Boston.com: Are older clients worried about potential changes to Medicare?
Padula: For the most part we haven’t had clients ask us about changes to Medicare. Many of our clients are in their 50s to 60s and so Medicare is a generalized concern. It can be confusing and we try to help clients sort out their options. The way people work today is different that it was in the past.
Many don’t work for one company until age 65 in just one field the way people used to. People go into different careers, making the retirement age question not as top of mind as, say, take home pay. People are active and working beyond the traditional retirement age. Of course, Medicare and paying for health care is a big topic across all our clients.
Boston.com: Are there any investment concerns specific to Massachusetts residents?
Padula: If Massachusetts state taxes go up then municipal bonds for Mass. residents may be more appealing. The tax free income from a municipal bonds may be better than the after tax income received from other investments, say corporate bonds, especially if that income is subject to federal taxes as well. For example, earning 3 percent tax free on a Mass. municipal is equivalent to earning 4.5 percent on a taxable bond for someone in the 28 percent federal tax bracket and subject to the 5.3 percent Mass. income tax rate (a couple earning more than $250,000). If you can earn 3 percent on a municipal bond, it’s the same tax equivalent yield because Mass. municipal bonds are free from state and federal taxes.
Boston.com: Should homeowners refinance their mortgages?
Padula: That’s the one question we keep getting as rates are at historic lows. For clients that refinanced last year or the year before when rates were low then, rates are even lower now, so, in many cases it makes sense to refinance.
For example, a $350,000 mortgage at a 4.5 percent interest rate will result in a monthly principal and interest payment of $1,771. If you refinanced at 3½ percent you’d be paying $1,571 per month. Adjustable rate mortgages could be even lower, but, you have to figure out how long you are going to stay. There is a risk that rates could increase.
Saving $200 a month is real money and a positive boost for many people. You have to be aware of closing costs too, but some banks are even waiving those. So, for many people, it still makes sense to explore refinancing.
Boston.com: What should people be thinking about overall for their 2013 investment decisions?
Padula: Be realistic, keep it simple, have a long-term approach, keep expenses down, don’t try to time the market or think that you have to beat the market. Have a diversified portfolio and don’t think that there is only one “right time to invest.” If you can’t do it yourself, ask for assistance from an adviser. Importantly, make sure you have a rainy day fund, or get one started. In baseball terms, hit for singles and doubles, not home runs. It will make all the difference.