The Perfect Storm for Retirees

Today’s retirees are unlike any other retirees in history: They’re living longer, and many of them want to spend more in retirement than previous generations. At the same time, the fear of running out of money is incredibly common, and for good reason.

The bargain made decades ago in the transition from defined benefit pension plans to the modern 401(k) gave workers control over their savings but also transferred longevity risk from the employer to the worker. As such, these days few retirees can rely on a significant pension and must make their savings last for decades. This may be even more difficult considering that we could see persistently low interest rates, higher inflation and market volatility in the coming years.

The result? Today’s retirees could face a perfect storm, and they may have to use different financial planning strategies than retirees of the past.

Low Interest Rates

The Federal Reserve recently announced that it would maintain the target federal funds rate (the benchmark for most interest rates) at a range of 0% to 0.25%. The Fed cut rates down to this level in March of last year in hopes of combating the crippling economic effects of the pandemic, and it may not raise them for years. Interest rates are expected to stay where they are until 2023. Even when they rise, they could stay relatively low for some time.

As the U.S. government borrowings increase dramatically, the motivation for holding rates down increases. This combination works in favor of immense government borrowing, but for retirees it creates an intrinsic tax in the form of persistently low rates paid on savings. Borrowers love low rates as much as savers detest them. This truth is very much in play today. This poses a problem to retirees who want to earn a reasonable rate of return while minimizing their investment risk.

The Potential for Inflation

Coupled with persistently low interest rates, retirees could face increased inflation in the coming years. Government spending increased significantly due to COVID, with the CARES Act costing $2.2 trillion and the American Rescue Plan Act costing $1.9 trillion alone. The Federal Reserve has said that there is potential for “transient” inflation in the coming months and that it would allow inflation to rise above 2% for some time. While most experts don’t think it’s likely that we’ll return to the high inflation rates of the 1970s, even a normal inflation rate is cause for concern among those nearing and in retirement. Over the course of a long retirement, inflation can eat away at savings significantly.

Consider this: After 20 years with a 2% inflation rate (the Fed’s “target” interest rate), $1 million would only have the buying power of $672,971.

The combination of low interest rates and higher inflation may drive many retirees to take on more market risk than they normally would to account for that.

Market Risk

Those nearing retirement and recently retired can expose themselves to sequence-of-returns risk if they take on too much market risk. This is when a portfolio experiences a significant drop in value while the owner is withdrawing funds, owing to nothing more than unlucky timing. This risk is actuated by the timing of the age of the individual retiree and when they plan to retire, not something anyone usually times around market levels or investment performance but rather around lifestyle or even health factors. As a result, often the portfolio cannot fully recover as the market bounces back, due to the burden of regular withdrawals, and may be left significantly reduced.

Today’s retirees live in an uncertain world with an uncertain market. No one could have predicted the pandemic or its economic effects, and similarly, no one can predict where the market will be next year, in five years or in 10 years. While younger investors can ride out periods of volatility, retirees who are relying on their investments for income may have significantly lower risk tolerance and need to rethink their retirement investment strategy.

Is There a Solution?

This leaves many retirees in a perfect storm. They need to make their savings last longer than any previous generation, but with interest rates at historic lows, they may feel pressured to subject their savings to too much market risk in hopes of earning a reasonable rate of return. The most fundamental step to take is committing to regularized, frequent reviews with your financial adviser. Depending on portfolio size and complexity, this is most often quarterly, but should be no less frequent than every six months. This time investment keeps retirees attuned to shifts in the portfolio that will sustain them for decades to come.

Finally, consider the breadth of options available to your adviser, or on the retail platform you use if you are self-managed. Sometimes having the right tool is everything in getting the job done.  Often advisers have a greater breadth of options available that can more than offset their cost. Remember there are options beyond equities. The best advisers have access to guaranteed income insurance products, market linked certificates of deposits and other “structured assets.” This basket of solutions can provide downside protection ranging from a buffer of say 10%-20% all the way to being fully guaranteed by the issuing insurer or commercial bank. Even within the markets themselves, there are asset managers who create stock and bond portfolios that focus on a specific downside target first, emphasizing downside protection above growth right from the start.

