Category: Life Insurance

Taking on outside work after retirement is not a luxury for some but rather a need for others. However, the double-edged sword of Social Security is that your payments may become taxed if you earn too much outside money. If you think you’ll need to work once you start receiving Social Security payments, you must know how and when they become taxable.

When Does Social Security Become Tax-Free?

Social Security payouts aren’t taxable for many Americans. Benefits are currently nontaxable if your combined income is less than $25,000 for single filers and less than $32,000 for joint filers.

Your benefit will likely not be taxable if you live solely on your Social Security check. However, if your outside earnings increase significantly, you may be subject to taxes.

When Does Social Security Become 50% Taxable?

Social Security benefits are taxed at 50% for single taxpayers earning between $25,000 and $34,000. The range of combined income for joint filers is $32,000 to $44,000, as defined above.

When Is Social Security Taxable at 85%?

After your total income exceeds $34,000, you’ll owe taxes on 85 percent of your Social Security benefits as a single filer. Joint filers with a total income of more than $44,000 are in the same boat.

Is spousal income taken into account?

If you file jointly, spousal income is considered when computing the taxability of Social Security payments. So, even if you are completely retired and do not work, you must include your spouse’s salary when calculating your “combined income.”

Ways to Avoid Paying Social Security Taxes While Working

It can be a delicate balancing act to avoid paying taxes on Social Security benefits while still earning enough to live. However, keeping your total income low makes sense to avoid paying taxes on your benefits.

One technique is to take on modest side jobs to keep you below the tax threshold. Consider the case of a single filer who receives $20,000 in Social Security benefits yearly. You can earn up to $25,000 in “combined income” yearly before taxing under SSA guidelines.

Because combined income only accounts for half of your Social Security benefits, you can earn an additional $14,999 per year and still avoid paying taxes on your benefits. This would increase your total income for the year to $34,999, and you would still be exempt from Social Security taxes.

What Kinds of Side Jobs Can You Do?

Being retired allows you the flexibility to work part-time jobs that fit into your schedule. In many circumstances, you can work a side gig that you enjoy and earn some money without worrying about your Social Security payments being taxed. Some examples include being a guidance counselor, driver, artisan, online instructor, etc.

Contact Information:
Email: [email protected]
Phone: 2129517376

Bio:
M. Dutton and Associates is a full-service financial firm. We have been in business for over 30 years serving our community. Through comprehensive objective driven planning, we provide you with the research, analysis, and available options needed to guide you in implementing a sound plan for your retirement. We are committed to helping you achieve your goals. Visit us at MarvinDutton.com . Tel. 212-951-7376: email: [email protected].

Deciding when to file for Social Security benefits is one of the most significant retirement decisions, so make it wisely.

It might cost you later if you rush it and file your claim before you’re ready. However, if you wait too long to file for benefits, you may regret not claiming sooner. There’s no one-size-fits-all answer for when to file a claim. However, there are a few indicators that you’ve done your research and are ready to apply for Social Security right now.

1. Your savings are in good condition.

Social Security benefits are intended to replace only around 40% of your pre-retirement income. That implies that you’ll need to supplement your income unless you can dramatically lower your costs once you retire.

The amount you should have saved depends on several criteria, including your projected costs and the number of years you plan to spend in retirement. Your intended retirement lifestyle may also influence your expenses, and you may wind up boosting your spending levels when you retire.

If you don’t know how much to save or if you expect Social Security to be your primary source of income, you should postpone your claim for the time being.

2. You understand how your age affects your benefit amount.

The age at which you claim your benefits directly impacts how much you get each month. If you file a claim at your full retirement age (FRA), which is 66, 66, and a few months, or 67, depending on the year you were born, you’ll get the entire benefit amount based on your work record.

You’ll get a reduced amount if you file your claim before your FRA (as early as 62). Delaying benefits will give you a bonus for each month you wait until you reach 70. In theory, you can postpone benefits over 70, but that won’t result in any additional money per month.

The age at which you begin claiming is a personal choice, and there is no right or wrong answer. However, knowing how that age would impact your monthly payments can make it easier to plan for retirement.

3. You and your husband have developed a plan.

If you’re married and your spouse is also eligible for Social Security, you should plan when each of you will file a claim.

You may choose to file simultaneously, regardless of your age. Or perhaps one of you will file your claim first while the other waits. That way, you may get some additional cash sooner in retirement while still benefiting from the larger amounts you’ll receive by deferring.

Also, while it may be unpleasant to ponder, it’s essential to examine both of your lifespans. If one spouse dies, the surviving spouse may be entitled to the deceased spouse’s entire benefit amount in survivors benefits. If you have reason to expect that one of you will outlast the other, you should consider how survivors’ benefits fit your strategy.

