Age 70 and 1/2 or More – RMD Deadline Looming

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…)

August 7, 2018 — Since 1991 older Americans have experienced a three-fold increase in the rate they file for bankruptcy. From February 2013 to November 2016, there were 3.6 bankruptcy filers per 1,000 people 65 to 74; that rate was only 1.2 in 1991. Today one in seven bankruptcy filers is of retirement age, 65 years or over.

Causes
The problem is that there are so many causes, and many times it is a combination of problems that sinks the ship. Leading the list of causes is increased spending on medical care. As we age it gets worse: while folks 65-74 spend 34% of their Social Security income on medical expenses alone, that rate goes to 74% among (more…)

July 31, 2018 — Although “low taxes” was the third most important consideration for finding a place to retire in our recent Topretirements.com survey, we know there are a lot of baby boomers who have set moving to a low tax state as their most important goal. Although for some that might be a valid objective, we are not so sure that for the majority of folks it should carry so much importance. This article will explore 6 reasons why.

It is a sad fact that about half of retirees do not have sufficient financial resources to maintain their current lifestyle once they retire. There is no shortage of reasons for these financial shortfalls, some of which include: not saving enough money, poor investments, divorce or widowhood, having to take care of adult children or parents, medical situations, or losing a job before expected retirement. For these people, maintaining a comfortable lifestyle is going to take some adjustments. That probably means finding a cheaper place to live, and could also mean working longer than they had planned. But, avoiding taxes will be the one issue they generally don’t have to worry about.

There is another segment of retirees for whom moving to a low tax state is a possible consideration. These are the lucky people who will have significant retirement income, most likely from a pension. But while no one wants to pay taxes, making that as priority #1 could be a mistake. Here are 6 reasons to rethink (more…)

(Updated October 3, 2018 – with an important new development) –July 18, 2018 — Back in May we reported on our experience of applying online for our Social Security retirement benefits. The plan was to have the application completed and accepted in time to start receiving benefits in August, 2018, the month we turned 70 years old. Here is our report on the final two chapters in that process. (You can read the entire report, including this update, at “Applying Online for Social Security- Our Experience“.
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July Update – Not quite there yet!
Since I filed my application in mid May I have been waiting to see what would happen with it. I did receive a letter from SS saying my application had (more…)