Although market risk remains, it’s true that by focusing on acceptable downside first, those portfolios are likely to weather downturns better even if they do surrender some upside as an offset. And while none of these approaches is perfect, they can work as a component to offset a portion of the market risk retirees probably need to endure for decades to come.

The article and opinions in this publication are for general information only and are not intended to provide specific advice or recommendations for any individual. We suggest that you consult your accountant, tax, or legal advisor with regard to your individual situation. Securities offered through Kalos Capital Inc. and Investment Advisory Services offered through Kalos Management Inc., both at 11525 Park Woods Circle, Alpharetta GA 30005, (678) 356-1100. SouthPark Capital is not an affiliate or subsidiary of Kalos Capital or Kalos Management.

CEO, SouthPark Capital

George Terlizzi has worked in business for more than 25 years as an entrepreneur, consultant, dealmaker and executive for early and mid-stage companies. He has substantial concentrations in finance, technology, consulting and numerous forms of transaction work. Today George advises wealth clients individually and sets the strategic vision for SouthPark Capital. George’s insatiable curiosity, action-oriented approach, and broad-ranging interests are invaluable to those he advises.

Source: kiplinger.com

Will you get a second stimulus check?

The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.

By mid-May 2020, the IRS had issued more than $218 billion in stimulus checks related to the CARES Act, and it was still working to ensure all eligible Americans received theirs. But in early August, 2020, almost five months after the CARES Act was passed, many people were wondering if they would receive a second stimulus check. Find out what’s known about stimulus checks and future financial assistance from the federal government in the article below.

Will There Be a Second Stimulus Check?

Judging on the number of bills being passed around Congress, there’s a possibility another stimulus act is coming, and it may come with a second round of stimulus checks. But the details—including how much the check will be worth and who will be eligible—depend on which of the acts ends up making it through.

Bills currently being discussed include:

By mid-May 2020, the IRS had issued more than $218 billion in stimulus checks related to the CARES Act.

The HEALS Act

The HEALS Act comes from the Republicans and is a stimulus package similar to the CARES Act. If this act passes in its current form it will include many of the details described below.

How Much Money Will People Get?

Yes, this act does include stimulus payments to many Americans. The details of how much and who might get what amount are included below.

  • Individuals making less than $75,000 per year will get $1,200.
  • Couples filing jointly and making less than $125,000 per year will get $2,400.
  • People making above those amounts may still get a check. The stimulus is reduced $5 for every $100 of income above those limits until it tapers off completely. So, someone making $80,000 per year would get $950, for example.
  • An additional $500 is also included for every dependent claimed on the person or couple’s tax return, which is different from the CARES Act, which excluded dependents over the age of 16.

Who Would Qualify?

The income and dependent restrictions explained above will determine who would qualify for the stimulus. Qualification would likely be based on tax returns or Social Security benefit statements as was the case with the CARES Act.

What Other Benefits Are Included?

The HEALS Act contains a number of other benefits and stimulus efforts for businesses, schools and workers. Some of the main provisions are highlighted below, but this is not a comprehensive list.

  • Additional unemployment benefits would be provided, but it would be less per week than under the CARES Act.
  • The act would expand the Paycheck Protection Program by another $190 billion and make it easier for businesses to comply with the payroll requirement.
  • A return-to-work bonus may be offered to unemployed workers who find new jobs.
  • Funds to schools to help support reopening efforts would be included.
  • Some protection against lawsuits related to COVID-19 would be provided for businesses.
  • The act also includes $16 billion in coronavirus testing support.

The HEROES Act

This is the stimulus act being proposed by the Democrats. It also includes stimulus payments and other benefits for individuals and businesses.

How Much Money Will People Get?

As with the other bills, the HEROES Act includes a round of stimulus payments for qualifying Americans. The details of the payment amounts being proposed are summarized below.

