You can listen to this article by using the podcast player below if you’re on the blog; if you’re reading this via RSS, there should be a “Play Now” link just below the title to access the audio. Did you realize that even delaying a few months can have a significant impact on your Social Security benefit? This is the case for all Social Security benefits, including your own, a Spousal Benefit, or a Survivor Benefit. This applies whether you are taking the benefit before FRA or after, since your age is always calculated by the month. Increase or reduction factors are applied for each month of delay or early application, respectively.
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5 Tips To Avoid Overspending for the Holidays
The Holiday season is the time of year when we get into the spirit of giving and start our lists of who’s been naughty and nice. With Black Friday and Cyber Monday over, there are still plenty of days left to shop for friends and loved ones. It can be tempting to get caught up in the spirit of giving so much that after the Holidays are over we’ve put ourselves in a financial bind. The following are five tips to consider this Holiday season to avoid overspending.
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College Costs Increase for 2014/2015
Background Every year, the College Board releases its Trends in College Pricing and Trends in Student Aid reports that highlight current college costs and trends in financial aid. While costs can vary significantly depending on the region and college, the College Board publishes average cost figures, which are based on its survey of nearly 4,000 colleges across the country. Following are cost highlights. Total cost figures include tuition and fees, room and board, and a sum for books, transportation, and personal expenses. Together, these expenditures are officially referred to as the “total cost of attendance.”
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Year-End Charitable Giving Tips
The end of the year, especially around the holidays, is a time when many folks’ thoughts turn to charitable giving. Many opportunities present themselves, from the gentleman with the bell and the red kettle to our local food and coat drives. With this in mind, the IRS recently published their Special Edition Tax Tip 2014-13 which details six tips for charitable giving. The actual text of the Tip is listed below. In addition to those tips, I’ll offer one more: if you are interested in utilizing the Qualified Charitable Distribution option from your IRA – presently this option has not been extended for tax year 2014. It’s possible that it might be extended yet this year, so check back here – we’ll keep you posted.
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A new way to fund your Roth IRA
As you plan and save for your retirement, it’s nice to have multiple types of taxation for your income sources. You may have a pension, Social Security, and a traditional IRA, all of which are taxed to some degree or another. Adding to this list you might have a Roth IRA which generally will provide you with tax-free income in retirement. The problem with the Roth IRA is that you have some strict limits on the amounts that you can contribute, and typical Roth Conversion strategies are costly and complicated. With the recent pronouncement from the IRS in Notice 2014-54, there is a brand new, sanctioned method, to fund your Roth IRA.
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Happy 40th Anniversary, IRA!
This year marks the 40th anniversary of the Individual Retirement Arrangement (IRA). In 1974 via the ERISA law, Congress made this new type of retirement plan available for employees whose employers who could not provide them with the traditional type of retirement plan. In 1981, the plans were made generally available to all taxpayers. The Tax Reform Act of 1986 limited the deductibility of IRAs by income. 1997 saw the launch of the Roth IRA, as a part of the Taxpayer Relief Act of 1997. This type of IRA came with no deductibility, but earnings (and contributions) would be tax free upon distribution, following the rules associated with the accounts. With the exception of changes to limits of contributions, income limits, and catch-up provisions, little has changed for these accounts since 1997, with the exception of the introduction of the Roth-IRA-like myRA account that was established in 2014 for the […]
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You’ve still got time to avoid tax surprises
Even though there are only a few more weeks left in the calendar year, there are a few things that you can do to avoid some serious and consequential tax surprises come April next year. The IRS recently published their Special Edition Tax Tip 2014-21 which details some of the steps you could take now to avoid these surprises. Still Time to Act to Avoid Surprises at Tax-Time Even though only a few months remain in 2014, you still have time to act so you aren’t surprised at tax-time next year. You should take steps to avoid owing more taxes or getting a larger refund than you expect. Here are some actions you can take to bring the taxes you pay in advance closer to what you’ll owe when you file your tax return:
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Social Security Bend Points for 2015
Along with the increases to the maximum wage base and the Cost-of-Living Adjustment (COLA) announced by the Social Security Administration, the 2015 bend points used to calculate both the Primary Insurance Amount (PIA) for Social Security benefits were announced as well. In addition, the Family Maximum Benefit (FMax) bend points for 2015 were also announced.
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2015 Contribution Limits for Retirement Plans
The IRS recently published the new contribution limits for various retirement plans for 2015. 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 a few increases for some contribution amounts, and the income limits increased for most types of accounts after virtually no changes to the contribution amounts in 2014.
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Social Security COLA for 2015 Set at 1.7%
The Social Security Administration announced today that the annual automatic Cost Of Living Adjustment (COLA) for Social Security benefits in 2015 will be 1.7%. This is comparable to the 1.5% COLA for 2014, and is the 5th time in the past six years that the adjustment has been less than 2%. Look for more articles in the near future with details on earnings limits, bend points, and other factors affected by the COLA.
