and their data is prone to infla-
tion and manipulation. But the Centers for Medicare &
Medicaid Services, which manages the tool, has im-
proved its accuracy over the past several years by bas-
ing data on verifiable sources, such as staffing levels
from payroll data.
Every state has an office of ombudsman for long-
term care that fields and resolves complaints about
nursing homes and other care facilities. Besides advo-
cating for improvements in long-term care, these of-
fices can share complaint data about a facility such as
the number of complaints logged in a given year and
ISTOCKPHOTO.COM
what they were for, says Amity Overall Laib, director of
the National Long-Term Care Ombudsman Resource
Center. To find your state or local ombudsman, visit
theconsumervoice.org/get_help, and click on your state.
 State survey reports are another resource. To be cer-
tified by Medicare and Medicaid, facilities must show
they comply substantially with federal and state re-
quirements based on an annual survey that the state
department of health oversees. The report lists defi-
ciencies cited and enforcement actions taken, with up
to three years of survey reports accessible on Care
Compare. Nursing homes and your state’s department
of health should also make the reports available. Note
the number, recency and nature of the deficiencies
cited, along with any inadequate infection control, ne-
glect or abuse, says Kristine Sundberg, executive direc-
tor of Elder Voice Family Advocates, a citizen advocacy
group in Minneapolis. Fewer, older and less egregious
deficiencies are better. Advocacy groups, such as Elder
Voice, can also be a great source of advice.
Ask Plenty of Questions
When you call or visit a nursing home, staff members
should be forthcoming and transparent when answer-
ing your questions. How they communicate with you
during your visit could indicate how they will do so
later when your loved one lives there, Smetanka says.
Take notes or even record your conversation (with per-
mission if required under your state’s law). This can be
useful for future reference, not to mention, evidentiary
support if needed later, says Suzanne Scheller, an elder
law attorney in Champlin, Minn.
You’ll probably speak first with the nursing home’s
director of admissions or director of marketing, who
can tell you whether the facility will have a bed avail-
able when you need it. This person often isn’t a nurse
or financial expert, says Caspi. “While many are honest
and caring people, others are not, so be mindful of the
potential for unfounded promises,” he says. Beware
customer satisfaction surveys, which may be biased
in favor of the facility.
A high vacancy rate may be a red flag. “As a rule
of thumb, a facility with few available beds is full for a
reason, such as a good reputation and referrals,” says
Scheller. Be wary of any recent change in management.
That usually means a period of disruption, which vul-
nerable patients can’t afford.
Inadequate staffing and high turnover rates are an-
other source of disruption. The appropriate ratio of
nurses and aides to residents varies with the time of
day and the degree of care the patients need. A recent
study by nursing researchers found that a registered
nurse can care for nine to 28 residents and an aide five
to seven residents during the day when needs are
greatest. Nursing homes must post their staffing levels
by shift daily. An RN should be available throughout
the day and evening to provide adequate supervision,
says Caspi.
Despite federal and state regulations, which gener-
ally set a low bar, understaffing was widespread and
chronic before the pandemic and only worsened dur-
ing it. Those difficulties still remain. Understaffing
leads to neglect when overworked nurses and aides
don’t have time to meet all the needs of every resident.
It also produces high turnover, as staff members burn
out and quit, so find out how management attracts and
keeps employees.
Because aides will provide hands-on care of your
loved one, management should treat them as valued
members of the care team, not merely as the bottom
rung of a hierarchy. There should also be a process for
managing medications and preventing errors, as well
as background checks on prospective employees to
prevent sexual predation and theft of medications.
Talk with the nursing home administrator, the di-
rector of nursing or both and find out how much ex-
pertise the nursing home has caring for people with
your loved one’s medical, cognitive or physical condi-
tions. Ask for examples of such specialized care.
Don’t Go It Alone
A geriatric care manager who belongs to the Aging
Life Care Association (aginglifecare.org) can find and
coordinate post-hospital care for patients. These care
managers know the reputations of facilities in their
communities and understand the financial side. Once
your loved one is in residence, they can be your eyes
and ears as well as advocates.
ALCA-approved care managers must have special-
ized degrees and experience in human services, such
as social work, psychology, gerontology or nursing.
Their allegiance is to the client and their family,
and they don’t accept compensation from services
to which they refer clients, says Liz Barlowe, a care
manager in St. Petersburg, Fla., and a recent past
president of ALCA. Rates typically range from $300 to
$800 for an initial assessment and $100 to $200 per
hour thereafter, depending on the region. Medicare,
Medicaid and private insurers don’t cover the cost,
but some long-term care policies may pay part of it.
AUGUST 2021 KIPLINGER’S RETIREMENT REPORT | 15
Five Steps to Choosing Boredom and a lack of meaningful activity are risk fac-
tors for many care-related problems. Look for facilities
a Nursing Home that have programs to engage the residents.
If you can, without invading their space or privacy,
talk with residents and their family members to learn
what their experiences have been like. Most nursing
STEP 1 homes have either a family or resident council, some-
times both, and they can be a great resource. Ask to
CHECK OVERALL RATING ON CARE COMPARE
speak with a council president or member about any
concerns and how the nursing home responded.
1-2 Stars 3 Stars 4-5 Stars
(Worst) (Average) (Best) Investigate the COVID Track Record
No Possibly Yes As of late May 2021, nearly 132,000 residents of nurs-
ing homes had died of COVID-19 since the pandemic
began, comprising about 20% of all COVID deaths in
the U.S. With opportunities to socialize and visitation
STEP 2 limited or banned for many months, residents suffered
from isolation, loneliness, depression and exacerbated
FILTER FOR STAFFING RATING
memory loss. Although the rates of infection and death
have fallen dramatically with safety measures and vac-
1-3 Stars 4-5 Stars cination of residents, the trauma still reverberates.
No Yes Get specifics about the facility’s track record, in-
cluding the number of COVID-19 cases and deaths for
residents and staff and when they occurred. Some fa-
cilities post that information on their websites, or you
STEP 3 can search for it at Data.CMS.gov by clicking on “Co-
vid-19 Nursing Home Data.” Even as COVID cases de-
REVIEW COMPLAINTS AND
cline, the nursing home should still have measures in
DEFICIENCIES FOR TOP 3 PICKS
place to keep everyone safe. If a new case emerges, will
they “lock down,” prohibiting indoor visitation again?
Unacceptable Acceptable “No two facilities have the same guidelines or proto-
No Yes cols for our visits, even now,” says Liz Barlowe, a care
manager in St. Petersburg, Fla.
When considering the facility’s policies, you’ll need
to balance accessibility with safety. You must feel com-
fortable abiding by the policies, which should reflect
STEP 4
your values, says Steven Barlam, a care manager in
BED AVAILABLE WHEN NEEDED? Los Angeles.