  • Individuals making less than $75,000 get a $1,200 check under this act.
  • Married people filing jointly making less than $125,000 total annually get a $2,400 check under this act.
  • The stimulus is reduced $5 for every $100 of income above those limits until it tapers off completely.
  • The HEROES Act provides $1,200 per dependent for the first three dependents for an individual or married couple with no age restrictions. So if you claim three children, you would get an additional $3,600 in stimulus funds.

Who Would Qualify?

The qualifications for stimulus checks would be similar to those under the HEALS and CARES Acts as represented above.

What Other Benefits Are Included?

Here are some of the other benefits included in the HEROES Act:

  • This act includes the same enhanced unemployment benefits available under CARES, just extended for a longer period of time.
  • The HEROES Act also includes expanded eligibility for the Paycheck Protection Program and a reduction in the payroll requirement.
  • An expansion and extension of the eviction moratorium and protections for renters is included in the HEROES Act but not the HEALS Act.
  • Funds to support school reopenings are also included in this act.

When Could a Second Stimulus Check Come?

When a second stimulus check might arrive depends heavily on when a bill is passed. Both the House and the Senate must pass the bill, and then it has to be signed by the president. But the hope is that it won’t take as long for the IRS to turn around payments as it did in March and April. Ideally it won’t—the IRS has now done this once already and has probably learned lessons and put a system in place that speeds up the second round.

In fact, Steven Mnuchin, the US Treasury Secretary, said that the IRS could start sending payments within a week of an act being passed. So, if the act is passed anytime in mid-September, for example, the checks could start rolling out before the calendar moved into October.

The Stimulus check process in 4 steps

Will This Be the Last Stimulus Check?

It’s pure speculation at this point to discuss a second, or even third or fourth stimulus check. But it’s not impossible. It likely depends on the state of the economy and job market as the COVID-19 pandemic continues. If future stimulus checks do come, though, they may become increasingly more targeted as time passes. For example, it’s possible stimulus funds might start to go to people who can demonstrate a need.

However, until this second act is passed and lawmakers move on to considering future bills, there’s simply no way to know.

Protecting Your Financial Status During COVID-19 and After

Whether you’re waiting for and relying on a second stimulus check or you’re beginning to see a light at the end of your own personal COVID-19 financial tunnel, it’s definitely important to keep an eye on your personal finances during these trying times. That can include checking your credit report to ensure all the information is accurate and disputing inaccurate items so they don’t drag down your score in the future. It can also include managing your debt, income and investments in the most responsible way. During COVID-19 and beyond, Lexington Law offers information that can help you navigate finances and plan for the future. Check out articles that range from student loans to mortgages, and consider our credit repair services if you need help getting your credit report back to rights.


Reviewed by Kenton Arbon, an Associate Attorney at Lexington Law Firm. Written by Lexington Law.

Kenton Arbon is an Associate Attorney in the Arizona office. Mr. Arbon was born in Bakersfield, California, and grew up in the Northwest. He earned his B.A. in Business Administration, Human Resources Management, while working as an Oregon State Trooper. His interest in the law lead him to relocate to Arizona, attend law school, and graduate from Arizona State College of Law in 2017. Since graduating from law school, Mr. Arbon has worked in multiple compliance domains including anti-money laundering, Medicare Part D, contracts, and debt negotiation. Mr. Arbon is licensed to practice law in Arizona. He is located in the Phoenix office.

Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.

Source: lexingtonlaw.com

Own Occupation vs Any Occupation Disability Insurance, Explained

Many of us rely on a job for our income. If that includes you and you find yourself unable to continue performing your job duties because of a physical ailment, disability insurance can be a godsend. It replaces a portion of the income you lose when you can’t work.

However, disability insurance comes in two distinct flavors: own-occupation (also called own-occ) and any-occupation (or any-occ) disability insurance policies. And although they may sound similar, there are some key differences in how much coverage these options offer.

What is Disability Insurance?

