Real estate’s bright spot

I’ve always liked real estate: Single-family rentals, duplexes, and self-storage facilities. As long as you buy it right and manage your expectations, real estate can provide a good cash flow and long-term growth.

And I’ve written before how real estate investment trusts (REITs) can let you dip your toe in this sector without worrying about the day-to-day hassles that come with being a landlord. Let’s face it, though, the market really stinks now, especially in the U.S.

Well, you might want to take a look at our neighbors to the north. It seems the Canadian real estate market has weathered the global financial crisis better than most.

Among the reasons:

• Strong exports of oil and other natural resources

• Strong Canadian dollar

• Low borrowing costs

Watch this YouTube video to learn what the Canadian REITs are doing in their own country and around the world.

And here are three Canadian-based real estate funds you might want to check out:

• IA Ecoflex Real Estate Income Fund (IAECREIN CN)

• BMO Equal Weight REITs Index ETF (ZRE CN)

• Investors Real Property Fund (INVRLPRA CN)

Best wishes,

George

Boomers not up-to-date on Medicare

Boomers are turning 65 at a record rate … 10,000 a day in fact … which means they’re eligible for Medicare.

However, a survey sponsored by the National Council on Aging and United Health Care found that many boomers are in the dark when it comes to Medicare. For instance,

• 46% of respondents have never shopped around for better Medicare coverage because many (41%) thought they couldn’t save any money,

• 35% were confused by Medicare,

• 16% didn’t understand Medicare at all,

• Less than half were familiar with the Medicare prescription drug “donut hole” or coverage gap, and

• Only 12% described their understanding of the health reform law as excellent or good.

What’s more, many respondents were not aware of extra benefits that can provide critical assistance, including Medicare Savings Programs, which help people with limited income pay for some or all of their Medicare costs, and Extra Help, which helps pay for prescription drug costs.

Look, no one knows what the future holds for Medicare. But ignoring what it currently offers could cost you big bucks down the road!

Click here to find more details about the survey and links to a bunch of helpful sources on Medicare.

Best wishes,

George

P.S. With so much uncertainty surrounding Medicare, protecting your finances from the ravages of long-term care is more critical than ever. Learn what you can do about it now.

Reader with Real Estate Questions

I had the following come in from a reader:

“George, we are considering purchasing a rental property. The question we have is: Can our adjusted gross income (if it is too high) preclude us from deducting any losses (depreciation, property taxes, mortgage interest) from our current income taxes?

“Also, do people incorporate and what would that do for us? I appreciate your input.” —Kay

My reply …

“Kay, your income should not prevent you from deducting losses. For more info, here are the instructions.

“Most taxpayers, including me, own the property personally and just file a Schedule E. Sure, you could incorporate. Tax wise, though, I don't see what that would accomplish for you. And a mortgage company will make you personally guarantee the note.

“Yes, it might shield you from liability in case of a law suit. But a good liability insurance policy can protect you even better.”

Best wishes,

George

P.S. Do you have a question about your real estate investment? Post it here or drop me an e-mail.

What to do if you inherit an IRA

Beneficiaries often aren’t sure how to handle an IRA their loved one left them. Some think they can just let the account stay as is. And I’ve seen others who think they can take the all the money and ignore the tax consequences. What’s more, there are a lot of misconceptions floating around … even among financial advisors.

Here’s one:

Beneficiaries might be led to believe they have to empty the inherited account within 5 years after the date of death (the 5-year rule). Yet they probably have a whole lot longer to deplete the account, which means more tax-deferred growth.

This “stretching” of the withdrawals over many years can also reduce the overall income tax bite.

There are cases when a beneficiary will have to remove the inherited money within 5 years. But these are the vast minority.

So how would you know if this applies to you?

One point to check out is if you were directly named on the IRA beneficiary form. If so, the 5-year rule most likely won’t apply. That means you can stretch the withdrawals over your life expectancy.

There are a whole slew of rules when it comes to inherited IRAs, including: Your relationship to the deceased, their age, and whether they started taking required minimum distributions yet. So you’d be wise to read through them or get with an advisor who can help you out.

IRS Publication 590, page 18, is a good place to start.

Good luck!

George

Nanny State’s anti-McDonald’s campaign continues

On May 17, I wrote about the Happy Meal laws floating around the country. Then the very next day, I reported that there was a plot to ax Ronald. Well, it seems that the busybodies and Washington bureaucrats with too much time on their hands are at it again ...