Tour the Facility in Person

No Yes
Many facilities provide virtual tours, but nothing beats
an in-person visit where you can use all your senses.
If something doesn’t look, sound or smell right, ask
about it. If facilities know you’re coming, they may put
STEP 5 on a show. So, after an initial visit, drop by again at an
TOUR AND GET QUESTIONS ANSWERED unpredictable time, a practice you should continue
throughout your loved one’s stay.
What’s the vibe? Warm and welcoming? Cold and
Unacceptable Acceptable institutional? You and your family member must feel
No Yes comfortable here, especially if you anticipate a long-

16 | KIPLINGER’S RETIREMENT REPORT AUGUST 2021


term placement. Don’t be misled by a facility’s physical
appearance. Some look like an elegant hotel but pro-
vide mediocre care, while others that seem institu-
tional offer great care. Keep in mind if the facility’s ap-
pearance is off-putting to family members, they may
find it hard to visit, says Barlam.
Take the time to observe how staff members interact
with each other and the residents. Are they collegial
and caring or just doing their job? Are the residents
participating in activities or lined up in a hallway,
slumped in wheelchairs? “Many don’t arrive like that
but end up that way because it’s the easiest way to keep
an eye on them,” says Anne Sansevero, a care manager
in New York City. Check bulletin boards to get an idea
of the activities on the agenda.
Consider the Financial Side
The national monthly median cost of nursing home
care is $7,756 for a semi-private room (ranging from
$5,019 in Texas to $37,413 in Alaska) and $8,821 for a
private room (ranging from $5,749 in Missouri to
$36,378 in Alaska), according to the Genworth 2020
Cost of Care survey.
Medicare will pay for up to 100 days of care per ben-
efit period in a certified skilled nursing facility as long
as the care is medically necessary. There are other re-
quirements, so read “Your Guide to Choosing a Nurs-
ing Home or Other Long-Term Services & Supports”
(medicare.gov/pub/popular-medicare-publications). For the
first 20 days, Medicare pays the full cost; for days 21
through 100, you pay coinsurance of up to $185.50 per
day in 2021. If you only need long-term custodial care,
which includes help with activities of daily living such
as bathing, dressing, toileting and eating, Medicare
won’t cover the cost.
Patients that don’t need 100 days of care are dis-
charged sooner. Conversely, if the person declines—be-
cause of, say, advanced dementia, chronic obstructive
pulmonary disease, Parkinson’s or the effects of a
stroke—short-term rehabilitation could become a long-
term placement. At that point, you must pay out of
pocket or file a claim if you have a long-term care in-
surance policy that covers skilled nursing. You may be
eligible for Medicaid, but only if your assets fall below
a certain level.
In most states, facilities that are certified for Medi-
care and Medicaid are not required to certify all of
their beds. If a Medicaid-certified bed isn’t open when
you need it, you must pay out of pocket until one be-
comes available. K PATRICIA MERTZ ESSWEIN
INVESTING
Yes, You Can Have
Too Much Cash
WHEN IT COMES TO FINANCIAL SECURITY, IT’S COMFORTING
to know that you have adequate cash reserves to
tap when you need them. But there’s also a down-
side to stockpiling cash: It can drag down your portfo-
lio’s returns over the long haul.
If you’re like many Americans, you’re probably sit-
ting on a larger pile of cash than usual after spending
less during the pandemic and depositing government
stimulus checks. Or maybe you trimmed your stock ex-
posure during last year’s bear market and never got
back in. The U.S. personal savings rate (the percent of
disposable income people save) was 27.6% in March.
That’s below the record 33.7% savings rate in April
2020 but nearly four times the prepandemic rate of
7.3%, according to financial services firm UBS. Nearly
$17 trillion was held in money market funds, savings
accounts and certificates of deposit in January, up 24%
from the start of 2020, according to Crane Data.
Some investors have been reluctant to funnel their
spare cash into assets such as stocks that have histori-
cally delivered bigger returns over time. U.S. investors
had an “elevated” 19% of their portfolios in cash in
April despite an improving economy and rising stock
prices, a UBS survey found.
Sure, having a rainy-day fund can help you survive
financial jams such as an unexpected car repair or job
loss. But cash really shouldn’t play a big role in invest-
ment accounts meant to fund long-term goals such as
retirement. “Cash becomes a drag on returns really
quick,” says Kristin McKenna, managing director at
Darrow Wealth Management.
The Weight of Too Many Greenbacks