Let’s start with a review of what exactly disability insurance is and how it works. SoFi Money® members can benefit from our unique Vaults feature. Vaults allow you to set aside cash for specific purposes, including unplanned expenses; in fact, “Emergency Fund” is one of the first categories you’ll see listed when you create a Vault on the SoFi mobile app.

To make it even easier, you can set up a recurring transfer to move a set amount of money into your emergency fund Vault on a regular basis. It’s a lot easier to save when you don’t have to move the money yourself, and once it’s out of sight, it’s out of mind until you need it for a rainy day.

Want to learn more about the unique benefits SoFi Money members get when they sign up for our cash management platform? Check out the full details.


SoFi Money®
SoFi Money is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member FINRA / SIPC .
Neither SoFi nor its affiliates is a bank.
SoFi has partnered with Allpoint to provide consumers with ATM access at any of the 55,000+ ATMs within the Allpoint network. Consumers will not be charged a fee when using an in-network ATM, however, third party fees incurred when using out-of-network ATMs are not subject to reimbursement. SoFi’s ATM policies are subject to change at our discretion at any time.
Third Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SOCO21020

Source: sofi.com

2021 Tax Brackets Are Here: Here’s What You’ll Owe Next Year

The year 2021 is looking a lot like 2020, at least in terms of taxes.

The IRS released its inflation adjustments for 2021 federal income tax rates and brackets. While these changes are unlikely to have a huge impact on your bottom line, there are a few things you should be aware of.

Because these are the 2021 tax rates, they’ll determine your tax bill that will be due in 2022. You’ll use 2020 rates and brackets when you file your taxes on or before May 17, 2021. That’s 32 days later than usual due to the tax deadline extension.

How the 2021 Tax Brackets Break Down

There are seven tax brackets that range from 10% to 37%. The 2020 and 2021 tax brackets break down as follows:

Unmarried Individuals

Tax Bracket Taxable Income for 2020 (use when you file in 2021) Taxable income for 2021 (use when you file in 2022)
10% Up to $9,875 Up to $9,950
12% $9,875 to $40,125n $9,950 to $40,525
22% $40,125 to $85,525 $40,525 to $86,375
24% $85,525 to $163,300 $86,375 to $164,925
32% $163,300 to $207,350 $164,925 to $209,425
35% $207,350 to $518,400 $209,425 to $523,600
37% Over $518,400 Over $523,600

Married Individuals Filing Jointly or Surviving Spouses

Tax Bracket Taxable income for 2020 (use when you file in 2021) Taxable income for 2021 (use when you file in 2022)
10% Up to $19,750 Up to $19,900
12% $19,750 to $80,250n $19,900 to $81,050
22% $80,250 to $171,050 $81,050 to $172,750
24% $171,050 to $326,600 $172,750 to $329,850
32% $326,600 to $414,700n $329,850 to $418,850
35% $414,700 to $622,050n $418,850 to $628,300
37% Over $622,050 Over $628,300

Heads of Household

Tax Bracket Taxable income for 2020 (use when you file in 2021) Taxable income for 2021 (use when you file in 2022)
10% Up to $14,100 Up to $14,200
12% $14,100 to $53,700n $14,200 to $54,200
22% $53,700 to $85,500 $54,200 to $86,350
24% $85,500 to $163,300 $86,350 to $164,900
32% $163,300 to $207,350 $164,900 to $209,400
35% $207,350 to $518,400 $209,400 to $523,600
37% Over $518,400 Over $523,600
Pro Tip

Not sure of your filing status? This interactive IRS quiz can help you determine the correct status. If you qualify for more than one, it tells you which one will result in the lowest tax bill.

Tax rates apply to the income within each bracket. So if you’re an unmarried individual with taxable income of $50,000, you won’t pay 22% of that $50,000 to Uncle Sam.

