Retirement Savings Program for Lower-Income Earners Is Ending

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The Trump administration is ending an Obama program that was designed to be a starter retirement savings account for low- and middle-income workers. The Trump administration’s Treasury Department determined that the program, known as myRA, was not cost effective. Similar to a Roth IRA, the myRA accounts allowed workers to invest money after tax and withdraw the money in retirement tax-free. Unlike a Roth IRA, however, the savings were backed up by U.S. Treasury bonds, so investors would never lose their principal investments. The accounts were available to married couples with modified adjusted gross incomes up to $191,000 and to…

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Be Aware of the Kiddie Tax Before Leaving an IRA to Children

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Grandparents may be tempted to leave an IRA to a grandchild because children have a low tax rate, but the “kiddie tax” could make doing this less beneficial. An IRA can be a great gift for a grandchild. A young person who inherits an IRA has to take minimum distributions, but because the distributions are based on the beneficiary’s life expectancy, grandchildren’s distributions will be small and allow the IRA to continue to grow. In addition, children are taxed at a lower rate than adults—usually 10 percent. However, the lower tax rate does not apply to all unearned income. Enacted to prevent…

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HUD Makes Reverse Mortgages a Little Less Attractive

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The Department of Housing and Urban Development (HUD) has announced changes to the federal reverse mortgage program. Citing the need to put the program on better financial footing, HUD will raise reverse mortgage fees for some borrowers and lower the amount homeowners can borrow. A reverse mortgage allows a homeowner who is at least 62 years old to use the equity in his or her home to obtain a loan that does not have to be repaid until the homeowner moves, sells, or dies. In a reverse mortgage, the homeowner receives a sum of money from the lender, usually a bank,…

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Social Security Beneficiaries Will Receive a 2 Percent Increase in 2018

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In 2018, Social Security recipients will get their largest cost of living increase in benefits since 2012, but the additional income will likely be largely eaten up by higher Medicare Part B premiums. Cost of living increases are tied to the consumer price index, and an upturn in inflation rates and gas prices means recipients get a small boost in 2018, amounting to $27 a month for the typical retiree. The 2 percent increase is higher than last year’s .3 percent rise and the lack of any increase at all in 2016. The cost of living change also affects the maximum amount of…

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What Can We Do About Our Parents’ Credit Card Debts?

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Q: My wife and I have just become agents under a power of attorney for her parents. They are both in their late sixties, and her mother has just been diagnosed with terminal cancer. We moved them into a retirement home so her mother can get the extra help she needs. After gaining access to their finances, we’ve discovered that her father has accumulated over $100,000 in credit card debt spread among several cards. We purchased their home, and they recently sold some land that was in a trust. Her mother just transferred to my wife a 25 percent interest…

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Use Your Will to Dictate How to Pay Your Debts

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The main purpose of a will is to direct where your assets will go after you die, but it can also be used to instruct your heirs how to pay your debts. While generally heirs cannot inherit debt, debt can reduce what they receive. Spelling out how debt should be paid can help your heirs. If someone dies with outstanding debt, the executor is responsible for making sure those debts are paid. This may require selling assets that you would like to leave to specific heirs. There are two types of debts you might leave behind: Secured debt is debt…

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Is It Better to Sell My Mom’s House or Have It Go into Foreclosure?

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Q: My mother was admitted to a nursing home in November 2016. At that time we applied for Medicaid and she was approved. In April 2017, she had a stroke and my sister decided to take care of her at my sister’s house. My mother’s house is valued at around $80,000, and she has a mortgage with a $57,000 balance. No one is currently living in the house and between the mortgage, insurance, and taxes, it is a financial burden to keep the house. I think it is best to let the house go into foreclosure, but my sister wants…

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IRS Issues Long-Term Care Premium Deductibility Limits for 2018

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The Internal Revenue Service (IRS) is increasing the amount taxpayers can deduct from their 2018 income as a result of buying long-term care insurance. Premiums for “qualified” long-term care insurance policies (see explanation below) are tax deductible to the extent that they, along with other unreimbursed medical expenses (including Medicare premiums), exceed 10 percent of the insured’s adjusted gross income. These premiums — what the policyholder pays the insurance company to keep the policy in force — are deductible for the taxpayer, his or her spouse and other dependents. (If you are self-employed, the tax-deductibility rules are a little different:…

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Retired or Retiring?

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Planning for these Economic & Political Times FIVE THINGS TO DO TODAY!!! What it takes today to prepare for a successful retirement tomorrow. Although you may have worked hard throughout your life, the economy does not care. There could be more recessions, inflation diminishing your purchasing power, the growing national debt, and the end of entitlement programs, i.e. Social Security, Medicare and Medicaid. So what will happen to you? How do I make sure I have enough income for me and my spouse through retirement? What happens if I get sick? How will I pay for my care? What are…

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How Much Money Will You Need for Retirement?

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The main goal before you retire is to make sure that you have enough money when you do retire so you can maintain your standard of living. How much is enough depends on when you wish to retire, what your anticipated living expenses will be, what rate of return you can expect on your savings, and whether you will continue to work at all after retirement. The anticipated date of your retirement affects two important factors: how much time you will have to save up for retirement and the number of years you can expect to live after you retire….

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