The IRS Trap
By Sam Miller, Jul 6 2015 04:04PM
What the IRS giveth, the IRS taketh away! Employers and their employees are encouraged to offer and contribute to 401(k)s, 403(b)s and various other retirement programs, which permit deductions from payroll before taxes. These plans permit building retirement accounts with tax free contributions, compound interest, stock dividends, market gains etc. Except for the Roth IRA, Individual Retirement Accounts are practically the same. Know What Your Expenses Are! Of course, there will also be market losses, if the market is involved, plus administrative fees and commissions to pay. Before age 59 ½ expect a 10% penalty for early withdrawal. What is usually not emphasized are the taxes that must be paid when proceeds are taken during retirement, which may very well cause your Social Security to be included in taxable income. Plus, if the distributions are not adequate to cover the Required Minimum Distribution after age 70½, there will be an additional amount of income to be taxed. If you do not know the costs of your plan, ask for the annual report, which must be provided. Believe it or not! Most of all, keep in mind that currently in 2015, personal income taxes are close to a 35 year low, which begs the question: what will income taxes be when you reach retirement age? Also, if you are in the market, will it be up or down when you actually want to retire? Remember 2007- 2008 and how long it has taken to get back, if you were able to keep your job. Be Safe and Secure! Your retirement fund should not be at risk and should be growing. So how can you do this? First of all, pay income taxes now, not later, and place your retirement savings in a Roth IRA, which will be tax free when you wish to retire after age 59 ½. The Roth alone will probably not provide a life time income, so consider an annuity inside the Roth for at least some of your funds. If enjoying good health, consider also a tax free indexed universal life policy for available cash if needed and long-term growth, safety and family protection with riders to help with chronic or terminal illness. If you already have a life insurance, consider exchanging it for an indexed universal life policy, including credit for any cash value that policy may have available. Call or e-mail for a calculation of what your taxes may be on your retirement savings.
By Sam Miller, Jun 10 2015 03:11PM
If you are approaching age 65, Medicare is waiting for you and I predict you will love it! Medicare Plan A will provide hospitalization coverage automatically but Medicare Plan B is optional with an annual deductible of only $147 during 2015. The monthly premium is $104.90 during 2015. Together these two plans cover 80% of your medical costs and that is why it is necessary to enroll in a supplemental policy provided by a private insurance company. The uncovered 20% can be very expensive. You may enroll in a Medicare Supplement during the 6 month open enrollment starting the month of your birthday and extending for 6 months thereafter. You must have Medicare Parts A and B before enrolling in a Medigap Supplement. Do not procrastinate; enroll the month before the month of your birthday with a Medicare Supplement effective for you on the 1st of the month during which your 65th birthday falls. Medicare enrollment during this 6 month period is guaranteed, so you will be covered regardless of your health condition and you may change your insurer during this 6 month period. What plans are available in Vermont? What are the features of each plan and what do these plans cost? Email, fax or mail me the contact form on the Contact page of this site and I will provide a chart from the VT Department of Insurance listing the companies licensed in VT, their plans and costs. My wife and I have had Medicare for years and I am always glad to describe our experience. It is preferable to meet in person though enrollment in a supplement may be accomplished by email, phone and/or mail.