According to the 2021 tax brackets (the ones you’ll use for next year’s return), you’d pay:

  • 10% on the first $9,950
  • 12% on the next $30,575 ($40,525 – $9,950 = $30,575)
  • 22% on the next $9,475 ($50,000 – $40,525 = $9,475)

2 Tax Changes That Could Affect You in 2021

The modified tax brackets aren’t the only changes for 2021. About 60 tax provisions were adjusted in the new year. A few highlights:

  • The standard deduction will rise slightly: For 2020, the standard deduction is $12,400 for single filers and people who are married filing separately. In 2021, it will rise by $150 to $12,550 for single taxpayers. For those who are married filing jointly, the standard deduction will rise by $300, from $24,800 in 2020 to $25,100 in 2021.
  • Some limited-income families can get an extra $68. The maximum Earned Income Tax Credit will increase in 2021 to $6,728, from $6,660 in 2020. You need at least three children to qualify for the maximum amount.

3 Tax Rules That Aren’t Changing in 2021

  • IRA contribution limits won’t change. The traditional IRA and Roth IRA contribution limits will remain at $6,000 for people under 50. The extra $1,000 “catch-up” contribution the IRS allows people 50 and older to make won’t change either. You can still fund your IRA for 2020 until tax day, which is May 17, 2021.
  • 401(k) contribution limits aren’t changing either: If you have an employer-sponsored tax-deferred retirement plan, like a 401(k) or 403(b), your maximum contribution is still $19,500 in 2021. The additional “catch-up” contribution workers ages 50 and older can make will also remain at $6,500.
  • There’s no limit on itemized deductions. The Tax Cuts and Jobs Act of 2017 suspended these limits.

Ready to Start Your 2021 Tax Prep?

If you’re ready to dive into your taxes, you can check out this comprehensive summary of 2021 tax changes courtesy of the IRS.

Even if you’re not ready to jump into 2021 tax planning mode just yet, keep in mind it’s a good time to check your tax withholdings and make adjustments if necessary. Just make sure you file your return or ask for an extension by the May 17 deadline. If you can’t afford your tax bill for 2020, it’s essential that you file a tax return anyway and ask for an IRS payment plan.

Robin Hartill is a certified financial planner and a senior editor at The Penny Hoarder. She writes the Dear Penny personal finance advice column. Send your tricky money questions to [email protected]

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Source: thepennyhoarder.com

Benefits of an Employer Tuition Reimbursement Program & Policy

While they may not have a line item on a balance sheet, employees are your company’s most important asset. Their knowledge, skill sets, and expertise impact your ability to keep customers or clients satisfied and improve your bottom line.

A tuition reimbursement program is an employee perk that shows you’re invested in their long-term success.

What is Tuition Reimbursement?

Just as it sounds, tuition reimbursement in an employee benefit program or policy where the employer pays back employees for education expenses. Although the program’s rules vary from employer to employer, most cover the cost of tuition as well as textbooks and other required course materials.

Employees still have to pay out of pocket for the courses they take, but when the course is over, the employee can get back some or all of their tuition expenses. At some institutions, students with financial constraints qualify to defer payment until their coursework is complete.


Advantages of an Employer Tuition Reimbursement Program

The Society for Human Resource Management (SHRM) 2019 Employee Benefits survey notes more than half of employers (56%) offer some sort of tuition or student loan repayment assistance for employees, so education is clearly a priority for businesses.

1. More Skilled Employees

As the International Labour Organization (ILO) states, “Many of today’s skills won’t match tomorrow’s jobs, and skills acquired today may quickly become obsolete.” So workers need to update their skills on an ongoing basis.

Investing in your employee’s education can help you custom-build the skills, talent, and expertise you need to grow your business today and in the future.

2. Higher Retention Rates

Employees who take advantage of tuition reimbursement tend to stay with the company longer.

The Harvard Business Review noted one powerful example: when Fiat Chrysler Automobiles partnered with Strayer University to allow its dealership employees and their families to earn a degree free of charge, participating dealerships saw employee retention rates increase by nearly 40%.

3. Lower Recruiting Costs

Companies can promote educated employees to higher-level positions, saving the company time and money compared to filling vacancies with outside talent.

