Why Judy Pays $9,623 in Tax and Jane Pays 0 on $80,000

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This is the chapter where we show you the insane consequence of IRA distributions and how it can lead to a doubling, tripling even quadrupling of your taxes.

We use Judy as the example. She is in the 22% tax bracket. But pays 32% MORE in taxes on an IRA distribution. How could this be?

Well, welcome to the insanity of the tax code, my friends. For middle and lower income taxpayers the tax code is absolutely stacked against you when it comes to IRAs.

Here’s why. For every $1 extra dollar you take out in IRAs you are not only adding that $1 extra dollar to your taxable income, you are also adding an extra 85 cents of income because of your Social Security benefits.

In real numbers, an extra $1 actually increases your taxable income by $1.85. And that is how someone in the 22% bracket pays 32%, or more, in taxes on IRA distributions.

Crazy isn’t it??? This is why I focus so heavily on provisional income. Because once you go over a certain provision, not only will your actual income be taxed but your Social Security will be as well. Again, $1 IRA distribution means you have $1 more as income plus 85cents of your Social Security will now be subject to taxes too.

Oh, it even gets worse. That extra $1 of IRA distribution could also increase your Medicare premiums AND make you pay tax on your dividends and capital gains, whereas before they were tax free.

$1 in extra income can hit you in 4 different places for increase taxes and premiums!

But hey, Congress will fix it, right? This can’t be allowed. Yeah, keep thinking that. Congress will do the least amount of work to raise the most revenue for the government as they can.

As long as people don’t gripe about the insanity of the tax code, Congress won’t act.

WHy don’t people gripe, you may be wondering? Because they don’t know what is going on. I didn’t know what was going on, myself, until some insurance agent told me back in 2011.

Frankly, I thought he was full of it but he insisted. So, I did some research and couldn’t’ believe it. He was right! But very few people were talking about this, even the professional tax people I follow.

Hardly anyone understood the ramifications. And thus the taxpayer didn’t either.

This is why I wanted to write this book to begin with, to be a Paul Revere of sorts about how the tax man is coming and he doesn’t play fair. He relies on your ignorance to take more of your money.

The fact you are here, reading and watching this though means you can no longer claim ignorance. Now you need to do something. and that is tell others.

Avoid the quadruple tax!

 

 

Big Social Security COLA Coming For 2019???

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Well this could be good news.

The folks over at the fool.com are giving us reasons to think that the Social Security Cost of Living Adjustment for 2019 could be the largest since 2012.

Given what I posted two days ago on how inflation is destroying Social Security beneficiaries purchasing power, a 3% or more COLA is long coming.

We’ll see if it comes to fruition. But, as the fool points out, it looks pretty set.

The problem with Social Security adjustments is that it’s based on the CPI-W which is more an analysis of cost increases for working people, not retirees. So, things a retiree may be affected by may be counted less in the CPI numbers than what affects a worker.

Energy, for instance, represents less than 5% of the CPI-W. Does the average retiree have a larger energy expense? How about health care? etc.

Until the COLA adjustment is made more geared towards retirees there is nothing we can do other than be happy when a larger COLA comes down the pike, like seems will happen next year.  We shall see.

https://www.fool.com/retirement/2018/…

Health Care Costs In Retirement

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Health care costs in retirement are a HUGE concern for soon-to-be retirees and current retirees alike.

You can’t blame folks, actually, as so much ink has been spilled about the costs retirees face for health care.

Fidelity Health Costs In Retirement Study

Fidelity does a study each year that purportedly shows retirees need $260,000 to fund their health care costs.  “Oh no, honey, we don’t have that kind of money!!! What are we going to do???” (Give Fidelity more money to invest of course!)

Why doesn’t Fidelity also how much retirees need for food, housing, auto insurance etc…? If we use the same logic, we’d say retirees need to have $500,000 or more for housing costs in retirement and another $500,000 or so for food because both of these are higher on the list of retirement expenses for the average American.

Preying on fears of bankruptcy?

No one says that though. Why? Because it wouldn’t scare the way saying people will go bankrupt due to health costs does. For some reason, that fear has taken over for many retirees. And unfortunately, that fear has also kept those same retirees from actually enjoying their retirement out of fear of running out of money.

These retirees, and I’ve spoke to many of them in my career, see their future selves as paupers, eating Ramen noodles, having to move in with their kids.  So, to try to avoid that fate, they take minimum out of their accounts and live much more frugally than is required.