It might be challenging to choose when to collect Social Security, but the more you plan ahead of time, the better off you’ll be in retirement. If you’ve thought about these three considerations, you might be ready to file for Social Security as soon as possible.

Contact Information:
Email: [email protected]
Phone: 2129517376

Bio:
M. Dutton and Associates is a full-service financial firm. We have been in business for over 30 years serving our community. Through comprehensive objective driven planning, we provide you with the research, analysis, and available options needed to guide you in implementing a sound plan for your retirement. We are committed to helping you achieve your goals. Visit us at MarvinDutton.com . Tel. 212-951-7376: email: [email protected].

Shakespeare’s tragic play Romeo and Juliet features a line from Juliet Capulet asking, “What’s in a name?” (Act II, Scene II). What we refer to as a rose could just as quickly be called something else and still have the same pleasant aroma. In Act I of their new comedy show, “The Latest TSP Changes,” the TSP appeared to pose the same question more than once.

What exactly is meant by the term “contribution allocation”? Even though we call it an “investment election.”

Investment elections designate where your TSP contributions will go after you receive them. Your investment preference will apply to all future deposits your account makes. Your investment decision will not affect funds already in your account. Your investment decision will be valid until you create a new one. In some publications, the TSP refers to this action as a “contribution election,” which sounds like a combination of contribution allocation and investment election.

What exactly is meant by the term “interfund transfer?” Whatever we call “reallocation” or “fund transfer,” it will still be crystal clear what you want to do with the money already invested in your TSP.

Reallocation and transfer of fund

The difference between a reallocation and a transfer of funds might interest some people. With a fund transfer, you can move money within your account from one designated fund to another designated fund (or funds) without affecting any other funds. A fund transfer is a method for transferring money into or out of a mutual fund account. This does not affect the other funds in your account.

When you reallocate, the money in your account is moved between the TSP investment funds. When you reallocate, you decide how much of your money you want to put into each fund. You can’t transfer money between funds from one source to another. For example, if you have both traditional (including tax-free) and Roth money in your account, your reallocation will move a certain amount from each type of money into the funds you choose.

It tells us they’re the same thing, but the TSP seems to believe there’s enough difference to warrant two new terms. Why use one term (fund reallocation) when you can use both (fund transfer and interfund transfer)?

Even though they now go by different terms, reallocations and fund transfers are still bound by the same restrictions applied to interfund transfers. Each calendar month, you can use your first two reallocations or fund transfers to move money from one TSP fund to another. After the first two of either type, you can only move money into the G Fund for the rest of the month. Each account has its rules if you have both a civilian account and a uniformed services account.

You should download a copy of the Summary of the Thrift Savings Plan for yourself if you’re interested in understanding how the TSP functions in light of the most recent changes. It was updated in May 2022 and now contains information on the mutual fund window and other changes to the TSP.

Contact Information:
Email: [email protected]
Phone: 2129517376

Bio:
M. Dutton and Associates is a full-service financial firm. We have been in business for over 30 years serving our community. Through comprehensive objective driven planning, we provide you with the research, analysis, and available options needed to guide you in implementing a sound plan for your retirement. We are committed to helping you achieve your goals. Visit us at MarvinDutton.com . Tel. 212-951-7376: email: [email protected].

Retirement is a stage of life everyone aspires to reach as quickly as possible because there is freedom in not having to work any longer. Many believe it will be a golden time of being able to do whatever they want. However, there are many financial considerations to make before actually retiring. Below are a few of the issues with retirement that are not often discussed, as well as helpful solutions.

1. Your net worth becomes meaningless when you retire.

You may have meticulously saved money in the future and currently have a sizable nest egg fund. However, if you reside in a place with a high cost of living, then $1 million might not be enough to support you during retirement.

Solution: Establish an income plan.

Start by not assuming that your retirement spending will be significantly lower. You might need to change your expenditures if you’re already retired and didn’t figure out how much income you’d need to fund your monthly expenses. It’s essential to separate your necessities from your wants to determine what you’ll need to survive each month as opposed to how much you spend on your desires.

2. Taxes can significantly reduce retirement income.

A larger-than-expected tax burden on their retirement income is another significant issue that retirees deal with. Everyone believes their tax rate will decrease once they retire, but that’s not true.

You’ll be responsible for paying taxes on withdrawals at your ordinary income tax rate if you have saved most of your cash in a tax-deferred pension plan, such as a 401(k). 

Solution: Establish tax-free income sources.

If you want to bring down your tax burden and keep much more of your money, you need to have money saved up that you can access tax-free. You can achieve this by investing in either a Roth IRA or a Roth 401k because retirement withdrawals from these accounts are tax-free. 

Ask your HR if you have a Roth alternative or would like to add one to your account.

