Retirement Articles

  Social Security Changes

Changes to Social Security will eliminate a few strategies that allow some recipients to maximize benefits.  The first change applies to the “file and suspend” strategy which allowed couples to maximize their combined benefits by having one spouse file for Social Security upon reaching full retirement age(currently 66), then immediately suspending the benefits. This allowed the other spouse to claim spousal benefit while their deferred Social Security grew 8 percent per year until age 70.   The file and suspend strategy will no longer work after May 1, 2016. At that time, a person must file for Social Security and actually receive benefits in order for a husband or wife to get a spousal benefit.

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  Reverse Mortgage With A Twist

With a traditional reverse mortgage, anyone 62 or older can tap home equity for income. A relatively new alternative, a home-equity conversion mortgage (HECM) for purchase, can allow you to buy a new home without a mortgage payment. The new home must be your primary residence, but if you have the case to make a down payment equal to about half of the home’s price, you can use the proceeds from the reverse mortgage for the rest. Lenders will determine the maximum amount for which you’ll qualify based on the price of the house, the ages of you and your spouse, and prevailing interest rates. With current rates, the HECM for purchase will pay for roughly half of the purchase price of the home for a 62 year old.

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  Waiver of Penalty for Newly Retired

This isn’t a deduction, but it can save you money if it protects you from a penalty. Because our tax system operates on a pay-as-you earn basis, taxpayers typically must pay 90% of what they owe during the year via withholding or estimated tax payments.  If you don’t, and you owe more than $1,000 when you file your return, you can be hit with a penalty for underpayment of taxes.  The penalty works like interest on a loan as though you borrowed from the IRS the money you didn’t pay.  The current rate is 3%.  There are several exceptions to the penalty including a little known one that can protect taxpayers age 62 and older in the year they retire and the following year.  You can request a waiver of the penalty – using Form 2210- if you have reasonable cause such as not realizing you had to shift to estimated payments after a lifetime of meeting your obligation via withholding from your paycheck.

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  Social Security Surprises

At full retirement age (FRA), one may receive their retirement benefit or a spousal benefit equal to half their spouse’s retirement benefit whichever is larger. Remember to claim that spousal benefit, the spouse on whose record the 50% payment is based must be receiving or have suspended retirement benefits.

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  Birthday Milestones Present Special Tax Events

Age 50 Catch-up contributions may be made to IRAs and qualified retirement plans.


Age 55 Penalty-free distributions may be taken from 401(K) plans if retired. Catch up contributions may be made to HSAs.

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  Succession Planning for Business Owners

Whether your retirement is years away, or around the corner, most likely you will want to protect your business assets for the future. Your succession plan should include:

  • Structuring the proposed succession, including its tax consequences.

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  The 403(b) Advantage

The 403(b) was established in 1958 by the federal government to encourage employees in certain tax-exempt organizations to establish retirement savings plans. The name 403(b) refers to the relevant section in the Internal Revenue Code.

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  Mistakes to Avoid with your Retirement Health Costs

If you are in the retirement planning stage, you might be envisioning future years of lower living costs — no more commuting expense, buying business attire or setting aside large sums for retirement. Don’t underestimate the cost of retirement; especially healthcare costs.

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  Do Not Cash Out Retirement Plans When Switching Jobs

When you leave a job, the vested benefits in your retirement plans are an enticing source of money. It may be difficult to resist the urge to take the money as cash, particularly if retirement is many years away. But generally you will have to pay federal income taxes, state income taxes (if applicable) and a 10% penalty if you are under age 55. This can cut into your investment significantly. If your state income tax is 7.5%, for example, someone in the 25% federal tax bracket would loose 42.5% of the amount he or she took.

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  401(K) Plan Choices for Job Changers

When you leave an employer, you are likely to have several options. You may

  • Stay invested in your previous employer’s plan if your balance meets plan’s minimum
  • Invest your assets in the new employer’s plan

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