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Retirement plans must include the unexpected

Q. I am planning to retire in June when I will be 62{. I have $67,053 in savings, including $16,000 in a supplemental pension plan, plus about $60,000 of equity in my home, which I intend to keep as an inheritance for my children. I figure that I can live rather nicely on a monthly income of $950.

I will get $483 a month in Social Security and $396 a month from my regular pension plan, plus about $400 from my supplemental plan until it runs out, in about three to three and a half years.

If my ex-husband dies before I do, I'll be able to increase my Social Security benefits to "ride" his. Also, I may inherit some money from my mother, who is 92 and has a net worth of about $100,000. I will have no health insurance until I reach Medicare age. If something happens, I'll rely on my home equity, my savings and a $12,000 credit line.

Are there any serious flaws in my plan?

A. Serious flaws? You mean like the fact that a single hospitalization could wipe out your savings?

Going without health insurance is a huge risk. If you are unable to afford continued comprehensive health insurance from your employer under COBRA, you could seek out catastrophic coverage that would pay expenses above a certain level.

My opinion is that your savings are inadequate for you to be able to afford to retire. If you find your current job to be intolerable, I suggest that you take another job at least part time. Ideally, between now and the time you are 65, you should continue your medical insurance, increase your savings and delay tapping your supplemental pension. It does not appear to me that you can do that without working.

Your income will be inadequate once your supplemental pension runs out unless your ex-husband obliges you by passing on at a convenient time or your mother dies without spending her savings on nursing home care. It is best not to count on things like that until they actually happen.

Since you apparently are in good health and your mother is 92, you are a likely candidate to live 30 more years _ or even longer. Your income needs are likely to increase substantially during that period, thanks to inflation.

I think it would be a big mistake for you to start spending your home equity or much of your cash savings while you are in your 60s. Once you are in your mid-70s, you might be a good candidate for a reverse mortgage on your home.

Q. I have several single-premium, tax-deferred annuities purchased in the '80s. I would like to use these to fund a charitable remainder trust. What are the income tax implications on the tax-deferred gains if I do this?

A. It turns out that you have not asked a simple question. I asked three people who know a lot about taxes and charitable giving and I got three different answers. All I can say for sure is that there is some confusion on this issue.

If your goal is to leave the charity your annuities when you die, the simplest thing to do is to name the charity the beneficiary of each annuity. This eliminates estate tax on your annuities.

If you want to pursue putting your annuities into a charitable remainder trust, I recommend that you consult a good tax lawyer.

Q. If I bought one share of stock at $50 and now it is worth $100, can I just give that share of stock to my granddaughter, making her basis $100, so I wouldn't have to pay capital gains on my profit?

A. It seems as though Times readers are feeling especially generous lately. Could it be that nice spring weather we've been having?

If you give your stock to your granddaughter, you also give her your basis. You won't owe any capital gains tax, but she will when she sells, and her profit will be figured from your original cost.

The only way to avoid capital gains taxes entirely on your stock is to give it to charity or to leave it to someone at your death.

Helen Huntley writes about investing and markets for the Times. If you have a question about investments or personal finance, send it to On Money. We'll try to answer those we think are of greatest reader interest. All questions must be submitted in writing, but readers' names will not be published. Send questions to Helen Huntley, Times, P.O. Box 1121, St. Petersburg FL 33731, or to huntleysptimes.com by electronic mail.

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