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Social Security Reset May Go Away

Written by Jon T. Meyer, CFP® | 01 September 2010

Sometimes things are just too good to be true. We have been talking with our retired clients recently about paying back Social Security benefits – interest and penalty free - that they may have started when they were 62 and starting over again now that they are 66 (or later). There is also a tax benefit to doing this (credit or deduction, but that is for the accountants to discuss with you). This reset can increase benefits approximately 6% for every year between 62 and 66, and 8% per year between age 66 and 70. In a market where returns have been negative and cash is paying next to nothing, this is a great opportunity. This is such a good opportunity that Social Security is proposing to change this rule.

Under the proposed change, Social Security would allow you to pay back your benefits only once in your lifetime and only within 12 months of when you first started. This 12-month limit would prevent most people from resetting their benefits, especially with the hindsight of a weak stock market like we have had over the last decade.

A Tax To Prepare For

Written by Jon T. Meyer, CFP® | 04 August 2010

Under the new health care legislation that was signed into law this spring, 2013 becomes an important year for many people. Starting in 2013, there will be a new 3.8% Medicare tax on unearned income (IRC Section 1411). It would be easy to just wait and see how this affects you but there may be some planning opportunities to discuss with your advisor. But first, let me define the issue.

In 2013 the law assesses a new 3.8% tax to the lesser of: a) net investment income; or b) the excess of modified adjust gross income (MAGI) over the applicable threshold amount ($200,000 for those filing single and $250,000 for those filing jointly). I am not going to get into a definition of what net investment income is but for purposes of this article, it includes everything from dividends to rental income to capital gains (municipal bond interest is excluded from this computation). There is more to it than that so as we always say, see your accountant before making any decisions for your own situation.

Let me point out who is not affected by this. If you do not have unearned income, this new tax does not apply; and if your MAGI is not above the threshold limits ($200,000/$250,000), then you do not have to worry about this tax. But equally important, do not dismiss this quickly if you are under the threshold since many things can push you over, and that is where planning comes in.

There Ain't No Cure, But Is There An Upside To The Summertime Blues?

Written by Jim Tice | 04 August 2010

Those real estate soothsayers were correct. There has been a rather precipitous fall in sales activity since the expiration of the deadline for the federal tax credit on April 30. The Twin Cities market was off by 38.2% in June compared to June of 2009. And, yes, it appears that the pundits were right in suggesting that the tax credit stimulus merely “sold forward” buyers who would otherwise have purchased over the summer, resulting in a negligible net gain in sales for 2010.

“So, what’s the good news?” you may ask. Well, mortgage interest rates are amazingly low now. One positive consequence of this is that many existing adjustable rate mortgages are adjusting sharply downward, to record levels this summer, an involuntary, automatic “mortgage modification program” for many beleaguered borrowers, accomplished without government cajoling, providing welcome stability and affordability to the market.

What is Your Long-Term Care Plan?

Written by Jon T. Meyer, CFP® | 30 June 2010

Fidelity Investments publishes an annual study, the Retiree Health Care Costs Estimate, which found a 65-year-old couple retiring in 2010 will need $250,000 to cover health care expenses, not including a nursing home. This estimate is up 56% from when this study started in 2002; the 2002 estimate was $160,000. While this is only an estimate, it is alarming that the number is climbing this fast and many people have not had a discussion with their family about what their long-term care plan is. A long-term care plan, in my mind, is about your health care, not just insurance.

Increase Your Social Security Income

03 June 2010

The recent volatility in the market has caused a few clients to ask if there is anything we can do to make sure their income is not threatened. They probably are thinking about their investments, but when my answer is to look towards Social Security they tend to be surprised. Social Security can still provide a firm leg to your retirement stool; the following strategy is but one example.

I recently worked with a couple where we determined that the husband was going to wait until age 70 to take Social Security since between age 66 and 70, his benefits will increase approximately 8% for each year he waits. Thus, his benefits at 70 will be approximately 32% higher than at age 66. But his spouse has started taking her benefits already at age 62 and will simply switch over to 50% of his benefit when he starts collecting at age 70 (50% of his benefit is greater than all of hers). Most people would stop at that point and wait the four years out.

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Social Security Reset May Go Away

A Tax To Prepare For

There Ain't No Cure, But Is There An Upside To The Summertime Blues?

What is Your Long-Term Care Plan?

Increase Your Social Security Income

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