ARE HIGHER TAXES ON YOUR RETIREMENT HORIZON?

Most of us have been programmed to believe that when we retire we will be “in a lower tax bracket.”  Most Americans who use an IRA or 401k (403b,457, etc.) to save for retirement think that they are saving money because they are not forced to pay tax on those earnings while working.  But, what will that look like when they retire?

          For most workers, the biggest write-off we have is the interest we pay on our mortgage.  Will we have that deduction when we retire?  Will we have children living at home?  Medicare recipients rarely ever have a medical deduction or meet the 10% threshold for a write-off. 

            So, will you be in a lower tax-bracket when you retire?

          You paid in to Social Security as a “supplemental income” source and now you may also have to pay taxes on that income depending on how much other money you are using for living expenses and where that money comes from. 

          If you are single/qualified widow/widower and your retirement income is $25,000-$34,000 you are taxed on 50% of your SS income.  Over $34,000 85% is taxed.  Married: $32,000-$44,00 -50% is taxed.  Over $44,000 – 85% is taxed.    

          So, let’s say your single and your SS income is $1300 per month = $15,600 per year and you need $50,000 to live on.  So, you take $34,400 from your pension/IRA/401k retirement accounts to meet the budget.  If single, you now pay taxes on $11,470 of Social Security income.  Your Federal Tax is $4642 per year.  

Where do you get the $4642 to pay the taxes?  From the same “qualified” accounts (IRA/401k, etc.)?  If you take it from “qualified” account you now pay taxes on $13,260 of SS and your Federal Tax is $5922.  It’s a vicious cycle.  If you are a couple and can live on $50,000 per year you have the advantage of an extra “standard deduction” and your Federal Tax is only $2748. 

          And remember, you will be forced to take a “Required Minimum Distribution” at age 70 ½.  That means even if you do not need that money now, or are hoping for it to grow for income later, you are forced to take it as income and pay those taxes. 

          And what if tax rates go up when you are retired?  We are enjoying one of the lowest tax rates in history. But, that will most likely have to change. 

          The United States is the most powerful country on earth.  California is the 6^th largest economy in the world surpassing France (7^th) and India (8^th). Interestingly, India has the most up-and-coming economy.    California’s debt is now an astounding $443 Billion.

           The US has an amassed debt of over $19 Trillion (with a T).  Interest payments on that debt are the largest in the world and run neck-and-neck with the European Union of 28 countries.  The federal government currently pays $223 Billion - 6% of the entire budget - on interest payments.  That is more than what America produces in one year. Two-thirds is owed to Treasury-bond holders.  The Treasury Yield is percentage rate US pays to borrow money. When interest rates go up the government pays more on that debt. 

  What do you think the most likely solution to this problem may be?  Do the M-A-T-H.  Tax rates will have to double at some point in our future!

          If you have not seriously explored how to re-diversify your savings so that you have “non-taxed” income to manage the tax hit in retirement, now is the time to do so.  Roth IRA is only one component but you are limited to your contributions so it’s not the best option for everyone.  There are solutions that do not cap how much you add, the money grows tax-deferred and you enjoy a tax-free income stream when ready to retire. 

Our goal is to add more money to your retirement lifestyle.                             Give us a call (800) 546-4126

      " Are There Too Many Government Regulations?"

    Everyone would probably answer that question based on their own personal or business experience.  What prompted me to address this issue today is personal.

    My mom is 83. She and I have a joint credit card and make a payment to that card every month.  In order to get that card she deposited $500 into a savings account at the same bank.  I now handle all of her financial business.  Yesterday she got a letter from that bank stating that her savings account was about to be turned over to the state unless she verified that she was, in fact, still alive and living at the very same address as her credit card account. 

    My mom just had her shoulder replaced and her arm is tied to her side for the next 6 weeks.  She is also on heavy doses of pain killers and already suffers from memory compromise so the stress from this surgery hasn't helped.  What if she had not seen that notice?  Would the bank have followed government regulations and taken her money from her and given it to the state?  

    14 months ago she had her other shoulder replaced and during recovery missed seeing the bill for our homeowner's insurance.  We had a flood in the house on January 1st and when I called to file the claim I was told the bill hadn't been paid.  Luckily, I was able to fix that and get it reinstated immediately but what would have happened if I had not been here to take care of it?  

    Mom had a good girlfriend who died 3 years ago.  She had been married to her beloved husband for 64 years and he is still suffering her loss.  My mom calls him twice a day just to give him a touchstone and keep him grounded.  He is 87 years old and has 2 significantly disabling conditions; an ostomy bag and severe neuropathy in his feet.

    Yesterday he was very upset because his ostomy bag exploded all over the rug.  He has had this condition for over 10 years and the past year or two has had to beg and scream for the Medicare-approved provider to get his supplies to him on time.  Today he was in a rage.  He had been on the phone for over an hour trying to get his supplies and was finally told that he needed his doctor to approve the order before the could send his supplies.  

    Does the government REALLY think he is hoarding ostomy bags and selling them on the Black Market?  

     "Obamacare" may have provided medical services to many who were uninsurable but what about those who are paying their fair share?  

    In 2017 there are zero "Affordable Care Act" options to choose from.  Premiums on insurance plans if you stayed on jumped over 115%.  

     Try calling Medicare to get a logical answer and you will be told (after holding for over an hour) that they have not been cross-trained so cannot answer your questions.  Where does the "human element" fit into regulations that clerks read from books yet know zero about in reality?  

    It makes me wonder - who is minding the store?

(An ostomy pouching system is a prosthetic medical device that provides a means for the collection of waste from a surgically diverted biological system (colon, ileum, bladder) and the creation of a stoma. Pouching systems are most commonly associated with colostomies, ileostomies, and urostomies.)

 Neuropathy in the feet is a very common condition. According to the Neuropathy Association, over 20 million Americans suffer from peripheral neuropathy, or neuropathy in the feet.There are several types of neuropathy. Peripheral neuropathy is a condition in which the peripheral nerves or the nerves in the extremities are damaged. This condition is a progressive disease that may come and go or may become severe and debilitating.