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October, 2012:

Retirement Plan Contribution Limits for 2013

The IRS recently published the new contribution limits for various retirement plans for 2013.  These limits are indexed to inflation, and as such sometimes they do not increase much year over year, and sometimes they don’t increase at all. This year we saw across-the-board increases for most all contribution amounts, and as usual the income limits increased as well.  This provides increased opportunity for savings via these tax-preferred vehicles. IRAs The annual contribution limit for IRAs (both traditional and Roth) increased from $5,000 in 2012 to $5,500 in 2013.  The “catch up” amount, for folks age 50 or over, remains at $1,000. The income limits for traditional (deductible) IRAs increased slightly from last year: for singles covered by a retirement plan, your Adjusted Gross Income (AGI) must be less than $59,000 for a full deduction; phased deduction is allowed up to an AGI of $69,000.  This is an increase of […]

Book Review: The Chinese Way to Wealth and Prosperity

You’d have to be living under a rock to have not noticed how the Chinese people have pretty much taken over all the top spots in most all pursuits – athletic, artistic, educational, financial, and most other areas of life. This book, by Michael Justin Lee, a Chartered Financial Analyst and formerly the nation’s first Financial Markets Expert-in-Residence in the US Department of Labor, seeks to explain the reasons behind the success of the Chinese in so many areas of life.  Mr. Lee delivers concrete examples of how this likely has come to be. Admittedly, the success that the Chinese people are experiencing is not limited solely to the Chinese, and the author points this out – it appears that much of the basis behind this success comes from Confucian teaching, which influences many other Asian countries.  It’s not surprising that Japan, Taiwan, Hong Kong, and other Eastern countries are […]

Long Term Care Insurance – Protecting Your Nest Egg

Long term care is a topic few people know about and a topic even fewer people are prepared to deal with in the future. As the average life expectancy increases in the US, more and more people – from Baby Boomers to X and Y geners – are going to be confronted with the need for and planning for long term care. According to the Medicare website, about 9 million men and women over age 65 will need LTC this year – that number expanding to 12 million by 2020. According to the Department of Health and Human Services, people who reach age 65 will have a 40% chance of entering a nursing home and 10% of those will stay there for more than 5 years. This, of course, can get expensive. This is where an LTC policy can make sense. There are two types of LTC policies that a […]

Factors to take into account when planning Social Security filing

As with the overall process of planning for retirement income, there are certain important factors external to Social Security benefits that you need to take into account while planning when to file for benefits.  In the list below I will detail some of these factors and why they are important to the process. Important Factors When Planning Social Security Filing Pension income.  Pension income must be considered with special care when planning your Social Security filing strategy.  Often, pensions will increase in value up to a certain age of commencement and then there are no increases after that age.  Coordinating your pension with your Social Security benefits can enhance your overall income stream – since a pension is generally a guaranteed source of income for yourself and possibly your spouse. In addition, since many pensions are not indexed for inflation, meaning that there are no Cost-of-Living-Adjustments (COLAs), it probably makes […]

Investing in Taxable Accounts vs. IRAs

When investing beyond an employer-sponsored retirement plan, you have a choice to make, between using an IRA, a Roth IRA, or a taxable, non-deferred investment account.  In making this choice your primary consideration should be the tax implications. It’s easy to understand the current tax implications: if you invest in a traditional IRA and your contributions are deductible, you are saving the income tax of the deductible contribution.  In all other choices, there is no current tax impact.  For non-deductible contributions to a traditional IRA, or regular contributions to a Roth IRA, or saving in a taxable account, you are paying income tax as you’ve earned the money, regardless of what you do with it. The second area to consider tax implications on all of these types of accounts is when there is income produced from the investments within each type of account.  Income produced includes capital gains from sales […]

2013 COLA for Social Security is Set

The increase to Social Security retirement benefits for calendar year 2013 has been announced at 1.7%.  Much ballyhoo has been made about the fact that this is one of the smallest increases in history, following the 3.6% increase at the beginning of 2012.  This is actually an increase of more than the average that was received with the most recent increase, since there was no increase at all between from the beginning of 2009 until the beginning of 2012.  So the average increase over the past three years was 1.2%. Inflation has been extremely low over period, so this small increase is not unexpected.  Medicare premiums are also expected to increase, which likely will wipe out approximately half of the Cost-of-Living Adjustment.

Errors on Your Tax Return? Here’s How to Fix Them

Often we discover long after filing that we’ve made errors on our tax returns.  And too often the idea of resolving the problem seems too daunting to undertake, so we ignore it, deciding to just let things go.  This can cause problems if it turns out that the error results in additional tax owed – so it is usually in your best interests to fix the error and go on with your life.  On the other hand, if the error resulted in paying too much tax, you should get what you rightfully deserve (in terms of the overpaid tax.) Recently the IRS published their Summertime Tax Tip 2012-05 which details tips on how to resolve these errors on your tax return.  The actual text of the tip follows: IRS Offers Tips on How to Fix Errors Made on Your Tax Return If you discover an error after you file your […]

Can I Switch to My Spouse’s Benefit At FRA?

This is a question that comes up pretty frequently, in several different flavors.  Basically, here’s the full question: I started benefits at age 62, and now I’m 66 (Full Retirement Age) – can I switch over to my spouse’s benefit now that I’m age 66?  And will it be based on his benefit when he was 66, or his benefit now.  (He’s 70 now, and has been collecting benefits since he turned 66.) There are a couple of questions being asked here, and I’ll cover them one-by-one. Can I switch to my spouse’s benefit? The wording here is troubling, because the asker specifically wishes to “switch” to another benefit.  If an individual is already receiving retirement benefits, the spousal benefit is not a “switch”, but rather an “addition” to the retirement benefit. The second issue is implied, and maybe not troublesome to the question at hand.  The Spousal Benefit at […]

The Value of Your Social Security Benefits

As you consider your Social Security benefits and when you might begin to draw them, keep in mind that the benefits you’re receiving are actually akin to an annuity – a stream of income that you will receive from the time you start the benefits throughout your life.  As with an annuity, if you live longer than average, you will receive much more than the original value (premium) of the annuity.  If you have a way to increase the amount of the stream of income, by delaying start of the benefits, the overall amount that you eventually receive will increase as well (assuming you live longer than average). Let’s say that your Social Security benefit would be $1,500 at Full Retirement Age.  If you started your benefit early at age 62, your benefit would be reduced to 75% of that amount, or $1,125; if you delayed your benefit to age […]

My credit card meets Carly Rae

So, is it just me? I try not to be too terribly difficult to work with. I go along with most requests without any roadblocks, but every once in a while something comes up that just drives me bats. Problem is, this seems to be something that crops up more and more often. All too often I come across this issue – maybe not every day, but very regularly. What is it that I’m talking about? Let me borrow a line from Ms. Carly Rae Jepson to help explain: Hey! I just met you… (And this is crazy) … but here’s my number, so call me maybe? Okay stop being freaked out that I happened to know the lyrics to that song. I just happen to know things, among those things are the lyrics to many a song, inane or otherwise described. Ask anyone who has taken a long road […]