Missed Opportunity To Enjoy Retirement

This saddens me greatly because I can’t tell you how many widows, mainly, I’ve spoken to that have more money than they know what to do with but no one to share it with. Their husband has since passed, and now they’re in their mid 80s and not as sprite as they once were.

Their regret is not have doing more when they were younger and the hub was alive. That bothers me. It bothers me even more when the tax man comes knocking to claim an even bigger share of THEIR money because as you know widows pay MUCH more in tax than married couples.

EBRI Health Costs In Retirement Study

So along comes this study from the Employee Benefits Research Institute. This study shows the ACTUAL out of pocket expenses retirees have from a conducting interviews of over 8,000 participants every two years since 1993.

Lo and behold, what we find is the majority of these people had little to no out of pocket expenses. In fact, other than a tiny percentage of retirees most have very little expenses.

Hmmm… Could There Be A Reason To Frighten People?

Why this study hasn’t received more attention is beyond me, well I am a natural cynic, so I think I know. The investment firms, and the insurance industry, doesn’t want you to breathe easy when it comes to your retirement money. Fear is a great motivator to get you to buy the stuff they sell.

Before you part with your hard-earned money though please look a bit at your situation. Are you a woman with longevity in your bloodline? That is the person most at risk for major out of pocket expenses.

Consider All Your Options

You may want to consider some options to protect against those risks.

However, for all others, men and women alike, think twice before buying something expensive that offers protection against a risk that is not likely to matriculate and maybe consider ways to actually enjoy your retirement instead of constant worry.

 

Inflation Is Destroying Your Social Security Benefits

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Social Security benefits have been reduced by 34% in REAL dollars since 2000 according to a study by the Virginia Senior League.

This is happening even with the Cost of Living Adjustments for Social Security benefits.

Let’s put it like this. In 2000 you had $1 in Social Security benefits. That $1 could buy you a loaf of bread, let’s just say.

Fast forward 18 years and now that loaf of bread costs $2. But your $1 dollar of Social Security benefits has only grown to $1.66. This means you can no longer afford that loaf of bread.

That is what’s going on with the REAL Inflation rate, i.e., what the true cost increases for retirees, vs. the Social Security Cost of Living Adjustments.

This is not good folks. It means you are losing purchasing power each and every year you are on Social Security. Purchasing power is the ONLY thing that matters. Actual dollars don’t matter. Purchasing power per dollar is what matters. Always remember that.

Oh, don’t forget you are also paying tax on your inflated dollars as well which puts you even further behind.

Not good.

https://www.cnbc.com/2018/06/21/social-security-benefits-buy-34-percent-less-than-in-2000-study-shows.html

Analyzing Stocks: How I Do It

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Stock analysis is basically a loser’s game. No one, and I mean NO ONE, knows what’s going to happen to a stock regardless of fundamentals.

How do I know this? Well, the Wall St.Journal used to run a report of monkeys literally throwing darts at a stock chart vs. the best and brightest analysts in the world and more often than not the monkey’s did better.

Why is that? Anyone’s guess. Some stocks, money managers, investors, get lucky. Others…not so much.

However, when it comes to YOUR portfolio, one thing any good financial planner is going to recommend is NOT having more than 10% of your assets in any one security.

So, today I received a call from a client who has a large position, relative to his/her asset base in GPC stock. My client wanted to know what I thought of it.

My first inclination is that the client holds TOO much of it, regarldess of the stock because GPC represents nearly 40% of the total liquid net worth. That’s a problem.

But how about fundamentals? I do need to have a look at fundamentals too and that’s what we do in this episode. I go over the things I look at when analyzing individual stocks.

A couple things to understand here. I own NO individual stocks. I got burned too much in the early aught’s that I simply refuse to go down that road again.

Two, I know NOTHING about the business of GPC. The only think I know is that it has a three letter ticker symbol meaning it trades on the NYSE, thus it’s a blue chip stock of some sort.

Three, this is NOT a recommendation for buying or selling. I literally don’t ANY opinion on what YOU should do. I am only looking at this stock on the basis of the person I am dealing with.

So, do not take this as any advice whatsoever. Do your OWN research to make your own investment decisions.

A few things to consider:

  • dividend yield
  • dividend payout ratio
  • price to earnings ratio
  • current ratio
  • debt to equity
  • cash flow
  • debt levels
  • ebitda

St. George Village, Roswell, GA -Continuing Care Retirement Community – On Location!

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St. George Village in Roswell, GA is the FIRST Life Plan/Continuing Care Retirement Community in Roswell. Not sure how big a deal that is, frankly, but that’s what the sign says!

