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Medicare Taxes in the New Year

The IRS recently issued a series of Proposed Regulations for the 3.8 percent and the 0.9 percent Medicare taxes slated to begin in 2013 as part of the Patient Protection and Affordable Care Act.

 

[CLICK HERE to read the actual Act, “HR 3590: The Patient Protection and Affordable Care Act,” at Congressional Health Care Caucus, January 5, 2010.]

 

The 0.9 percent surtax will be applied to wages and self-employment income that exceed $200,000 (for single filers) or $250,000 (for couples filing jointly). However, the tax will apply only when wages surpass the $200,000 threshold each year, continuing at the higher level for the remainder of the year.

 

The new 3.8 percent Medicare surtax will be applied to 2013 investment income received by high-income taxpayers. It will be levied on the lesser of either your net investment income or the amount by which modified adjusted gross income (MAGI) exceeds the same thresholds.

 

The tax will be levied on interest and dividends; distributions from annuities (other than tax-deferred distributions); rent and royalties; gains from investments in passive activities; trades of financial instruments and commodities; and the net capital gain from the sale of real property.

 

Note that “net investment income” for purposes of this tax does not include distributions from IRAs and qualified retirement plans, income from tax-exempt municipal bonds, or tax-deferred income from nonqualified annuities.

 

[CLICK HERE to read, “Affordable Care Act Tax Provisions,” at IRS.gov, December 11, 2012.]

 

[CLICK HERE to read answers to frequently asked questions, “New 3.8% Medicare Tax on ‘Unearned’ Net Investment Income,” at Congressional Health Care Caucus, December 13, 2012.]

 

One of the most notable items among the IRS’ new guidelines is that the tax code provisions that normally exempt income for regular tax purposes will also apply to the Medicare taxes. For example, the tax-deferred gains from a Section 1031 real estate exchange or Section 1035 annuity exchange will not to be assessed for the Medicare tax.

 

It’s also good to know that capital gains on the first $250,000 / $500,000 (individuals/married couples) resulting from the sale of a personal residence also will be excluded from the Medicare tax.

 

[CLICK HERE to read, “The 3.8% Tax Real Estate Scenarios & Examples Effective January 1, 2013,” at Realtor.org, 2012.]

 

With new taxes on tap for 2013, now may be a good time to reassess and perhaps even reposition assets to avoid surplus taxes. Give us a call for a complete evaluation.

 

[CLICK HERE to read, “CRTs, PIFS, CLTs & CGAs – Proposed Regulations on 3.8 Percent Medicare Tax,” at WealthManagement.com, December 27, 2012.]

 

By contacting us, you may be offered insurance products for sale. The links provided above are from sources believed to be reliable, but accuracy and completeness cannot be guaranteed.  They are for informational purposes only.

This information is not intended to provide any tax, legal, investment, or accounting advice or provide the basis for any financial decisions.  Be sure to speak with qualified professionals before making any decisions about your personal situation.

The information and opinions contained herein are provided by third parties and have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed by our firm. Content is provided for informational purposes only and is not a solicitation to buy or sell the products mentioned. The information is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual’s situation.    

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New Year’s Resolutions for 2013

Have you thought about your resolutions for the New Year? According to the Spectrem Group, the top five resolutions of affluent investors are to spend less, save more, pay down debt, revise or create an estate plan, and revise or create a retirement plan.

 

[CLICK HERE to read, “What Kinds of New Year’s Resolutions Do Investors Make?” at The Millionaire Corner, December 17, 2012.]

 

Perhaps this year you can focus on some resolutions that really need to be done, but they’re a bit farther down your list. How about talking to your elderly parents/adult children about estate and healthcare directive plans?

 

Did you know that 40% of adult children feel like it’s not their business to ask about their parent’s finances? And according to a recent Fidelity study, 97% of both parents and adult children disagree on whether the children will take care of the parents if they become ill. With such a wide discrepancy in perception and so much at stake, maybe this is an issue best moved to the top of your resolution list.

 

[CLICK HERE to read, “Parents and Adult Children Not in Sync as Many Families Still Struggle with Financial Conversations,” at Fidelity Investments, November 14, 2012.]