Having too much wealth parked in low-return assets is
a recipe for “portfolio drag.” You earn less on your
money by playing it safer than you otherwise could.
“Too much cash is bad for your wealth,” says Mark
Haefele, chief investment officer at UBS. A $10,000 in-
vestment in a three-month Treasury bill, a proxy for
cash, grew to $21,351 over a 30-year period ending in
December 2020, a study by fund company T. Rowe
Price found. In contrast, $10,000 invested in the S&P
500 stock index would have swelled to $211,000.
AUGUST 2021 KIPLINGER’S RETIREMENT REPORT | 17
 Running to the perceived safety of cash or trying to
time the market can hurt you in the short run, too.
Consider investors who took some chips off the table
last spring, when the S&P 500 suffered its fastest-ever
20% bear market drop and then mounted a rapid re-
bound. A portfolio that increased its cash holdings
from 3% to 15% (thereby reducing its stock allocation
from 60% to 48%) underperformed a portfolio that re-
mained at 3% cash by roughly 7% from March 23, 2020,
through Aug. 18, 2020, according to Wells Fargo Invest-
ment Institute. A portfolio that sold half of its 60%
stock stake and put the proceeds into cash underper-
formed the 3% cash portfolio by 15%.
Another reason being too conservative can be costly:
Cash, which yields zero, is losing purchasing power
and generating a negative return when you factor in
consumer inflation, which has risen more than 4% in
the 12 months through April. Consider the following
UBS analysis: Someone with a $5 million all-cash nest
egg who has annual expenses of $250,000 that increase
2% per year due to inflation would have only $2.5 mil-
lion left after 10 years of drawing down the cash to pay
bills. The same portfolio invested in stocks is projected
to rise to $7 million over the same period.
The Bucket Approach
Weigh short-term needs against long-term goals to find
an optimal cash position. Personal finance pros recom-
mend a “bucket” approach that allocates cash over
three different time frames.
A zero-cash allocation isn’t crazy. Once you have
buckets one and two funded and can survive financial
Armageddon, you likely have enough
protection to invest aggressively
with bucket three. Those
nearing or in retire-
ment must keep
their nest egg
growing to fund
golden years that
could last decades,
so building a growth-
and-income portfolio
of stocks and bonds
makes sense. Van-
guard’s target-date fund
for people who retired
in 2015, for example,
consists of 33% stocks,
66% bonds and 1% cash; a fund targeting
18 | KIPLINGER’S RETIREMENT REPORT AUGUST 2021
retirement in 2025 holds 58% stocks, 41% bonds and
1% cash. “Try to stay fully invested,” says Ward.
Bucket 1: Emergency fund. You need cash savings for
emergencies such as an unexpected health care bill.
View your emergency bucket “as your personal safety
net when life throws you a curveball,” says Judith
Ward, senior financial planner at T. Rowe Price. Single-
income households should have six to 12 months of
regular expenses set aside. For dual-income families,
three to six months should suffice.
It makes sense for retirees to build a cash cushion of
one to two years of living expenses so that they can tap
their emergency fund to ride out a market decline
without having to sell retirement savings at depressed
prices. “It’s about protecting your long-term assets,”
says Ward, adding, that research shows that most bal-
anced portfolios (60% stocks, 40% bonds) recovered
fully from the bear markets of 2000 and 2008 within
one to two years.
Bucket 2: Major expenses or intermediate-term goals. If
a big-ticket purchase such as a new car, college tuition
or the down payment on a new home is on the horizon,
you should have the money socked away for it, too. You
can’t afford to risk money you’ll need in a few years in
the stock market. High-yield savings or money market
accounts, or even conservative short- or intermediate-
term bond funds, are good choices for this goals-based
bucket.
Bucket 3: Investments. For money earmarked for the
long term, the less cash the better. “We don’t see cash
as having a place in an investment portfolio,” says
McKenna, who recommends no more than 2%. Even a
5% to 10% cash weighting can act as a headwind.
To maximize long-term returns, emu-
late the low cash holdings fa-
vored by fund managers.
The seven nations with
the biggest government
pension funds (a
group that includes
the U.S.) had average
cash positions of 4% in
2019, UBS data show.
Target-date funds from
Vanguard, which get more
conservative as you near
ISTOCKPHOTO.COM
retirement, hold only about
1% cash in portfolios that
target retirement in as little as
five years. K ADAM SHELL
 Download your FREE issue…
Investing f PREFER
RED IN
VESTOR

