What the experts say

Retirees’ health care surprise

Don’t forget to factor in rising health care costs when you plan for retirement, said Paul Sullivan in The New York Times. Fidelity estimates that a 65-year-old couple retiring this year has to figure on spending $240,000 out of pocket, assuming the man lives 17 more years and the woman 20. That figure—6 percent more than in 2011—probably comes as a surprise to the many near-retirees who don’t realize that Medicare pays for an average of just 51 percent of health care services, according to the Employee Benefit Research Institute. Carol and Richard Bechtel, who retired in 2006, will pay more than $9,000 in health care premiums this year—including Medicare, a supplementary policy, and a dental plan—a 14 percent increase over last year. “Health premiums are probably one of our biggest expenses,” Carol said.

A market disconnect

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“There is a mystery hanging over the markets,” said Neil Irwin in The Washington Post. S&P 500 companies’ profits dropped by an estimated 2.7 percent last quarter, but the market went up 5.8 percent. That means “investors are paying more for shares of companies that are making less money.” Why? Major bond buying by central banks in the U.S. and Europe likely played a role. When aluminum giant Alcoa recently announced a quarter of slow sales, its executives said the company’s rising stock price now follows government economic measures more closely than global demand for aluminum. “The market today is basically driven by headlines and not market fundamentals,” Alcoa CEO Klaus Kleinfeld said. In other words, central banks appear to have convinced investors—rightly or wrongly—that they “have the world’s economic problems under control.”

To sell or not to sell

The likely Jan. 1 jump in the capital gains tax rate makes it tempting for anyone sitting on large unrealized gains to sell, said Dave Carpenter in the Associated Press. “But pulling the trigger on a sale hastily could be a mistake.” Crunch the numbers and factor in what you’d lose on appreciating assets if you sold. If you were already planning a fire sale, it’s fine to wait until after November to see if there’s a tax deal in Washington, but be careful not to sell during the market low at the end of the year. And finally, watch whether the sale drives you into a higher-income bracket, which could “skew your math on tax savings.”