 

Have you thought about pursuing an entrepreneurial business you’ve always wanted to start? Entering this new phase of our economic recovery, this could be a good year to do so. Today, more than 12% of Americans are engaged in some sort of entrepreneurial activity. Accounting for more than a 60% increase from 2010 to 2011, we are currently at our highest level since 2005.

 

[CLICK HERE to read, “U.S. Entrepreneurship Rates Increase According to Research by Babson College and Baruch College,” at Babson College, November 29, 2012.]

 

Do you own a long-term care insurance (LTCi) policy yet? If not, now may be your last chance to get one at a lower price. With so many Americans living longer, insurers are starting to exit the business. The ones still selling LTCi have announced they are raising premiums and reducing benefits.

 

The Wall Street Journal reported that Genworth Financial is planning to charge women 40% more than men for premiums of individual long-term care insurance policies in 2013. Until now, premiums have been the same regardless of gender, but analysis has revealed that women are paid two out of every three benefit dollars from long-term-care insurance.[1]

 

[CLICK HERE to read, “Women Face Higher Costs,” at The Wall Street Journal, November 23, 2012.]

 

As always, we’re here to help you get ship shape for 2013. If you’d like some more ideas on how to get financial fit this New Year, please give us a call.

The above links are provided from sources believed to be reliable, but accuracy and completeness cannot be guaranteed.  They are for informational purposes only. This information is not intended to provide any tax, legal or investment advice or provide the basis for any financial decisions.  Be sure to speak with qualified professionals before making any decisions about your personal situation. By contacting us you may be offered insurance products for sale.

[1] American Association for Long Term Care Insurance, “2013 Increased Tax Deduction Limits for LTC Insurance,” October 18, 2012.

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Retirement Security: The Gorilla in Our Midst

In 2009, Knowledge@Wharton published an article referring to reforming Social Security and Medicare as “trying to tackle two 800-pound gorillas.” Amid end-of-year discussions concerning government spending on entitlement programs, two things have become clear: Social Security is on the chopping block and, for now, Medicare is off the table.

 

[CLICK HERE to read, “Social Security and Medicare: Trying to Tackle Two 800-pound Gorillas,” at Knowledge@Wharton, May 13, 2009.]

 

One cost-saving measure that’s been bantered about is increasing Medicare’s eligibility age to 67 from the current 65. According to research by the Kaiser Family Foundation, raising Medicare’s eligibility to 67 in 2014 would generate an estimated $5.7 billion in net savings to the federal government, but also result in an increase of about $3.7 billion in out-of-pocket costs for 65- and 66-year-olds, plus another $4.5 billion in employer retiree health-care costs. Furthermore, the study projects that the change would raise premiums by about 3% both for those who remain on Medicare and for those who obtain coverage through health reform’s new insurance exchanges.

 

[CLICK HERE to read, “House Dems to Obama: Don’t Raise Medicare Age,” at The Hill, December 13, 2012.]

 

[CLICK HERE to read, “Trade-offs in raising Medicare eligibility age,” at Associated Press, December 7, 2012.]

 

[CLICK HERE to read, “Raising the Age of Medicare Eligibility: A Fresh Look Following Implementation of Health Reform,” at Kaiser Family Foundation, July 18, 2011.]

 

This reminds me of the story of a father who tries to teach his son about money by offering to trade him two dollar bills for the son’s five dollar bill, observing that the boy would gain two times the number of bills. What sounds like a gain to the boy is a detriment to both father and son. Why? Because when they go to the corner drug store and the boy wants to buy a five dollar toy but now only has two dollars, the dad ends up footing the bill for the extra three dollars – lesson lost.

 

And you know he will. Just like our government steps in when its citizens don’t have enough money to pay for vital services like food and healthcare. One step forward, two steps back.

 

It kind of feels that way when you’re saving for retirement. Right about the time millions of baby boomers hit their income-earning stride, the recession pounced and they cut back on savings contributions to help pay down debt. Right about the time when retirement assets started taking off, a market correction hit and market values tanked.

 

[CLICK HERE to read, “Big Income Losses for Those Near Retirement,” at The New York Times, August 23, 2012.]

 

The fact is you have more control over your finances than you may think you do. After all, you just have to worry about your own household income – the federal government is trying to look after the vastly different interests of 114,761,359 households[1] in this country. Working out issues on a much smaller scale, with far fewer people to please, is much more manageable. You can always find ways to rein in your spending habits without impacting your neighbors, friends, and a bunch of people in a different socio-economic status whom you don’t even know. Plus, you have all those great money lessons your father taught you.