3. Your income in retirement may be impacted by inflation.

Inflation impacts our ability to buy things, and it’s crucial to realize that this impact can be subtle.

Expect to pay more over time as the cost of living increases if you want to retain your current standard of living in retirement.

Solution: Invest in stocks.

Investing in assets with a greater rate of return is essential if you don’t want inflation to erode your purchasing power and want to prevent running out of cash in retirement.

The answer is to incorporate stocks into your financial portfolio since you’ll need the savings to increase during retirement.

4. You might live longer than your savings.

Most people would most likely respond that their goal is to live a long and healthy life if asked. However, for individuals who have insufficient savings, this may be a drawback to retirement.

The Social Security Administration estimates that one in four 65-year-olds will live above the age of 90 in the current population.

Solution: Plan for a lengthy retirement.

The future cannot be predicted. However, the Social Security Administration has a life expectancy calculator that can estimate how many years you can expect to live on average based on your age and date of birth. However, your plan must offer you enough money to cover your expenses for a minimum of 30 years and possibly longer.

5. The cost of long-term care could eliminate your savings.

If you don’t have a plan to pay for long-term care, you could still run out of money even if you have a sizable nest egg and won’t outlive your assets. According to the U.S. Department of Health and Human Services, your chances of requiring long-term care are around 50/50 after you reach the age of 65.

According to Genworth Financial, the median yearly cost of an assisted living home is $54,000 in 2021.

Solution: Get long-term care insurance.

Expect Medicare or health insurance to not cover the expense of long-term care. The Administration for Community Living says these only offer a small amount of coverage for some forms of long-term care.

Consider purchasing long-term care insurance or getting a life insurance policy with a long-term care benefit.

6. Maybe you are not ready for high healthcare costs.

If you don’t have the funds set aside to pay for medical expenses in retirement, you might be in for a surprise. According to Fidelity Investments, a 65-year-old couple who retired this year will require $315,000 to cover medical costs. Even the expenditures of long-term care are not included in that.

Solution: Reduce costs and increase health savings.

You might profit from working more hours to continue obtaining subsidized health insurance through your company to deal with escalating healthcare expenditures in retirement. If you’ve got a high-deductible health plan, you can also contribute to one while you are still at work. Retirement HSA withdrawals for eligible medical costs are tax-free.

Contact Information:
Email: [email protected]
Phone: 2129517376

Bio:
M. Dutton and Associates is a full-service financial firm. We have been in business for over 30 years serving our community. Through comprehensive objective driven planning, we provide you with the research, analysis, and available options needed to guide you in implementing a sound plan for your retirement. We are committed to helping you achieve your goals. Visit us at MarvinDutton.com . Tel. 212-951-7376: email: [email protected].

Did you know that on average most people need over $1 million to afford a comfortable retirement? Are you one of 75% of all Americans who worry they cannot afford to retire? Less than 22% of surveyed individuals feel confident they have adequate savings for their retirement years. Just a little half of all retirees have less than $250,000 put away, further highlighting the importance of a diversified retirement portfolio.

Most of America’s aging workforce is now facing a scarcity of retirement funds. The current belief among citizens is that they have failed to accumulate enough savings to retire altogether, which motivates them to increase funds for savings. Younger workers, who will statistically enjoy a longer lifespan, will have more time to grow said savings.

By taking a moment to delve into the numbers, we find a higher level of angst surrounding retirement, with only 3% of all retirees saying they are living the dream.

On the other hand, 37% of retirees feel they are living comfortably, with the remaining 37% feeling uncomfortable with their financial situation. Expenses are undoubtedly on the rise, which has led to nearly half of all retirees feeling as though they are paying too much in their golden years due to inflation.

If you are one of the many workers planning to fund retirement through a 401(k) or IRA plan, you won’t have to rely on Social Security payments. By making strides to save early, and often, you are poised to feel more confident in your tax-advantaged retirement savings accounts rather than risk playing catch-up. As a big, long-term goal, retirement usually requires individuals to focus on regularly occurring goals rather than the final goal.

Due to various standards of living, as well as the cost of inflation, Social Security often falls short of providing throughout retirement. Even though getting started is the most challenging step, there are many ways to begin saving for retirement. By creating a budget, you are more likely to prioritize retirement savings overall, with a figure you can stick to. You can begin to amass your retirement account savings by tracking expenses and simply living by a budget.

Contact Information:
Email: [email protected]
Phone: 2129517376

Bio:
M. Dutton and Associates is a full-service financial firm. We have been in business for over 30 years serving our community. Through comprehensive objective driven planning, we provide you with the research, analysis, and available options needed to guide you in implementing a sound plan for your retirement. We are committed to helping you achieve your goals. Visit us at MarvinDutton.com . Tel. 212-951-7376: email: [email protected].