According to SHRM, the average cost of hiring a new employee is $4,425, or $14,936 for hiring an executive. That includes the cost of advertising the position, training, conducting interviews, and providing new hire orientation. Plus, it can take months for the new hire to acclimate to company culture and become fully productive.

On the other hand, promoting people from within generates little if any additional cost to the company.

4. Tax Breaks

The IRS allows employers to write-off up to $5,250 of tuition reimbursements per employee per year. These reimbursements are considered a tax-free fringe benefit, so they aren’t included in the employees’ wages, and the employer doesn’t have to pay Social Security, Medicare, federal or state unemployment taxes on the reimbursement.

To qualify for this tax perk, the tuition reimbursement plan has to be in writing and meet other requirements, including:

  • The program can’t favor highly compensated employees — generally defined as someone who owns at least 5% of the business or received more than $130,000 of compensation in the prior year.
  • The program doesn’t provide more than 5% of its benefits to shareholders, business owners, or their spouses or dependents.
  • The program doesn’t allow employees to opt to receive cash or other benefits instead of educational assistance.
  • All eligible employees have to receive reasonable notice of the program.

You can find more information about the IRS requirements for educational assistance benefits in IRS Publication 15-B.


Eligibility for Reimbursement

Employers can determine their conditions for reimbursement of employee tuition. Some common conditions include:

Length of Service and Performance

The first condition that may limit eligibility is length of service. Many employers offer tuition reimbursement only to full-time employees who have worked at the company for at least six months to a year. They also require the employee to still be employed with the company when they complete the course.

Employers can also require that the employee is meeting all performance expectations for their current position or require that the employee hasn’t been formally disciplined during the previous six to 18 months. The definition of discipline can vary from company to company but typically includes written warnings, demotions, or suspensions.

Program of Study

The next condition that may hinder eligibility is course of study. Many employers require that the courses or degree program can be applied within the organization. For example, a consulting firm may broadly define relevant subjects; on the other hand, a small IT firm may only reimburse specific technology-related courses.

The program can also require the employee to take classes only at a pre-approved educational institution such as a local university or community college or an accredited online college.

Cost

Another potential condition is the level of cost the company is willing to reimburse. Most tuition reimbursement programs have an annual cap on what they’ll cover. This limit varies greatly from company to company, but most employers base their caps on IRS limits.

As mentioned above, the IRS allows employers to deduct up to $5,250 of tuition costs per employee each year. Employers who pay more than $5,250 for an employee’s educational benefits during the year have to include it in the employee’s wages and pay all applicable payroll taxes, thus negating the tax benefits of the program.

Grades

An employer can require the employee to earn a passing grade to qualify for tuition reimbursement. For example, the policy may require that the employee passes the course with a letter grade of C or better.

Employers can also have scaled grade requirements. For example, the employer’s tuition reimbursement plan may specify that an A grade receives full reimbursement, a B grade receives 80% reimbursement, a C grade garners 60% reimbursement, and anything below a C is not eligible.


Final Word

A tuition reimbursement program is an attractive benefit that can help companies find, develop, and hold on to skilled talent. How you design your program depends on the needs of your business and employees.

If you want to try it out, consider starting by reimbursing employees for one work-related course per year, subject to manager approval. This will give you an idea of how popular the program will be with your employees, and you can decide whether to expand it in the future.

Source: moneycrashers.com

10 Things That Lower Your Social Security Check

Senior couple on a computer
SUPERMAO / Shutterstock.com

You’ve worked hard for Social Security retirement benefits, and you probably want every dollar you’re entitled to receive.

Unfortunately, the sad reality is that there are reasons why your Social Security payments could decrease. Many are in your control, but some are not.

Keep reading to find out how your monthly check could get dinged for everything from poor timing on your part to poor planning on the government’s end.

1. Failing to catch incorrect wage information

A young black man gets angry at his laptop computer while working at his office desk
Roman Samborskyi / Shutterstock.com

Social Security benefits are based on your lifetime earnings record. If the government doesn’t have the correct wage information for you, the result could be a smaller Social Security check.