or Income
COMPLI
MENTAR
Y ISSUE

Unless oth
erwise not
ed, all prices
are curren Strateg
ies to
After the D
t as of Ma

Earn up to 10% cash yield

rch 13, 202
0. Subscri
be to Kip Boost Y
eluge: Pick linger’s Inv
esting for
Income for
our Cash
ld Yie
ing U
Y
more tim
ely

p the Piece
rates and
ou—and yields in
every mo
us
unnerved , too- are still nthly issu

s
e.
thi by the po
we For exam
traders’ inas sudden bear ma r of po rat ple, BBB-
rk e bonds, wh rat
daily and bility to prevent et and wi nn ich are
ed cor-
are resilie
ma ers an
and fund hourly swings. Bu ssive category, d still a core incom term
long- nt
ally soun and backed by

safely and reliably, 12 Is

pr t
while, it’s ices can recover. stock ca
March’s ught contagion e d
some ma credit. There’s be ner-
ge
portfolio a calamity to lose Mean- vio
bonds an lent selloff in jun m
fro
sues
rk
inc fund share downs of munic en
to look be ome. So, it’s es critical d the poor
prospects
k
performan s, but that’s beca l
ipa
yo nd pr sential fo
at
and evalu incipal los r us
“tourists” ce-chasing fund e

61 %
ate se
scheduled the certainty of s Volatility an them—cu as fund managers yers—
bu
letter’s fir income payment. every d po
st
and advis mission is to dis Our damage w rtfolio pal mark t and run and the call
etplace isn munici-
e on cuss ill ma ’t equippe
when fear ease
ssive ex
If you’r investment inc a 13% dr it volumes. Losse d for

even under challenging

as we su e sensibly divers ome.
annoyance turns into
op
gg the close in the share prices like
from bank est, you’re draw ified, d-
Value fund end Nuveen Mun of
governme interest; municipa cash
ing with daily

s av i n
life. do with cre (NUV) thus had icipal
dividend nt and corporate l, thing to do ditworthiness an little to
-p bo industries
mortgage, aying corporation nds; like auto wi d ev
funds; an credit and ba s; ma nu factur an d airpla an d herd mi th trading mech ery-
nk-lo Investmen ing. IShares iBox ne funds’ inc schief. That and anics

gs
d
from rea pass-through inc an safe. Ratinome distributions similar
l ome ETF (symbt Grade Corporate x
transporta estate, oil and ga ol LQ Bo nd gs ag remain

market conditions.
s, lion of sin D) owns some tax en cies have
of the ne tion providers. So and $3 -fr pu
ws me and its 8.4 gle-A and triple-B 5 bil- for a possi ee borrowers on t
such as gr from these fronts downgrad ble downgrade, bu tch
wa
of March % loss in the seco bonds
threaten ounded airplanes , wa nd in bunche es don’t come qu t such
airport rev that pected as s as ugly and un week ick
already en enue and an s.
the subseq ything in stocks. ex- bonds, yo If you own indivi ly or
dismal. Oi ded airline divide have u
about da need not worry dual
nd April 3, theuent three weeks, But in
way down l and gas income s, is en ily price
quotes. anyway
half of its fund regained mo ding
revenue as pipeline and is also Preferre
suffers fro storage the coronashare price from be re than our favor d stocks, anoth
ed incom er
reduced m su rp lus vir us an fore too e categor of
consum es an monthly d
But other ption and expo d dividend reduced its k some pu
ferred sh nc he s althoug , also
ies
trends are rts. Munici only by a are h
as dire. It’ litt before co holders must be pre-
s n’t ne caught in pal bonds also go le.
local gove true that banks, arly the storm, bu t their div
mm on sto pa id
sta idends. Sh ckholders get
tions and rnments, major co te and t they, too
,
co rp Inside Th ares of th
were robu nsumers’ cash po ora- is Issue co inue e
can withs st entering this cri sitions Fixed-Incom Special
e
Report...for subscribers
Unless oth to Kiplinger’sntInvesting
erwise not
d on ne for
xt Income
page ...
tand a few sis and Debt and Fun d Pay outs Becom ed,
provided more mo hig prices and
the unpleasan h-speed trading e Unfixed 3 data are
assistance government’s nths, t fact of
bond-fund lead to an Ask Jeff
as of Ma
rch 13, 202
fin REITs, Utilitie
feeds mo and other relief ac ancial
0
life. Are these
This is trads and the Crash

isit ng
re on with investments saf
and preven cash into the econtually and isn’t ing panic, not a 4 she
Annaly and
lter from Co
e; what’s
going
6

i
foreclosur ts mass bankruptc omy
the death business

V
estate or crashing mpass; and how

.
issu
water and of investing in rea e,

e t
What’s New oil and gas to
dividend es. There will be ies and

u
power. l

s
The imp in Cash
Timely Tac prices.

