How the New Tax Bill Affects You As a Retiree

Category: Financial and taxes in retirement

December 19, 2017 — The imminent passage of the Republican tax bill makes us wonder how our audience – retirees and people about to retire – will be affected by it. We will attempt to answer that question here, recognizing that everyone’s situation is unique and might be affected differently. We are not tax experts, but have tried to digest various media reports to provide this overview.

The bill will have direct effects on retirees in 2018, as well as some possible indirect effects down the road. Let’s look at each of those in turn.

Direct effects on retirees
1. Lower tax payments. With the exception of the people described in #4 below, almost everyone will pay lower federal taxes in 2018 than they do now. However, those cuts will expire in 2025.
Effect: Good news for retirees who pay taxes, except in those who live in high tax states. Who wouldn’t want to pay lower taxes!

2. The standard deduction is now much higher, at $12,000 per person vs. the current $6500. This means that far fewer people will have enough deductions to itemize, and filing will be simplified. On the other hand the current personal deduction of $4500 has been eliminated, so the net effect in the increase in the standard exemption (more…)

Posted by Admin on December 18th, 2017

3 Things That Could Save Social Security

Category: Financial and taxes in retirement

November 28, 2017 — As if there wasn’t enough bad news to go around, your Social Security retirement check is in trouble. If Congress doesn’t act soon, retirement benefits will probably have to be cut by 23% in 2034 – when someone who is 66 years old now will be 83. Most everybody knows the two major reasons driving this – too many baby boomers getting benefits compared to the number of younger folks paying into the system, and our ever-increasing life spans. Combine that with the fact that 60% of Americans rely almost entirely on Social Security for their income, and we have a disaster in the works.

Recently we saw a very practical article in MarketWatch by Paul Brandus, “3 things that could help put Social Security back in the black“. His common sense approach so simply gets to the bottom of the issue that we thought we would repeat it:

1. Raise the retirement age. Brandus suggests that we start raising the normal retirement age for full benefits by a month a year. It wouldn’t take too long to raise it to age 68, which would do a lot to help stabilize the fund.

2. Raise payroll taxes. This one might hurt a bit. Currently employees pay 6.2% in FICA – the SS trustees recommend increasing that by another 2.83%. So if you make $50,000, your FICA share would go from $3100 to $4650 – ouch!

3. Raise — or eliminate — the cap on taxable wages. In 2018 if you make more than $128,700 you and your employer would stop paying into Social Security at the point when you earned that much (there is no limit on Medicare). SS misses a lot of potential revenue from CEOs who get those nice $50 million paychecks. The Center for Budget and Policy Priorities, a nonpartisan group, estimates are that from a quarter to as much as 90% of the SS shortfall could be solved with this idea alone.

Seems simple enough, right?
We have to do something, as every month of inaction makes the problem harder to fix. Yet neither party is talking about it. Neither is the guy who signed the rather dire Audit Report, Steve Mnuchin. It is a national embarrassment, in our opinion. Next time you talk with an elected official, ask them what their plan is to save your Social Security.

For further reading:
Full Social Security Trustees 2016 Report
Social Security: The Can That Keeps Getting Kicked Down the Road

Posted by Admin on November 27th, 2017

How Will Tax Reform Affect Your Retirement?

Category: Financial and taxes in retirement

Update Dec 2, 2017: The Senate passed their tax proposal early this morning. It is anticipated that the reconciliation between the Senate and House versions of the bill will go smoothly and it will be signed by the President soon. As soon as the final details emerge we will either update this article or create a new one, so that you can see how tax reform might affect your retirement.
November 23, 2017 — Recently we had some Comments made to other posts that touched on how the proposed tax bills approved by the House and being considered by the Senate might affect retirees. While the bills and different how they might be reconciled in the end is very fluid, it is worth considering how they impact your retirement. Just about everyone agrees that the concept of simplifying our overly complex tax code is a good thing in principle. But it also certain that any tax reform always produces winners and losers. In this article we will give our opinions on how different groups of retirees would fare on tax reform. Let us hope for your sake you are among the winners!

Tax Reform and Roth Conversions
Here is the Comment by Peder: “If the tax reform/cut/whatever gets through and they raise the 25% bracket all the way to $200K, I’m seriously going to consider converting (more…)

Posted by Admin on November 23rd, 2017

Social Security Cost-of-Living (COLA) for 2018 – Up 2%

Category: Financial and taxes in retirement

November 20, 2017 — Monthly Social Security and Supplemental Security Income (SSI) benefits for more than 66 million Americans will increase 2.0 percent in 2018.

The 2.0 percent cost-of-living adjustment (COLA) will begin with benefits payable to more than 61 million Social Security beneficiaries in January 2018. Increased payments to more than 8 million SSI beneficiaries will begin on December 29, 2017. (Note: some people receive both Social Security and SSI benefits)

The maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $128,700.

The earnings limit for workers who are younger than “full” retirement age (age 66 for people born in 1943 through 1954) will increase to $17,040. (We deduct $1 from benefits for each $2 earned over $17,040.)

The earnings limit for people turning 66 in 2018 will increase to $45,360. (We deduct $1 from benefits for each $3 earned over $45,360 until the month the worker turns age 66.)

There is no limit on earnings for workers who are “full” retirement age or older for the entire year. Here is a SS Fact Sheet with more.

