Plan Ahead to Steer Clear of Retirement's Unexpected Complications

This column marks the beginning of the end.

The Washington Post has made me an offer I can't refuse -- a buyout that will let me retire a couple of years early with a full pension, plus two years' pay as a goodbye present. So after 34 years here, 19 of them spent writing the Cash Flow column and its predecessor, I am headed for the door.

Because the first wave of baby boomers is right behind me, I figure it might be useful to take this column and next week's, which will be my last, to look at some unexpected complications -- how even an asset can be a problem -- that can emerge at retirement, along with some of the strategies my wife and I employed over the years to build our financial security.

I'll admit that, compared with many baby boomers, my wife and I have it easy. We both have traditional, defined-benefit pensions -- I from The Post and she from the federal government -- and thanks to her federal employment, we also have retiree medical insurance.

We also have defined-contribution retirement plans, mine a 401(k), hers the federal Thrift Savings Plan. And we have investments.

That means we don't have to worry about outliving our pension income, one of the key difficulties that face those retiring with only a 401(k) or the like. But it doesn't eliminate all our problems or uncertainties. We must be conscious of the erosive power of inflation -- though my wife's pension is COLA-ed, meaning cost-of-living-adjusted, mine isn't -- and the steady bite of taxes. Both pensions are taxable, of course, and in a few years, we will also be forced to start making withdrawals from our 401(k)/TSP accounts, subjecting that money to tax, as well.

Add to that property taxes, which are assessed regardless of whether you can pay, and choice of residence becomes a major consideration even for the relatively secure.

On that basis, continuing to reside in the District of Columbia becomes highly problematical.

That's unfortunate because, judging from the sentiments of many of our friends and neighbors, our Capitol Hill neighborhood could easily become a NORC -- a naturally occurring retirement community -- but for the taxes.

With a top marginal income tax rate of 8.7 percent (down from 9 percent last year), a real estate tax of about 92 cents per $100 of assessed value (I say about because the city's "homestead exemption" reduces it slightly for homeowners) and a general sales tax of 5.75 percent, Washington is at or near the top of just about every tax rate there is.

And there seems little prospect of serious reduction in the future. In fact, at a recent forum of mayoral candidates, only one, Adrian Fenty, promised not to raise taxes, and no one envisioned cutting them.

There does seem to be plenty of revenue. Next year's budget numbers, reported this month, put total D.C. and federal spending for the city at $9 billion. Assuming a population of 500,000, that's $18,000 for every man, woman and child in the District of Columbia. But somehow, that's not enough.