To make sure the government has the right info on your wages, sign up for your own account at the Social Security Administration (SSA) website. Among other things, you can use the account to review your earnings history.

For more on Social Security accounts and earnings histories, check out “9 Social Security Terms Everyone Should Know.”

2. Receiving some types of pensions

Worried senior couple
wavebreakmedia / Shutterstock.com

Some workers may not be eligible for Social Security as a result of the nature of their employment. As we report in “6 Types of People Who Can’t Count on Social Security“:

“Not every worker pays into the Social Security system. In certain states, public employees are not covered by Social Security due to receiving a pension. They can include employees of state and local government agencies, including school systems, colleges and universities. In some states, they may also include police officers and firefighters.”

3. Missing the Medicare application window

K.D.P. / Shutterstock.com

While the full retirement age for Social Security has been slowly changing, the age for Medicare eligibility has remained the same. That means that even if you aren’t applying for Social Security until age 66 or later, you need to apply for Medicare at age 65.

Failure to do so could result in late enrollment penalties. For instance, Medicare Part B premiums are 10% higher for every 12-month period a person fails to sign up for Medicare coverage when they are eligible. Because Medicare payments generally are taken from your Social Security benefit, this could lower your Social Security benefit each month.

4. Rising Medicare premiums

Rayjunk / Shutterstock.com

Even if you apply for Medicare on time, you could find that your Social Security payments take a hit from rising Medicare premiums. That’s because Medicare premiums generally are deducted from Social Security payments.

In 2012, people paid $99.90 per month for Medicare Part B, which covers outpatient services. For 2020, that premium is $144.60 for most people, with high earners paying more — between $202.40 and $491.60, depending on their income.

5. Claiming retirement benefits early

travel
Ekaterina Pokrovsky / Shutterstock.com

Claiming your Social Security benefits earlier than your full retirement age (an age set by the SSA) will result in a smaller check going forward. While the government is happy to start sending you monthly checks at age 62, it is going to reduce your monthly payment — possibly by up to one-third or more.

The reduction is permanent, so don’t expect to see a big bump in benefits once you reach your full retirement age.

6. Getting your full retirement age wrong

senior man
Roman Samborskyi / Shutterstock.com

You may think you’re doing everything right by filing for Social Security benefits at age 65, but filing at that age will reduce your payments as well. Although 65 was long considered the full retirement age, the government has been slowly moving the goalposts.

If you were born between 1943 and 1954, your full retirement age is 66. The number increases by two months each year (for example, 66 and 6 months for those born in 1957) until reaching a full retirement age of 67 for those born in or after 1960.

7. Earning too much income as an early retiree

sirtravelalot / Shutterstock.com

If you decide to go the early retirement route, you should think twice about continuing to work while receiving Social Security benefits. In 2021, if you are younger than your full retirement age but old enough to have started taking Social Security, you can only earn up to $18,960 before a portion of your benefits is withheld. In that situation, the government reduces monthly benefits by $1 for every $2 earned above that amount.

If you’ll hit your full retirement age this year, you can earn up to $50,520 in the months leading up to your birthday. Exceeding that amount means the Social Security Administration will take $1 for every $3 you earn over the limit.

Fortunately, these aren’t permanent reductions in your benefits. And, starting with the month you reach full retirement age, there is no limit on how much you can earn. In addition, any benefits withheld because of your earnings will be added back to your benefits each month starting at your full retirement age.

8. Owing taxes or child support

Worried stressed businessman
fizkes / Shutterstock.com

The government can also take money from Social Security to pay for back taxes or child support.

Garnishment for taxes is limited to 15% of your monthly benefits. However, if you owe child support, get ready for the government to take as much as 65% of your benefits to pay for that obligation.

9. Defaulting on federal student loans

Student loans
PHOTOBUAY / Shutterstock.com

Thanks to a U.S. Treasury rule, debt collectors for credit cards and other consumer accounts can’t garnish your Social Security benefits. However, that protection doesn’t extend to debts owed to the federal government. If you have defaulted on federal student loans for yourself or loans you took out for a child, some of your Social Security benefits can be withheld to pay off the debt.

