CHICAGO, Nov 7 (Reuters) – Congress probably won’t produce a
broad overhaul of the U.S. tax code anytime soon. But if and
when it does, lawmakers shouldn’t overlook some of the oddities
of the way we tax retirement income. Many Americans are stressed
out about their economic security in old age, and tax code
writers could ease their pain.
Here are three areas ripe for reform.
BOOST REQUIRED MINIMUM DISTRIBUTION AGE
Under current law, you must start drawing down funds
accumulated in tax-deferred retirement accounts in the year you
turn 70½. Required minimum distributions (RMDs) must be taken
from individual retirement accounts and 401(k)s starting at that
point, unless you still work for the employer that sponsors your
CHICAGO (Reuters) – U.S. senior citizens and retirement savers finally got the word last week on three critical inflation adjustments for next year.
And the word is – not bad.
The announcements of cost-of-living adjustments (COLA) for 2014 were delayed by the recent government shutdown. Now the COLA figures for Social Security, Medicare and limits on contributions to retirement savings accounts have been released. It will be a year of moderate Social Security benefit bumps, flat Medicare premiums and status quo for retirement savers.
CHICAGO (Reuters) – I asked a financial services executive recently how our retirement saving system can be considered a success, considering that all but the highest-income households are approaching retirement with next to nothing saved.
His reply: “They don’t have any money while they’re working, so why would they have any money in retirement?”
CHICAGO (Reuters) – More than 2 million people on Medicare could be getting their prescription drugs nearly for free, but don’t. That’s because they have not signed up for Extra Help, an important Medicare benefit that subsidizes drug costs for low-income senior citizens.
Extra Help can pay nearly all of the prescription drug costs a senior incurs in a Part D drug plan. It is provided automatically to seniors receiving Medicaid or Supplemental Security Income benefits. In some states, Extra Help also is automatic for people receiving benefits through the Medicare Savings Program, which helps subsidize Medicare Part A (hospitalization) and Part B (outpatient) premiums.
CHICAGO (Reuters) – Bet you didn’t know this is National Save for Retirement Week. Unless your boss is marking the occasion by herding the staff into retirement education seminars, it’s just another one of those manufactured calendar events that tend to fly right by us.
There are other national awareness weeks in October – for fire prevention, school lunches and forest products. And did you miss National Boss Day (October 16) and International Talk Like a Pirate Day (September 19)?
CHICAGO (Reuters) – Do you need an MBA degree to figure out the new health insurance exchanges?
Just getting online to shop has been tough enough during these early days of the insurance marketplaces launched under the Affordable Care Act, with reports of website malfunctions piling up. But a new study suggests even after they get into the ACA exchanges, consumers will have difficulty picking the policies that will be most cost effective.
CHICAGO, Oct 17 (Reuters) – Do you need an MBA degree to
figure out the new health insurance exchanges?
Just getting online to shop has been tough enough during
these early days of the insurance marketplaces launched under
the Affordable Care Act, with reports of website malfunctions
piling up. But a new study suggests even after they get into the
ACA exchanges, consumers will have difficulty picking the
policies that will be most cost effective.
CHICAGO (Reuters) – Talk about counter-programming: A coalition of Social Security advocates plans a one-day summit meeting later this month to talk about ways to expand Social Security benefits to address America’s retirement security crisis. Unfortunately, it looks like Washington will be changing the channel.
If we do manage to sidestep the shutdown-Obamacare-debt ceiling-default crisis this week with our economic system intact, it looks like Congress and the White House will enter a new round of negotiations to cut Social Security – and Medicare.
CHICAGO (Reuters) – There’s a reason why 401(k) and individual retirement accounts are called “tax deferred.” You pay no taxes while you’re accumulating savings, but Uncle Sam ultimately gets his bite when funds are withdrawn. And to make sure the meal gets started on time, you’ll face though the dreaded required minimum distribution (RMD).
RMDs must be taken from IRAs starting in the year you turn 70.5 – and from 401(k)s at the same age, unless you’re still working for the employer that sponsors the plan. They exist to make sure the tax benefits of these accounts don’t extend indefinitely – and that you start using these assets, and start paying taxes, in retirement.
CHICAGO, Oct 8 (Reuters) – President Barack Obama warned
last week that Social Security benefits might not go out “on
time” if Congress does not raise the debt ceiling.
Should seniors and disabled American really be worried about
their benefits if the U.S. government runs out of borrowing
capacity later this month?