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New For 2014 Taxes: Health Premium Tax Credit
We knew when Obamacare went into place that there would be new requirements for income tax filing, and one of the first to deal with is the health premium tax credit. This will require the use of a new form, Form 8962. Health Premium Tax Credit For this tax credit you will need to reconcile your advance credits that you have received in the form of reduced subsidized healthcare premiums.
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Understand Deemed Filing to Avoid a Surprise in Your SS Strategy
There’s nothing worse than feeling as if you have your Social Security filing strategy all lined out, when a rule like deemed filing rears its ugly head to throw your strategy off track. Here’s an example: Steve and his wife Edie are ages 66 and 61 respectively. The plan is for Steve to file for his Social Security benefit now (at his Full Retirement Age), and for Edie to file for her own benefit when she reaches age 62. Then Edie will wait until she reaches Full Retirement Age of 66 to file for the Spousal Benefit based on Steve’s record, which will increase her benefit by $500 at that time.
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IRS Notice 2014-54: Will This Clarify NUA Basis Allocation?
Recently the IRS issued a Notice, 2014-54, which details some information regarding the allocation of pre-tax funds from a qualified plan (such as a 401(k) plan) into a Roth IRA. This is a clarification of a question that has been on the minds of folks in the financial services industry for some time, and it’s a good result. Now the question becomes: does this help to clarify NUA basis allocation strategies? If you’d like additional detail on Notice 2014-54, you can find the actual text of the Notice by clicking this link. What I find interesting about this Notice is that this is the first time that the IRS has used this interpretation of the rules referenced specifically in IRC Section 402(c)(2), which is the code section I’ve referenced before regarding allocation of basis for Net Unrealized Appreciation (NUA) treatment for employer stock. (See more information in this most recent […]
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File & Suspend and Restricted Application are NOT Equal
Note: with the passage of the Bipartisan Budget Bill 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. We’ve discussed the Social Security filing options of File & Suspend and Restricted Application many times before, but it seems that folks continue to confuse these two options. It’s easy to see why: one (File & Suspend) can be used to enable the other (Restricted Application). Also, neither option is available until the individual is at least at Full Retirement Age (FRA). It’s important to know the difference between File & Suspend and Restricted Application though – primarily because if you confuse the two when talking to the […]
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Paper Social Security Statements are Back
The best laid schemes o’ mice an’ men Gang aft agley — Robert Burns To a Mouse, on Turning Her Up in Her Nest with the Plough As with many great ideas, in practice the concept of exclusive electronic delivery of Social Security benefit statements seems to have gone “agley”. Apparently a very small percentage of folks actually took advantage of the online version of these statements (primarily my client base, I’m guessing). As a result of this and apparent feedback from customers, advocates and Congress, Social Security is resuming the physical delivery of paper Social Security Statements. The new delivery schedule will be based upon the age of the potential Social Security benefit recipient, with statements being sent automatically 3 months before your 25th, 30th, 35th, 40th, 45th, 50th, 55th, and 60th birthdays. You will only receive this statement if you are not currently receiving Social Security benefits AND […]
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Social Security Wage Base Projected for 2015
Update 10/22/2014: The wage base has been set for 2015. See the article Social Security Wage Base Set for 2015. According to the Social Security Administration trustees, the Social Security wage base for 2015 is projected to be $119,100. This represents an increase of $2,100 from the 2014 wage base of $117,000. This is an increase of 1.79% – and won’t be finalized until October when the other increases for Social Security amounts are announced. This is a relatively small increase when compared to recent annual increases we’ve seen. The previous 3 years’ increases have averaged 3.09%. This is different from the COLA (Cost of Living Adjustment), which has increased an average of 2.27% in the past three years. The 2014 COLA (applicable to 2015 benefits and other figures) will be released later in the year, typically in October.
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Don’t Let the Premium Tax Credit Hang You Out to Dry
When you are using the Health Insurance Marketplace for your family’s health insurance, you may be receiving assistance with the premiums in the form of a premium tax credit. This credit is paid to the health insurance provider, allowing your monthly premium to be lower. These premium credits are based upon your residence, income, family size, and eligibility for health insurance via other avenues, such as through a new employer. If something has changed in your life, you may be receiving too much or too little in premium tax credits. The IRS recently issued a Health Care Tax Tip designed to help you understand if you need to make a change to the premium credit you’re receiving to avoid unpleasant surprises at tax time.
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Resurrecting the Qualified Charitable Distribution?
This past week the US House of Representatives passed a bill (HR 4719, known as the America Gives More Act) which would re-instate the Qualified Charitable Distribution from IRAs and make the provision permanent. This provision expired at the end of 2013, as it has multiple times in the past, only to be re-instated temporarily time and again. A Qualified Charitable Distribution (QCD) is when a person who is at least age 70½ years of age and subject to Required Minimum Distributions from an IRA is allowed to make a distribution from the IRA and direct the distribution to a qualified charitable organization without having to recognize the income for taxable purposes. This has been a popular option for many taxpayers, especially since the QCD can also be recognized as the Required Minimum Distribution for the year from the IRA.
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”.