s s
tic
There’s of the Month

I e
cu so act
the shock- ts and bond defau me volatility; of machine trad

E E v
stil 7

R
and manag l room for a RE rates; and beware of rising ing on market

Get a F
now replacand-awe phase is lts, but 4

go / i n
es studen IT tha bank-loan lon
over, Kiplinger’s t residence t owns -fund tro ger-term
ed by wo 25 s. Flashb ubl
rry and co Bloody red for Income ack es.
ncern. dividends galore, but we Model Por

nger.com/
wil l get thedon 5
’t think tfolios 7
ax. The late
st
Copyright Dividend- on our four rot 8
atin
202 0 • The Kip Going for A-Month, Tax-Ex g models:

www.kipli
linger Wa the Max, em
shi ngton Edi and Juiced pt Income,
tor -Up Cash.

Income Investing Strategies

s, Inc. • 110
0 13th Str
eet NW •
Washingt
on, DC 200
05-4051

for an Uncertain Market

• www.kipli
ngerincom
e.com

investment that escaped the collapse with positive back to ugly. This is possible.

A
t Kiplinger, we are forgiving
when an otherwise triumphant
stock, fund or sector goes into a
tailspin. Investing hath no guarantees,
and any company or money manager
(or team) can have a slump. So we aren’t
embarrassed that every member of the
Kiplinger 25 for Income got slammed
in March’s trading panic and liquidity
crunch. The subsequent sharp recovery
only slight damage did so on merit. And,
given all of the unforeseen and second-
order business perils the crisis brought,
these stalwarts are not always the outfits
you might have expected (Boeing, Disney,
fet us now review what has stood up well
to the year’s challenges and offers opportunity.
There is no fundamental reason why a
stock index such as the Nasdaq keeps
hitting all-time highs. Too much exuber
exuber-
ant money is chasing neon rainbows like
Tesla and Zoom.

There’sbalwaysbsouethingbworkingbtobgeneratebcashbwithb
by the 25 (and others) brims now with

righteous concern that the indexes and
averages have already pilfered gains from
the steady bounce-back we anticipated
for late 2020 and into 2021. As the pan
pan-
demic lingers and worsens, we thus prepre-
FREE
Exxon and Wells Fargo, we’re pointing
at you). Good and bad performance
and dividend stability or instability are
widely dispersed within categories rang
rang-
We could extend this discussion, but
let us now review what has stood up well
to the year’s challenges and will likely
offer opportunities and stability even in

uanageablebrisk,byearbinbandbyearbout,binbanybkindbofbuarket.
dict heavy profit-taking (or loss-cutting)
in the months ahead, as investors of all
ages, sizes, sentiments and political per
per-
suasions hedge and exhale. Once again,
if you have enough savings for life, or
you do not expect to earn new money to
replace your losses, we advise continued
de-risking and a cautious approach to the
reinvestment of interest and dividends.
But 2020 has been so freaky that we
also offer this comfort: We presume any
ing from banking and real estate to tech,
transportation and utilities. The flat yield
curve even affects credit and financial
companies differently. It helps beneficia
beneficia-
ries of cheap short-term funding, such
as credit card banks. But it harms others,
such as business development companies
with your
and mortgage real estate investment
trusts, as the spread (the profit margin)
between their cost of funds and the
yields they earn on their assets shrinks.
That said, our purpose here is to
a longer or deeper disruption.
FULL FAITH AND CREDIT. The
sense that mortgage and rent delinquen
delinquen-
cies will soar encourages investment
in government-guaranteed real estate
loans—specifically, Ginnie Mae pools. In
the GNMA world, if a borrower skips a
payment, the Treasury ensures that inves
inves-
tors collect “timely payment of principal
and interest.” And although the yields on
new mortgages are low, seasoned fixed-
rate mortgages, like long-term Treasury

Kiplinger’sbInvestingbforbIncouebwillbshowbyoubhowbtobearnb subscription!
spotlight—and praise—income ideas
well-placed to hold value and maintain
distributions if the economic outlook
bonds, are gaining value. Representative
GNMA funds from Fidelity, Pimco,

and market action regress from cautiously continued on next page ...