Anyway, I broke out my brand new Go Pro Session and man oh man, is this thing awesome. I’m going to get the hood mount so next time you can see the scenery almost like Google street view. It’s going to be awesome.

I love the “live” looks, actually. So, hope this shows some of the scenery, moreso than just the sales brochure.

If there is a place you want me to shoot, let me know.

Anyway, take a look around as I drive though the community.

I will post another video on the pricing as well.

A couple links to the youtube channel I mentioned during the video.

https://www.youtube.com/user/iamnjorganic

Medicare For Beginners – Myself Included!

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Medicare is NOT my area of expertise. Not in any stretch of the imagination. But after talking with Jae Oh from maximizeyourmedicare.com, I realized I really needed to up my game in understanding this most important issue.

Medicare for Beginners

After all, EVERYONE will use Medicare. And, unfortunately, if they don’t sign up correctly, their upside risk could easily bankrupt them.

So, in this video I look at a Blue Cross Blue Shield document which goes over some real basic Medicare information.

Medicare Definitions

Part A is the building you use for care, essentially.
Part B – The services you receive in that building, to include skilled nursing care.
Part C – is Medicare Advantage plans which MUST provide you an out of pocket maximum
Part D – prescription drug coverage
Medicare Supplements – Medigap coverage

Blue Cross Blue Shield

Blue Cross Blue Shield provides a nice example too that we go through to show you the risk and how a plan may minimize that risk to you.

If you are like me and completely ignorant about how Medicare works, this video is a good starting point.

Social Security Survivors Benefits

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We review the specific document from the Social Security Administration that discusses Survivor benefits. Below we’re going to post verbatim highlights from the document…

You definitely want to read this yourself. There is A LOT going on here. So think this through before doing anything rash. It’s very important:

How To Apply For Social Security Survivor Benefits

“You cannot report a death or apply for survivors benefits online. We should be notified as soon as possible when a person dies.

In most cases, the funeral home will report the person’s death to us. You should give the funeral home the deceased person’s Social Security number if you want them to make the report.

If the deceased was receiving Social Security benefits, you must return the benefit received for the month of death and any later months.

Who Receives Survivor Benefits?

Certain family members may be eligible to receive monthly benefits, including:

A widow or widower age 60 or older (age 50 or older if disabled);
A surviving divorced spouse, under certain circumstances;
A widow or widower at any age who is caring for the deceased’s child who is under age 16 or disabled and receiving benefits on their record;
An unmarried child of the deceased who is:
Younger than age 18 (or up to age 19 if he or she is a full-time student in an elementary or secondary school); or
Age 18 or older with a disability that began before age 22.

Widow(er) Of Covered Worker

If you are the widow or widower of a person who worked long enough under Social Security, you can:

receive full benefits at full retirement age for survivors or reduced benefits as early as age 60.
If you qualify for retirement benefits on your own record, you can switch to your own retirement benefit as early as age 62.

What If You Remarry?

If you remarry after you reach age 60 (age 50 if disabled), your remarriage will not affect your eligibility for survivors benefits.

A few other situations:
If you already receive benefits as a spouse, your benefit will automatically convert to survivors benefits after we receive the report of death.
If you are also eligible for retirement benefits (but haven’t applied yet), you have an additional option. You can apply for retirement or survivors benefits now and switch to the other (higher) benefit at a later date.
For those already receiving retirement benefits, you can only apply for benefits as a widow or widower if the retirement benefit you receive is less than the benefits you would receive as a survivor.
If you became entitled to retirement benefits less than 12 months ago, you may be able to withdraw your retirement application and apply for survivors benefits only. If you do that, you can reapply for the retirement benefits at a later date when they will be higher.

Surviving Divorced Spouse

If you are the divorced spouse of a worker who dies, you could get benefits the same as a widow or widower, provided that your marriage lasted 10 years or more.

Benefits paid to you as a surviving divorced spouse won’t affect the benefit amount for other survivors getting benefits on the worker’s record.

If you remarry after you reach age 60 (age 50 if disabled), the remarriage will not affect your eligibility for survivors benefits.

Switch To Your Own Benefit?

If you receive benefits as a widow, widower, or surviving divorced spouse, you can switch to your own retirement benefit as early as age 62. This assumes you are eligible for retirement benefits and your retirement rate is higher than your rate as a widow, widower, or surviving divorced spouse.
In many cases, a widow or widower can begin receiving one benefit at a reduced rate and then, at full retirement age, switch to the other benefit at an unreduced rate.”

https://www.ssa.gov/planners/survivor…

How To Avoid 50% Tax Increase On IRA Distributions

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