 

If that’s not enough wisdom to get you comfortably through retirement, please remember you have us to help you as well.

 

By contacting us, you may be offered insurance products for sale.

The information and opinions contained herein are provided by third parties and have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed by our firm. Content is provided for informational purposes only and is not a solicitation to buy or sell the products mentioned. The information is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual’s situation.   



[1] U.S. Census Bureau, People QuickFacts, December 10, 2012.

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The Art of Negotiation: Can’t We All Just Get Along?

Winston Churchill is credited with observing that if we don’t learn from our mistakes in the past, we are destined to repeat them. Nowhere is this more evident than a year ago when the 112th Congress nearly brought this country to its knees while trying to “negotiate” the national debt ceiling. Today’s 113th Congressional debates do not appear to be the wiser.

 

[CLICK HERE to read, “Negotiation Advice for the 112th Congress,” at Harvard Law School’s Program on Negotiation, November 18, 2010.]

 

[CLICK HERE to read, “Debt Ceiling Debate Cost Taxpayers $18.9 Billion, Study Finds,” at The Huffington Post, November 28, 2012.]

 

[CLICK HERE to read, “First Federal Congress: The Compromise of 1790,” at George Washington University, retrieved December 7, 2012.]

 

It’s tough to negotiate a foregone conclusion, such as preventing the upcoming fiscal cliff. One side will win but offer parting gifts to the losing party. This is because modern era negotiation techniques require the addition of periphery conditions to make the losing side feel better that it balked and agreed to something it didn’t want.

 

In some ways, politics is a lot like marriage. Frequently, one spouse will want Chinese food while the other wants a burger, so they compromise and eat at a Mexican restaurant. Neither got what they wanted but they both got something they could live with. And nobody had to give in.

 

That may not be the best way to run a country.

 

From all evidence since the November 6 election, it appears the 113th Congress is perpetuating the loop it started last year with no real effort to compromise in one way or another. Each side has offered basically the same deal it tried and failed to push through in previous altercations, but neither is budging. And as we loom closer toward year-end and all the economic doom it brings, it looks less like negotiation and more like a game of chicken.

 

[CLICK HERE to read, “A Fine Mess,” at The Weekly Standard, December 10, 2012.]

 

[CLICK HERE to read, “Threading the Needle – Medicaid and the 113th Congress,” at The New England Journal of Medicine, December 5, 2012.]

 

Martin Luther King Jr. once said, “We must all learn to live together as brothers or we will perish together as fools,” a sentiment that is as timely today as it was back in 1963.

 

Don’t let politics drive your financial decisions. That’s something you can stay in control of; give us a call if you’d like some help.

 

 

By contacting us, you may be offered insurance products for sale. The links provided above are from sources believed to be reliable, but accuracy and completeness cannot be guaranteed.  They are for informational purposes only.

 

 

 

 

The information and opinions contained herein are provided by third parties and have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed by our firm. Content is provided for informational purposes only and is not a solicitation to buy or sell the products mentioned. The information is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual’s situation.

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Welcome

Today’s economic environment is more complex than ever before, and achieving financial success can be an incredibly confusing process to even the most experienced individuals. That’s exactly why we’ve created this blog – to provide a forum for discussion, a portal for helpful information and resources and an ongoing stream of expert insights to help you make informed decisions about your financial future.

What are your biggest financial concerns? If you’re like many individuals preparing for or actively enjoying retirement, you may be wrestling with any number of pressing issues that keep you up at night.  Many find themselves asking questions such as:

Have we really saved enough?
How do we make up what we’ve lost over the past 2-3 years?
What are the right moves to make in today’s uncertain economy?
What should we be doing with our IRA and 401(K)?
Are there ways to reduce what we’re paying in taxes each year?
How do we create the most meaningful legacy possible for our children and grandchildren?
Will we outlive our retirement savings?

We’ll use this blog to provide valuable insights into each of these areas and more, so take a look around, check out the most recent posts and be sure to offer feedback or post a question if there are topics you’d like to see addressed!

Prefer to have your particular situation reviewed in person? We’d love to meet you!  Simply call (760) 346-9700 to schedule a complimentary consultation today!