Hey, soon-to-be-graduates: as you begin to make your way out into the world of full-time employment, you’ll soon be faced with many, many “grown up” ways to spend the money you’ll be earning. You’ll of course have rent, insurance, food and clothing, maybe a car payment, and you’ll want to use some of that new-found money to blow off steam, however you choose to do that – maybe fulfilling a lifetime dream of getting “beaked” by Fredbird, for example. If you’re on top of your game, you’ll may also be thinking about saving some of your earnings. Here, you’ll have a bundle of options to choose from – regular “bank” savings accounts, 401(k) plan (or something similar) from your employer, and IRA accounts, both the traditional deductible kind and the Roth kind (hint: the Roth kind is what I want you to pay particular attention to). Side note: even if […]
March, 2012:
Smoke, Mirrors, and Alphabet Soup
In an environment of Ponzi schemes and financial scandals many Americans have lost trust and confidence in the financial profession; seems like there are some financial advisers that have been helping themselves, more than their clients. To fight back against this trend of lost trust and skepticism, advisors are being more creative with credentials, some of which can be earned with minimal or no study and can be bought with a couple hundred dollars. A quick look at the Financial Industry Regulatory Authority’s web site (FINRA) (http://apps.finra.org/DataDirectory/1/prodesignations.aspx) shows over one hundred and twenty different credentials being used by advisors to build creditability and trust. I’m sure there are many more not tracked by FINRA. Professional certifications arose decades ago as a way for people in various industries to identify qualified practitioners. It’s always good to know that our doctor has an MD or our account is a CPA. In the […]
Share, tweet, print, email, like or pin this post:
Early Social Security Filing Examples
Most of the examples that you see indicate that filing for Social Security benefits as late as possible is the best way to go. However, this is not always the case, given that you’re receiving the benefit (albeit at a reduced rate) for a longer period of time. Let’s work through some examples to show how this works. This article will only deal with single individuals – we’ve covered spouse benefits in several other articles, it’s time to provide some guidance for single folks. Example 1, Filing at 62 vs 66 John is single, age 62, and his benefit at Full Retirement Age (FRA) has been estimated at $2,000, so his benefit at age 62 would be $1,500, or 75% of the amount at FRA. If he takes the benefit now, he’ll receive $18,000 per year for the next four years. (COLAs have been eliminated in this example to keep […]
Share, tweet, print, email, like or pin this post:
What types of accounts can I rollover into?
OMG IRA (Photo credit: girlonaglide) When you have money in several accounts and you’d like to have that money consolidated in one place, the question comes up – Which type of account can be tax-free rolled over into which other type of accounts? Thankfully, the IRS has provided a simple matrix to help with this question. At this link you’ll find the matrix, sourced from IRS Publication 590. In terms of explanation, here are a few rules to remember: You can generally rollover one account of any variety (IRA, Roth IRA, 401(k), and so on) into another account of the exact same type. You can rollover a Traditional IRA into just about any other tax-deferral plan, including 401(k), 403(b), 457(b), as well as a SEP IRA. The same goes for each of the accounts in reverse as well as between all of these types of accounts. In general, employer plans […]
Share, tweet, print, email, like or pin this post:
Mortgage Debt Forgiveness and Taxes
Image via Wikipedia When you have a debt canceled, the IRS considers the canceled debt to be be income for you, taxable just like a paycheck. There are cases where you don’t have to include all of it though, and mortgage debt forgiven between 2007 and 2012 may be partly excepted from being included as income. The IRS recently issued their Tax Tip 2012-39, which lists 10 Key Points regarding mortgage debt forgiveness. Below is the actual text of the Tip. Mortgage Debt Forgiveness: 10 Key Points Canceled debt is normally taxable to you, but there are exceptions. One of those exceptions is available to homeowners whose mortgage debt is partly or entirely forgiven during tax years 2007 through 2012. The IRS would like you to know these 10 facts about Mortgage Debt Forgiveness: 1. Normally, debt forgiveness results in taxable income. However, under the Mortgage Forgiveness Debt Relief Act […]
