Finally: Somebody in Congress Wants to Fix Social Security

February 10, 2019 — If you have been reading this Blog for awhile you know that fixing Social Security is one of our pet issues. In 2034, if nothing is done, the system will start to fail the millions of Americans who are counting on Social Security for their retirement. Yet prior to last week, no politician we know of had done anything to get the reform process going.

“The Social Security 2100 Act” was introduced into the U.S. House of Representatives and the Senate in late January. Representative John B. Larson, a Democrat from Connecticut, is the sponsor, and he has 200 lawmakers supporting it. As written, the bill has several interesting features, most of which we approve. It would be the most significant reform of Social Security since 1983.

January 29, 2019 — Perhaps you have heard of the FIRE movement, which stands for Financial Independence, Retire Early. The idea is to retire in one’s late 30s or early 40s by a combination of aggressively cutting down on spending and amassing retirement savings. There are hundreds of thousands of millenials, many of them in the hi-tech sector, who are enthralled with this idea. In many ways the movement is an outgrowth of the old “What is your number” question – as in how much money do you have to have in the bank before you think you can tell your boss to take this and sh*ve it! But for all of its devotees, there are many financial experts who warn that FIRE is not either feasible or safe. Here is what that smoke is all about.

One expert believes that is just not possible to accumulate a large enough pile of savings to be able to safely pull off an early retirement. Suze Orman, the popular financial guru, thinks you need $5 million to be able to pull off retirement. She thinks FIRE could be “the biggest (financial) mistake” of a lifetime. Mitch Tutman dismisses her figure as too high, saying you can do it with $1 million. Either way, it is the rare person who can scrimp and save enough to get to any one of those levels by the age of 40.

Note: This is Module 2 in our Online Retirement Planning 101 Series. See end of article for full list.

January 26, 2019 — The overwhelming #1 suggestion for our Retirement 101 series was “How to Retire on Less than $1 million” (smaller numbers were suggested to). Certainly most retirees find themselves in this predicament. Living on Social Security plus maybe some small savings is not a recipe for a happy retirement – unless you take drastic steps!

Over the years in many articles we have outlined some of the tactics you can apply to make the best of this situation. But even if you fortunate to be well fixed financially in retirement, you still might be able to profit from a few of these ideas.

Exercise #1: Figure Out Your budget (this applies to everyone!).

Until you have a good idea of what your retirement expenses will be and how they match up to your income, you can’t really start planning. While not difficult to do, it is a critical step to head off what could be a disaster – running out of money way before you are ready to check out. This budget worksheet in csv format contains most of the items you need to consider when developing a budget – just input them into a spreadsheet, by hand or on a computer.

December 11, 2018 — December 31 is the deadline for taking a Required Minimum Distribution (RMD) from your 401(k) or IRA if you are older than 70 and 1/2 (but if you turned 70 and 1/2 this year you have until April 1). Fines for not doing so are steep – 50% of the required distribution not taken. Because it might take several days for your financial firm to handle the distribution, it is definitely time to make sure you do this now!

Tax savings available
For people with substantial income and retirement saving balances, the taxes on an RMD can be significant – because it is treated as ordinary income. If you already have pension, investment income, and Social Security income, the RMD could tip you into a higher bracket. But there is an easy way not to pay taxes on up to $100,000 of your annual RMD.

You can take a Qualified Charitable Distribution (QCD) by directly transferring funds from your IRA custodian to a qualified (more…)

December 3, 2018 — One of the intriguing lines that came up during the interviews for our “Should You Hire a Financial Advisor, Or Do It Yourself” article of a few months ago was this one: “Beware those free dinners”. Lewis, the author of that quote, was referring to those invites you get in the mail for a free dinner at some nice restaurant; in exchange all you have to do is listen to some financial expert tell you how you can make a ton of money. Recently Ron Lieber, a columnist from the New York Times, took up that invitation, using one that came in for his 80 year aunt. The pitch was: “Tired of the stock market roller coaster ride? Want to protect your principal and lock in interest earnings?” The answer was to be found during a free (more…)

October 22, 2018 — Medicare costs for 2019 have been announced, and fortunately, the increases are small. The standard Part B premium amount is $135.50 (or higher depending on your income), vs. $134 in 2018. Part B deductible and coinsurance will be $185 per year, vs. $183. The Part A deductible for each benefit period will be $1,364 vs. $1,340 in 2018. After your deductible is met, you typically pay 20% of the Medicare-approved amount for most doctor services (including most doctor services while you’re a hospital inpatient), outpatient therapy, and durable medical equipment (dme)

Certain people pay different Part B premium
The standard Part B premium amount in 2019 will be $135.50. Most people will pay the standard Part B premium amount. If your modified adjusted gross income as reported on your IRS tax return from 2 years ago is above a certain amount, you’ll pay the standard premium amount and an Income Related Monthly Adjustment Amount (IRMAA). IRMAA is an extra charge added to your premium.


For further reading
For more about Medicare costs for 2019

October 14, 2018 — If you receive Social Security or Supplemental Security Income (SSI) benefits, the biggest increase in years is about to come your way. More than 67 million Americans will see an increase of 2.8 percent in 2019. The COLA was 2% in 2018 and .3% in 2016. The 2.8 percent cost-of-living adjustment (COLA) will begin with benefits payable in January 2019 (which means you will see the increase in your Feb deposit). If your monthly payment is currently $2500, that means a $70/month increase.

Earnings limits also increased
The maximum amount of earnings subject to the Social Security tax (taxable maximum) (more…)

September 14, 2018 — Thanks to one of our regular idea contributors, Jeff H, we have a not so hypothetical problem for you. If, as the Social Security Trustees warn, the retirement portion of Social Security exhausts its reserves in 2034 and is only able to fund 77% of promised benefits starting in that year, what will you do? A similar question could apply to Medicare, which is expected to run out of money even earlier, in just 8 years (2026). Medicare’s case is harder to prepare for: if nothing is done, presumably benefits will be cut or reimbursements to doctors and hospitals reduced, driving even more health care providers out of Medicare.(Note: in our recent newsletter the headline said ‘cut 77%), which was an inadvertent error. The accurate statement is that benefits would be paid at 77%.)

In spite of a steady stream of warnings from Trustees and other experts, legislators have done nothing to address the coming problem. With soaring deficit projections expected (more…)

August 30, 2018 – Is your estate planning goal to maximize the amount of money you give to the IRS, give probate attorneys a huge cut of your assets, leave nothing to your favorite charities, and pit your relatives against each other in family destroying battles over money and possessions? If those are your goals, achieving it is easy, just die without a will.

We will all miss Aretha Franklin. Her music lives on, but one thing her heirs will miss, besides the Queen of Soul, is a will. Reportedly, like Prince, she did not leave a last will and testament. Some people never get around to a will because they don’t want to take the time, or possibly admit their mortality. Others dither because they can’t make (more…)

Aug. 21 2018 — Fortunate retirees, those with a good amount of retirement savings, agonize over a perplexing problem: how much can you safely take out of your retirement funds? Spend those hard earned savings too fast and, if you live too long, live in poverty. Hold on too tightly, and you will go on to your greater reward with a big pile of unspent money in the bank. Your heirs will be able to fly first class, even if you didn’t!

The traditional rule of thumb for spending is the 4% rule. Originally popularized by Bill Bengen in 1994, the idea was pretty simple – you have pretty good odds of spending of not running out of money if you take out 4% of your savings every year of retirement. The theory (more…)