Category: Financial and taxes in retirement
February 2, 2016 -- Social Security - so misunderstood. And unfortunately, that misinformation causes many people to make very costly decisions. This article will talk about how one of those decisions - filing early and deciding not to work any more because of fear that earnings will be taken away - can jeopardize financial health. We'll explain that mistake in detail, but first we have to give some background, including how concerns about Obamacare can complicate the decision making. Note: we are not accountants or financial experts. Before you make any important financial decision consider it carefully and get expert help.
Over the years Congress has tweaked Social Security to encourage people to work to at least Normal Retirement Age (66 for most boomers), rather than collecting sooner (the earliest you can claim is at age 62). The thought was to encourage folks to work longer and delay benefits so they have the opportunity to save more money for retirement. And, because they paid more into the SS system, they and their surviving spouses get higher benefits for the rest of their lives. Both factors result in
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Published on February 1, 2016
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Category: Financial and taxes in retirement
December 28, 2015 -- You only have a few days left to do it, but you can now once again make a qualified charitable donation from your IRA in 2015, and not have that donation count as taxable income. The re-authorization of The IRA Charitable Rollover provision is one of many outcomes of the Congress's recent Omnibus spending bill (PATH Act of 2015). The provision allows individuals who have reached age 70½ to donate up to $100,000 to charitable organizations directly from their Individual Retirement Account (IRA). The change is permanently reinstated. The payment must be made directly to the charity from the IRA or 401k.
The problem with this good news is that most
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Published on December 27, 2015
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Category: Financial and taxes in retirement
Note: This article compiles information from a Social Security Office or Retirement and Disability Report: Taxation of Social Security Income. Note that we are not tax professionals - consult your accountant or other expert before you make any important decisions on this issue.
December 18, 2015 -- Many of our members are either not aware that they might have to pay taxes on their Social Security benefits, or if they are, not sure how much they might have to pay. This article will try to shed some light on the issue.
Social Security beneficiaries with total income exceeding certain thresholds have been required to claim part of their Social Security benefits as taxable income since 1984. The income thresholds for taxation of benefits have remained unchanged since Congress first established them but, because wages have increased, the proportion of Social Security beneficiaries who must pay federal income tax on their benefits has risen over
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Published on December 19, 2015
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Category: Financial and taxes in retirement
December 6, 2015 -- If you have a 401(k) and/or an IRA, and you turned 70 and 1/2 in 2014 or earlier, you have a very big deadline coming December 31. That is the date by which you must take your annual Required Minimum Distribution (RMD), or face significant penalties. A surprising number of people fail to take these distributions. All of the money taken from regular
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Published on December 5, 2015
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Category: Financial and taxes in retirement
Nov 30 Update: It is a little tricky to get the ebook for free, but you can do it. Use this link and find the link that says 0.00 to Buy. Click on that, not the Amazon/Kindle unlimited option (you have to be a subscriber for that). Then…
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Published on November 28, 2015
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Category: Financial and taxes in retirement
November 24, 2015 -- There are many classic examples of the kind of mistake made by your Topretirements.com editor. They include experts who don't listen to their own advice: the cobbler with holes in his soles, the doctor who still smokes, the plumber with a leaky faucet - you get the picture. We're sharing our mistake - the kind you would think someone who has a good grip on retirement matters wouldn't make - so you don't make the same one. Our mistake was not to sign up for Part D, prescription drug coverage, when we originally enrolled in Medicare. If you don't currently have prescription drug coverage, consider yourself forewarned: you still have time to take corrective action during the current Medicare enrollment period, which ends December 7, if that is what you decide after reading this article.
2 very serious consequences
Failing to sign up for Part D insurance when you first become eligible can have two serious, even disastrous consequences:
1. You pay a penalty of 1% a month for every month you do not have "creditable" prescription drug coverage. In our case, it means a 30% penalty on our monthly premiums - forever!
2. Inability to get coverage immediately. There is an open enrollment period every year from Oct. 15 - Dec. 7 where you have the option to sign up for Part D insurance (or change your Part B or C plans). But let's say you don't take that option, and next February you are diagnosed with a serious medical condition that requires $25,000 worth of drugs, taken immediately, to treat it. Even if you register for Part D on Oct. 15 you are out of luck until January 1 - that's the earliest your new plan can kick in. Although the odds are low of this (or something worse) happening - it is possible!