asbuuchbasb8%,b9%,bevenb10%babyearbrightbnowb—bandbstayb Copyright 2020 • The Kiplinger Washington Editors, Inc. • 1100 13th Street NW • Suite 1000 • Washington, DC 20005

wellbaheadbofbthebpackbnobuatterb
whichbwaybthebeconouybgoesb
Preferred Investor Invitation, You Save 61%!
froubhere.
✓ Yes! Send me 1 year/12 issues of Kiplinger’s Investing for Income for
❑
just $79. I save 61% off the cover price of $204.
❑ $79 check enclosed (payable to Kiplinger’s Investing for Income). ❑ Bill me.
Get a FREE issue. Visit Please add state sales tax in these states: CO 2.9%, DC 6%, HI (GET) 4%, IA 6%, IN 7%, KY 6%, LA 4.45%, MD 6%,
www.kiplinger.com/go/investing ME 5.5% NC 4.75%, NM 5.125%, OH 5.75%, SD 4.5%, UT 4.85%, WA 6.5% and WY 4%. Applicable sales tax will be
added to credit card and bill-me orders in those states.

For credit card orders visit www.kiplinger.com/go/investing

Risk-Free 100%
Money-Back Guarantee Name ________________________________________________________________________________________________________________

If you’re ever dissatisfied Address ______________________________________________________________________________________________________________