For further reading
It’s 2017: What You Thought You Knew About Social Security

Posted by Admin on November 20th, 2017

Does the Equifax Data Breach Affect You – Probably!

Category: Financial and taxes in retirement

September 19, 2017 — Last week we found out that one of the nation’s largest credit monitoring services, Equifax, had been hacked. The credit records of 143 million Americans were compromised, including in most cases their social security numbers, addresses, birth dates, credit ratings and sometimes a lot more – basically the keys to the scamming kingdom. Since then the company is being investigated because there was an earlier hack not disclosed, and corporate insiders might have traded ahead of the public release of information.

If you have been wondering if you were one of those whose credit info is now available to the highest underworld bidder – yes you probably were. After all the U.S. population is 323 million, so statistically you have just under a 1 in 2 chance of being affected. This (more…)

Posted by Admin on September 18th, 2017

Don’t Get Hurt by the Latest Scam – Phony Federal Reserve Accounts

Category: Financial and taxes in retirement

August 28, 2017 — From June to mid-August 15, nearly 107,000 payments for more than $100 million were attempted by people trying to use the latest financial scam. Unfortunately for those who tried, all of the payments were nullified. In this “too good to be true” flim flam people are being told there are secret accounts at the Federal Reserve that ordinary people can tap into to pay bills, if they learn how. All you need to do is add your Social Security number to (more…)

Posted by Admin on August 28th, 2017

The Can That Keeps Getting Kicked Down the Road: Social Security Trustees Annual Report Has More Bad News

Category: Financial and taxes in retirement

August 15, 2017 — If you are receiving Social Security or you plan on relying on it for your retirement, this news is important. If no action is taken, your benefits will take a big haircut in just 17 years.

Every year the Social Security Trustees prepare an annual report. The one for 2016 was just published, and once again it predicts trouble ahead for the nation’s system of Federal Old Age and Survivors Insurance and Federal Disability Insurance Trust Funds (OASDI), otherwise known as Social Security. Every year the Trustees warn Congress that something must be done, and every year Congress kicks it down the road. Fixing the system will be painful, but in our opinion, something must be done. The longer it takes to correct the system, the worse the problem gets.

Income still higher than expenditures – for now
Total expenditures in 2016 were $922 billion, while total income was $957 billion: the surplus for the year was $35 billion. Asset reserves held in special issue U.S. Treasury securities continued to grow. Social Security’s total income is projected to exceed its total cost through 2021, as it has for every year since 1982.

Interest income not enough to cover program cost deficit
The Trustees project that interest income, which was $88 billion in 2016, is shrinking every year. Up to this point it has helped cover the deficit of expenses over contributions paid in. As interest income declines, however, the total surpluses will turn to (more…)

Posted by Admin on August 15th, 2017

Social Security 2017 Update: Part 2

Category: Financial and taxes in retirement

June 26, 2017 — This is Part 2 of our “Social Security 2017 Update”. Here we will cover the changes to two popular SS claiming strategies that went into effect last year, and what you might do in response.

In Part 1 we explained how the Full Retirement Age (FRA) is gradually increasing for those born in 1955, eventually reaching age 67 for those born in 1960 or later. We also provided some strategies on how to make up for this delay and the slightly smaller benefits that come with it. Here is the link to Part 1, “What You Need to Know About Social Security in 2017“.

2 big changes to SS in 2016
Two Social Security claiming strategies went into effect on April 30, 2016 that changed (more…)

Posted by Admin on June 26th, 2017

The Scammers Are Standing By…to Cheat You. 5 Tips to Stay Safe

Category: Financial and taxes in retirement

Update June 29 — Since we wrote this article another major malware/ransomware attack, Petya, started in the Ukraine and spread across the world. Here is a helpful article from Norton (they make a good anti-virus software) – 7 Tips to Prevent Ransomware Attacks.
June 14, 2018 – Don’t think for a second that you are safe from the criminals who are trying to separate you from your money. There are tens of thousands of these folks who spend all day, every day, coming up with clever ways to trick you. Here are just a few tips to help keep them at bay.

1. Never, ever give out private information like credit card, SSAN, or bank account numbers to someone calling you. No reputable outfit will ask you for it. The IRS doesn’t call people, they send letters. If you “won” something, someone tells you your grandson needs bail money, or that you missed jury duty, hang up. They are trying to trick you. No credit card company or bank will ask for your credit card or account number.

2. Be very cautious about giving out too much information over the phone, even if you are the one calling out. Here is how your editor got tricked last (more…)

Posted by Admin on June 14th, 2017

It’s 2017: What You Thought You Knew About Social Security…

Category: Financial and taxes in retirement

May 27, 2017 — If you thought you knew everything you needed to know about when and how to claim your Social Security benefit – think again. For those who have not yet claimed their benefit as of 2017, two major developments probably affect you. This 2 Part article will help educate you on how to best navigate this new world. Part 1 explains how benefits are different (lower and later) for people born in 1955 or later, and how those folks might cope with that. Part 2 explains the 2016 changes affecting the popular claiming strategies called “file and suspend” and “restricted benefit”.

Where you born in 1955 or later?
The first item affects those who will celebrate their 62nd birthday in 2017 (or in a later year). If that describes you, the age in which you are eligible for full Social Security benefits is on its way from age 66 to 67. The Full (more…)

Posted by Admin on May 28th, 2017