To Part D - Or Not
When you hit age 65 and sign up for Medicare you have many choices. Part A is the hospital component, Part B or C cover doctor and outpatient type claims, and then there is Part D - prescription drugs. Part C programs typically include prescription drug coverage, so you don't need Part D if it is included there. In our case, at age 65 we signed up for Part A, Part B, and an commercially available Medigap policy from Anthem. When it came to Part D, we were like a lot of people we know - we don't currently take any prescription drugs, and our insurance agent didn't
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Published on November 24, 2015
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Category: Financial and taxes in retirement
November 16, 2015 — The biggest change affecting Social Security benefits in at least 15 years is about to go into effect on April 30, 2016. It is a change that could cost certain beneficiaries $50,000 over a lifetime. As with any major change to a benefit program there has been a lot of confusion over who is affected and how - this article will explain how it will affect you.
We were fortunate to have Kurt Czarnowski, a 34 year veteran employee of the Social Security Administration and leading expert on the subject, explain the changes to us in practical terms. Here is what we learned from Kurt about how various groups are affected.
File and Suspend and Restricted Benefit
The Budget Bill passed by Congress and signed by the President in early November included changes to
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Published on November 16, 2015
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Category: Financial and taxes in retirement
November 12, 2015 -- The Centers for Medicare & Medicaid Services (CMS) has announced the 2016 premiums and deductibles for the Medicare inpatient hospital (Part A) and physician and outpatient hospital services (Part B) programs.
Part B Premiums/Deductibles
Most people with Medicare Part B will not see any increase in their premiums in 2016, which will remain at $104.90/month. Since there will be no Social Security cost of living increase for 2016, the law requires that most beneficiaries must be “held harmless” from premium increases.
Beneficiaries not subject to the “hold harmless” provision will pay $121.80,
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Published on November 12, 2015
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Category: Financial and taxes in retirement
Update 1. See our new File and Suspend article that explains how the law affects this and other claiming issues for people of different ages.
Update2 Nov, 3, 2015: The Budget Bill was approved by the Senate and then was signed by the President into law.
October 29, 2015 -- The budget bill just passed by the House, if approved by the Senate and signed by the President, might keep the country from entering a government shutdown and budget chaos. But one of its provisions would have a profound effect on anyone considering or currently taking advantage of the popular File and Suspend strategies. The bill is far from passing the Senate at this point, but if it does hundreds of thousands of retirees are going to have to rethink a claiming strategy that is worth about $50,000 for many who take advantage of it. According to the Center on Budget and Policy Priorities, about 100,000 people are now taking advantage of this strategy.
File and Suspend
This popular strategy goes something like this: A couple retires at full retirement age (66 for most baby boomers) and both file for Social Security. The higher earning member immediately suspends his or her benefits, planning to claim again at the age with the maximum benefit, 70. Meanwhile their spouse claims a spousal benefit, 50% of what
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Published on October 28, 2015
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Category: Financial and taxes in retirement
Note on Nov. 12: Final Medicare costs have been announced, which ended up slightly different than the preliminary predictions discussed in this article. See Final Medicare Part Premiums and Deductibles article. See also related article on how current Congressional bill ends the popular Social Security "File and Suspend" strategy for most people not already using this strategy.
October 28, 2015 - It hasn't happened many times, but it is coming in 2016: there will be no Cost of Living Adjustment (COLA) for those receiving Social Security. That is due to the fact that the cost of living in the U.S. went down, "fueled" by falling energy and commodity prices. This is only the 3rd time in history there has been no COLA. The COLA in 2015 was 1.7%.
This news will undoubtedly disappoint many folks who look forward to a small increase in their monthly Social Security deposit, something they might view as a pay raise every year, although it is really only an adjustment to keep on pace with inflation (which seems to be in check, at least for the present).
Most will dodge a Medicare increase
Meanwhile in the Medicare world, most people will escape a Medicare bullet. Had there been
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Published on October 27, 2015
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