with Kiplinger’s Investing for
Income for any reason, simply
cancel at any time and request
a 100% refund of the full price
you paid for your current
subscription term.
City ___________________________________________________ State ______________ Zip __________________________________
E-mail ________________________________________________________________________________________________________________
Special
Mail to: Kiplinger’s Investing for Income
Offer 61KVKP
P.O. Box 320308, Palm Coast, FL 32132-0308 Code:
CAREER
Sabbaticals Aren’t
Just for Professors
WHEN AMANDA SCHMUTZLER WAS DIRECTOR OF PATIENT
services at Genentech, she went on a six-week,
fully paid sabbatical that all full-time employees
can take after six years of service. She and her hus-
band, also a Genentech employee, moved from their
San Francisco home to Martha’s Vineyard, which was
close to both of their large extended families. “We
parked ourselves in a big beach house and let everyone
come to us, as we had an infant and a toddler at the
time,” Schmutzler recalls. “It was really an opportunity
to decompress and reconnect with family and friends.”
That was in 2008.
Eight years later, they both became eligible for an-
other sabbatical, so they took the whole family up and
down the East Coast, visiting relatives. Their sabbatical
culminated in a two-week trip to Portugal, while their
children stayed with grandparents. At Genentech, no
one really begrudges you the sabbatical because every-
one has one coming, says Schmutzler, who has since
left the company. “People really celebrate other peo-
ple’s sabbaticals. It was among the things that made me
grateful to be employed there.”
Traditionally a perk of universities for professors to
work on scholarly projects, sabbaticals are used by the
private sector to improve recruitment, retention and
productivity while supporting work-life balance.
Though still rare, the benefit is catching on. “Sabbati-
cals offer an opportunity for employees to recharge,
pursue a travel dream, learn a new skill, or give back
through volunteerism in ways that would not be possi-
ble by taking the usual vacation time,” says Amanda
Fallon, senior director of corporate relations for Ge-
nentech. One Genentech employee moved to Spain to
learn flamenco. Another went on safari in Africa. Some,
like Schmutzler, use the time to care for babies or aging
relatives. For older workers, the extended break can
give them a much-needed breather from a demanding
career without having to retire.
Refreshed and Recharged
Typically, a sabbatical is offered to employees after four
to six years on the job, with additional sabbaticals pos-
sible every four to six years after that. Citigroup Inc.
launched its sabbatical program in January for full-
20 | KIPLINGER’S RETIREMENT REPORT AUGUST 2021
time employees with at least five years of tenure, and
already more than 100 employees have applied to take
one, according to Diane Arber, head of human re-
sources for Citigroup’s Institutional Clients Group,
based in New York.
After more than a year of juggling work and family
responsibilities during COVID-19 lockdowns at home,
many employees are feeling burned out. Although va-
cations can provide some respite, they’re generally not
long enough. Compared with most European coun-
tries, where employees get four or more weeks of vaca-
tion a year, U.S. workers get an average of two weeks of
annual leave, according to the Center for Economic
and Policy Research.
Even then, Americans don’t fully disconnect from
their jobs. A 2017 U.S. survey from Internova Travel
Group found that more than 62% of respondents
checked emails and voicemail messages while on vaca-
tion. “We recognize how hard it is to unplug, especially
when our workforce continues to navigate remote
working while balancing personal and professional
lives,” says Suzanne Ledesma, director of global bene-
fits and wellness at PayPal, which has been offering
sabbaticals as an employee perk since 2005, when its
parent company was eBay.
It’s no coincidence that Citigroup’s program is
called R3, for refresh, recharge and reenergize. “The
pandemic taught us that well-being needs to be priori-
tized. Employee expectations are changing,” Arber
says. At software company Autodesk, where employees
are eligible for a six-week sabbatical after every four
years, the program was designed so that employees
“return to work not only refreshed but also excited
about new ideas and ready to tackle new challenges,”
says Stacy Doyle, the company’s director of brand com-
munications.
Terms and Conditions
Most companies don’t mandate how employees spend
their time on sabbatical, which can range from four
weeks at PayPal to a more substantial absence, like
three months, at Citigroup. But health care company
OneMedical imposes a requirement: Employees must
give a presentation to colleagues and managers about
what they did and learned after taking OneMedical’s
four-week sabbatical, a benefit extended to those with
at least five years of tenure. “Our hope is that they ap-
ply their new learnings and skills to their growth and
development,” says Dr. Natasha Bhuyan, One Medical’s
West Coast regional medical director.
 Other terms, including whether the sabbatical is
paid and how much other employee benefits are cov-
ered, will vary. Only 5% of companies offer paid sab-
baticals while 11% make it an unpaid employee benefit,
according to a survey of more than 2,700 companies by
the Society for Human Resource Management. PayPal
and Genentech, which launched its program when the
company was formed three decades ago, pays employ-
ees on sabbatical a full salary with no change in bene-
fits. Even annual leave often continues to accrue. At Ci-
tibank, which at 12 weeks had the longest sabbatical of
the companies we spoke with, employees on sabbatical
earn 25% of base pay. All health care, retirement and
other benefits continue while the person is on leave,
with those that are tied to salary—such as 401(k) con-
tributions—based on the temporary lower earnings.
Sabbaticals may be offered in addition to other ex-
tended leave. Citibank, for instance, also lets full-time
employees with five years’ experience take two to four
weeks of fully paid time off to volunteer for a nonprofit
on a pro bono basis. And those who only need a short
amount of time may purchase up to five vacation days
for life events or needs that are not covered by vacation
or sick leave. Additional leave can sometimes be tacked
on to lengthen a sabbatical. OneMedical, for example,
allows its employees to extend a sabbatical by adding
up to two weeks of annual leave.
Some companies offer longer sabbaticals each time
an employee becomes eligible for one. At Adobe, full-
time workers can avail themselves of a four-week paid
sabbatical with all benefits covered in full after five
years of employment. Every five years after that, they
can take another sabbatical with the time off length-
ened to five weeks after 10 years of employment and
six weeks after 15 years.
ISTOCKPHOTO.COM
Even part-time employees may be eligible for the
benefit. Autodesk, PayPal and OneMedical all extend
the opportunity to part-time employees who work a
certain number of hours each week. At Autodesk, em-
ployees who work at least 30 hours a week can take the
company’s six-week sabbatical after four years of ser-
vice. Part-timers at OneMedical who work more than
24 hours a week are also eligible.
Freedom and Structure
How do you know if a sabbatical is right for you? Ra-
chael O’Meara, San Francisco-based author of Pause:
Harnessing the Life-Changing Power of Giving Yourself
a Break (TarcherPerigee, $14), says to watch for these
signs: if you used to love your job and now loathe it; a
health or family challenge demands your attention and
time; an opportunity comes knocking; you feel tethered
to your email and technology; or your boss signals that
things aren’t working.
To make the most of your sabbatical, you should
plan how you intend to spend the time. “Give yourself
permission to be open and curious. It’s not necessarily
what you know so far. That’s where the magic is,”
O’Meara says.
Structure is also important to use the time effec-
tively, but resist continuing your normal schedule and
habits. You should still create rules and boundaries,
however, such as getting out of bed by 10 a.m., restrict-
ing email to a few instances a week and setting goals.
Those goals should reflect what you want to get out of
the sabbatical, such as reading one book a week, taking
a cooking class or exercising regularly.
For people considering whether they’re ready to re-
tire, a sabbatical lets them try out the retirement life-
style without taking the plunge. “It is something I
highly recommend in midlife,” says Soulaima Gourani,
who writes about employee wellness and is also the co-
founder of tech company Happioh Inc., which provides
customized online meeting platforms for businesses.
“We are used to talking about how you best prepare for
your pension and retirement, but what we really
should be talking about is how to allow yourself some
breaks during life and your career.”
Don’t assume that you’ll enjoy the time off and
never want to return to work. “Maybe you decide it’s
too much time and you do enjoy what you do,” O’Meara
says. “You can experiment with a new lifestyle, but you
don’t have to commit to it. It could be a great segue to
retirement but also a great reality check.” K KATHERINE
REYNOLDS LEWIS
AUGUST 2021 KIPLINGER’S RETIREMENT REPORT | 21