They’ve pressured McDonald’s into adding more fruit and reducing the number of fries in its Happy Meals. It’s all in an effort to cut childhood-obesity. Whether kids will even eat the fruit is a different story.

But now parents have another dilemma: According to the Pesticide Action Network (PAN) many fruits, including apples, grapes and peaches are loaded with pesticides!

So I have a better idea that should appease the anti-fries crowd ...

Have your kids plant a garden.

Even if it’s only a few potted plants on the patio or balcony, imagine the possibilities:

• They’ll get off their butts, breathe some fresh air and get some exercise.

• They’ll learn that food doesn’t magically appear in a red cardboard box.

• It’s something you can do together.

• You control what goes on your veggies.

• And kids may actually acquire a taste for something homegrown!

Perhaps I’m biased. I love McDonald’s fries. And I think the company is a good corporate citizen. In fact, I own some MCD stock. And I completely agree the obesity epidemic is causing major heath problems.

But you can’t change kids’ eating habits by shoving a few slices of fruit in front of them and taking away a couple of fries. It has to come from a lifestyle change in which a parent’s personal responsibility comes into play.

Furthermore, I don’t like those small brains in our over-bloated government telling us how much of what, kids in this country should eat. After all, what’s on the regulators’ agenda next …

Banning goldfish? Been done

Banning yellow pages? Been done

Banning circumcisions? Been done

Banning sale of all soft drinks on city property? Been done

Banning all pet sales? Been done

Good grief!

George

President Obama: "Were you lying then ... or are you lying now?"

Last week President Obama said Social Security checks might not go out if the debt ceiling isn’t lifted. Shortly thereafter, I received a flurry of e-mails from readers who are retired or about to retire wondering if they should start panicking.

Then over the weekend I heard Congressman Dennis Kucinich (D-OH), one of the most liberal guys in Washington, on Fox News. He reiterated the thrashing he gave the President earlier in the week:

"It’s A Fake Crisis, Social Security Did NOT Create The Deficit! It Will Be Able To Pay 100% Of Benefits Through 2037!"

That got me thinking: According to the Social Security trustees, there is enough in the trust fund to carry it through 2036. And I wondered if the President knew this. I did. In fact I wrote a column about this very topic back on June 5. And Kucinich did. So surely the President did.

After a quick Google search I found where he said less than a year ago at an Ohio fundraiser that the nation's Social Security system is "not in crisis" and doesn't need "any newfangled schemes" to keep it solvent for the next generation.

If I could meet President Obama face to face, speak to him on the phone, or even get an e-mail through to him, I have something to ask. I’d use a strategy trial lawyers like when they catch a witness with their pants down:

Mr. President: “Where you lying then … or are you lying now?” 

I’d put my question more diplomatically. But you get the point.

Of course I know I’ll never get to ask the President directly. But if he is one of your Facebook friends or Twitter followers, please ask him for me.

Best wishes,

George

Don’t let this derail your retirement dream

Back in May, I gave some ideas on what you should do before helping an elderly loved one. Then on June 18, I touched on it again. Now, a just-released report has kicked the importance of this up a notch.

Valuing the Invaluable: 2011 Update - The Growing Contributions and Costs of Family Caregiving found that in 2009, about 1 in 4 Americans provided care to an adult who needed help because of a disability or chronic condition.

The estimated economic value of their unpaid contributions: Approximately $450 billion in 2009, up from an estimated $375 billion in 2007 — a 21% increase. The report also explains the contributions of family caregivers; and details the costs and consequences of providing family care.

Besides the financial aspect, all this can take a toll on a caregiver’s mental wellbeing, too. According to the report, 69% of the caregivers said taking care of a loved one was their number one source of stress.

You can read the complete report here.

Staying at home to receive care is indeed the preference for most people. As I wrote in A Boomer’s Guide to Long-term Care …

“… six times as many elderly people with disabilities live at home than in nursing homes.”

And I explain the options you have so you can make a choice based on your circumstances.

Life expectancies are increasing, health care costs are soaring and retirement accounts are floundering. So planning for the day when you or a loved one needs additional help doing the things you take for granted right now, has become even more important.

Don’t put it off.

Best wishes,

George