Share, tweet, print, email, like or pin this post:
Calculating the PIA
WOMEN’S HISTORY MONTH (Photo credit: mademoiselle louise) In determining your retirement benefits from Social Security, as well as those of any dependents who may claim benefits based upon your record, the Primary Insurance Amount, or PIA, is an important factor. The PIA is the amount of benefit that you would receive if you began receiving benefits at exactly your Full Retirement Age, or FRA. (see this article for information about determining your FRA). The PIA is only one of the factors used in determining the actual amount of your retirement benefit – the other factor being the date (or rather your age) when you elect to begin receiving retirement benefits. So, how is PIA calculated? There are several factors that go into the calculation of the PIA. You start off with your Average Indexed Monthly Earnings (AIME – which we defined in this article about the AIME). Then, we take […]
Share, tweet, print, email, like or pin this post:
The Rollover
Image via Wikipedia You’ve heard it millions of times – on the radio or tv – “when you leave your job, you should roll over your retirement account”. You may know that it makes sense (or at least you assume it makes sense, otherwise why would these folks admonish you to do so?), but do you know why it’s important? And do you have the first clue as to how to accomplish a rollover? Why rollover? Among the reasons that it is important to rollover your retirement account when you leave employment is that you want to have control over your money. If you leave the account with the former employer, you are effectively handing over a portion of the control of your money to the administrator. This administrator’s primary job is to ensure that the plan remains as effective and efficient as possible, for your former employer. Your interests […]
Share, tweet, print, email, like or pin this post:
Tax Credits That Can Increase Your Refund
The IRS recently issued their Tax Tip 2012-41, which lists out some of the tax credits that are refundable. Most tax credits are not refundable, meaning that if the amount of the credit is more than your tax for the year, the credit is limited only to the amount of your tax. For example, if you had tax payable of $1,500 and then had Education Credits, Energy Credits, and/or Foreign Tax Credits amounting to more than $1,500. Your credits will be limited to $1,500 since that’s your tax payable and the credits are not refundable. On the other hand, there are a few credits that are refundable, as listed below in the actual text from Tax Tip 2012-41. Four Tax Credits that Can Boost Your Refund A tax credit is a dollar-for-dollar reduction of taxes owed. Some tax credits are refundable meaning if you are eligible and claim one, you […]
Share, tweet, print, email, like or pin this post:
Example Using Spousal Benefits and Delayed Retirement Credits for Social Security
(Photo credit: jodigreen) Note: with the passage of the Bipartisan Budget Act of 2015 into law, File & Suspend and Restricted Application have been effectively eliminated for anyone born in 1954 or later. If born before 1954 there are some options still available, but these are limited as well. Please see the article The Death of File & Suspend and Restricted Application for more details. This particular situation was presented to me by a reader. Since the facts represent a fairly common situation that we haven’t addressed here in the past, I thought I’d present it here for discussion. Here’s the original question (altered a bit for clarity): My wife and I are age 65 & 67 respectively. We’re both still working part-time, and my wife has now 20 years of earnings on her Social Security record. At this point her PIA is approximately 45% of my PIA, and increasing […]
Sterling Raskie, MSFS, CFP®, ChFC®
The latest in our Owner’s Manual series, A 401(k) Owner’s Manual, was published in January 2020 and is available on 
A Medicare Owner’s Manual, is updated with 2020 facts and figures. This manual is available on 
Social Security for the Suddenly Single can be found on Amazon at 
Sterling’s first book, Lose Weight Save Money, can be 
An IRA Owner’s Manual, 2nd Edition is available for purchase on Amazon. Click the link to choose the 
Jim’s book – A Social Security Owner’s Manual, is now available on Amazon. Click this link for the 
And if you’ve come here to learn about queuing waterfowl, I apologize for the confusion. You may want to discuss your question with Lester, my loyal watchduck and self-proclaimed “advisor’s advisor”.