RETIREMENT PLANNING
Can Insurers Be a
Pension Safety Net?
PENSIONS ARE COMPLICATED ENOUGH WITHOUT EMPLOYERS
passing the buck onto someone else, but increas-
ingly, that is what’s happening. In exchange for
buying a group annuity, employers are transferring
their pension-paying obligations to life insurance com-
panies, who pay the pension. The practice, known as
pension risk transfer or de-risking, has implications for
how pensions are protected and whether the payments
are off limits to creditors. About 33 million Americans
still participate in private pension plans, according to
the federal Pension Benefit Guaranty Corp.
Until recently, pension risk transfer accounted for
only a tiny number of pension plans, but the practice
took off when Verizon and General Motors sold about
$36 billion of pensions to insurance companies in 2012.
“It made plan sponsors realize this is something they
could do,” says Jarred Wilson, vice president and actu-
ary at Segal, a benefits consulting company. Although
pension risk transfers fell to a more typical $4 billion in
2013, they have steadily grown to $30 billion in 2019, he
says. That amount is still a drop in the bucket for pen-
sion plans, also known as defined benefit plans, which
are worth trillions in the U.S., but “this is not going to
go away,” says Edward Stone, a lawyer who has repre-
sented pensioners in pension risk transfer cases.
When an insurer takes over the plan, that pension is
no longer protected by federal law, but rather state law,
which regulates insurance companies. In 1974, Con-
gress passed the Employee Retirement Income Secu-
22 | KIPLINGER’S RETIREMENT REPORT AUGUST 2021
rity Act or ERISA, which established the Pension Ben-
efit Guaranty Corp. for private pensions. PBGC is
largely funded by premiums collected from defined
benefit plan sponsors. If the company that owns a
pension plan fails, PBGC will continue to cover part,
if not all, of the monthly payments, depending on the
pensioner’s salary and age. In 2021, a 65-year-old could
receive a maximum of about $6,034 a month, rising to
$18,343 for a 75-year-old.
But if an insurance company becomes insolvent and
can’t cover annuity payments, a state guaranty fund for
annuities kicks in. Depending on the state, that amount
can vary from a lifetime maximum of $250,000 to
$500,000 per individual, Stone says. “The loss of all
protections under ERISA is significant,” says Jack Co-
hen, chairman of the Association of BellTel Retirees,
which is trying to get some of that protection back.
Not everyone sees de-risking as a problem. Keith
McDonagh, head of MassMutual’s Institutional Solu-
tions Businesses, says state laws regulating insurers are
robust and may even offer greater pension plan protec-
tion. “Plan sponsors have a fiduciary duty to pick a
sound insurance company,” he says. “In many ways
there’s a higher bar for an insurance company to take
on this obligation than for a company in any other in-
dustry.” Unlike many companies that currently sponsor
pension plans, insurers have experience meeting long-
term financial obligations. “It should give individuals a
lot of comfort that this is something we do day in and
day out,” he says.
Another concern is that under ERISA, an individu-
al’s pension is protected from creditors, but that’s not
the case in every state when a pension becomes an an-
nuity. Connecticut and Virginia have passed laws that
protect a pensioner’s annuity benefits from creditors,
and New York is considering one, says Stone, who
helped push for and craft those laws. In addition, un-
der ERISA, pensioners receive annual notices about
their plans, which insurers are not required to send. If
you belong to a pension plan, keep tabs on the status of
your pension, including any changes in ownership, and
notify the company if you have moved.
Regulations that govern de-risked pensions need to
be stronger, says Karen Friedman, executive director of
the Pension Rights Center. “With lack of uniform reg-
ulation, my fear is that some of these big life insurance
ISTOCKPHOTO.COM
companies will have incentives to free up reserves for
other purposes,” Stone says. “My concern is not if they
can pay out today, but if they can pay out 30 to 40 years
from now.” K ALINA TUGEND
 X E S N G
TA S T I N G
V E D I
I N E N
SP I N G
T E N D
E N & L
R E M I T
T I E D
RE CR SS
I N E
S
BU

Whatever your personal finance need, there’s a

Kiplinger e-newsletter or podcast to help you
make more money and keep more of the money you make!

Choose yours today — FREE!

my.kiplinger.com/email
kiplinger.com/podcasts
 Free Findncidl Tools
uedlth Mdndgement

Worried about
your retirement?
It’s time to get
a plan.
Our free Retirement Planner can help you
track your retirement accounts and take control
of your financial life. And if you work with one
of our advisors*, online or by phone, you also get
TM
access to our Smart Withdrawal tool. This
innovative tool helps you plan for retirement
spending just as thoughtfully as you save.

Get stdrted with your free Retirement

Pldnner or tdlk to dn ddvisor toddy dt:
FREE FINANCIAL TOOLS AVAILABLE ON WEB & MOBILE

persondlcdpitdl.com/kipretire

*Advisory services are offered for a fee by Personal Capital Advisors Corporation ("PCAC"), a registered investment adviser with the Securities and Exchange Commission. Registration does not
imply a certain level of skill or training. Investing involves risk. Past performance is not indicative of future returns. You may lose money. All visuals are illustrative only. Featured individuals are
actors or paid spokespeople and not clients of PCAC. PCAC is a wholly owned subsidiary of Personal Capital Corporation ("PCC"), an Empower company. PCC is a wholly owned subsidiary of
Empower Holdings, LLC. © 2021 Personal Capital Corporation. All rights reserved.