10. Outliving the Social Security trust fund

A senior man opens an empty wallet
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Your Social Security benefits might take a hit if you outlive the program’s trust fund. According to the 2020 Trustees Report, the Old-Age and Survivors Insurance Trust Fund — which pays out Social Security retirement benefits — will run out of cash in 2034.

The retirement of the largest generation in U.S. history, the baby boom generation, is challenging the system as the cost of those workers’ benefits grows faster than the working-age population paying into the system.

After 2034, the program will only have enough income from employed workers to pay 76% of Social Security benefits, the report notes.

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Source: moneytalksnews.com

Is Your Apartment Tax-Deductible When You WFH? | ApartmentSearch

Woman holding baby while sitting at desk on computerIf you’re someone who primarily works from the comfort of their home, you might find yourself wondering, “Can I write off my home office?” This is certainly a valid question and one that can possibly save you a lot of money when tax season rolls around. Learn what (if anything) is tax-deductible when your apartment doubles as your office space!

But before we begin, please know this post is not intended as legal or tax advice; rather, it’s simply meant to provide some helpful resources for your tax journey. If you need additional support or guidance as you’re filing, we encourage you to seek professional tax prep services.

Can I write off my home office?

With so many of us working from home these days, there’s a lot of curiosity around whether this situation can yield any tax breaks. Unfortunately, you won’t qualify for the home office tax deduction as a full-time remote employee in most cases.

In other words, if you work remotely — but you’re not an employer or business owner — you won’t be able to write off your home office. With that said, this might be available as a state tax deduction for *some* remote workers, so don’t give up all hope!

Anyone who’s self-employed or runs a business out of their home will likely have better luck with this write-off. According to the IRS, there are two basic requirements to qualify for a home office deduction: (1) regular and exclusive use and (2) principal place of your business.

The term ‘regular and exclusive use’ means you regularly use part of your house or apartment exclusively for conducting your business. The second criteria (principal place of business) implies your home office is either the primary location of your business or space where you frequently meet with customers or clients.

For instance, if you run a business out of your apartment, like an e-commerce store, you may be eligible for this deduction. Likewise, if you are “self-employed” as a freelancer, you may also meet this requirement.

How do I calculate my home office deduction?

If you meet the criteria stipulated by the IRS, you’ll want to know how to deduct a home office to net the most significant savings possible. There are two ways to go about this: (1) the regular method — keeping track of your expenses throughout the year and itemizing them on your tax forms, or (2) using the simplified option (if you’re eligible for it).

The regular method involves diligent record-keeping of your year-round expenses and honest reporting in your tax form. With this method, you can write off things like the cost to paint or repair your office space, which can add up pretty quickly!

The actual-expenses approach also allows you to deduct a portion of some indirect home expenses, based on the square feet you use as your office. What this means is, if your office is one-tenth of the total square footage in your house or apartment, you can deduct 10% of your mortgage interest or rent and even some of your utilities (like water and electric bills).

The simplified version of the home office deduction can be used if your office measures 300 square feet or less. For those who qualify, the IRS will give you a deduction of $5 per square foot of your home that’s used for business, up to $1,500 for a 300-square-foot-space.

If you’re unsure which choice is right for you, know that the simplified method can work well for single-room offices or smaller operations, while actual-expenses might work better if your business takes up a larger part of your home.

Additionally, the simplified route is typically easier to compute, resulting in a smaller tax break overall. The regular method requires more thorough recordkeeping (and more time to gather your receipts), but it could provide you with a larger deduction in the end.

Find a Place for Work and Life

Are you thinking of upgrading your apartment so you can have a dedicated home office? With the help of ApartmentSearch, you can easily explore two-bedroom apartments and live-work spaces for rent near you! This way, you’ll have an extra room you can use as your very own office, which is sure to help boost your morale and productivity.

Source: blog.apartmentsearch.com